2022 (7) TMI 950 - AT - Income Tax

Assessee liable for capital gains tax on property share, ITAT affirms CIT(A) decision.

The ITAT upheld the CIT(A)'s decision that the assessee is liable to pay capital gains tax on her 1/4th share in the property for the Assessment Year ... Capital gain - sale of property by the legal heir with the co-owners - AO taking 1/4 th of jantri value of the land as sale consideration in the hands of appellant for arriving at LTCG capital gain - addition made in the hands of assessee on protective basis - AO observed that the assessee had sold the immovable property along with other co-owners for a total consideration as per sale deed (valuation for purpose of stamp duty) but the capital gain arising from this sale was not offered to tax - HELD THAT:- When the father of the assessee entered into Banakhat with Mr. Hammad Ali in the year 2000, and received certain amount in cash, no amount was offered to tax as capital gains tax. Secondly, there is nothing on record to show that effective possession was transferred to Mr. Hammad Ali pursuant to entering of Banakhat in 2000. Thirdly, the fact that terms of conditions of Banakhat in 2000 do not find any mention in the registered sale deed dated 28.07.2011 points to the state of affairs that the terms of the registered sale deed were not governed by the terms of the Banakhat entered into in the year 2000 and operated independently of it. Fourth, the property remained in the name of Mr. Ganpathbai Patel till transfer took place pursuant to registered sale deed dated 28.07.2011. Therefore, in our considered view, in the light of above Rulings as applied to the assessee’s set of facts, the assessee (as legal heir of the said property) is liable to capital gains tax during the year under consideration. Accordingly, we are of the considered view that Ld. CIT(Appeals) has not erred in law and in facts in holding that the assessee is liable to pay capital gains tax on her 1/4th share in the property during the year under consideration. In the result, the order of ld. CIT(A) is upheld. Issues Involved:1. Taxability of long-term capital gain (LTCG) in the hands of the assessee for the Assessment Year 2012-13.2. Validity of the CIT(A)'s decision to take 1/4th of the jantri value of the land as sale consideration for arriving at the LTCG.3. Deletion of the addition made by the Assessing Officer (AO) on a protective basis in the hands of the assessee.4. Whether the sale transaction should be taxed in the Assessment Year 2001-02 or 2012-13.Issue-wise Detailed Analysis:1. Taxability of Long-Term Capital Gain (LTCG) in the Hands of the Assessee for the Assessment Year 2012-13:The assessee filed a return of income for the Assessment Year 2012-13, declaring a total income of Rs. 8,90,060/-. The AO observed that the assessee sold immovable property along with other co-owners for Rs. 5,11,50,000/- as per the sale deed dated 29-07-2011, but did not offer the capital gain arising from this sale to tax. The AO took the assessee's share as 25%, amounting to Rs. 1,44,04,200/-, and assessed the remaining profit of other co-owners on a protective basis in the hands of the assessee. The CIT(A) upheld the AO's decision, noting that the sale transaction was not offered to tax by the original owner, Mr. Ganpatbhai Patel, in the Assessment Year 2001-02 when the Banakhat (Agreement to Sell) was entered into. The CIT(A) concluded that the sale of the property actually took place in the Assessment Year 2012-13, and the assessee was liable for capital gains tax during this period.2. Validity of the CIT(A)'s Decision to Take 1/4th of the Jantri Value of the Land as Sale Consideration for Arriving at the LTCG:The CIT(A) observed that the sale proceeds received by the legal heirs totaled Rs. 54,26,000/-. The CIT(A) applied the provisions of Section 50C of the Income Tax Act, which considers the jantri value (stamp duty value) of Rs. 6,00,49,300/- for computing the LTCG. The CIT(A) concluded that the assessee's share of the LTCG was Rs. 29,73,200/- (1/4th of Rs. 1,18,92,800/-), and accordingly, the addition made on a protective basis was deleted, restricting the addition to Rs. 29,73,200/-.3. Deletion of the Addition Made by the Assessing Officer (AO) on a Protective Basis in the Hands of the Assessee:The CIT(A) deleted the addition made on a protective basis, observing that the entire sale consideration was not received by the assessee alone. The CIT(A) noted that the sale proceeds were received by the legal heirs and other parties involved in the transaction. The CIT(A) provided relief to the assessee by restricting the addition to Rs. 29,73,200/- for her 1/4th share in the property.4. Whether the Sale Transaction Should be Taxed in the Assessment Year 2001-02 or 2012-13:The assessee argued that the sale transaction should be taxed in the Assessment Year 2001-02 when the Banakhat was entered into, and the father of the assessee received the sale proceeds. However, the CIT(A) and ITAT observed that there was no mention of the Banakhat terms in the registered sale deed executed in 2011. The property remained in the name of Mr. Ganpatbhai Patel until the registered sale deed was executed in 2011. The ITAT relied on previous judgments, including the Supreme Court's ruling in PCIT v. Chuni Lal Bhagat, which emphasized the importance of registered agreements for taxability under Section 2(47) of the Income Tax Act. Therefore, the ITAT upheld the CIT(A)'s decision that the sale transaction should be taxed in the Assessment Year 2012-13.Conclusion:The ITAT upheld the CIT(A)'s decision that the assessee is liable to pay capital gains tax on her 1/4th share in the property for the Assessment Year 2012-13. The ITAT dismissed both the appeals filed by the assessee and the Department, affirming the CIT(A)'s order. The judgment emphasized the importance of registered sale deeds and the applicability of Section 50C for computing LTCG based on jantri value. The ITAT also relied on previous judgments to conclude that the sale transaction should be taxed in the year when the registered sale deed was executed.