2021 (10) TMI 601 - AT - Income Tax

LTCG - Proof of sale transaction - assessee in substance submitted as not sold the land under consideration rather the buyer by fraudulent means has got the sale deed registered in his favour - case of the assessee is that the subject transaction has been carried out under fraudulent circumstances and on the pretext of certain promises and agreement between the parties which have not been fulfilled by the buyer - case of the Revenue is that the assessee has executed a sale deed for sale of the land which has been duly registered and has not been cancelled till date and as per sale deed, the property has been transferred and possession has been handed over to the buyer and therefore, it is clear that a transfer has taken place which is liable for capital gains - HELD THAT - In the instant case, as we have noted above, subsequent to entering into the sale deed, the assessee has taken series of steps against the buyer from time to time by way of filing an FIR, thereafter, suit for injunction in court of civil judge, thereafter civil appeal before the Add. Judge and lastly, by way of filing a civil writ before the Hon ble Rajasthan High Court where the Hon ble Court has directed to maintain a status quo and the case of the assessee before the Hon ble Court is that the subject transaction has been carried out under fraudulent circumstances and on the pretext of certain promises and agreement between the parties which have not been fulfilled by the buyer and the Hon ble Rajasthan High Court directed to maintain status-quo as regards the possession, alienation, construction and creation of third party interest in the suit lands, pending the writ petition. The Stay application stands disposed of. In light of aforesaid discussions and in the entirety of facts and circumstances of the case and in the fitness of things, we are of the considered view that the matter need to be set-aside and remanded to the file of the Assessing officer who is hereby directed to decide the same afresh after taking into consideration the decision of the Hon ble Rajasthan High Court in the aforesaid writ petition which has a direct bearing on the matter. Determining sale consideration u/s 50C - We believe that in light of differential approach and valuation adopted by the stamp duty authorities in case of assessee and in case of brother of the assessee in respect of similar situated property as so claimed, the reference to DVO becomes imperative to take the same into consideration and determine the fair market value of the property. Given that the AO had go ahead in the matter without referring the matter to DVO, it gives rise to another reason why we are of the considered view that the matter deserve to be set-aside to the file of the Assessing officer who is hereby directed to refer the matter to DVO and decide as per law. Since we are setting aside the matter, the Assessing officer is also directed to consider other contentions raised by the ld AR regarding non-allowance of indexed cost of acquisition while determining capital gains in the hands of the assessee and decide as per law. The assessee is also hereby directed to place on record of the Assessing officer developments and status of the proceedings before the Hon ble Rajasthan High Court in the matter on regular basis and a copy of the order/directions so passed by the Hon ble Rajasthan High Court in aforesaid writ petition as soon as copy of the order is received or made available on the official website of the Hon ble Rajasthan High Court and other information/documents as so desired by the Assessing officer. Needless to say, the assessee be allowed a reasonable opportunity before deciding the matter.

Summary

Issues Involved:
1. Assessment of long-term capital gain.
2. Validity of the sale deed under fraudulent circumstances.
3. Applicability of Section 50C and determination of Fair Market Value (FMV).
4. Non-allowance of indexed cost of acquisition.

Issue-Wise Detailed Analysis:

1. Assessment of Long-Term Capital Gain:
The primary issue is whether the long-term capital gain assessed at ?81,58,720/- by the Assessing Officer (AO) is correct. The AO based this assessment on the value determined by the Stamp Duty Authority. The assessee contends that the transaction was fraudulent, and no capital gains liability arises from such a sham transaction. The AO, however, held that the sale deed indicated a transfer of property, and thus, capital gains tax was applicable.

2. Validity of the Sale Deed Under Fraudulent Circumstances:
The assessee argued that the sale deed executed was under fraudulent circumstances, and the buyer did not fulfill the promises made. The AO and CIT(A) did not accept this contention, stating that the sale deed indicated a completed transaction with possession handed over. The assessee had filed an FIR and a civil suit, and the High Court directed to maintain the status quo regarding the possession, alienation, construction, and creation of third-party interest in the suit land. The Tribunal referred to the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Patna High Court, which held that registration of a sale deed, though evidentiary, is not conclusive if the transaction is proven to be sham or fraudulent.

3. Applicability of Section 50C and Determination of Fair Market Value (FMV):
The AO adopted the value determined by the Collector (Stamps) at ?81,58,722/- under Section 50C. The assessee contended that the actual consideration was ?5,00,000/- as recorded in the sale deed and that the AO should have referred the matter to the DVO for FMV determination. The Tribunal noted that in a similar case involving the assessee's brother, the ITAT had held that Section 50C could not be invoked when the sale consideration declared by the assessee was accepted by the Sub-Registrar. The Tribunal directed the AO to refer the matter to the DVO and determine the FMV before substituting the sale consideration as per the Collector (Stamps).

4. Non-Allowance of Indexed Cost of Acquisition:
The AO did not allow any deduction for the indexed cost of acquisition while computing the long-term capital gain. The Tribunal directed the AO to consider the assessee's contention regarding the non-allowance of indexed cost of acquisition and decide as per law.

Conclusion:
The Tribunal set aside the matter and remanded it to the AO for fresh consideration. The AO was directed to:
- Take into account the decision of the Hon'ble Rajasthan High Court in the writ petition.
- Refer the matter to the DVO for FMV determination.
- Consider the assessee's contention regarding the non-allowance of indexed cost of acquisition.
- Provide the assessee with a reasonable opportunity before deciding the matter.

The appeal of the assessee was allowed for statistical purposes.