MOHAMMED YUSUF, RAIPUR V. INCOME TAX OFFICER , WARD - 3(1), RAIPUR

ITA 147/RPR/2019

AI Insights

The case revolves around the assessment of long-term capital gains arising from the sale of a 4.5-acre property in Raipur, which was sold by Mohd. Yusuf acting as a power of attorney for the actual owners, Tafazzul Hussain and Abbas Hussain. The Assessing Officer (A.O) taxed the gains in the hands of Mohd. Yusuf, asserting that he was liable as he executed the sale deed and received the sale consideration. The CIT(Appeals) upheld this decision. However, the Tribunal found that the property was owned by Tafazzul Hussain and Abbas Hussain, and Mohd. Yusuf, merely facilitated the sale on their behalf without any vested interest in the property. The Tribunal referenced similar cases and legal provisions to conclude that the tax liability for the capital gains should rest with the actual owners, not the power of attorney holder.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128048 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-09-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 08-07-2019
• Other Referred Cases: ACIT Vs. Janak Raj Chauhan, Amit kumar Ambalal Shah Vs. ITO, ITO vs. Ch. Attchaiah
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Principle of natural justice; Capital Gains
• Section: 143(3); 50C; 143(1); 251; 143(2)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI G D PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.147/RPR/2019 Ǔनधा[रण वष[ / Assessment Year :2012-13 Mohd. Yusuf Ward No.27, Dabari Para, Mova, Raipur-492 009 (C.G.) PAN : ACFPY4817N .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-3(1), Raipur (C.G.) ......Ĥ×यथȸ / Respondent Assessee by :Shri Veekaas S Sharma, CA Revenue by :Shri Debashis Lahiri, CIT-DR स ु नवाई कȧ तारȣख / Date of Hearing :12.09.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 12.12.2022 2 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-I, Raipur, dated 11.03.2016, which in turn arises from the order passed by the A.O. u/s. 143(3) of the Income-tax Act, 1961 (for short ‘Act’), dated 16.02.2015 for A.Y. 2012-13. The assessee has assailed the impugned order on the following grounds of appeal before us : “1 That having regard to the facts and circumstances of the case, order of CIT (Appeals)-1, Raipur is unjust, unfair and bad in law as the same is contrary to facts and in violation of principles of natural justice. 2 On the facts and in the circumstances of the case, the Learned A.O has erred on facts and in law in making addition of Rs.3,20,93,522/- on account of Long Term Capital Gain arising from transfer of property that was never owned by the assessee and the Learned CIT (Appeals)-1, Raipur has erred in confirming the said addition without appreciating the facts properly on account of extraneous reasons, hence, it is prayed that the addition and consequential enhancement to the total income may kindly be deleted. 3. Without prejudice to the above, on the facts and in the circumstances of the case, the Learned CIT (Appeals)-1, Raipur is not justified in passing the order without providing proper opportunity of hearing to the appellant, thereby, violating the principles of natural justice. The order passed by the Learned CIT(A)-1, Raipur being contrary to the principles of natural justice is not sustainable. 4 The Appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of Appeal.” 3 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 2. Succinctly stated, the assessee who is running a general store under the name and style of M/s Baba Taj General Stores had e-filed his return of income for the A.Y.2012-13 on 24.06.2013, declaring an income of Rs.1,68,000/-. The return of income filed by the assessee was initially processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee during the year under consideration had sold an immovable property admeasuring 4.5 acres situated at Moza Saddu, Pat. Halka No. 109/39, Raipur out of Khasra No. Part of 7/6 (admeasuring 4.5 acre), vide a registered sale deed dated 30.06.2011 for a consideration of Rs.60 lacs, but had not disclosed the said income in his return of income. On being queried, it was the claim of the assessee that the aforesaid property in question was sold by him in the status as that of a power of attorney holder of two persons, viz. (i) Shri Tafazzul Hussain; and (ii) Shri Abbas Hussain Ss/o. Abid Ali, residents of Bhopal. It was further observed by the A.O that the aforesaid property was valued by the Stamp Valuation Authority, Raipur at Rs.3,27,93,522/-. On being queried that now when the transfer of the property in question was carried out on the basis of sale deed executed under his signature, then how he was not liable for being saddled with the consequential taxes on the profit/income arising there 4 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 from, the assessee reiterated his claim that as the transfer of the property in question was carried out by him as a power of attorney holder and not as an owner, therefore, no liability qua the profit/income arising there from could be brought to tax in his hands. However, the aforesaid claim of the assesee did not find favor with the A.O for the reasons as culled out by him in his order, as under: “(a) The fact of transfer of property by executing a sale deed by Shri Mohd. Yusuf is not disputed and then term “transfer” is complete. (b) The person who is giving effect to the “transfer” is Mohd. Yusuf i.e. the assessee. On transfer of the property by sale deed, gives rise to the long-term capital gain. (c) The entire sale consideration was received by the assessee as may be seen from the sale deed itself. The act of sale of property is one part of the issue and consequences of sale i.e. liability of assessment of the income arising therefrom, is the second part. Both the things are to be same together. (d) Therefore after considering the facts of the case, assessee’s submissions and reasons narrated above, I am of the considered view that the assessee is liable to be assessed on the income arising from transfer of the said property under the head “Long Term Capital Gains.” 4. Accordingly, the A.O on the basis of his aforesaid observations determined the long term capital gain (LTCG) on sale of the aforesaid property under consideration under Section 50C of the Act at Rs.3,27,93,522/-, and vide his order passed u/s.143(3) of the Act, dated 16.02.2015 assessed the income of the assessee at Rs.3,22,61,520/- (including LTCG of Rs. 3,27,93,522/-). 5 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success. 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. A.R to drive home his contentions. 8. Admittedly, it is a matter of fact borne from record that the assessee had sold the property under consideration i.e. 4.5 acre of land bearing Khasra No. Part of 7/6 at Moza Saddu, Pat Halka No.109/39, Raipur in his status as that of power of attorney holder of two persons, viz. (i) Shri Tafazzul Hussain; and (ii) Shri Abbas Hussain Ss/o. Abid Ali, resident(s) of Jhandha Chouwk, Opposite Union Bank, Bhopal. The aforesaid factual position can safely be gathered from a perusal of the registered sale deed dated 30.06.2011, Page 16-31 of APB. Also, the aforesaid factual position can safely be gathered from a perusal of the copy of the registered power of attorney dated 18.02.2011 that was executed by S/sh. Tafazzul Hussain and Abbas Hussain in favor of the assessee, Page 2-15 of APB. Also, the fact that the aforesaid persons, viz. S/sh. Tafazzul Hussain and Abbas 6 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 Hussain were the co-owners of the property in question, while for the assessee was merely holding a power of attorney that was executed by them in his favor to facilitate the sale of the aforesaid property, can safely be gathered on a perusal of the “agreement” dated 05.07.2013 which was executed between the purchaser of the property on the one hand and the objecting/consulting parties including the aforesaid owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain, wherein it is categorically stated at Para 8 of the agreement that the assessee at Sl. No.10 of the said agreement was merely holding a power of attorney that was executed in his favor by the aforesaid owners of the property, viz. S/sh. Tafazzul Hussain and Abbas Hussain. Considering the aforesaid facts, there remains no iota of doubt that the property in question i.e. 4.5 acre of land (forming part of Khasra No. Part 7/6) at Moza Saddu, Pat Halka No.109/39, Raipur was sold vide a registered sale deed, dated 30.06.2011 by the aforesaid owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain through their power of attorney holder i.e. the assessee. Nothing is either discernible from the record nor has been brought to our notice by the Ld. DR, which would reveal that the assesee, viz. Mohd. Yusuf had any interest other than as that of a power of attorney holder in the aforesaid property under consideration that was sold by him for and on behalf of aforementioned owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain. 7 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 9. Apart from that, nothing has been brought on record which would even otherwise reveal that the assessee had any vested interest in the property in question, except as that of a person who had merely facilitated the “transfer” of the property in question on behalf of the aforesaid owners. As the property under consideration is proved to the hilt to have been sold by the aforementioned owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain through the assessee, i.e., a power of attorney holder, therefore, we find no justification in bringing to tax the income/gain arising from the said transaction in his hands rather than in the hands of the aforesaid owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain (supra). At this stage, it would be relevant to point out that as per the registered sale deed, dated 30.06.2011 the sellers of the property had received the entire amount of the sale consideration of Rs.60 lacs in cash in presence of the witnesses from the purchasers and nothing was outstanding. Be that as it may, we are of the considered view that as it stands established beyond doubt that the property in question was transferred by the aforementioned owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain, therefore, the income/gain arising from the said transfer transaction could have only been brought to tax in their hands and not in the hands of the assessee who had merely facilitated the sale transaction in his status as that of a power of attorney holder. As it is neither the case of the department that the assessee on the basis of the power of attorney executed by the 8 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 aforementioned persons, viz. S/sh. Tafazzul Hussain and Abbas Hussain had in any way got vested with the rights, title or interest in the property in question by purchasing the said property on the basis of an “agreement”, nor that the aforementioned persons were in fact merely benamidar of the assessee who in fact was the real owner of the property, therefore, bringing to tax the income/gains on transfer of the property under consideration in the hands of the assessee is not justified. Our aforesaid conviction is fortified by the order of the ITAT, Amritsar Bench in the case of ACIT Vs. Janak Raj Chauhan (2006) 102 TTJ (Asr) 297. In its aforesaid order, it was observed by the Tribunal that as the assessee before them was a simpliciter power of attorney holder on behalf of his mother and father-in-law, and there was no proof of the assessee having purchased the property, therefore, profit and gains on the transfer of the said property could not have been brought to tax in the hands of the assessee. Also, a similar view had been taken by the ITAT, Ahmedabad Bench in the case of Amit kumar Ambalal Shah Vs. ITO (2015) 68 SOT 251 (Ahd.). It was observed by the Tribunal that as per Section 1A and Section 2 of the Powers of Attorney Act, 1882 a power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property and is only a creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by 9 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 him. Apropos the contention of the ld. D.R that as the assessee had not made available the complete addresses of the aforesaid owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain and, the registered sale deed, dated 30.06.2011 was executed under the signature of the assessee, therefore, the A.O had rightly brought the LTCG arising on the transfer of the property to tax in the hands of the assessee, we are unable to concur with the same, both factually and legally. As the address of the owners could safely be gathered from the registered sale deed, dated 30.06.2011 and the registered power of attorney, dated 18.02.2011 executed by the said persons in favor of the assessee, therefore, the contention of the ld. D.R that the whereabouts of the owners of the property was not to the knowledge of the department is found to be absolutely incorrect and misconceived. Apart from that, as the property in question was undeniably owned by the aforesaid persons, viz. S/sh. Tafazzul Hussain and Abbas Hussain, therefore, the income/gain arising on the transfer of the said property could have only been brought to tax in their hands. As observed by the Hon’ble Supreme Court in the case of ITO vs. Ch. Attchaiah (1998) 218 ITR 239 (SC), the income has to be assessed in the hands of the right person and the right person alone, and while giving effect to the said scheme of taxation the interest of the revenue cannot be allowed to come in the way. Thus, in the case before us, merely for the reason that the whereabouts of the real owners were either not to the knowledge of the 10 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 department, or the bare minimum effort were not put in by the A.O to gather the whereabouts of the said persons who were the right persons in whose hands the LTCG on sale of the property was liable to be brought to tax, would by no means justify bringing the said income/gain to tax in the hands of a wrong person i.e the present assessee before us. 10. We, thus, on the basis of our aforesaid observations are unable to persuade ourselves to subscribe to the view taken by the lower authorities who had brought the income/gain arising on the transfer of the property in question to tax in the hands of the assessee, who had merely facilitated the sale transaction in question in the status as that of a power of attorney holder for and on behalf of the actual owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain. We, thus, in terms of our aforesaid observations set- aside the order of the CIT(Appeals) and vacate the addition of long-term capital gain of Rs.3,20,93,522/- made by the A.O in the hands of the present assessee. 11. In the result, the appeal of the assessee is allowed in terms our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- G D PADMAHSHALI RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 12 th December, 2022 11 Mohd. Yusuf Vs. ITO-3(1), Raipur ITA No. 147/RPR/2019 ***SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals), Raipur (C.G) 4. The CIT, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur.