2024 (5) TMI 1079 - AT - Income Tax

Capital Gain on sale of plant - real owner - capital asset in the name of assessee or not? - HELD THAT - As abundantly clear that the assessee has never admitted that the sale cum GPA executed by M/s. Deccan Townships Pvt Ltd with regard to remaining 10 acres was in the name of the assessee - also not admitted by the assessee that the assessee will submit the capital gain computation and pay the resultant tax in due course. As abundantly clear there was no admission in the eyes of law to pay the tax dues based on the statement recorded u/s. 132 rather the assessee has only sought time to file the copy of the sale deed for the remaining Ac 10-00 gts of land and paying the taxes after computing the capital gains. In fact this statement was also retracted by the assessee before filing the return of income. Even otherwise no addition can be made in the hands of the assessee u/s 153A in the absence of incriminating material. Undoubtedly the capital asset has been defined in section 2(14) of the Act which provides that an asset which is held by the assessee and not connected with the business or profession of the assessee is required to be treated as capital asset. Admittedly the land admeasuring Ac. 10-00 is owned and registered in the name of A. Vindhyavali and not in the name of the assessee. The registered document clearly shows that the property was owned registered and held by Smt. A. Vindhyavali who is not connected with the assessee in any manner. Thus it is clear that the land owned by Smt. A. Vindhyavali was not a capital asset in the hands of the assessee and therefore no addition can be made in respect of such land for capital gains arising out of the sale of the capital asset. Admittedly the assessee was only the owner of Ac. 22-27 gts and assessee has offered the STCG in the FY 2019-20 relevant to the AY 2020-21. This has been recorded by the AO in the order itself. With respect to the objection of the Revenue that no opportunity of hearing was given to the AO before relying upon the sale deeds. It will be sufficient to mention here that the AO mentioned about the sale deeds with respect to the agricultural land and AO further referred to the sale cum GPA entered by the assessee. CIT(A) has granted the relief based on the Agreement of sale cum GPA dated 19/08/2019 wherein it is clearly mentioned that the assessee was only the owner of Ac. 22-27 gts. Though the ld.CIT(A) had also referred to the other registered sale deed in the name of Smt. A. Vidhyavali for the purpose of concluding that the assessee was not the owner of the Ac. 10-00 gts. CIT(A) has decided the issue solely on the basis of registered documents which are admissible in law as they are documents in rem and we also draw the strength from Explanation to Section 3 of the Transfer of Property Act 1882 which provided that any document which is registered shall be deemed to have notice of registration . CIT(A) had decided the issue on the basis of the documents available with the Ld. AO. Thus there is no violation of the principle of natural justice and Rule 46A of the IT Rules 1962. There is no error in the reasons given by the learned CIT (A) to delete the addition made by the AO towards the capital gain derived from sale of land. Decided against revenue.

Summary

Issues Involved:
1. Validity of the addition made by the AO based on the assessee's statement during the search.
2. Consideration of additional evidence by the CIT(A) without a remand report from the AO.
3. Ownership and sale of agricultural land and its impact on capital gains.

Summary:

1. Validity of the Addition Made by the AO:
The AO made an addition of Rs. 3,04,77,880/- to the assessee's income under the head capital gains, based on a statement recorded u/s. 132(4) during a search operation. The assessee initially admitted to capital gains on the sale of land measuring Ac 32.27 gts but later retracted, clarifying that only Ac 22.27 gts was sold. The CIT(A) found that the assessee had inadvertently admitted capital gains on the total land instead of the actual land sold. The CIT(A) concluded that the land admeasuring Ac 10-00 gts was sold directly by M/s. Deccan Townships Pvt Ltd to a third party, and thus, the assessee was not liable for capital gains on this portion.

2. Consideration of Additional Evidence by the CIT(A):
The Revenue argued that the CIT(A) allowed relief based on additional evidence without calling for a remand report from the AO, violating Rule 46A(3) of the IT Rules, 1962. The CIT(A) relied on registered sale deeds to conclude that the assessee was not the owner of the Ac 10-00 gts land. The Tribunal found that the CIT(A) decided the issue based on admissible registered documents, which were already mentioned by the AO in his order. Therefore, there was no violation of natural justice or Rule 46A.

3. Ownership and Sale of Agricultural Land:
The Tribunal noted that the assessee was only the owner of Ac 22-27 gts and had correctly offered short-term capital gains for this portion. The remaining Ac 10-00 gts was owned and sold by Smt. A. Vindhyavali, not connected to the assessee. The Tribunal upheld the CIT(A)'s finding that the land admeasuring Ac 10-00 gts was not a capital asset in the hands of the assessee, and thus, no addition could be made for capital gains on this land.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition made by the AO towards capital gains derived from the sale of land. The Tribunal found no error in the CIT(A)'s reasoning and concluded that the assessee was not liable for capital gains on the land not owned by him. The appeal filed by the Revenue was dismissed.