2017 (8) TMI 407 - AT - Income Tax

Determining the income of the assessee - Capital gain - Transfer u/s 2(47) - joint ownership - registration of agreement to sell - section 50C applicability - Held that - There is no doubt that agreement to sell the plot of land was not registered with the stamp duty authorities. Even the buyer of the plot admitted that registration had not taken place. Secondly,the buyer had not adhered to the payment schedule. It is also a fact that as per the revenue records the assessee and the other co-owners of the owner of the plot of land though the possession of the plot is with the buyer.Considering these peculiar facts and circumstances we are of the opinion that there was no transfer of plot of land as envisaged by the provisions of section 2 (47) of the Act read with section 53A of the Transfer of Property Act. After going through the paper book we find that the AO had made the reference to the valuation officer u/s.142 and not u/s.55A of the Act. Clearly, the reference was not in accordance with the provisions of the law. As far as applicability of section 50C is concerned it is sufficient to say that provision of the said section were not applicable to the facts of the case under consideration - Decided in favour of assessee.

Issues Involved:
1. Taxability of sale proceeds of a plot of land under the head capital gains.
2. Applicability of section 50C of the Income Tax Act.
3. Admissibility of additional documents under Rule 46A of the Income Tax Rules, 1962.
4. Calculation of capital gains and forfeited amounts.
5. Penalty under section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Taxability of Sale Proceeds of a Plot of Land under the Head Capital Gains:
The primary issue revolves around whether the sale proceeds from a plot of land should be taxed under the head capital gains. The Assessing Officer (AO) contended that the assessee had transferred his rights in the property and received part of the sale consideration, thus making it liable to be taxed under capital gains. The AO referred to section 2(47) and section 53A of the Transfer of Property Act to support this view. However, the First Appellate Authority (FAA) disagreed, stating that the agreement to sell was not registered, and the full consideration was not received, meaning no transfer had occurred as per the legal provisions. The Tribunal upheld the FAA's view, noting that the possession of the plot by the buyer without adherence to the payment schedule and registration did not constitute a transfer under section 2(47).

2. Applicability of Section 50C of the Income Tax Act:
The AO adopted the fair market value as per the Stamp Duty Ready Reckoner, 2002, to determine the sale consideration, invoking section 50C. However, the FAA and the Tribunal found that section 50C was not applicable because the transaction was not registered with the stamp duty authorities. The Tribunal cited the Madras High Court decision in R. Sugantha Ravindran, which clarified that section 50C applies only to registered transactions and the amendment to include "or assessable" in section 50C is prospective, effective from October 1, 2009.

3. Admissibility of Additional Documents under Rule 46A:
The assessee submitted additional documents before the FAA, which were admitted under Rule 46A of the Income Tax Rules, 1962. The FAA called for remand reports from the AO and provided opportunities for both parties to comment. The Tribunal found no error in the FAA's procedure, thus upholding the admissibility of these documents.

4. Calculation of Capital Gains and Forfeited Amounts:
The FAA directed that the amount received by the assessee should be treated as forfeited due to the non-performance by the purchaser and taxed accordingly. The Tribunal agreed with this approach but also noted that the assessee had agreed to pay tax under capital gains if the benefit of indexation was provided. Consequently, the Tribunal directed the AO to compute the capital gains after allowing indexation benefits.

5. Penalty under Section 271(1)(c) of the Income Tax Act:
The AO had levied a penalty of ?50,400 under section 271(1)(c) for concealing particulars of income related to the sale of the plot. Since the Tribunal decided the quantum appeal in favor of the assessee, the penalty appeal did not survive and was dismissed.

Conclusion:
The appeals filed by the AO (ITA Nos. 2999/M/09, 3000/M/09 & 484/M/10) were dismissed. The appeals filed by the assessee (ITA Nos. 2608/M/09 & 4811/M/12) were partly allowed, with directions to the AO to recompute the capital gains after considering the benefit of indexation and ensuring no double taxation of amounts.

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