Assessee is not liable for tax on capital gain, when Assessee is neither a signatory to subsequent Sale Deed nor recipient of any sale consideration

In facts of the present case are that the Assessee, an individual, did not file any return of income for the relevant assessment year. The Assessing Officer (AO) received information that the assessee has sold a property vide Sale Deed Document during the Financial Year 2011-12 for an amount of Rs.9,90,000. The Assessee had not offered to tax any capital gains from the said transaction. Therefore, the AO initiated proceedings under Section 147 of the Income Tax Act, 1961, after issuance of notice under Section 148 of the Act.

The AO observed that vide the Agreement of Sale cum GPA, the assessee has only appointed his attorney on his behalf to deal with property with the prospective buyers and therefore, there is no transfer of property vide AGPA. He held that, the transaction vide Sale Deed No.1610/2012, dated14th March, 2012 is the transaction resulting in transfer of property by the assessee through his attorney. Therefore, he held that the assessee is liable to pay tax on the Long Term Capital Gain. Without giving any credit for cost of acquisition, the AO treated the entire sum of Rs.9,90,000 as capital gain and brought the same to tax. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of AO and the assessee is in second appeal before the Tribunal.

By virtue of the AGPA dt.29th November, 2006, the assessee has parted with his right in the property because he had received the entire sale consideration of Rs.5,94,000 as agreed to between both the parties and has also handedover the vacant possession of the property to the Vendee therein. It is also stated therein that, the GPA is given to the Vendee for the convenience of the purchaser for doing the necessary acts and things on behalf of the Vendor and the Vendee therein.

Since the Vendee has paid the entire sale consideration and has taken possession of the property, the Vendee becomes the owner of the property under Section 53A of the Transfer of Property Act, 1882 and under Section 2(47) of the IT Act, it is a transfer of the property. The Vendee has executed the Sale Deed by virtue of the said AGPA, as he has sold the property to another party for Rs.9,90,000. The sale of the property by the Vendee cum AGPA-holder cannot be considered as sale of property by the assessee. Further, it is worth noting that except being described as the Vendor, the assessee is neither a signatory to the subsequent Sale Deed nor is he the recipient of any of the sale consideration. In view of the same, it is held that the assessee is not liable for tax on any capital gain arising out of transfer of property vide Document No.1610/2012, dated 14th March, 2012. Accordingly, the appeal of assessee is allowed.

Sama Om Reddy vs. The Income Tax Officer, HYDERABAD - (Income Tax Appellate Tribunal) (29 Apr 2020) - MANU/IH/0038/2020