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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-3, National Faceless Appeal Centre (NFAC), Delhi dated 12.07.2022 and pertains to assessment year 2014-15.
:-2-: ITA. No:783 /Chny/2022 2. The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case the order of the first appellate authority in dismissing the appeal of the appellant is against facts and is not legally maintainable.
2. On the facts and circumstances of the case the AO is not justified in bringing to tax capital gains for the assessment year 2013-14 and 2014-15 and it is a settled position that taxing capital gains in respect of a single transaction can happen only in one assessment year and not in two assessment years.
3. On facts and circumstances of the case the first appellate authority has not considered the written submissions dated 03.02.2022 filed along with enclosures in all its aspects in deciding the appeal and the above submissions may also be taken in to account in deciding the appeal.
4. For the above grounds and other grounds to be urged during the hearing of the appeal, the appellant prays that the appeal be allowed in the interest of equity and justice.”
3. The brief facts of the case are that, the assessee is a retired college professor, did not filed his return of income for the assessment year 2014-15. The assessment has been re- opened on the basis of information available with the Department, as per which income chargeable to tax had been escaped assessment on account of understatement of his share of sale consideration and consequent capital gain from sale of property. Therefore, notice u/s. 148 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), dated 31.03.2018 was served on the assessee. In response to the notice, the assessee has filed return of income on 05.11.2019 :-3-: ITA. No:783 /Chny/2022 admitting income of Rs. 4,89,930/-. The case has been taken up for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee has sold a property along with his two brothers through his Power of Attorney (POA) holder Mr. A. Sridharan, in favour of Mrs. Krishna vide sale deed dated 18th July 2013 for a consideration of Rs. 50 lakhs. Therefore, the AO called upon the assessee to file necessary evidences including computation of capital gains from sale of property. In response, the assessee vide his letter dated 21.11.2019, submitted that he along with his two brothers had sold a property for a consideration of Rs. 54,70,500/-, by way of registered POA coupled with sale receipt dated 02.01.2013 and also declared his share of consideration of Rs. 18,23,500/- and computed necessary capital gains and offered to tax for assessment year 2013-14. Since, the assessee has transferred a property by way of registered POA, and also handed over possession to the buyer, as per the provisions of section 2(47)(v) of the Act, deemed transfer took place for the assessment year 2013-14, and thus, the question of computation of capital gains for assessment year 2014-15 does not arise, when the POA holder transferred the property in favour of his wife Mrs. Krishna.
:-4-: ITA. No:783 /Chny/2022 4. The AO, however, was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, when the POA holder has executed sale deed on 18.07.2013, the transfer took place in terms of section 247 of the Act and thus, the assessee is liable to pay capital gain for the assessment year 2014-15 and therefore, rejected arguments of the assessee and computed capital gains on sale consideration by taking into account sale consideration of Rs. 94,48,500/- in terms of section 50C of the Act and considered 1/3rd share of the assessee which works out to Rs. 31,49,500/- and computed long term capital gain of Rs. 13,99,344/-. The AO, while arriving at income from capital gains has allowed relief to the extent of Rs. 5,58,321/-, towards capital gains admitted by the assessee in the return of income filed for assessment year 2013-14.
The assessee carried the matter in appeal before the first appellant authority, but could not succeed. The ld. CIT(A), for the reasons stated in the appellant order dated 12.07.2022 rejected arguments of the assessee and sustained additions made by the AO towards computation of capital gains from :-5-: ITA. No:783 /Chny/2022 transfer of property. The relevant findings of the AO are as under: 4. Appellate findings:
I have carefully considered the facts of the case, reassessment order dated 22.12.2019 u/s 143(3) r.w.s. 147 from the ITO, Ward-1(4), Salem, submission on the merit of the case filed by the appellant during the appellate proceedings.
4.1 It is seen that appellant has filed the present appeal on 22.02.2020 against the reassessment order u/s 143(3) r.w.s. 147 dated 22.12.2019. This appeal is filed out of date and not filed within 30 days from the service of the order. However, the appellant has filed a request letter seeking condonation of delay in filling the appeal. In his letter the appellant has stated the facts and reasons as to why he has. failed to file the appeal within due date. I have carefully considered the reasons and circumstances as stated by the appellant and I am fully satisfied that it is a fit case for condonation of delay. In view of the above discussion I hereby condone the delay in filing the appeal and this appeal is admitted for adjudication on merit.
4.2 Grounds of appeal No. 1 to 9:- Vide these grounds of appeal the appellant has challenged the addition of Rs. 13,99,340/- made u/s 143(3) r.w.s. 147 on account of long term capital gain. The sum and substance of these grounds of appeal is that the appellant is aggrieved with the addition and has challenged on various accounts. The appellant has contested the application of section 50C of the IT Act by the ITO and has argued that fare market value to the registering authority is only enabling provision to arrive at fare market value and it shall not be conclusive mandatory. Further, the appellant has also argued that he was duped by the purchaser/buyer therefore, AO should have made full inquiry before reaching the fare market value at Rs. :-6-: ITA. No:783 /Chny/2022 94,48,500-. The appellant has also raised the question on the validity of reassessment order passed u/s 147 of the IT Act and has also argued that reassessment proceedings are bad in law. Based on the strength of these grounds of appeal the appellant has sought relief this office.
4.2 I have carefully perused/examined the facts of the case, reassessment order u/s 143(3) r.w.s. 147 and reply filed by the appellant during the appellate proceedings. From the perusal of reassessment order it is seen that the case was reopened u/s 14 7 of the IT Act based on the information received by the department and subsequent belief with regard to escapement of income during the assessment year 2014-15. It is seen that the appellant has sold the property during the year and has not shown/declared due capital gain earned on this property. Due inquiry was made by the AO from the Sub Registrar office u/s 133(6) and it came to notice that the appellant has received 1/3° share of total sale consideration amounting to Rs, 94,48,500/-. The AO has calculated 1/3° share has amounting to Rs. 31,49,500/and has also given benefit of indexation and also exemption u/s 54 of the IT Act, to the appellant. Further, it is also noticed from the computation of income AO has given due credit to the capital gain amounting to Rs. 5,58,321/- already admitted by the appellant. Based on these facts, the AO has arrived that an amount of Rs. 13,99,344/- as balance capital gain which was not declared by the appellant. Accordingly, AO has made an addition of Rs. 13,99,344/- as on account of capital gain not declared by the appellant.
4.3 The appellant has contested and challenged the addition of Rs. 13,99,344/made by the AO on account of long term capital gain and has argued that the action of AO is bad in law. The appellant has argued that he was duped by the purchaser and true capital gain has already being shown by him in his ROI. The appellant has also stated that power of attorney was transferred :-7-: ITA. No:783 /Chny/2022 to third party thereby owner of the property looses entire control over the property and such control gets transferred to the person in whose favour the power of attorney has been executed. Based on the factual position with regard to power of attorney the appellant has claimed that it has only received 54,70,500/- as sale consideration (113rd share of the appellant) which has been duly disclosed. Further, AO has also contested the invocation of section SOC of the IT Act by the AO and has argued that matter should have been referred to valuation cell as provided u/s 55A of the IT Act.
4.4 I have duly considered the reply of the appellant and findings of the AO in his assessment order from the perusal of assessment order it is seen that AO has made due inquiry u/s 133(6) from the Sub Registrar Office. Further, it is also evident that AO has also made inquiry from SRO, Joint-1, Coimbatore and has got the copy of said power of attorney. The AO has given his clear finding in the paragraph 7 of his reassessment order, where it is mentioned that no consideration has been received for executing this power of attorney. The AO has given his finding that in the facts/circumstances of the present case, the appellant is responsible for sale and sale consideration. Based on his clear cut findings, the AO has invoked section 50C of the IT Act for arriving at fair market value of the property sold by the appellant. Accordingly, AO has taken the sale consideration of Rs. 94,48,500/- as reflected in the sale documents. In view of the above discussion I am inclined to concur with the findings AO in his assessment order with respect of addition of Rs. 13,99,344/- on account of long terms capital gain. Hence, the addition of Rs. 13,99,344/- made by the AO is confirmed. Therefore, these grounds of appeal are dismissed.”
:-8-: ITA. No:783 /Chny/2022 6. The Ld. Counsel for the assessee, referring to POA dated 16th day of November, 2012 which was registered in the office of Sub-Registrar on 02.01.2013, submitted that the assessee has executed irrevocable POA in favour of the buyer Mr. A. Sridharan and also received full amount of consideration of Rs. 54,70,500/- by way of cheque and cash as per receipt dated 02.01.2013. Since, the assessee has executed irrevocable POA, coupled with sale receipt, deemed transfer referred to section 2(47)(v) of the Act took place in the assessment year 2013-14, and thus, the assessee has rightly computed capital gains for the assessment year 2013-14. He further, referring to the sale deed dated 18.07.2013, submitted that if you go through sale deed, the same has been executed by POA holder in favour of his wife and from the above, it is very clear that property is with the POA holder and thus, the question of computation of capital gain for the assessment year 2014-15 does not arise.
The ld. DR, on the other hand referring to the recitals of the POA submitted that as per POA dated 16.11.2012, it was clearly stated that no consideration has been received for executing the POA, and from the above, it is very clear that :-9-: ITA. No:783 /Chny/2022 the assessee has transferred right of the property in favour of the POA holder in the financial year relevant to assessment year 2014-15. Therefore, the AO has rightly computed capital gain when the assessee has transferred the property in the impugned assessment year.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The fact borne out from record clearly indicates that the assessee along with his two brothers has executed the POA on 16.11.2012 in favour of Shri. A. Sreedharan and relinquished right and interest in the property in favour of the purchaser for a consideration of Rs. 54,70,500/-. It is further strengthened by the sale receipt dated 02.01.2013, as per which the entire sale consideration of Rs. 54,70,500/- has been paid by the seller right from 15.11.2012 by way of six cheques in favour of three sellers and partly by cash. If you go by the recitals of POA, coupled with sale receipt dated 02.01.2013, there is no dispute with regard to the date of transfer of property, because the assessee has relinquished their right in favour of the buyer and received full amount of consideration in the assessment year 2013-14. Therefore, in :-10-: ITA. No:783 /Chny/2022 our considered view, deemed transfer referred in to section 2(47)(v) of the Act, took place in the assessment year 2013- 14, and thus, the assessee has rightly computed capital gains and offered to tax in the assessment year 2013-14. As regard the observation of the AO on the basis of subsequent sale deed dated 18.07.2013 and computation of capital gains for the assessment year 2014-15, we find that although, the POA holder executed registered sale deed dated 18.07.2013, but sale deed has been executed in favour of Mrs. Krishna, assessee’s wife. From the above, what we understood is that POA holder had purchased a property from the assessee in the year 2012-13 by way of registered POA coupled with sale receipt dated 02.01.2013 and has only completed the formality of registration of documents in favour of his wife on 18.07.2013. Therefore, we are of the considered view that the AO is completely erred in computing capital gains in the impugned assessment year on the basis of subsequent sale deed dated 18.07.2013, even though the assessee has made it very clear, he has offered capital gains in the assessment year 2013-14. In fact, the AO himself has given credit for the amount of capital gains declared for the assessment year 2013-14, while computing capital gains in the impugned :-11-: ITA. No:783 /Chny/2022 assessment year. In our view, once the AO came to the conclusion that the assessee has offered capital gains in the earlier assessment year, then there is no reason for the AO to compute capital gains on transfer of very same asset in the impugned assessment year, because transfer will not take place in two assessment years. The ld. CIT(A), without considering relevant facts simply sustained additions made by the AO and thus, we set aside the order passed by the CIT(A) and direct the AO to delete the additions made towards capital gains from sale of property for the impugned assessment year.