When a sale deed is executed in the name of the daughter-in-law, capital gains are not calculated

Fact and issue of the case

This appeal is filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi [hereinafter referred as “NFAC”] dated 15-11-2022 for the assessment year 2008-09 wherein the assessee vide application dated 18th Feb. 2023 prayed for admission of revised grounds under Rule 11 of the I.T.AT Rules 1962 which are as under:-

The ld. CIT(A) has erred on facts and in law in confirming the action of the AO in treating the gift of immovable property to daughter-in-law as chargeable to capital gain tax on the basis of sale deed executed by the assessee instead of gift deed.

The ld. CIT(A) has erred on facts and in law in confirming the action of the AO in treating the sale consideration of the property u/s 50C at Rs.12,84,450/- without referring the matter to DVO u/s 50C(2) of the Act.

The ld. CIT(A) has erred on facts and in law in confirming the action of AO in allowing deduction u/s 54F with reference to the deemed consideration instead of actual consideration.”

The Bench has taken into consideration the revised ground filed by the assessee (supra) which shall be adjudicated on merit hereunder.

Apropos Ground No. 1 to 3 of the assessee, brief facts of the case are that the as per AIR details, the assessee had sold immovable property for the total consideration of Rs.14.00 lacs which had been valued at Rs.25,68,900/- for the purpose of charging stamp duty and on verification of record, it had been found that the assessee had not filed the return of income for the year under consideration. Thus according to the AO, the assessee had failed to disclose fully and truly all material facts necessary for his assessment and accordingly in view of the above facts and circumstances of the case the AO noted that there were sufficient reasons to believe that an amount of Rs.25,68,900/- had escaped assessment within the meaning of Section 147 of the Act. Hence, notice u/s 148 dated 25-03-2015 was issued and served upon the assessee through speed post and in compliance to notice u/s 148, the assessee had filed the return of income on 1606-2015. Thereafter notice u/s 142(1)/143(2) of the Act issued along with query. In compliance to notice, the ld. AR of the assessee attended hearing before the AO and filed ITR for the year under consideration along with computation, sale deed, power of attorney dated 30-12-1988 relating to Plot Nol. 32, Desh Bhushan Nagar, Galta Gate, Jaipur. It is worthwhile to mention that the fact relating to Plot No. 32, situated at Dehbhushan Nagar, Galta Gate, Jaipur measuring 266.66 sq. ft is that this plot was allotted to Shri Chote Lal Jain by Jawaharpuri Bhawan Nirmam Sahakari Samiti Ltd. Shri Chote Lal Jasin sold this plot to Shri Ghanshyam Tambi for Rs.4.00 lacs vide agreement dated 30-12-1998 (PB Page 8 to 12) and gave power of attorney (POA) to brother of Shri Ghanshyam Tambi i.e. the assessee (PB Page 13 to 17). On the basis of such power of attorney, a part of plot measuring 128.88 sq. yard was sold for Rs.4.00 lacs to Shri Atal Behari vide sale deed dated 15-03-2008 (PB Page 18-29) which was valued by the Sub-Registrar at Rs.5,92,625/-. The sale consideration so received was used for construction on part of remaining plot. In response to notice u/s 148 of the Act, the assessee filed the return on 16-06-2015 (PB Page 9-10) declaring long term capital gain of Rs.94,695/- as under:-

Sales consideration	Rs. 5,92,625/-
Less: indexed cost of acquisition	Rs. 3,01,289
Less: Deduction u/s 54F	Rs. 2,91,336/- Rs. 1,96,441/-
LTCG	Rs. 94,695/-

The Investment in house property u/s 54F is Rs.4,00,000/-. Thereafter out of remaining plot measuring 137.78 sq. yd., the assessee as Power of Attorney holder transferred part of plot measuring 84.38 sq. yd. to his daughter-in-law Smt. Asha Tambi. It is noted that in fact, the assessee gifted the property to his daughter-in-law but for legal title and he executed sale deed dated 24-03-2008 (PB 11 to 23 Paper Book) in which sale consideration of Rs.3.00 lacs was mentioned but no consideration was received. This fact was stated by the assessee in his affidavit dated 14-11-2015 (PB 24 to 25 of paper book) filed during assessment proceedings. Further the assessee vide letter dated 23-11-2015 (PB 26 of Paper Book) also stated that he can produce his daughter-in-law to confirm this fact. However, the AO held that the registered sale deed clearly shows that the assessee has received sales consideration in cash from Smt. Asha Tambi in presence of Sub-Registrar and the witnesses. If the sale deed is wrongly executed the assessee is required to rectify the same at that time. The submission of the assessee is an afterthought and hence is not acceptable. The Sub-registrar has valued this part of plot at Rs.6,91,825/-

Observation of the court

2We have heard both the parties and perused the materials available on record. Without going on to the various contentions raised by the parties, the main issue in this appeal is whether the sale deed dated 24.03.2008 executed by the assessee in favour of Smt. Asha Tambi, daughter-in-law of the assessee stating consideration of Rs.3 lacs is in fact a sale deed or is a gift of property by the assessee Smt. Asha Tambi. The AO on the basis of this sale deed has taken the full value of consideration u/s 50C at Rs.6,91,825/- and computed the long term capital gain accordingly which is confirmed by Ld. CIT(A). We note that in support of the contention that the sale deed was wrongly executed instead of executing the gift deed and that the consideration mentioned in the sale deed was never received by the assessee from his daughter-in-law, assessee filed an affidavit dated 14.11.2015 where he declared that sale deed has been wrongly executed, he was having no knowledge of transferring legal title at the time of execution, he executed sale deed instead of gift deed as per the advice of his advocate and that he has not received any sale consideration from daughter-in-law. We also note that assessee vide his letter dated 23.11.2015 (Page26 of PB) to the AO specifically explained that if he has any doubt, daughter-in-law can be produced to confirm the fact. However, the AO did not require the assessee to produce Smt. Asha Tambi. Thus the affidavit filed by the assessee is not controverted. Hon’ble Supreme Court in case of Mehta Parikh & Co. Vs. CIT 30 ITR 181 at Pg 187 has held that the rejection of affidavit filed by the assessee is not justified unless the deponent has either been discredited in cross examination or has failed to produce other supporting evidence when called upon to do so. This is also reiterated by Hon’ble ITAT, Jaipur Bench in case of Kuldeep Chand Garg Vs. ITO 37 Taxworld 127 where it held that contents of duly sworn and affirmed affidavit are to be accepted as such unless the deponents are examined to established otherwise. On the direction of Bench the legal heir of assessee also filed affidavit of Smt. Asha Tambiwhere also she affirmed that his father-in-law executed the sale deed instead of gift deed and that she has not paid the amount of Rs.3 lacs as mentioned in the sale deed. In these facts and circumstances, we are of the view that no capital gain can be computed in respect of the sale deed executed in favour of Smt. Asha Tambi as it is only a gift to close relative and not a sale and, therefore, Ground No. 1 is allowed. Since, we hold that there is no capital gain, therefore, the consequential ground nos. 2 and 3 become educative. In the result Ground No.1 of assessee is allowed and Ground No.2 & 3 is not decided being infructuous. Thus the appeal of the assessee is partly allowed.

In the result, the appeal of the assessee is partly allowed

Order pronounced in the open Court on 14 /06/2023.