Can sale of prop at low price termed as Undisclosed income

Tax planning 631 views 2 replies

Darshan

Finance Controller

35 Points Posted on 09 June 2011

Hi all

Captial gains on sale of property requires that sale consideration is taken as higher of municipal valuation or actual sale price of flat. Now in a scenario where say e.g. Municipal valuation is 15 lakhs and actual sale price is 10 lakhs, its very clear that sale price should be considered @ 15 lakhs.

However, here, can there be scenario where income tax officer takes a view that differential 5 lakhs is undisclosed income for seller and undisclosed source of funds for buyer?

In my view, it should not be the case, since both valuations are prescribed as per Income tax act for the purpose of computation of capital gains only.

Replies (2)

CS Bijoy

Expert

6394 Points Posted on 09 June 2011

Accordng to me the valuation of the property can not be taken below the Municipal Valuation otherwise it will be case of transfer of property without or inadequate consideration and the income of the property Capital gain or other should be clubbed in the hands of the transferor.

CA Mohit Saxena

FINANCE MANAGER

343 Points Posted on 09 June 2011

For the purpose of of Capital Gains,

Sale Consideration is "Value as per Stamp value Authority"
This is intangible addition by Income Tax Act
Income Tax Authority cannot consider it as Undisclose Income
as it is Intangible adfdition
But if in any year we use that Rs. 5 lakh ( Intangible Addition) for explaining any expenditure in case asked by Income Tax Authority
then Penalty for Concealment of Income is charged on Rs. 5Lakh in the year in which we explained expenditure.

This as per Proviso of Section 271(1)(c).