No transfer u/s 2(47) of Income Tax If assessee himself did not hold valid title of Capital Asset: ITAT

The assessee is engaged in the business of Flour Mill and derived income there from and filed its return declaring total income of Rs.36,000. Thereafter, notice under section.142(1) was issued and necessary information/ documentations were called for under which AO found that the assessee had sold a piece of land bearing survey No. 193/2 measuring an area of 3.24 hectors. AO held that the value of the land adopted by the stamp valuation authority has been determined at Rs.78,15,550 as against the declared sale consideration of Rs.58,000.  As the value of the sale consideration is less than the value adopted by the stamp valuation authority, Provisions of section 50C are attracted in the instant case and a liability under long term capital gains was determined at Rs.76,62,583 by AO.

Appeal before CIT(A): Being aggrieved, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) after considering the submissions of the assessee and after calling for the remand report and the rejoinder filed by the assessee, confirmed the action of the AO and the appeal of the assessee was dismissed.

Appeal before ITAT: Aggrieved by the said order the assessee preferred an appeal before the tribunal. It was held that the auction was canceled on the ground that it was not conducted in an appropriate manner, by the Civil Judge, which was upheld by District Judge. Thus, as on the date of the Conveyance deed the assessee did not hold a valid legal title to the land. Therefore, the conveyance deed executed was null and void ab initio. Since legally there is no capital asset in the hands of the assessee as on the date of conveyance deed there cannot be any legal transfer within the meaning of section 2(47) of the Income Tax Act, 1961. The tribunal thus, admitted the additional ground of appeal and the ground was restored back to the file of AO to decide the same taking into consideration the order of District Judge and any other documentation/information as so required after providing reasonable opportunity to the assessee. Therefore, the other grounds of appeal are left open and not adjudicated upon but are also set aside to the file of the AO to examine the same afresh as per law. Hence, the appeal of the assessee was allowed.

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