Capital gains tax cannot be levied under Section 2(47) without verifying whether the assessee was a power-of-attorney holder or the actual landowner.

By | October 5, 2026
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Capital gains tax cannot be levied under Section 2(47) without verifying whether the assessee was a power-of-attorney holder or the actual landowner.
Issue
Whether long-term capital gains under Section 2(47) can be assessed in the hands of an assessee under a Joint Development Agreement without verifying whether he acted merely as a power-of-attorney holder/agent rather than the actual landowner.
Facts
  • The Assessing Officer noted that during AY 2011-12, the assessee entered into a Joint Development Agreement (JDA) with OSB Developers.
  • The assessee did not declare capital gains arising from the JDA, prompting the Assessing Officer to invoke Section 2(47) and assess Long-Term Capital Gains (LTCG) in the assessee’s hands.
  • The assessee contended that he was not the actual owner of the land, but merely a constituted power-of-attorney holder acting on behalf of the real landowner.
  • The CIT(A) upheld the addition, observing that the assessee failed to produce sufficient supporting proof or evidence to substantiate his claim of being a mere agent.
  • Before the Income Tax Appellate Tribunal (ITAT), the assessee produced copies of the sale deed and power-of-attorney to establish his agency status.
Decision
  • The Tribunal observed that if the assessee is not the real owner and the property belongs to another person, capital gains cannot be automatically assessed in his hands.
  • It held that the underlying facts required thorough factual verification in light of the newly submitted legal documents (sale deed and power-of-attorney).
  • The ITAT set aside the CIT(A)’s order and remanded/restored the matter back to the CIT(A) for fresh adjudication after considering the submissions and evidence from both parties.
Key Takeaways
  • Ownership Pre-condition: Capital gains liability under Section 45 read with Section 2(47) applies to the legal/beneficial owner of the property, not to a agent or power-of-attorney holder acting on behalf of the owner.
  • Scope of Power of Attorney: Executing a Joint Development Agreement as an agent or attorney-holder does not automatically make the agent liable for capital gains tax on the property.
  • Remand for Factual Verification: Where foundational documents (like sale deeds or power-of-attorney agreements) establishing legal ownership are submitted, appellate authorities must verify the facts before confirming tax additions.
IN THE ITAT PATNA BENCH ‘DB’
Sajindra Singh
v.
Income-tax Officer
Pradip Kumr Choubey, Judicial Member
and Rakesh Mishra, Accountant Member
IT Appeal No.161 (Pat.) of 2026
[Assessment year 2011-12]
AUGUST  25, 2026