Case Law Details
Shri Rama Chandra Reddy Vs. ITO (ITAT Hyderabad)
In this case GPA was given by three persons i.e. (i) Shri K. Pratap Reddy, Sri K. Madhav Reddy and Shri K. Dharma Reddy in favour of the assessee in the year 1990 and it is mentioned therein that the possession of the said land was also given to the assessee, but there is no consideration mentioned in the said GPA. As seen from the sale deed dated 28.06.2007, the landowners are shown as the vendors represented by the GPA holder i.e. the assessee herein and the consideration mentioned therein is Rs.13.00 lakhs. Further, from the statement of Shri K. Dharma Reddy on question No.15 and 16 therein, it is clear that he did not receive any consideration on account of GPA document and in reply to question No.25, he had stated that the total consideration for the entire land situated at Macha Bolarum, Secunderabad Cantonment was received by him and by his brothers at Rs.12 to 13 lakhs and he also confirmed the agreement cum sale dated 30.06.2008 as signed by him confirming the receipt of sale consideration. In reply to question No.27, he also stated that the amount shown to have been received after 2004 was received by his brothers and not by him. This is the statement of Shri K. Dharma Reddy under oath and therefore, it is clear that the GPA given to the assessee is not for the any consideration and therefore, the assessee has not become the owner of the property by virtue of the GPA. When the assessee is not the owner of the property, the sale consideration on account of sale deeds in favour of his son and nephew cannot be deemed to have been received by him in his own right and therefore, no capital gain has arisen in his hands. If the vendees are not able to explain their sources of funds, it is to be brought to tax in their hands and not in the hands of the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
This is assessee’s appeal for the A.Y 2008-09 against the order of the CIT (A)-7, Hyderabad, dated 6.9.2017.
2. Brief facts of the case are that the AO received information that the assessee had sold two plots, i.e. Open Plot No.19, admeasuring 416.67 sq. yards and Open Plot No.21, admeasuring 233.33 sq. yards, total admeasuring 650 sq. yards, in survey No.44, situated at Macha Bollarum, Secunderabad Cantonment, for a consideration of a total of Rs.13.00 lakhs as per Registered Sale Deed No.1182/2007 dated 30.06.2007, as against the SRO value of Rs.17,55,000/- on which the stamp duty was paid. Therefore, he observed that the assessee is liable to pay capital gains tax in terms of provisions of section 50C(1) of the I.T. Act. On verification of the records, it was noticed that no capital gain was admitted by the assessee and since the AO was satisfied that the capital gain on sale of property had escaped assessment, he issued a notice to the assessee u/s 148 on 25.3.2015. The notice was served on the assessee on 31.3.2015. However, the assessee did not respond and none appeared for the assessee till 2/6/2015 on which date a letter was filed stating that the assessee’s source of income is commission from land deals and he has been filing his income tax returns regularly and for the A.Y 2008-09 also, he had filed his income tax return on 2.9.2008 declaring total income of Rs.1,24,520/-. A copy of the return of income for the A.Y 2008-09 and the revised return of income declaring total income of Rs.14.00 lakhs were filed. With regard to the registered document No.1182/2007, it was stated that the assessee is not the owner of the property and that he has registered the Sale Deed as a power of attorney holder only and not as an owner of the property and that the document clearly states this fact and therefore, there cannot be any capital gains in his hands.
3. Since the assessee did not file any document to prove that the property did not belong to him and that he has executed the registered document as power of attorney and not owner of the property, the AO did not accept this argument. He accordingly issued a letter dated 29.07.2015 requiring the assessee to furnish certain information called therein. In reply thereto, the assessee filed a copy of the G.P.A vide document No.618 of 1990- dated 3.8.1990 and Bank A/c statement for the financial year 2007-08 and with regard to the direction of the AO to produce the vendors as well as his vendees, he requested the AO to allow some more time. Thereafter, it was also stated that as he could not sell the entire property, the leftover 2 plots were purchased by him and registered in the names of his son Sri P. Sreenivasa Reddy and his nephew Shri P. Satish Reddy and the amount was paid out of their family income to the vendors. He also expressed his inability to produce the vendors. When the assessee was asked to furnish the payment details of Rs.13.00 lakhs to the owners of the property and the date on which the same was received from the vendees and the details of the commission received by the assessee on this deal, the assessee produced the vendees Shri P. Satish Reddy and Sri P. Sreenivas Reddy. The AO recorded their statements on 13.10.2015 who denied having paid any amount for the purchase of the property since they had no sources of income at that time and stated that the amount of Rs.13.00 lakhs was paid by their respective fathers out of their family savings to the land owners and when they were asked to furnish the proof of payment of the amount to the land owners, they have stated that they do not remember the details. From the document produced by the assessee, the AO observed that the GPA document No.618 of 1990 dated 3.8.1990 was an irrevocable general power of attorney given by the land owners in respect of the land in survey No.44, admeasuring 28 guntas or 3388 sq.yards situated at Macha Bollaram, Secunderabad Cantonment and that the assessee has acquired an absolute right/interest over the property and that he can sell, gift, lease, mortgage etc., the said property. Therefore, he observed that the assessee has become the absolute owner of the property and thereafter, he transferred the property to Shri P. Satish Reddy and Sri P. Sreenivas Reddy and therefore, capital gain has arisen therefrom. He accordingly treated it as a transfer and has taken into consideration the SRO value of the Plots at Rs.17.55 lakhs as long term capital gains u/s 50C of the Act and brought it to tax.
4. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the AO and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal:
“1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law.
2. The learned Commissioner of Income-Tax (Appeals) erred in holding that the appellant transferred two plots admeasuring totally to 650 sq. yards situated at Macha Bolarum, Secunderabad Cantonment without considering the fact that there is no transfer of the property.
3. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the appellant acted as a GPA but not as the owner of the property and, therefore, capital gain is not assessable in the assessment of the appellant.
4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the GPA was executed vide document No.618/1990 on 3.8.1990 and the GPA holder cannot transfer the property to himself and, therefore, the appellant transferred the property in favour of his children.
5. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the transaction does not attract liability of capital gain.
6. Any other ground that may be urged at the time of hearing”.
5. The learned Counsel for the assessee Smt. S. Sandhya while reiterating the submissions of the assessee before the authorities below submitted that the assessee was not the owner of the property but was only a GPA holder and in the relevant previous year, the properties were registered in the names of assessee’s son and nephew by the assessee as a GPA holder but the sale consideration has been received by the land owners. She also drew our attention to the statement of one of the owners i.e. Shri K.Dharma Reddy, S/o Late K. Malla Reddy wherein he had admitted to have received certain amounts from the assessee towards sale of subject land. Therefore, she submitted that the property was not sold by the assessee as an owner but was sold as a GPA holder and there was no transfer from which any capital gain has arisen in the hands of the assessee.
6. The learned DR, on the other hand, supported the orders of the authorities below and submitted that the irrevocable GPA was given to the assessee in the year 1990, whereas the properties were registered in the name of assessee’s son and nephew on 30.06.2007 and therefore, it is clearly a transfer within the meaning of section 240 of the I.T. Act. He submitted that the relationship between the assessee and the vendees alone will not prove that there is no transfer of property and since the sale consideration is mentioned in the sale deed, the assessee is deemed to have received the sale consideration. He further submitted that the provision of section 50C is applicable to the facts on hands and therefore, the AO has rightly invoked the provisions and computed the long term capital gains.
7. Having regard to the rival contentions and the material on record, I find that the GPA was given by three persons i.e. (i) Shri K. Pratap Reddy, Sri K. Madhav Reddy and Shri K. Dharma Reddy in favour of the assessee in the year 1990 and it is mentioned therein that the possession of the said land was also given to the assessee, but there is no consideration mentioned in the said GPA. As seen from the sale deed dated 28.06.2007, the landowners are shown as the vendors represented by the GPA holder i.e. the assessee herein and the consideration mentioned therein is Rs.13.00 lakhs. Further, from the statement of Shri K. Dharma Reddy on question No.15 and 16 therein, it is clear that he did not receive any consideration on account of GPA document and in reply to question No.25, he had stated that the total consideration for the entire land situated at Macha Bolarum, Secunderabad Cantonment was received by him and by his brothers at Rs.12 to 13 lakhs and he also confirmed the agreement cum sale dated 30.06.2008 as signed by him confirming the receipt of sale consideration. In reply to question No.27, he also stated that the amount shown to have been received after 2004 was received by his brothers and not by him. This is the statement of Shri K. Dharma Reddy under oath and therefore, it is clear that the GPA given to the assessee is not for the any consideration and therefore, the assessee has not become the owner of the property by virtue of the GPA. When the assessee is not the owner of the property, the sale consideration on account of sale deeds in favour of his son and nephew cannot be deemed to have been received by him in his own right and therefore, no capital gain has arisen in his hands. If the vendees are not able to explain their sources of funds, it is to be brought to tax in their hands and not in the hands of the assessee.
8. In the result, assessee’s appeal is allowed.
Order pronounced in the Open Court on 5th October, 2020.
