2022 (6) TMI 634 - AT - Income Tax

Capital gain on sale of land - completion of sale - Return was selected for limited scrutiny assessment under CASS for the reason, sale consideration of property in ITR is less than sale consideration of property reported in AIR - HELD THAT - As the transfer of the immovable property cannot be said to be complete till the deed is registered and it cannot be said to have been completed earlier because by virtue of s. 47 or section 75 of the Registration Act 1908. These sections, therefore, have nothing to do with the completion of a sale. The object of these sections is to decide which of two or more registered instruments in respect of the same property is to have effect. So far as the third parties like tax authorities are concerned, the relevant date will be the date of registration, when the transfer deed is get completed. Our observations made above, however, are subject to the applicability of provisions of section 2(47) of the Income Tax Act in relation to the definition of transfer under Income Tax Act which is to be seen in the peculiar facts and circumstances of each case. The gist of the discussion made above is that the proposition canvassed by Shri Surana, assessee that by virtue of provisions of section 47 and section 75 of the Registration Act, the transfer will be deemed to be complete on the date of presentation of the deed to the sub registrar is not well founded and is, therefore, repelled. So far as the contention the assessee that since the title of the assessee was defective, therefore, there was no transfer, we do not find any force in the above contention of the ld. counsel for the assessee. The registered sale deed executed in favour of the assessee by Shri Sujit Kr. Bindal has never been set aside by any court of competent jurisdiction. Though, the plea of the assessee is that his sale deed was not valid, whereas, the assessee, himself, has sold the above said property by way of three registered sale deeds to Priyanka Promoters and Developers. Moreover, the alleged gift executed by Shri Sujit Kr. Bindal allegedly to his brother, in our view, will not have any impact until and unless the registered sale deed in favour of the assessee by the said Sujit Kr. Bindal is not declared null and void by any court of competent jurisdiction. It is commonly known that the sale deed is registered in front of the Sub-Registrar and the seller admits the sale deed in the presence of witnesses who append their signatures in admission of witnesses. In this case also, the purchase deed in favour of the assessee is a registered deed which might have been presented and registered in the presence of witness before the Sub-Registrar, therefore, the plea of the assessee that the same did not confer title upon the assessee is frivolous at this stage. Assessee has transferred whatever the rights he has in the property to Priyanka Promoters and Developers by way of registered deed which constitutes transfer of capital asset as per the provisions of section 2(47) of the Income Tax Act. So far as the plea that there was a dispute relating to the title of the property, hence there was less saleable price of the property is concerned, we find that the said issue has not been properly considered by the ld. CIT(A). Though, it has been mentioned by the Ld. CIT(A) in the impugned order that the said Sujit Kr. Bindal has appeared before the Assessing Officer and had also furnished the copy of a suit filed against the Priyanka Promoters and Developers, however, no copy of the same has been produced on file before us. It is not clear as to who is/was in possession of the property in question. What are the allegations by the seller relating to the title of the property and whether those allegations/claim made by the original owner/seller had any bearing on the sale price of the property in relation to the sale deeds made by the assessee. Therefore, we restore the matter to the file of the CIT(A) with a limited direction that the ld. CIT(A) will make or cause to make such enquiry so as to ascertain the aforesaid facts and to find out whether there was any justifiable reason for the assessee to transfer the aforesaid property at a much lower rate than the market rate and what would have been the market/saleable value of the property under the circumstances and accordingly to decide this limited issue afresh in accordance with law. - Appeal of assessee allowed for statistical purposes.

Issues Involved:
1. Applicability of Section 50C of the Income Tax Act.
2. Date of transfer of property for tax purposes.
3. Validity of the assessee's title over the property.
4. Consideration of additional grounds of appeal.
5. Determination of long-term capital gains.

Detailed Analysis:

1. Applicability of Section 50C of the Income Tax Act:
The primary issue was whether Section 50C, which deals with the valuation of capital assets for the purpose of calculating capital gains, was applicable. The Assessing Officer (AO) noted that the market value of the land, as determined by the Stamp Valuation Authority, was significantly higher than the sale consideration declared by the assessee. The AO applied Section 50C and computed the capital gains based on the market value assessed by the Stamp Valuation Authority.

2. Date of Transfer of Property for Tax Purposes:
The AO determined the date of transfer as 01.04.2013, when the sale deeds were actually registered, rather than 31.03.2013, when they were presented for registration. The AO relied on the Supreme Court decision in Suraj Lamps & Industries (P) Ltd. vs. State of Haryana, which held that immovable property can be legally transferred only by a registered deed of conveyance. The assessee contended that as per Sections 47 and 75 of the Registration Act, 1908, the registration should relate back to the date of presentation, i.e., 31.03.2013.

3. Validity of the Assessee's Title Over the Property:
The assessee argued that he did not have a valid title over the property due to a dispute with the original seller, Sujit Kumar Bindal, who had allegedly executed a gift deed in favor of his brother. The AO, however, noted that the assessee had not provided any substantial evidence to support this claim, nor had he disclosed the sale transaction in his income tax return.

4. Consideration of Additional Grounds of Appeal:
The Tribunal addressed the additional ground raised by the assessee, which argued that the deed was not executed during the relevant assessment year and thus Section 50C should not apply. The Tribunal found that the assessee had not come to the court with clean hands and had attempted to manipulate the events to evade tax. The Tribunal refused to admit the additional ground, emphasizing that the date of registration is crucial for determining the transfer of property.

5. Determination of Long-Term Capital Gains:
The AO computed the long-term capital gains based on the market value assessed by the Stamp Valuation Authority, which was higher than the sale consideration declared by the assessee. The CIT(A) upheld the AO's decision, noting that the assessee had not substantiated his submissions with any documents. The Tribunal, however, restored the matter to the CIT(A) with directions to ascertain whether there was any justifiable reason for the assessee to transfer the property at a lower rate and to determine the market/saleable value of the property under the circumstances.

Conclusion:
The Tribunal concluded that the assessee's appeal was allowed for statistical purposes, directing the CIT(A) to re-examine the issue of the sale price in light of the alleged title dispute and market conditions. The Tribunal emphasized the importance of the date of registration for determining the transfer of property and upheld the applicability of Section 50C based on the registered date of the sale deeds.

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