Vedkumari Pradipkumar L/h of late Kanubhai Maganbhai Patel, Anand V. The Income Tax Officer, Ward-1, Anand

ITA 1809/AHD/2015

AI Insights

The case involves Vedkumari Pradipkumar, who, along with five other co-owners, sold a plot of land and was assessed for capital gains under Section 50C of the Income Tax Act, 1961. The Assessing Officer reopened the assessment for A.Y. 2005-06, considering the market value of the property significantly higher than the sale consideration. The CIT(A) upheld this assessment, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal found discrepancies in the CIT(A)'s application of the law regarding the timing of the capital gains assessment and the handling of the unregistered sale agreement, leading to a partial allowance of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129294 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 25-09-2023
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2015
• Laws Referred To: Income Tax Act, 1961, Registration Act, 1908, Transfer of Property Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K. PATEL
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Capital Gains
• Section: 147; 148; 144; 50C

Judgement Text

ITA No.1809/Ahd/2015 Assessment Year: 2005-06 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1809/Ahd/2015 Assessment Year: 2005-06 Vedkumari Pradipkumar, L/H. of Late Kanubhai Maganbhai Patel, Brahmdham, 62, Jivandeep Society, Opp. Para Medical College, Near Sardarbaug, Anand [PAN – AOBPP 4564 R] Vs. The Income Tax Officer, Ward – 1, Anand. (Appellant) (Respondent) Assessee by Shri Mehul K. Patel, Advocate Revenue by Shri Ramesh Kumar, Sr. DR Da te o f He a r in g 26.09.2023 Da te o f P ro n o u n ce m e n t 18.10.2023 O R D E R This appeal is filed by the Assessee against order dated 31.03.2015 passed by the CIT(A)-2, Vadodara for the Assessment Year 2005-06. 2. The Assessee has raised the following grounds of appeal :- “1. That on facts, and in law, the learned CIT(A) has grievously erred in confirming the re-opening of assessment. 2. That on facts and in law, the learned CIT(A) has grievously erred in distinguishing the orders of CIT(A) Gandhinagar and in holding that all the transfers and entire capital gains is chargeable for A.Y. 2005- 06, and that too for 58 plots and not 46 plots. 3. That the learned CIT(A) has grievously erred in holding that the provisions of Section 50C are applicable. 4. That the learned CIT(A) has grievously erred in rejecting the claim of appellant that capital gains is taxable in hands of AOP/BOI and not in case of appellant.” 3. The assessee has not filed any return of income for A.Y. 2005-06. The Assessing Officer observed that the assessee along with five other persons have given power of attorney to Shri Himansu J. Gosai for sale of land. On perusal of ITA No.1809/Ahd/2015 Assessment Year: 2005-06 Page 2 of 5 the Sale Deed, the Assessing Officer observed that the transfer of and was effect for a consideration of Rs.4,79,946/-. The Assessing Officer further observed that over and above the stamp duty of Rs.40,320/- was paid and additional stamp duty of Rs.16,985/- was levied by the Stamp Duty Authorities while estimating the market price of the property. The Assessing Officer observed that market value of the property was estimated at Rs.6,81,130/- and since the land was divided into 58 equal pieces, the total market value of the property worked out to Rs.3,95,05,540/-. Therefore, assessee’s share comes to Rs.65,84,256/-. The Assessing Officer reopened the case of the Assessee u/s 147 of the Act and notice u/s 148 was issued on 29.03.2012 which was served on the assessee on 29.03.2012. Since no revised return and no reply to the subsequent statutory notices were submitted by the assessee, the Assessing Officer passed assessment order u/s 144 r.w.s. 147 of the Act, thereby sale consideration of the assessee’s portion of land was considered as per the provisions of Section 50C of the Act and Long Term Capital Gain was determined at Rs.45,20,613/-. 4. Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that Ground No.1 is not pressed. As regards to Ground Nos. 2, 3 and 4, the Ld. AR submitted that the assessee purchased a plot of land for Rs.19,02,292/- on 30.10.2001 along with 5 co-owners as AOP. The assessee submitted the Purchase Deed to the Assessing Officer. The land was owned jointly by all six person including assessee. The said land was converted into non-agricultural land on 03.11.2003 and 58 plots were sanctioned on 07.04.2003 on the said land. In A.Y. 2004-05, the assessee made an Agreement to Sale dated 01.07.2003 with Royal Park Co-Op. Society (proposed) and sold 32 plots @ Rs.4100/- per meter of the plotted area. The Ld. AR submitted that though the Agreement states that the possession was not given to the Society, but in fact, the possession was given to the Royal Park Society on the date of agreement which is evident from the fact that substantial payment is also made by the society to the assesses before 31.03.2004 and the remaining payments are also made as per the terms of the agreement in the next Financial Year. The said payments are reflected in the balance sheet of the society as on 31.03.2004 and the land purchase is also shown as on 31.03.2004. In fact, collector issued a letter dated 22.10.2003 for levy of penalty for starting the construction on the land prior to ITA No.1809/Ahd/2015 Assessment Year: 2005-06 Page 3 of 5 conversion of the same into NA. The proposed society got registered on 30.07.2003 with co-operative department of Government of Gujarat. The assessee has not received any amount from the member directly before or at the time of execution of sale deed. The Ld. AR submitted that since the inception of AOP/BOI did all the activities with the intention to do business. The Ld. AR further submitted that since the assessee sold the whole property to Royal Park Co-op Society and in turn Royal Park Society has executed the final document in name of member and also the fact that the assessee has done the activities in the course of its business, the provisions of Section 50C will not be applicable in the case of the assessee. The Ld. AR further submitted that in case of Shri Mahendragiri Kahangiri Goswami who is 1/6 th co-owner of this property, the CIT(A) in his case vide order dated 17.11.2014 directed the Assessing Officer to re-calculate capital gain in the hands of individual co-owners considering the sale value of land as mentioned in ATS and allowing the proportionate cost. Thus, addition was restricted for 14 plots in the year under consideration and AO is at liberty to tax long term capital gain pertaining to balance 32 plots in A.Y. 2004-05. 6. The Ld. DR submitted that the CIT(A) in para 4.4.4 clearly mentioned the agreement of sale dated 01.07.2003 between the assessee and Royal Park Co- op. Housing Society Ltd. entered on stamp paper of Rs.50/- and the same was not registered as per the provisions of the Registration Act, 1908. Thus, unregistered agreement of sale has no effect on the provisions of Section 53A of the Transfer of Property Act and accordingly, no transfer can be said to have taken place on the day of such agreement to sale within the meaning of Section 2(47)(v) of the Income Tax Act, 1961. Thus, the Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. Ground No.1 is not pressed by the assessee, hence dismissed. As regards to Ground No.2 it is pertinent to note that in co-owner’s case that of Shri Mahendragiri Kahangiri Goswami who is 1/6 th co-owner of this property, the CIT(A) in his case directed the Assessing Officer to re-calculate capital gain in the hands of individual co-owners considering the sale value of land as mentioned in ATS and allowing the proportionate cost and addition was restricted for 14 plots for A.Y. 2005-06. The CIT(A) also observed that the Assessing Officer therein is at liberty to tax long term capital gain pertaining to balance 32 plots in A.Y. 2004-05. ITA No.1809/Ahd/2015 Assessment Year: 2005-06 Page 4 of 5 But in the present case, the CIT(A) has taken a stand that the Agreement for sale is unregistered document and therefore, no transfer can be said to have taken place. While looking to the documents including the Agreement for sale, it is a valid document which is registered as per the provisions of Registration Act, 1908. In fact, the document relating to the letter of the Collector proves that the possession was in fact with the Royal Park Society, therefore, in the present case the CIT(A) was not right in taking the different approach contrary to the actual evidence produce by the assessee. Further, the consideration received by the assessee for 32 plots was reflected in the Books of account for A.Y. 2004-05 and the same cannot be taxed in A.Y. 2005-06. Therefore, the Assessing Officer as well as CIT(A) was not right in making the addition to that extent. Therefore, it is directed to the Assessing Officer to recalculate the capital gain in the hands of individual co-owners considering the sale value of land as mentioned in Agreement for sale and allow the proportionate cost accordingly. Thus, the addition made by the Assessing Officer is restricted for 14 plots in the year under consideration i.e. A.Y. 2005-06. Ground No. 2 is partly allowed. 8. As relates to Ground Nos.3 and 4 which states that the provisions of Section 50C will not be applicable to assessee as the same has to be taxed in the hands of AOP / BOI. The reasoning given by the assessee appears to be incorrect as the assessee is jointly with other 5 persons purchased the property as well as the selling of plot was also jointly done by all the 6 persons. In fact, there is no evidence to the effect that the assessee and the other five persons were having AOP/BOI registered. Therefore, Ground Nos.3 and 4 are dismissed. 9. In result, appeal of the assessee is partly allowed. Order pronounced in the open Court on this 18 th October, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 18 th October, 2023 PBN/* ITA No.1809/Ahd/2015 Assessment Year: 2005-06 Page 5 of 5 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad