2014 (4) TMI 701 - AT - Income Tax

Computation of capital gains - deduction of amount from sale consideration incurred by the purchaser towards vacating the encroachment, earth filling etc. - Deletion of payment made after execution of sale deed Payment not a part of sale deed Held that - once the assessee is claiming that it has not received the full consideration, as mentioned in the deed of conveyance and only sum of Rs. 31 lakhs has been received, then onus to prove is on the assessee with some credible evidence - the claim of the assessee that the purchaser had incurred Rs. 15 lakhs is also not corroborated by any evidence that the purchaser had actually incurred this amount for getting the encumbrance free plot and how it has been quantified. The deed of conveyance is completely silent on this point that the assessee was liable for incurring such an expenditure or the purchaser shall incur this amount which shall be reduced from the total sale consideration agreed upon between the parties - If it has not been mentioned in the conveyance deed that it is axiomatic that the sale consideration mentioned in the conveyance deed is the actual consideration receivable by the assessee - No evidence or details have been submitted by the purchasers with regard to expenses incurred - The content of the letter also raises a doubt in the wake of the fact that how only the assessee is responsible alone for liability of Rs. 15 lakhs from his share of sale consideration receivable to him and will be reduced from the sale and not the other seller - Thus, the letter dated 31st March 2005 cannot be held to be conclusive proof of reduction of sale consideration by Rs. 15 lakhs when the registered deed of conveyance is completely silent about such a reduction of amount by Rs. 15 lakhs the order of the CIT(A) set aside Decided in favour of Revenue.

Summary

Issues:
Challenge to impugned order dated 3rd July 2012 for assessment year 2005-06 under Income Tax Act, 1961 regarding addition of Rs. 15,00,000 made by Assessing Officer on account of payment made to purchases after execution of sale deed.

Analysis:
The assessee filed its return of income at Rs. 59,250 which was re-opened under section 147 due to non-disclosure of tax on capital gains. The Assessing Officer disallowed Rs. 15 lakhs claimed against long term capital gain due to lack of mention in the sale deed regarding adjustment of this amount from total consideration. The assessee contended that a mutual agreement with the purchaser required Rs. 15 lakhs for encroachment clearance and access, supported by a letter signed by both parties. The Commissioner (Appeals) accepted the contention, emphasizing the absence of evidence proving related parties or cash return to the assessee, thus deleting the addition.

The Departmental Representative argued no evidence supported the Rs. 15 lakhs expenditure claim, pointing out the conveyance deed's clear clauses on the purchaser's responsibilities. The Counsel for the assessee reiterated the agreement's terms and the Commissioner's findings. The Tribunal noted the absence of long term capital gain disclosure initially, with the claim that only Rs. 31 lakhs, not Rs. 46 lakhs, was received, supported by a mutual agreement letter. However, the Tribunal found the letter insufficient evidence, shifting the burden of proof to the assessee, as the conveyance deed did not mention the Rs. 15 lakhs deduction, and the joint ownership raised questions on sole liability. The Tribunal concluded the letter lacked details on expenditure quantification, casting doubt on the sole responsibility of the assessee for the Rs. 15 lakhs deduction, ultimately allowing the Revenue's appeal and setting aside the Commissioner's order.