2021 (4) TMI 737 - AT - Income Tax

Capital gain computation - CIT(A) determined the sale consideration on the basis of Form 26AS - what is correct value of sale consideration? - HELD THAT - Admittedly in this case, the CIT(A) determined the sale consideration on the basis of Form 26AS without seeing the actual sale deed entered by the assessee with concerned parties. In our opinion, sale consideration cannot be determined only on the basis of Form 26AS. The provisions of s.2(47)(v) can be applied only if there is a written contract coupled with the transfer of possession in terms of s.53A of the Transfer of Property Act. In English law, the contract to which the doctrine of part-performance applies may be oral. Section 53A of the Transfer of Property Act expressly requires that the contract must be in writing by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Thus s. 53A does not recognize an oral contract. The writing is an essential sine qua non for the applicability of the doctrine of part-performance. The lower authorities must have considered the relevant sale deed so as to compute the correct value of sale consideration and during the year of assessment. Being so, the assessment framed on the basis of Form 26AS is set aside. However, we make it clear that if the revenue finds that there is material evidence in support of the transfer of land by assessee to M/s. Nambiars Pvt. Ltd. who had deducted TDS in anticipation of transfer of land in this A.Y. under consideration that to be brought to tax. if the revenue finds that there was a transferable land by the assessee in favour of the deductor of TDS i.e. Nambiars Pvt. Ltd. in the A.Y. by executing a proper sale deed towards transfer of the impugned property, the same may be examined in accordance with law. At this stage, we refrain from committing anything on status of the assessee in whose name capital gain to be taxed as we have set aside the assessment. It is kept open. Appeal filed by the assessee is partly allowed.

Summary

Issues Involved:

1. Status of the assessee: Individual vs. HUF.
2. Correct sale consideration for the property.
3. Entitlement to deduction under Section 54F of the Income-tax Act.
4. Admission of additional grounds of appeal.
5. Validity of sale consideration based on Form 26AS.
6. Transfer of property and applicability of TDS.

Detailed Analysis:

1. Status of the Assessee: Individual vs. HUF

The assessee contended that the CIT(A) erred in adjudicating the appeal in the status of "Individual" instead of "HUF." The appellant argued that the land sold was ancestral property and each co-parcener had a 1/4th undivided share. The Tribunal noted that the assessee had offered the return of income in the capacity of an individual, and the A.O. and CIT(A) included the capital gain in the hands of the assessee as an individual. However, the Tribunal refrained from commenting on the status of the assessee, leaving it open for further examination.

2. Correct Sale Consideration for the Property

The assessee challenged the CIT(A)'s decision to adopt the sale consideration of ?4,88,75,000/- instead of the actual sale consideration of ?2,70,00,000/- as per the registered sale deed dated 11-07-2013. The Tribunal observed that the CIT(A) determined the sale consideration based on Form 26AS without considering the actual sale deed. The Tribunal emphasized that sale consideration cannot be determined solely on Form 26AS and must be based on the actual sale deed. Therefore, the assessment based on Form 26AS was set aside.

3. Entitlement to Deduction under Section 54F

The assessee claimed entitlement to a deduction under Section 54F of the Income-tax Act for the investment of ?39,94,280/- in a new residential flat. The Tribunal noted that neither the A.O. nor the CIT(A) considered this claim. The Tribunal directed the authorities to allow the deduction admissible under Section 54F.

4. Admission of Additional Grounds of Appeal

The assessee raised additional grounds on 5.4.2021, arguing that the CIT(A) erred in computing the consideration at ?4,88,75,000/- based on an unmaterialized MOU with M/s. Nambiar Builders Pvt Ltd. The Tribunal admitted the additional grounds, noting that they related to the same facts and circumstances as the original grounds and did not cause any prejudice to the revenue.

5. Validity of Sale Consideration Based on Form 26AS

The Tribunal highlighted that the provisions of Section 2(47)(v) of the Income-tax Act and Section 53A of the Transfer of Property Act require a written contract and transfer of possession. The Tribunal emphasized that the lower authorities must consider the relevant sale deed to compute the correct value of the sale consideration. The assessment based on Form 26AS was set aside, and the Tribunal directed the revenue to examine the actual transfer of land and the corresponding sale deed.

6. Transfer of Property and Applicability of TDS

The assessee argued that the MOU with M/s. Nambiar Builders Pvt Ltd did not materialize, and the land was not transferred to the developer. The Tribunal acknowledged that the CIT(A) confirmed the addition based on the consideration mentioned in Form 26AS. The Tribunal directed the revenue to examine if there was a material transfer of land to M/s. Nambiar Builders Pvt Ltd and to bring it to tax accordingly. The Tribunal left the status of the assessee open for further examination.

Conclusion:

The appeal filed by the assessee was partly allowed. The Tribunal set aside the assessment based on Form 26AS and directed the revenue to re-examine the sale consideration based on the actual sale deed and the material transfer of property. The Tribunal also directed the authorities to allow the deduction under Section 54F and left the status of the assessee open for further examination.