Claimed Property Gift by Father-in-Law Mistakenly Registered as Sale: ITAT Remands Capital Gain Addition u/s 50C for Fresh Examination [Read Order]

The Bangalore Bench of the Income TaxAppellate Tribunal (ITAT) has remitted a dispute where a property meant to be a gift was mistakenly executed as a sale deed, resulting in a capital gains addition by AO for the assessment year 2016-17. The Bench opined that the issue required a de novo examination of facts and supporting documents.

The appeal was filed by Kovvur Chandrashekhar, who had challenged the order passed by the Commissioner of Income Tax (Appeals), upholding an addition of ₹92 lakh made under Section 50C of theIncome Tax Act, 1961. The assessee had filed a revised return declaring a total income of ₹34.02 lakh for AY 2016-17.

The case arose from the reopening of assessment proceedings under Section 147 on the ground that income chargeable to tax had escaped assessment. The assessee had executed a registered sale deed on August 10, 2015 in respect of non-agricultural land situated in Kunikeri Village, Koppal District, for a consideration of ₹58 lakh.

However, as per the property was valued at ₹1.50 crore. Applying Section 50C, the Assessing Officer made an addition of ₹92 lakh due to the difference between guidance value of the registered property and value offered for computation of capital gain.

The assessee then approached the Commissioner of Income Tax (Appeals), contending that the transaction was not a sale but a gift to his father-in-law and that the sale deed was executed due to an error by the document writer. It was further claimed that no consideration was received and possession of the land was never handed over.

The assessee relied on a deed of cancellation and argued that there was no “transfer” as per Section 2(47). The CIT(A), however, rejected the contentions and upheld the application of Section 50C.

The matter came up before the Tribunal Bench comprising Laxmi Prasad Sahu (Accountant Member) and Keshav Dubey (Judicial Member). The Tribunal examined the factual matrix, submissions of both parties, and the evidence produced before it. It was noted that several documents filed by the assessee were not certified and some documents were in vernacular language.

It further observed that the assessee claimed the transaction was intended as a gift, although the property was registered in the name of the assessee’s father-in-law. The Tribunal held that the matter required fresh verification at the assessment stage. It observed that the issue could not be decided without proper examination of all relevant documents and supporting evidence.

Accordingly, the Tribunal set aside the orders of the lower authorities and remitted the issue back to the file of the Assessing Officer. The Assessing Officer was directed to consider the documents produced by the assessee, and pass a reasoned order after granting reasonable opportunity of being heard.

As a result, the appeal filed by the assessee was allowed.

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