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Facts
The assessee, a Non-Resident Indian, sold an immovable property for Rs. 88,00,000 but paid stamp duty on Rs. 1,51,00,000. Proceedings under Section 147 were initiated as the assessee had not filed a return. The AO treated the stamp duty value as the full consideration and computed long-term capital gain.
Held
The Tribunal held that the unregistered and unstamped agreement to sell dated 20.02.2010 was not a valid piece of evidence for determining the transfer date. However, the cost of acquisition as per the registered sale deed was allowed as a deduction. Furthermore, the capital gain was restricted to 50% due to joint ownership.
Key Issues
Whether the transfer date can be determined by an unregistered agreement or the registered sale deed, and whether the cost of acquisition and joint ownership should be considered for capital gains computation.
Sections Cited
147, 148, 142(1), 50C, 271(1)(c), 271F, 144C(2), 53A, 2(47)(v), 48, 55
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Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Income Tax Department, Circle-1, International Taxation, Chandigarh dt. 03/03/2023 pertaining to Assessment Year 2013-14.
The assessee is a Non-Resident Indian (NRI). Based on information received by the department, the assessee had executed a sale of immovable property for a consideration of Rs. 88,00,000/- but had paid stamp duty on Rs.1,51,00,000/-. Proceedings under Section 147 were initiated. The assessee had not filed a return of income for the year under consideration.
A notice under section 148 dated 28.07.2022 was issued after obtaining the necessary approval from the competent authority. In the course of reassessment proceedings, notices under section 142(1), along with questionnaires, were issued by the AO seeking specific details regarding the said transaction.
The AO noted that despite repeated opportunities, no credible explanation or evidence for cost of acquisition of the property was furnished. Therefore, vide show cause notice dated 17.02.2023, the AO proposed to treat the full amount of Rs.1,51,00,000/- as long-term capital gain invoking the provisions of section 50C.
The assessee filed replies dated 10.02.2023 and 24.02.2023, inter alia, submitting that the property had been sold pursuant to an agreement to sell dated 20.02.2010 and that possession was handed over and the entire sale consideration of Rs.88,00,000/- was received through banking channels during A.Y. 2010-11. The assessee relied on section 53A of the Transfer of Property Act and section 2(47)(v) of the Act.
The AO, however, rejected the explanation and finalised the draft assessment order dated 03.03.2023 by adopting the stamp duty value of Rs.1.51 crore as deemed consideration under section 50C. He further denied the benefit of the indexed cost of acquisition and initiated penalty proceedings under sections 271(1)(c) and 271F.
The assessee filed objections against the draft order before the Dispute Resolution Panel (DRP) under section 144C(2) on 31.03.2023, along with Form No. 35A and various annexures, challenging the year of taxability, the incorrect application of section 50C, and the denial of deduction for the cost of acquisition.
The assessee contended that the transfer of the capital asset was completed in A.Y. 2010-11 when possession was handed over and full consideration was received. It was submitted that the registration of the sale deed in A.Y. 2013-14 was only a procedural formality. Reliance was placed on the judgment of Hon’ble Supreme Court in the case of Sanjeev Lal vs. CIT [(2014) 365 ITR 389 (SC)].
Without prejudice, the assessee submitted that in case the transaction was considered in A.Y. 2013-14, then in light of the first proviso to section 50C(1) inserted by the Finance Act, 2016, the stamp valuation as on the date of the agreement (20.02.2010) should be adopted since the entire sale consideration was received by account payee cheques before that date.
The assessee also contended that once the valuation adopted by the AO was objected to, the AO was legally bound under section 50C(2) to refer the matter to a Valuation Officer. This mandatory procedure was not followed, rendering the addition unsustainable.
The AO further erred in not granting any deduction towards indexed cost of acquisition, which is impermissible under the law. The entire value was treated as capital gain in disregard of the provisions of section 48 and 55 of the Act.
The learned AR reiterated the submissions and placed reliance on multiple judicial precedents including those of the Supreme Court, High Courts and coordinate benches to support the claim that the addition made by the AO was erroneous and liable to be deleted.
The learned DR, however, supported the order of the AO and submitted that the registered deed is the determinative point for recognising the year of transfer and that the AO had rightly adopted the higher stamp duty value in the absence of cost details.
We have heard the rival contentions and perused the material on record. The case of the assessee is that she had purchased the property vide sale deed dated 17.04.2008 for a consideration of Rs.75,00,000/- and incurred an additional Rs.6,00,000/- towards stamp duty and incidental charges, as evidenced at page 99 of the paper book. It is further claimed by the assessee, both before the lower authorities and before us, that the subject property was agreed to be sold vide an agreement dated 20.02.2010 to Dr. Dalbir Singh for a total consideration of Rs.88,00,000/- by way of a sale agreement executed between the assessee, Smt. Neelu Arora and Dr. Amandeep Arora with the said buyer. A copy of the sale agreement has been placed at page 66 of the paper book.
Upon a perusal of the agreement dated 20.02.2010 placed at page 66, we find that it is neither registered nor notarized nor stamped and, importantly, it is not even signed by the alleged buyer, Dr. Dalbir Singh. For completeness, the last page of the alleged sale agreement (page 68) and the last page of the registered sale deed dated 25.03.2013 (page 106) have also been examined. The sale deed was executed by Shri Sandeep Arora, son of Shri Madan Arora, acting as the Power of Attorney holder for Shri Amandeep Arora and Smt. Neeru Arora, based on GPAs dated 28.11.2012 and 27.12.2012.
In view of the above, we are of the considered opinion that the alleged agreement dated 20.02.2010 is not a valid piece of evidence for adjudicating the issue in hand. It is a settled legal position that the transfer of immovable property can only be evidenced by a duly executed and registered document, stamped in accordance with the applicable laws. In the absence of registration and execution by both parties, no legal sanctity can be attached to the said document. Moreover, if the assessee’s claim of transfer in 2010 were to be accepted, there was no occasion for executing GPAs in 2012 or a sale deed in 2013. The registered sale deed dated 25.03.2013 also does not refer to the agreement dated 20.02.2010. Accordingly, the contention of the assessee that the date of transfer should be taken as 20.02.2010 is devoid of merit and is hereby rejected. The ground is accordingly dismissed.
We now turn to the alternate contention of the assessee that the cost of acquisition, as mentioned in the registered sale deed dated 25.03.2013, should be allowed as a deduction for computing short-term capital gain. The Ld. DR has opposed the claim on the ground that the assessee failed to furnish the purchase document during the assessment proceedings, and hence no benefit was allowed.
We have considered the submissions and perused the record. The impugned addition is based on the registered sale deed dated 25.03.2013, which in turn refers to the assessee's purchase transaction. The relevant details, including the registration particulars, date, and amount of purchase, are clearly mentioned therein. In our view, once the Revenue has relied on this document to make the addition, it cannot simultaneously disregard the purchase details embedded therein. We, therefore, hold that the assessee is entitled to benefit of cost of acquisition as under:
Component Amount (Rs.) Purchase Price (as per sale deed dated 17.04.2008) 75,00,000 Stamp Duty Charges 6,00,000 Sale Stamp 5% 3,82,600 SSF 3% 2,29,600 Total Cost of Acquisition 87,12,200 The Collector Rate on the date of transfer (25.03.2013) is stated to be Rs.1,51,00,000/- Therefore, the assessable gain would be:
Rs.1,51,00,000 – Rs.87,12,200 = Rs.63,87,800 Accordingly, the Revenue is directed to recompute the tax liability considering the short-term capital gain of Rs.63,87,800.
Further, the assessee has raised the valid contention that the subject property was jointly owned by her and her husband. The sale deed confirms that both the assessee and her husband the joint owners of the property and that the GPA holder acted on behalf of both. Hence, the entire capital gain cannot be brought to tax in the hands of the assessee alone. We, therefore, direct the Revenue to restrict the addition to 50% of Rs.63,87,800, i.e., Rs.31,93,900 in the hands of the assessee. The remaining addition is deleted. The Revenue is at liberty to initiate appropriate proceedings in accordance with law in the hands of the other co-owner.
In the result, the appeal of the assessee is partly allowed in terms indicated above.