Tax liability of long-term capital gain is not on power-of-attorney holder

Tax liability of long-term capital gain is not on the power-of-attorney order but on registered owner of the property 

ABCAUS Case Law Citation
ABCAUS 3402 (2020) (10) ITAT

Important case law relied upon by the parties:
Suraj Lamps Industries [2011] 14 103 (SC)
Seshasayee Steels (P.) Ltd. [2020] 115 5 (SC)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming tax liability towards capital gains.

The Assessing Officer (AO) had received information regarding the sale of an immovable property. After making a preliminary enquiry in this regard, proceedings were initiated by issuing a notice u/s 148 of the Income Tax Act, 1961 (the Act).

In response, the appellant submitted that ITR originally filed may be treated as filed in response to the notice issued u/s 148. 

Thereafter, notices u/s 143(2) and u/s 142(1) were issued.  With regard to the sale of the property, the appellant explained that he had sold the same as a registered power of Attorney holder on behalf of six persons and he did not sign the sale deed as an owner. Hence, the tax liability should be on the original sellers and not of the agent.

The assessee submitted that he had executed the sale deed in the capacity of agent/ power of attorney holder on behalf of six principal co-owners.

The AO recorded statements of the persons who had issued the power of Attorney.  They submitted that the land was sold to the appellant earlier and they had not received the consideration in respect of the sale.

However, the AO held that the appellant had sold the property as an owner and hence, the LTCG was assessable in his hands. 

The CIT(A) confirmed the addition

The Tribunal stated that immovable property can only be transferred  by a person for a consideration by transferring the  possession of  property through a registered written document as per section 54 of the Transfer of Property Act read with   the  corresponding provisions of Stamp Duty And Registration Act.

The Tribunal observed that the revenue had not brought on record any document demonstrating handing over of possession/transfer of possession from alleged seller to the assessee either by transfer of title from them to the assessee either by way of a gift or by way of a sale deed. 

The Tribunal opined that in the absence of any transfer document coupled with transfer of possession it could not be   concluded that the assessee was owner of the property in law.

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Further, the Tribunal stated that AO could not rely on the oral statement of the alleged seller, which was contrary to the written registered document POA.  Contrary oral statement of a person can not be accepted contrary to the registered  document unless it satisfy the requisite conditions as  mentioned under Evidence Act.

The Tribunal stated that it is a settled position of law and do not require much argument that the tax liability arising out of the long-term capital gain is required to be fastened on the registered owner of the property and not on the assessee who is merely a power-of-attorney order.

Following the decision of the honorable Supreme Court  and  also  on  account of  fact  that  there  was no transfer of property had taken place from these persons to the assessee, the Tribunal held that the addition in the  hands  of  the  assessee  was  bad  in law.

Accordingly, the appeal was allowed in favour of the assessee.

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