2015 (11) TMI 745 - AT - Income Tax

Computation of capital gain - whether transfer was complete during the financial year 2004-05 and not in the impugned assessment year, therefore, no capital gain was accrued in the impugned assessment year? - CIT(A) deleted the addition - Held that - Assessee has placed ample evidence on record to establish that the sale agreement was executed on January 27, 2005 and the sale consideration was paid on two occasions - one is on January 10, 2005 and the other is on March 31, 2005. The possession was also handed over to the buyer. The sale agreement is a registered document. Commissioner of Income-tax (Appeals) has examined this issue in the light of the provisions of section 2(47)(v) and 2(47)(vi) of the Act and 53A of the Transfer Property Act. Before taking a view in this regard, the learned Commissioner of Income-tax (Appeals) has also called a remand report which was also confronted to the assessee and comments were also obtained from the assessee. Having taken into account all these facts, the learned Commissioner of Income-tax (Appeals) has taken a view that the capital gain does not arise in the impugned assessment year, as it arise in the financial year 2004-05 relevant to the assessment year 2005-06 and the Assessing Officer may consider computation of capital gains in that assessment year. Since it has been established that the transfer took place as per the provisions of section 2(47)(vi) of the Act, no capital gain can be computed in the impugned assessment year. We, therefore, find no infirmity in the order of the learned Commissioner of Income-tax (Appeals) and we confirm the same. - Decided against revenue

Issues Involved:
1. Liability for capital gains tax in the financial year 2007-08.
2. Acceptance of additional evidence by the Commissioner of Income-tax (Appeals) without offering opportunity to the Assessing Officer.
3. Fair market value determination by the District Judge.
4. Timeliness of the cross-objection filed by the assessee.

Detailed Analysis:

1. Liability for Capital Gains Tax in Financial Year 2007-08:
The primary issue was whether the liability for capital gains tax arose in the financial year 2007-08. The Revenue contended that the liability should be recognized in the financial year 2007-08 based on the actual sale consideration of Rs. 51,00,000. However, the assessee argued that the property was transferred during the financial year 2004-05, relevant to the assessment year 2005-06, as per the agreement to sell dated January 27, 2005, and the full consideration was received and possession handed over by March 31, 2005. The Commissioner of Income-tax (Appeals) agreed with the assessee, determining that the transfer was complete in the financial year 2004-05 under section 2(47)(vi) of the Income-tax Act, 1961, and thus, no capital gains tax liability arose in the financial year 2007-08.

2. Acceptance of Additional Evidence by the Commissioner of Income-tax (Appeals):
The Revenue argued that the Commissioner of Income-tax (Appeals) erred by accepting additional evidence (a letter dated March 31, 2005) without providing the Assessing Officer an opportunity to confront the same, thus violating rule 46A of the Income-tax Rules, 1962. The Commissioner of Income-tax (Appeals) justified the acceptance of the evidence, stating that it was pursuant to the directions given under section 251(2) read with rule 46A(4) of the Act, 1961. The Tribunal upheld this decision, finding no procedural lapses.

3. Fair Market Value Determination by the District Judge:
The assessee contended that the fair market value of the property was determined by the District Judge, Kanpur, on March 10, 2004, and the property could not be sold or transferred without this permission. The Commissioner of Income-tax (Appeals) acknowledged this determination and the subsequent sale agreement dated January 27, 2005, which was registered and involved full payment and possession transfer by March 31, 2005. The Tribunal confirmed that the property transfer was complete in the financial year 2004-05, thus aligning with the fair market value determination.

4. Timeliness of the Cross-objection Filed by the Assessee:
The cross-objection filed by the assessee was delayed by 272 days, and no application for condonation of delay was submitted. The Tribunal dismissed the cross-objection as time-barred, noting the absence of a reasonable cause for the delay.

Conclusion:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision that the capital gains tax liability did not arise in the financial year 2007-08 but in the financial year 2004-05. The Tribunal found no procedural errors in the acceptance of additional evidence and dismissed the Revenue's appeal and the assessee's cross-objection. The order of the Commissioner of Income-tax (Appeals) was confirmed, and the appeal of the Revenue and the cross-objection of the assessee were dismissed.

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