2020 (12) TMI 79 - AT - Income Tax

Capital gains on sale of property - invoking 50C of the Act for year under consideration and computing capital gains by taking guidance value for year under consideration - AO reworked LTCG based on the guidance value in the year of sale being 04/10/2004 as assessee has shown sale proceeds of sale of property, which is much lesser than, guidance value, and accordingly as per provisions of section 50C - HELD THAT - In the present case, at the time of registration in the year 2004, assessee was represented by the original purchase through general power of attorney executed by assessee in 1993 - at the time of registering the sale deed the said property stands transferred in the name of another person who is submitted to be the brother of Director in the company being original purchaser. The recitals in the registered sale agreement placed at page 94-104 mentions details of the sale consideration having received by assessee under Memorandum of Agreement of Transfer and Assignment entered into on 17/03/1993 between assessee and the company. Provisions of section 50C has been inserted in the form of clarification to the section and accordingly is retrospectively applicable. In our view provisions of section 50C should be looked into from the date of Memorandum of Agreement of Transfer and Assignment entered into by assessee with M/s Shantha Exports Pvt.Ltd through its Director. Nothing has been placed on record to show why the subsequent sale has been registered in the name of an individual who is alleged to be the brother of the Director of M/s Shantha Exports Pvt Ltd. It also has been recorded by Ld.CIT(A) that assessee did not disclose the capital gain - Nothing has been brought to record how the loss if any is allowable during the year under consideration. We therefore set aside the issue back to the file of Ld.AO to consider it de novo in the light of various evidences filed by assessee. Assessee is directed to establish all relevant links and reply to queries raised by Ld.AO in order to complete the assessment in accordance with law - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Taxability of capital gains for the assessment year 2005-06.
2. Applicability of section 50C of the Income Tax Act.
3. Adoption of sale consideration and indexed cost.
4. Liability to pay interest.

Taxability of Capital Gains for the Assessment Year 2005-06:
The appellant challenged the taxability of capital gains for the assessment year 2005-06, arguing that the transfer of the capital asset did not occur during the relevant previous year. The CIT(A) upheld the taxability of capital gains, noting that no income was offered under capital gains for the assessment year 1993-94 when the entire consideration was received by the appellant. The CIT(A) observed that the appellant had declared capital loss during the relevant year. The appellant's contention was rejected, leading to an appeal before the ITAT.

Applicability of Section 50C of the Income Tax Act:
The appellant contested the invocation of section 50C of the Act for the assessment year in question and the computation of capital gains based on the guidance value. The appellant argued that the actual transfer of the property occurred in 1993 when the entire sale consideration was received. The ITAT considered the retrospective applicability of the proviso to section 50C and noted that the property was transferred in 2004, with the original purchaser's brother being involved in the registration. The ITAT directed the AO to re-examine the issue based on the evidence presented by the appellant.

Adoption of Sale Consideration and Indexed Cost:
The appellant disputed the adoption of sale consideration and indexed cost as erroneous. The ITAT remanded the issue back to the AO for further consideration, rendering this ground academic at the current stage.

Liability to Pay Interest:
The appellant denied liability to pay interest, seeking its deletion. However, the judgment did not provide a specific resolution to this issue, as the focus was primarily on the taxability of capital gains and the applicability of section 50C.

In summary, the ITAT's judgment addressed the appellant's challenges regarding the taxability of capital gains, the application of section 50C, and the adoption of sale consideration and indexed cost. The ITAT directed the AO to reevaluate the issues based on the evidence presented by the appellant, providing an opportunity for a fresh assessment. The judgment partly allowed the appeal for statistical purposes, emphasizing the need for a thorough examination of the facts and compliance with legal provisions.