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2025 Supreme(Online)(ITAT) 6424
INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
Madhusudan Sawdia, A.M., Vijay Pal Rao, Vice President
Raja Giridhar Kumar Nimmagadda – Appellant
Versus
Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi – Respondent
ITA No.287/Hyd/2024
For the Appellants/Petitioners: Not specified
For the Respondents: Not specified
The principle of substance over form applies, allowing unregistered sale agreements as valid in assessing capital gains when payments are made through banking channels.
Headnote:The case involved the appeal of an individual concerning the assessment of Long Term Capital Gain under the Income Tax Act. The assessing officer determined taxable income based on registered sales deeds, disregarding unregistered agreements that reflected actual payments through banking channels. The Court emphasized the principle of substance over form, allowing the appeal and ordering the reassessment based on unregistered agreements. 'In the result, the appeal filed by the assessee is allowed.'
Certainly. Based on the provided legal document, here are the key points summarized with references:
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The appeal concerns the assessment of Long Term Capital Gains (LTCG) for the assessment year 2016-17, with the appellant challenging the revenue authorities' rejection of unregistered sale agreements and the corresponding calculations (!) (!) .
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The appellant argued that the unregistered sale agreements, supported by actual banking transactions, reflect the true nature of the transactions and should be considered valid for tax assessment purposes, as the payments made through banking channels substantiate their authenticity (!) (!) .
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The Court emphasized the principle of substance over form, stating that the actual transaction details and banking evidence should take precedence over procedural formalities like registration, especially when payments are made through banking channels (!) .
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The Court directed the assessing officer to recompute the LTCG based on the purchase and sale considerations as per the unregistered agreements, which reflect the actual transaction values, and to delete the addition made under unexplained cash credits (!) .
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The decision highlights that ignoring the unregistered agreements, despite evidence of payments through banking channels, would lead to an inaccurate and distorted computation of capital gains, contrary to fair taxation principles (!) .
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The appeal was ultimately allowed, and the assessment was remanded for recomputation in accordance with the unregistered agreements and banking transactions (!) .
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The order was pronounced in open court on 16th January 2025 (!) .
Please let me know if you need further analysis or assistance.
| Table of Content |
|---|
| 1. factual background of assessment and appeal based on income tax. (Para 1 , 2 , 3 , 4) |
| 2. arguments regarding the validity of unregistered sale agreements. (Para 5) |
| 3. court's rationale emphasizing substance over form in tax assessments. (Para 7) |
| 4. final conclusion on the appeal allowing the taxation claim based on proper evidence. (Para 8) |
आदेश/ORDER
PER MADHUSUDAN SAWDIA, A.M.:
This appeal is filed by Raja Giridhar Kumar Nimmagadda (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 01.02.2024 for the A.Y. 2016-17.
2. The assessee has raised the following grounds of appeal :
“ 1. The order of the Ld. CIT(A) NFAC, Delhi passed under Sec.250 dt. 1.2.2024 for the A.Y. 2016-17 may be erroneous both in law and also on facts of the case.
2. Taking cognisance of the fact that the property under consideration, viz.. was alienated by the assessee in favour of M/s Maytri constructions by means of PART PERFORMANCE referred to in Sec.53A of Transfer of property Act, 1882 read with Sec 2(47) (v) of the I.T. Act. 1961,the CAPITAL GAIN arising out of such transaction by virtue of the Sale Agreement dt.24.11.2014 which is authenticated by payments reflected in the Bank account, the Authorities ought to have noticed that the LTCG, referred to therein, may be liable to be brought to tax for the AY 2015-16 and not for the A.Y.2016-17 and hence the aforesaid Order dt, 24.12.2018 may be VOID AB INITIO.
3. As it being a ’legal issue’, the claim that the assessment proceedings pertaining to charging LTCG under consideration may have to be initiated for the A.Y.2015-16 may be admitted and adjudicated in conformity with the provisions of law.
4. Also considering, the fact that the UNREGISTERED Sale Agreements, Dt 4.1.2007. 4.1.2007, 3.3.2008, 3.3.2008 established the PURCHASE CONSIDERATION OF Rs..2,35,65,595/-(assessee’s share therein), the same may not be liable to be IGNORED AS NON EST.IN LAW on the mere ground that the same was an UNREGISTERED DOCUMENT and hence the INDEXED COST OF ACQUISITION claimed by the appellant and the resultant CAPITAL LOSS of RS.1,97,41,203 may not be liable to be rejected and such loss may not be liable to be SUBSTITUTED with Capital gain of Ra.95,02,388/- as per the enacted law and also judge made law.
5. In the context of receipt of actual Sale price of Rs.2,42,10,000/- as disclosed in the ITR for the A.Y.2006-17 (vide SCHEDULE CG) and as authenticated by the Agreement of Sale, dt. 24.11.2014, the Ld. A.O. ought not have substituted the sale price of Rs.1,84,81,000/- as reflected in the Regular Conveyance deeds at. 10.5.2015 Documents No. 4447/2015, 4440/2015, 4449/2015 and 4450 / 2015) and thereby the addition of Rs.95,82,388/- towards L.T.C.G. may be superfluous and may not be SUSTAINABLE in the eyes of low.”
3. The brief facts of the case are that the assessee is an individual, filed his Return of Income (“ROI”) for A.Y. 2016-17 on 31.03.2017 declaring total income of Rs.4,78,430/-. Subsequently, the case of the assessee was selected for scrutiny and the Learned Assessing Officer (“Ld. AO”) completed the assessment u/s.143(3) of the Income Tax Act, 1961 ("the Act") on 24.12.2018 making addition on account of Long Term Capital Gain (“LTCG”) of Rs.95,82,388/- and under the head ‘income from other sources’ towards unexplained cash credit of Rs.57,29,000/-.
4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) accepting the view of Ld. AO, dismissed the appeal of the assessee.
5. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Learned Authorised Representative (“Ld. AR”) submitted that, the assessee along with Smt. Muppavarapu Rajakumari (“co-owner”) entered into agreement for purchase of following lands through unregisterd agreement :
| S. No. | Name of the Vendor | Extent of land (Acres) | Sale Price Rs. | Reference |
| 1 | Sri M | |||
