2014 (4) TMI 349 - AT - Income Tax

Taxability of capital gain on transfer of property u/s 50C of the Act Computation of LTCG Held that - There is no evidence regarding payment of consideration by the transferee and also taking possession of the immovable property immediately after the execution of the agreement - The transferor had at any time not ceased to be the owner of the property by virtue of any agreement entered by the assessee and Smt. Neeraja Reddy - the assessee executed Special Power of Attorney in favour of Smt. Neeraja Reddy by her nominee, the transfer of the immovable property is not completed as on date and evidence brought on record by the assessee does not suggest transfer of property took place in the year 1994. The assessee miserably failed to prove the transfer of property in the year 1994 - the immovable property is sold only on 23rd October, 2007 to Sri G. Srinivasa Reddy by way of sale deed - Smt. Neeraja Reddy has not derived any control over the ownership of the property in the year 1994 through the Special Power of Attorney executed by the assessee - The Special Power of Attorney is only a facilitator to perform certain actions and things on behalf of the assessee - the transfer took place vide sale deed executed on 23.10.2007 in favour of Sri G. Srinivasa Reddy and the lower authorities are justified in invoking the provisions of section 50C to determine the sale consideration and to bring the capital gain to tax there was no infirmity in the order of the CIT(A) Decided against Assessee.

Issues Involved:

1. Violation of provisions of law by the CIT(A).
2. Sustaining addition under Section 50C of the Income Tax Act for the sale of Jubilee Hills Property.
3. Adoption of Rs. 2,55,50,000 as sale consideration for the Jubilee Hills Property.
4. Computation of Long-term capital gains on the sale of Jubilee Hills Property at Rs. 2,54,58,000.
5. Assessment of total income at Rs. 2,57,64,625.
6. Rejection of submissions made by the buyer of the property.
7. Demand of Rs. 86,72,524 raised by the assessing officer.
8. Allowability of claim of indexation while computing long-term capital gains.
9. Set off long-term capital loss on the sale of Sundale property against the long-term gains from Jubilee Hills property.
10. Penalty proceedings initiated under Section 271(1)(c).

Detailed Analysis:

1. Violation of Provisions of Law by CIT(A):
The assessee contended that the order of the CIT(A) was in gross violation of the provisions of law, making it bad in law. However, the tribunal did not find any such violation in the CIT(A)'s order.

2. Sustaining Addition under Section 50C:
The core issue was the applicability of Section 50C of the Income Tax Act concerning the sale of the Jubilee Hills property. The AO applied Section 50C, determining the market value at Rs. 2,55,50,000 based on the SRO's valuation, leading to the addition in question.

3. Adoption of Rs. 2,55,50,000 as Sale Consideration:
The assessee argued that the property was sold in 1994 for Rs. 1,00,000, and thus the adoption of Rs. 2,55,50,000 as the sale consideration was erroneous. However, the CIT(A) found discrepancies in the assessee's claims, such as the lack of evidence for the payment of Rs. 1,00,000 and the continued possession of the property by the assessee until 2007.

4. Computation of Long-term Capital Gains:
The CIT(A) upheld the computation of long-term capital gains at Rs. 2,54,58,000, rejecting the assessee's claim that the property was transferred in 1994. The tribunal agreed with the CIT(A) that the property was sold in 2007, making the computation of capital gains for the assessment year 2008-09 valid.

5. Assessment of Total Income:
The CIT(A) upheld the assessment of total income at Rs. 2,57,64,625. The tribunal found no infirmity in this assessment, as it was based on the correct application of Section 50C and the actual sale transaction in 2007.

6. Rejection of Submissions by the Buyer:
The CIT(A) rejected the submissions made by the buyer, G. Srinivas Reddy, during the assessment proceedings. The tribunal supported this rejection, noting inconsistencies and lack of credible evidence in the buyer's statements.

7. Demand of Rs. 86,72,524:
The CIT(A) upheld the demand of Rs. 86,72,524 raised by the assessing officer. The tribunal found this demand justified based on the proper application of the law and the facts of the case.

8. Allowability of Claim of Indexation:
The CIT(A) did not give a specific finding on the allowability of the claim of indexation while computing long-term capital gains. The tribunal did not address this issue directly, focusing instead on the validity of the capital gains computation.

9. Set off Long-term Capital Loss:
The CIT(A) did not address the claim for setting off long-term capital loss from the sale of Sundale property against the gains from Jubilee Hills property. The tribunal did not provide a detailed analysis on this point.

10. Penalty Proceedings under Section 271(1)(c):
The CIT(A) upheld the initiation of penalty proceedings under Section 271(1)(c). The tribunal found this ground premature and declined to entertain it, as the penalty proceedings were still in the initial stages.

Conclusion:
The tribunal dismissed the appeal of the assessee, confirming the order of the CIT(A) on all grounds. The provisions of Section 50C were rightly applied, and the sale transaction was correctly assessed in the year 2007, leading to the proper computation of long-term capital gains and the resultant tax demand. The tribunal found no merit in the assessee's claims and upheld the CIT(A)'s findings and the assessing officer's actions.

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