2023 (4) TMI 194 - AT - Income Tax

Tribunal rules in favor of assessee as real landowner, assesses capital gains, disallows Section 54B claim

The Tribunal concluded that the assessee was the real owner of the land, with the sellers being benamidars. The capital gains were assessed based on the ... Capital gain - real owner - person/s in whose hands income on sale of land is to substantially assessed - quantum of capital gains - HELD THAT:- The matter was examined from the stand-point of both – the ownership of the subject land by the assessee, in whose hands substantive assessment stands made, as well as the quantum of the capital gains. Qua the latter aspect, in the absence of any finding per the impugned order, reliance was placed by the assessee-respondent on the order by the first appellate authority, being incidentally the same person, in the assessee’s own assessment for AY 2007-08 (refer para 4.2), which in turn stands followed by the first appellate authority for the current year in case of the ostensible sellers, assessed protectively. There is, however, no specific finding therein as to ownership, being sans any finding qua the relevant aspects viz. the validity of the agreement dated 03/01/2007; it’s cancellation; retraction; utilisation of sale proceeds, etc. Our examination, which is, as is to be the case, on the basis of the material on record, leads to a unequivocal finding of the assessee being the owner of the subject land, a contiguous piece; the executor of it’s sale per a single transaction; and the beneficiary of the sale proceeds. The common factor between all the four sellers is the assessee; they being employees in his different concerns, or that of his son - The capacity (to purchase) by the sellers, absence of which is apparent, is completely un demonstrated, with two (of four) being transferred land by the assessee at less than 10% of the obtaining price, with a view to, as stated, ‘help’ them! In the absence of any explicit or implicit authority, his sole presence in the negotiation with the buyers, being represented by Dr. Abdul Majeed, is a significant indicator of the de facto ownership of the land. Of no less import is not-knowing any of the other sellers by the three brokers, who would rather contact them in the first place. The statement of the brokers, as indeed the sellers themselves, are a complete give-away; the latter having little clue of the transaction, much less of its finer details. The retractions, months later, are unsubstantiated nor backed by corroborative material, i.e., are factually and legally untenable, as opposed to that by the principal buyer, duly cross-examined, bringing parity between the different statements. There being a complete absence of money trail, the sellers have been found to be puppets. So much for the collective bargaining power, stated to be the reason for all of them, including the assessee – who admittedly owns the land that fronts the road, and through which access to the land of other four could be had, for coming together for the sale of land. Not surprisingly, the land is sold, in all four cases, on the same date, i.e., 25/8/2007. Contrast this with, and in any case, it needs to be noted that this land was subsequently sold at Rs. 6.70 lacs per cent, i.e., in February, 2010 The return of the capital gain by two sellers is of no consequence; the same being only be give effect to the benami transitions (refer: ITO v. Rattan Lal [1983 (8) TMI 1 - SUPREME COURT]; Jamnaprasad Kanhaiyalal [1981 (5) TMI 1 - SUPREME COURT]. Why, the money to pay the tax is itself either unexplained (Rs. 3.45 lacs) or comes from the assessee (or his family member) (Rs. 6.40 lacs), who stands the benefit by off-loading his tax liability. Scrutiny of the material led to demonstrate utilization of sale proceeds, not banked, reveals it to be sans evidence; rather, an attempt to mislead. Though, therefore, liable to be ignored to the extent it stands adduced as additional evidence, having been admitted without recording any satisfaction of the conditions of admissibility, the same, intertwined with other material, has been considered, finding it as not assisting and, rather, defeating the assessee’s case. Claim u/s. 54B, made for AY 2009-10, the same stood denied by the AO stating the same as applicable only where the agricultural land purchased is subsequent to the transfer of the land being used for agricultural purposes by the assessee, while in the instant case the same stands purchased earlier on 17/04/2007. This would equally apply for the current year; the subject land having been sold on 25/8/2007. We state this as, where otherwise valid, we would have, despite absence of any claim for the current year, restored the matter to the file of the AO for an examination thereof on merits, i.e., in the interest of justice. This is as, without doubt, it is a correct income that is liable to be assessed and brought to tax NTPC v. CIT [1996 (12) TMI 7 - SUPREME COURT]. This, despite the fact that there is nothing on record to show, nor even a claim at any stage, that the subject land, located at a commercially prime location in Thrissur, had been used in the two years prior to it’s sale for any agricultural activity. That would form the subject matter of adjudication on merits. Working of the capital gain in the case of Shri P. Manoj & Shri K.J. Thomas would not be as short-term capital gain, as made in their protective assessments, but as long-term capital gains, ignoring the purchase dated 18/12/2006, i.e., substituting it with the actual cost (and date) of acquisition by the assessee (TGC). We, in view of the foregoing, find no merit in the assesse’s case, while surely in that of the Revenue, both as regards the beneficial owner of the subject land, the capital asset, as well as the quantum of the sale consideration, which thus finds our approval, vacating the findings per the impugned order. Appeal by the Revenue is allowed. Issues Involved:1. The person/s in whose hands income on sale of land is to be substantially assessed.2. The quantum of capital gains.Summary:1. The person/s in whose hands income on sale of land is to be substantially assessed:- Background: The case involves a sale agreement dated 03/01/2007 for 384.5 cents of land, found during a search conducted by the Revenue. The sale consideration in the registered deeds was significantly lower than the agreed amount, leading to an escapement of income from assessment.- Revenue's Stand: The Revenue assessed the income substantively in the hands of the assessee and protectively in the hands of the respective sellers, based on statements from the sellers, brokers, and buyers, which indicated that the sellers were benamidars of the assessee.- CIT(A)'s Decision: The CIT(A) deleted the addition, stating that the sellers were not benamidars and provided evidences like income tax returns and balance sheets of the sellers.- Tribunal's Analysis: The Tribunal found that the statements of the sellers and brokers were consistent and credible, confirming the assessee's ownership and control over the land. The Tribunal also noted the lack of substantive evidence for the cancellation of the original agreement and the subsequent lower sale price. The Tribunal concluded that the sellers were indeed benamidars of the assessee.2. The quantum of capital gains:- Revenue's Stand: The Revenue assessed the capital gains based on the sale consideration of Rs. 2.24 lakh per cent as per the original agreement.- CIT(A)'s Decision: The CIT(A) accepted the revised sale consideration of Rs. 1 lakh per cent for some sellers and Rs. 20,000 per cent for others, based on the subsequent sale deeds.- Tribunal's Analysis: The Tribunal found no credible evidence for the revised sale consideration, noting several inconsistencies and the lack of any substantial proof for the cancellation of the original agreement. The Tribunal upheld the original sale consideration of Rs. 2.24 lakh per cent, finding it consistent with the statements of the brokers and the buyers.Conclusion:- Ownership: The Tribunal concluded that the assessee was the real owner of the land, with the sellers being benamidars.- Quantum of Capital Gains: The capital gains should be assessed based on the original sale consideration of Rs. 2.24 lakh per cent. The Tribunal vacated the findings of the CIT(A) and allowed the Revenue's appeal.Additional Notes:- Section 54B Claim: The Tribunal noted that the assessee's claim under Section 54B was not valid for the assessment year in question.- Protective Assessments: The Tribunal directed that the protective assessments in the hands of the sellers should be converted to substantive assessments in the hands of the assessee.Order:- The Tribunal allowed the Revenue's appeal, vacating the CIT(A)'s order and directing the Registry to place a copy of this order in the appellate folders of the sellers who had preferred appeals before the Tribunal.