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Facts
The assessee entered into a sale deed for a property in December 2008. The Assessing Officer initiated reassessment proceedings under Section 147 as no return of income was filed. The assessee contended that the property was purchased in 2005 and the gain should be treated as long-term capital gain, or alternatively, a deduction for the cost of acquisition should be allowed.
Held
The Tribunal held that the assessee failed to provide evidence to substantiate their claim of acting as a power of attorney holder or that the sale consideration was transferred to the original owners. However, the Tribunal found merit in allowing a deduction for the cost of acquisition, setting aside the matter to the AO for this purpose.
Key Issues
Whether the capital gain arising from the sale of property is short-term or long-term, and whether the assessee is entitled to a deduction for the cost of acquisition.
Sections Cited
250, 147, 148, 142(1), 144, 48
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “SMC”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
This appeal by assessee is directed against the order of NFAC, Delhi dated 24.04.2025 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: -
1. On the facts and in the circumstances of the case the Ld. CIT (A) (NFAC) has erred in confirming addition of Rs. 12,51,000/- and confirming ex parte assessment Panchu Ram Sharma without giving proper opportunity of being heard and without considering the material available on record which includes purchase cost as per Registry and construction cost and period of holding of plot. Hence, order of CIT Appeal and Assessing officer is liable to be set aside.
The Ld. CIT Appeal has erred in law and facts to accept the remand report without providing copy of same to appellant and also not considering the documents and written submission filed by the Appellant. The Ld. CIT Appeal also not appreciated the fact that no notice served during assessment proceedings upon the Appellant (Assessee) and no PAN was allotted to Assessee and ex parte Assessment completed without considering the documents available from insight and from records. The Assessment order was passed against natural justice and bad in law need to be set aside.
The Appellant craves permission to add, amend, alter or delete any of the grounds of Appeal.
2. This appeal by the assessee is directed against the order dated 24.04.2025 passed by the Ld. Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Year 2009-10. Information was received from the Sub-Registrar that the assessee had executed a registered sale deed in respect of Plot No. 152B, Laxmi Nagar, Hamathpura-A, Kalwar Road, Jaipur. The stamp valuation authority determined the value of the property at Rs. 12, 51,000/-. Since no return of income was filed by the assessee for the year under consideration, the Assessing Officer (AO) recorded reasons to believe that income chargeable to tax had escaped assessment within the meaning of section 147 of the Income-tax Act, 1961.
3. Notice under section 148 of the Act was issued and duly served. However, despite repeated notices under section 142(1) of the Act dated 16.06.2016, 05.09.2016, 18.10.2016 and 02.12.2016, including a final opportunity dated 08.12.2016, the assessee neither filed return nor any submission. The AO, Panchu Ram Sharma accordingly, completed the assessment under section 144 of the Act and brought to tax the entire sum of Rs. 12,51,000/- as short-term capital gain vide order dated 13.12.2016. Aggrieved, the assessee filed appeal before the Ld. CIT (A). The only contention raised was that the property had been purchased vide Regn. No. 2005004120 dated 23.08.2005 and that the property sold in December 2008 included both the plot and constructed area on the ground and first floors. Since the holding period exceeded three years, the assessee claimed that the gain was liable to be taxed as long-term capital gain after allowing deduction for cost of acquisition.
4. The assessee also sought to argue before the Ld. CIT (A) that he was merely acting as a power of attorney holder on behalf of the original owners, Shri Nishant Chandel and Shri Rajan Swaroop Chandel. However, it is pertinent to note that no such ground was formally taken in the appeal memo, nor was any documentary evidence produced to substantiate that the sale consideration was transferred to the said original owners. The CIT(A), after considering the submissions, rejected the claim. The relevant portion of his findings (page 18, para 1) reads as under:
“Appellant submitted that the property is purchased vide registration no. 2005004120 dated 23.8.2005 and the property purchased on 23.08.05 was a plot land having area 73.30 sq. mts. (87.68 Sq. Yds.) only. He submitted that the sale deed dated 12.12.2008 states that property sold includes plot area 73.30 sq. mts. (87.68 Sq. Yds.) and constructed area on Ground floor and First floor 789.125 sq. ft. each floor and that the documents proves that construction at GF and FF was completed after purchase of plot and before sale of House meaning after 23.08.2005 and before 12.12.08. He also submitted that hence LTCG shall be applicable. This submission of appellant is based on the premise that the POA dated 12.01.2007 is not taken cognizance of. Once it has been held that transfer has taken place as per POA dated 12.01.2007, the transfer attracts STCG and not LTCG and also the nature of property as on 23.8.2005 is not relevant to determine the cost of acquisition. Hence the contention of appellant on this ground is not 5 Before us, the assessee reiterated the submission that he was not the real owner but merely a power of attorney holder of the said land. Alternatively, it was urged that, without prejudice, deduction for cost of acquisition should be granted. We have considered the rival contentions and perused the orders of the authorities below. The assessee has not placed on record any cogent evidence to substantiate that the transaction was on behalf of Shri Nishant Chandel and Shri Rajan Swaroop Chandel and that the sale consideration was transferred to them. In absence of such evidence, the assessee cannot escape liability merely by asserting that he was acting as a power of attorney holder.
At the same time, we find merits in the alternative submission that the entire sale consideration cannot be brought to tax without granting deduction for cost of acquisition. The provisions of section 48 of the Act mandate that the cost of acquisition is to be reduced from the full value of consideration for computing capital gains. However, no deduction towards alleged cost of construction can be allowed, as the assessee has not filed any supporting evidence.
Accordingly, we set aside the matter to the file of the AO with a direction to allow deduction towards cost of acquisition of the property, subject to the condition that the assessee furnishes necessary documentary evidence to adduce his claim. No deduction on account of cost of construction shall be admissible in absence of proof. The assessee is directed to fully cooperate in the set-aside proceedings without seeking any adjournment.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 15th day of September 2025. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 15/09/2025 Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. आयकर आयु� CIT 3. 4. िवभागीय �ितिनिध, आय.अपी.अिध., Sr.DR., ITAT, 5. गाड� फाइल/Guard file.