Capital gains are taxable on the execution date of the registered sale agreement for the absolute owner.

ORDER

Ravish Sood, Judicial Member. – The captioned appeals filed by the assessee are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 04/07/2025 and 29/09/2025 which in turn arises from the orders passed by the Assessing Officer (for short, “AO”) under section 143(3) r.w.s 144 r.w.s 144B of the Income Tax Act, 1961 (for short, “the Act”), dated 15/03/2024 and 04/03/2025 for the Assessment Year (AY) 2016-17 and AY 2017-18, respectively. As a common issue is involved in the present appeals, the same are being taken up and disposed of vide a consolidated order. We shall first take up the appeal for the AY 2016-17 in ITA No.2058/Hyd/2025, wherein the impugned order has been assailed on the following grounds of appeal before us:

“GROUND 1

Relevant Sections of Income Tax Act: under section 143(3)

Issue: The Assessment Unit made an addition of amount of Rs. 3,23,25,000/-towards capital gains and did not give cognizance to the fact that the major part of the sale consideration of the subject property of capital gains was received in the ensuing financial year and was subject to tax in the next Assessment Year i.e Assessment Year 2017-18.

Ground of Appeal: The Assessment Unit is not justified in making the addition of Rs. 3,23,25,000/- towards capital gains for Assessment year 2016-17

GROUND 2

Relevant Sections of Income Tax Act: under section 143(3)

Issue: The Assessment Unit made the addition of capital gains of Rs. 3,23,25000/- in toto, whereas the appellant share was only 25.65% which works out to Rs. 82,91,491/-. The Assessment unit did not gave cognizance to the submission made by the Assessee that a Memorandum of Recording a Family Settlement deed existed wherein the Appellant was entrusted with the responsibility of collecting the sale proceeds and distributing among the family members.

Ground of Appeal: The Assessment Unit is not justified in making the addition of Rs.3,23,25,000/- in toto and not proportionately which works out to Rs. 82,91,491/-

Ground 3:

Relevant Sections of Income Tax Act: Any section under Income Tax Act Issue: Any issue or matter that may arise during the course of proceedings.

Ground of Appeal: Any other ground that may be relevant to such issue or matter.”

2. Succinctly stated, the AO based on information that the assessee during the subject year had though carried out substantial financial transactions, viz., (i) sale of immovable property: Rs.3.75 crores; and (ii) sale of equity shares: Rs.1,40,344/- but had not filed his return of income for the said year, issued notice under section 148A(b) of the Act, dated 13/02/2023. Thereafter, the AO passed an order under section 148A(d) of the Act, dated 13/03/2023. Notice under section 148 of the Act, dated 13/03/2023, was issued and duly served upon the assessee. In response, the assessee filed his return of income, but he neither disclosed in his return of income the capital gain arising on the subject transaction of sale of property nor claimed the credit of the tax deducted at source (TDS) on the sale consideration of Rs.3,75,000/-, which was carried forward by him to AY 2017-18.

3. During the course of the assessment proceedings, the AO observed that, as per the information available on record, the assessee had, during the subject year, sold a Flat No.-23, Sixth Floor, Panch Ratan, Almedia Road, Bandra West, Mumbai to Mr. Sumit Anand and Smt. Chandrika Anand for a consideration of Rs.3.75 crores. The AO called upon the assessee to explain why the “capital gain” arising on the sale of the aforesaid property was not offered by him for tax during the subject year. In reply, the assessee stated that the subject property was transferred by virtue of the transfer of shares in a cooperative society, but that he did not receive the entire sale consideration during the subject year. Elaborating further, it was stated that he had, during the subject year, received a total consideration of Rs.15 lakhs, viz., (i) Cheque No.031846, dated 18/02/2016 drawn on HDFC Bank: Rs.1 lakh; and (ii) Cheque No.003919, dated 21/03/2016 drawn on HDFC Bank: Rs.14 lakhs. It was stated by him that the balance sale consideration of Rs.3,56,25,000/- was received by him in the immediately succeeding year, viz., (i) Cheque No.003924: Rs.56,25,000/-; and (ii) Funds transfer (FT) Ref. No. 000000485122: Rs. 3,00,00,000/-. Also, it was stated that the aforesaid amount of Rs. 3,56,25,000/- that was received in the succeeding year was disclosed in the return of income for the succeeding year, i.e., AY 2017-18.

4. Apropos the transaction of the sale of shares of M/s. Greavescot (1125 shares) @Rs.124.75 per share, it was stated that as the capital gain arising therefrom was exempt under section 10(38) of the Act, the same was not offered for tax during the year under consideration.

5. Ostensibly, the AO did not find favor with the explanation of the assessee for not offering the capital gains on the transfer of the subject property to tax during the year under consideration. It was observed that as the property was transferred vide a registered agreement, dated 28/03/2016, the capital gain arising on the said sale consideration was liable to be disclosed in the year under consideration itself.

6. At this stage, it would be relevant to point out that the assessee had also claimed that pursuant to a “Memorandum of Family Settlement”, dated 06/04/2016, his entitlement in the sale consideration was restricted to 25.65%. However, the AO did not find favor with the aforesaid claim of the assessee. It was observed by him that as the Memorandum of Family Settlement, dated 06/04/2016, was executed subsequent to the transfer transaction that took place on 28/03/2016, therefore, the same could not be acted upon, and the entire amount of the long-term capital gains (LTCG) arising from the subject sale transaction was totally cast upon the assessee.

7. Apart from that, we find that the AO to verify the correctness of the assessee’s claim that his entitlement in the sale consideration based on the Memorandum of Family Settlement, dated 06/04/2016, was confined to 25.65% of the total amount of the sale consideration, issued notice under section 133(6) of the Act to the other family members. In reply, Smt. Nisha Prakash Babani, i.e., one of the family members, vide her reply submitted that she was merely a confirming party to the sale agreement and not a seller.

8. The AO, based on his aforesaid observations, brought the entire amount of sale proceeds of the subject property that was sold by the assessee vide a registered sale agreement, dated 28/03/2016, for a consideration of Rs.3.75 crores to tax in his hands and worked out the long-term capital gains (LTCG) arising from the said sale transaction at Rs. 3,23,25,000/-.

9. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. For the sake of clarity, the observation of the CIT(A) is culled out, as under:

“I have perused the order passed by the AO, written submissions filed by the appellant, remand report submitted by the AO and the rejoinder filed by the appellant. The issues raised in the grounds, which require adjudication are decided as under:

6.1 This appeal has been filed against the assessment order passed under Section 147 r.w.s 144 r.w.s144B dated 15.03.2024, for Assessment Year 2016-17. The primary issue for consideration is whether the long-term capital gains (LTCG) arising from the sale of a residential flat at Bandra (West), Mumbai, vide agreement dated 28.03.2016, should be taxed fully in the hands of the assessee in A.Y. 2016-17 or otherwise.

6.1.1 The assessee has raised the following main contentions:

The capital gain is not taxable in AY 2016-17 but in AY 2017-18, as 95% of the consideration was received in FY 2016-17 and possession was linked to receipt of full consideration.

The assessee was only entitled to 25.65% of the total consideration based on a family settlement deed executed on 06.04.2016.

The AO did not consider the submissions fully and the reassessment order in AY 2017-18 erroneously excluded capital gains.

6.2 . Remand Report and Assessee’s Rejoinder:

6.2.1 The remand report submitted by the AO reiterates that the entire sale consideration was received by the assessee in his HDFC Bank account. The AO has highlighted that:

The agreement for sale was executed and registered on 28.03.2016, falling in FY 2015-16, and hence taxable in AY 2016-17.

The sale deed mentions only the assessee as the vendor, while the other family members are confirming parties, with no mention of any prior family settlement TAX DEPAR

The family settlement deed relied upon by the assessee is post-dated (06.04.2016) and does not alter the fact that the transfer u/s 2(47) of the IT Act occurred on 28.03.2016.

There is no evidence that the confirming parties were co-owners of the property in title or in law before the sale.

6.2.2 In his rejoinder, the assessee has reiterated that the family had orally agreed on 27.03.2016 to divide the sale proceeds, and the deed was only a record. It is also stated that most of the sale proceeds were passed on to family members, evidencing his 25.65% share. He also emphasized that the advance tax was paid in AY 2017-18 based on actual receipt of funds.

6.3 Year of Taxability

6.3.1 The agreement for sale was executed and registered on 28.03.2016, and possession and rights were effectively transferred under the sale deed. Section 45(1) read with Section 2(47)(v) of the IT Act clearly provides that transfer takes place upon execution of registered sale agreement conferring possession and rights. The fact that a part of the sale consideration was received in the next financial year does not defer the taxability. The argument that capital gains can be taxed in AY 2017-18 merely because possession was conditional upon full consideration is not legally sustainable.

6.3.2 Further, while the assessee paid advance tax in AY 2017-18, such self-perception does not override the provisions of law. Thus, the capital gains are clearly taxable in AY 2016-17.

6.4 Claim of 25.65% Ownership

6.4.1 The assessee’s claim that he was only entitled to 25.65% share is based on a Memorandum of Family Settlement Deed dated 06.04.2016, which is admittedly subsequent to the date of sale. The said deed is not referred to in the sale agreement dated 28.03.2016, nor does it form part of the sale documentation. The entire sale consideration was received by the assessee in his personal bank account, and no legal document was placed to demonstrate that other parties had ownership rights in the property prior to sale.

6.4.2 The confirming parties in the agreement for sale did not assert any legal title, nor was any relinquishment deed or partition document produced prior to sale. The claim of oral settlement on 27.03.2016, subsequently reduced to writing, is not corroborated by contemporaneous evidence. PART

6.4.3 The subsequent payments made by the assessee to family members after receipt of sale consideration are in the nature of post-sale arrangements, and do not dilute the taxability of the capital gain in the hands of the person executing the sale. Many Judicial precedents support the view that capital gains arise in the hands of the transferor, irrespective of internal family arrangements.

6.5 AO’s Procedural Compliance

6.5.1 The assessee’s claim that no adequate opportunity was provided is not borne out by the records. The AO has provided multiple opportunities during the course of assessment and again during remand proceedings. The issuance of show-cause notice dated 17.02.2024 is duly recorded. The adjournment request made against the notice dated 01.03.2024 does not invalidate the earlier notices, especially when sufficient time and opportunities were otherwise given.

6.5.2 The allegation that the remand report was mechanical or non-analytical is also not tenable, as the AO has provided pointwise responses to each submission of the assessee.

6.6 Conclusion

6.6.1 The capital gains on the full consideration of Rs. 3,75,00,000 are rightly taxable in AY 2016-17 in the hands of the assessee, being the sole transferor as per the registered agreement. The claim of partial ownership based on a subsequent family settlement is not legally sustainable in the absence of a pre-existing legal title or any relinquishment deed executed before the sale.

6.6.2 Accordingly, I find no merit in the grounds raised by the appellant. The addition made by the Assessing Officer towards Long Term Capital Gains is confirmed in full.

6.7 In view of the above, the grounds raised by the appellant are hereby dismissed.

7. As a result, the appeal is dismissed.”

10. The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

11. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below, and considered the material available on record.

12. Shri Bhavesh R Vithlani, CA, Learned Authorized Representative (for short, “Ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the same involves a delay of 58 days. Elaborating on the reason leading to the delay, the Ld.AR submitted that the same had crept in as the assessee, a Non-Resident Indian (NRI), during the relevant period was diagnosed with laryngitis and, for the said reason, could not file the appeal within the prescribed period. The Ld. AR to buttress his aforesaid claim had drawn our attention to the affidavit, dated 24/04/2026, sworn by the assessee at Panama City. The Ld. AR submitted that as the delay in filing of the appeal had crept in for reasons beyond the control of the assessee, the same, in all fairness and in the interest of justice, be condoned.

13. Per contra, Dr. Sachin Kumar, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) did not raise any objection to the seeking of the condonation of delay in filing of the present appeal by the assessee appellant.

14. We have given thoughtful consideration and are of firm conviction that, as the delay in filing of the present appeal had crept in for reasons beyond the control of the assessee, i.e., his ill health during the relevant period, the same, in all fairness, merits to be condoned. Our aforesaid view is supported by the recent decision of the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal v. ITO  (SC)/Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31^st January, 2025. The Hon’ble Apex Court, while setting aside the order of the Hon’ble High Court of Chhattisgarh, which had approved the declining of the condonation of the delay of 166 days by the Income-Tax Appellate Tribunal, Raipur Bench, had observed that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal. We thus, in terms of our aforesaid observations, condone the delay of 58 days involved in the filing of the present appeal.

15. Coming to the merits of the case, we find that the controversy involved in the present appeal lies in a narrow compass, viz., (i) that whether or not the sale transaction of the subject property had taken place during the year under consideration, i.e., the period relevant to the AY 2016-17; and (ii) that whether or not the assessee’s share in the sale consideration was restricted only to the extent of 25.65%.

16. Coming to the first aspect, i.e., the year in which the subject property had been transferred, we deem it apposite to refer to the registered agreement to sell, dated 28/03/2016, vide which the sale transaction has been carried out. We find that the assessee, viz., Mr. Raju Jamnadas Babani, i.e., the vendor, had sold the subject property, viz., AT Panch Ratan constructed on Plot No.91-A, CTS No.F/1055B of Revenue Village Bandra, admeasuring 1483 sq mts vide a registered agreement to sell, dated 28/03/2016 to, viz., (i) Mrs. Chandrika Vaisoha Anand; and (ii) Mr. Sumeet Anand for a sale consideration of Rs.3.75 crores. Although, it is the claim of the assessee that as he had during the year under consideration received only a part sale consideration of Rs.15 lakhs (out of Rs.3.75 crores), and had both received the balance sale consideration and handed over the possession of the subject property to the purchasers in the immediately succeeding year, therefore, the AO was not justified in relating the transfer of the subject property and computing the consequential capital gain arising therefrom in his hands in the subject year, i.e., the period relevant to AY 2016-17, we are unable to persuade ourselves to accept the same. We say so because the registered agreement to sell the subject property was executed on 28/03/2016, which proves beyond doubt that the transfer transaction for the purpose of computing capital gains stood concluded in the said year itself. In our view, the fact that the substantial amount of sale consideration of Rs.3,56,25,000/- (out of total sale consideration of Rs.3,75,00,000/-) was received by the assessee from the purchasers in the immediately succeeding year, i.e., AY 2017-18, will not have any bearing in determining the date on which the transfer of the subject property stood concluded. Also, we are clear in our minds that, as the registered sale agreement was executed on 28/03/2016, the factum of delivery of possession of the subject property to the purchasers in the subsequent year will in no way be determinative of the date on which the transfer transaction was concluded. At this stage, we may herein observe that though the Ld. AR in the course of the hearing of the appeal had drawn support from section 2(47)(v) of the Act, as per which in a case where the possession of any immovable property is taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), then the same is to be taken as the point of “transfer” of the subject capital asset, but we are unable to comprehend as to how the same would support his case. We say so, for the reason that, as in the present case before us, the assessee had already executed a registered sale agreement, dated 28/03/2016; therefore, the same, as per section 2(47)(i) r.w. “Explanation 2” of the Act brings the said transaction within the meaning of “transfer” during the year under consideration. We thus, in terms of our aforesaid observations, are of a firm conviction that, as the assessee had executed the registered agreement for sale, dated 28/03/2016, the transaction of transfer of the property without any choice has to be related to the said date. At this juncture, we deem it apposite to observe that as the computation of capital gains and the transfer of property have to go hand in hand and cannot be divorced and considered separately, therefore, based on the fact that the subject property had been transferred by the assessee vide a registered agreement to sell, dated 28/03/2016, the long term capital gains (LTCG) arising therefrom along with the consequential tax liability has to be determined in the hands of the assessee during the year under consideration itself.

17. Coming to the second facet of the issue involved in the present appeal before us, i.e., the claim of the assessee that his entitlement in the sale consideration is restricted to the extent of 25.65%, we are unable to persuade ourselves to subscribe to the same. We say so, for the reason that as per Sl No. XV of the registered agreement to sell, dated 28/03/2016, the assessee, viz., Mr. Raju Jamnadas Babani is clearly referred to as the vendor who is absolutely and sufficiently entitled to sell, transfer, convey, and assign all his right, title, and interest in the said property and right to use, occupy, and possess the said flat and all the rights incidental thereto. Also, at Sl No. XIV of the registered agreement to sell, it is specifically stated that the vendor, i.e., the assessee, is fully seized and possessed of and otherwise well and sufficiently entitled to the said property. Also, we find that the assessee’s claim that the other family members, who are the confirming parties to the registered agreement to sell, were also vested with their respective rights/title in the property is disproved by the fact that at Sl. No. XIII of the registered agreement to sell, it is specifically stated that the confirming parties do not have any right, title, or interest in the said property. Apart from that, we find that at Sl No. XII of the registered agreement to sell, it is clearly stated that the society, viz., Almeida Park Apartments Cooperative Housing Society Limited, had, pursuant to an application filed by the assessee, i.e., the vendor, on 20/04/2006, transferred the share in the subject property in his favor.

18. Considering the aforesaid facts, we find no infirmity in the view taken by the authorities below, who have rightly concluded that as the assessee was the absolute owner of the subject property, the entire amount of capital gains arising on the transfer of the same was liable to be assessed in his hands.

19. At this stage, we may herein observe that the Ld. AR had brought to our notice a fact which is even otherwise discernible from the record, i.e., the assessee remaining under a bona fide belief that the transfer of the subject property stood concluded in the immediately succeeding year, i.e., AY 2017-18, had disclosed his share of sale consideration of Rs. 96,18,899/- in his return of income for the said succeeding year, i.e., AY 2017-18, and, had disclosed in his hands capital gain of Rs. 42,91,489/-. However, as we have herein above observed that the transfer of the subject property stood concluded based on the registered agreement to sell, dated 28/03/2016 in the year under consideration, i.e., period relevant to the AY 2016-17, therefore, no part of the capital gains arising on the sale of the said transfer transaction is liable to be assessed in the hands of the assessee in the succeeding year, i.e., AY 2017-18. Also, we may herein observe that as certain taxes pertaining to the aforesaid transfer transaction are stated to have been paid/collected/deducted in the hands of the assessee in AY 2017-18, we herein direct that the credit of the said amounts be allowed in the hands of the assessee while computing his tax liability pertaining to the subject sale transaction during the year under consideration, i.e., AY 2016-17. Our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in the case of Income Tax Officer v. Bachu Lal Kapoor Kewal Ram [1966] 60 ITR 74 (SC). The Hon’ble Supreme Court in its order had observed that if the assessment proceedings initiated under section 34 of the 1922 Act culminate in the assessment of the HUF, appropriate adjustments have to be made by the ITO in respect of the tax realized by the revenue in respect of that part of the income of the family assessed in the hands of the individuals of the said family. In our view, by safely drawing an analogy from the ratio decidendi of the aforesaid judgment of the Hon’ble Apex Court, now when the capital gains arising on the transfer of the subject property has been held by us as liable to be assessed in the hands of the assessee in AY 2016-17, therefore, the credit of the taxes paid/collected/ deducted in the hands of the assessee in AY 2017-18 is to be allowed to him while computing his tax liability pertaining to the capital gains arising on the transfer of the subject property during the year under consideration, i.e., AY 2016-17.

20. We thus, in terms of our aforesaid observations, though principally concur with the view taken by the AO, viz. (i). that the capital gain arising from transfer of the subject property is to be assessed in the hands of the assessee in the year under consideration, i.e., AY 2016-17; and (ii). that as the assessee was the complete owner of the subject property, therefore, the entire amount of capital gain is to be assessed in his hands, but at the same time modify the orders of the authorities below to the extent of allowing the credit of taxes pertaining to the subject transfer transaction, as were paid/collected/deducted in the hands of the assessee during AY 2017-18, while computing his tax liability for the year under consideration.

21. In the result, the appeal filed by the assessee is dismissed, but subject to our aforesaid observations.

22. We shall now take up the appeal filed by the assessee against the order passed by the CIT(A), National Faceless Appeal Center, Delhi, dated 29/09/2025, which in turn arises from the order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 04/03/2025.

23. As the issue involved in the present appeal remains the same as was there before us in the appeal filed by the assessee for the AY 2016-17, therefore, our order therein passed shall apply mutatis mutandis qua the subject issue in hand.

24. Appropos the Ld. AR’s contention that as the computation of income tax liability in the body of the assessment order is contradictory to the demand raised vide notice issued under section 156 of the Act, we are of the view that as the said infirmity in the demand notice under section 156 of the Act is stated to have been rectified, therefore, the grievance of the assessee to the said extent is put to rest and does no more survive.

25. Resultantly, the appeal filed by the assessee on the same terms is dismissed, but subject to our aforesaid observations.

26. In the result, both the appeals filed by the assessee in ITA Nos. 2058 & 2059/Hyd/2025 are dismissed, subject to our aforesaid observations.