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Facts
The assessee, acting as a Power of Attorney (POA) holder for Akansha Gupta, sold a property. The Assessing Officer (AO) taxed the capital gains in the hands of the assessee, considering them as the owner. The assessee contended that they were not the owner, but merely acted as a POA holder, and thus no capital gains should arise in their hands.
Held
The Tribunal held that the assessee acted solely as an agent and Power of Attorney holder for the actual owner, Akansha Gupta. The sale deed and POA documents clearly indicated that the property rights were not transferred to the assessee, and they did not derive any ownership or enjoyment rights. Therefore, the capital gains arising from the sale were not taxable in the hands of the assessee.
Key Issues
Whether capital gains arising from the sale of property can be taxed in the hands of a Power of Attorney holder when the actual ownership and transfer of property rights remain with the principal.
Sections Cited
Section 44 AF, Section 2(47), Section 50C
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Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’SMC” JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 1005/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 24-01-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2009-10 raising therein following grounds of appeal. ‘’1. The reopening of the case by issue of notice u/s 148 is bad in law, as the reasons stated therein were non-existent.
1. 2. The addition made by the AO and confirmed by the ld. CIT(A) is bad in law and on facts as addition has been made on a ground other than that stated for reopening of the case.
3. The ld. CIT(A) has erred on facts in confirming the addition, notwithstanding the fact that the assessee was not owner of the impugned property giving rise to capital gains and he had sold the property as holder of power of attorney for Akansha Gupta.’’ 2.1 At the outset of the hearing of the appeal, it is noticed that the assessee filed the appeal late 125 days for which the assessee filed an application dated 27-07- 2024 for condonation of delay with the reasons that he met with an accident on 05-02-2024 causing fracture in right foot and thus he was confined to bed for three months and in this situation he forgot to contact his Counsel to file the appeal. Thereafter his elder daughter was hospitalized and due to such medical emergencies, the appeal could not be filed timely. The assessee submitted the medial report of CK Birla Hospitals in connection with fracture in his right foot. Further the assessee submitted the medical report of his daughter Riya Jain and she got treatment from Vijayvargiya Hospital, Jaipur. Besides this, the assessee has filed an affidavit deposing the above facts. 2.2 On the other hand, the ld. DR objected to such inordinate delay but submitted that the Court may decide the issue as deem fit and proper in the present circumstances of the case. 2.3 The Bench has heard both the parties and perused the materials available record including the medical reports of the hospital in connection with treatment of the assessee and his daughter. The Bench noticed that there is sufficient cause SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR which prevented the assessee to file the appeal in time. In this view of the matter, the delay of 125 days in filing the appeal by the assessee is condoned. 3.1 As per the facts of the present case the assessee derived business income from a retail shop in his village and filed his return of income under Section 44 AF of the Income Tax Act. However during the year under consideration, Assessee sold property in the capacity of power of attorney holder of Shrimati Akanksha Gupta on which AO taxed capital gain accordingly as a result of such transfer upon the assessee. Although assessee challenged the said additions before ld. CIT (A) but remained unsuccessful. 3.2 Now before me although Assessee had raised three Grounds yet he has not pressed Ground No.
Consequently, now there remains Ground No. 1 and Ground No.
Since Ground No. 1 is legal in question and Ground No. 3 relates to challenging the quantum additions, therefore, I have decided to deal with Ground No. 3 firstly. Through this ground, the assessee has challenged the additions by submitting that assessee was not the owner of the property in question but has sold the same in the capacity of power of attorney holder. Therefore no capital gain can arise in the case of assessee. It was also submitted that although this reason was specifically pleaded before the AO but AO rejected the same without passing any speaking order. The assessee also relied upon his written submissions filed before me which is reproduced as under:-
SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR ‘’Re Gr. No.3- The CIT(A) has erred on facts in confirming the addition, notwithstanding the fact that the assessee was not the owner of the impugned property giving rise to Capital gains and he had sold the property as holder of Power of attorney for Akansha Gupta 3.1 The assessee had in very clear terms, on receiving the reasons for reopening of his case, had stated that he was not the owner of the impugned property and he had sold it in the capacity of Power Of Attorney holder. The AO, while passing the order disposing of the objections, arbitrarily rejected the submission of the assessee. Again in the reply to the Show cause notice for making addition of capital gain accruing on sale of the impugned property, the assessee reiterated that he had sold the property as a POA holder. He filed a copy of the POA executed by Smt. Akansha Gupta, in his favour The AO brushed aside the submission as well as the documentary evidence, and without rebutting it, went to tax the resultant capital gain in the hands of the assessee. 3.2 In this case, the document of POA clearly indicated that the assessee was given the authority to undertake any legal paper work on behalf of Smt. Akansha Gupta it was revocable and the possession of the impugned property remained with her The assessee, as Power of attorney holder had only the rights to dispose but did not become the owner of the property. Therefore, if any capital gain arose on the sale of the impugned property, it was taxable in the hands of Smt. Akansha Gupta, and not the assessee When the property was sold by the assessee as general power of attorney holder and the owner of the property has acknowledged in the general power-of-attorney that she is the owner of property and no contrary evidence has been brought on record to show that the sale consideration was used and appropriated by assessee as owner of the property or misappropriated against the consent of the owner of the property, capital gains could not be assessed in the hands of assessee. 3.3 Further. Page-3 of the sale deed clearly states that the Principal (Smt. Akansha Gupta) is selling the impugned property to fulfill her family needs through her agent Further, page-4 of this deed states that if any part/portion of the impugned plot is parted on account of any lapse on the part of the principal or the purchaser is made to bear any loan/charge on behalf of the Principal, the purchaser will have the right to recover such loss along with allied expenses, from the Principal or her estate, for which the principal or her successors will have no objection. All the above conditions mentioned in the sale deed clearly show that the assessee is only an agent of Smt. Akansha Gupta, who is the actual owner of the impugned plot and who ought to have been charged for the capital gain arising on it's transfer 3.4 The addition was made in the hands of assessee without bringing any evidence or positive material. The Id AO rejected the evidence submitted by assessee (POA and Sale deed) and assessed the entire sale proceed of the plot as SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR income of the assessee on surmises, conjectures ad suspicion. The department has no material to show that the assessee was the owner of the land or that the assessee was beneficial owner of the entire sale proceed of the plot The Id AO has not made any inquiry from the witnesses who signed as witness in power of attorney and registered sale deed. The registered sale deed and the registered power of attorney are evidences, which show that the owner of the plot was Smt. Akansha Gupta and the assessee acted as an agent of principal The assessing officer merely disbelieved the explanation given by the assessee and has converted good proof into no proof. Hon'ble Supreme Court in the case of Sreelekha Benerjee Vs CIT [1963] 49 ITR 112 (SC): 120 observed that the Inocme Tax Department cannot by merely rejecting unreasonably a good explanation, convert good "proof into no proof Hon'ble Supreme Court in the case of Uma Charan Shaw & Bros. Co. Vs CIT 37 ITR 271 has held that the surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof Hon'ble Punjab & Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P &H) also held that suspicion, howsoever strong cannot take the place of legal proof. 3.5 Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [2004 (8) SCC 614) wherein the Hon'ble Supreme Court has held that a power of attorney is not an instrument of transfer in regard to any right, title or interest in any immovable property. The power of attorney is a creation of an agency whereby the grantor authorizes the grantee to do acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him. 3.6 Page 3 of the sale deed clearly states that the Principal (Smt Akansha Gupta) is selling the impugned property to fulfill her family needs through her agent Further page 4 of this deed states that if any part/ portion of the impugned plot is parted on account of any lapse on the part of the principal or the purchaser is made to bear any loan/ charge on behalf of the Principal, the purchaser will have the right to recover such loss alongwith allied expenses, from the Principal or her estate, for which the principal or her successors will have no objection. All the above conditions mentioned in the sale deed clearly show that the assessee is only an agent of Smt. Akansha Gupta, who is the actual owner of the impugned plot and who ought to have been charged for the capital gain arising on it's transfer 3.7 In the present case, there is no transfer to or enabling enjoyment of property in favour of the assessee in any manner The document clearly reveals that no consideration was received from the power agent for appointing him as power of attorney. It also emphasised therein that the property right has not been handed, over to the power agent The provisions of sub-clause (vi) of Section 2(47) of the Income Tax Act make it clear that the transaction, which has the effect of transferring or enabling the enjoyment of immovable property alone SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR would come within the ambit of transfer. There is no such recital in the power of attorney. On the contrary, the terms of the power of attorney clearly show that property rights has not been transferred to the power of attorney holder and there is also.no provision for enabling enjoyment. On the contrary, the first para of Page-3, clearly states that the property is in possession of the Principal (Smt. Akansha Gupta) It is not the case of the Department that the power of attorney is sham. If they accept the power of attorney is valid, then the plea of capital gains at the hands of the assessee has no legs to stand. 3.8 For the above proposition, the assessee relies on the decision of Hon'ble Madras High Court in the case of CIT vs. C. Sugumaran, wherein under exactly identical circumstances, the Court upheld the decision of the Tribunal, that capital gains can not be taxed in the hands of POA holder In this case, Mr. C.Sugumaran, had sold the property as POA holder of Mr.M.Viswanathan, to his wife Dr Meera Bai, for a sum of Rs 25 lakh. The property was valued Rs.60 lakh as per section 50C. The AO adopted this value as sale consideration and after giving credit for cost of acquisition, assessed the capital gains in the hands of the assessee (C. Sugumaran). On appeal by the assessee to the Hon'ble Tribunal (ITA No.518/Mds/2013), the Tribunal deleted the addition holding we observe that the assessee could not have been treated as owner of the property sold on 23.10.2008 resulting in computation of capital gains in his hands. 3.9 ITAT, Chandigarh, in the case of Inder Singla vs. ITO (ITA No. 1462/CHD/2010) in respect of sale of property as POA holder, has observed-11 Considering totality of facts and circumstances, we are of the view assessee is not owner of the properties of which he has acted as GPA holder only. No profit arises on executing Sale Deed by assessee as GPA holder There is also no transfer of capital asset by assessee so as to attract the provisions of capital gains in his hands. Addition, therefore, is wholly unjustified and shall have to be deleted. 3.10 Finally, the assessee relies on the decision of jurisdictional Jaipur Bench of ITAT in the case of Gyan Chand Agarwal vs. Addl.CIT in and Suraj Narain vs. ITO in ITA No. 1043/JP/2011 In the latter case, the facts are almost identical as sale of the property in this case was registered in the name of the wife (Radha Devi Khatoria) of the POA holder (Suraj Narain), and the AO, instead of taxing the owners (Bharat Singh and Vijay Pal Singh), fastened the tax liability on Suraj Narain (the POA holder). In view of the above factual and legal position, the addition made by the AO and confirmed by the CIT(A) may kindly be deleted.’’ SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR 3.3 On the other hand ld. DR relied upon the orders passed by the revenue authorities and submitted that since assessee was ex parte before ld. CIT(A), therefore, matter be restored back to ld. CIT(A). 3.4 I have heard the Counsel for both the parties and also perused the material placed on record, judgement cited by the respective parties as well as orders passed by the revenue authorities. From the records I noticed, that appellant has placed on record the copy of sale deed and also the copy of power of attorney and after analysing the copy of sale deed as well as copy of power of attorney I found that at page number 3 of the sale deed it clearly states that the Principal (Smt Akansha Gupta) is selling the impugned property to fulfill her family needs through her agent. Further page 4 of this deed states that if any part/ portion of the impugned plot is parted on account of any lapse on the part of the principal or the purchaser is made to bear any loan/ charge on behalf of the Principal, the purchaser will have the right to recover such loss alongwith allied expenses, from the Principal or her estate for which the Principal or her successors will have no objection. All the above conditions mentioned in the sale deed clearly show that the assessee is only an agent of Smt. Akansha Gupta, who is the actual owner of the impugned plot and who ought to have been charged for the capital gain arising on it's transfer. Since as per the facts of the present case there is no transfer or enabling enjoyment of property in favour of assessee in any manner and in this regard the documents SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR clearly reveals that no consideration was received from the power of attorney holder for appointing him as power of attorney. Moreover it has also emphasized therein that the property right has not been handed over to the power of attorney holder. In my view the provisions of sub clause (vi) of section 2(47) of the Income Tax Act makes it clear that the transaction which has the effect of transferring or enabling the enjoyment of immovable property alone would come within the ambit of transfer. Since there is no such recital in the power of attorney, therefore, the terms of the power of attorney clearly shows that property rights has not be transferred to the power of attorney holder and there is also no provision for enabling enjoyment. Whereas on the contrary the first para of Page 3 clearly states that the property is in possession of the Principal i.e. Smt. Akanksha Gupta and it is not the case of the department that the power of attorney is sham. Therefore if the department accepts that the power of attorney is valid then in that eventually the plea of capital gain at the hands of the assessee has no legs to stand. On further analysing the document of power of attorney, it clearly indicates that the assessee was given the authority to undertake any legal paper work on behalf of Smt. Akanksha Gupta. The said document is also revocable and the possession of the immovable property would always remain with the principal and the assessee as power of attorney holder had only the right to dispose off but did not become the owner of the property therefore if any capital gain arose on the sale of the SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR impugned property, then in that eventuality the capital gain if any arose, would be taxable in the hands of Smt. Akanksha Gupta and not the assessee. Moreover when the property was sold by the assessee as general power of attorney holder and the owner of the property has acknowledged in the general power of attorney that she is the owner of the property and no contrary evidence has been brought on record by the revenue to show that the sale consideration was used and appropriated by the assessee as owner of the property or misappropriated against the consent of the owner of the property. However, in the present case the addition was made in the hands of the assessee without bringing any evidence or positive material on record, the AO rejected the evidences submitted by the appellant and assessed the entire sale proceeds of the plot as income of the assessee on surmises, conjectures and suspicion. Whereas the department has no material to show that the appellant was the owner of the land or that the assessee was beneficial owner of the entire sale proceeds of the plot in question. The AO had not made any enquiry from the witnesses who signed as witnesses in the power of attorney and the registered sale deed but merely disbelieved the explanation given by the appellant and had converted good proof into no proof. In this regard, I rely upon the decision court in the case of Sreelekha Banerjee versus CIT wherein Hon'ble Supreme Court observed that the Income Tax Department cannot by merely rejecting unreasonably a good explanation, convert good "proof into no proof Hon'ble Supreme Court in SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR the case of Uma Charan Shaw & Bros. Co. Vs CIT 37 ITR 271 has held that the surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof Hon'ble Punjab & Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P &H) also held that suspicion, howsoever strong cannot take the place of legal proof. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [2004 (8) SCC 614) wherein the Hon'ble Supreme Court has held that a power of attorney is not an instrument of transfer in regard to any right, title or interest in any immovable property. The power of attorney is a creation of an agency whereby the grantor authorizes the grantee to do acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him. I further rely upon the decision of Hon’ble Madras High Court in the case of CIT vs. C. Sugumaran, wherein under exactly identical circumstances, the Court upheld the decision of the Tribunal, that capital gains cannot be taxed in the hands of POA holder. In this case, Mr. C.Sugumaran, had sold the property as POA holder of Mr.M.Viswanathan, to his wife Dr Meera Bai, for a sum of Rs 25 lakh. The property was valued Rs.60 lakh as per section 50C. The AO adopted this value as sale consideration and after giving credit for cost of acquisition, assessed the capital gains in the hands of the assessee (C. Sugumaran). On appeal by the assessee to the Tribunal in ITA No.518/Mds/2013), the Tribunal SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR deleted the addition holding - we observe that the assessee could not have been treated as owner of the property sold on 23.10.2008 resulting in computation of capital gains in his hands. The ITAT, Chandigarh, in the case of Inder Singla vs. ITO (ITA No. 1462/CHD/2010) in respect of sale of property as POA holder, has observed-11 Considering totality of facts and circumstances, we are of the view assessee is not owner of the properties of which he has acted as GPA holder only. No profit arises on executing Sale Deed by assessee as GPA holder There is also no transfer of capital asset by assessee so as to attract the provisions of capital gains in his hands. Addition, therefore, is wholly unjustified and shall have to be deleted. Finally, the assessee relied on the decision of jurisdictional Jaipur Bench of ITAT in the case of Gyan Chand Agarwal vs. Addl.CIT in ITA No.266/JP/2017 and Suraj Narain vs. ITO in ITA No. 1043/JP/2011. In the latter case, the facts are almost identical as sale of the property in this case was registered in the name of the wife (Radha Devi Khatoria) of the POA holder (Suraj Narain), and the AO, instead of taxing the owners (Bharat Singh and Vijay Pal Singh), fastened the tax liability on Suraj Narain (the POA holder). Therefore considering the totality of facts and circumstances as discussed by me above and also taking into consideration the legal prepositions as laid down by different High Courts as well as the Coordinate Benches of the Tribunal I am of the considered view that Assessee is not owner of the property of which he has acted as GPA holder only.
SUSHIL KUMAR JAIN VS ITO, WARD 7(2), JAIPUR Hence there is also no transfer of Capital Asset by the assessee so as to attract the provisions of capital gains in his hands. Therefore, addition in the hands of Assessee is wholly unjustified and deserves to be deleted and therefore I direct the AO to delete the additions. Consequently this ground raised by the appellant stands allowed. 4.0 Since the Bench has have deleted the addition, therefore now there is no need to dispose off. Ground No. 1 5.0 In the result, the Appeal of the appellant stands partly allowed with no orders as to cost. Order pronounced in the open court on 17/09/2024.