2024 (12) TMI 562 - HC - Income Tax

Tax Notice Quashed: Income Recognized in AY 2005-06, Not AY 2006-07, Due to Sale Completion Timing.

Satish Chand Bothra Versus Income Tax Officer Jaipur.

Satish Chand Bothra Versus Income Tax Officer Jaipur. - 2024:RJ - JP:45880 - DB Issues:Quashing of notice under Section 147 read with Section 148 of Income Tax Act, 1961 and rejection of objections filed by the petitioner.Analysis:The petitioner sold his share of agriculture land at less than market price due to a dispute among co-sharers. The transaction was disclosed in income tax returns for AY 2005-06. However, a notice was issued for AY 2006-07 under Section 147 read with Section 148 of the IT Act. The petitioner challenged this, citing that the transaction was complete in AY 2005-06, relying on legal precedents like Ittianam case and a Division Bench judgment.The respondent argued that the sale consideration was not accepted by Registration Authorities, leading to a demand for stamp duty and penalty. Section 47 of the Registration Act of 1908 was cited, stating that a registered document operates from the time it would have commenced to operate if no registration was required.The court noted that the sale transaction was completed in AY 2005-06, even though the sale deed was registered later in 2008. Referring to the Supreme Court's decision in Ittianam case and the Division Bench judgment in Maharani Yogeshwari Kumari case, it was established that the income derived from the property in the AY of execution of the sale deed would be taxable in the hands of the transferee.Based on Section 47 of the Registration Act, the sale deed was deemed to relate to AY 2005-06, not the date of registration. Since in AY 2006-07, neither the sale of property nor registration had occurred, the initiation of proceedings under Section 148 of the IT Act was deemed unnecessary. Consequently, the court quashed the impugned order and notices, allowing the writ petition in favor of the petitioner.