The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has held that capital gain tax should not be chargeable to immovable property gifted to daughter -in -law by wrongly executed sale deed instead of gift deed.
The assessee, Hanuman Prasad Tambi as Power of Attorney holder, sold immovable property for the total consideration of Rs.14.00 lacs which had been valued at Rs.25,68,900/- for the purpose of charging stamp duty and on verification of record, it had been found that the assessee had not filed the return of income for the year under consideration. Thererafter, the Assessing Officer (AO) initiated proceedings Section 147 of the Income Tax Act, 1961 along with notice of enquiry was issued to assessee.
After verifying the sale deeds and power of attorney made by the assessee it was noted that the assessee gifted property to his daughter-inlaw but for legal title and he executed a sale deed in which sale consideration of Rs.3.00 lacs was mentioned but no consideration was received. Based on the sale deed AO computed the long-term capital gain
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] who dismissed the appeal of assessee. Against the CIT(A)order, the assessee filed appeal before the tribunal.
Before the bench P.C. Parwal, the counsel for the assessee argued that “no capital gain can be assessed in the hands of assessee in respect of sale deed executed by him as POA holder even when the assessee admitted capital gain in his hand”.
Further, the Revenue has not brought any material on record suggesting that this power of attorney was executed in lieu of a consideration.
Monisha Choudhary, the department representative supported the decision of the lower authorities.
The tribunal after reviewing the facts point out that sale deed was wrongly executed instead of executing the gift deed and that the consideration mentioned in the sale deed was never received by the assessee from his daughter-in-law.
Moreover, the assessee on it is affidavit declared that “sale deed has been wrongly executed, he was having no knowledge of transferring legal title at the time of execution, he executed sale deed instead of gift deed as per the advice of his advocate and that he has not received any sale consideration from daughter-in-law.”
Hence, a bench consisting of two members, Rathod Kamlesh Jayantbhai (Accountant Member): Dr. S. Seethalakshmi (Judicial Member) reviewed the arguments presented by both parties and held that no capital gain can be computed in respect of the sale deed executed in favour of daughter -in- law as it is only a gift to close relatives and not a sale.
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