2022 (3) TMI 381 - AT - Income Tax

Double taxation - Addition of capital gain or income from other sources - assessee received a sum on signing as a consenting party in a sale transaction of land and offered long term capital gain by deducting the remaining amount as indexed cost of acquisition - AO observed that the assessee was not the owner of the above property as per the Sale deed and also did not have any share in the land transferred AND treated the entire amount of ₹ 10 lakhs as Income from other sources‟ and made an addition for differential amount - HELD THAT - Here is a case in which the assessee inadvertently suo motu offered ₹ 5.39 lakhs as long term capital gain and the AO made further addition of ₹ 4.61 lakhs. In view of the fact that the assessee was not at all chargeable to tax in respect of receipt of ₹ 10 lakhs for acting as a consenting party and the entire sale consideration has already been taxed in the hands of Mrs. Anuradha Ashok Satbhai, his mother, as a sole owner, we hold that the amount of long term capital gain of ₹ 5.39 lakhs wrongly offered by the assessee is also not chargeable to tax in the same manner in which the addition of ₹ 4.61 lakhs was wrongly made by the AO. It is trite that no income can be taxed merely because the assessee wrongly offered it in his return. I am reminded of the mandate of Art. 265 of the Constitution of India, which states that No tax shall be levied or collected except by authority of law‟. It is, therefore, held that full amount of ₹ 10 lakhs should be deleted from the assessee‟s computation of total income. Assessee appeal allowed.

Summary

Issues: Double taxation of ?10 lakhs.

Analysis:
1. Issue of Double Taxation: The appeal was against the double taxation of ?10 lakhs received by the assessee for acting as a consenting party in a land sale transaction. The Assessing Officer (AO) treated the entire amount as "Income from other sources" due to the property being solely owned by the assessee's mother. The assessee contended that the full sale consideration had already been taxed in the hands of the mother, and taxing a part of it in the assessee's hands would lead to double taxation. The ld. CIT(A) approved the addition made by the AO, leading to the appeal.

2. Adjudication: The ITAT Pune observed that the assessee had offered ?5.39 lakhs as long-term capital gain and the AO added ?4.61 lakhs. However, since the mother was taxed as the sole owner of the property and the full consideration was already taxed in her hands, the ITAT held that the amount of long-term capital gain offered by the assessee was not chargeable to tax. Referring to the Constitution of India's Art. 265, which prohibits levying tax without authority of law, the ITAT ruled in favor of the assessee and deleted the entire ?10 lakhs from the computation of total income.

3. Conclusion: The ITAT allowed the appeal, emphasizing that no income should be taxed merely because the assessee mistakenly offered it in the return. By considering the tax already imposed on the mother for the entire sale consideration, the ITAT prevented double taxation of the amount received by the assessee. The judgment highlighted the importance of legal authority for tax collection and ensured that the assessee was not unfairly burdened with additional tax liability.