2022 (12) TMI 688 - AT - Income Tax

LTCG - ownership of property - Liability of power of attorney holder (GPA) - income/gain arising on the transfer of the property in the hands of the assessee acting as a sales facilitator - HELD THAT - As observed by the Hon ble Supreme Court in the case of ITO vs. Ch. Attchaiah 1995 (12) TMI 1 - SUPREME COURT the income has to be assessed in the hands of the right person and the right person alone and while giving effect to the said scheme of taxation the interest of the revenue cannot be allowed to come in the way. Thus in the case before us merely for the reason that the whereabouts of the real owners were either not to the knowledge of the department or the bare minimum effort were not put in by the A.O to gather the whereabouts of the said persons who were the right persons in whose hands the LTCG on sale of the property was liable to be brought to tax would by no means justify bringing the said income/gain to tax in the hands of a wrong person i.e the present assessee before us. We thus on the basis of our aforesaid observations are unable to persuade ourselves to subscribe to the view taken by the lower authorities who had brought the income/gain arising on the transfer of the property in question to tax in the hands of the assessee who had merely facilitated the sale transaction in question in the status as that of a power of attorney holder for and on behalf of the actual owners viz. S/sh. Tafazzul Hussain and Abbas Hussain. We thus in terms of our aforesaid observations setaside the order of the CIT(Appeals) and vacate the addition of long-term capital gain made by the A.O in the hands of the present assessee. Appeal of the assessee is allowed.

Summary

Issues Involved:
Appeal against order of CIT(Appeals)-I, Raipur on grounds of unjustness, unfairness, and violation of natural justice; Addition of Long Term Capital Gain (LTCG) on property transfer not owned by assessee; Lack of proper opportunity of hearing violating natural justice; Assessment of income at Rs.3,22,61,520/- including LTCG of Rs. 3,27,93,522/-; Dispute over tax liability on property transfer; Interpretation of power of attorney holder's role in property sale; Justification of bringing income/gain to tax in power of attorney holder's hands.

Detailed Analysis:
The appellant challenged the order of CIT(Appeals)-I, Raipur, alleging unjustness, unfairness, and violation of natural justice. The dispute arose from the addition of Long Term Capital Gain (LTCG) on the sale of a property not owned by the assessee. The Assessing Officer (A.O) observed that the property was transferred by the assessee under a registered sale deed but was not disclosed in the income tax return. The assessee claimed to have acted as a power of attorney holder for the actual owners, denying tax liability. The A.O disagreed, asserting that the assessee received the entire sale consideration and was liable for LTCG. The A.O assessed the income at Rs.3,22,61,520/-, including LTCG of Rs. 3,27,93,522/-.

During the appeal process, it was established that the property was sold by the actual owners through the assessee as a power of attorney holder. The Tribunal found no justification to tax the income/gain in the hands of the assessee who merely facilitated the transaction. Citing legal precedents, the Tribunal emphasized that a power of attorney does not confer ownership rights, and income should be assessed in the hands of the rightful owners. The Tribunal noted that the A.O's failure to locate the owners did not justify taxing the income in the wrong person's hands. Consequently, the Tribunal set aside the CIT(Appeals) order and vacated the addition of LTCG made by the A.O in the assessee's hands.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee based on the established facts and legal principles. The decision highlighted the importance of correctly attributing income/gain from property transactions to the rightful owners rather than intermediaries like power of attorney holders.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented, and the Tribunal's decision based on legal interpretations and factual evidence presented during the proceedings.