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2025 Supreme(Guj) 1543
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
Lata Kamalbhai Shah, Lh. Of Late Kamalbhai Ramniklal Shah & Anr. – Petitioner
Versus
National Faceless Assessment Centre, Delhi & Anr. – Respondents
R/Special Civil Application No. 12942 of 2022
Decided On : 23-06-2025
For the Petitioner: Mr. Hardik V Vora.
For the Respondents: Karan G. Sanghani, Sr. Standing Counsel.
Legal heirs can claim capital gains exemptions under Section 54 of the Income Tax Act, even when investments are made in their names post the death of the deceased, emphasizing a liberal interpretation of 'assessee'.
Headnote:(A) Constitution of India - Article 227 - Income Tax Act, 1961 - Sections 147, 148 and 54 - Challenge to notice for re-opening assessment and consequent order based on alleged escapement of income pertaining to capital gains - Petitioner legally representing deceased's estate argued jurisdictional errors in the impugned notice - Court found investments made in legal heirs' names eligible under Section 54 for claiming exemptions - Upheld by citing previous rulings which advocate a liberal interpretation of 'assessee'. (Paras 4, 8, 9)
Facts of the case:
The petitioners, as legal heirs of a deceased individual, contended that they had filed legitimate income tax returns declaring property sales and corresponding capital gains while claiming deductions permitted under Section 54, with investments made post-decease in the legal heirs' names. (Paras 5.1-5.6)
Findings of Court:
The court ruled that the respondent could not have reopened the assessment on the grounds cited, thereby finding the evidence of investment by legal heirs just and in compliance with Section 54 - A hyper-technical approach was deemed invalid. (Paras 8.1-8.3)
Issues: The primary issue revolved around whether the effective notice issued under Section 148 became invalid, given that the petitioners were legally representing the deceased, and whether investments made after death qualified for deductions under Section 54. (Paras 6, 8)
Ratio Decidendi: The court reaffirmed that legal heirs can claim exemptions under Section 54 when making investments relevant to capital gains, thus disallowing the assessment order based on notification claims of income being escapable just because investments were made in the legal heirs' names. (Paras 8.2-8.3)
Result: Petition succeeded; the impugned notice and assessment order quashed.
JUDGMENT :
BHARGAV D. KARIA, J.
1 Heard learned advocate Mr.Hardik Vora for the petitioner and learned Senior Standing Counsel Mr.Karan Sanghani for the respondent.
2 Rule returnable forthwith. Learned Senior Standing Counsel Mr.Sanghani waives service of notice of rule for the respondent.
3 Having regard to the controversy involved in this petition which is in a narrow compass with the consent of the learned advocates for the respective parties, the same is taken up for hearing.
4 By this petition under Article 227 of the Constitution of India, the petitioner has challenged the notice dated 21.04.2020 issued under Sec.148 of the INCOME TAX ACT , 1961 (for short ’the Act’)as well as the Assessment Order dated 27.03.2022 passed under Sec.147 read with Sec.144B of the Act.
5 The brief facts of the case are that the petitioners are the legal heirs of one Kamalbhai Ramniklal Shah, who expired on 12.03.2013. After the death of late Shri Kamalbhai Shah, the petitioners filed return of income for the Assessment Year 2013-14 declaring total income at Rs.15,64,200/- on 05.08.2013. In the return of income, capital gains arising out of the property situated at Plot No.4617 Arignar, Anna Nagar, Mullam village, Chennai, Tamil Nadu, was disclosed after availing the benefit under Sec.54F after placing the fixed deposits in name of the legal heirs under the Capital Gain Accounts Scheme with the IDBI Bank amounting to Rs.90 lakhs on 03.1.2013 and Rs.95 lakhs on 08.1.2013.
5.1 It is the case of the petitioners that late Kamalbhai Ramniklal Shah, along with three brothers were gifted with the aforesaid property in equal proportion i.e. 25% each by their mother through Settlement Deed dated 18.08.2009 and the said property was sold for a consideration of Rs.13,72,00,000/- on 19.12.2012 and the share of late Kamalbhai Ramniklal Shah was Rs.34,300,000/-.
5.2 After the sad demise of late Kamalbhai Shah, the fixed deposits in Capital Gain Accounts Scheme was made in the name of the petitioner Ajit Shah amounting to Rs.40 lakhs on 26.07.2013 and further REC bond were purchased amounting to Rs.20 lakhs on 21.05.2013 and NHAI bonds amounting to Rs.30 lakhs on 26.5.2013 in name of Lata Kamalbhai Shah, the wife of late Kamalbhai Shah.
5.3 The respondent – Assessing Officer, issued the impugned notice dated 21.04.2020 for re- opening the assessment for the year under consideration on the information that late Kamalbhai Shah sold the immovable property during the year under consideration but the long term capital gains was not disclosed in the return of income ignoring the aforesaid facts of filing the returns by the petitioners in the capacity of the legal representatives.
5.4 Thereafter, notices under Sec.142(1) dated 29.09.2020, 19.03.2021 and 27.09.2021 were issued calling for the details and necessary documents which were provided by the petitioners. The petitioners were also called upon to provide the details by notice dated 29.09.2021 under Sec.142(1) of the Act regarding the capital gains disclosed in the Income Tax Returns which were provided by the petitioners along with the Sale Deed, Settlement Deed, proof of expenditure on sale of property, proof of exemptions claimed and computation of capital gains, by reply dated 07.10.2021.
5.5 In response to the notice dated 23.11.2021 was issued under Sec.141 of the Act, calling for the certified statement from the bank confirming the investments made under the Capital Gains Scheme and to show cause as to why the exemption under Sec.51 should not be denied as it was not done in the name of late Kamalbhai Shah. Petitioner No.2 Ajitbhai Shah, legal heir of the petitioner submitted a copy of statement from the bank with period of holding of investment in Capital Gains Account along with date of investment and maturity and withdrawal date. It was also intimated to the respondent – Assessing Officer that the late Kamalbhai Shah died on 12.03.2013, hence the investment after his demise could not be done in his name and a
