1995 (10) TMI 73 - AT - Income Tax

Summary

Issues:
Ownership of property and profit on sale of property.

Ownership of Property:
The appellant, an assessee, appealed against the order of the CIT(A)-XIV, New Delhi, regarding the addition of Rs. 4 lakhs as profit on the sale of a property. The appellant contended that they only carried out construction on the property on a contract basis for the owner, Mr. J.P. Bahl, who later sold the property. The appellant argued that there was no power of attorney in favor of the appellant, and the sale consideration was received and deposited in Mr. Bahl's bank account. The Departmental Representative argued that Mr. Bahl had accepted entering into an agreement with the appellant for the sale of the property, indicating the appellant's interest in the property. The Tribunal noted that the appellant had paid an advance to Mr. Bahl for construction, and the property was eventually sold to a third party. The Tribunal found that Mr. Bahl was the owner of the property, and the appellant had only constructed the property on his behalf. The Tribunal observed that Mr. Bahl had retracted his earlier statement regarding the sale agreement during cross-examination, and there was no documentary evidence to establish the appellant's ownership of the property. Consequently, the Tribunal ruled in favor of the appellant, deleting the addition made by the AO.

Profit on Sale of Property:
The crux of the issue was whether the appellant was liable to pay tax on the profit arising from the sale of the property. The appellant argued that they were not the owner of the property and had only carried out construction work on behalf of the actual owner, Mr. Bahl. The Departmental Representative contended that the appellant had an interest in the property as evidenced by the advance payment made to Mr. Bahl. However, the Tribunal found that the appellant's role was limited to construction, and the property was sold by Mr. Bahl, who received the sale consideration. The Tribunal emphasized the lack of documentary evidence supporting the Department's claim that the appellant was the owner of the property. As a result, the Tribunal concluded that the appellant could not be taxed for the profit arising from the sale of the property. Therefore, the Tribunal allowed the appellant's appeal, ruling in their favor and deleting the addition of Rs. 4 lakhs made by the AO.