2018 (12) TMI 213

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....he light of the law relating to part performance (Sec.2(47)(v) of the Income Tax Act read with Section 53A of the TP Act) the Tribunal is right in law to have considered events and circumstances beyond the previous year relevant to the assessment year 1999- 2000? (ii) If the answer to the above question is in the negative is not the order of the Tribunal against law? (iii) If the Tribunal is justified in interfering with the order of assessment?" 2. The facts in brief are thus: Following a search and seizure under Section 132 of the Act at the premises of the assessee on 6.8.2003, notice was issued under Section 153A read with Section 153C of the Act on 5.8.2004. The assessee filed a return on 27.12.2004 declaring 'nil' income, consequent to which notice was issued under Section 143(2) and assessment completed making an addition of Rs. 1,87,00,000/- as being concealed income under 'short-term capital gain'. The assessee, which was a partnership firm and later registered as a Company, owns 30.7 cents of land in a prime location at Ernakulam. While the assessee was a firm, it started construction of a building and from out of that, a constructed a....

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....er before the Income Tax Appellate Tribunal and vide Annexure-G order, the appeal was dismissed. Hence, the Revenue is aggrieved and before us. 5. The learned Senior Standing Counsel, Government of India (Taxes) states that the Tribunal failed to note that except a nominal balance of Rs. 12,92,649/-, the entire sale consideration was paid by M/s.MAPL to the assessee. The possession was also taken over. The Tribunal failed to note the conduct of the parties to the agreement that the act of the parties to the agreement would amount to part performance under Section 53A of the Transfer of Property Act, 1882 ('TP Act' for short), which would squarely bring it under the purview of transfer contemplated under Section 2(47)(v) of the Act. The Tribunal gave much importance to the events and circumstances, which transpired in the previous assessment year 1999-2000 and concluded that the parties have voluntarily rescinded from the agreement and a major portion of the consideration was also returned to the assessee and therefore, the Tribunal held that, in the circumstances, the AO was wrong in finding that there was a transfer of possession and part performance of contract making ....

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.... and therefore, the provisions of Section 2(47) of the Act will not be attracted. The relevant portion of Section 2(47)(v) of the Act reads thus: "Section 2(47) "transfer" in relation to capital asset, includes,- (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882." 9. A reading of the above cited provision would indicate that the possession of the immovable property following a transaction; enabling retention by the expected vendee, would be part performance of the contract as contemplated under Section 53A of the TP Act. Section 53A of the TP Act reads thus: "Section 53A : Part performance : Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession,....

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.... indicate handing over of possession, which is an essential ingredient under Section 53A of the TP Act and in the absence of that, possession cannot be one under part performance of the contract and therefore, does not attract Section 2(47)(v) of the Act. 12. It is true that the documents at Annexures-A and B do not necessarily spell out handing over of possession, but the parties to the agreement admit handing over of possession. In the deposition given on behalf of the assessee before the AO, it is submitted that the possession of the property was handed over to the expected vendee and that the vendee continues to remain in possession. The vendee, M/s.MAPL, has written a letter to the Department, which is produced at Annexure-D admitting that the possession of the building was taken by them on 4.12.1998. Hence, inter se parties, there is no dispute that the possession was handed over in pursuance to the agreement for sale. It is also admitted in the deposition as well as in the letter that the building continues to be in the possession of M/s.MAPL during the assessment period. 13. There is no doubt that only when the agreement to sell is coupled with delivery of possession,....

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.... view is supported by the fact that in part performance of contract, the vendee has done something in the property, such as electrification and drawing of telephone lines. The vendee could not have done such acts without taking possession of the building in pursuance of the agreement. 15. Another argument advanced by the learned Senior Counsel for the assessee is that part performance is not valid because the agreement has not been registered as is required under the provisions of Section 17(1A) of the Registration Act. The relevant provision reads thus:- "17 Documents of which registration is compulsory- (1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be registered if they have been executed on or after the commencement of the Registration and other related laws (Amendment) Act, 2001, and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A." 16. Additional condition of registration of an agreement for sale in which there is a claim of part perform....