Taxability of a asset not shown in the bsheet

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hitendra bhatia

52 Points Posted on 19 July 2011

Hi,

I have a question regarding taxability of sale of asset which was not shown in the balance sheet or P&L of the seller. Question is summarized below:

I am going to buy a property whose current value as per Registrar office is around 24 Lakhs and he is ready to sell this property to us at that price itself. And the person from whom (that person is having the business of money financing) we want to buy this property has not shown this property in his P&L and balance sheet which he has presented to IT Deptt, since he purchased the land & made construction. He purchased land from government in 30,000 Rs (in 1987 bill or lease deed is available) and construction was made of around 3 Lakhs in 1989 (but he does not have any invoice or bill of material purchased for construction)

now that person is asking for some 9-10 Lakhs rupees so that he can show this property in his books and then further initiate sale deed in favor of us.

So now my basic questions are summarized below:

What is impact if someone has not shown some asset in the books? And now if he wants to sell that asset. In this case what would be tax liability on him considering the above mentioned facts?

And as the asset has not been shown in the books since day 1, then how it could be clubbed in the books now, in a legal way and how it could be sold in legal way.

If it is possible in above 2 questions that it could be shown in the books, and can be sold now then how the taxes would be coming on that person definitely it will attract LTCG tax.how much would be the same.

Replies (6)

U S Sharma

glidor@gmail.com

21068 Points Posted on 19 July 2011

as a buyer , you are not entitled to look in depth of his recordings with incometax, you have to make search of property title, if found without any trouble, then make agreement and buy it, registrar will make entries in AIR,

from your side make available your PAN details with registrar,

if any LTCG or STCG arise, the seller would be liable for it,

normally 1987/89 files are dumped and now there is no scope to revise the returns of that period, maximum he can endorse the property in previous year ...( a buyer is not supposed to take headache of seller)

hitendra bhatia

52 Points Posted on 19 July 2011

From your side these points are ok but now the problem is that in realty we have purchased that plot from him and we have made the construction but problem in all these thing is that we does not have any documents regarding this with us.

so that's why we have to go through this option.

as you have imentioned n your reply that "maximum he can endorse the property in previous year"

so i want to know how he can endorse the property in the previous year and then how this could be justified in his book and further how the taxablitiy will be in this case.

if you have any understanding issue please reply me with your contact no so that i can let you know all the story in behind in detail (if you dont have any problem)

Thanks

Hitendra Bhatia

09001317333

U S Sharma

glidor@gmail.com

21068 Points Posted on 19 July 2011

get the property registered in your name, on the documents of himself ( not IT documents but land registration and municvipal completion certificate/ tax assessment) and then proceed on, you need a clear title of property only, irrespective of the origin of funds for buying the property, by previous owner.

again, if he did not shwon it in his ITR, then also he is not liable to pay tax now, coz its case beyond 6 years, and department had to claim tax at that period, now its his property and he can utilize it at his wish, evidencing the property in his custody by virtue of registration in 1987, again construction ( where municipal assessments had been done to fix taxes) in 1989, and these transactions are valid .

a new instrument in your favor will solve the prob