2016 (3) TMI 638 - AT - Income Tax

Computation of long term capital gain - sale of immoveable land bearing Khasra No.1583 Ka, Rakba 1.986 Hectare and the other Khasra No.1584 Kha, Rakba 0.101 Hectare, totaling 2.087 Hectare situated at village Aurangabad Khalsa, Tehsil and Zila Lucknow - Held that - The onus is upon the assessee to establish through documents that the impugned land was purchased by the assessee and his wife. The, onus is also upon the assessee to establish that the other land bearing Khasra No.1584 ख for land measuring 0.101 hectare is still owned by them or it was also disputed by some other party as the order of the Tehsildar talks about the land bearing Khasra No.1584 क for the land measuring 1.986 Hectare. It is also for the assessee to establish as to whether he has refunded the entire amount to M/s Sanskar Foundation to whom he sold the land. If not, is there any claim raised by them for refund of the sale consideration on the ground that the assessee did not own the land, pending before any of the judicial forum. If no claim in this regard is raised by M/s Sanskar Foundation and the assessee has not refunded the sale consideration to M/s Sanskar Foundation, having realized that he is not the owner of the land, the assessee would be responsible to pay tax on the income realized on this alleged transfer. According to us, if provisions of section 50C of the Act cannot be invoked on account of illegal transfer of land for want of legal ownership of the land, the difference in investment and sale consideration would be treated as income from other sources of the assessee. As per the sale deed, the assessee has received sale consideration on 3.2.2006 and till dateaccording to the ld. counsel for the assessee, no claim is raised by M/s Sanskar Foundation, therefore, the difference in investment and sale consideration would be the income from other sources, as the so called buyer, M/s Sanskar Foundation cannot recover the said amount, as it has already barred by limitation. All these aspects were neither examined by the Assessing Officer nor by the ld. CIT(A). Therefore, we are of the view that these aspects should be examined by the Assessing Officer after affording proper opportunity of being heard to the assessee. Accordingly, we set aside the order of the ld. CIT(A) and restore the matter to the Assessing Officer to re-adjudicate the issue in terms indicated above. Appeal of the assessee as well as the Revenue are allowed for statistical purposes.

Summary

Issues:
1. Computation of long term capital gain on the sale of immovable land.
2. Dispute regarding ownership of the land and its impact on tax liability.

Issue 1: Computation of long term capital gain on the sale of immovable land:
The case involved cross appeals by the assessee and the Revenue against the order of the ld. CIT(A) regarding the assessment year 2006-07. The primary issue was the computation of long term capital gain on the sale of specific parcels of land in Lucknow. The Assessing Officer invoked section 50C of the Income-tax Act, 1961 to determine the market value of the property sold by the assessee. The DVO valued the property at a certain amount, leading to the computation of long term capital gain in the hands of the assessee. The assessee contended that the ownership of the land was disputed, and therefore, he should not be liable for capital gains tax. The ld. CIT(A) held that 50% of the capital gain should be taxed in the hands of the assessee and his wife. However, during the appeal hearing, it was argued that the assessee did not acquire a better title than the seller due to a legal dispute, and hence, the capital gain should not be applicable.

Issue 2: Dispute regarding ownership of the land and its impact on tax liability:
The disagreement revolved around the ownership of the land in question. The assessee claimed that the land was not legally owned by him and therefore, no capital gain should be levied. The ld. counsel for the assessee presented an agreement to support this claim, stating that the land was purchased from someone who was later deemed not to be the owner. The Revenue argued that even if the assessee was not the legal owner, the amount earned from the transaction should be considered income from other sources. The Tribunal found discrepancies in the documents presented and noted that the ownership of the land was not definitively established. The onus was placed on the assessee to prove ownership and whether the sale consideration had been refunded. The case was remanded to the Assessing Officer for further examination, emphasizing the need to verify ownership, refund status, and potential tax liabilities arising from the transaction.

By analyzing the legal aspects and evidence presented, the Tribunal set aside the previous order and directed a reevaluation by the Assessing Officer to address the unresolved issues regarding ownership, refund status, and tax implications related to the sale of the land. Both the appeal of the assessee and the Revenue were allowed for statistical purposes, pending further investigation and clarification on the disputed ownership and tax liability aspects of the transaction.