Taxpayer Merely Confirming Party to Property Sale Deed, Revenue Fails to Prove Ownership: ITAT Deletes Capital Gain Addition [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) deleted a capital gain addition made in the hands of a taxpayer who was shown only as a confirming party to a registered sale deed.

Mahadevbhai K. Bharwad filed the appeal against the order of the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2018-19.

The taxpayer had not filed the original return. The Department received information through the Insight Portal under the Non-Filer Monitoring System that the taxpayer had sold immovable property during the year. Based on this information, proceedings under Section 148 were initiated.

In response, the taxpayer filed a return declaring total income of Rs. 2,18,110. He also disclosed capital gains from the property transaction.

During reassessment, the Assessing Officer ( AO ) observed that the total sale consideration of the property was Rs. 3,47,95,000, while the taxpayer had declared only Rs. 20,20,202 as his share. Since the taxpayer did not comply with notices under Sections 142(1) and 143(2), the AO completed assessment under Section 147 read with Sections 144 and 144B and added Rs. 3,27,74,798.

The Commissioner of Income Tax (Appeals) dismissed the appeal ex parte and confirmed the addition.

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The assessee’s counsel argued that the taxpayer was neither the sole owner nor the principal transferor of the property. The counsel argued that the taxpayer was only a confirming party to the sale deed and had received only Rs. 20,20,202, which was already offered to tax.

The revenue supported the lower authorities and argued that the taxpayer failed to file supporting evidence during assessment. They submitted that the AO was justified in making the addition based on information available on record.

The two-member bench comprising Dr. B.R.R. Kumar (Vice-President) and T.R. Senthil Kumar (Judicial Member) examined the registered sale deed dated November 10, 2017.

The Tribunal observed that several persons were shown as executants and owners of the property, while the taxpayer was shown only as a confirming party. It also observed that as per AS26, the taxpayer was paid Rs. 20,20,202.

The tribunal held that the Revenue brought no material to prove that the taxpayer was owner or co-owner of the property. It also found no evidence that he received any amount beyond Rs. 20,20,202.

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