Sale deed for the sake of registering property with no financial transaction
manishjohn
(Querist) 05 January 2015
This query is : Resolved
My parental house is in Delhi on land measuring 180 sq yards which my father bought in 1976. Originally, it was in my father’s name and a General Power of Attorney was made in 1982 with valuation shown at 3 lacs. Later, in order to get the property registered, a sale deed was made in 2009 and my mother was shown as buyer. The sale deed showed that the property was sold to wife for 13 lacs in 2009 (as per prevailing circle rates). The property was thereafter registered in my mother’s name. No financial transaction took place, either cash or cheque as the sale deed was prepared just for the sake of getting the property registered as my father could not do it in his name because GPA was in his name, hence a sale was shown. During this time, he was a pensioner with no tax liability.
On the other hand, the registrar office sent the sale deed details to income tax department as it was bound to do so. We have now received a notice from IT Dept. in the last week of December 2014 wherein it has raised an issue that sale of property took place in 2009 and the tax return had not been filed for that particular year, indicating that my father had earned capital gain of 10 lacs from 1982 to 2009 by selling the property. A valuable advice is kindly requested as to how we should convince the IT Dept. that the sale deed was made just for the purpose of getting the property registered and no financial transaction took place. Stamp duty was duly paid at that time. My parents still live in the same property.
Vineet
(Expert) 06 January 2015
Well, the transaction of sale between your parents requires to be considered for Capital Gains tax even though no amount was transferred. Ideal situation could have been a gift deed which is not a transfer for the purposes of capital gains tax.
Now the good news is that even then there is chargeable capital gains in this case. You mentioned that there is a document of purchase in 1982 showing consideration of 3 Lakh. the indexed cost in 2009-10 becomes 17.39 lakhs. Since sale consideration is only 13 Lakhs, actually your father has incurred a loss of Rs 4.39 Lakhs in this case. Presuming your father does not have taxable income exceeding exempt limit in 2009-10, he was not required to file any return.
Even otherwise I am surprised, how IT department can send notice for such petty sale consideration because normally registrars intimate transaction above Rs 30 Lakhs only. Further, the officer sending notice must be knowing that after indexation there is a loss in this case. So please check for any foul play.
T. Kalaiselvan, Advocate
(Expert) 09 January 2015
I agree with the opinion of expert Mr. Vineet, yo may consult a local lawyer/consultant and clarify the issues through him and then decide about further course of action as per law.
