Capital gains Exemption under sections 54 and 54EC if Husband and wife both claims co-ownership without legal ownershjp

Overview:

 Mere fact that both assessee’s being husband and wife had suo motuoffered rental income equally in their returns of income, did not confer ownership in property on wife whose name did not appear in the capacity of owner/co-owner in either the purchase or sale deed of concerned property. Therefore, assessee (wife) was not entitled to claim exemption under sections 54 and 54FC in relation to said property.

Assessees both husband and wife claimed 50% of the exemption under section 54 and section 54EC available in respect of reinvestment of long-term capital gain having arisen on sale of certain residential property, on the ground that rent received from letting out of the said property was equally shown in their respective hands in earlier years and their intentions were that said property was a joint property and both of them having equal share therein, were co-owners thereof.

It is held that Ownership had to be considered from recitals of relevant documents and not from any stated intention or claim being legally unsustainable. As per the recitals in purchase and registered sale deeds of impugned property, assessee (husband) alone was sole legal owner of said property to the exclusion of all others, including his wife whose name did not appear in the capacity of co-owner. The mere fact that both assessees being husband and wife had suo motu offered rental income equally in their returns of income, did not confer ownership in property on wife and she was, therefore, not entitled to claim and be allowed exemption under sections 54 and 54EC.

Decision: Against the assessee.

IN THE ITAT BANGALORE ‘C’ BENCH

SUNIL KUMAR YADAV, JM & JASON P BOAZ, AM

Shri Raghuram P Nambyar & Anr. v. Asstt. CIT & Anr.

ITA No. 2007/Bang/2016 & IT(IT)A No. 12/Bang/2014

A.Y. 2009-10

2 March, 2018

Appellants by : H.N. Khincha, C.A. & A. Shankar, Advocate

Respondent by : Dr. Pradeep Kumar, Addl. CIT.

Jason P Boaz, A.M.

These are appeals filed by two assessees who are wife and husband. One appeal in IT(IT)A No.12/Bang/2014 is by Smt.Veena Nambyar directed against the order passed by the Commissioner (Appeals) -4, Bangalore dt. 20-2-2014, in respect of the order of assessment passed. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dt. 27-12-2011. The second appeal in ITA No.2007/Bang/2016 by Shri Raghuram P Nambyar is directed against the order passed by Commissioner (Appeals)-12, Bangalore dt. 22-9-2016 in respect of the order of assessment passed under Section 143(3) of the Act dt. 25-3-2015. The relevant assessment year is 2009-10. Since connected issues are involved, these appeals were heard together and are being disposed off by way of this common order for the sake of convenience.

2. Briefly stated, the facts of the case essential for disposal of these appeals are as under:-

2.1 Shri Raghuram P Nambyar purchased in his name a vacant site situated at No.1088, HAL 2nd Stage, Indiranagar, Bangalore-560 038 vide registered sale deed dt. 8-12-1986 from one Dr. R. Syed Umar for a consideration of Rs.13 lakhs. Subsequently, a residential property was constructed thereon in the financial year 1991-92 and thereafter both these assessees i.e. husband and wife, resided therein. After sometime, the said property was let out and the assessees both husband and wife declared 50% of the rent received from tenants in their respective hands in their returns of income from Assessment Year 1993-94 onwards.

2.2 The said property in the name of Raghuram Nambyar was sold to one Sri S. Venkata Ramanan vide registered sale deed dt. 30-6-2008 for a total consideration of Rs.7,04,00,000. The Long Term Capital Gains (‘LTCG’) on sale of the aforesaid property was computed at Rs.6,00,90,049 after claiming indexation and was offered @ 50% of the LTCG thereof at Rs.3,00,45,025 in each of the hands of the husband Shri Raghuram P Nambyar and wife Smt. Veena Nambyar. The assessees claimed reinvestment of the capital gains by purchase of new properties. Smt. Veena Nambyar, purchased a residential property at “Mantra Espana”, Kariammanagrahara Village, Varthur Hobli, Bangalore for a total consideration of Rs.2,38,75,427; invested Rs.50 lakhs in Bonds for claiming exemption under Section 54EC of the Act and declared the balance of Rs.61,69,598 as LTCG exigible to tax. In her return of income for Assessment Year 2009-10 filed on 30-7-2009, Smt. Veena Nambyar declared total income of Rs.69,17,415 that included the aforesaid LTCG of Rs.61,69,598 and income from other sources.

2.3 Shri Raghuram P Nambyar, on his part, purchased a new residential property in “Wind Mills of Your Mind’at Whitefield, Bangalore for a total consideration of Rs.1,43,71,700; invested Rs.50 lakhs in Bonds for claiming exemption under Section 54EC of the Act; deposited Rs.40 lakhs into the Capital Gains Account Scheme with Canara Bank and declared the balance of Rs.66,73,325 as LTCG exigible to tax.

2.4 The case of Smt. Veena Nambyar for Assessment Year 2009-10 was selected for scrutiny by issue of requisite notice. In the course of assessment proceedings, the assessing officer questioned the assessee’s claim for exemption under Section 54F and 54EC of the Act observing that “ A glance of the Sale Deed executed on 30-6-2008 revealed that the name of Sri Raghuram P Nambyar spouse of the assessee is mentioned as seller and nowhere there is mention of the name of the assessee, Smt. Veena Nambyar, which goes to establish that she is not the rightful owner of the property even to the extent of 50% of the share claimed. Further purchase deed showing that the assessee had share in purchase of the aforesaid property was not furnished. In this factual matrix of the case, the assessing officer held that the taxability of the income from LTCG in the hands of Smt. Veena Nambyar does not arise at all, since the assessee has no share in the ownership of the said property. The assessing officer was of the view that the LTCG on sale of the said property is exigible to tax fully in the hands of Shri Raghuram P Nambyar only and not in the hands of Smt. Veena Nambyar. In this view of the matter, the assessing officer completed the assessment under Section 143(3) of the Act vide order dt. 27-12-2011 determining the assessee’s taxable income at Rs.7,47,817 comprising only of the income declared under the head “Other Sources” as against income of Rs.69,17,415 declared by the assessee.

2.5 Smt. Veena Nambyar, being aggrieved by the order of assessment dt. 27-12-2011 for Assessment Year 2009-10, preferred an appeal before the Commissioner (Appeals) – 4, Bangalore which was dismissed by the learned Commissioner (Appeals) holding that “ Since the issue of taxability of capital gains offered by the assessee in the hands of Smt. Raghuram P Namabyar is yet to be finalized by the assessing officer and the final outcome in appeal is not clear, the action of the assessing officer is confirmed on protective basis subject to the outcome in the case of Sri Raghuram P Nambyar in the higher appellate stages.”

2.6 In the case of Sri Raghuram P Nambyar, the assessment proceedings for Assessment Year 2009-10 was initiated by the assessing officer under Section 147 of the Act, in view of the fact that the assessing officer in the case of the wife Smt. Veena Nambyar, held that the appropriation of LTCG on sale of the said property equally between both spouses @ 50% each was incorrect as the purchase and sale of the same was in the name of Sri Raghuram P Nambyar only and therefore the LTCG arising from sale thereon was to be assessed in his hands alone. Therefore, having declared only 50% of the LTCG in his hands, income of this assessee liable for tax escaped assessment within the meaning of the provisions of section 147 of the Act. After recording reasons in this regard, the assessing officer issued notice under Section 148 of the Act on 10-2-2014. The procedure as contemplated by the provisions of Sections 147 & 148 of the Act have been followed by the Assessing Officer. The assessment proceedings were concluded under Section 143(3) of the Act vide order dt. 25-3-2015, wherein the total income of this assessee was determined at Rs3,80,16,320 as against returned income of Rs.66,73,325; in view of the entire LTCG on sale of the aforesaid property at HAL Stage II amounting to Rs.3,72,03,779 being brought to tax in his hands.

2.7 Shri Raghuram P Nambyar, being aggrieved by the order of assessment dt. 25-3-2015 for Assessment Year 2009-10, filed an appeal before the Commissioner (Appeals)-12, Bangalore. The assessee’s appeal was dismissed by the impugned order dt. 22-9-2016, whereby the learned Commissioner (Appeals) upheld the finding / view of the assessing officer that the assessee was the sole and absolute owner of the aforesaid property and therefore the entire LTCG arising on sale of the aforesaid property at No.1088, HAL IInd Stage, Indiranagar, Bangalore was exigible to tax in the hands of the assessee alone.

3.1 Both the assessees, Smt. Veena Nambyar and Sri Raghuram P Nambyar, being aggrieved by the aforesaid orders of the Commissioner (Appeals) for Assessment Year 2009-10 dt. 20-2-2014 and 22-9-2016 respectively have preferred appeals before this Tribunal.

3.2 ITA No.2007/Bang/2016 – Appeal of Shri Raghuram P Nambyar.

In his appeal, the assessee Sri Raghuram P Nambyar has raised the following grounds :-

“ 1. The learned assessing officer had erred in passing the order in the manner passed by him and the learned Commissioner (Appeals) has erred in confirming the same. The impugned orders being bad in law, void ab-initio are required to be quashed.

2.1 In any case, the conditions precedent for the issue of notice under section 148 of the Act being absent, the re-opening of assessment becomes bad in law and consequently the order as passed/confirmed being also bad in law is required to be quashed.

2.2 The learned Commissioner (Appeals) has instead of quashing the impugned order on the above grounds, has just confirmed the order of assessing officer without properly considering the fact and circumstances of the case, submissions of the appellant and the law applicable.

3. The assessing officer had in any case, erred in assessing the Long term capital gain earned on sale of residential house held jointly by the appellant as well as the wife of the appellant in the hands of appellant only and the learned Commissioner (Appeals) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the action of authorities below being totally erroneous both on facts and law is to be disregarded.

4.1 In any case and without further prejudice, the authorities below have erred in:

(a) Not appreciating the fact that the property sold was held by the appellant and the wife of the appellant jointly.

(b) Not appreciating the fact that the rentals received from letting of aforesaid property were offered to tax in equal proportion in the hands of both appellant as well as appellant’s wife and same had been accepted by the department itself.

(c) Holding that the appellant was the sole/absolute owner of the residential property and appellant’s wife had not invested in acquisition of residential property.

The conclusions / observations of authorities below being totally erroneous and without basis both on facts and law is to be disregarded.

4.2 The several observations made and various conclusions drawn by the lower authorities in the course of order are without basis and evidence and are made/drawn on surmises, probabilities and conjectures. Such observations and conclusions by quasi-judicial authorities have no support in law and deserve to be rejected in toto.

5. The appellant had rightly offered his portion of long term capital gain to tax and same is to be accepted without variation and the addition as made/ confirmed is not in accordance with law applicable is liable to be deleted.

6. In any case and without further prejudice, if the entire long term capital gain on sale of residential property is assessed in the hands of the appellant then even the exemption under section 54 and 54EC of the Income Tax Act, as claimed by the wife of the appellant is to be allowed in the hands of the appellant.

7. The appellant denies the liability to pay interest. The interest having been levied erroneously is to be deleted.

8. In view of the above and other grounds to be adduced at the time of hearing it is requested that the impugned order be quashed or atleast assessing the entire Long Term Capital Gain in the hands of the appellant is to be deleted. The income as returned by the appellant be accepted and the interest levied be also deleted.”

3.3 ITA No.12/Bang/2014 – Appeal of Smt. Veena Nambyar.

In her appeal, Smt. Veena Nambyar has raised the following grounds :-

“1. The order of the learned Commissioner (Appeals), passed under Section 250 of the Act in so far as it is against the appellant is opposed to law, equity, probabilities and facts and circumstances in the appellant’s case.

2. The appellant denies herself liable to be assessed on an income below the income filed in the return of income under the facts and circumstances of the case.

3. The learned Commissioner (Appeals) is not justified in upholding the order of assessment as regards an equal share in the Ownership of the Immovable Property sold.

4. The learned Commissioner (Appeals) failed to appreciate the fact that the revenue has accepted the return filed by the appellant for the earlier years offering 50% of the total rental receipts as income from the house property and the ld. assessing officer failed to apply the rule of consistency and now cannot change his opinion for this assessment year under the facts and circumstances of the case.

5. The learned Commissioner (Appeals) is not justified in law in upholding the disallowance of the claim of exemption under Section 54EC of the Act of Rs.50,00,000 invested in the REC Bonds under the facts and circumstances of the case.

6. The learned Commissioner (Appeals) is not justified in law in upholding the disallowance of the claim of exemption made by the learned assessing officer under Section 54 of the Act of Rs.1,68,75,427 invested in the purchase of the new residential property at ‘Mantri Espana’ under the facts and circumstances of the case.

7. The learned Commissioner (Appeals) is not justified in law in not allowing the further claim of exemption under Section 54 / 54F in respect of the sum of Rs.20,00,000 deposited into the capital gains account of the appellant opened in a nationalized bank under the facts and circumstances of the case.

8. The learned Commissioner (Appeals) is not justified in law in holding that the appellant is not eligible to claim deduction under Section 54 of the Act under the facts and circumstances of the case.

9. Without prejudice the learned Commissioner (Appeals) ought have given the benefit of claim of exemption under Section 54F of the Act under the facts and circumstances.

10. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

11. In the view of the above and other grounds that may beurged at the time of hearing of appeal, the appellant prays that appeal may be allow in the interest of justice and fair play.”

3.4 In the course of proceedings the counsels for both assessees filed written submissions. In the case of Smt. Veena Nambyar a paper book (pages 1 to 123) was filed on 19-6-2017. In the case of Sri Raghuram P Nambyar paper book (pages 54 to 293) was filed on 26-6-2017, and case law compilation thereafter. These submissions have been considered while disposing off these appeals.

4.1 The main issues / questions for consideration before us in these appeals are whether or not the assessees i.e. Smt. Veena Nambyar and her husband Sri Raghuram P Nambyar have equal ownership in the aforesaid property at No.1088, HAL II Stage, Indiranagar, Bangalore, as claimed by them and therefore consequently whether both of them are entitled to claim the benefits that arise from such transfer of property in the year under consideration, like exemptions under Section 54F and 54EC of the Act. On the other hand, the findings rendered in the orders of the authorities below is that, on the basis of the documents like sale / purchase agreements of the aforesaid property, Sri Raghuram P Nambyar is the sole owner of the said property, at every stage of purchase and sale thereof and therefore the LTCG arising on sale of the said property is to be assessed solely in his hands.

4.2.1 We have heard the rival contentions, perused and carefully considered the material on record before us. The contention of both assessees are that though in the sale deed dt. 30-6-2008 transferring the said property situated at No.1088, HAL II Stage, Indiranagar, Bangalore does not mention or record the co-ownership of both of them, and records only Sri Raghuram P Nambyar as the sole owner; the purchase of the aforesaid property was effected by equal contributions by both of them. According to the assessees, pursuant to the purchase of the said property, both husband and wife came into joint possession of the said property and thereafter in financial year 1991-92, both of them jointly constructed the residence thereon with equal contributions from both of them from out of their earnings and savings. It was also submitted by the assessees that the rent received from letting out the said property was also equally shown in their respective hands as income from house property in the earlier year and the same has been accepted by the Department. Therefore, according to the assessees, their intentions were that the said property was a joint property and both of them having equal share therein, are both co-owners thereof. It is the assessee’s contention that merely because in the purchase deed dt. 8-12-1986 and sale deed dt. 30-6-2008, under which the said property together with house constructed thereon was sold was only in the name of Sri Raghuram P Nambyar, it does not take away the 50% right in the ownership and enjoyment of the property sold from Smt. Veena Nambyar. In this regard, it was submitted that the authorities below have not considered that the intention of the parties to the sale deed was that both the husband and wife were to jointly sell the aforesaid property along with house thereon and therefore immediately thereafter, Sri Raghuram P Nambyar, the husband made over 50% of the sale consideration i.e. Rs.3,00,45,025 to the account of his wife, Smt. Veena Nambyar’s account. In view of the above, it was argued that both the assessees are entitled to claim the deductions / exemptions under Section 54F and 54EC of the Act in respect of their equal share of the sale consideration arising from sale of the aforesaid property. Strong reliance was placed on the decision of the Hon’ble Apex Court in the case of Poddar Cements ((1997) 226 ITR 625) (SC) in support of the proposition that in the context of section 22 of the Act, to tax the income, the owner is the person who is entitled to receive income from house property in his own right. Therefore, it is contended that in the light of the above cited decision of the Hon’ble Apex Court (supra), the assessee Smt. Veena Nambyar will also be the 50% owner and consequently entitled to the benefits of exemptions under Section 54F and 54 EC of the Act arising out of sale of the said property. It is contended that in these circumstances the actions of the authorities below in the cases on hand are not in accordance with law.

4.2.1 Before us, the learned Departmental Representative for Revenue vehemently supported the findings rendered in the impugned orders of the authorities below. According to the learned Departmental Representative, the learned Commissioner (Appeals) in the impugned order in the case of Sri Raghuram P Nambyar has considered the submissions put forth by the assessee and passed a detailed order. It is pointed out that in para 16 of his order, the learned Commissioner (Appeals) has recorded the finding that in the return of income filed by Shri Raghuram P Nambyar for Assessment Year 1993-94, it is noted that “The residential house has been constructed on a site measuring 4400 sq. ft. purchased by the assessee in the year 1986 for a total consideration of Rs.6,38,000.” The learned Departmental Representative contended that by this admission the averments that the said land / property was purchased jointly by both husband and wife is factually incorrect and it is unimpeachably established that the said property was purchased by Shri Raghuram P Nambyar alone and he is the sole owner of the said property. It was also submitted that no evidence to controvert this admission has been brought on record to establish the assessee’s claims that Smt. Veena Nambyar had contributed 50% of the purchase consideration for purchase of the aforesaid property in 1986. Moreover, in the assessment for Assessment Year 2007-08 in case of Smt. Veena Nambyar, the assessing officer has not considered the issues of joint ownerships of the aforesaid property, therefore the assessee’s contention that Department has accepted her joint ownership of the property is incorrect. It was further argued that the assessee Smt. Veena Nambyar was a citizen of Malaysia when the property was purchased in 1986 and as per law permission of the RBI is required for her to acquire or hold or transfer or dispose by sale any immovable property situated in India and it has not been established with any documentary evidence to the effect that such permission was obtained by her in respect of the purchase of the aforesaid property. In this factual situation of the matter, Smt. Veena Nambyar cannot enjoy the benefits of ownership of the aforesaid property, such as receiving rent, earning profits on disposal of the same and the attempt of the assessees, if accepted, would amount to achieving in the present indirect manner what the law never ever intended to grant to Smt. Veena Nambyar in the first place. Thus it is clear and evident that no title on the said property can be conferred on the wife, i.e. Smt. Veena Nambyar in the factual and legal circumstances of the case.

4.3.1 We have considered the arguments, averments and submissions put forth, by both the learned Authorised Representative for the assessee and the learned Departmental Representative for Revenue, and perused and carefully considered the material on record before us. The question for consideration before us is whether Smt. Veena Nambyar, wife of Shri Raghuram P Nambyar was legally 50% co-owner of the property situated at No.1088, HAL II Stage, Indiranagar, Bangalore which was sold vide registered sale deed dt. 30-6-2008. This is relevant in the context of the claims made by Smt. Veena Nambyar for the benefits of exemption under Section 54EC and 54 of the Act consequent to sale of the aforesaid property. It is an undisputed fact on record that both in the original purchase deed dt. 8-12-1986 and in subsequent registered sale deed of the aforesaid property, dt. 30-6-2008, the name of the assessee, Smt. Veena Nambyar does not appear as owner or coowner. It is also not disputed that the funds for purchase of the aforesaid property in 1986 were entirely met out by Shri Raghuram P Nambyar as set out in the Registered Purchase Deed dt. 8-2-1986. Similarly, on sale of the property vide Regd. Deed dt. 30-6-2008 the sale consideration was entirely received by Shri Raghuram P Nambyar only and Smt. Veena Nambyar had no role in these transactions. The authorities below after examining the relevant records have recorded the finding that in both the purchase and sale deed of the aforesaid property, only the name of Shri Raghuram P Nambyar is mentioned therein to establish that he was the sole legal owner of the aforesaid property. This finding of fact has not been controverted before us by the assessees with any evidence to the contrary.

4.3.1 According to both the assessee’s and the details / records placed before us in the paper books submitted, rental income earned from letting out of the aforesaid property before the sale thereof on 30-6-2008 was offered / declared by both the assessees, Shri Raghuram P Nambyar equally in their returns of income and were assessed in their respective hands. In our considered view, after a careful consideration of the relevant material on record in this regard, the mere fact that both the husband Shri Raghuram P Nambyar and wife Smt. Veena Nambyar have suo moto offered rental income equally in their returns of income, does not confer ownership in the aforesaid property on Smt. Veena Nambyar. As per the recitals in the purchase and registered sale deeds of the aforesaid property, Shri Raghuram P Nambyar alone is the sole legal owner of the said property to the exclusion of all others, including his wife Smt. Veena Nambyar whose name does not appear in the capacity of owner / co-owner in either the purchase or sale deed of the aforesaid property. Ownership has to be considered from the recitals of the relevant documents and not from any stated intention or claim made which is legally unsustainable. In this factual matrix of the cases on hand, we find no merit in the assessee’s contentions that Smt. Veena Nambyar had 50% ownership in the aforesaid property and was therefore entitled to claim and be allowed exemption under Section 54 and 54 EC of the Act.

4.3.2 AS regards the reliance placed by the assessees on the decision of the Hon’ble Apex Court in the case of Poddar Cements P. Ltd. (supra), it is true that the settled position for the purposes of offering income under the head “Income from House Property” for the purposes of section 22 does not require registration of sale deed. The aforesaid decision of the Hon’ble Apex Court (supra) was rendered in the context of section 22 of the Act. In the case on hand, however, the matter of dispute is not with regard to the provisions of Sec.22 of the Act and thus in our considered view the reliance placed by the learned Authorised Representatives thereon is not applicable to the issue before us in the case on hand. At placentum ‘E’ on page 653 of its decision, their Lordships in the case of Poddar Cement Pvt. Ltd. (supra) have held as under –

“ We are conscious of the settled position that under common law, “Owner” means a person who has got valid title legally conveyed to him after complying with the requirements of law such as Transfer of Property Act, Registration Act, etc. But in the context of section 22 of the Income Tax Act, having regard to the ground realities and further having regard to the subject of the Income Tax Act, namely “to tax the income”, we are of the view, “Owner” is a person who is entitled to receive income from the property in his own right.”

4.3.3 It is thus clear that the aforesaid decision of the Hon’ble Apex Court (supra) relied by the assessees counsels are rendered with regard to the provisions of Sec. 22 of the Act. But it is also clearly spells out that “Owner” is the person who is entitled to receive the income from the property in his own right; a right to which Smt. Veena Nambyar is not entitled, but has accorded herself in connivance with her husband. In our humble view, the aforesaid judicial pronouncements (supra) would not come to the rescue of the assessees with regard to the issue of taxability of capital gains; whereby without any legal ownership whatsoever, a person i.e. Smt. Veena Nambyar in this instance, can be considered as owner and be given the benefits of exemption under Section 54 and 54 EC of the Act. As per the recitals in the Purchase and Sale Deeds, the sole owner of the said property is only her husband Shri Raghuram P Nambyar.

4.3.4 One of the contentions taken by the learned Authorised Representative for the assessee, Smt. Veena Nambyar, was that she had contributed to the purchase of the vacant site originally and also contributed an equal share towards the construction of the residential thereon. In this regard copies of certain Bank Accounts of Andhra Bank (Placed at pages 73 to 83 of Paper Book) filed before the authorities below were also placed before us in an attempt to show that Smt. Veena Nambyar had contributed equally to the purchase of the aforesaid vacant site No.1088, HAL II Stage, Indiranagar, Bangalore vide Registered Purchase Deed dt. 8.12.1986. In our view, this claim is factually and legally untenable as at that time, admittedly, the assessee Smt. Veena Nambyar was a Malaysian citizen employed in Saudi Arabia and could not have purchased any property in India without the permission of the Reserve Bank of India (RBI). No such permission of the RBI as required by law has been placed before the authorities below or us. In this factual and legal matrix of the case, we uphold the view of the authorities below that Shri Raghuram P Nambyar alone is the purchaser and sole legal owner of the said property as confirmed by the recitals in the registered purchase and sale deeds.

4.3.5 It was also urged that the assessee Smt. Veena Nambyar and her husband Shri Raghuram P Nambyar had contributed funds equally to the construction of the residence on the aforesaid property. On a perusal of the entries in Andhra Bank Accounts cited by the learned Authorised Representative of the assessee, Smt. Veena Nambyar in this regard, we observe that certain amounts have been transferred from her account to that of her husband Shri Raghuram P Nambyar and others; but that the said transfers were for the purpose of construction of the residence, is not supported or corroborated by any bills to prove the assessee’s claim that they were utilized for construction. No documentary evidence in this regard has been placed either before the authorities below or before us. This being the factual position i.e. that Smt. Veena Nambyar is not the owner of the said property, the authorities below have (i) rightly rejected her claims for exemption under Section 54F and 54EC of the Act and (ii) correctly brought the entire LTCG arising on sale of the said property in the hands of the assessee Shri Raghuram P Nambyar. In this factual matrix of the case, as discussed above, we are of the view that there is no merit in the claims put forth by the assessee in this regard and dismiss the same. Consequently, the grounds raised by the assessee, Smt. Veena Nambyar are dismissed and grounds 1, 3 to 5 and 8 raised in the appeal of Shri Raghuram P Nambyar are dismissed.

5. Ground Nos.2.1 and 2.2 (in the case of Shri Raghuram P Nambyar)

5.1 In these grounds, the assessee contends that the conditions precedent for issue of notice under Section 148 of the Act being absent, the reopening of the assessment becomes bad in law and consequently, the order of assessment passed subsequent to issue of such notices is also bad in law and is required to be quashed. According to the learned Authorised Representative, the assumption of jurisdiction by the assessing officer is improper as the notice under Section 148 of the Act has been issued without application of mind and the reasons recorded do not amount to reason to believe. Reliance was placed on various judicial pronouncements.

5.2 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. On an appraisal of the aforesaid material on record and the orders of the authorities below, we find that the reasons recorded by the assessing officer for initiating proceedings under Section 147 of the Act have been properly recorded, setting out the facts of the case on hand leading to formation of belief that income of the assessee, Shri Raghuram P Nambyar, had escaped assessment due to the fact that, in spite of his being the sole owner of the property purchased on 8-12-1986 and sold on 30-6-2008 as per the recitals in the registered deed, he had offered only 50% LTCG in his hands and incorrectly offered the remaining 50% LTCG in the hands of his wife Smt. Veena Nambyar. In our view, there was tangible material before the assessing officer to form the reason to believe that income of the assessee had escaped assessment. At the stage of initiation of proceedings it is not necessary that escapement of income need be established, but there should be formation of belief by a reasonable person based on relevant material. In our view, the assessing officer has succinctly set out the facts of the case and recorded the reasons leading to the formation of belief that income of the assessee liable to tax had escaped assessment for Assessment Year 2009-10, with due application of mind, following the prescribed procedure as contemplated by the Act and in consonance with the decisions of various Hon’ble Courts. In this factual and legal matrix of the case as discussed above, we do not find any infirmity with the procedure adopted by the assessing officer in initiating proceedings under Section 147 of the Act and consequently dismiss Ground Nos.2.1 and 2.2 raised by the assessee.

6. Ground No.6 (Appeal of Shri Raghuram P Nambyar)

6.1 In this ground, the assessee has raised an alternate plea to contend that if the entire LTCG on sale of the aforesaid property is assessed in the hands of the assessee, Shri Raghuram P Nambyar, then the exemption under Section 54 and 54 EC of the Act as claimed by the assessee’s wife ought to be allowed in the hands of the assessee. This ground was never raised before the learned Commissioner (Appeals). Except for raising this ground, before us, the assessee was not able to substantiate or establish as per the Act as to how his claim that the exemptions claimed by his wife, Smt. Veena Nambyar, under Section 54F and 54 EC of the Act be allowed in his hands when he himself never made the said investments. Finding no merit in this ground No.6 raised by the assessee, we dismiss the same.

7. Ground No.7 (In appeal of Shri Raghuram P Nambyar)—Charge of Interest under sections 234B & 234C.

7.1 In this ground, the assessee Shri Raghuram P Nambyar denies himself liable to be charged interest under Section 234B and 234C of the Act. The charging of interest is consequential and mandatory and the assessing officer has no discretion in the matter. This proposition has been upheld by the Hon’ble Apex Court in the case of Anjum Ghaswala & Others ((2001) 252 ITR 1) (SC) and we, therefore, uphold the action of the assessing officer in charging the assessee the said interest. The assessing officer is however directed to recompute the interest chargeable under Section 234B and 234C of the Act while giving effect to this order.

8. In the result, both the appeals of the assessee for Assessment Year 2009-10 are dismissed.