2021 (4) TMI 726 - AT - Income Tax

Reopening of assessment u/s 147 - taxability of long term capital gain contained u/s 45 - Whether assessee is not owner of the house? - assessee as general power of attorney holder sold the property on behalf of Smt Tripta Nurpuri for a sale consideration vide conveyance deed registered with sub-registrar, Alwar - HELD THAT - Assessee has produced the necessary documents and also the affidavit of Smt Tripta Nurpuri that she had sold the property and had received the sale consideration from the assessee and thus, has discharged the primary onus cast on her and where the AO still harbours any doubt, it was incumbent upon the AO to conduct further enquiry by issuing summons and calling Smt Tripta Nurpuri for necessary examination which the AO has failed in the instant case. Therefore, basis material available on record, it cannot be said that the assessee has sold the property in capacity as owner of the property rather the same has been sold in the capacity of power of attorney holder and on behalf of Smt Tripta Nurpuri and any capital gain tax liability on such transaction arises in hands of Smt Tripta Nurpuri and not in hands of the assessee. AO has failed to conduct any enquiry and bring any material or fact to establish that the assessee has initially acquired the property in question at the time of Power of Attorney dated 3.1.2008 and subsequently sold the same vide sale deed dated 23.09.2009 in the capacity and in her right as an owner of the property. While computing capital gains in the hands of the assessee, the AO has allowed the cost of acquisition of ₹ 289,582 which was actually the cost of acquisition paid by Smt Tripta Nurpuri at the time of initial allotment way back in year 1998 which cannot be inferred as cost of acquisition in hands of the assessee as on the date of execution of power of attorney on 3.1.2008. The same thus shows that the AO himself was not clear as to the taxability of the transaction in the hands of the assessee in absence of requisite enquiry and examination. Thus the addition made by the AO in the hands of the assessee is not warranted and the same is directed to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of initiation of proceedings under Section 147.
2. Addition of ?9,22,312/- as capital gains in the hands of the assessee.

Detailed Analysis:

1. Legality of Initiation of Proceedings Under Section 147:

During the course of the hearing, the assessee contested the initiation of proceedings under Section 147, arguing that the Commissioner of Income Tax (Appeals) erred in confirming the initiation. The assessee received a notice under Section 148 based on information that the assessee sold an immovable property for ?6,00,000/-, while the Sub-Registrar valued it at ?14,75,230/- for registration purposes. The assessee filed a return declaring a total income of ?340/-. The assessee presented documents showing that she was only a General Power of Attorney holder for her sister, Smt. Tripta Nurpuri, who was the actual owner of the property. Despite these submissions, the AO proceeded with the assessment.

The Tribunal held that the AO was in possession of relevant information and had followed due process by recording reasons and seeking permission from the competent authority before issuing the notice under Section 147. The Tribunal found no merit in the arguments against the initiation of proceedings under Section 147 and upheld the AO's jurisdiction.

2. Addition of ?9,22,312/- as Capital Gains:

The primary dispute was whether the capital gains arising from the sale of the property should be taxed in the hands of the assessee or her sister, Smt. Tripta Nurpuri. The AO added ?9,22,312/- as capital gains in the hands of the assessee, arguing that she failed to produce Smt. Tripta Nurpuri for verification. The AO calculated the capital gains by adopting the value of ?14,75,230/- as per Section 50C of the Income Tax Act, 1961, and reduced the indexed cost of ?5,52,918/- from it.

The Tribunal examined the documents, including the allotment letter from the Rajasthan Housing Board to Smt. Tripta Nurpuri, the General Power of Attorney given to the assessee, and the sale deed executed by the assessee as the General Power of Attorney holder. The Tribunal noted that the assessee acted as an agent and not as the owner of the property. The Tribunal emphasized that the AO should have conducted further inquiries by issuing summons to Smt. Tripta Nurpuri, which he failed to do.

Citing a similar case (Shri Gyan Chand Saini vs ITO), the Tribunal reiterated that the primary onus was on the AO to conduct further inquiries if there were doubts. The Tribunal concluded that the capital gains liability should be in the hands of Smt. Tripta Nurpuri, not the assessee. The Tribunal found that the AO allowed the cost of acquisition paid by Smt. Tripta Nurpuri, indicating a lack of clarity on the AO's part regarding the taxability of the transaction.

Conclusion:

The Tribunal directed the deletion of the addition made by the AO in the hands of the assessee, thereby allowing the appeal. The judgment emphasizes the importance of proper inquiry and the distinction between an agent and an owner in property transactions. The Tribunal upheld the legality of the initiation of proceedings under Section 147 but ruled in favor of the assessee on the merits of the capital gains addition.