Taxpayer is not Owner of Property: ITAT deletes Addition of 25 lakhs u/s 56 of Income Tax Act [Read Read]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has nullified the addition of Rs. 25 lakhs under Section 56 of the Income Tax Act, stating that the taxpayer is not the rightful owner of the property under scrutiny.

The facts relevant to the adjudication of the case are that, two persons namely Mr. Narender Kapoor (resident of New Zealand) & Mr. Aseem Doomra were joint owners of property by virtue of a Sale Deed (registered on 27.06.2016) from Bhagwan Dass son of Sita Ram. It was not in dispute that the assessee in question is not the owner of the property at any given point of time. Mr. Aseem Doomra who is in India had proposed to sell the said property to one M/s Kritunairu Builders & Developers Pvt. Ltd.

Since, one of the owners was a non-resident, Ashish Gupta, Director of the assessee company was roped in to take forward the deal of sale to M/s Kritunairu Builders & Developers Pvt. Ltd. Accordingly, the assessee entered into agreement to  sell & purchase on behalf of Sh. Narender Kapoor and Sh. Aseem Doomra.

With a view to conclude the deal, Mr. Narender Kapoor (one of the joint owners) had executed a Power of Attorney at Auckland Country New Zealand in favour of Mr. Aseem Doomra (other joint owner), giving him power to execute the Sale Deed in respect of the said property, in his absence, in favour of the ultimate buyer . 

M/s Kritunairu Builders & Developers Pvt. Ltd. made payment of Rs.25,00,000 on 30.03.2019 and Rs.19,00,000 on 04.06.2019 and taken signatures of Mr. Ashish Gupta of M/s Sai Samarpan Realtors Pvt. Ltd. who was working on behalf of the owners as per the agreement dated 04.02.2019.

Accordingly, proceedings under Section 153C of the Income Tax Act were initiated and the AO made addition of Rs.25,00,000 and Rs.19,00,000 received by the assessee under Section 56 of the Income Tax Act, 1961 as income from other sources.

The AO made an addition of Rs.25,00,000 under Section 56 with the remark since the assessee has not furnished any cogent explanation with respect to the cash received amounting to Rs.25,00,000 and the same has been received as an advance in respect of the immovable property and the transaction has not materialized as far as the assessee is concerned , the amount of Rs.25,00 ,000/- is being added to the income of the assessee as per the provision of section 56 of the Act

Ashish Gupta stated that the money received was handed over to Aseem Doomra….”. Since the said property was never owned by the assessee, it was not eligible /entitled to keep the money having been received by way of earnest money & part sale consideration in respect of the said property from the prospective buyer.

The two member bench of the tribunal comprising Astha Chandra Judicial member and Dr. B. R. R. Kumar (Accountant member) concluded that the seized documents being agreement to sale and purchase were required to be considered in entirety, not in piece meal. Hence, the view formed by the lower authorities to treat the assessee as real beneficiary of Rs.44,00,000/- (Rs.25 ,00 ,000/- during FY 2018-19 and Rs.19,00,000/- during FY 2019-20) was arbitrary and cannot be affirmed, Accordingly, the appeals of the assessee are allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates