2022 (6) TMI 567 - AT - Income Tax

Capital gain u/s 45 - long term capital gains in the hands of the assessee - Addition invoking provisions of section 50C - HELD THAT - There is no capital asset as on the date of execution of conveyance deed on 31.03.2005 and there is no transfer of any capital asset since the assessee does not hold any legal title to the land as on the date of execution of conveyance deed on 31.03.2005 and the transaction is null and void on the basis of order of the District Judge, Warora dated 29.02.2020. As claimed that order of the Collector, Chandapur dated 27.04.1992, which was under challenge at the time of assessement and first appellate proceedings, cancelling the auction has been set-aside and the Collector, Chandapur has been asked to decide the matter afresh after providing reasonable opportunity to the assessee. We find that this issue is fundamental and germane to decide the present matter and given that the order of the District Judge dated 29.02.2020 has been passed subsequent to passing of the impugned order dated 11.12.2012, therefore, we admit the additional ground of appeal so raised before us and to consider the order of the District Judge, in the interest of substantial justice, and the ground of appeal is set-aside to the file of the Assessing officer to decide the same taking into consideration the order of District Judge dated 29.02.2020 as well as proceedings before the Collector, Chandapur and any other documentation/information as so required after providing reasonable opportunity to the assessee. Other contentions raised by the assessee in support of other grounds of appeal are left open and not adjudicated upon. Since we have set-aside the aforesaid ground of appeal, other grounds of appeal are also set-aside to the file of the AO to examine the same afresh as per law taking after providing reasonable opportunity to the assessee and the assessee is at liberty to raise the contentions as so raised before us and as so advised. Appeal of the assessee is allowed for statistical purposes.

Issues Involved:
1. Levying of long-term capital gains under Section 50C of the Income Tax Act.
2. Applicability of Section 53A of the Transfer of Property Act, 1882.
3. Applicability of Section 45 of the Income Tax Act regarding the existence of a capital asset and legal title.

Detailed Analysis:

1. Levying of Long-Term Capital Gains under Section 50C:
The primary issue is whether the provisions of Section 50C of the Income Tax Act, which pertains to the valuation of capital gains based on the stamp duty value, apply to the transaction in question. The Assessing Officer (AO) determined that the sale consideration declared by the assessee was significantly lower than the value adopted by the stamp valuation authority. Consequently, the AO invoked Section 50C and calculated the capital gains based on the higher stamp duty value, resulting in a substantial tax liability. This decision was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who found no credible evidence to support the assessee's claim that the land was transferred to a society and that the society paid for the land.

2. Applicability of Section 53A of the Transfer of Property Act, 1882:
The assessee argued that the provisions of Section 53A of the Transfer of Property Act, which deals with part performance of a contract, should apply. The assessee claimed that possession of the land was handed over to a society immediately after purchase, and the society had incurred expenses for its development. However, the AO and CIT(A) rejected this argument, stating that the society was not registered and the transfer deed was not registered. The assessee's reliance on cases such as Chaturbhuj Dwarkadas Kapadia and Jasbir Singh Sarkaria was also noted, where possession and control over the property were deemed sufficient for transfer under Section 2(47)(v) of the Income Tax Act.

3. Applicability of Section 45 of the Income Tax Act:
The assessee contended that there was no capital asset at the time of the execution of the conveyance deed on 31.03.2005, as the auction through which the land was acquired was canceled by the Collector, Chandrapur. This cancellation was under litigation, and the final judgment by the District Judge, Warora, set aside the Collector's order and directed a fresh decision. The assessee argued that without a valid legal title, the conveyance deed executed in 2005 was null and void, and thus, no capital gains could be levied.

Tribunal's Decision:
The Tribunal admitted the additional ground of appeal regarding the applicability of Section 45, considering the subsequent order of the District Judge, Warora, which was passed after the impugned order. The Tribunal found this issue fundamental and set aside the matter to the AO to decide afresh, taking into account the District Judge's order and any subsequent proceedings. The Tribunal left other contentions open and not adjudicated upon, directing the AO to re-examine all grounds after providing a reasonable opportunity to the assessee.

Conclusion:
The appeal was allowed for statistical purposes, with the AO directed to re-evaluate the case considering the recent judicial developments and provide the assessee with an opportunity to present additional evidence and arguments. The Tribunal emphasized the need for substantial justice and a thorough re-examination of the facts and legal issues involved.

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