LTCG Addition for Sale of Immovable Property: ITAT Deletes addition Citing Taxpayer as Mere Power of Attorney Holder [Read Order]

The Rajkot Bench of Income Tax Appellate Tribunal (ITAT) has set aside an order confirming the addition of ₹16,99,579 as Long Term Capital Gain (LTCG) on the sale of an immovable property. remanded the matter back to the Assessing Officer (AO) finding that the assessee was merely a Power of Attorney (POA) holder and not the actual seller of the property.

Nitinbhai Ranchabhai Dhakecha (assessee) filed an original return of income declaring a total income of ₹98,271. His assessment was reopened based on information that he, as a Power of Attorney holder of Shri Manharsinh Jalamsinh Parmar, had sold an immovable property for ₹10,20,000/-, though the stamp duty valuation was ₹16,99,579/-.

The assessee argued that he was not the owner and acted only as a POA holder to complete the transaction for the actual owner, Shri Manharsinh Jalamsinh Parmar. Despite this, the AO made an addition of the entire stamp duty value, ₹16,99,579/-, as undisclosed LTCG without allowing any deduction for the cost of acquisition.

Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] which dismissed the assessee's appeal and upheld the addition. Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT.

The two-member bench, comprising Dr. Arjun Lal Saini (Accountant Member) and Dinesh Mohan Sinha (Judicial Member), noted that neither the AO nor the CIT(A) had a copy of the purchase deed, bank statement, or the Power of Attorney.

The Tribunal observed that the assessee was only a POA holder and that the sale consideration was not received by him.

The bench relied on a relevant judicial precedent from the Gujarat High Court in the case of Vishnubhai Kanjibhai Desai , where it was held that a person acting as a POA holder on behalf of the actual firm/owner could not be taxed for the income from such transactions.

Considering the evidence presented by the assessee (including the POA and purchase deed) as additional evidence before the Tribunal, the tribunal observed that the order should be set aside.

The Tribunal remitted the entire matter back to the file of the AO for fresh adjudication on merit, directing the AO to give the assessee a due opportunity to present his case and file the additional evidence. In the result, the appeal filed by the assessee was allowed for statistical purposes.

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