Top Stories Non-Registration of Gift Deed can’t be considered to be Sham Transaction as Assessee was in Full Possession of Property Sold by a Registered Sale Deed: ITAT [Read Order] By Sunayana Dhal – On December 13, 2023 5:30 pm – 2 mins read The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that non-registration of gift deeds cannot be considered to be a sham transaction as the assessee was in full possession of the property sold by a registered sale deed.
The AO found that the husband of the assessee had purchased the said property from M/s. Glorious Housing & Land Development Pvt. Ltd. vide agreement to sell for a consideration of Rs.16005000/-. Subsequently, 1/3rd share of the said property was given as a gift to the assessee by her husband. 1/3rd share was valued at Rs.53.35 lacs which was subsequently sold on which long-term capital gains were earned by the assessee on which exemption under Section 54 of the Income Tax Act was claimed. The AO concluded that no portion of the property at Rani Jhansi Chowk, Delhi has been transferred to the assessee by way of gift, therefore, the assessee could not have sold and earned long-term capital gains, therefore, the amount of Rs.12.50 crores credited in her bank account was treated as income of the assessee under Section 69A of the Income Tax Act and addition of Rs.12.50 crores was made.
The Commissioner of Income Tax (Appeal) [CIT(A)] concluded that the documents need to be registered under the Transfer of Property Act but the AO has failed to appreciate that under the provisions of Section 2(47)(vi) of the Income Tax Act defacto transfer of any immovable property are covered. The CIT(A) further opined that pursuant to the gift deed the assessee was in full possession of the property and further entered into an agreement to sell and sold the said property for a consideration of Rs.12.50 crores which was invested in another residential property on which exemption under Section 54 of the Income Tax Act was claimed.
The Two-member bench comprising of N.K. Billaiya (Accountant member) and Astha Chandra (Judicial member) held that no doubt the gift deed was not registered but the same cannot be rubbished as the sham transaction since the assessee was in full possession of the said property which was subsequently sold by her by way of a registered sale deed for a consideration of Rs.12.50 crores which was credited to her bank account held with HDFC Bank. By no stretch of the imagination provisions of Section 69A of the Income Tax Act can be applied to such transactions as the credit is the outcome of the sale of property.
It is not a case of the revenue that the assessee has introduced her own unaccounted money by depositing the same in her bank account in the garb of the sale of some immovable property. Thus, the appeal of the revenue was dismissed.