ACIT Vs Sh. Ijyaraj Singh (ITAT Jaipur)
The issue under consideration is whether the AO is correct in chargeing capital gain in the hands of assessee irrespective of the fact that the full consideration not received by the assessee?
In the present case, the assessee transferred his land through a registered sale deed for a consideration of Rs 3.40 crores paid by cheques. Out of these cheques, two were dishonored and returned unpaid to the assessee. The AO, while completing the assessment against the assessee demanded income tax from the assessee holding that the transfer of land has been done through these two registered sale deeds wherein the sales consideration was mutually agreed upon, accepted and deemed to be received before signing and registering the sale deed before the Registering Authority and deduction for not receiving any part of sales consideration in the future is not acceptable from the full value of consideration under the provisions of Act and the transaction is subject to levy of capital gains tax.
ITAT states that a registered sale deed does carry an evidentiary value. At the same time, where the assessee is able to prove by cogent evidence brought on record that no sale has in fact taken place, then, in such a scenario, the taxing and appellate authorities should consider these evidences brought on record by the assessee and basis examination thereof, decide as to whether sale has taken place or not in the given case. Further, it has been held that the title in the property does not necessarily pass as soon as instrument of transfer is registered and the answer to the question regarding passing of title lies is the intention of the parties executing such an instrument. The Registration is no proof of an operative transfer and where the parties had intended that despite execution and registration of sale deed, transfer by way of sale will become effective only on payment of the entire consideration amount, then in such a scenario, the transfer will be effected only on payment and receipt of full sale consideration and not at the time of execution and registration of sale deed.
In the instance case, given that the sale transaction fell through in view of non-fulfillment of the terms of sale deed whereby cheques have been dishonored and he has failed to discharge the full sale consideration, there is no transfer and no income which has accrued or arisen to the assessee besides the fact that there is no receipt of sale consideration, thus no real income in hand of the assessee and in absence thereof, the assessee is not exigible to capital gains tax
FULL TEXT OF THE ITAT JUDGEMENT
These are cross appeals filed by the Revenue and the assessee against the order of ld. CIT(A), Kota dated 26.11.2018 wherein the respective grounds of appeal are as under:-
Grounds of Revenue’s appeal:
“i) Whether on the facts and in circumstances of the case, Ld. CIT(A) has erred in restricting the addition up to Rs. 2,44,03,979/- made by the AO on account of Long Term Capital Gain of total Rs. 4,21,69,213/-.
ii) Whether on the facts and in circumstances of the case, the ld. CIT(A) has erred in allowing the proportionate expenses to the extent of Rs. 4,55,953/- out of the total expenses of Rs. 8,45,000/- as claimed by the assessee towards brokerage and other expenses claiming as connected with sales of Land & structure and development charge etc.
iii) Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs.3,50,536/- on account of various expenses wrongly claimed by the assessee against the interest & remuneration received from various firms.
iv) Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs.14,32,160/- on account of expenses wrongly claimed by the assessee u/s 57 of the Act for earning interest income.”
Grounds of assessee’s appeal:
“1. That the Ld. AO grossly erred in not accepting the value of wells, Baories, Roads & boundary wall and there by AO have not considered the index value of these things which are situated on the Land. And the Ld. CIT(A) also erred in not accepting the value of wells Baories, Roads as on 01.04.1981 & there by not allowed the cost of Rs. 27,50,000/-and proportionate indexed cost Rs. 1,25,19,756/- in calculation of LTCG on sale of Land & there by sustained the addition in Long Term Capital Gain on sale of Land by Rs. 1,25,19,856/-.
2. That the Ld. AO Grossly erred on law facts in not considering the genuinely incurred expenses amounting to Rs. 24,48,450 (8,45,000 + 2,83,680 + 13,19,770) & there by enhanced the LTG by the said amount.
That the Ld. CIT(A) also erred in sustaining the addition by not allowing the expenses relating to Legal & other expenses Rs. 16,03,450/- & its proportionate expenses on sale of Land Rs. 8,65,205/-.”
2.Firstly, we take up the matter relating to transfer of land and related computation of long term capital gains, and the respective grounds of appeal taken by both the parties.
3. Briefly stated, the facts of the case are that the assessee in the original return of income filed u/s 139(1) reported long term capital gains of Rs. 2,51,85,149/- in respect of sale of agricultural land situated at Ummed Vilas Akashwani Colony, Kota. Thereafter, during the course of assessment proceedings, the assessee filed revised return of income wherein the income under the head “long terms capital gain” was revised to Rs. 1,10,18,918/- as against Rs. 2,51,85,149/- shown in the original return of income. As per assessee, out of three sale deeds, two sale deeds of land executed with Shri Rajeev Singh are invalid sale deeds, no transfer took place and hence, no capital gains arises in respect of two invalid sale deeds and the Hon’ble Rajasthan High Court has also granted stay on the sale deeds executed by the assessee. However, the Assessing Officer didn’t agree with the assessee’s submissions and the computed long term capital gains wherein he considered the full value of consideration including two sale deeds which have been stated to be invalid sale deeds as per the assessee, and computed the full value of consideration u/s 50C at Rs.22,33,80,189/-. Further, the AO didn’t allow cost of boundary wall, Baories, wells, roads, development expenses as cost of acquisition/improvement and other legal expenses as expenses incurred in connection with transfer, as claimed by the assessee, against the full value of consideration and computed long term capital gains as under:
