Non-Registered Banakhat is Not A Valid Document for Property Transfer: ITAT disallows Capital Gain Exemption u/s 54F [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmadabad Bench, has recently, in an appeal filed before it, while disallowing capital gain exemption u/s 54 F, held that non- registered banakhat is not a valid document for property transfer. The aforesaid observation was made by the Ahmadabad ITAT, when an appeal was preferred before it by an assessee, as against the order of the Commissioner of Income Tax (Appeals), Vadodara, dated03/09/2019, arising in the matter of assessment order passed under s.143(3) ofthe Income Tax Act, 1961, relevant to the Assessment Year 2013-14. The grounds of the assessee’s appeal being the question, as to whether the CIT(appeals) , has erred in law and on facts, in confirming action of the AO intreating the sale of land as Short Term Capital Gain by considering purchase deed dated14.09.2009 & not considering notarized Banakhat dated 19.12.2007 for calculating period of holding of the asset(land), though actual possessing of land was obtained by the Appellant from the date of the Banakhat i.e., 19.12.2007 and payment have been madethereafter, and also, as to whether, the CIT (appeals) has erred in law and on facts, in confirming action of AO in non -granting of deduction U/s. 54F of Rs. 41,50,000/- by considering Long Term Capital Gains Short -Term Capital Gain even though the appellant has submitted possession letter towards purchase of new house, the brief facts pertaining to the issue were that the assessee was an individual and engagedin the business of selling milk. The case of the assessee, was selected for scrutiny, and as per the details available with the AO, it was observed that the assessee has sold a piece of land for a consideration ofRs.4,80,00,000/- with other ten persons on 24.05.2012. The land being owned by all of them equally, the assessee’s share in the sales consideration i.e., 1/11th of 4,40,00,000 was Rs.43,63,636/- only, and the assessee had claimed an indexed cost of acquisition amounting to Rs.3,39,722/- along with the balance long term capital gain, claimed as deduction under section 54F of the Income Tax Act. Thus,the long term capital gain resulted to be NIL. However, on verification, it was found by the AO that the assessee had purchased that piece of land as on 14.09.2009, and that since the assessee had held that piece of land for less than 36 months, it shall be treated as short term capital Gain and that the deduction under section 54F cannot beclaimed against short term capital Gain. Thus, the AO sought a clarification fromthe assessee on the facts discussed above, subsequent to which the assessee filed a ‘Banakhat’, dated 19.12.2007, to justify that thepossession of land was already transferred to him (the assessee) earlier asmentioned in it, and hence that it should be treated as long term capital Gain. However, the AO disregarded the claim of the assessee by observing that non-registered Banakhat is not a valid document to transfer the property, that even in the sales deed there was no mention of any Banakhat and further that the assessee had not mentioned about it unless and until the same was pointed out by the AO. According to the AO, it was a frivolous and after thought attempt by the assessee, to misguidethe authority, and hence, he disregarded the contention of the assessee and added the sum of 41,11,645.00to the total income of the assessee. Aggrieved by the same, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the decision of the AO by observing that the assessee has held the land for less than 36 months. Adding to his observation, he mentioned that the period of holding has to be calculated since the time the property has been physically transferred, not by merely executing on paper through a notarized Banakhat, and that the right of the property is transferred either by possession or by sales deed and not by any simply agreement. And it is being aggrieved by the said order of the CIT(A), that the assessee has preferred the instant appeal before the Ahmadabad ITAT. With neither the concerned Counsel nor any other person on behalf of the assessee having appeared before the ITAT it was so decided by the ITAT to proceed to dispose off the appeal ex–parte qua the assessee , with the assistance of Shri Sanjaykumar, the Sr.DR , who vehemently relied upon the order of the authorities below, while Sri Waseem Ahmed, the Accountant Member of the ITAT Panel noted: “I have heard the Ld. DR and perused the materials available on records. It was observed that the order of the authorities below has passed a speaking order and incorporated lots of evidences to substantiate their decision against the assessee. The transfer of property cannot take place on simple agreement.The transfer of the property only takes place when either the possession of the property is transferred or sales deed is executed.” “Documents like unregistered Banakhat, power of attorney are not the substitute of sale deed. So, in present case the land has been sold and sale deed is executed on 14.09.2009 only. The sale of the piece of land within 36 months resulted in short term gain to the assessee”, he added. Thus, dismissing the assessee’s appeal the Ahmadabad ITAT, finally held: “Even in the sale deed there is no mentioned of Banakhat. The issue of invoking the exemption under sec 54F was also held invalid by the lower authorities. The onus to proof the findings of the authorities below as not justifiedlies upon the assessee. However, the assessee has not brought anything contrary to the findings of the authorities below. As such, it seems that the assessee is not interested in pursuing his claims as he failed to appear despite giving so many opportunities by the Tribunal.Therefore, we are not inclined to interfere in the finding given by the Ld. CIT(A). Hence, the ground of appeal raised by the assessee is dismissed.” Support our journalism by subscribing to TaxscanAdFree. 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