2016 (9) TMI 697 - AT - Income Tax

Tribunal rules builder as real owner in property sale income dispute, revenue appeal dismissed

ITO 25 (1) (4), Bandra (E), Mumbai Versus Ms. Bhavna N Patel,

The Appellate Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, ruling that the appellant was not the real owner entitled to the income ... Unexplained money u/s.69A - sale consideration of the subject property - beneficial ownership of the flat - Held that:- From the record we found that the said flat No.132/H in Raj Arcade was sold to M/s Karma Ispat Ltd, was belonging to the builder and not to the assessee. As per the evidence discussed by CIT(A) in his order, the builder has shown the sale of flat in its books of accounts and also offered profit arising thereon in respect of sale consideration so received by it. A finding has also been recorded to the effect that assessee or her husband has not received any other benefit under this arrangement. Therefore, the clear position emerges is that the beneficial ownership of the flat was always with the builder and the assessee was merely a front for executing the arrangement. The CIT(A) also recorded a finding that income arising from sale of said flat has already been included in the total income of the builder, which fact has not been rebutted by the AO, therefore, the same cannot once again be added in the hands of the assessee. The detailed finding recorded by CIT(A) are as per material on record, therefore, do not require any interference on our part. - Decided against revenue Issues:Revenue's appeal against deletion of addition made on account of short term capital gain for assessment year 2008-2009.Analysis:The dispute revolved around the addition of Rs. 50,00,000 as unexplained money under section 69A by the Assessing Officer (AO), which was later deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) found that the appellant and her husband were merely name lenders in the transaction concerning the sale of a property, as evidenced by various documents and statements. The builder confirmed that the appellant did not pay any consideration for the property and that the sale consideration of Rs. 50 lakhs was received by the builder, not the appellant. The builder's submissions and other evidence indicated that the beneficial ownership of the property was with the builder, and the income from the sale had already been included in the builder's total income. The CIT(A) relied on legal precedents to establish that income should be taxed only in the hands of the legal owner, who is entitled to receive income from the property in their own right. The CIT(A) concluded that the income from the sale of the property should not be assessed in the appellant's hands since she was not the real owner entitled to the income.The Appellate Tribunal upheld the CIT(A)'s decision, emphasizing that the property was sold to a third party by the builder, and the appellant was merely a front in the transaction. The Tribunal agreed that the beneficial ownership of the property always resided with the builder, who had already accounted for the sale in their books of accounts. Since the appellant did not receive any consideration and the builder was the rightful recipient of the income, the Tribunal dismissed the revenue's appeal. The Tribunal found no reason to interfere with the detailed findings of the CIT(A) as they were based on the material on record, leading to the dismissal of the revenue's appeal.In summary, the judgment centered on establishing the true ownership of the property and determining the rightful recipient of the income from its sale. The legal principles regarding taxation of income in the hands of the legal owner were crucial in resolving the dispute, ultimately leading to the dismissal of the revenue's appeal against the deletion of the addition made on account of short term capital gain for the assessment year 2008-2009.