2025 (3) TMI 1049 - AT - Income Tax

Addition towards profit from sale of immovable property - HELD THAT - Sum has already been offered to tax sustaining of the impugned addition in the hands of assessee will only tantamount to double addition and that too when the alleged sum has not been received by the assessee in his bank account and complete details have been filed before us to prove that the alleged sum has been offered to tax by different assessee s in their income-tax returns at different point of time when they sold the property to other person. We thus fail to find any infirmity in the finding of the CIT(A) deleting the impugned addition. Therefore all the grounds of appeal raised by the Revenue are dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the addition of Rs. 15,13,95,000/- to the assessee's income by the Assessing Officer (AO) was justified, given the claim that this amount was already taxed in the hands of intermediary parties involved in the property transactions.
Whether the transactions conducted through unregistered agreements to sell are valid for tax purposes under the Income Tax Act, 1961, and whether they can be considered as legitimate transfers of property.
Whether the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete the addition made by the AO was correct, considering the argument of double taxation and the evidence provided by the assessee.
Whether the provisions of the Transfer of Property Act and the Indian Registration Act affect the validity of the transactions for income tax purposes.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Addition to Assessee's Income

Relevant Legal Framework and Precedents: The AO added Rs. 15,13,95,000/- to the assessee's income, arguing that the transactions were not legally valid without registered sale deeds. The CIT(A) disagreed, citing that taxing the same income again would result in double taxation.

Court's Interpretation and Reasoning: The Tribunal noted that the profit from the sale of the property had already been offered to tax by various parties involved in the transactions over time. The CIT(A) found that each party had disclosed their respective profits in their income tax returns, thereby avoiding double taxation.

Key Evidence and Findings: The assessee provided detailed documentation showing the series of transactions and the corresponding tax filings by each party involved. This included agreements to sell, profit and loss accounts, and income tax returns.

Application of Law to Facts: The Tribunal applied the principle that income should not be taxed twice. It considered the evidence that the income had already been taxed in the hands of intermediary parties.

Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the transactions were invalid due to the lack of registered sale deeds, emphasizing the principle that only real income should be taxed.

Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the addition, preventing double taxation of the same income.

2. Validity of Transactions through Unregistered Agreements

Relevant Legal Framework and Precedents: The AO relied on the Supreme Court's decision in CIT vs. Balbir Singh Maini, which emphasized the need for registration of agreements post-2001. However, the Tribunal considered other precedents that allowed unregistered agreements to be used as evidence of transactions.

Court's Interpretation and Reasoning: The Tribunal noted that the unregistered agreements, along with the transfer of possession and payment through banking channels, were sufficient to establish the transactions' validity for tax purposes.

Key Evidence and Findings: The Tribunal reviewed the series of unregistered agreements and the corresponding tax disclosures by the parties involved.

Application of Law to Facts: The Tribunal applied the principle that the substance of the transactions, rather than their form (i.e., registration), should determine tax liability.

Treatment of Competing Arguments: The Tribunal found that the AO's reliance on the need for registered deeds was misplaced for determining tax liability under the Income Tax Act.

Conclusions: The Tribunal concluded that the transactions were valid for tax purposes, despite being conducted through unregistered agreements.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, "From the facts of the case, it is evident that, each of the above parties including the appellant have received sale consideration separately and have earned profit of Rs. 14,90,01,765/- and also offered the same in their computation of income. Therefore, taxing the said profit again in the hands of the appellant shall result into double taxation of the same income."

Core Principles Established: The judgment reinforced the principle that income should not be taxed twice and that the substance of transactions should prevail over formal requirements for tax purposes.

Final Determinations on Each Issue: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition to the assessee's income. It confirmed that the transactions were valid for tax purposes, and the income had already been appropriately taxed in the hands of intermediary parties.

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