WWW.TAXSCAN.IN - Simplifying Laws ITA No 1098Tax of 2016 Gollu Sudha Kiran Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Smt. P. Madhavi Devi, Judicial Member AND Shri S.Rifaur Rahman, Accountant Member ITA No.1098/Hyd/2016 (Assessment Year: 2007-08) Asstt. Commissioner of Income Tax, Circle 7(1) Hyderabad (Appellant)

Vs

For Revenue : For Assessee : Date of Hearing: Date of Pronouncement:

Sri Gollu Sudha Kiran, Hyderabad PAN: BPBPG 0802 D (Respondent) Smt. Suman Malik, DR Shri K.A. Sai Prasad 27.07.2017 29.09.2017 ORDER

Per Smt. P. Madhavi Devi, J.M. This is Revenue’s appeal for the A.Y 2007-08. The grounds of appeal raised by the Revenue are as under: “1. The learned CIT(A) erred both in law and on facts of the case. 2. Ld. CIT(A) erred in directing that capital gains arose in A. Y.2005-06 when there was no sale. 3. Ld. CIT(A) erred in considering the transaction in F.Y.2004-05 between the assessee and his father is sale. 4. Ld. CIT(A) failed to appreciate that the sale has taken place in F.Y.2006-07 relevant for A. Y.2007-08.

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5. Any other ground(s) that may be urged at the time of hearing”.

2.

Brief facts of the case are that the assessee, an

individual, is a non-resident Indian. The AO got information that the assessee has sold plots of land bearing Nos. 206(Part), 207, 208 and 209 admeasuring 1900 sq. yds in Survey No.116 situated at Alakapoor Towship in Sector-III, in Block-B of Neknampur Village, Rajendranagar Mandal, Ranga Reddy Distt. to three persons Shri Rajender Kumar Agarwal, Sri Ashok Kumar Agarwal and Sri Praveen Kumar Agarwal for a total sale consideration of Rs.11,40,000 on 9.3.2007. It was noticed that the assessee has not filed his return of income for the A.Y 2007-08. In view of the same, the AO reopened the assessment by issuance of notice u/s 148 of the Act dated 11.3.2014. The assessee, vide letter dated 29.3.2014, submitted that he is an NRI since last several years and is presently residing in USA. He submitted that he visited India on 5.2.2005 and left for USA on 4.3.2005 and all these facts are clear from the copies of the Passport submitted by him. He further submitted that during his visit to India, he executed an agreement of sale cum-GPA in favour of his father Sri Gollu Appa Rao and handed over the possession of the property to him and therefore, by virtue of the said document, the property was transferred to his father on 2.3.2005 and the assessee is not having any income as such for the A.Y 2007-08 and therefore, he was not liable to file any return of income as such.

3.

The AO, thereafter, issued statutory notices u/s 142(1)

and 143(2) of the Act which was also served on the assessee. The

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assessee through his father, filed his return of income, declaring “Nil” income and vide letter dated 2.2.2015 submitted that the property was transferred to his father vide registered agreement of sale cum GPA vide document No.1732/2005 dated 2.3.2005 for a consideration of Rs.4,09,500. It was submitted that subsequently his father has sold the said property to the above vendees mentioned in the sale deed vide document No.132 of 2005 for a consideration of Rs.11,40,000. Thus, the assessee reiterated that the capital gains are to be assessed for the A.Y 2005-06 and not for the A.Y 2007-08.

4.

The

AO,

however,

was

not

convinced

with

the

assessee’s contention. He observed that the agreement of sale cum GPA executed by the assessee in favour of his father is not a valid one and a power of attorney is not an instrument of transfer but that it only authorizes the assessee’s father to sell his property on behalf of him. Thus, according to him, the GPA holder has sold the property on 9.3.2007 for a consideration of Rs.11,40,000. He observed that the market value as per the stamp duty authorities is Rs.66,50,000 and therefore, he took it as sale consideration u/s 50C of the Act. Accordingly, he brought the Long Term Capital Gain of Rs.66,50,000 to tax. The AO also observed that the GPA holder also has not shown the sale consideration of Rs.66,50,000 in his return of income for the A.Y 2007-08 and therefore, the assessee’s contention of transfer of property during A.Y 2005-06 is an afterthought to avoid taxable income in his hands. Aggrieved by the above findings of the AO and the demands raised there under, the assessee filed an appeal before the CIT (A) who allowed the same. Aggrieved by the relief

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granted by the CIT (A), the Revenue is in appeal before us raising the above grounds of appeal.

5.

The learned DR, while supporting the order of the AO,

submitted that the agreement of sale cum GPA between the assessee and his father is not a valid document and if at all it is to be considered, it can only be treated as a GPA. She submitted that there is no proof of the consideration of Rs.4,09,500 passing on from the assessee’s father to the assessee. Therefore, according to her, it is only a document allowing the father to do certain acts on behalf of his son and no right or title in the property was transferred to the GPA holder. Further, she also submitted that the assessee has not reflected the capital gain in his return of income for the A.Y 2005-06 nor offered the capital gain his hands during the A.Y 2007-08. Therefore, the entire argument of the transfer of title and the possession being handed over to the father is an afterthought to avoid paying tax in either of the hands. She further submitted that if the Tribunal accepts the contention of the assessee that there is a transfer of property from the assessee to his father by virtue of the agreement of sale cum GPA, then under the provisions of Explanation 3 to section 153 of the Act, the Tribunal may direct the AO to bring the capital gains to tax in the hands of his father.

6.

The learned Counsel for the assessee, on the other

hand, reiterated the submissions made by the assessee before the AO and the CIT (A) and supported the findings of the CIT (A). He submitted that there is no provision in law that the property

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cannot be transferred by a son to his father for a valid consideration. He submitted that the agreement of sale cum GPA is a registered document and the possession was accordingly handed over to the father and therefore, the transfer is complete. He submitted that since the transfer has taken place between the assessee and his father during the financial year relevant to the A.Y 2005-06, the assessee is not liable to pay any tax during the A.Y 2007-08 and therefore, the directions of the AO have rightly been set aside by the CIT (A).

7.

As regards the prayer of the DR that directions should

be given in accordance with the Explanation 3 to sub section (3) to section 153 of the Act, he submitted that there was no such ground raised by the Revenue along with the memorandum of appeal and therefore, the said ground cannot be entertained at this stage and particularly when no notice has been given to assessee’s father before giving such a direction.

8.

Having considered the rival contentions and the

material on record, there is no dispute about the agreement of sale cum GPA being a registered document and also subsequent sale deeds being registered. Copies of the agreement of sale cum GPA as well as the subsequent sale deed have been filed before us. As per the averments in the agreement of sale cum GPA, the assessee is the vendor and his father Shri Gollu Appa Rao is the vendee and the property has been sold for a consideration of Rs.4,09,500 and it is also mentioned that the vendee has already paid the entire sale consideration to the vendor and that the

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vendor has delivered the vacant possession of the scheduled property to the vendee with all the rights and title and interest which he has by virtue of being the owner. Thereafter, the vendor has given GPA to his father. It is stated by the learned Counsel for the assessee that the agreement of sale cum GPA has been entered only to save the stamp duty which could be refunded when the final sale deed has been entered into but according to him, the entire sale consideration has been received by the assessee and therefore, the transfer is complete. He submitted that he does not have any instructions as to whether the assessee has offered capital gain during the A.Y 2004-05 and that the Revenue is free to take action in accordance with the law. In view of the above and as seen from the final registered sale deed, the assessee is shown as vendor represented by a GPA holder Shri Gollu

Appa

Rao

and

the

property

has

been

sold

for

a

consideration of Rs.11,40,000 which has been paid through cheques and the stamp duty paid on the agreement of sale cum GPA has been adjusted against the stamp duty paid on the final sale deed. The Revenue accepts that the final sale deed executed by the GPA holder in favour of 3rd party as a valid document. However, the Revenue is only contesting the validity of the registered agreement of sale. A document has to be either accepted or rejected in to-to and cannot be considered as partly in favour and partly against the assessee. The agreement of salecum-GPA is one single document and is also a registered document. Both the agreement of sale cum GPA and the final sale deeds are registered documents and the assessee’s contention that there is a transfer of property in the A.Y 2005-06 cannot be said to be an afterthought. There is no prohibition against the sale

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of property between a son and his father as long as both the parties are competent to enter into a contract. As long as it is not a prohibited transaction, the doubts raised by the Revenue cannot be sustained without any appropriate evidence. By virtue of agreement of sale, with handing over of the possession, there is a valid transfer u/s 2(47)(v) of the I.T. Act though the legal title gets transferred only on the registration of the sale deed. Therefore, the assessee has to be shown as the vendor in the subsequent and final sale deed executed in favour of the three persons. Therefore, the mere mention of the assessee in the sale deed as the vendor does not confer any title on him which he has already transferred to his father by virtue of the agreement of sale cum GPA. The learned Counsel for the assessee also has submitted that the entire sale consideration of Rs.11,40,000 has already been paid to the assessee’s father vide cheques mentioned in the sale deed and this fact has not been refuted by the Department. The learned DR’s submission that under Explanation 3 to section 153 of the I.T. Act, a direction should be given to tax the father, the ultimate owner, is also not sustainable because the Revenue has not raised any such ground of appeal along with Form 36 and since the other person was not given an opportunity of being heard before passing such order. The Hon'ble Supreme Court in the case of Rajinder Nath vs. CIT reported in (1979) 120 ITR 14 (S.C) has held that the finding that the income represents the income of another person requires a proper enquiry and for that purpose, an opportunity of being heard was necessary under Explanation 3 to section 153(3) of the Act. The above principle has been reiterated by the Hon'ble Bombay High Court in the case of ITO vs. Ramnarain Sons P Ltd (1979) 119 ITR 83 (Bom.),and the Hon'ble

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Allahabad High Court in the cases of Gupta Traders vs. CIT (1982) 135 ITR 504 (All.) and Rani Rajendra Kumari Ba vs. ITO (1981) 130 ITR 708 (All.). In the case of Rani Rajendra Kumari Ba, the re-assessment notice was issued to the wife in order to give effect to a finding by the Tribunal in an appeal by the husband that the income of the wife could not be included in the total income of the husband under the then section 64(iii) of the Act. Since such a finding was given without giving the wife an opportunity of being heard in the course of the husband’s appeal, it was held that the initiation which was beyond the normal period of limitation could not be upheld u/s 150 because the condition of Explanation 3 to section 153 was not fulfilled. Therefore, the said ground raised orally by the learned DR, also cannot be entertained. 9.

In the result, Revenue’s appeal is dismissed.

Order pronounced in the Open Court on 29th September, 2017. Sd/(S.Rifaur Rahman) Accountant Member

Sd/(P. Madhavi Devi) Judicial Member

Hyderabad, dated 29th September, 2017. Vinodan/sps

Copy to: 1 Asstt. Commissioner of Income Tax, Circle 7(1) Room No.812, 8th Floor, Signature Towers, Opp: Botanical Gardens, Kondapur, Hyderabad 2 Sri Gollu Sudha Kiran, D.No.13-6-432/3 Srinivasa Nagar, Ring Road, Hyderabad 3 CIT (A)-3 Hyderabad 4 Pr. CIT – 3 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order

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