2019 (11) TMI 917 - AT - Income Tax

Capital gain - transfer of property in assessment year under appeal - HELD THAT - Agreement to sell was executed and registered on 16.01.2009 whereby the part possession of the property in question have been handed over to the purchaser subjected to part payment. Therefore, transfer of capital asset completes in preceding A.Y. 2009- 2010. This fact is further strengthened by the fact that registered sale deed was executed between the parties on 31.03.2009 whereby the entire terms and conditions are satisfied. The full sale consideration have been paid and possession of the property have been handed over to the purchaser. This fact is further strengthened by Section 47 of the Registration Act whereby it is provided that registered document shall operate from the date of its execution. We hold that transfer of capital asset had taken place in preceding A.Y. 2009-2010. Therefore, capital gain tax would not be chargeable in assessment year under appeal i.e., 2010-2011. The initiation of reassessment proceedings are illegal and beyond jurisdiction of A.O. We, therefore, set aside the Orders of the authorities below and delete the entire addition. In this view of the matter, there is no need to decide the other issues involved in the present appeal. We would like to make it clear that since assessee has declared capital gain in the return of income filed for assessment year under appeal and paid self assessment taxes, therefore, assessee would not be entitled to retract from the statement so made in the return of income - Appeal of Assessee allowed.

Summary

Issues:
Challenge against reopening of assessment under section 147 of the I.T. Act, disagreement with the capital gain tax levy for the assessment year under appeal, challenge against additions made by the assessing officer, including interest under sections 234A, 234B, and 234C of the I.T. Act, 1961.

Analysis:
1. The appeal was against the Order of the Ld. CIT(A)-10, New Delhi, challenging the reopening of the assessment under section 147 of the I.T. Act, contesting the capital gain tax levy for the assessment year under appeal, and disputing the additions made by the assessing officer. The primary contention was that the transfer of property did not occur in the assessment year under appeal, hence no capital gain should be chargeable. The issue focused on the interpretation of Section 45 and Section 2(47)(v) of the I.T. Act regarding the definition of "Transfer" and the conditions for capital gains tax levy.

2. Section 45 of the I.T. Act stipulates that profits from the transfer of a capital asset in the previous year are chargeable to income tax under "Capital Gains." The definition of "Transfer" under Section 2(47)(v) includes allowing possession of immovable property in part performance of a contract. The case involved a property sale agreement registered on 16.01.2009, where part possession was handed over to the purchaser, satisfying the conditions of transfer. The sale deed executed on 31.03.2009 completed the transfer in the preceding A.Y. 2009-2010, not the assessment year under appeal.

3. The Tribunal referred to the Supreme Court's ruling in CIT vs. Balbir Singh Maini [2017] 398 ITR 531, emphasizing the objective of bringing de facto property transfers into the tax net. The agreement to sell, registered on 16.01.2009, and the subsequent sale deed on 31.03.2009 indicated a transfer of title in the preceding A.Y. 2009-2010. The Registration Act's Section 47 clarified that a registered document operates from the date of execution, supporting the conclusion that the capital asset transfer occurred in the previous year.

4. Consequently, the Tribunal held that the reassessment proceedings were illegal and beyond the assessing officer's jurisdiction. The Orders of the authorities below were set aside, and the entire addition, including interest under sections 234A, 234B, and 234C of the I.T. Act, was deleted. The appeal of the Assessee was allowed based on the finding that capital gain tax was not chargeable for the assessment year under appeal, given the transfer occurred in the preceding year.

5. The Tribunal highlighted that since the Assessee had declared capital gain in the return of income and paid self-assessment taxes for the assessment year under appeal, they were not entitled to retract from the statement made in the return. The decision to allow the appeal was based on the conclusion that the capital gain tax levy for the assessment year under appeal was not applicable due to the transfer occurring in the previous year.

6. In conclusion, the Tribunal allowed the Assessee's appeal, emphasizing that the capital gain tax was not chargeable for the assessment year under appeal as the transfer of the capital asset had taken place in the preceding year. The decision was made based on the interpretation of relevant sections of the I.T. Act and legal precedents.