2019 (4) TMI 347 - AT - Income Tax

Distress sale - sale of property under pressure - adoption of stamp value u/s 50C as sales consideration for Capital gain computation - assessee is a daughter of a retired army officer - fraudulent registration of same property to another persons who has no right or title over the property - harassment by Revenue and Registration Department of the State Government - HELD THAT - When the document was executed and registered on 11.06.1997 in favour of the assessee, who is none other than a daughter of an army officer, the very same Sub Registrar has registered another document said to be executed by the very same vendor on 20.07.1999 in favour of Shri I.A.J. Balan, Shri I.P. Andrew Raj, Shri I.S.J. Rozario, Shri I. Francis Jeyaraj and Shri I. Jerome Michael Pushpanathan. Tahsildar is the competent authority for grant of patta. When it was brought to his notice about the fraudulent issue of patta in favour of the third party, the Tahsildar ought to have cancelled the patta immediately and a patta should have been granted in favour of the assessee. Unfortunately, the Tahsildar has not acted on the petition received even from an army officer. Even though a report was said to be prepared, the Tahsildar failed to forward the same to the higher authorities. Circumstances under which the sale deed executed by the assessee through her father Col. V.N. Lingappan is a distress sale. When the property was sold under pressure and this Tribunal is of the considered opinion that adopting guideline value under Section 50C is not called for. Under normal circumstances, this Tribunal would have remitted back the matter to the file of the Assessing Officer for referring the matter to the valuation officer. In this case, we are not doing so since the Assessing Officer himself accepted that the property was sold under pressure. This Tribunal is of the considered opinion that remitting back the matter to the file of the Assessing Officer for the purpose of making reference to the valuation officer would tantamount not only harassing the assessee further but also rubbing the salt on the would again and again. This Tribunal is of opinion that the assessee executed the sale deed, the apparent sale consideration disclosed in the sale deed has to be considered as market value and the same has to be adopted for the purpose of computing capital gain. Hence, this Tribunal is unable to uphold the orders of both the authorities below. Accordingly, orders of both the authorities below are set aside and the addition made by the Assessing Officer is deleted. - Decided in favour of assessee

Summary

Issues Involved:
1. Fraudulent execution of a second sale deed.
2. Non-action by State Revenue and Registration authorities.
3. Application of Section 50C of the Income-tax Act, 1961.
4. Computation of capital gain.

Issue-wise Detailed Analysis:

1. Fraudulent Execution of a Second Sale Deed:
The assessee purchased a piece of land in Kolathur on 11.06.1997, which was executed by a power of attorney holder. However, the same vendor fraudulently transferred the same land to third parties on 20.07.1999. The assessee was unaware of this fraudulent transfer until later. The fraudulent transfer led to the Revenue authorities granting patta to the third parties, which was contested by the assessee’s father through various petitions and complaints.

2. Non-action by State Revenue and Registration Authorities:
The assessee’s father, Col. V.N. Lingappan, approached various State authorities, including the Tahsildar, District Collector, and Registration authorities, to cancel the fraudulent patta and registration. Despite a report prepared by the Tahsildar recommending the cancellation of the patta, no action was taken, and the report was neither signed nor forwarded. The authorities cited the lack of provision in the Registration Act to cancel a registered document, which the Tribunal criticized as a dereliction of duty.

3. Application of Section 50C of the Income-tax Act, 1961:
The Assessing Officer invoked Section 50C of the Income-tax Act to compute the capital gain based on the guideline value, despite acknowledging that the property was sold under distress. The Tribunal noted that the property was sold under pressure due to the fraudulent actions and the non-cooperation of the State authorities.

4. Computation of Capital Gain:
The Tribunal observed that the sale was a distress sale and criticized the application of the guideline value under Section 50C. It held that adopting the guideline value was not justified given the circumstances. The Tribunal decided not to remit the matter back to the Assessing Officer for valuation, as it would further harass the assessee. Instead, it ruled that the apparent sale consideration disclosed in the sale deed should be considered the market value for computing the capital gain.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, setting aside the orders of the lower authorities and deleting the addition made by the Assessing Officer. The decision highlighted the failure of the State machinery in addressing the fraudulent actions and emphasized the need for responsible action by the authorities to reduce judicial pendency and uphold democracy. The Tribunal's observations underscored the distress sale circumstances and the unjust application of Section 50C in this case.