Case Law Details

Case Name : Smt. R.Mangala Devi Vs ITO (ITAT Hyderabad)
Appeal Number : ITA No. 772/Hyd/18
Date of Judgement/Order : 05/03/2020
Related Assessment Year : 2009-10
Courts : All ITAT (6949) ITAT Hyderabad (370)

Smt. R. Mangala Devi Vs ITO (ITAT Hyderabad)

In the given case both the assessees are husband and wife. Based on the information that assessees had sold a property for a consideration of Rs.40 Lakhs during the relevant previous year and that the value of the same was adopted by the registration authorities for the purposes of stamp duty at Rs.83,28,000/- and since the assessees had not filed their returns of income for the AY 2009-10, the Assessing Officer (AO) issued a notice u/s.148 of the Income Tax Act.

In reply to the Show Cause Notices, both the assessees filed letters dt.15-12-2016, stating that they have purchased the said land for Rs.40 Lakhs through Agreement of Sale cum GPA and within a span of three months thereafter, they have registered the same in favour of their blood relatives i.e., their children and therefore the sale consideration should be adopted at Rs.40 Lakhs only and in the alternative, they requested that the matter may be referred to the Valuation Cell for valuation of the property. Assessees also made an alternative claim that since the transaction is with their blood relatives (i.e., their children), it should be treated as a ‘gift’ which is exempt from tax in the hands of the Donor as well as the Donee.

Having regard to the rival contentions and the material on record, we find that both the assessees had purchased the said property through Agreement of Sale cum GPA along with possession vide Document No.1165/2008, dt.25-03-2008, wherein the sale consideration for the said land was mentioned as Rs.40 Lakhs only and subsequently, vide registered Sale Deed No.2476/2008, dt.21-07-2008, registered the same in favour of their children, who are aged 22, 20 and 18 respectively and from the description given therein, it is also seen that they are all students, without any source of income of their own. By virtue of the said Agreement of Sale cum GPA, the assessees have acquired a right in the said property but have not become absolute owners of the property and by virtue of the Sale Deed dt.21-07-2008, the original owners through the GPA holders had sold the property to the children of the assessees before us. Thus, it is seen that there is actually no sale of property by the assessees before us and the Sale Deed has been executed by the original owners through GPA holders to the children of assessees. Therefore, in my opinion, there is no transfer of property by the assessees in fact it is acquisition of property by the assessees in the names of their children and it is not the case of transfer or gain on sale of property. In view of the same, I allow the Grounds raised by the assessees and in the result, the appeals of both the assessees are accordingly allowed.

FULL TEXT OF THE ITAT JUDGEMENT

Both the appeals are filed by the respective assessees against the separate orders of the Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 20-12-2017 & 18-12-2017 respectively.

2. Brief facts of the case are that both the assessees are husband and wife. Based on the information that assessees had sold a property for a consideration of Rs.40 Lakhs during the relevant previous year and that the value of the same was adopted by the registration authorities for the purposes of stamp duty at Rs.83,28,000/- and since the assessees had not filed their returns of income for the AY 2009-10, the Assessing Officer (AO) issued a notice u/s.148 of the Income Tax Act [Act] on 14-03-2016, requiring the assessees to file their returns of income.

In response to the same, assessees filed their returns of income, admitting the income of Rs.1,38,600/- each. The AO observed that both the assessees have sold the immoveable property during the previous year relevant to the AY. 2009-10 vide Document No.1165/2008 with SRO, Hyderabad (R.O.). The value adopted by the SRO for the purpose of stamp duty for registration of the said property was Rs.83,28,000/-, whereas the assessees had declared Rs.40 Lakhs (Rs.20 Lakhs each) only as sale consideration of the property. Thus, the AO observed that the value adopted by the SRO is more than the sale consideration declared by the assessees. Hence, the AO held that the provisions of Section 50C of the Act are applicable and accordingly issued Show Cause Notices to both the assessees.

2.1. In reply to the Show Cause Notices, both the assessees filed letters dt.15-12-2016, stating that they have purchased the said land for Rs.40 Lakhs through Agreement of Sale cum GPA and within a span of three months thereafter, they have registered the same in favour of their blood relatives i.e., their children and therefore the sale consideration should be adopted at Rs.40 Lakhs only and in the alternative, they requested that the matter may be referred to the Valuation Cell for valuation of the property. Assessees also made an alternative claim that since the transaction is with their blood relatives (i.e., their children), it should be treated as a ‘gift’ which is exempt from tax in the hands of the Donor as well as the Donee. The AO did not accept the submissions of assessees and pointed out that though the transaction is between blood relatives, it is seen from the document that the entire transaction is a ‘sale transaction’. Thus, he brought the difference of value (i.e., SRO value and the amount declared by the assessees) to tax in their respective hands.

3. Aggrieved, the assessees filed appeals before the CIT(A), who confirmed the order of AO and assessees are in second appeal before the Tribunal. The following Grounds are raised by each of the parties:

“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 confirming the action of the Assessing Officer in initiating proceedings u/s 147 of the I.T.Act.

3) The learned Commissioner of Income Tax (Appeals) erred in holding that there was any transfer of property in favour of the children by the appellant and further erred in holding that capital gain arose against such transaction.

4) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in fixing the total consideration at Rs.83,28,000/- and in determining the capital gain attributable to the appellant at Rs.21,21,285/-

5) The learned Commissioner of Income Tax (Appeals) ought to have seen that the transaction was entered into to protect the title of the property as the appellant was having the general power of attorney in his favour and, therefore, with a view to retain the title, the property was transferred in favour of his children.

6) In the alternative, the Assessing Officer ought to have held that the provisions u/s.50C have no application as the Assessing Officer did not apply the provisions u/s.50C(2) of the I.T.Act and in view of the fact that the transfer is only to her children.

7) Any other ground/grounds that may be urged at the time of hearing”.

4. Ld.Counsel for the assessee reiterated the submissions made before the authorities below while the Ld.DR supported the orders of the authorities below

5. Having regard to the rival contentions and the material on record, we find that both the assessees had purchased the said property through Agreement of Sale cum GPA along with possession vide Document No.1165/2008, dt.25-03-2008, wherein the sale consideration for the said land was mentioned as Rs.40 Lakhs only and subsequently, vide registered Sale Deed No.2476/2008, dt.21-07-2008, registered the same in favour of their children, who are aged 22, 20 and 18 respectively and from the description given therein, it is also seen that they are all students, without any source of income of their own. By virtue of the said Agreement of Sale cum GPA, the assessees have acquired a right in the said property but have not become absolute owners of the property and by virtue of the Sale Deed dt.21-07-2008, the original owners through the GPA holders had sold the property to the children of the assessees before us. Thus, it is seen that there is actually no sale of property by the assessees before us and the Sale Deed has been executed by the original owners through GPA holders to the children of assessees. Therefore, in my opinion, there is no transfer of property by the assessees in fact it is acquisition of property by the assessees in the names of their children and it is not the case of transfer or gain on sale of property. In view of the same, I allow the Grounds raised by the assessees and in the result, the appeals of both the assessees are accordingly allowed.

Order pronounced in the open court on 5th March, 2020

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