TaxTMI 
TaxTMI 
2018 (12) TMI 1506
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....r the AY 2010-11 showing total income of Rs. 66,32,298/-. The return filed by the assessee was subjected to scrutiny assessment. In the course of the scrutiny assessment, the AO with reference to Annual Information Report (AIR) details observed that the assessee has sold the immovable property for a consideration of Rs. 3,40,84,800/- and the same was registered with the Sub-Registrar Office, Sanand on 21.01.2010. It was observed by the AO that assessee has not declared the capital gains arising in sale of the said immovable property for the year under consideration. On being confronted, the assessee pointed out that he has entered into an agreement to sale (Banakhat) in the preceding financial year on 15.09.2008 with one M/s. Melody Complex Pvt. Ltd. (Melody Complex) for sale of land of various survey numbers for a sale consideration of Rs. 19,01,177/-. The capital gain arose on sale of land amounting to Rs. 4,10,377/- was offered in the preceding AY i.e. AY 2009-10 relevant to FY 2008-09 and therefore no income has escaped for the purpose of assessment. According to the AO, the Banakhat (agreement to sale) entered into by the assessee with Melody complex was unregistered and the p....
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....ed on 21.01.2010 (date of registration) on which date the assessee has conveyed his rights totally, absolutely and completely to the purchaser Gatil Properties. The AO was not convinced with the assessee has received a mere sum of Rs. 19,10,171/- whereas the bulk of the amount was stashed away by Melody Complex. It was further observed that the assessee as an original owner and who is in possession of the capital asset and who executed the transfer through process established by law and system in vogue is liable for the capital gains in entirety. The AO also observed that both the confirming parties as well as ultimate sellers were not found traceable for inquiry. In these circumstances, it was alleged that the assessee has avoided the payment of capital gains tax on sale of land which is chargeable to tax for AY 2010-11 quantified at Rs. 3,18,55,034/-. 6. Aggrieved, the assessee preferred appeal before the CIT(A) and reiterated the facts concerning the issue as noted above. It was further emphasized that the assessee had parted with the possession of the land on receipt of full consideration as agreed with Melody Complex at the time of execution of a subsequent tripartite Banakha....
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....per the AIR details, the assessee has sold immovable property for a consideration of Rs. 3,40,84,800/- and the same was registered in Sub-Registrar Office, Sanand on 21.01.2010. In the return of income, the assessee has not shown the sale of the above said immovable property for the year under consideration. The AO has called for information during the assessment proceedings. 3.5. The facts of the case is that assessee has entered into an agreement to sale (banakhat) on 15.09.2008 with Melody Complex Pvt. Ltd. for a sale consideration of Rs. 19,01,177/-. The assessee has offered capital gain of Rs. 4,10,377/- in the A.Y. 2009-10 relevant to F.Y. 2008-09. According to the A.O., that banakhat was unregistered and one sided without valid addresses of witnesses and possession was not transferred to the Melody Complex Pvt. Ltd. Therefore, transfer is not completed as per that agreement. Thereafter, one more agreement to sale was executed on 25.03.2009 between the appellant, Melody Complex Pvt. Ltd. and Gatil Properties Pvt. Ltd. As per this agreement, Melody Complex Pvt. Ltd. was entitled for consideration to be received by Melody Complex Pvt. Ltd. and before March, 2009, Melody Comp....
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....ction can be termed as a transfer giving rise to short term capital gain by referring to Section 2(47) of the I.T. Act r.w.s. 53 of the Transfer of Property Act, 1882. The appellant has also emphasize upon the clauses-5 and 6 of Section 2(47) of the Act and contended that on execution of agreement dtd. 25.3.2009 when the possession was also handed over the transfer within the meaning of Section 2(47)(v) and (vi) was complete. The appellant has also contended that the genuineness of any agreement is not depended upon the actual payment of tax resulted on account of execution of these agreements and first genuineness of the agreements has to be ascertained and then inconsequence of these agreement, if any, tax liability has arisen it is to be fastened upon the right person. The appellant has submitted that according to AO, Melody Complex Pvt. Ltd. has filed NIL return. The Department did not raise any objection in the case of Melody Complex Pvt. Ltd. The appellant has already shown the amount received in his books of account and the AO has also failed to establish that the appellant has received more money for which the additions have been made by him. Further contended that M/s.Melo....
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....e Act was that the capital gain is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. Therefore, it is correctly said that on execution of agreement dtd. 25.03.2009 when the possession was handed over the transfer within the meaning of Section 2(47)(v) & (vi) was complete. 3.9 The one of the ground taken by the AO for rejecting the agreement to sale dtd. 15.09.2008 and 25.03.2009 is that both these agreements s were not registered. If the assessee refuse to honour the agreement dtd. 15.09.2008, the Melody Complex Pvt. Ltd. has a right to get to this agreement enforced by way of suit for a specific performance and the assessee could be persuaded to execute the sale deed in favour of Melody Complex Pvt. Ltd. by virtue of this agreement. The AO has not appreciated this aspect while holding that since the agreements are unregistered, therefore they are nongenuine. An analysis of all the facts and circumstances as well as the judicial pronouncements, I am of the view that agreement dtd. 15.09.2008 and 25.03.2009 are not sham or bogus as held by the A.O. The appellant has cited ....
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....e other hand, submitted in defense that the bonafides of Banakhat entered into with the intermediary namely Melody Complex has not been seen with doubt nor could have been. The assessee has admittedly received earnest money of Rs. 1 Lakh against the proposed sale to Melody Complex. The enforceable right was thus created in favour of the intermediary by virtue of Banakhat. The learned AR next submitted that if the Banakhat with the intermediary is to be disbelieved then the final sale deed with the ultimate buyer (Gatil Complex) is also required to be treated alike where the intermediary as existed by virtue of Banakhat dated 15.09.2008 was part of the sale deed as a confirming party. The learned AR pointed out that the differential amount to the intermediary was paid by the seller to the confirming party directly and not routed through the assessee as pointed out to the AO. The assessee has received cheque only to the extent of consideration receivable by it as per the Banakhat with the confirming party. The learned AR referred to a detailed Banakhat entered into dated 15.09.2008 as appearing at page nos. 35 to 54 of the paper book and submitted that the aforesaid agreement has cre....
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.... gains by the AO where the assessee transferred the right in the land in favour of the Melody Complex vide agreement date 15.09.2008. For this purpose para 3.3(5) / page no.17 of the order of the CIT(A) was referred. The learned AR thereafter referred to the decision of the co-ordinate bench in Smt. Sapnaben B. Patel vs. ITO ITA No. 24114/Ahd/2013 order dated 13.01.2016 and submitted that in the similar facts the issue has been resolved in favour of the assessee by the co-ordinate bench. 12. The learned AR accordingly submitted that the enforceable right created by virtue of agreement to sale dated 15.09.2008 falls within the ambit of expression 'capital asset' and 'transfer' thereof in terms of Section 2(47) of the Act would entail tax liability on the assessee in the year of transfer i.e. 2009-10. It was pointed out that the AO has itself accepted the capital gain arising on such transfer reported in the earlier year and given credit for it while computing the revised capital gains. The learned AR accordingly submitted that the CIT(A) has taken note of long line of judicial precedents as applicable to the facts of the case and has rightly concluded the issue in favour of the ass....
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....computation of capital gain. This Section contemplates that income chargeable under the head 'capital gains' shall be computed by deducting from 'the full value of consideration' received or accruing as a result of transfer, the amounts viz., (i) expenditure incurred wholly and exclusively in connection with such transfer & (ii) the cost of acquisition of asset and the cost of another improvement thereto. Sub-section (1) of Section 50C simultaneously contemplates that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted by an authority of State Government for the purpose of payment of stamp duty valuation, in respect of such transfer, then value so adopted would be deemed to be 'full value of the consideration' received or accruing to the assessee. In other words, the AO will be entitled to replace and substitute the alleged sale consideration by the value on which stamp duty was paid while computing the capital gain at the time of transfer. However, where the jantri value is found higher than the sale consideration agreed, such jantri value shall be replaced by act....
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....e assessee that agreement to sale with Melody Complex has given a right to the proposed buyer (intermediary/confirming party) to obtain the conveyance of the immovable property and therefore is required to be reckoned as capital asset under s.2(14) of the Act. It is further case of the assessee that on receipt of consideration and alienation on possession/enjoyment of land on 25.03.2009 at the time of subsequent Banakhat (tripartite), the transfer in terms of Section 2(47) of the Act is complete, pending actual registration of the sale deed in the subsequent assessment year. In this regard, we take notice of the long line of judicial precedents referred to and relied upon by the CIT(A) and more particularly, the decision rendered by the division bench of Punjab & Haryana High Court in the case of Ram Kishan vs. Bijender Mann. (Second Appeal No. 4946 of 2011) (page no.27 of the order of the CIT(A)), wherein Hon'ble High Court held that while Section 53A of the Transfer of the Properties Act is not a source by which the title of an immovable property can be acquired but it only serves as a shield to the defend ones lawful possession obtained in pursuance of a contract. It was further....