2017 (5) TMI 126 - HC - Income Tax

Determination of capital gain on sale of property - assessee claimed that she was not the not the owner of the property - assessee never signed such a sale deed and that therefore upon coming to know of the same she has already lodged a police complaint. - case of the respondent-department is that the name of the petitioner, her fathers name and other particulars tally with those mentioned in the sale deed and that the petitioner had inherited the property from her father under a gift settlement deed dated 30.09.1982. Held that - Assuming that the petitioner has played fraud upon the Income Tax Department after having sold the property, the best way of exposing such a fraud would be to bring the property disowned by her to sale. It is true that the property has now passed on to several hands. But once notices are issued to all the purchasers including the one under the disputed document, the truth will come out. Till then, it is not possible to tax the petitioner - petition allowed.

Summary

Issues involved: Challenge to order under Section 143(3) and Section 147 of the Income Tax Act, 1961; Penalty proceedings under Section 271(1)(c).

Analysis:

Issue 1: Challenge to Order under Section 143(3) and Section 147 of the Income Tax Act, 1961
The petitioner challenged an order under Section 143(3) read with Section 147 of the Income Tax Act, 1961. The petitioner denied ownership of a property sold under a registered sale deed, leading to the initiation of proceedings for Capital Gains tax. The respondent claimed the petitioner inherited the property from her father, but discrepancies were found between the descriptions of the property in the gift settlement deed and the sale deed. The Court noted that the petitioner, who received 240 sq. yds. under the gift settlement deed, could not have sold a property measuring 551 sq. yds. under the disputed sale deed in 2007. The Court emphasized the need for detailed investigation and set aside the impugned orders, allowing the department to initiate proceedings against the property after serving notices on all relevant parties.

Issue 2: Penalty Proceedings under Section 271(1)(c)
In the second writ petition, the petitioner challenged penalty proceedings under Section 271(1)(c) related to the alleged sale of the property. The petitioner vehemently denied ownership of the property and claimed to have lodged a police complaint regarding the misuse of her name in the sale deed. The Court highlighted the possibility of fraud but emphasized the importance of establishing the truth through a thorough investigation. The Court concluded that until the property's ownership was clarified through proper notices to all involved parties, it was not appropriate to tax the petitioner. Consequently, the writ petitions were allowed, and the impugned orders were set aside, leaving room for further proceedings against the property.

In summary, the Court's judgment focused on the discrepancies between the descriptions of the property in the gift settlement deed and the sale deed, highlighting the need for a detailed investigation to establish ownership and potential fraud. The Court emphasized the importance of serving notices to all relevant parties before taxing the petitioner and set aside the impugned orders to allow for further proceedings.