The Jaipur Bench of Rajasthan High Court while quashing the reassessment has held that income derived from property in Assessment Year (AY) in which sale deed was executed would be taxable irrespective of sale deed registration.
The bench of Justice Avneesh Jhingan and Justice Uma Shanker Vyas has observed that the income derived from the property in AY in which the sale deed was executed would be taxable in the hands of the transferee, even if the registration of the sale deed was subsequent. As per Section 47 of the Act of 1908, the sale deed executed shall relate to AY 2005-06 and not to the date of registration.
The petitioner/assessee sold his share of agriculture land situated in Chimanpura vide sale deed dated 19.03.2005. As a result of dispute pending between the co- sharers, the sale consideration was less than the prevailing market prices.
The fact that dispute is pending between the co-sharers was mentioned in the sale deed. The transaction was depicted by the petitioner in the income tax returns filed pertaining to Assessment Year 2005-06. The notice under Section 147 read with Section 148 of the Income Tax Act for AY 2006-07 was served upon the petitioner. The reasons for initiating proceedings under Section 148 were supplied. The objections filed by the petitioner were rejected.
The assessee contended that the transaction was complete in the AY 2005-06. There was no cause of action for the department to initiate re-assessment proceedings for AY 2006-07.
The department contended that the consideration for sale was not accepted by the Registration Authorities and demand for stamp duty was created as also the penalty was imposed.
Section 47 stipulates that where registration of document was not required or not made, the document shall come into operation from the time it would have commenced to operate and not from the date or time of its registration.
The court noted that the sale transaction was complete in the AY 2005-06 by execution of agreement, receipt of consideration and handling over of possession. The transaction was disclosed in the Income Tax Returns filed for the AY 2005-06. Due to the circumstances pleaded, the sale deed was registered in July, 2008.
The court held that in AY 2006-07, neither of sale of immovable property nor of registration of document had taken place, there was no occasion for the income tax authorities to initiate proceedings under Section 148 of the Income Tax Act to determine the capital gains from the transaction of sale of land.
Case Details
Case Title: Satish Chand Bothra Versus Ito
Case No.: 06/11/2024
Date: D.B. Civil Writ Petition No. 19589/2013
Counsel For Appellant: Gunjan Pathak with Mr. Kanishk Singhal
Counsel For Respondent: Anuroop Singhi with Mr. Aditya Khandelwal & Mr. N.S. Bhati
