2022 (11) TMI 1079 - AT - Income Tax

Long term capital gain - sale of land - Legal owner of asset/property - claim of proportionate share of 2/3rd - assessee along with his grandmother has executed power of attorney(POA) in favour of one Shri S. Ramaswamy, the agent in respect of the property - proportionate deduction on account of expenses incurred for removal of encroachment, eviction, illegal squatters etc. - HELD THAT - PoA and sale deed both are executed on the same day by assessee as well as the GPA Shri S. Ramaswamy on 19.02.2015. It means the PoA holder has no legal right or interest in the property and entire consideration belongs to assessee or other co-owner. Even otherwise, Shri S. Ramaswamy has not accounted for this consideration in his return of income or no capital gain is declared either short term or long term by Shri S. Ramaswamy, the PoA holder in his return of income. CIT(A) and the AO has rightly concluded that receipt of 93% of sale consideration i.e., 6,93,50,000/-i.e., sale of land without any encumbrance on the date when GPA was executed including GPA of Rs.7,43,50,000/- clearly proves that the assessee has no intention of declaring the capital gain in his return of income. Hence, we are of the view that the authorities below have rightly concluded that the entire capital gain is to be assessed in the hands of the assessee to the extent of his share and hence, we confirm the order of the lower authorities and dismiss this issue of assessee s appeal. Disallowance of eviction expenses - assessee now before us made submission that the entire details are available with him as regards to eviction payments and eviction expenses which the assessee could not produce before the CIT(A) and hence, he requested that to that extent, the matter can be restored back to the file of the AO because the same were partly produced before the AO just before the completion of assessment - HELD THAT - After hearing both the sides on this issue, now we are of the view that the assessee is entitled for this claim but assessee has to prove this claim and file evidence. Hence, we restore this issue back to the file of the AO for fresh adjudication after verifying the evidences. This issue of assessee s appeal is set aside and allowed for statistical purposes.

Summary

Issues:
1. Treatment of amount received by an individual as income under 'long term capital gain'.

Analysis:
The appeal arose from the Commissioner of Income Tax (Appeals)-2, Chennai's order regarding the assessment framed by the ACIT, Non-Corporate Circle-2, Chennai for the assessment year 2015-16 under section 143(3) of the Income Tax Act, 1961. The main issue was the confirmation of the action of the Assessing Officer in treating the amount of Rs.6,86,06,500/- received by an individual as income under the head 'long term capital gain'. The individual had disclosed long term capital gain of Rs.29,81,660/- on the sale of land, but the Assessing Officer noted that the individual, along with his grandmother, had executed a power of attorney in favor of another individual for a property sale, leading to the receipt of a total consideration of Rs.7,43,50,000/-. The individual claimed to have received only Rs.30 lakhs and disclosed long term capital gain accordingly.

The Assessing Officer questioned the individual's failure to declare capital gain on the entire sale consideration and requested explanations. The individual detailed the circumstances, including the power of attorney given due to family responsibilities and legal issues with the property. The Assessing Officer, however, did not accept the explanations and assessed long term capital gain on the entire sale consideration. The Commissioner of Income Tax (Appeals) upheld this decision, considering the individual as the legal owner and the power of attorney holder as not having any right to claim consideration. The Tribunal noted the clauses in the power of attorney agreement and sale deed, highlighting that the principal was to receive monetary consideration, and the power of attorney holder had no legal right or interest in the property.

The Tribunal concurred with the lower authorities that the individual had not intended to disclose the full capital gain, as evidenced by the execution of the power of attorney and sale deed on the same day, with the power of attorney holder not declaring any capital gain. Therefore, the entire capital gain was to be assessed in the individual's hands. Regarding the disallowance of eviction expenses claimed by the individual, the Tribunal allowed the claim but directed the individual to provide evidence to substantiate the expenses. The issue was remanded back to the Assessing Officer for fresh adjudication. Consequently, the appeal was partly allowed for statistical purposes, with the Tribunal's order pronounced on 16th November 2022 in Chennai.