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2022 (3) TMI 778 - AT - Income TaxCapital gain on transfer of land - Asset jointly by 5 co-owners (all are brothers and sisters) - assessee was one of the co-owners of the property and had also signed the Sale Deed as a co-owner, the AO held that capital gain was proportionately chargeable u/s.2(47) - Was the assessee a co-owner or a consenting party only? - HELD THAT - The relevant thing to be mentioned from that proceeding at this stage is that the name of the assessee is appearing in that order also as the owner transferring the property. A Para of the order on page 31 of the paper book records the submissions made by the five brothers and sisters including the assessee contending Since the land belonged to 1) Lalchand Sheshmal Firodiya and 2) Zumbarlal Hemraj Firodiya the applicants have admitted the distribution of land and recording of successors therein . It is absolutely clear from the submissions made by the assessee and other 4 brothers and sisters that the land in question originally belonging to his father had devolved upon the 5 brothers and sisters including the assessee as successors. In view of the foregoing discussion, it is clear that the argument made by the assessee about his having no interest in the property in question transferred, has no merit and is hereby rejected. This contention is, ergo, repelled. When the transfer of the property in question took place? - Necessarily and as a sequitur , it follows that the mandate of section 17 of the Registration Act requiring the registration as a pre-condition for transfer, after the 2001 amendment, applies to all the clauses of section 2(47) dealing with the immovable property. Execution of an unregistered sale deed is no more treated as transfer unless the sale deed is registered in the same manner, as the position has become after the 2001 amendments qua the transaction of part performance of contract as per section 53A of the TPA covered under section 2(47)(v) of the Act. When the facts as prevailing in the extant case are viewed in the light of the above legal position, it becomes ostensible that the transfer of the property in question took place only on the execution of the registered sale deed in 2010 relevant to the assessment year under consideration and not in the year 2001 when the unregistered Agreement to sell was executed. Moreover, the ld. AR has not drawn my attention towards any material indicating that the capital gain on the transfer of the property in question was offered by the assessee or his father or anyone else at any point of time. This contention, ergo, fails. Effect of order of Tehsildar and Agricultural Lands Tribunal - The order of Tehsildar and Agricultural Lands Tribunal, Ahmednagar itself has been set-aside in further appeal, then, of course, the assessee will be obliged to pay tax on capital gain on the transfer of the property taking place by means of the registered Sale Deed on 07-12-2010 in the year under consideration. In the third scenario of the property in question getting vested in the State Government, again several consequences will follow as regards the timing and the amount of computation of capital gain. These aspects of the matter have remained unanswered. At this stage, it is relevant to mention that the argument about the order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, dated 9.11.2013 setting aside the registered sale deed executed in the year 2010, was taken up before the Tribunal for the first time. No such plea was there before the AO or the ld. CIT(A) that the sale made through registered Sale Deed 07-12-2010 was set-aside by the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, even though the impugned order came to be passed in the year 2016, much after the order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar. Considering these peculiar facts, this issue needs consideration at the end of the AO in the hue of the above discussion. Computation of capital gain Reference to the DVO - Section 50C(2) of the Act provides that where the assessee claims, inter alia, before the Assessing Officer that the value adopted etc. by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer. The word may as used herein has been interpreted by the Hon ble High Courts as shall , meaning thereby, that when the assessee makes a request to the AO for making a reference to the DVO, the AO is bound to do so and then adopt the value so determined in place of the stamp value as the full value of consideration in the computation of capital gains. Despite the specific request of the assessee, the AO did not make any such reference to the DVO and proceeded to compute capital gain on the basis of the stamp value only. It would be in the fitness of things if the impugned order is set-aside and the matter is restored to the file of AO for re-deciding the issue afresh as per law in terms of discussion made herein above. Needless to say, the assessee will be allowed a reasonable opportunity of hearing.
Issues Involved:
1. Determination of whether the assessee was a co-owner or merely a consenting party. 2. Timing of the transfer of the property in question. 3. Effect of the order of the Tehsildar and Agricultural Lands Tribunal. 4. Computation of capital gain and the necessity of reference to the District Valuation Officer (DVO). Issue-wise Detailed Analysis: I. Was the assessee a co-owner or a consenting party only? The assessee argued that he was not a co-owner of the property at the time of its transfer and hence no capital gain was chargeable. He claimed to have received three other properties in lieu of his share in the property in question, substantiated by an affidavit dated 01-12-1990 and another affidavit by his father dated 26-02-1994. However, there was no registered document or court decree supporting this claim. The Tribunal noted that immovable property transfers require compulsory registration under Section 17 of the Registration Act, and unregistered documents cannot affect such property or be received as evidence of transfer. The Sale Deed dated 07-12-2010, signed by the assessee as a co-owner, did not reference any prior transfer of properties in lieu of his share. Additionally, an order by the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, listed the assessee as an owner. Therefore, the Tribunal rejected the argument that the assessee was not a co-owner at the time of the sale. II. When did the transfer of the property in question take place? The assessee contended that the property was transferred in 2001 based on an unregistered Agreement to Sell, and thus no capital gain arose in 2010. The Tribunal referenced Section 53A of the Transfer of Property Act (TPA) and Section 2(47)(v) of the Income Tax Act, which, prior to 2001 amendments, allowed part performance of a contract to constitute a transfer even without registration. However, post-2001 amendments, compulsory registration was mandated for such transfers. Consequently, the Tribunal concluded that the transfer took place only with the execution of the registered Sale Deed in 2010, not in 2001. III. Effect of the order of Tehsildar and Agricultural Lands Tribunal The assessee introduced a new argument before the Tribunal, stating that the registered Sale Deed executed in 2010 was declared invalid by an order dated 09-11-2013 from the Tehsildar and Agricultural Lands Tribunal, Ahmednagar. The Tribunal noted the order declared the transfer legally invalid and directed the property to be surrendered to the State Government. However, the Tribunal found contradictions in the assessee's submissions regarding the execution of this order and the current status of the property. As this issue was raised for the first time before the Tribunal, it required further examination by the Assessing Officer (AO). IV. Computation of capital gain – Reference to the DVO The assessee argued that the stamp value was excessive and requested the AO to refer the valuation to the DVO, which the AO did not do. Section 50C(2) of the Act mandates that the AO must refer the valuation to the DVO if the assessee claims the stamp value exceeds the fair market value. The Tribunal found that the AO erred by not making such a reference despite the assessee's request. Consequently, the Tribunal set aside the impugned order and remanded the matter to the AO for fresh consideration, ensuring the assessee is given a reasonable opportunity of hearing. Conclusion: The Tribunal concluded that the assessee was a co-owner of the property at the time of the sale in 2010, and the transfer took place with the registered Sale Deed in 2010. The issue of the validity of the Sale Deed due to the Tehsildar's order required further examination by the AO. The AO also needed to refer the valuation to the DVO as requested by the assessee. The appeal was partly allowed for statistical purposes, and the matter was remanded to the AO for re-evaluation.
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