AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2016 (8) TMI 1225
X X X X Extracts X X X X
X X X X Extracts X X X X
....ressed. 5. Ground No. 9 is charging of interest which is consequential and mandatory. 6. On ground Nos. 3 to 7, assessee challenged the order of ld. CIT(Appeals) in upholding the addition of Rs. 2,68,43,750/- on account of long term capital gain on sale of agricultural land and in denying the deduction under section 54B of the Act. During the course of assessment proceedings, the Assessing Officer noted that assessee had sold land for consideration of Rs. 2,95,28,125/- through Registered Sale Deed dated 20.03.2007. The sale consideration comprised of Rs. 2,50,000/- in cash, Rs. 24,34,375/- by cheque dated 20.03.2007 and Rs. 2,68,43,750/- by cheque from M/s Zodiac Housing & Infrastructure Pvt. Ltd. The proceeds of the aforesaid cheques were realized by assessee in March, 2007 and June, 2008 respectively. The assessee offered the part sale consideration of Rs. 26,84,375/- for capital gains during assessment year under appeal and the sale consideration of Rs. 2,68,43,750/- will be offered for taxation only after realization of post dated cheque. The Assessing Officer issued show cause notice to the assessee and considering assessee's reply, referred to provisions of Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on Bench, Chandigarh in group cases of Shri Rajiv Kumar Vs ITO and others in ITA 17/2016 vide order dated 29.06.2016. It was held by the Tribunal that there is no transfer of capital asset in assessment year 2007-08 and no capital gain accrues in assessment year under appeal and liberty was given to the revenue to consider issue of capital gains in assessment year 2009-10. The issue is, therefore, covered in favour of the assessee by order of ITAT, Division Bench in the case of Shri Rajiv Kumar and others (supra), copy of the order is placed on record. 8(i) On the other hand, ld. DR relied upon orders of the authorities below and referred to his written submissions and submitted that the order in the case of Shri Rajiv Kumar (supra) is not applicable to the case of the assessee because possession was handed over to the buyer on the registration of the sale deed on 20.03.2007, information from Tehsildar was obtained to confirm that physical possession of the land was given to the buyer and khasra girdawari is changed in buyer's name. Intakal was also done before end of the financial year i.e. 31.03.2007 and there was no pre condition in the sale deed. The buyer have become in pos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Assessing Officer noted from the Sale Deed that the claim of assessee that sale of land measuring 80 Kanal for Rs. 5,50,00,000/- will take effect at two different points of time when two different cheques for Rs. 41,50,000/- and Rs. 5 Crore were encashed, was not in consonance with existing law. The assessee himself offered for tax an amount of Rs. 50 lacs during the year and for balance amount of Rs. 5 Crores, the assessee claimed that it will be offered for tax in assessment year 2009-10, which was not in accordance with law. The assessee executed Sale Deed on 20.03.2007 and the sale consideration was partly received and partly promised. The buyer issued cheque for Rs. 5 Crores undated bearing No. 009643 to the assessee and also contracted that the Sale Deed in question shall automatically be stand cancelled in the event of dishonour of post dated cheque. The Assessing Officer framed the following questions to arrive at the decision : i) If the amount of cheque of Rs. 5 Crore was realized, what will be the effective date of transfer ? ii) If the amount of cheque of Rs. 5 Crores was not realized, what will be the fate of Rs. 50 lacs already paid by the buyer to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... consideration of Rs. 5.50 Crore is taxable in assessment year under appeal i.e. 2007 08 and accordingly, computed the long term capital gain. 8. The assessee challenged the findings of the Assessing Officer before ld. CIT(Appeals). It was submitted before ld. CIT(Appeals) that assessee executed Sale Deed dated 20.03.2007 in favour of M/s Link Infrastructure and Developer Pvt. Ltd., Delhi. The total contracted consideration was Rs. 5.50 Crore. The sale consideration was received as advance of Rs. 41,50,000/- vide cheque on 15.03.2007, cash of Rs. 8,50,000/- at the time of registration of the Deed on 20.03.2007 and balance Rs. 5 Crores through undated cheque which was later on encashed on 16.06.2008. As per terms of the Sale Deed, it was stipulated that in case the cheque of balance amount gets dishonoured, the Sale Deed shall stand automatically cancelled. The assessee referred to the terms of Sale Deed for cancellation of the Sale Deed on dishonour of undated cheque. Regarding possession, assessee has relied upon affidavit given by the buyer at the time of registration. The assessee submitted that assessee received sum of Rs. 50 lacs only as proceeds of the land and due t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer has rightly taxed the capital gain on entire sale consideration in the assessment year under appeal 2007-08. The findings of ld. CIT(Appeals) in para 6 to 6.13 of the impugned order are reproduced as under : "6. I have gone through the facts of the case and written submission filed by the appellant. The AO had information available with him that the assessee had sold his share in land in Village Jaroda, Yamuna Nagar which was situated within 8 km. of municipal limits and the taxable capital gain was involved. The AO after obtaining due approval u/s 151(2), issued notice u/s 148 dated 21.08.2012 which was duly served on the appellant. The appellant was required to file return within 30 days of receipt of the notice. However, no compliance was made. Subsequently, notices u/s 142(1) dated 18.10.2013 and 03.12.2013 were issued but no compliance was made. Again a notice u/s 142(1) dated 08.01.2014 was issued and served upon the appellant. Subsequently, the appellant vide its reply dated 14.02.2014 submitted that return filed in original may be treated as filed in response to notice u/s 148 of the Act. 6.1 It is further noted that the appellant has sold agricultu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i was confirmed. Change in girdawari in buyer's name was also confirmed. Intkal of the registry was accepted before the ending of year, i.e. 31.03.2007. There was no pre-condition for execution of sale deed. In fact, in the sale deed also the appellant has committed that nothing is due. The mutation would be entered or the officials of the company itself can mutate in their name, the seller will have no objection. Thus, as per provisions of Transfer of Property Act, the transfer was affected on 20.03.2007. In the instant case, there is intention of the seller to sell and buyer to purchase a property for a sum which is paid and promised to be paid, so sale has taken place on 20.03.2007 i.e. during year under consideration. Here, the reliance is placed on the decision of Hon'ble Tribunal Hyderabad 'A' Bench in the case of Dr. Maya Shenoy 23 DTR 140, wherein it was held that so long as transfer is made for a consideration it is immaterial that consideration will be received in future. Thus,the sale is complete even if price is intended to be paid. So sale has taken place during the year. 6.4 Further, there is a certainty in performance of contract and no right....
X X X X Extracts X X X X
X X X X Extracts X X X X
....land was also not with the appellant till the encashment of the post dated cheque. 6.6 Regarding the affidavit of the buyer stating that the possession is subject to the clearance of post date cheque, it is noted the registration deed dated 20.03.2007 clearly states that the possession has been handed over to the buyer on the date of registry itself. It is to be noted that the document evidencing the transfer of property has been duly registered by the competent authority i.e. Registering Authority and the necessary mutation entry has also been done and accepted by 31.03.2007. Truly speaking such an affidavit is not valid in the eyes of law as it states something which is not borne out of legally valid documents and record. If such affidavit has to take precedents over the provisions of law it will only lead to anarchy. Naturally, in such circumstances one has to go by the entries in the land revenue records and sale deed. Therefore, the appellant's reliance on the buyer's affidavit for second date of sale is not well placed as these do not nullify the effect of what is stated in the revenue records and sale deed registered on 20.03.2007. 6.7 Regarding the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that the transfer of capital asset takes place in the year of transfer, so, such decisions are in favour of revenue and not applicable on the facts of instant case where the appellant is claiming capital gain at two points of time on receipt of part sale consideration by two cheques encashed on different dates falling in two financial years. Therefore, the appellant's reliance on these cases is not relevant to the facts of the instant case. 6.10 The appellant has further relied on the decision in the case of ACIT Vs. Hotel Harbour View [2009] 184 Taxman 42, wherein the Hon'ble ITAT, Cochin Bench on interpretation of section 2(47) r.w.s. 53A of the Act held that the transfer of possession of property takes place only when sale deed is executed and title of property is transferred from vendor to vendee. The appellant has also relied on the judgment of Hon'ble Madras High Court in the case of Smt. D. Kasturi Vs. CIT [2010] 323 ITR 40 wherein Hon'ble High Court held that where assessee had executed agreement for transfer in respect of property and given possession to party and received consideration, doctrine of part performance as per section 53 A of Transfe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... situation even if the documents are not registered but the conditions of section 53A of TP Act are satisfied, then the ownership of the property is considered to be transferred. The 'transfer' as per section 2(47)(v) includes such second situation cases. This does not mean that in all situations the possession of property is pre requisite before or during the registration of sale deed for effective transfer of capital assets. In the instant case, the transfer is by way of registered sale deed wherein it has been mentioned -'possession of land in question had been handed over to the purchaser company on the spot. Now the purchaser company has become owner in possession of the above land in my place'. This fact shows that there is a registered sale deed and according to sale deed the possession of land has already been transferred. The provisions of section 2(47)(i) recognizes the sale of the capital assets as a mode of transfer in relation to the capital asset. So, the 'transfer' of capital asset is covered by section 2(47)(i) of the Act and not by 2(47)(v) as contemplated by the appellant. In the judgment given by Hon'ble High Court of Bombay in the cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The title is complete and the effect of registration is to make it unquestionable and absolute ; but by virtue of section 47, once registration is effected, the title relates back to the date of execution : vide Mulla on the Indian Registration Act, 6th edition, pages 164 and 165. " A similar question was before the Hon'ble Andhra Pradesh High Court in the case of Addl. CIT v. G.M. Omar Khan (116 ITR 950) which is reproduced as under : "3. Whether the profits or gains arising from the transfer of a 'capital asset' can be chargeable to income-tax if the transfer is effected in the previous year and if no amount is received? " The Hon'ble High Court answered the question in favour of the Revenue. While answering the question in favour of the Revenue, the Hon'ble High Court observed as under :- "The Madras High Court in T. V. Sundaram lyengar and Sons Ltd. v. CIT [1959137ITR 26 opined (per headnote): "In order to attract liability to tax on capital gains under section 12B of the Indian Income-tax Act, 1922, it is sufficient if in the relevant accounting year profits have arisen out of the sale of capital assets, that is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....07 through which assessee received only meager advance of 10% and it was specifically mentioned in the sale deed that in case the undated cheque of Rs. 5 Crores is bounced, the sale deed will be automatically cancelled. He further submitted that on the same day i.e. on 20.03.2007, the buyer has executed the affidavit which is duly attested by Executive Magistrate, Jagadhri in which the buyer has specifically affirmed that sale deed of the land has been registered but the spot possession will be given at the time when company would be paying the total land amount of PDC cheque to the assessee. Until the amount of PDC cheque has not been paid, the buyer company cannot make discharge of any kind to the remaining persons etc. If the PDC cheque could not be paid at the mentioned time, then owner will made holder of the possession and sale deed will be cancelled and buyer company will be responsible for the loss of the trees and crops, building etc. and the property will remain with the assessee. 11(i) The ld. counsel for the assessee further submitted that sale deed was executed with advance because the buyer company will have to get land use changed from the Revenue authoritie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... & Haryana High Court dated 05.02.2009 in which also Shri Tejinder Kumar & others filed writ petition before High Court because the real estate Developers & Builders have duped several farmers in Yamuna Nagar area by alluring them to execute the sale deed with a promise to pay sale consideration through cheques which later on bounced for want of sufficient funds. Hon'ble High Court had taken the cognizance of the same and directed the investigation through senior officer of the Crime Branch to look into the allegations and even the Collector, Yamuna Nagar was directed to take remedial action. Special Investigation Team was formed under the head of Additional Director General of Poilice. The ld. counsel for the assessee, therefore, submitted that these facts will clearly reveal that there was no intention of the buyer to pay the sale consideration to the assessee in assessment year in appeal. The buyers duped the assessee and others and got the sale deed registered without giving any sale consideration and only after intervention of the High Court and various civil and police authorities, assessee got the amount of undated cheque. Therefore, no capital gain arises in the years u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usion that there was no capital gains. As is apartment from the observations made in the order of the Tribunal, the Tribunal was under the misapprehension that the registered sale deed was final and, therefore, refused to look into the other material produced by the assessee with a view to prove its case that the sale transaction was a sham transaction. It is, however, a different matter that the Tribunal may not feel convinced that the sale transaction was a sham transaction and refuse to rely on the material produced by the assessee for good reasons, but the said material had to be taken into considered and could not be ignored. The enquiry before the Tribunal was to be directed to find out whether there had been a sale and if the Tribunal comes to the conclusion that the sale had taken place, in that case, that capital gains tax would become payable. The matter can be viewed from another angle. It is a matter of daily happening that people, who want to avoid payment of tax, would sell the property by getting the sale deeds registered at under- estimated value. If it is held that the sale deed is final, in that case, the IT authorities will be debarred from looking into as to how....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of right over the property is not justified. In the present case, the assessee executed only sale agreement on 3/2/2OO7 with the stipulation of executing the sale deed within a period of 6 months on terms and conditions stipulated there in, without transferring any right of ownership, use or possession of the property, or transferring any right over the income arising from such property to the purchaser and having decided to execute the sale deed in a future date the transaction of sale of properly was not completed in terms of section 2(47) of the Act., specifically, read with the Sec 53A of Transfer of Property Act, 1882. We place reliance on the judgement of Patna High Court in the case of Smt. Raj Rani Devi Ramna vs. CIT ( 201 ITR 1032) wherein it was held that sale deed, though registered, stipulating a condition precedent that the property shall pass only on receipt of sale consideration, transaction did not take place on the date of registration of sale deed. We also place reliance on the order of the Delhi Tribunal in the case of ITO vs. Srnt. Satwavati Devi Verma (124 ITD 467) wherein held that the assessee having executed the agreement, which only contemplated the sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated copy of the deed of confirmation dated 4.2.2009 it is stated that the Assessee has handed over the vacant and peaceful possession of land to the purchaser on 4.2.2009 and the purchaser became the occupier of the land from 4.2.2009 and the purchaser was entitled to transfer the land in his name in the Government records from that date. Thus, the intention of the parties appears to transfer the possession of land on receipt of final amount and which in this present case had taken place on 4/2/2009. From the above facts it can be concluded that though the Assessee entered into agreement for sale on 19.3.2008, the actual rights and benefits in the land were transferred by the Assessee on receipt of the final installment i.e. in AY 2009.10. The Assessee has disclosed the capital gains in the return in AY 2009-10. The Revenue has not been in a position to controvert the aforesaid facts by bringing any contrary material on record. 8.1. In the case of Smt. Raj Rani Devi Ramna Vs CIT (1993) 201 ITR 1032 (Pat) the Hon'ble HC has held that the properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. Regist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the statement of case itself as drawn up by the Tribunal, it is apparent that the parties had clearly intended that despite the execution and registration of sale deeds, transfer by way of sale will become effective only on payment of the entire consideration amount and in this background of facts, it has be held that there was no transfer of land covered by the three sale deeds in question during the period under consideration making the assessee liable for capital gains tax under s. 45-Nitai Chandra Naskar vs. Smt. Champaklata Debi (1919) 29 CJL 250, Panchoo Sahu vs. Janku Mandar AIR 1952 pat 263 and Shiva Narayan Sah vs. Baidya Nath Prasad Tiwary AIR 1973 pat 386 relied on." 15(vi) ITAT Kolkata Bench in the case of Chanchal Kumar Sirkar V ITO (supra) held as under : "Where the consideration for the transfer was received several months after the date of the transfer of property, the period of six months for making deposit under s 54EC should be reckoned from the date actual receipt of the consideration". 15(vi) Hon'ble Bombay High Court in the case of CIT V Mrs. Hemal Raj Shete in IT Appeal No. 2348 of 2013 vide judgement dated 29.03.2016 held i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the respondent-assessee. Therefore, entire amount of Rs. 20 crores which is sought to be taxed by the Assessing Officer is not the amount which has accrued to the respondent-assessee. The test of accrual is whether there is a right to receive the amount though later and such right is legally enforceable. In fact as observed by the Supreme Court in E.D. Sassoon & Co. Ltd. Vs. CIT (1954) 26 ITR 27 "It is clear therefore that income may accrue to an assesee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro............". In this case all the co-owners of the shares of M/s.Unisol have no right in the subject assessment year to receive Rs. 20 crores but that is the maximum which could be received by them. This amount which could be received as deferred consideration is dependent/contingent upon certain uncertain events, therefore, it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... received as deferred consideration to tax in the subject assessment year as it had not accrued to the respondent-assessee. 11. We find that both the Commissioner of Income-Tax (Appeals) and the Tribunal have in view of the clear clauses of agreement dated 25th January, 2006 have in the facts of the present case correctly held that the respondent-assessee and the co-owners of the shares did not have a right to receive Rs. 20 crores in the subject assessment year. 12. In the above view, in the present facts the question of law as framed does not give rise to any substantial question of law. Accordingly, appeal is dismissed. No order as to costs". 16. In the instant case, the sale deed dated 20.03.2007 in question mentioned the sale consideration of Rs. 5.50 Crores out of which advance of Rs. 50 lacs have been given on the date of execution of the sale deed. The substantial balance consideration of Rs. 5 Crores was to be paid through undated cheque No. 009643. Further, it is mentioned that due to bouncing of the aforesaid cheque, sale deed will be cancelled. Therefore, essential condition of the sale deed is transfer of the property on full payment made by the purch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt to the assessee and others (agriculturists). The assessee further explained that when no action have been taken in the matter, Shri Tejinder Kumar & others further filed CWP No. 1908 of 2009 which is decided by Hon'ble Punjab & Haryana High Court vide judgement dated 05.02.2009 in which similar allegations were made for direction to the Superintendent of Police, Yamuna Nagar and others for taking legal actions against the Real Estate Developers & Builders who have duped/cheated hundreds of farmers in the area of Yamuna Nagar by alluring them to execute the sale deeds with a promise to pay sale consideration through cheques which later on bounced for want of sufficient funds. All the substantial amount remained unpaid. 16(ii) Hon'ble High Court, considering the serious allegations against the builders/buyers for cheating hundreds of farmers in District Yamuna Nagar directed the senior officers of the Crime Branch to look into the allegations of conniving with the builders alongwith Collector Yamuna Nagar to take immediate remedial action. Addl. DGP, Crime Branch was also directed to constitute Special Investigation Team to conduct fair investigations. These facts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pital gain accrues only if there is a sale or transfer of capital asset. The assessee is able to prove on face of sale deed, affidavit executed by the buyer and the cogent evidence on record that no sale took place on 20.03.2007 i.e. the day when sale deed was registered. The documents/material produced on record proved no sale transactions completed on 20.03.2007. The material and evidence brought on record, thus, cannot be ignored. The contents of sale deed, affidavit and undated cheque of Rs. 5 Crores and orders of Hon'ble Punjab & Haryana High Court clearly proved that the buyer company manipulated the sale deed to dupe the assessee and other agriculturists. Undated cheque of Rs. 5 crores shows no intention of the buyer to pay any sale consideration in future to complete the transaction. The undated cheque itself shows that buyer company was not definite of the payment within the time-bound period. The intention of the parties shall have to be considered on the facts and circumstances of the case. The registration is prima-facie proof of an intention to transfer but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... gain accrued or arises in assessment year under appeal. These issues may be considered by both the parties in the year when capital gain would arise. These grounds, therefore, stand disposed off. 21. In the result, appeal of the assessee is allowed." 11. Whatever points have been raised by the ld. DR, have been considered by the Tribunal in the case of Shri Rajiv Kumar (supra). In the case of the assessee, the copy of sale deed is filed at page 49 of the Paper Book in which the last payment of Rs. 2,68,43,750/- is stated to have been made through cheque but no date is mentioned in the sale deed. The ld. DR referred to the cheque issued in this case having date 15.06.2008 is issued on execution of the sale deed. Therefore, cheque cannot be considered in isolation and shall have to be considered in the light of the facts mentioned in the sale deed in question. In the case of Shri Rajiv Kumar (supra), the Tribunal has considered the writ petition filed in the case of one of the assessee Shri Tejinder Kumar and others in which Special Investigation Team was formed under the head of Additional Director General of Police because various Real Estate developers and builders ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....54B of the Act because capital gain was found to be assessed in assessment year 2007 08. Since we have deleted the similar addition on account of capital gain in assessment year 2007-08 and directed to consider this issue in assessment year 2009 10, therefore, the orders of authorities below are set aside and matter in issue is restored to the file of Assessing Officer with direction to consider issue of long term capital gain in assessment year 2009-10 alongwith claim of deduction under section 54B of the Income Tax Act alongwith issue of agriculture income of Rs. 2,67,022/-. The Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee. 16. In the result, appeal of the assessee is allowed for statistical purposes. ITA 972/2014 ( Smt. Payal Kumari : A.Y. 2007-08) 17. This appeal by assessee has been directed against the order of ld. CIT(Appeals), Panchkula dated 28.08.2014 for assessment year 2007-08. The ld. counsel for the assessee did not press ground Nos. 1 and 2, same are dismissed being not pressed. Ground No. 8 is for charging of interest which is mandatory and consequential. On ground Nos. 3 to 7, the assessee challenged the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1, 2 and 8, same are dismissed being not pressed. Ground No. 9 is for charging of interest which is mandatory and consequential. 23. On ground No.s 3 to 7, assessee challenged order of ld. CIT(Appeals) in upholding addition of Rs. 2,24,06,250/- on account of long term capital gain on sale of agricultural land and in denying deduction under section 54/54F of Income Tax Act. This issue is same as have been considered on identical facts in the case of Shri Parshotam Kumar (supra). Following the reasons for decision in the case of Shri Parshotam Kumar (supra), we set aside the orders of authorities below and delete the entire addition in assessment year under appeal 2007-08 on account of long term capital gain. There is no need to consider issue of deduction under section 54/54F of the Act. This issue can be considered in assessment year 2009-10. 24. In the result, appeal of the assessee is partly allowed. ITA 971/2014 ( Shri Parveen Kumar : A.Y. 2009-10) 25. This appeal by assessee has been directed against the order of ld. CIT(Appeals), Panchkula dated 02.09.2014 for assessment year 2009-10. The ld. counsel for the assessee did not press ground No. 3, same is dismissed ....