INCOME TAX ACT, 1961

Section 2(47)

Capital gain - Transfer - Assessee executed General Power of Attorney - Transfer of property under section 2(47)--Assessee having sold certain properties, not paid capital gains

During the course of search, certain incriminating material were found and it was also found that the assessee had sold certain properties and had not paid capital gains. Thereupon, proceedings under section 153C of the Act read with section 143(3) were initiated in the case of the assessee who is an individual. The order of assessment was passed by the Assessing Authority on 28-10-2011. The Assessing Authority inter alia held that as per the seized material, the assessee had entered into an agreement for sale as well as executed irrevocable General Power of Attorney in favour of M/s. Trishul Developers for sale of land measuring 1.47,898.98 square feet situated in Veerasandra Village of Sy.No.48 and 48/1 and has received total sale consideration of Rs. 7,90,68,395 out of which, a sum of Rs. 5,01,37,720 was paid by way of Cheque and Rs. 2,97,27,675 was paid by way of cash to the assessee. It was further held that the aforesaid fact was confirmed by Prakash Shetty namely partner of M/s. Trishul Developers in the course of search. As the assessee did not offer the sale consideration to tax, therefore, the Assessing Authority made an addition of Rs. 7,57,65,395. The Tribunal, held that the permissive possession given by the assessee to the holder of the agreement cannot be considered as transfer and therefore, provisions of section 2(47) of the Act cannot be invoked to the fact situation of the case. In the aforesaid factual background, the revenue has filed this appeal. In the instant case, admittedly the assessee had entered into an agreement for sale in respect of the land in question and had executed an irrevocable General Power of Attorney on 21-12-2005. Assessee submitted that the Tribunal has rightly held that there was no transfer of property by the assessee and therefore, the capital gains did not arise. It was further submitted that transfer of possession of the property is one of the essential ingredients of transfer under section 2(47) of the Act. It is further submitted that the assessee has neither received the balance consideration of Rs. 5,01,37,720 nor has handed over the possession of the property. Therefore, the transaction in question has rightly been treated to be not a transfer under section 2(47) of the Act. It was also urged that the property was still recorded in the name of the assessee in the revenue records and a litigation was pending between the assessee and the prospective purchaser in an appeal namely RFA No.1758/2016 c/w RFA No.1610/2016 in which an interim order was been passed restraining the parties not to alter the nature of the property. It is submitted that the assessing officer had merely relied on the declaration made by the aforesaid Prakash Shetty and had not brought on record any tangible material to demonstrate that the assessee has received the cash. It was further submitted that the order passed by the Tribunal does not call for any interference. Held: From perusal of relevant clauses of the Power of Attorney which was executed on the same day, it was evident that all rights in the property including the possession constructively infact has been handed over by the assessee to the purchaser. Therefore, there is no hesitation in holding that the aforesaid transaction was the same within the meaning of section 2(47) of the Act and the assessing officer as well as the Commissioner (Appeals) had rightly treated the same to be a transaction of sale. However, the Tribunal, without taking into account the incriminating material on record, merely on the basis of the fact that the possession of the property under the agreement was not delivered, has held the same to be not sale. In view of preceding analysis, the substantial question of law was answered in the negative and in favour of the revenue.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2006-07

SUBSCRIBE FOR FULL CONTENT