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Facts
The assessee's assessment for AY 2011-12 was reopened under Section 148 due to the sale of immovable property, for which no return of income was filed. The assessee contended they were not the owner of the property at the time of sale, claiming an earlier sale in 2005, and disputed the addition of capital gains under Section 50C.
Held
The tribunal upheld the validity of the reopening under Section 148, finding the assessee to be the legal owner based on Gujarat High Court's liquidation proceedings. The tribunal rejected the assessee's claim of a 2005 sale as a "colourable device" and confirmed the Assessing Officer's calculation of long-term capital gain of Rs. 3,25,07,063/- on the property sale, including the application of Section 50C.
Key Issues
Validity of reopening assessment under Section 148; ownership of the immovable property at the time of sale; and correctness of applying Section 50C for calculating capital gains.
Sections Cited
148, 147, 142(1), 50C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 16-10- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2011-12.
The grounds of appeal
are as under:- “Ground 1. The appellant contends that the reopening under Section 148 in this case does not meet the requirements of law, including the failure to provide proper reasons for reopening or to provide a clear basis for such action. Further, upon filing an appeal before CIT (Appeals), the CIT (Appeals) has erred in dismissing the appeal. The appellant should be given an opportunity to examine the reasons recorded by the A.O. for reopening the assessment to Rinki Shashikant Gandhi, A.Y. 2011-12 ensure they are valid and justified. Therefore, it is prayed to nullify the assessment and delete the addition of Rs. 3,25,07,063/-. Ground 2 In this case, the appellant has claimed that he was not the owner of the property being referred to and have already sold the property long back in 2005 with proper registered documentation and therefore addition towards the said sale of property cannot be added here doubly.
Copy of Sale deed and ITR Showing Capital Gain offered in AY 2005-06 substantiate the statement of appellant.
Even application of Section 50C to their case is incorrect. If the appellant is not the rightful owner of the property, the question of applying Section 50C does not arise. The A.O. as well as the CIT (Appeals) have incorrectly assumed ownership, or have failed to verify the factual position regarding the ownership before applying Section 50C. Therefore, it is prayed to delete the addition of Rs. 3,25,07,063/-. Ground 3 Without Prejudice to the other arguments the appellant claims that the A.O. made the addition under Section 50C without issuing proper notice or providing an opportunity for the appellant to submit a valuation report. Ground 4 Ld. CIT (A) erred in holding that sale consideration was not paid in 2005. Ld. CIT (A) ignored the sale deed dtd. 09/02/2005 wherein page 9 & 10 clearly mention payment cheque number and amount of Rs. 24,00,000/- paid to Rinki S Gandhi. Crucial facts have been ignored resulting into dismissal of appeal without any proper inquiry - notice, etc. Ground 5 Ld. CIT (A) erred in taxing it as Capital Gain and applying provisions u/s 50C in FY 2004-05 knowing well that the land was sold by sale deed dtd. 09-02-2005 which is registered on 18/07/2007. Hence reassessment u/s 147 is invalid with wrong additions. Ground 6 The appellant requests the right to amend or add to the grounds of appeal at the time of hearing, should any new issues arise or if further details need to be presented.”
The assessee’s case was reopened as the assessee has sold immoveable property on more than Rs. 3,28,42,904/- Rinki Shashikant Gandhi, A.Y. 2011-12 and has not filed return of income. Notice u/s. 148 of the Act on 27-03-2018 was issued after recording the reasons for the same and obtaining prior approval from the competent authority. The Assessing Officer observed that the assessee sold immoveable property of more than Rs. 30,00,000/- in assessment year 2011-12 and the assessee has filed the return of income. But after the information data of AIR transaction, it was found that the said immoveable property was sold on 08-02-2011 for amount of Rs. 3,28,42,904/- and the transaction by the assessee was done as single party transaction. In response to the notices u/s. 148 of the Act, the assessee filed return of income on 28-04-2018 declaring total income of Rs. 27,310/-. The Assessing Officer issued notice u/s. 142(1) dated 23-10- 2018. In reply to the same, the assessee submitted copy of sale deed, purchase bill and other details on 19-11-2018 and submitted that the total value released by liquidator at Rs. 320 lakhs (97 lakhs and 223 lakhs) was paid off by liquidator on Motorola India directly and or through purchaser to parties as follows:-
1. 97 lacs Retained O.L. for payments of MI Ltd. 2. 223 lacs 73 Retained by O.L. 25 Paid to UC Lakhwani by OL 125 paid to Titco Ltd. Tarus Mutual Fund by OL 3. 320 lacs Rinki Shashikant Gandhi, A.Y. 2011-12 After taking cognizance of the assessee’s reply, the Assessing Officer held that Neptune Realty Pvt. Ltd. for assessment year 2011-12 who have purchased the said immoveable property and has submitted the details of payment made to Rinki S. Gandhi. The copy of ledger and statement of Neptune Realty Pvt. Ltd. supplied to the assessee on 20-12-2018. Show cause notice was issued thereby asking the assessee as to why the cost of immovable property sold should not be treated as capital gain in the hands of Rinki S. Gandhi. In response to the said notice, the assessee submitted the response on 21-12-2018. The assessee submitted that the assessee is a confirming party and the power of authority of seller Shri Dipak Sadarangani and other have not received any payment out or Rs. 2,23,00,000/- as can be seen from the sale deed dated 08- 02-2011 page no. 4 of (table of payment). Rs. 73,00,000/- was paid directly to liquidator by purchaser and Rs. 25,00,000 have been paid to U.C. Lakhwani by the purchaser directly on 07-02-2011. Rs. 1,25,00,000/- has been paid directly to Titco Ltd. Taurus Mutual Fund on 07- 02-2011. Thus, the entire payments were made directly to various parities by the purchaser as per the official liquidator of Motorol India Ltd. getting the title cleared of the property etc. and the seller Shri Dipak Sadarangani and others and power of authority holder Rinki S. Gandhi did not receive any amount out of the aforesaid payments made by the purchaser. The assessee’s reply also reiterated that the assessee has already sold the property to Shri Dipak Sadarangani on 10-02-2005 by registered document and Rinki Shashikant Gandhi, A.Y. 2011-12 even the said survey records wherein the name of Shri Dipak Sadarangani and other by entry on record as mentioned in sale deed. The power of authority in the name of the assessee does not have any bank account in the aforesaid State bank of India to act as confirming party and confirmed the sale deed. As regards to the payment of Rs. 96,00,000/-, the entire amount/payment made to the assessee was on account of payment to seller Shri Dipak Sadarangani and others. Once, the property is sold by our client Shri Dipak Sadarangani and others is entitled to any payment received by him which was on account of the payment to the seller to Shri Dipak Sadarangani and others. Thus, the assessee did not receive the sum of Rs. 2,23,00,000/- nor any other account towards the sale consideration of the property known as R & D Centre Rinki House. After taking cognizance of the assessee’s reply, the Assessing Officer held that the contention of the assessee is that the said amount was transferred is not justifiable from the purchase deed in 2005 wherein the assessee sold the immoveable property and signed himself as seller and again as purchaser being the POA of Shri Dipak Sadarangani and Smt. Sonal Dipak Sadarangani. The sale agreement was done just to cover up by the assessee to avoid any litigation with his creditors at various times filed suit in court for realization of their dues. Thus, the Assessing Officer held that the formation of the sale deed on 2005 to Sonal Sadarangani who is assessee’s own sister and Dipak Sardarangani his brother-in-law is nothing but a colourable device and it is for the benefit of the assessee to reduce Rinki Shashikant Gandhi, A.Y. 2011-12 capital gain liability and also to evade the creditors. The Assessing Officer therefore calculated the long term capital gain of the assessee at Rs. 3,25,07,063/- on the sale of immovable property and added the same to the income of the assessee.
Aggrieved by the assessment order, the assessee filed the appeal before CIT(A). The CIT(A) dismissed the appeal of the assessee.
The ld. A.R. submitted that the reopening u/s. 148 does not meet the requirement of law including the failure to provide proper reasons for reopening to provide a clear basis for such action. The ld. D.R. submitted that the reopening was rightly done as the assessee has not filed any return of income and there was huge transaction related to the immovable property owned by the assessee.
We have heard both the parties and perused the material available on record. It is pertinent to note that the assessee has not filed the return of income. In fact after receiving the information relating to the sale of immovable property, the department after following all the procedure issued notice u/s. 148 of the Act. The assessee never filed return of income in response to notice u/s. 148 of the Act. As the reopening was properly done as per Income Tax Act and no discrepancy pointed out by the Ld. A.R., the proceedings u/s. 148 of the Act are valid and assessment
As relates to the merits of the case, the assessee in his reply before the Assessing Officer categorically mentioned that once the property is sold by the assessee, the assessee is not entitled to any payment received by him but the fact remains that the assessee got the ownership of the said land from the decision of Hon’ble Gujarat High Court wherein the official liquidator was appointed and directed to distribute the proceeds of the said land. The assessee before the Hon’ble High Court has not pointed out that the assessee is no longer owner of the said property. Thus, the contention of the assessee that the assessee sold the property to Dipak Sadarangani and others, his sister in the year 2005 does not sustain. The assessee is the owner of the said property in the eyes of law as the assessee himself informed the same and the same has been notified by the Hon’ble High Court in the liquidation proceedings. Thus, the proceeds of Rs. 97,00,000/- was directed by the Hon’ble High Court to be paid to the liquidator. The liquidator on behalf of the assessee has taken the said amount which reiterated the revenue’s contention. The official liquidator of Motorol India Ltd. has been paid Rs. 73,00,000/- by Neptune Realty Pvt. Ltd on 08-11-2010. The Neptune Realty Pvt. Ltd. has made the payment of Rs. 25,00,000/- to UC Lakhwani on 07-02- 2011 and Neptune Realty Pvt. Ltd. has paid Rs. 1,25,00,000/- to Titco Ltd. Tarus Mutual Fund on 07-02- 2011. However, the statement and copy of ledger submitted Rinki Shashikant Gandhi, A.Y. 2011-12 by the assessee during the time of assessment proceedings by Neptune Realty Pvt. Ltd. which was clearly stated that total amount of Rs. 97,00,000/- was paid by Neptune Pvt. Ltd. to Shri Rinki Gandhi on 21-02-2011 and balance amount of Rs. 72,00,000/- was paid after 31-03-2011. The journal entry of the same was also notified. Thus, the assessee’s contention before the Assessing Officer that the assessee is not owner and the amount was not at all paid to the assessee has failed and the revenue has pointed out as to why the said contention of the assessee has failed. Thus, the Assessing Officer has rightly made calculation of long term capital gain on the whole immoveable property and the same is justified. The CIT(A) has also taken into cognizance of these aspects and has rightly confirmed the same. As regards the assessee’s contention that there was attachment on the property in question and company Motorol India Ltd. was in liquidation, the same has been taken care of by the Hon’ble Gujarat High Court by declaring assessee as owner of the said property which was at no point of time was denied by the assessee before the Hon’ble High Court despite showing the documents of 2005 only to the tax authorities and not to the Hon’ble High Court. Therefore, the journal entry as well as payment entry made by the Neptune Realty Pvt. Ltd. in the case of (assessment proceedings) of Neptune Realty Ltd. appears to be co-relating with the decision of Hon’ble Gujarat High Court and hence sales amount of Rs. 97,00,000/- was paid to the assessee and the property sale price of Rs. 3,20,00,000/- to that extent has to be treated as long term Rinki Shashikant Gandhi, A.Y. 2011-12 capital gain and the calculation to that effect was rightly done by the Assessing Officer. Hence, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 19-06-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 19/06/2025 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