2021 (12) TMI 1290 - AT - Income Tax

Assessment u/s 153C - Short Term Capital Gain - transfer within the meaning of section 2 47 - Assessee has relinquished his rights in the property - AO held that the assessee's right to transfer further in the property and earn out of it have been extinguished upon entering into of the agreement dated 21/02/2012 - HELD THAT - Since extinguishment of right in the immovable property in the impugned property, the AO brought on the difference between purchase and sale price as short terms capital gain in the assessment year under consideration. The contention of the ld.DR is that the assessee having acquired the right in a property under an agreement with the owners and later relinquishment of his right in favour of new purchaser for the year under consideration by the assessee for relinquishing the right for the property would attract provisions of sec.45(1) of the Act, which arises to short term capital gain and as such the ld.CIT(A) order to be confirmed. But in the present case, vide an agreement dated 20/12/2012, the assessee has not received the possession of the property and the delivery of the possession of property will be given to the assessee only on payment of balance consideration of 3.5 crores out of 4.5 croers. As per the sec.2(47)(i), transfer in relation to capital asset includes sale and exchange are realized on the asset so as to relinquish the asset. The assessee shall be in a possession of impugned property but in the present case, the property which was said to be existed or relinquished was not in the possession of the assessee and both purchase and sale agreement were unregistered agreement and it cannot be said that the assessee was in a physical possession of the property so as to relinquish the same in favour of the assessee. Being so, we are of the opinion that sec.2(47)(i) cannot be complied. Accordingly, we allow the appeal of the assessee. Chargeability of penalty u/s 271AAB - As decided in the case of Shri Suresh H. Kerudi 2019 (10) TMI 1175 - ITAT BANGALORE we are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the provisions of section 271AAB could not be invoked in his case. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assessment under section 153C of the Income Tax Act.
2. Justification for taxing short term capital gains.
3. Applicability of penalties under section 271AAB of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 153C:
The assessee challenged the assessment order passed under section 153C read with section 143(3) of the Income Tax Act on the grounds that the provisions of section 153C were not applicable to his case. The assessee argued that no incriminating material or undisclosed income was found during the search of his residential premises. The assessee also contended that the jurisdiction assumed by the Assessing Officer (AO) under section 153C was invalid as the documents seized did not pertain to him. The Tribunal noted that the AO had not set out details of any assets or documents seized that belonged to the assessee, thus failing to validate the jurisdiction under section 153C. Consequently, the Tribunal allowed the appeal on this ground.

2. Justification for Taxing Short Term Capital Gains:
The main issue was whether the short term capital gains of ?8,74,38,017/- should be taxed in the assessment year 2012-13. The AO had assessed this amount based on an unregistered sale agreement dated 21/02/2012, which the AO considered as a transfer of property under section 2(47)(ii) of the Act. The assessee argued that the sale agreement did not result in a transfer of property as he had not received possession of the property from Rasasri Developers Pvt. Ltd., and therefore could not have given possession to Confident Projects (India) Pvt. Ltd. The Tribunal agreed with the assessee, stating that the agreement to sell did not create any interest in the property and thus did not constitute a transfer. The Tribunal allowed the appeal, concluding that there was no justification for taxing the short term capital gains in the assessment year 2012-13.

3. Applicability of Penalties under Section 271AAB:
The Revenue appealed against the deletion of penalties levied under section 271AAB for the assessment years 2013-14 and 2014-15. The Tribunal noted that the penalties under section 271AAB could not be sustained as the assessee was not subjected to a search under section 132 of the Act. The Tribunal referenced previous decisions, including those by coordinate benches, which held that penalties under section 271AAB were not applicable in cases where the assessee was not directly searched. Consequently, the Tribunal dismissed the Revenue's appeal and upheld the deletion of penalties.

Conclusion:
The Tribunal allowed the assessee's appeal regarding the validity of the assessment under section 153C and the taxation of short term capital gains. The Tribunal also dismissed the Revenue's appeal concerning the applicability of penalties under section 271AAB, thereby providing relief to the assessee. The order was pronounced on 27th December 2021.