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Facts
The assessee, an elderly lady, granted a Power of Attorney (POA) for her agricultural land. Her POA holder fraudulently sold the property for Rs. 5,11,000/- and the Stamps Authority valued it at Rs. 35,22,000/-. The assessee was unaware of this sale and did not receive any payment. The AO initiated reassessment proceedings and added the entire sale proceeds of Rs. 35,22,000/- as long-term capital gain.
Held
The Tribunal noted that the assessee alleged fraud by the POA holder and had filed a suit to quash the sale deed, which was pending. The Revenue suggested restoring the matter to the AO for adjudication after the outcome of the civil court's decision. Both parties agreed to this course of action.
Key Issues
Whether the capital gain can be taxed when the property was allegedly sold fraudulently by a POA holder without the assessee's knowledge or receipt of sale proceeds.
Sections Cited
143(3), 147, 148, 50C, 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 28.02.2024 passed by learned Commissioner of Income-Tax (Appeals), NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 08.03.2016 passed by learned ITO-2(4), Bhopal [“AO”] u/s 143(3) r.w.s. 147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2007-08, the assessee has filed this appeal on following grounds:
1. That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC, Delhi erred in confirming the addition of Rs.
Page 1 of 5 AY 2008-09 35,22,000/- made on account of long term capital gain without accepting the explanation offered by the assessee that she has not made any sale of the property and no money was received against the sale of property. Hence, the order passed by the Ld. CIT(A) is unjust, unfair and against the principle of natural justice.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC, Delhi erred in not appreciating the fact that the assessee is an old lady and victim of the fraud and against this fraud, she has filed a sit in the court. Thus, the findings of the Ld. CIT(A) confirming the addition is unjust, unfair, unwarranted and deserves to be deleted.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the actual sale consideration of the impugned property is Rs. 5,11,000/- and the value of the Rs. 35,22,,000/- was determined invoking the provision of Se 50C of the Act adopting the fair value while proper procedure was not adopted before invoking the provisions of Section 50C of the Act adopting the fair value while proper procedure was not adopted before invoking the provision u/s 50C of the Act.
The background facts leading to present appeal are such that the assessee filed original return of income u/s 139 on 27.01.2009 declaring a total income of Rs. 1,36,930/- which was processed u/s 143(1).
Subsequently, based on AIR information showing that the assessee had sold an immovable property for Rs. 35,22,000/- on 29.03.2008, the AO framed a reason to believe that the assessee had not disclosed capital gain arising therefrom which had escaped assessment. Accordingly, the AO issued notice u/s 148 to re-open case of assessee u/s 147. Finally, the AO completed re-
Page 2 of 5 making an addition of Rs. 35,22,000/- treating the entire sale-proceed as long-term capital gain. Aggrieved, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come before ITAT assailing the orders of lower-authorities.
Ld. AR for assessee submitted that the assessee is an old lady aged about 75 years suffering from multiple illnesses. The assessee executed a registered Power of Attorney dated 13.03.2008 in favour of her known person Shri Mahendra Patidar (“POA Holder”) in respect of immovable property being an agricultural land admeasuring 0.32 acre, Khasra No. 24/1/1/7, Patwari Halka No. 50/42, Village – Jhatkhedi, Tehsil Huzur. But the POA Holder committed a fraud and sold the said property vide registered sale-deed dated 29.03.2008 for Rs. 5,11,000/- (valued by Stamps Authority at Rs. 35,22,000/-) without knowledge of assessee and without paying a single penny to assessee. Subsequently, when the assessee received notice from AO, the assessee came to know about the fraudulent sale having been made by POA Holder. The assessee then issued a legal notice to POA Holder with the help of her advocate and also filed a suit No. 121-A/2019 in the Civil Court of Bhopal for getting the sale-deed quashed. Thus, the impugned transaction of sale of assessee’s property was a fraudulent transaction without assessee’s knowledge and the assessee even did not receive a single penny out of it, therefore the capital gain taxed by AO in the hands of Page 3 of 5 hence deserves to be deleted.
In response to a query raised by Bench with regard to the status of suit filed by assessee, Ld. AR filed documents of the suit and informed that the suit has been dismissed vide order dated 14.07.2023 ex-parte due to non-prosecution by assessee but the assessee has filed a petition for cancellation of such ex-parte order. The assessee’s petition is pending as of now before Civil Court.
Ld. DR for revenue submitted that since the underlying issue of fraudulent (or genuine) transaction is pending before Civil Court, it would be better to restore this matter to the file of AO for adjudication afresh after outcome of order of Civil Court. Therefore, this matter should be remanded back to AO.
In rejoinder, Ld. AR agreed to the proposal of Ld. DR.
In view of consensus of both sides, we find it appropriate to restore this matter at the level of AO. The AO shall pass necessary order having regard to the outcome of the suit filed by assessee in Civil Court. Ordered accordingly.
Order pronounced in open court on 09.10.2024.