A recent Bombay High Court ruling has provided significant relief in a joint property ownership tax dispute. The case involved a high-value property worth ₹6.75 crore purchased entirely from one spouse’s personal funds, while the other spouse was added as a joint owner purely for convenience. Despite no financial contribution from the joint owner, the Income Tax Department issued a reassessment notice under Section 148, alleging possible income escapement.
The court examined property documents and bank statements confirming that the entire purchase amount came from the primary buyer’s account. It found no basis to believe that the joint owner had undisclosed income for the assessment year in question, noting that the person’s declared annual income was only ₹4.36 lakh. The reassessment notice was deemed unsustainable and was quashed.
The judgment emphasised that tax authorities must verify the actual source of funds rather than relying solely on the fact of joint ownership. It also drew support from earlier legal precedents where nominal co-owners with no financial stake were protected from similar notices.
Tax experts note that this decision reinforces safeguards against arbitrary reassessments and protects spouses or family members added to property titles for practical or sentimental reasons. They recommend that co-owners clearly record funding contributions in the sale deed, maintain thorough payment documentation, and make transparent disclosures in tax filings to prevent future disputes.
The ruling is expected to serve as a strong precedent, ensuring that nominal joint owners are not subjected to unwarranted tax scrutiny and that reassessment powers are exercised only with credible evidence of income escapement.
Source #ET
