2023 (12) TMI 1127 - AT - Income Tax

Treatment of advance received in respect of sale of agricultural land jointly executed with co-owner - Treating partial advance received against agreement to sell of an ancestral joint agricultural land as sale consideration - Whether no transfer of possession of land in the year under consideration? - only argument of the assessee is that the land in question was only advance and it could not be treated as sale consideration and since no possession of land was given, therefore, there was no transfer - HELD THAT - AO did not discard completely the contention regarding source of deposit being advance/sale consideration. However, he made addition on the basis that no capital gain was offered by the assessee. We find merit into the contention of learned counsel for the assessee that the amount was merely advance payment and the transfer was completed in the year 2020. Our attention was drawn towards sale deed and settlement agreement executed. As per these documents the possession was handed over on 15.02.2020. Therefore, hereby direct the AO to delete the impugned addition. The AO would be at liberty for taxing the capital gain arising out of sale of capital asset in the relevant year in accordance with law, Grounds of appeal are allowed.

Summary

Issues:
The judgment involves the treatment of advance received against the agreement to sell of an ancestral joint agricultural land as sale consideration without the transfer of possession.

Treatment of Advance Received:
The case involved the reassessment of the assessee for depositing cash in the bank account related to the sale proceedings of land. The assessing officer added the amount to the income, which was upheld by the CIT(Appeals). The main contention was the treatment of the advance received in respect of the sale of agricultural land jointly executed with a co-owner. The counsel for the assessee argued that the authorities erred in making the addition, emphasizing that the land was finally transferred and possession given in 2020, even though the agreement to sell was executed in 2013. The written submissions highlighted the legal provisions and case laws supporting the claim that the transaction was an advance and not a sale/transfer of immovable property. The assessing officer and CIT(Appeals) failed to consider the surrounding circumstances and human probabilities in treating the entire advance as taxable capital gain. The tribunal found merit in the argument that the amount was an advance payment, and the transfer was completed in 2020 when possession was handed over, directing the assessing officer to delete the addition and allowing the appeal.

Legal Interpretation - Section 2(47) of the Act:
The judgment referred to Section 2(47) of the Income Tax Act, which defines "transfer" concerning a capital asset, including various scenarios like sale, exchange, relinquishment, or allowing possession of immovable property in part performance of a contract. The assessing officer had considered the deposited amount as sale proceeds of urban agricultural land, taxable in the hands of the assessee. However, the tribunal found that the amount was an advance payment for the sale of agricultural land, and the transfer was completed in 2020 when possession was handed over. The tribunal directed the assessing officer to delete the addition, allowing the appeal and emphasizing the importance of considering all relevant material and circumstances in making assessments.

Conclusion:
The judgment focused on the treatment of advance received against the agreement to sell of an ancestral joint agricultural land as sale consideration without the transfer of possession. It highlighted the legal provisions, case laws, and the assessing officer's duty to consider surrounding circumstances and human probabilities in such cases. Ultimately, the tribunal ruled in favor of the assessee, directing the deletion of the addition and emphasizing the importance of making assessments based on all relevant material and circumstances.