2017 (8) TMI 1129 - AT - Income Tax

Reopening of assessment - non supply of reason to believe - LTCG - gift of immovable property to daughter - it is argued that, mistakenly instead of gift deed, sale deed was made - claim of exemption u/s 47(iii) - Held that - The reasons have not been sought by the assessee at assessment stage. After issuance of notice u/s. 148 of the Act, the assessee has filed return of income and participated in assessment proceedings and the assessment has been completed after taking into account the submission of assessee. Had the assessee sought the reasons and had AO denied the same, the matter would have been different. Thus the contentions of the assessee were rightly rejected by the Ld. CIT(A). - Decided against assessee. Computing the long term capital gain - Held that - The mode of receipt of consideration not mentioned. Since the consideration has not received through cheque, there is no question of it being reflected in the bank account of the daughter. The provisions of section 50C are clearly applicable in this case as it is a case of transfer of property through sale deed at a price lower than the value adopted for stamp duty valuation. Section 47(iii) comes to play only in cases of transfer through gift or will or an irrevocable trust. Transfer in the present case is not through these modes. The transaction has been held to be gift in the hands of the daughter, the transferee, and therefore it should be held so in the case of the assessee also is not tenable because in case of the daughter the consideration as per stamp duty valuation is not taxable as per proviso to section 56(2)(vii). However, the provisions of capital gains taxation and the income from other sources are independent of each other. The income in the hands of the daughter having been held to be exempt, does not absolve the assesee from the capital gain liability. In view of the above, the contention of assessee was rightly been rejected by the Ld. CIT(A), which does not need any interference on my part - Decided against assessee.

Summary

Issues Involved:
1. Validity of the order passed under Section 147/143(3) of the Income Tax Act.
2. Treatment of the transfer of immovable property as a sale instead of a gift.
3. Computation of Long Term Capital Gains under Section 50C of the Income Tax Act.

Issue-wise Analysis:

1. Validity of the Order under Section 147/143(3):
The Assessee contended that the order under Section 147/143(3) was invalid as the "reasons to believe" were not provided to the Assessee, citing the Supreme Court decision in GKN Driveshafts (India) Ltd. vs. ITO. The Tribunal found that the Assessing Officer (AO) had issued a letter inquiring about the property transaction before issuing the notice under Section 148. During the assessment proceedings, the Assessee was given notices under Sections 142(1) and 143(2) and had submitted details of the property transaction and capital gains computation. The Assessee did not request the reasons for reopening during the assessment proceedings. Therefore, the Tribunal held that the Assessee was aware of the reasons for reopening and had been given due opportunity to address the issue. The contention that the assessment was invalid due to non-supply of reasons was rejected, and the ground of appeal was dismissed.

2. Treatment of Property Transfer as Sale:
The Assessee argued that the transfer of the property to her daughter was intended as a gift, not a sale, and thus should not attract capital gains tax. The AO treated the transaction as a sale based on the registered sale deed, which indicated a consideration of ?2.5 lakhs, even though no money was actually received. The Tribunal noted that the deed was explicitly a sale deed, and the consideration was shown to have been received. The Tribunal rejected the Assessee's contention that it was a gift, stating that if the intention was to gift the property, a gift deed should have been executed. The Tribunal upheld the AO's treatment of the transaction as a sale.

3. Computation of Long Term Capital Gains under Section 50C:
The AO applied Section 50C, which mandates that if the consideration received on transfer of property is less than the value adopted for stamp duty purposes, the latter value should be deemed as the full value of consideration. The property was valued at ?35,11,704 for stamp duty purposes, while the sale deed showed ?2.5 lakhs. The AO computed the Long Term Capital Gains accordingly. The Tribunal upheld this computation, noting that the provisions of Section 50C were clearly applicable since the transaction was through a sale deed at a price lower than the stamp duty valuation. The Tribunal also dismissed the Assessee's reliance on the case laws of Rashtriya Ispat Nigam Limited and Mrs. Avtar Mohan Singh, stating that these cases did not apply to the facts at hand.

Conclusion:
The Tribunal dismissed the Assessee's appeal, upholding the validity of the order under Section 147/143(3), the treatment of the property transfer as a sale, and the computation of Long Term Capital Gains under Section 50C. The order of the CIT(A) was affirmed, and the Assessee's contentions were rejected. The appeal was pronounced dismissed in open court on 08-08-2017.