2017 (4) TMI 291 - AT - Income Tax

Capital gain - STCG OR LTCG - Held that - As already even though clause 4 of the agreement indicates that possession will be handed over at the time of registration, there is no registration so far, but possession was handed over according to Assessee. If clause 6 is to be considered, as another one restricting the possession, then entire consideration, barring small amount, was received by August 2007, which is within the 36 months period, to consider the capital gain as long term capital gain. The agreement itself indicates, by clause 12, that Assessee has handed over position as on 02-04-2007, which was relied on by the Ld. CIT(A). Considering the principles laid down in the case of Potla Nageswar Rao 2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT relied on by the CIT(A), it is of the opinion that Assessee did indeed handed over the possession as on 02-04-2007 or deemed to have been handed over on that day. Accordingly, the orders of the A.O and CIT(A) treating the capital gain as short term capital gain has to be accepted and the orders are accordingly confirmed. Whether the capital gain cannot be treated in this year? - Held that - Since Assessee himself has offered the capital gain during the year, by filing the revised return, which was later regularized u/s 148 of the IT Act, there is no merit in Assessee s contention on that issue. Since A.O noticed that Assessee did sell property, which was reflected by the company in their books of account, the revised return filed itself is the basis for reopening of the assessment. In view of that, the grounds raised by Assessee on these issues are accordingly rejected.

Summary

Issues Involved:
1. Legality of initiating proceedings under Section 147 of the Income Tax Act.
2. Determination of the date of transfer of property.
3. Applicability of Section 53A of the Transfer of Property Act.
4. Classification of capital gain as short-term or long-term.
5. Entitlement to deductions under Section 54 of the Income Tax Act.
6. Charging of interest under Sections 234B and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legality of Initiating Proceedings under Section 147 of the Income Tax Act:
The appellant challenged the initiation of proceedings under Section 147 by the Assessing Officer (A.O). The A.O issued a notice under Section 148 after noticing that the appellant did not admit capital gains from the sale of property in the original return. The appellant filed a revised return admitting the capital gains, which was beyond the permitted time, leading to the issuance of the notice. The tribunal upheld the initiation of proceedings under Section 147, noting that the revised return was the basis for reopening the assessment.

2. Determination of the Date of Transfer of Property:
The appellant argued that the transfer of property occurred in March 2008, not on 2.4.2007, as claimed by the A.O. The A.O, supported by the CIT(A), determined that the transfer occurred on 2.4.2007 based on the sale agreement and the physical possession clause. The tribunal confirmed that the transfer date was 2.4.2007, relying on the sale agreement and the substantial receipt of consideration by August 2007.

3. Applicability of Section 53A of the Transfer of Property Act:
The appellant contended that Section 53A was not applicable, arguing that the transfer did not occur on 2.4.2007. The tribunal, however, upheld the applicability of Section 53A, noting that the appellant handed over possession as per the agreement and the substantial consideration was received, thus constituting a transfer under Section 53A.

4. Classification of Capital Gain as Short-term or Long-term:
The appellant claimed the capital gain should be treated as long-term since the transfer was in March 2008. The A.O and CIT(A) classified it as short-term, considering the property was purchased on 20.01.2005 and transferred on 2.4.2007. The tribunal upheld this classification, stating that the substantial consideration was received by August 2007, and the transfer date was 2.4.2007, making it a short-term capital gain.

5. Entitlement to Deductions under Section 54 of the Income Tax Act:
The appellant argued for deductions under Section 54, claiming the capital gain as long-term. The tribunal, confirming the short-term classification, denied these deductions, as they are applicable only to long-term capital gains.

6. Charging of Interest under Sections 234B and 234C of the Income Tax Act:
The tribunal did not find merit in the appellant's challenge against the charging of interest under Sections 234B and 234C, as these were consequential to the determination of the capital gain as short-term.

Conclusion:
The tribunal dismissed the appeal, confirming the A.O and CIT(A)'s actions, including the initiation of proceedings under Section 147, the classification of the capital gain as short-term, and the applicability of interest under Sections 234B and 234C. The tribunal relied heavily on the sale agreement, the substantial receipt of consideration, and legal precedents, particularly the Andhra Pradesh High Court's decision in Potla Nageswar Rao's case.