2022 (12) TMI 689 - AT - Income Tax

Property classified as short-term capital asset, with added gain. Appeal dismissed on fresh transfer.

Ashalata Kulshretha Versus The ITO, Ward-7 (1) (3), Ahmedabad

Ashalata Kulshretha Versus The ITO, Ward-7 (1) (3), Ahmedabad - TMI Issues Involved:1. Classification of the property as a short-term or long-term capital asset.2. Validity of the cancellation deed executed on 30-07-2015.3. Determination of the actual property area transferred.4. Alleged willful tax evasion by the appellant.5. Additional grounds raised by the appellant during the appeal.Detailed Analysis:1. Classification of the Property as Short-term or Long-term Capital Asset:The primary issue was whether the property should be considered a short-term or long-term capital asset. The appellant argued that the property, held since 1986, should be treated as a long-term capital asset. However, the Assessing Officer and CIT(A) determined that the property was reacquired on 30-07-2015, the date of the cancellation deed. Consequently, since the property was sold within three months of reacquisition, it was deemed a short-term capital asset.2. Validity of the Cancellation Deed Executed on 30-07-2015:The CIT(A) and the Tribunal both held that a registered sale deed cannot be annulled by a subsequent cancellation deed without a court order, as per Section 31 of the Specific Relief Act. The Tribunal referred to multiple judicial precedents, including the Supreme Court's ruling in Satya Pal Anand vs. State of M.P, which stated that once a document is registered, it cannot be canceled by any authority under the Registration Act, 1908. The Tribunal concluded that the cancellation deed executed on 30-07-2015 was effectively a fresh transfer by the daughter in favor of the appellant, and not a mere annulment of the original sale deed.3. Determination of the Actual Property Area Transferred:The appellant contended that only the superstructure measuring 66.92 sq. mtrs was transferred to her daughter, and the remaining land area of 235.94 sq. mtrs was never transferred. However, the Tribunal found that the sale deed dated 16-03-2006 between the appellant and her daughter transferred all rights, title, interest, and possession of the entire property, including the land area. The Tribunal noted that the appellant herself had acknowledged that the land area was erroneously mentioned in the sale deeds. Therefore, the entire property area was considered transferred to the daughter in 2006.4. Alleged Willful Tax Evasion by the Appellant:The CIT(A) observed that the payment of stamp duty of Rs. 1,35,300/- for the cancellation deed indicated the intention to repurchase the property, thus substantiating the view that the transaction was a fresh purchase. The Tribunal upheld this observation, rejecting the appellant's claim of a mistaken payment of stamp duty and finding no malafide intention on the part of the appellant.5. Additional Grounds Raised by the Appellant:The appellant raised several additional grounds, including the argument that the property was not transferred to the daughter due to the absence of her name in revenue records and that municipal taxes were paid by the appellant. The Tribunal rejected these arguments, stating that the registered sale deed clearly transferred all rights to the daughter, and the payment of municipal taxes by the appellant did not alter the ownership status.Conclusion:The Tribunal upheld the CIT(A)'s decision, classifying the property as a short-term capital asset and confirming the addition of Rs. 2,26,85,000/- as short-term capital gain. The appeal of the assessee was dismissed. The Tribunal emphasized that the cancellation deed executed on 30-07-2015 was effectively a fresh transfer, and the original sale deed from 2006 could not be annulled without a court order. The Tribunal also confirmed that the entire property area was transferred to the daughter in 2006, and the appellant's arguments regarding the property area and payment of municipal taxes were rejected.