Loading judgment…
Facts
The assessee received Rs. 5,40,000/- as a confirming party to a property sale, which the Assessing Officer treated as income from other sources. The assessee claimed it as capital gain. The Assessing Officer re-opened the assessment under Section 147.
Held
The Tribunal held that the amount received by the assessee as a confirming party in a property sale was indeed capital gain and not income from other sources. The Assessing Officer and CIT(A) were therefore incorrect in their treatment of the income.
Key Issues
Whether the amount received by a confirming party to a property sale constitutes capital gain or income from other sources, and if the reopening of assessment and charging of interest under Section 234 were justified.
Sections Cited
147, 148, 234A, 234B, 208, 234
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 29-01- 2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2012-13.
2. The grounds of appeal
are as under:- “I On Legality
1. The CIT(A) has erred in passing the Ex-Parte order as none of the hearing notices were received by Your Appellant on his registered email id which is also mentioned in Form 35.
2. The CIT (A) has erred both in Law and in Fact in upholding the Reopening of the Assessment u/s. 147 and therefore order passed by the ITO is bad in Law and Void.
Your Appellant submits that the notice u/s. 148 was issued on 30-3-2019 for A.Y. 2012-13 is bad in Law and Time Barred and therefore not operative and also the day of issue of Notice was Saturday a Holiday in Government Office and therefore the issue of Notice is bad in Law.
3. (a) Without prejudice your Appellant submits that the Reasons Recorded by the AO for Reopening the assessment are at dated 27-11-2019 which means after issue of notice u/s. 148 of 30-3- 2009 making the entire proceedings bad in Law.
(b) Further also the Reasons Recorded are not valid since para 4 mentions "inquires made by the AO" is left blank and incomplete still it has been finally relied for Reopening on para 4 mentioned in para 6 of the Reasons Recorded.
(c) Further the Reasons Recorded are for escapement of "Capital Gain and addition made as Income for “other sources” runs counter making the very basis of Reopening of Assessment bad in Law and Void.
II On Merits:
1. Your Appellant submits that the amount of Rs. 5,40,0000/- received by your Appellant as "Confirming party" to the Sale Document is Capital Gain and not income from other sources as assessed.
2. Your Appellant further submit that the Sale Deed would have remained incomplete without signature of Confirming Party and therefore confirming party is the root of Capital Gain and receipt in his hands is therefore liable Capital Gain.
3. Your Appellant submits that ever the Reasons Recorded for escapement was for Capital Gain and final assessment is as income from other sources is illegal and bad in Law and Void.
III On Interest u/s. 234
1. The CITA) has erred both in Law and in Fact in upholding charging of Interest us 234A of Rs. 36,366 and u/s 234B of Rs. 18,874/- which is not chargeable both on point of Law and on point of Fact since Interest us 234 which was not specifically mentioned by the AO and in general remark to charge Interest u/s. 234A/B/C/D, wherever applicable does not amount to order after application of mind and therefore Interest is not chargeable.
On facts of the case your Appellant submits that since the Assessee had genuine and bonafide belief that his Income is not liable to tax and is not required to file Return of Income. Hence for 2 Sanjaykumar Rameshbhai Mali, A.Y. 2012-13 good and valid reason and therefore Interest of Rs 36,366 u/s 234A is not chargeable and also is not correctly worked out.
Your Appellant also submits hat Interest u/s 234B is also not chargeable since your Appellant was not liable to pay Advance Tax u/s. 208 of the Act and hence there is no question of his failure and Section does not apply and therefore Interest of Rs.38,874/-be deleted. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly Your Appellant reserves right to add, alter, amend to withdraw any or all Grounds of Appeal.”
3. The assessee has filed his return of income for assessment year 2012-13. Accordingly, the case was reopened after recording reasons and notice u/s. 148 of the Act dated 30-08-2019 was issued and duly served upon the assessee. In response to the notice u/s. 148 of the Act, the assessee filed his return of income on 26-11-2014 declaring total income of Rs. 3,020/-. The Assessing Officer observed that the receipt of Rs. 5,40,000/- as confirming party in respect of the purchase of immovable property should have been treated as income from other sources. The assessee received Rs. 5,40,000/- from the transaction of property sale working of capital gain wherein the assessee has shown index cost of acquisition of Rs. 1,60,168/-, sale rate of Rs. 5,40,000/- and claimed long term capital gain of Rs. 4,94,500/- as exempt. The Assessing Officer held that being one of the confirming parties, the assessee is not eligible for any claim regarding the cost of acquisition or exemption and the said amount was treated as receipt of the assessee. Thus, the Assessing Officer made addition of Rs. 5,40,000/- as income from other sources.
The ld. A.R. submitted that the amount of Rs. 5,40,000/- received by the assessee as confirming party to the sale Sanjaykumar Rameshbhai Mali, A.Y. 2012-13 document is capital gain and not income from other sources. It is categorically submitted by the assessee along with the documentary evidences that Shri Jiterndra Hushmukhbhai Patel has purchased immoveable property for Rs. 1,15,00,000/- on 05-12-2011 from Smt. Shantaben Somabhaimali and five other co-owners and seven confirming parties. The assessee being one of the parties received an amount of Rs. 5,40,000/- in the said transaction and thus it is a capital gain. The ld. A.R. submitted that the Assessing Officer as well as CIT(A) was not right in making the addition as income from other sources. The ld. A.R. also relied upon the decision of the other confirming party, Santokben Rameshbhai Mali wherein the Tribunal in has treated the same as long term capital gain. (ITA No. 265/Ahd/2023 A.Y. 2012-13 A.Y. 2012-13)
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee is owner of the property which was sold as per the sale deed and in fact the assessee being a confirming party to the sale agreement has received a consideration of Rs. 5,40,000/- in respect of holding jointly/the said property by the assessee himself as well. Thus, the said amount is capital gain only and the treatment given by the Assessing Officer that of income from other sources is not justified. Hence, the Assessing Officer as well as CIT(A) was not right in treating the same as income from other sources. The contention of the assessee appears to be correct. Besides this, the Tribunal in the co-owner of Smt. Santokben Rameshbhai Mali (supra) has also treated the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08-07-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 08/07/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद