No Capital Gains Tax on Void Sale Deed Executed Through Forged POA: ITAT Ahmedabad

Suraj Jayantilal Patel Vs ITO (ITAT Ahmedabad)

The appeal before the Income Tax Appellate Tribunal (Ahmedabad) arose from reassessment proceedings for Assessment Year 2015–16, wherein the assessee had originally declared total income of Rs. 1,37,330. The Assessing Officer (AO) received information that the assessee, as co-owner, had allegedly sold land at Hanspura Village on 25.07.2014 for Rs. 6,82,53,000. Since no capital gains were declared, the case was reopened under Section 147 of the Income Tax Act.

During assessment, the assessee denied any sale of the land and stated that no Power of Attorney had been executed. It was explained that the sale deed was executed fraudulently using forged signatures and a forged Power of Attorney by a land-grabbing group. The assessee had filed a civil suit, and the Principal Senior Civil Judge, Ahmedabad (Rural), by order dated 03.06.2020, declared the sale deed void. The assessee contended that no consideration was received and, therefore, no capital gains arose.

Despite this, the AO made a protective addition of Rs. 3,41,26,500, treating it as capital gains, citing that the matter was still pending before the Gujarat High Court due to an appeal filed against the civil court’s order. The assessment was completed determining total income at Rs. 3,42,63,830. The Commissioner (Appeals) upheld this addition, leading to the present appeal.