Tribunal upholds reduced sale consideration in capital gains case, favors assessee over Revenue appeal

The Tribunal dismissed the Revenue's appeal regarding the re-computation of capital gains, upholding the CIT(A)'s decision to consider a reduced sale consideration of Rs. 25 lakh due to unclear land title and ongoing litigation. The Tribunal found the Revenue's contentions lacking basis and accepted the assessee's explanation for the reduced consideration. Consequently, the Tribunal directed the AO to recompute the capital gains based on the revised sale consideration. The appeal outcome favored the assessee, and the order was pronounced on 31/03/2023.

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Issues Involved:

1. Condonation of Delay in Filing Appeal
2. Re-computation of Capital Gains

Summary:

Condonation of Delay in Filing Appeal:

The present appeal, filed by the Revenue, was delayed by 130 days. The learned Departmental Representative (DR) argued that the limitation period for filing the appeal was extended until 29/05/2022 due to an order by the Hon'ble Supreme Court during the Covid period. The appeal was filed on 27/05/2022. The learned Authorised Representative (AR) did not object to the condonation of delay. Consequently, the Tribunal concluded that the appeal was filed within the extended time and proceeded to decide on the merits.

Re-computation of Capital Gains:

The Revenue challenged the learned Commissioner of Income Tax (Appeals) [CIT(A)]'s decision to compute capital gains by considering Rs. 25,00,000 as the total consideration for the sale of equity shares, as opposed to Rs. 10,00,00,000 shown by the assessee in its return. The assessee, engaged in real estate, had initially declared a total income of Rs. 22,98,44,928 for the assessment year 2009-10, including capital gains from the transfer of shares of its wholly-owned subsidiary, Shivalik Land Development Ltd., at Rs. 10 crore.

The learned CIT(A) had allowed the assessee's appeal, directing the AO to compute the capital gains based on a revised sale consideration of Rs. 25 lakh, as per a Settlement Deed and Supplementary Share Purchase Agreement. The Revenue contended that the learned CIT(A) failed to examine how the sales consideration was reduced from Rs. 10 crore to Rs. 25 lakh and argued that a post facto event cannot reduce the sales consideration.

The Tribunal reviewed the sequence of events and documents, including the initial Share Purchase Agreement, Mortgage Deed, Settlement Deed, and Supplementary Share Purchase Agreement. It was found that the title of the land held by Shivalik Land Development Ltd. was not clear and was under litigation, leading to the revision of the sale consideration. The Tribunal noted that the AO's allegations lacked basis and that the assessee had adequately explained the reduction in sale consideration. The Tribunal concluded that there was no evidence to prove that the entire consideration of Rs. 10 crore was received by the assessee.

Thus, the Tribunal found no infirmity in the learned CIT(A)'s order and dismissed the Revenue's appeal, directing the AO to recompute the capital gains by considering the total sale consideration of Rs. 25 lakh.

Order Pronounced:

The appeal by the Revenue was dismissed, and the order was pronounced in the open Court on 31/03/2023.

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