The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that offering Long Term Capital Gain (LTCG) on sale of land by fresh cheques, not acceptable on pretext that there is no cancellation of registered sale deed.
The assessee company, Gupta Synthetics Ltd is engaged in the business of manufacturing partially oriented yarn, fully drawn yarn etc. The assessee filed its income declaring total income at Nil and the case was selected for scrutiny and order was passed under section 143(3) making addition of Rs.46,01,084/- as long-term capital gain on sale of land for a consideration of Rs.70 lakhs by the Assessing Officer. Aggrieved by this, the assessee was in appeal before the CIT(A), who confirmed the said addition.
The assessee contends that two cheques issued for the sale consideration of Rs.70 lakhs were not presented to the bank for encashment and also the possession of the said land was also not handed over to the buyer. The assessee further stated that the said transaction was cancelled for want of NOC from bank. The assessee further stated that the said transaction was not disclosed in the return of income and relied on the provisions of section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882.
The CIT(A) during the appellate proceedings has discussed elaborately in his orders stating that the sale deed has recital that the entire sale consideration of Rs.70 lakhs has been received towards full and final consideration. The assessee has not proved even before the CIT(A) either by submitting the cancelled cheques or by furnishing copies of bank statement of the assessee as well as that of the purchaser to prove that the said cheques were not encashed. The assessee has also not provided with correspondence with bank for non receipt of NOC as claimed by the assessee. The assessee has failed to produce the cancellation deed of sale which is a mandatory requirement as per provisions of law.
The Bench consisting of Prashant Maharshi, Accountant Member and Kavitha Rajagopal, Judicial Member observed that “The assessee’s claim that it had offered long term capital gain on sale of the land in A.Y. 2015-16 since it received the consideration of Rs.70 lakhs in F.Y. 2014-15 by way of fresh cheques is not acceptable on the pretext that there is no cancellation of registered sale deed.”
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