Delhi High Court
Estate Of Smt. Abnash Kaur vs Acit Circle 23(1), New Delhi on 17 March, 2015
$~31-38
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: March 17,2015
+ ITA 198/2015, C.M. No.4860/2015
+ ITA 199/2015, C.M. No.4861/2015
+ ITA 200/2015, C.M. No.4862/2015
+ ITA 201/2015, C.M. No.4863/2015
+ ITA 202/2015, C.M. No.4864/2015
+ ITA 203/2015, C.M. No.4867/2015
+ ITA 204/2015, C.M. No.4868/2015
+ ITA 205/2015, C.M. No.4869/2015
ESTATE OF SMT. ABNASH KAUR ..... Appellant
Through: Mr. Bharat Beriwal, Advocate.
Versus
ACIT CIRCLE 23(1), NEW DELHI ..... Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.K.GAUBA
MR. JUSTICE R.K.GAUBA
%
1. These eight appeals under Section 260-A of the Income Tax Act arise
out of common order passed by the Income Tax Appellate Tribunal
(hereinafter referred to as "the ITAT") on 07.02.2014 in appeals preferred
before it respecting the assessment years (AY) 1991-92 and 1994-95 to
2000-01. The appeals have been instituted by Smt. Surjit Kaur Gill, one of
the legal heirs of late Smt. Abnash Kaur, describing herself as the
executor/administrator of the estate. Since the contentions raised in all the
appeals are identical, they have been heard together.
2. The appellant urges the following as the question of law for
consideration:-
"Whether the decision of the ITAT that in the circumstances of
the case there was no infirmity with the decision of the AO and
CIT (Appeals) as to the tax liability in the hands of the estate of
Late Abnash Kaur, was justified?"
3. The background facts as narrated by the appellant, to the extent
germane to the issue involved, need to be noted.
4. It is stated that Smt. Abnash Kaur was married to Seth Shiv Prasad in
1955, it being his second marriage. It is claimed that with the help of
money received as marriage gifts from her husband, Smt. Abnash Kaur
purchased property No. 3, South End Road (now known as Rajesh Pilot
Marg), New Delhi from S. Basakha Singh for total consideration of
`2,50,000/- vide sale deed dated 18.01.1956 duly registered on 30.01.1957
in the office of Sub-Registrar, New Delhi. Smt. Abnash Kaur died on
10.06.1976. It is the aforesaid property that constitutes the estate which is
subject matter of the bequest through Will dated 06.02.1973 left behind by
Smt. Abnash Kaur at the time of her death and the rental income from which
forms the bone of contention here. According to the appellant, in terms of
the Will, the estate was bequeathed in equal shares in favour of six
beneficiaries, they including (a) Sh. Kamal Kishore Bindal (son); (b) Smt.
Surjit Kaur Gill (sister); (c) Sh. Ajit Singh (brother); (d) Smt. Adarsh Kaur
Gill (sister); (e) Sh. Gumir Singh Gill (son of Smt. Surjit Kaur Gill and
nephew of Smt. Abnash Kaur); and (f) Ms. Noorien Kaur Gill (daughter of
Smt. Adarsh Kaur Gill and niece of Smt. Abnash Kaur).
5. The appellant Smt. Surjit Kaur Gill, claiming to represent the estate as
its executor/administrator, contends that Smt. Abnash Kaur had executed a
lease deed in March, 1961, ante-dating it as a document executed on
18.11.1958 in favour of her sister Smt. Adarsh Kaur Gill, the document
being attested as witness by her brother Shri Ajit Singh, thereby purporting
to let out the aforesaid property at a nominal rent of `500/- per month. It is
stated that this was a sham transaction and that Smt. Adarsh Kaur Gill, in
turn, had let out the same property at `4,500/- per month for a period of
three years beginning 01.02.1961 in favour of Consul General of
Democratic Republic of Vietnam. It appears that the income returns
submitted by Smt. Abnash Kaur and Smt. Adarsh Kaur Gill (for AY 1959-
60) claiming rental income on such basis were not accepted. The appellant
avers that the objective sought to be achieved through the fake lease deed
was to create a false charge in respect of the property in favour of Smt.
Adarsh Kaur Gill by showing that she had spent an amount of `1,25,000/-
on its renovation, thereby defeating the claim of step-sons of Smt. Adarsh
Kaur in such regard. The appellant pleads that the view of the Assessing
Officer (AO) to such effect was, however, overruled by ITAT in ITA No.
4576/69-70 by order dated 28.02.1971 for AY 1964-65 and that upon
reference being preferred by the Revenue under Section 256(2) of the
Income Tax Act, the High Court declined to answer it holding that it gave
rise to questions of fact.
6. It is alleged by the appellant that after the death of Smt. Abnash Kaur,
Smt. Adarsh Kaur Gill continued to sublet the property and earn rental
income and when called upon by Shri Ajit Singh (one of the legal heirs,
since deceased), she refused to vacate the property or give account of the
rent received. Against the backdrop of these facts, Shri Ajit Singh filed a
civil suit No. 2167/1993 in this court on 16.09.1993 praying for reliefs in
the nature of partition of the estate, rendition of accounts, declaration and
permanent injunction.. The civil suit is stated to be still pending for
adjudication.
7. It is further stated that Shri Ajit Singh being the executor and
administrator of the estate had filed an application before Commissioner of
Income Tax under Section 281-A (since repealed) of the Income Tax Act in
1985 for Benamidar declaration and also made a disclosure on 30.09.1986
under the amnesty scheme. Shri Ajit Singh further filed a revision petition
under Section 264 of the Income Tax Act on 29.11.1990. It is stated that in
all these petitions and declarations, Shri Ajit Singh made averments about
the falsity of the lease document mentioned above. It is claimed that
pursuant to the disclosure made by Shri Ajit Singh, the tax recovery officer
issued a warrant of attachment on 11.09.1987 in respect of the property and
that the said warrant has not been recalled till date.
8. The appellant further pleads that since the estate of Smt. Abnash Kaur
had not been distributed, the AO issued a notice under Section 148 of
Income Tax Act to re-open the assessment for the block period 1991-92 to
2000-01, recording, inter alia, the following reasons:-
"An application U/S 230 A (1) in Form no. 34A has been filed
in respect of Estate of Late Smt. Abnash Kaur situated at
Bungalow No.3, South End Road, New Delhi by Smt. Surjit
Kaur Gill and Sh. G S Gill in the combined application both
the legal heirs requested for grant of certificate to register 61%
share in the undivided property of late Smt. Abnash Kaur. The
other 39% share is claimed to have been devolved to Smt.
Abnash Kaur Gill and her daughter Smt. Noorien Kaur Gill.
Smt. Abnash Kaur Gill acquired property known as Bungalow
No.3 South End Road, New Delhi for a consideration of
Rs.2,50,000/- vide sale deed dated 18.01.1956 registered as
document no. 215, Additional Book no. 1, Vol. No. 354 at
pages 117 to 138 on 30.01.1957 in the office of Sub-Registrar,
New Delhi. Smt. Abnash Kaur Gill expired on 10.06.1976
leaving behind the following beneficiaries under her registered
will dated leaving behind the following beneficiaries under her
registered will dated 06.02.1973 bequeathing 1/6th share each
to her six beneficiaries in the above said property:
Name of Relationship to Division as per
Beneficiaries Original will of Smt.
Abnash Kaur
K K Bindal Son (1/6) 16.67
Ajit Singh Brother (1/6) 16.67
Surjit Kaur Sister (1/6) 16.67
Gill
GSGill Nephew (1/6) , 16.67
Adarsh Gill Sister (1/6) 16.67
Noorien Kaur Niece 16.67
Gill
Shri K K Bindal s/o. Late Smt. Abnash Kaur expired on
15.12.1995, in Estate, leaving no first and second class heirs.
His share was thus, devolved to Shri Ajit Singh, Smt. Surjit
Kaur Gill and Adarsh Kaur Gill @ 5.55%, 5.56% and 5.56%
respectively. Similarly, Sh. Ajit Singh expired on 12.12.2000
and his share of 22.22% (16.67 + 5.55) would devolve to Smt.
Surjit Kaur Gill, being executor and administrator to the Estate
left by Shri Surjit Kaur Gill and Shri G S Gill in their letter
dated 21.05.2001(Annex. A-3), thus, comes to as under as on
date:
Surjit Kaur Gill 44.45%
G. S. Gill 16.67%
Adarsh Kaur Gill 22.22%
Noorien Kaur Gill 16.67%
The property in question being No.3, South End Road,
New Delhi is in the possession of the above named four persons
who are executors/ administrators/ occupiers/ legal heirs of
Late Smt. Abnash Kaur. It is further noticed from the details
furnished along with the letter dated 21.05.2001 that the
property was let out to various parties during the period for
last ten years. No return of income, however, for any of these
last ten years were filed in the name of Estate of Late Smt.
Abnash Kaur with the department. If is further noticed that
there are certain contradictions in the submission made by the
legal heirs/ occupiers/ administrators/executors etc to the
Appellate Authorities including ITAT as also to the other
Courts. One such matter is still pending before the Hon'ble
Delhi High Court. Details of such facts are narrated in the
letter dated 21.05.2001. In view of the above mentioned facts
and since no return of income of the Estate of Late Smt. Abnash
Kaur is filed, I have reasons to believe that income chargeable
to tax have escaped the assessment. Since the status of all four
legal heirs/ occupies/ administrators/ executors etc. is not
known to this office in the absence of complete details, notices
u/s 148 of the Act are being issued from Assessment Year 1991-
92 to 2000-01 in the cases of the four existing legal heirs/
administrators/ executors/occupiers i.e. Smt. Adarsh Kaur Gill,
Noorien Kaur Gill, Surjit Kaur Gill and Sh. GS Gill. "
9. It is further stated by the appellant that the AO framed the assessment
orders on 25.03.2003 for the afore-mentioned period adding the rental
income in the sum of `81,21,250/- in the hands of the appellant. It is stated
that Smt. Adarsh Kaur Gill, however, filed an appeal against the said
assessment order dated 25.03.2013 before the Commissioner of Income Tax
(Appeals) [CIT (Appeals)] challenging the said addition. In the course of
consideration of the appeal, the appellant (Smt. Surjit Kaur Gill) with her
son made a request for opportunity of hearing.
10. The appellant states that the CIT (Appeals), by his order dated
26.03.2004, deleted the addition of rental income in the hands of the estate
primarily on the ground that the said rental income had been already
assessed in the hands of Smt. Adarsh Kaur Gill. The Revenue challenged
the order of CIT (Appeals) before ITAT, during the hearing on which the
appellant also participated to raise grievance about denial of opportunity to
rebut. The ITAT dismissed the appeals of the Revenue by common order
passed on 07.02.2014.
11. It is argued by the appellant that the view taken by ITAT is erroneous
because the lease deed in favour of Smt. Adarsh Kaur Gill was a sham
document and cannot be relied upon; the estate not yet divided or
distributed, Section 168 mandates that the income be assessed in the hands
of the executor who is in the de facto management of the estate; and that the
conclusion that there is no loss to Revenue is not correct since there are
outstanding dues of income tax and wealth tax in the name of the estate for
the period 1969-70 to 1988-89, as reflected, inter alia, in notice dated
04.10.2001 under Section 221(1) of Income Tax Act indicating demand in
the sum of `41,15,101/-.
12. The CIT (Appeals), in deleting the addition made by the AO in the
block assessment order, inter alia, rejected the contention that the rent deed
executed by Smt. Abnash Kaur in favour of her sister Smt. Adarsh Kaur Gill
is a sham document. The ITAT upheld the said finding of fact quoting (in
Para 40 of the impugned order) the observations of the first appellate
authority as under:-
"40. ... Late Smt. Abnash Kaur in her Will has categorically
made mention of the lease agreement dated 18.11.1958
between her and Smt. Adarsh Kaur Gill relating to property no.
3, South End Road, New Delhi. She has also mentioned the
increase the lease rent through a subsequent agreement and
she has also categorically stated that the property 3, South End
Road is in physical possession of Smt. Adarsh Kaur Gill. She
has admitted in her Will that Smt. Adarsh Kaur Gill is her
tenant from whom a rent of Rs.1,500/- p.m. was being received.
She is also mentioning about the charge of Smt. Adarsh Kaur
Gill, the lessee of the house under agreement dated 18-11-1958
vide clause No. 13 created at 50% of the amount spent by her
in the renovation of the said house No. 3, South End Road, New
Delhi as and when she vacates the premises. The declaration
made by late Smt. Abnash Kaur in her Will relating to the
agreement dated 18-11-1958 tallies with the photocopy of the
lease agreement dated 18-11-1958...
In her Will late Smt. Abnash Kaur has made reference that Sh.
Ajit Singh is authorized to receive the rent of Rs.1,500/- per
mensem from property 3, South End Road, New Delhi from
Smt. Adarsh Kaur Gill. This makes it clear that during her
lifetime Smt. Abnash Kaur never terminated the tenancy rights
given through the lease agreement to Smt. Adarsh Kaur Gill
and she never intended to terminate the lease agreement even
after her death because otherwise there was no purpose to
authorize Sh. Ajit Singh, executor of the Will to receive
Rs.1,500/- p.m. as rent from Smt. Adarsh Kaur Gill.
The Assessing Officer has not brought anything on record to
prove that the tenancy rights given by Smt. Abnash Kaur Gill
during her life time were terminated by her during her lifetime
or even after her death except relying on the statement of Sh.
Ajit Singh who was one of the witness to the lease agreement.
Perusal of the declaration made by Sh. Ajit Singh indicates that
Sh. Ajit Singh has not denied his signatures on the lease
agreement.
The writing of this document has not been denied even by Sh.
Ajit Singh and he has also not denied the writing and existence
of the lease agreement. He has only said that the lease
arrangement was a sham transaction entered into between the
parties for saving the property from the litigation by the order
claimants i.e. the step sons of the Smt. Abnash Kaur. The
Assessing Officer has not discussed whether Sh. Ajit Singh was
competent to make a benami declaration u/s 281A because
such declaration could be made by the owner of the property
actually belonging to the person but held in the name of some
other person. A certificate was to be issued by the CIT on the
basis of declaration of 281A and the Assessing Officer has not
brought on the record whether any cognizance was taken by
the CIT on the benami declaration u/s 281A and whether any
certificate was issued ..."
13. Taking note of the fact that the estate of Smt. Abnash Kaur remains to
be divided/partitioned, the contention that the rental income received by
Smt. Adarsh Kaur Gill is liable to be assessed in the hands of the estate was
rejected by the CIT (Appeals) for the following reasons:-
"The Assessing Officer has ultimately come to the conclusion
that the estate of late Smt. Abnash Kaur i.e. property No. 3,
South End Road, New Delhi is still undivided and the rental
income received by the legal heirs on account of this property
is liable to be reassessed in the hands of the estate. As
discussed above this conclusion drawn by the Assessing Officer
cannot be considered as logical or cogent because as per Will
and as statement filed before the competent authority discussed
above the property owned by the estate is still on rent with Mrs.
Adarsh Kaur Gill at Rs.1,500/- per month and following the
decision of Hon'ble ITAT Bench Delhi for different years in the
case of Smt. Abnash Kaur as discussed above, it is held that the
rental income assessable in the hands of the estate would be
only the extent of Rs.1,500/- p.m. which is the rent payable by
Smt. Adarsh Kaur Gill. Since the estate is not self occupied by
any of the heirs as legal heirs but is actually in possession of
one of the legal heirs on account of the tenancy rights, hence
the Assessing Officer was also not justified to assess any
notional income on account of self occupancy."
14. The ITAT upheld the above-quoted findings and concluded (in Para
43) as under:-
"... in view of the pending litigation regarding the distribution
of estate of late Smt. Abnash Kaur i.e. 3, South End, New Delhi,
the estate still continues to be undivided, and the income to be
assessed in the hands of the estate would only be Rs.1,500/- per
month. The entire property is still subject to partition only, as
and when the estate is partitioned the liability of paying tax
would fall on those successors of Abnash Kaur from whom the
revenue could collect tax later..."
15. The ITAT further observed (in Para 45) thus:-
"...It is evident from the records placed before us, and rather
stands admitted, that the tax demands in question have already
been paid by Smt. Adarsh Kaur for the relevant assessment
years. The only argument raised before us, to justify re-opening
these demands, is under the garb that the corresponding
income ought to have been accounted for in the estate of
Abnash Kaur. There is no evidence or arguments brought to
bear that in case such re-accounting is done, the tax demands
for the relevant assessment years qua the said property would
have increased, and some benefit would have accrued to the
exchequer. As such, it is evident that this effort of re-
accounting, even if successful, may yield no benefit to the
exchequer, whatsoever and is merely an academic exercise
sans any benefit. It is well settled that this sort of adjudication
for academic purposes only, cannot be permitted, rather we are
not willing to be persuaded to indulge in such purely academic
exercise when judicial institutions of every level, including the
Tribunal is seriously burdened with huge backlog of cases. We
are in agreement with the finding of the ld. CIT(A) that had the
rental income been separately assessed in the hand of the
estate then the tax payable would be lower than what has been
paid by Smt. Adarsh Kaur Gill because she has other income
also than the rental income. Therefore, ld. CIT(A) has found
that there is no reduction of tax on account of rent from sub-
letting of properties assessed in the hand of Smt. Adarsh Kaur
Gill as an individual."
16. It appears that in the civil suit No. 2167/1993 instituted by Shri Ajit
Singh, inter alia, seeking partition, Smt. Adarsh Kaur Gill who had been
impleaded as defendant No. 1 had moved an application under Order VII
Rule 11 of Code of Civil Procedure taking objection to the claim for
rendition of account (in respect of rental income) being time barred. The
application was dismissed by the learned Single Judge by order dated
07.04.2008. But, a Division Bench by order dated 27.01.2009 allowed
FAO(OS) No. 290/2008 holding the reliefs other than the one praying for
partition of the property to be time barred. A copy of judgment dated
30.01.2014 allowing civil appeal No. 8221/2011 of Supreme Court has been
filed to contend that the claim of Shri Ajit Singh (since deceased) as one of
the legal heirs of Smt. Abnash Kaur for his share in the rental income is still
alive. It does appear that in taking the views to the effect quoted above, the
CIT (Appeals), and the ITAT, had referred to the rejection of the claim in
the civil suit to the extent of rendition of accounts in the rental income. But
then, in our view, nothing turns in favour of the appellant in these appeals
on account of the judgment rendered by the Supreme Court on 30.01.2014
in the context of the civil suit.
17. The findings of the two appellate forums on the plea respecting the
lease deed executed by late Smt. Abnash Kaur in favour of Smt. Adarsh
Kaur Gill relate to questions of fact which cannot be agitated in appeals
under Section 260-A. Whilst there is no doubt that in terms of Section 168
of the Income Tax Act, the income of the estate of the deceased person is
chargeable to tax in the hands of the executor, in the face of the factual
matrix indicating the legal heirs to be locked in litigation in the civil court
for their respective claims, the view taken by the CIT (Appeals) and the
ITAT cannot be faulted. The rental income accruing to Smt. Adarsh Kaur
Gill, may be on account of subletting, cannot be included in the annual
letting value of the estate, until and unless the civil suit is decided. Even
otherwise, as held by the authorities below, such rental income coming in
the hands of Smt. Adarsh Kaur Gill has been duly declared in her returns
and assessed accordingly. The appellant claims to be the
executor/administrator of the estate. If she makes any payment on account
of outstanding liability of the estate towards income tax, or wealth tax, she
would be entitled to get suitable adjustment or set off towards such liability
in the event of she succeeding in her claim in the civil suit,
18. Thus, no substantial question of law arises. The appeals are
dismissed.
R.K.GAUBA
(JUDGE)
S. RAVINDRA BHAT
(JUDGE)
MARCH 17, 2015
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