2018 (5) TMI 1163 - HC - Income Tax

Revision u/s 263 - capital gain - did assessee receive sale consideration of ₹ 4,43,52,100/- out of such sale? - Held that - In the sale deed, the assessee did pose as a seller and sale consideration stated to have been paid by the purchaser Gatil Properties Ltd was undoubtedly ₹ 4,43,52,100/-. However the entire amount was never received by the assessee. It was a confirming party- Melody Complex Pvt. Ltd which, under the agreement to sale, had a right to insist on purchasing the land or seek specific performance of the agreement and receive bulk of the sale consideration. Out of the total sale consideration, ₹ 4,04,77,669/- was received by such confirming party. When the assessee never received anything beyond ₹ 38,74,431/- originally agreed, question of charing capital gain from the assessee on a sum larger than the said amount of ₹ 38,74,431/- would not arise. It is true that in a short span, the parties to the said transactions showed spectacular appreciation in land price. If the Revenue was of the opinion that such unusual rise in the land price indicated non-genuineness of the transaction itself, no such angle has been probed. In any case, the remaining sale consideration of ₹ 4,04,77,669/- received by Melody Pvt. Ltd can always be taxed appropriately in the hands of the said recipient. We fail to see how the Commissioner could have held the assessee answerable for capital gain for a sum which she never received.

Summary

Issues:
Appeal against ITAT judgment - Quashing of CIT order u/s. 263

Analysis:
1. The respondent-assessee, an individual, declared a capital gain of ?5.04 lacs for the assessment year 2009-10 from the sale of a landed property acquired at a cost of ?33,69,763 after converting it from agricultural to non-agricultural use by paying conversion charges.
2. An agreement to sell the property was made with Melody Complex Pvt. Ltd for ?38,74,431, with an initial payment of ?1 lac. Subsequently, a sale deed was executed with Gatil Properties Ltd for ?4,43,52,100, with the balance sale consideration of ?37,74,431 received by the assessee and the remaining amount by Melody Complex Pvt. Ltd.
3. The assessee claimed a short-term capital gain of ?5,04,886 in the return filed, which was accepted by the Assessing Officer after examination.
4. The Commissioner revised the assessment under section 263, contending that possession was not handed over to the purchaser until the sale deed was executed, and the capital gain should be based on the higher sale consideration of ?4,43,52,100.
5. The Tribunal, in its judgment, found the Commissioner's exercise of revisional powers erroneous, citing a previous case with similar facts where revisional powers were not upheld.
6. The Tribunal's decision was based on a detailed consideration of facts from the earlier judgment, indicating a consistent application of principles in similar cases.
7. The fundamental issue raised was whether the assessee actually received the entire sale consideration of ?4,43,52,100. While the sale deed mentioned this amount, only ?38,74,431 was received by the assessee, with the rest going to Melody Complex Pvt. Ltd as a confirming party.
8. The Tribunal noted the significant rise in land price but did not investigate any potential non-genuineness of the transaction.
9. The Court found that the unreceived sale consideration of ?4,04,77,669 by Melody Complex Pvt. Ltd could be appropriately taxed in their hands, and the assessee should not be held liable for capital gains on an amount she did not receive.
10. The Tax Appeal was dismissed, affirming that the assessee should not be accountable for capital gains on the unreceived portion of the sale consideration.