The Hon'ble Rajasthan High Court, in the case of Satish Chand Bothra v. ITO, D.B. Civil Writ Petition No. 19589/2013, Dated: 06-11-2024, has held that income from property is taxable in the Assessment Year (AY) in which the sale deed is executed regardless of sale deed registration.

Section 47 of the Income-tax Act, 1961, stipulates that where registration of a document is not required or not made, the document shall come into operation from the time it has commenced to operate, not from the date or time of its registration.

The court noted that the sale transaction was completed in the AY 2005-06 by executing the agreement, consideration receipt, and possession handling. 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. In such circumstances, the capital gain should be taxable in the AY 2015-06.

 The High Court order is appended in this Blog

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Facts of the Case

The petitioner/assessee sold his share of agriculture land situated in Chimanpura vide the sale deed dated 19.03.2005. As a result of the dispute pending between the co-sharers, the sale consideration was less than the prevailing market prices. 

The fact that a 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 about 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.

Assessee Contention

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. 

Department Contention

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.

Decision

Section 47 stipulates that where registration of a document was not required or not made, the document shall come into operation from the time it would have commenced to operate, 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, consideration receipt, and possession handling. 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 documents 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.