In Shri Gyan Chand Agarwal v. ACIT, a division bench of the ITAT Jaipur held that addition of income against a power of attorney holder for the consideration received on the sale of land is not sustainable when the Department has no evidence to prove that this power of attorney was executed in lieu of a consideration.
The bench, while deleting the addition, has clarified that, the department can, however, proceed against the real owners as per the provisions of the Income Tax Act, 1961, for such income.
In the instant case, the department took a stand that the assessee, a power of attorney holder of one Shri Sultan Meena, is liable to be taxed for the sale consideration of the land belonging to the latter. Admittedly, Shri Sultan Meena is recorded owner in the land in question and , there is no evidence on record suggesting that the Power of Attorney to Shri Sultan Meena was executed by the assessee by paying consideration of the land.
However, the department suspected the transaction on ground that the assessee failed to produce Shri Sultan Meena to prove that the sale consideration so received was handed over to the said Shri Sultan Meena and also in the absence of any receipt by the owner of the land, stating that the assessee acted merely an agent.
The bench noted that the revenue has not brought out any material suggesting that the assessee received this consideration as the owner of the land.
The bench said that “the Revenue has not brought any material on record suggesting that this power of attorney was executed in lieu of a consideration. In the absence of such material, purely, on the basis of presumption and suspicion tax liability cannot be fastened on such receipt on the assessee.”
The bench further relied on the decision of the Supreme Court in the case of Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra, wherein the Court has held that a power of attorney is not an instrument of transfer in regard to any right, title or interest in any immovable property.
“The power of attorney is a creation of an agency whereby the grantor authorizes the grantee to do acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done and by him.” It said.
Read the full text of the Order below.
