2020 (9) TMI 1091 - AT - Income Tax

Validity of reopening of assessment u/s 147 - notice after the period of four years from the end of the relevant assessment year - Capital gain computation invoking the provisions of section 50C - HELD THAT - Just because there were few mistakes committed on the unregistered notarized sale deed, the fact that the amount received by the assessee towards the sale consideration of the property and the handing over the possession of the property cannot be disputed. Section 2(47)(v) of the Act clearly stipulates that transfer of the immovable property comes into effect when possession of the property is handed over coupled with part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. In the instant case, it is apparent that on 27/12/2003 the assessee had received the part consideration of ₹ 5 lakhs and the possession of the property was also handed over as evident from the bank statement of the assessee and the unregistered notarized sale deed. Assessee would be exigible towards capital gain tax only for the AY 2004-05 and not for the relevant AY 2007-08. It is also pertinent to mention that just because capital gain accrued to the assessee has escaped tax in the AY 2004-05, the same cannot be brought to tax subsequently in the AY 2007-08 as per the provisions of the Act. Therefore, hereby set aside the order of the CIT (A) and further direct the Ld. AO to delete the addition made and enhanced in the hands of the assessee towards LTCG. - Decided in favour of assessee.

Summary

Issues:
1. Validity of re-opening assessment after four years under sections 147 & 148 of the Act.
2. Applicability of section 50C of the Act to determine capital gains from property sale.

Analysis:

Issue 1:
The appeal was filed against the order of the Ld. CIT (A) confirming the re-opening of assessment after four years under sections 147 & 148 of the Act for the assessment year 2007-08. The Tribunal found no fault with the Ld.AO for re-opening the assessment due to fresh material emerging during the relevant assessment year regarding the unreported sale of property by the assessee. The ground raised by the assessee against the re-opening was deemed devoid of merit.

Issue 2:
Regarding the applicability of section 50C of the Act, the case involved the sale of property by the assessee at a lower value than the fair market value, leading to a discrepancy in the capital gains computation. The Ld. CIT (A) held that the transfer of the property occurred during the financial year 2006-07, making section 50C applicable for assessing capital gains in the relevant AY 2007-08. The discrepancies between the unregistered notarized sale deed and the registered sale deed, along with the property details, were highlighted to support this decision.

The Tribunal, after considering the submissions and evidence, concluded that the assessee received the sale consideration and handed over possession of the property in 2003, making him liable for capital gains tax in the AY 2004-05. The Tribunal set aside the Ld. CIT (A)'s order and directed the deletion of the addition made towards long-term capital gains in the AY 2007-08. The decision was based on the Transfer of Property Act and the Act's provisions regarding the timing of property transfer and capital gains taxation.

In conclusion, the Tribunal partly allowed the assessee's appeal, emphasizing the correct assessment of capital gains based on the actual transfer date and possession handover. The judgment was delivered after a delay due to the Covid-19 pandemic, with reference to a relevant case law supporting the decision.