2021 (6) TMI 502 - AT - Income Tax

Capital gain computation - treating the assessee s general power of attorney GPA document as transfer within the meaning of Section 2(47) of the Act giving rise to the capital gains addition - HELD THAT - The assessee s vendee herein has not paid the full amount of ₹ 5.50 crores since only an amount of ₹ 50 lakhs has been received. There is no material to the contrary in the case records. We make it clear that this is not the Revenue s case that the assessee has in fact received the balance sum post-facto the CIT(A) s order passed way back on 30-12-2013 under challenge as well. And the clinching fact further remains that once the assessee has not even received the balance consideration, the said entire amount could not be brought to tax in his hands. We thus confirm learned lower authorities action to the extent of the actual receipt sum of ₹ 50 lakhs only which deserves assessment being non-refundable in nature. Faced with this situation, we deem it appropriate to restore the instant sole issue of long term capital gains addition to the tune of ₹ 5,34,34,495/-; back to the CIT(A) for his afresh detailed adjudication keeping in mind not only the relevant facts and circumstances of the transferee s alleged failure in not paying the balance consideration but also the final outcome of the civil proceedings to this effect as per law, within three effective opportunities of hearing. Assessee s appeal allowed for statistical purposes

Issues Involved:
1. Erroneous order by CIT(A)
2. Breach of contractual obligation by the realtor
3. No delivery of possession and transfer within the meaning of Section 2(47)(v) of the Act
4. Subjudice status of the sale matter
5. Need for a remand report for full verification of suit proceedings
6. Deletion of the impugned addition towards capital gains
7. Equity, justice, and conformity with the provisions of law

Detailed Analysis:

1. Erroneous Order by CIT(A):
The appellant contended that the CIT(A)'s order dated 30-12-2013 for AY 2009-10 was erroneous both in law and on facts. The appellant argued that the assessment of capital gains was incorrect and based on flawed premises.

2. Breach of Contractual Obligation by the Realtor:
The appellant highlighted that the realtor, M/s Aashi Realtors, paid only an advance of ?50,00,000 and failed to pay the balance consideration of ?5.00 crores. This breach of contractual obligation, according to the appellant, should render the Agreement of Sale void in law.

3. No Delivery of Possession and Transfer within the Meaning of Section 2(47)(v) of the Act:
The appellant argued that there was no delivery of possession of the property to the realtor, which is a critical factor pending adjudication in a court of law. Therefore, the addition made under the head 'Capital Gains' was devoid of merit and void ab initio as per Section 2(47)(v) of the Act read with Section 53A of the Transfer of Property Act, 1882.

4. Subjudice Status of the Sale Matter:
The appellant emphasized that the entire matter of sale was subjudice, and the CIT(A) should not have confirmed the addition under the head 'Capital Gains' when the sale matter was under judicial consideration.

5. Need for a Remand Report for Full Verification of Suit Proceedings:
The appellant pointed out that the CIT(A) should have called for a remand report from the Assessing Officer after a thorough verification of the suit proceedings. This would have been in accordance with Rule 46A of the Income Tax Rules, 1962, before confirming the addition under 'Capital Gains.'

6. Deletion of the Impugned Addition towards Capital Gains:
The appellant argued that the addition towards capital gains of ?5,84,34,495 was unfair, arbitrary, and against the provisions of law. The appellant sought the deletion of this impugned addition.

7. Equity, Justice, and Conformity with the Provisions of Law:
The appellant prayed that the impugned addition be deleted in the interests of equity and justice and to be in conformity with the provisions of law.

Tribunal's Findings:

Assessment of Capital Gains:
The Tribunal noted that the Revenue treated the appellant's general power of attorney (GPA) document dated 21-03-2009 as a "transfer" under Section 2(47) of the Act, leading to the capital gains addition of ?5,84,34,495. However, the appellant claimed that the GPA was an instance of alleged cheating by M/s Aashi Realtors, who had only paid ?50 lakhs and not the full consideration.

Civil Proceedings:
The Tribunal observed that civil proceedings were pending between the appellant and the vendee. The appellant's vendee had not paid the full amount of ?5.50 crores, and only ?50 lakhs had been received. There was no material suggesting that the balance sum had been received post the CIT(A)'s order.

Conclusion:
The Tribunal confirmed the lower authorities' action to the extent of the actual receipt sum of ?50 lakhs, which deserved assessment as it was non-refundable. However, the Tribunal deemed it appropriate to restore the issue of long-term capital gains addition of ?5,34,34,495 back to the CIT(A) for fresh adjudication. This would consider the transferee's failure to pay the balance consideration and the final outcome of the civil proceedings. The appellant or their representative was instructed to appear before the CIT(A) with relevant details for factual verification within three effective opportunities of hearing.

Order:
The appeal was treated as allowed for statistical purposes, and the order was pronounced in the open court on 11th June 2021.

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