2023 (2) TMI 702 - AT - Income Tax

Computation of capital gains from transfer of property - Transfer u/s 2(47)(v) - assessment year - assessee along with his two brothers has executed the POA in favour of Shri. A. Sreedharan and relinquished right and interest in the property in favour of the purchaser - HELD THT - Deemed transfer referred in to section 2(47)(v) took place in the assessment year 2013- 14, and thus, the assessee has rightly computed capital gains and offered to tax in the assessment year 2013-14. As regard the observation of the AO on the basis of subsequent sale deed dated 18.07.2013 and computation of capital gains for the assessment year 2014-15, we find that although, the POA holder executed registered sale deed dated 18.07.2013, but sale deed has been executed in favour of Mrs. Krishna, assessee s wife. What we understood is that POA holder had purchased a property from the assessee in the year 2012-13 by way of registered POA coupled with sale receipt dated 02.01.2013 and has only completed the formality of registration of documents in favour of his wife on 18.07.2013 - AO is completely erred in computing capital gains in the impugned assessment year on the basis of subsequent sale deed dated 18.07.2013, even though the assessee has made it very clear, he has offered capital gains in the assessment year 2013-14. AO himself has given credit for the amount of capital gains declared for the assessment year 2013-14, while computing capital gains in the impugned assessment year. Once the AO came to the conclusion that the assessee has offered capital gains in the earlier assessment year, then there is no reason for the AO to compute capital gains on transfer of very same asset in the impugned assessment year, because transfer will not take place in two assessment years. CIT(A), without considering relevant facts simply sustained additions made by the AO and thus, we set aside the order passed by the CIT(A) and direct the AO to delete the additions made towards capital gains from sale of property for the impugned assessment year. Appeal of assessee allowed.

Issues Involved:
1. Legality of dismissing the appeal.
2. Justification of taxing capital gains in two assessment years.
3. Consideration of written submissions by the first appellate authority.
4. Validity of reassessment proceedings under section 147 of the Income-tax Act.
5. Application of section 50C of the Income-tax Act for determining fair market value.
6. Computation of capital gains for the assessment year 2014-15.

Detailed Analysis:

1. Legality of Dismissing the Appeal:
The appellant contended that the dismissal of the appeal by the first appellate authority was against the facts and not legally maintainable. The appellate authority condoned the delay in filing the appeal and admitted it for adjudication on merit after considering the reasons and circumstances provided by the appellant.

2. Justification of Taxing Capital Gains in Two Assessment Years:
The appellant argued that taxing capital gains for the assessment years 2013-14 and 2014-15 for a single transaction was not justified. The appellant had sold a property along with his two brothers through a Power of Attorney (POA) holder and declared his share of consideration and computed necessary capital gains for the assessment year 2013-14. The Assessing Officer (AO) computed capital gains for the assessment year 2014-15 based on the sale deed executed on 18.07.2013, which the appellant contended was incorrect as the deemed transfer took place in the assessment year 2013-14.

3. Consideration of Written Submissions by the First Appellate Authority:
The appellant claimed that the first appellate authority did not consider the written submissions dated 03.02.2022 in deciding the appeal. The appellate authority, however, reviewed the reassessment order, submissions on merit, and the facts of the case before making a decision.

4. Validity of Reassessment Proceedings under Section 147 of the Income-tax Act:
The appellant challenged the validity of the reassessment proceedings, arguing that they were bad in law. The AO reopened the assessment based on information received and subsequent belief of income escapement. The AO made inquiries from the Sub Registrar office and found that the appellant received 1/3rd share of the total sale consideration amounting to Rs. 94,48,500/-, leading to the reassessment.

5. Application of Section 50C of the Income-tax Act for Determining Fair Market Value:
The appellant contested the application of section 50C, arguing that the fair market value determined by the registering authority was only an enabling provision and not conclusive. The AO invoked section 50C to arrive at the fair market value of the property sold, taking the sale consideration of Rs. 94,48,500/- as reflected in the sale documents.

6. Computation of Capital Gains for the Assessment Year 2014-15:
The AO computed capital gains for the assessment year 2014-15, considering the sale deed executed on 18.07.2013. The appellant argued that the transfer took place in the assessment year 2013-14 when the irrevocable POA was executed, and the full consideration was received. The appellate tribunal found that the POA coupled with the sale receipt indicated the transfer took place in the assessment year 2013-14. The AO erred in computing capital gains for the assessment year 2014-15 based on the subsequent sale deed. The tribunal directed the AO to delete the additions made towards capital gains for the assessment year 2014-15.

Conclusion:
The appeal filed by the assessee was allowed. The tribunal set aside the order passed by the CIT(A) and directed the AO to delete the additions made towards capital gains from the sale of property for the assessment year 2014-15. The order was pronounced on 15th February 2023 at Chennai.

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