Tribunal overturns FAA order, directs deletion of LTCG addition. Appeal allowed based on property sale evidence.

The Tribunal set aside the FAA's order and directed the AO to delete the addition of Long Term Capital Gains (LTCG). The appeal was allowed, concluding that the sale of the property occurred in the assessment year 2010-11, supported by evidence of payment and possession transfer in that year. The decision was pronounced in open court on 27th April 2017.

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Issues Involved:
1. Confirmation of addition of Rs. 22,42,843/- as Long Term Capital Gains (LTCG) for the assessment year 2009-10.
2. Determination of the correct assessment year for the sale of property and corresponding tax liability.

Detailed Analysis:

Issue 1: Confirmation of Addition of Rs. 22,42,843/- as LTCG

The assessee filed a return of income declaring a total loss of Rs. 1,67,257/-. The case was selected under CASS, and statutory notices were issued. During assessment, the AO observed that the assessee sold an immovable property for Rs. 30 lakhs, which was not shown in the return. The assessee claimed an exemption under section 54F of the Act for investing Rs. 13,62,900/- in a new house property, but this was declined by the AO based on the Supreme Court decision in Goetz India Ltd V/s CIT (2006) 284 ITR 323 (SC).

The AO calculated the capital gains as follows:
- Sale consideration: Rs. 30,00,000
- Less brokerage: Rs. 51,111
- Net consideration: Rs. 29,48,889
- Less Indexed cost of acquisition: Rs. 8,06,046
- Long term capital gains: Rs. 21,42,843

The assessment was framed at an income of Rs. 23,14,390/-. The assessee contended that the sale took place in the assessment year 2010-11, as the balance sale consideration of Rs. 29 lakhs was received in that year, and possession was handed over in May 2009.

Issue 2: Determination of the Correct Assessment Year for the Sale of Property

The First Appellate Authority (FAA) dismissed the assessee's appeal, stating that the transfer took place on 9.2.2009 when the agreement to sell was registered, and part consideration of Rs. 1,00,000/- was received. The FAA relied on the Bombay High Court decision in Chaturbhuj Dwarakadas Kapadia Vs CIT, which held that the date of contract is relevant for determining the year of chargeability under section 2(47)(v) of the Act.

The assessee argued that the transfer could not be said to have taken place on 9.2.2009 as only Rs. 1.00 lakh was received, and the balance of Rs. 29 lakhs was received in April 2009, with possession handed over in May 2009. The assessee claimed that the transaction was covered under section 2(47)(v) of the Act, which pertains to the allowing of possession in part performance of a contract.

The Tribunal considered the rival contentions and found that the sale of the property took place in the assessment year 2010-11. The balance consideration was paid in April 2009, and possession was handed over in May 2009, as evidenced by a letter and sale-com-assignment deed dated 11.5.2009. The Tribunal concluded that the sale was covered under section 2(47)(v) and not section 2(47)(vi) of the Act. Additionally, permission from CIDCO was obtained on 18.5.2009, further supporting the assessee's contention.

Conclusion:

The Tribunal set aside the order of the FAA and directed the AO to delete the addition made on account of LTCG. The appeal of the assessee was allowed, and the order was pronounced in the open court on 27th April 2017.

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