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The Income Tax Appellate Tribunal ruled that adding a spouse’s name to property for convenience doesn’t automatically make them liable for entire sale proceeds. The tribunal directed tax officers to verify if the husband was the sole funder and owner, and if capital gains were already taxed in his return, offering relief to a Mumbai taxpayer.

MUMBAI: If a spouse’s name is added to a property merely for convenience or security, the income-tax (I-T) department cannot automatically tax the entire sale proceeds in that person’s hands without examining who actually funded and owned the property, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT)

In a relief for a Mumbai taxpayer who was saddled with a Rs 62.5 lakh addition to her income, the tribunal directed the I-T officer to verify her claim that she was only a nominal co-owner, while the flat was fully purchased and sold by her husband using his own funds, and that the capital gains were already disclosed in his I-T return.

The case involved one Gupta, whose assessment for AY 2018-19 was reopened after the tax department received information that she had sold an immovable property for Rs 62.5 lakh during the financial year 2017-18, but had not filed an I-T return. The tax officer completed the assessment ex parte (without hearing the taxpayer) and treated the entire sale consideration as taxable income in her hands after noting that no details regarding acquisition cost or computation of gains were furnished.

Before the ITAT, Gupta contended that she was only a co-owner in name and that the property was entirely funded by her husband through his own bank accounts and loan proceeds. It was also submitted that the husband had already disclosed the capital gains arising from the sale of the property in his I-T return. Supporting documents, including purchase and sale agreements, bank statements, loan disbursement records and the husband’s tax return acknowledgement, were placed on record with the ITAT.