Revenue not to take benefit of mistake committed by assessee. Gift wrongly executed through sale deed can not be taxed as capital gain
In a recent judgment, the Hon’ble ITAT has held that revenue should not take the benefit of the mistake committed by the assessee. Gift to daughter in law wrongly reported as transfer can not be taxed as capital gain
ABCAUS Case Law Citation:
ABCAUS 3967 (2024) (04) ITAT
Important Case Laws relied upon:
S.R. Koshti Vs. CIT reported in 276 ITR 165
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the order of the Assessing Officer (AO) by treating the transaction of gift as sale/transfer of the property and accordingly, computed the capital gain under the provisions of section 50C of the Income Tax Act, 1961 (the Act).
The appellant assessee was an individual and earning income from the share of the partnership firm and agricultural activities. The assessee in the year under consideration had transferred certain pieces of land to the daughter-in-law and claimed short-term capital loss on the transfer of such lands in the income tax return.
However, the AO during the assessment proceedings found that the stamp value of such piece of land was much more than the sale consideration declared in the sale deed. On question by the AO, the assessee submitted that he has transferred the lands to the daughter-in-law as gifts and therefore the same doesn’t fall under the category of transfer u/s 2(47) of the Act as provided under section 47(iii) of the Act.
It was further submitted by the assessee that he inadvertently had transferred the land in dispute through the sale deed instead of transferring the same under the gift deed. However, the assessee claimed that such sale deed was subsequently rectified which was duly registered as gift deed. The assessee also filed the gift deed during the assessment proceedings.
The assessee also submitted that the daughter-in-law was a relative as defined under the provisions of section 56 of the Act and therefore such gift was outside the purview of the provisions of transfer under section 47(iii) of the Act and therefore there will not be attracted the provisions of section 50C of the Act.
However, the AO disagreed with the contention of the assessee by observing that the assessee himself had declared the transaction of transferring the land as sale of land to the daughter-in-law at a consideration lesser than the amount of stamp value. There was no mention about such gift in the statement of income. According to the AO at the time of registration of the sale deed, there was no specific document suggesting the gift as claimed by the assessee.
Accordingly, the AO worked out the difference amount between actual sale consideration and stamp value, and added to the total income of the assessee.
The Tribunal observed that there was no dispute to the fact that the transaction in the nature of gift cannot be treated as transfer under clause (iii) of section 47 of the Act.
The assessee had claimed that he had transferred the land by virtue of the gift to the daughter-in-law who was the relative within the meaning of the provisions of section 56 of the Act. However, the assessee inadvertently has shown such transaction as sale of property but the same was rectified on a later date.
On perusal of the order of the AO, the Tribunal noted that the gift deed was duly submitted by the assessee during the assessment proceedings and no defect was pointed out by the AO in such gift deed. According to the assessee, such gift deed was made in pursuance to the rectification of the sale deed. But the authorities below, was of the view that such transaction was not gift as sale was declared by the assessee in the computation of income.
The Tribunal further noted that though the assessee in return not declared the gift as such but as a sale, however, upon receiving the show cause notice, the assessee had changed the stand as alleged by the revenue.
However, according to the Tribunal the question was whether such change in the stand of the assessee was beyond the provisions of law. The answer stood in negative. None of the authorities below had challenged that the transaction was outside the purview of the law being gift.
The Tribunal opined that even assuming the assessee had committed a mistake then also the revenue should not take the benefit of such mistake committed by the assessee. The tax has to be charged as per the provisions of law.
The Tribunal observed that the Hon’ble High Court has observed that regardless of whether the revised return was filed or not, once an assessee is in a position to show that the assessee has been over-assessed under the provisions of the Act, regardless of whether the over-assessment is as a result of assessee’s own mistake or otherwise, the CIT has the power to correct such an assessment under section 264(1) of the Act. If the CIT refuses to give relief to the assessee, in such circumstances, he would be acting de hors the powers under the Act and the provisions of the Act and, therefore is duty-bound to give relief to an assessee, where due, in accordance with the provisions of the Act.
Accordingly, the Tribunal opined that the revenue should not take the benefit of the mistake committed by the assessee. As such, the assessee was entitled for the lawful claim as provided under the provisions of the Act despite the assessee omitted to claim the same in the given fact and circumstances.
Accordingly, the Tribunal held that impugned transaction for the transfer of property by the assessee to the daughter-in-law is not transfer under clause (iii) to section 47 of the Act and therefore the same cannot be made subject to the addition under the provisions of section 45 of the Act. Consequently, the provisions of section 50C of the Act cannot be attracted in the given facts and circumstances.
As a result, the Tribunal set aside the finding of the CIT-A and directed the AO to delete the addition made by him.
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