2025 (5) TMI 1939 - AT - Income Tax

Undisclosed Income on Sale of Flats - Undervaluation of sale consideration of flats - right or title on the flat bearing no. 204 - difference between stamp duty value and sale consideration HELD THAT - It is an admitted fact that there was no recital in the sale deed which was executed by the assessee-company in favour of Shri Gautam Krishna about the previous transaction/agreement of sale deed/handing over the possession of the flat bearing no.204 to Smt. Awadh Kumari from the assessee-company. It is also an admitted fact that the alleged agreement of sale between the assessee-company and Smt. Awadh Kumari neither registered nor it was executed on the stamp paper. Admittedly it is a simple black and white paper. It is also an admitted fact that the assesese-company offered the capital gains for sale of flat bearing no. 204 in the financial year 2003-04. After considering the recitals mentioned in the sale deed it is crystal clear that as on the date of execution of the sale deed the assesese-company/ Attorney has received the entire sale consideration and the possession of the flat was handed over to Shri Gautam Krishna on the date of execution of sale deed i.e. on 08.01.2015. Capital gains for sale consideration of flat bearing no. 204 -burden heavily lies on the assessee company to establish that there was a valid sale of immovable property - HELD THAT - As the registered sale deed clearly establishes that the sale transaction was made on 08.01.2015 between the assessee-company and Shri Gautam Krishna and assessee company received the sale consideration and delivery of possession was also handed over to Shri Gautam Krishna by assessee-company. The valuation of property was shown on the sale deed is Rs. 25, 79, 477/-. Thus no oral evidence shall be allowed to disprove the contents mentioned in the sale deed by saying that the sale was made on 11.10.2003 and delivery of possession was also completed on 1st August 2005 by executing on while paper in presence of one Smt. Awadh Kumari. Therefore in the absence of satisfactory legal evidence the contention of the assessee should not be acceptable that the assessee-company has already sold the flat to Smt. Awadh Kumari by registered sale deed dated 11.10.2003. Therefore the grounds raised by the assessee-company are liable to be dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the delay of 19 days in filing the appeal by the assessee should be condoned.
• Whether the addition of Rs. 25,71,276/- as undisclosed income on account of undervaluation of sale consideration of flats by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals) was justified.
• Whether the assessee had validly sold Flat No. 204 of Ram Shyam Apartment to Smt. Awadh Kumari in 2003 for Rs. 3,60,000/- and recognized the sale consideration in the financial year 2003-04, thereby losing title and ownership over the property.
• Whether the subsequent registered sale deed executed in 2015 in favour of Shri Gautam Krishna, at a higher stamp duty value, could be challenged on grounds of prior sale and possession delivery to Smt. Awadh Kumari.
• Whether oral evidence and unregistered, unstamped documents such as sale agreements and possession letters could be relied upon to disprove the contents of a registered sale deed under Section 91 of the Indian Evidence Act.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay in Filing Appeal

The assessee filed the appeal 19 days beyond the prescribed time limit and sought condonation of delay on grounds of counsel's health and travel constraints. The Tribunal examined whether sufficient cause was shown for the delay. Considering that the delay was not due to negligence but due to unavoidable circumstances, the Tribunal exercised discretion to condone the delay. This aligns with established principles that delay should be condoned if sufficient cause is shown and the delay is not willful or deliberate.

Addition of Undisclosed Income on Sale of Flats

The Assessing Officer noted a discrepancy between the sale consideration declared by the assessee and the stamp duty value for three flats sold during the relevant year. The difference was substantial for two flats (Nos. 402 and 403), and the Assessing Officer referred the matter to the Valuation Officer who determined the fair market value (FMV) which was higher than the declared sale consideration. Based on this, the Assessing Officer made an addition of Rs. 25,71,276/- as undisclosed income, which was upheld by the Commissioner of Income Tax (Appeals).

The Tribunal considered the legal framework under the Income Tax Act, which empowers the Assessing Officer to make additions where income is believed to be under-reported, especially when sale consideration is not reflective of FMV. The Tribunal noted that the assessee did not dispute the valuation of these flats except for Flat No. 204, which was separately dealt with.

Validity of Sale of Flat No. 204 to Smt. Awadh Kumari in 2003

The assessee contended that Flat No. 204 was sold to Smt. Awadh Kumari in 2003 for Rs. 3,60,000/-, which was fully paid and recognized as income in the financial year 2003-04. The assessee claimed possession was delivered, and the buyer had obtained electricity connection in her name, evidencing ownership. The assessee argued that the sale deed executed in 2015 in favour of Shri Gautam Krishna was on the request of Smt. Awadh Kumari and did not represent a fresh sale but a registration formality.

The Departmental Representative challenged this, pointing out that the alleged sale agreement was unregistered and unstamped, and the possession letter was similarly unregistered and unstamped. The registered sale deed of 2015 did not mention any prior sale to Smt. Awadh Kumari or any instruction to register the property in Shri Gautam Krishna's name. The Department argued that the registered sale deed is conclusive evidence of ownership transfer and sale consideration receipt as of 2015.

Legal Interpretation and Reasoning by the Tribunal

The Tribunal examined the evidentiary value of the documents presented by the assessee. It observed that the unregistered sale agreement and possession letter were insufficient to establish a valid transfer of ownership to Smt. Awadh Kumari in 2003. The Tribunal relied on Section 91 of the Indian Evidence Act, which mandates that the terms of a document must be proved by documentary evidence and oral evidence cannot be used to contradict a registered document.

The registered sale deed dated 08.01.2015 in favour of Shri Gautam Krishna was found to be the conclusive and legally valid document of transfer. The deed recited that the entire sale consideration was paid by the vendee and possession was delivered on the date of execution. There was no mention of any prior sale or transfer to Smt. Awadh Kumari. Hence, the Tribunal held that the legal ownership and possession stood transferred only in 2015.

Regarding the assessee's contention of having offered capital gains in 2003-04, the Tribunal held that mere offer of income without legally valid transfer and possession does not establish ownership transfer. The burden was on the assessee to establish the validity of the earlier sale, which was not discharged satisfactorily.

Treatment of Competing Arguments

The Tribunal carefully weighed the assessee's submissions about prior sale, possession, and payment against the Department's reliance on the registered sale deed and absence of legally valid earlier documents. It rejected the assessee's reliance on oral evidence and unregistered documents as insufficient to overturn the registered sale deed. The Tribunal emphasized the primacy of registered documents in property transactions and the need for compliance with statutory requirements for transfer of immovable property.

Conclusions on Issues

• The delay in filing the appeal was condoned as sufficient cause was established.
• The addition made on account of undervaluation of sale consideration of flats (other than Flat No. 204) was justified and upheld.
• The claim of prior sale and ownership transfer of Flat No. 204 to Smt. Awadh Kumari in 2003 was rejected due to lack of legally valid and registered documents.
• The registered sale deed executed in 2015 in favour of Shri Gautam Krishna was held to be the conclusive evidence of sale and transfer of ownership.
• The assessee's contention based on oral evidence and unregistered documents was not accepted in view of Section 91 of the Indian Evidence Act.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"It is an admitted fact that the alleged agreement of sale between the assessee-company and Smt. Awadh Kumari neither registered nor it was executed on the stamp paper. Admittedly, it is a simple black and white paper."

"As per provision of Section 91 of the Indian Evidence Act, the terms of documents must be proved by way of documentary evidence only, oral evidence cannot be allowed to disprove the contents of the documents."

"The registered sale deed clearly establishes that the sale transaction was made on 08.01.2015 between the assessee-company and Shri Gautam Krishna, and assessee company received the sale consideration and delivery of possession was also handed over to Shri Gautam Krishna by assessee-company."

"Therefore, in the absence of satisfactory legal evidence, the contention of the assessee should not be acceptable that the assessee-company has already sold the flat to Smt. Awadh Kumari by registered sale deed dated 11.10.2003."

Core principles established include the primacy of registered sale deeds in evidencing ownership transfer of immovable property and the inadmissibility of oral evidence or unregistered documents to contradict registered documents under Section 91 of the Indian Evidence Act. The Tribunal reaffirmed that the burden of proof lies on the assessee to establish prior valid sale and possession transfer.

On the issue of delay condonation, the Tribunal applied the principle that delay caused by reasons beyond the assessee's control and not due to negligence can be condoned.

Ultimately, the Tribunal dismissed the appeal, upholding the addition and confirming the validity and effect of the registered sale deed executed in 2015.