ITAT Delhi: No Capital Gains Tax On Property Transfer Between Spouses Without Actual Consideration
Pranav B Prem
The Delhi Bench “E” of the Income Tax Appellate Tribunal (ITAT), comprising Shri S. Rifaur Rahman (Accountant Member) and Shri Anubhav Sharma (Judicial Member), has ruled that transfer of property between spouses without any actual payment of consideration cannot attract capital gains tax under the Income Tax Act, 1961.
Background of the Case
The appeal arose from proceedings against late Sunil Kumar, now represented through his son. The assessee had filed his return of income for AY 2013–14 declaring a total income of ₹1,98,030. The case was reopened under Section 147 of the Act after the Assessing Officer (AO) noticed that by a conveyance deed dated 30.11.2012, the assessee had transferred his property at A-14, Nehru Ground, NIT, Faridabad to his wife, Smt. Bimla Devi, with a recital of consideration of ₹1.40 crore.
Treating this recital as actual sale consideration, the AO added ₹1.40 crore to the assessee’s income on account of capital gains and framed the assessment ex parte under Section 144 r.w.s. 144B, as the assessee, suffering from kidney ailments during the COVID-19 period, could not comply with repeated notices under Section 142(1). The assessee had, however, submitted before the AO that no consideration was ever received. The figure of ₹1.40 crore was mentioned only to facilitate mutation of title and for stamp duty purposes. To support this, he placed reliance on his bank statements which did not reflect any inflow of such funds.
First Appeal
The Commissioner of Income Tax (Appeals), NFAC, upheld the addition. The appellate authority observed that the deed itself recorded receipt of the entire sale consideration, and no evidence was placed to contradict this recital. It was therefore held that the AO had rightly charged the amount to capital gains tax.
ITAT’s Observations
Before the Tribunal, the legal representatives of the assessee reiterated that the transfer of property was made within the family, without actual consideration, amid ongoing family disputes which were later settled by a family arrangement dated 30.10.2018. The figure of ₹1.40 crore was only a notional value for stamp duty purposes.
The Tribunal closely examined the conveyance deed. It noted that while one part of the deed mentioned the consideration amount, the endorsement of the Sub-Registrar recorded that “NIL consideration/amount was paid by vendor to vendee.” This contradicted the finding of the CIT(A) and lent support to the assessee’s claim.
Further, the ITAT found that the bank statements of the wife did not show any funds available to her to pay such a large consideration. Significantly, she had filed an affidavit stating that no amount was paid by her to her husband for the transfer. The Tribunal held that once such an affidavit was on record, the AO could have verified the matter independently in her assessment, instead of fastening tax liability on the assessee. The Tribunal reasoned: “When wife could have been benefited by family settlement or even by gift deed, to transfer title without payment of consideration then it will not be justified to allege intention to conceal any capital gains.”
The Bench criticized the approach of the tax authorities, stating that they had failed to adopt a prudent view of the issue. It emphasized that capital gains taxation presupposes an actual transfer of property for valuable consideration, and a mere recital in the deed without factual corroboration cannot by itself justify an addition.
Concluding that the transaction was effectively a family transfer without consideration, and that the recital of consideration in the deed was only a sham entry for stamp duty, the Tribunal held that no taxable capital gains had arisen. Accordingly, the addition of ₹1.40 crore was deleted, and the appeal was allowed in favour of the assessee
Appearance
Counsel for Appellant/ Assessee: Praveen Kumar Misra, CA
Counsel for Respondent/ Department: Vipul Kashyap
Cause Title: Sunil Kumar V. Income Tax Officer
Case No: ITA No.957/Del/2025
Coram: Shri S. Rifaur Rahman [Accountant Member], Shri Anubhav Sharma [Judicial Member]
