2005 (6) TMI 278 - AT - Income Tax

Tribunal Orders Fresh Examination of Capital Gains Assessment, Ensures Fair Hearing and Document Access for Assessee.

The Tribunal ordered a de novo examination of the capital gains assessment for the years 1997-98, 1998-99, and 1999-2000. The AO must provide the assessee ... Capital Gains - sale of flat/tenement - transfer of FSI - non-genuine character - Prospective purchasers - full value of consideration - seeking cross-examination - Natural Justice - evidence tendered was false and fabricated - HELD THAT:- It is seen that in the present case, the assessee entered into an agreement with the builder/developer on 20th June, 1996 with the builder/developer-M/s Kolte Patil Enterprises to develop the land bearing Survey No. 16/1 admeasuring 8 hectares 25 acres situated at Mauze Wadgaonsheri and to construct buildings/apartments. The assessee signed a general power of attorney in favour of the builder/developer and gave possession of the property to the builder/developer. In his letter dt. 22nd Feb., 2001 addressed to the AO it was stated by the assessee that, 'I have given permissive possession to the developer, M/s Kolte Patil Enterprises so as to enable them to develop the land and complete their part of agreement of constructing the fiats'. It is an admitted fact that the assessee entered into an agreement with the builder/developer-M/s Kolte Patil Enterprises for development of the impugned land and construction of flats thereon. Also, the assessee signed a general power of attorney in favour of the builder/developer on 20th June, 1996 and gave possession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 1997-98 aggregating to Rs. 48,00,000 as admitted in his letter dt. 22nd Feb., 2001 addressed to the AO. Thus, we are satisfied that all the conditions of sub-cl. (v) of s. 2(47) are satisfied in this case and, therefore, it has to be inferred that a 'transfer' did take place within the meaning of s. 2(47)(v) of the Act. This conclusion of ours gets support from the decision of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia. The argument of Shri Sathe that the deeds in respect of the sale of flats were not registered/executed is not a relevant consideration so far as provisions of sub-cl. (v) of s. 2(47) are concerned. The completion of 'transfer' of an immovable property as per the general law is not a requirement for the applicability of the provisions of the sub-cl. (v) of s. 2(47) of the Act as was held by the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia [2003 (2) TMI 62 - BOMBAY HIGH COURT]. Further, the assessee's plea that subsequently he filed suits which were pending, against the builder/developer with the prayer that the agreements with the builder/developer be declared as cancelled, is merely about suits which Were pending and which represent a subsequent event and, therefore, it does not affect the above inference of ours. However, it is seen that the computation of the capital gains made by the assessee is based on the information furnished by the builder/developer before him. Shri Sathe, the ld AR, contended that the request made by the assessee before the AO and also before the CIT(A) for permission to cross-examine the partners of M/s Kolte Patil Enterprises in relation to the contents of their letters and other information and documents submitted by them before the AO during assessment proceeding was not allowed. He placed reliance on the decision of P.S. Abdul Majeed vs. Agrl. ITO & Ors.[1994 (1) TMI 54 - KERALA HIGH COURT] and contended that in the circumstances of the case, refusal to allow cross-examination amounted to violation of the principles of natural justice. It is seen that the facts of the case for AY's 1997-98, 1998-99 and 1999-2000 are identical that the assessment orders for AY's 1997-98, 1998-99 and 1999-2000 were passed by the AO on identical lines and that the assessee has raised identical grounds in these appeals. Thus, we consider it appropriate to remit this matter back to the file of the AO for the limited purpose of a de novo examination of the quantum of the capital gains to be assessed in AY's 1997-98, 1998-99 and 1999-2000. The AO is directed to make all the information/documents filed before him by the builder/developer M/s Kolte Patil Enterprises available to the assessee and to give the opportunity of cross-examination to the assessee as per law. The AO should pass fresh orders for AY's 1997-98, 1998-99 and 1999-2000 after giving adequate opportunity of being heard to the assessee. In the result, the appeals filed by the assessee for asst. yrs. 1997-98, 1998-99 and 1999-2000 are partly allowed for statistical purposes. Issues Involved:1. Assessment of Capital Gain2. Consideration of Assessee's Contention and Evidence3. Interpretation of Agreement and Power of Attorney4. Transfer under Section 2(47) of the Income Tax Act5. Denial of Cross-Examination6. Non-Genuine Character of Alleged Transfer of FSIIssue-Wise Detailed Analysis:1. Assessment of Capital Gain:The primary issue was the assessment of capital gain by the Assessing Officer (AO) based on the sale of Floor Space Index (FSI). The AO assessed Rs. 5,48,49,307 as capital gains for the assessment year 1997-98, which was later partially reduced by the Commissioner of Income Tax (Appeals) [CIT(A)] to Rs. 5,39,37,500. The assessee contested this assessment, arguing that the entire addition on account of capital gain should be deleted.2. Consideration of Assessee's Contention and Evidence:The assessee argued that the CIT(A) did not properly consider their contention that the letters from M/s Kolte Patil Enterprises were not corroborated by independent evidence. The assessee also claimed that the request for cross-examination was unreasonably denied and that the evidence submitted by the AO was false and fabricated. The CIT(A) was accused of not taking cognizance of these contentions, which included the fact that building plans were not passed until June 5, 1998, making the transfer of FSI impossible during the relevant years.3. Interpretation of Agreement and Power of Attorney:The assessee disputed the interpretation of the agreement dated June 20, 1996, and the power of attorney, which was canceled on December 24, 1998. The CIT(A) concluded that a transfer of FSI had taken place during the year under consideration, which the assessee argued was incorrect both in law and on facts.4. Transfer under Section 2(47) of the Income Tax Act:The assessee contended that no transfer of FSI had taken place under Section 2(47) of the Income Tax Act, as there were no registered sale deeds and no possession was given to the prospective purchasers. The Tribunal, however, noted that the sub-clauses (v) and (vi) of Section 2(47) include transactions involving the allowing of possession of any immovable property and any transaction that has the effect of transferring or enabling the enjoyment of any immovable property. The Tribunal referred to the case of Chaturbhuj Dwarkadas Kapadia vs. CIT to support the conclusion that a transfer had indeed taken place within the meaning of Section 2(47)(v).5. Denial of Cross-Examination:The assessee's request to cross-examine the partners of M/s Kolte Patil Enterprises was denied by the AO. The Tribunal agreed with the assessee that this denial amounted to a violation of the principles of natural justice, citing the case of P.S. Abdul Majeed vs. Agrl. ITO & Ors., which emphasized the necessity of allowing cross-examination to uphold natural justice.6. Non-Genuine Character of Alleged Transfer of FSI:The assessee argued that the alleged transfer of FSI was non-genuine, pointing out inconsistencies such as M/s Kolte Patil Enterprises showing a sale consideration received from the assessee himself as a flat purchaser, which was later deleted by the CIT(A). This, according to the assessee, indicated the non-genuine nature of the other alleged transfers.Conclusion:The Tribunal concluded that the matter required a de novo examination of the quantum of capital gains to be assessed for the assessment years 1997-98, 1998-99, and 1999-2000. The AO was directed to make all information and documents filed by M/s Kolte Patil Enterprises available to the assessee and to allow cross-examination as per law. Fresh orders were to be passed after giving the assessee adequate opportunity to be heard. The appeals filed by the assessee were partly allowed for statistical purposes.