ITAT upholds Addition on LTCG u/s 50C based on Unregistered Deeds merely Entered in Judicial Stamp Papers [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has upheld the addition of Long-Term Capital Gain (LTCG) under Section 50C of the Income Tax Act based on the unregistered deed merely entered in judicial stamp papers.

The assessee, Hari Mittar Yadav was into the business of commission agency and had also rented out a boutique shop during the A.Y. 2012-13. The assessee filed his return of income dated 29.01.2013, consisting of income from house property and income from other sources.

The assessee’s case was selected for scrutiny where the A.O. had made several additions, pertaining to long term capital gain (LTCG) under Section 50C of the Income Tax Act.

The assessee had transferred an immovable property for a sale consideration of Rs.12 lacs vide registered deed of transfer dated 18.01.2012 entered into between the assessee and Viswanath K. Shetty, being the vendor and Suresh Dhondu Waghmare and Balbir Singh Gabbar Singh as the purchasers. The A.O. made enquiries to the assessee pertaining to the difference in the stamp duty value and the sale consideration evidenced in the sale deed.

The assessee contended that the impugned property was declared as depreciable assets in A.Y. 2006-07 in the returns filed by the partnership firm Vihar Enterprises where the assessee and Vishwanath K. Shetty received Rs.12 lacs each and contended that the said property was transferred by the assessee along with co-owner during the year 2006.

The assessee furnished copies of the deed of the partnership, deed of retirement and reconstitution of partnership, Indemnity Bond cum Affidavit cum Undertaking to substantiate the claim of the assessee that the said property was sold in the year 2006, but the sale deed was affected only in the year 2012 due to some misunderstanding between the buyers and the sellers. The lower authorities failed to accept the contention of the assessee, as the said deeds furnished by the assessee were unregistered deeds merely entered in the judicial stamp papers.

The assessee’s contention that as per the deed of retirement dated 06.09.2006, the said property was transferred and the assessee had relinquished his right in the said property since that day. The assessee further stated that the transfer of deed entered upon on 18.01.2012 was erroneous, as it had specified that the assessee had sold the property in his personal capacity which had to be the capacity of a partner of the firm.

Hoshang B. Irani appeared for the Revenue and submitted that the assessee had failed to furnish the documentary evidence to prove that the property was sold in the year 2006 itself and whether the possession of the property was handed over to the buyers were all not corroborated by documentary evidence. He stated that neither the sellers nor the buyers had disputed the valuation of the stamp duty, assessed by the concerned authority and it was also to be noted that the parties had also paid the entire stamp duty charges as per the valuation determined by the government authority.

The two-member Bench of Om Prakash Kant, (Accountant Member) and Kavitha Rajagopal, (Judicial Member) observed that the deed of the reconstitution relied upon by the assessee was merely an unregistered document, which does not instil confidence. It was pertinent to point out that the assessee had failed to provide any such communication to the Registrar of Firms related to the reconstitution of the firm. The assessee had also failed to furnish the original partnership deed or the registered reconstitution deeds.

Upon perusal of the recitals of the deed of transfer executed on 18.01.2012, it was evident that none of the clauses had a mention that the said property was transferred during the year 2006 and that the sale was on behalf of the partners of the partnership firm.

In this case, there had been a subsequent rectification deed registered which substantiates the assessee’s claim, but in the present case the assessee had failed to prove his claim by way of any documentary evidence which can be relied upon. The Bench dismissed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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