TaxTMI 
TaxTMI 
2019 (10) TMI 1166
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..... The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Chennai (hereinafter called "the Tribunal") read as under:- ay: 2008-09: 1. The order of the learned Commissioner of Income tax Appeals-13, Chennai is opposed to law and facts. 2. The learned C.I.T (A) erred in not accepting the appellant's submission that land sold by him was agricultural in nature and the capital gain on its sale was exempt under section 10 (37) (i) of the I.T. Act in as much as the land was not situated in an area referred to in item (a) of sub clause (iii) of clause (14) of section 2 of the Act. 3. The learned C.I.T. (A) erred in not accepting the appellant's submission that the area in which the land was situated had not been notified by the Central Government as an urban area under clause (b) of clause section 2 (14) and for that reason also did not fall within the category of "Capital Asset". 4. The learned C.I.T. (A) erred in not accepting the appellant's submission that the land was sold for Rs. 1,91,50,575/- as per the agreement dated 7.1.2008 and that the sale proceeds together with consideration of Rs. 17,99,425/- for standing....
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....payments were received from the buyers. (Part payment of Rs. 82,00,000 received in the accounting period relevant for Asst. Yr 2008-09 and balance of Rs. 1,27,50,000/- received in accounting period relevant for Asst. Yr 2009-10). 5. The learned C.I.T (A) erred in concurring with the view of the Assessing Officer that the agreement had no evidentiary value as it had not been registered. 6. The CIT (A) erred in not recognizing the well known fact that Guideline Values are different from Market Values and at times they varied widely. In particular he failed to recognize that in this case the registration had been got done for the guideline value which was much lower than its market value. For these and other grounds that may be urged with leave of the Honourable Tribunal it is submitted that the appellate order may be cancelled as not rendering any justice. 2.2 The assessee has also raised additional grounds of appeals for ay: 2009-10 , which reads as under: 1. "The learned CIT(A) erred in not observing that the Assessing Officer had admittedly issued the 148 notice merely on the basis of information received from the Investigation Directorate and not on the basis of any reco....
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.... recorded by the AO and based on averments made , a survey u/s.133A was conducted in the cases of Shri S.D.Settu & Shri Palani on 22.09.2015 , who were purchasers of aforesaid lands from the assessee. The said survey was conducted by ITO, Ward-1, Vellore and ITO, Ward-2, Tiruvannamalai respectively. Consequent to survey u/s.133A in the cases of Shri S.D.Settu & Shri Palani, in order to have corroborative facts, proceedings of the chief examination of the assessee and his cross-examination of Shri S.D.Settu & Shri Palani were conducted on 17.02.2016 . The assessee had claimed that he entered into an agreement to sell dated 07.01.2008, wherein he agreed to sell his land admeasuring acre 25.36 and half cents of land , for a total consideration of Rs. 1,91,50,575/-. The assessee claimed that it received Rs. 50 lacs in cash as advance at the time of entering into an agreement to sell of his land from the purchasers on 07.01.2008. The assessee claimed that out of aforesaid advance of Rs. 50 lacs received as cash on 07.01.2008, the assessee deposited Rs. 45 lakhs in cash with IOB, Girivalam Road, Tiruvannamalai on 08.01.2008 while balance amount of Rs. 5 lakhs of cash was retained by the ....
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....essee had identified nature of receipt, source of funds and persons who had given the said sum of amount to the assessee, provisions of Section 69 of the 1961 Act has no applicability in the instant case. 3.4 The said Shri. S.D.Settu during the course of survey conducted u/s 133A of the 1961 Act on 22.09.2015 , in his statement recorded during survey operations submitted as under: "Q.No.19: Do you know Shri Anthiah Pancras and what is the business relationship between you? Reply of Shri S.D.Settu: I do not know him directly. My business associate Shri Palani of Arani introduced Shri Anthiah Pancras through a broker by name Shri Rasheed Bhai who indicated that there is prospective seller in Anthiah Pancras who is the owner of some lands. Through Rasheed Bhai myself and Shri Palani purchased 23.36 acres of lands in Velapadi Village, Arni Tk on 11-09-2008 through seven separate sale agreements for a consideration of Rs. 23,34,900/-. This did not include any registration charges. Q.No.20: Now I am showing you a copy of the agreement to sell dated 07-01-2008 executed with Shri Antniah Pancras according to which a sum of Rs. 1,91,50,575/- is stated to be agreed consideration. This....
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....3.34 acres purchased we incurred an additional expenditure of Rs. 40 lakhs for converting the same into 250 saleable plots. So far, 50 plots have been sold and the balance 200 plots remains unsold. From the same site we had made a lay-out of additional 450 plots and we are proposing to sell the same through lottery dip." 3.5 During the course of survey conducted by Revenue u/s 133A of the 1961 Act on 22.09.2015, Shri Palani concurred with the statement of Shri S.D.Settu that one Shri Rasheed Bhai introduced the assessee to them and that he purchased 23.36 acres lands in 2008 by availing Rs. 8 lacs as loan from Axis Bank . He further stated that total investment is around Rs. 24 lacs was made for purchase of aforesaid land along with Shri S.D.Settu and Shri Palani. 3.6 The said Shri S.D.Settu and Shri Palani admitted to have purchased the aforesaid land for Rs. 24 lacs along with Mr Palani , but denied consideration of Rs. 1,91,50,575/- having been paid by them for purchasing the aforesaid land. Shri S.D.Settu did not denied the existence of agreement to sale dated 07.01.2008 wherein consideration was stated to be of Rs. 1,91,50,575/- . He also admitted that initially they agreed ....
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....ttu: I do not have any evidence to substantiate that the cheque was given and cheque was returned. However, it is a fact that I had given a cheque and same was returned to me and the relevant bank account cheque leaves were not available with me. Q.No.4 by the assessee: Do you want to say that the agreement dated 07-01-2008 stood cancelled in the light of deposition dated 22-09-2015. Reply of Shri S.D. Settu: Since the agreement to sell dated 07-01-2008 was not subjected to registration I had not chosen to cancel the agreement. In real estate trade practice normally we used to enter into number of agreements and those agreements would remain cancelled due to non pursuance of the deal. I hereby confirm that there is no evidence for deviation of contractual amount from Rs. 1.91 cr. to 23.34 lakhs nor that agreement dated 07-01-2008 was superseded by some other fresh agreement, Q.No.5 by the assessee: I say that after entering to agreement dated 07-01-2008 and upon receipt of Rs. 25 lakhs in cash and Rs. 25 lakhs by way of Andhra Bank cheque before entering to seven absolute sale deeds dated 11-09-2008 you both have given me the following amounts. Date of receipt Amount (Rs.)....
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....l land summoned Shri R.Devaraj, Village Administrative Officer (VAO) , Revenue Department, Government of Tamil Nadu, Velapadi Village, Arani Taluk u/s 131 of the 1961 Act, who stated in an statement recorded that agricultural activities were undertaken on the said land at the time of transfer and there were standing crops of sugarcane, ground nut and paddy and Rs. 500/- was collected as land Revenue. The ld. VAO stated that there were three submersible pump sets for irrigating the lands. It was stated by learned VAO that as per revenue records these lands before transfer were agricultural in nature. He also confirmed that Velapadi Village is situated 1KM away from Arani Town. It was stated by learned VAO that Velapadi Village is not part of the Arani Town and still categorized as rural area, not forming part of Arani Town for administrative purposes. The learned VAO stated in its statement that said buyers Shri S.D. Settu and others after getting possession of the land after registration got the said lands converted into saleable plots for real estate activities. The learned VAO stated that after transfer of the said land, from 2008-09 land revenue at Rs. 250 was collectible which ....
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....ing crops of sugarcane, ground nuts and paddy grown when the lands were transferred , and an excess amount over and above agreed consideration of Rs. 1.91 crores was received from the buyers towards the said standing crop which was deposited in his bank account. The assessee also contended before AO that sale consideration which was received in cash was deposited in his bank account. Further, the assessee contended that statement of learned VAO which was based on revenue records and enquiries made from local villagers is more credible. The assessee contended that on-money is quite prevalent in India in real estate transactions and there is nothing new about the same and that the agreement of sale dated 07.01.2008 clearly evidences that total consideration paid was Rs. 1,91,50,575/- and sale agreement were entered into for Rs. 23.34 lakhs as per guideline value as per registration authorities which was shown by the buyers in sale agreement to evade Income-tax liability and Stamp duty. The assessee contended that buyers have admitted that they agreed to purchase the land for Rs. 1.1 Crs. in their statement recorded before the AO and that they have come out with theory of high tension....
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.... contentions of the assessee that gains arising from sale of these lands by the assessee were exempt under provisions of the 1961 Act because the land was rural agricultural land not liable to tax u/s 2(14)(iii) read with Section 10(37) of the 1961 Act. The AO based on the enquiry with the office of SRO, Arani adopted guideline value for these lands at Rs. 40,000/- per acre in financial year 2000-01, vide assessment order dated 31.03.2016 passed by AO u/s. 143(3) read with Section 148 of the 1961 Act. 4.Aggrieved by an aforesaid assessment framed by AO, the assessee filed first appeal with Ld.CIT(A) who after considering submissions of the assessee, dismissed the appeal of the assessee vide appellate order dated 11.11.2016 by holding as under:- "1 have given careful consideration to the findings given by the AO in the assessment order and the appellant's submissions made during the assessment proceedings, during the appeal proceedings and accordingly the issue is adjudicated as under; The sale agreement dt.7.1.2008 is an unregistered document and stand on the parties to the sale agreement are contrasting. Moreover, such sale agreement is not enforceable and does not have b....
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....stian Priest and utilized the sale proceeds for purpose of constructing school. It was explained that there was an agreement to sale dated 07.01.2008 entered into by assessee with Shri.D.Settu & Shri R. Palani for selling these land for a total consideration of Rs. 1,91,50,575/- with total area of around 25 acres and 36 ½ cents of rural agricultural land. It was explained by learned counsel for the assessee that said agricultural land was purchased by buyers for the purposes of real estate development and after taking possession divided the aforesaid land into plots for re-selling as part of their real estate business, Rs. 50 lakhs was paid by buyers in cash at the time of entering into an agreement to sale dated 07.01.2008 , while balance amount was to be paid of Rs. 1.41 Crs. within six months. It was explained that buyers took more time to pay the amount and part payment was only received in ay: 2008-09 , while balance remaining payments were received in the subsequent year. It was submitted by learned counsel for the assessee that guideline value of the said land was Rs. 1 lacs per acre and buyers finally got registered aforesaid agriculture land in their favour on 11.09....
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....g of the concluded assessment by invoking provisions of Section 147/148 of the 1961 Act , but on being confronted admitted that the assessee did not originally filed return of income with the Department for ay: 2009-10 and it is only on 31.03.2015, the return of income was filed and hence there cannot be any question of change of opinion as in the absence of original return of income, the AO could not have formed any opinion. The assessee also admitted that there were cash deposits of more than Rs. 2 Crs. in his bank account. 5.2The Ld. DR submitted that assessee has deposited Rs. 2 Crs. in his bank account . The learned DR submitted that assessee purchased said land for Rs. 15,000/- per acre in 2000 and further purchased said land in 2006 for Rs. 50,000/- per acre. Now, it is claimed that the assessee sold the said land for Rs. 8 lakhs per acre. She drew our attention to Page No.7 of the Assessment Order and answer to Question No.7 of statement recorded of learned VAO. Our attention was drawn by ld. DR to the statement of the buyers wherein they confirmed having made payment of Rs. 25 laksh in cash and Rs. 25 laksh by cheque . Our attention was drawn by learned DR to English tran....
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....eopening by the AO under the provisions of Section 147/148 of the 1961 Act needs to be upheld. The information received by the AO from Investigation Directorate , Chennai intimating about verifying sources of cash deposits in his IOB bank account was tangible incriminating material coming to the possession of the AO rightly triggering invocation of Section 147 of the 1961 Act. Similar situation prevailed in ay: 2009-10 wherein the assessee filed its return of income only on 31.03.2015 which is much beyond the time prescribed even for filing of belated return of income u/s 139(4) of the 1961 Act and such a return cannot be claimed to be a valid return by the assessee. Thus, even for ay: 2009-10 similar situation had prevailed as was in ay; 2008-09 and we uphold reopening of the assessment by the AO u/s 147 of the 1961 Act for both the ay's viz. ay: 2008-09 and 2009-10. Now proceeding to the facts of the case , it is observed that the assessee had sold acre 25.36 and half cents of land situated at Velapadi Village in Arani Circle. The assessee has claimed that he received consideration of Rs. 1,91,50,575/- from buyers which was claimed by assessee to be evidenced by an unregistered a....
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..... Palani. The Revenue recorded statements of Shri S.D.Settu and Mr Palani during course of survey operations and their cross examination by assessee was allowed by Revenue on 17.02.2016. The buyers Shri S.D.Settu & Shri Palani in their statements recorded before Revenue and their cross examination by assessee, however, admitted to have entered into and signed agreement to sale dated 07.01.2008 with the assessee for purchase of aforesaid land. They also admitted that witnesses as are mentioned in this agreement dated 07.01.2008 were genuine witnesses, one of the witnesses was brother of one of the buyer Mr Palani. The stamp papers for this agreement to sale dated 07.01.2008 was also admittedly bought by Mr Palani, the buyer. The final sale agreement for transfer of these land was entered into on 11.09.2008 for a total consideration of Rs. 23.34 lacs which happened to be guideline value of the property as notified by registering authorities . The buyers also admitted that initially they agreed for consideration of Rs. 1.10 crores for purchasing said land but later on they found that there are high tensile power towers and cable going through the land , lake was around the land and ....
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....tate activities and land revenue of Rs. 250 is collectible from the buyers which remained unpaid. The learned VAO is a government official employed by State of Tamil Nadu and his aforesaid averments recorded in statement were based on government records and cannot be lightly brushed aside. These government records are maintained in normal course of conduct by government authorities and presumption unless rebutted is that these records are true and correct. The learned VAO also stated that buyers spent approx. Rs. 40 lacs after purchase of the said land for leveling the land to make it fit for real estate activities which were then recognized as lay-outs by Arani Panchayat. The learned VAO also stated based on his enquiry with the villagers that there was some price increases of the land in that area in the year 2008 due to increased market activities and that the land value should be around Rs. 3 lacs per acre based upon his enquiry with villagers . The learned VAO no doubt also stated that price of Rs. 8 lacs per acres is on higher side and this land cannot fetch this much higher price. The buyers have denied to have paid Rs. 50 lacs in cash at the time of signing of the agreement....
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....tion to be Rs. 1.91 crores, This differential reflects payment of on-money for acquiring the aforesaid property which is quite prevalent in India in real estate transactions. The buyers are now coming out with story of adverse features in the said land such as high tension tower and power cables running through the land , lakes and refugee camps around the land. It is unbelievable that the buyers did not see the land before entering into an agreement to sale dated 07.01.2008 and made advance payment of Rs. 50 lacs without even seeing the land. It is also highly unbelievable that the sellers agreed for reduced consideration of Rs. 23.34 lacs as against consideration of Rs. 1.10 crores as itself admitted by buyers of the said land whence the buyers brought to notice of the assessee as to adverse features in the said land. Even if we go with the version of buyers that they initially agreed for consideration of Rs. 1.10 crores for acquiring the aforesaid property, no seller will renegotiate the said land for paltry amount of Rs. 23.34 lacs as against original agreed consideration of Rs. 1.10 crores which was itself admitted by buyers to have initally agreed upon. If we go with the ver....
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....under the circumstances cannot be ignored rather the said agreement to sale dated 07.01.2008 was duly acted upon and consideration moved based on said agreement dated 07.01.2008 which finally found its way into assessee's bank account with IOB by way of cash deposits. It is not an mere incident or a chance that the said property was registered at value which is the guideline value , but rather it was a carefully and well planned crafted device/mechanism to evade taxes and deprive authorities of their legitimate dues of taxes and stamp duty . Even , learned VAO has also stated in statement recorded before the AO based on his enquiries with the villagers that the market price was around Rs. 3 lacs per acre at that point of time of the land in that area as there was increased market activities in the year 2008 and not Rs. 1 lacs per acre as is recorded in the sale deed dated 11.09.2008. The learned VAO has also stated that this land however could not fetch Rs. 8 lacs per acre at that point of time. The learned VAO has given such statement based on enquiries with the villagers and not based on any government records and has also prayed that this statement of his should not be used agai....
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....t) Act, 2001 w.e.f. 24.09.2001. There were simultaneous amendments made in Section 53A of The Transfer of Property Act, 1882. Thus, this unregistered agreement of sale dated 07.01.2008 shall not affect the immovable comprised therein as is provided in amended Section 49 of the Registration Act, 1908 and hence the transfer shall be deemed to be completed only in ay: 2009-10 when the registered sales deed stood executed by the assessee in favour of the buyers on 11.09.2008. The assessee has received payments towards consideration of sale of land both in ay: 2008-09 and 2009-10. However this agreement to sale dated 07.01.2008 is admissible as an evidence of sale consideration of Rs. 1.91 crores stipulated therein. The assessee has also claimed that payments to the tune of Rs. 82 lacs were received in previous year relevant to ay:2008- 09 while rest of the consideration was received in previous year relevant to ay: 2009-10. Thus, we hold that capital gains arising on transfer of said land shall be brought to tax only in ay: 2009-10 when the registered sales deed stood executed. The decision of Hon'ble Supreme Court in the case of CIT v. Balbir Singh Maini dated 04.10.2017 in Civil Appe....
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....r shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. 48. Mode of computation - The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely: (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto:" 18. Section 53A, as is well known, was inserted by the Transfer of Property Amendment Act, 1929 to import into India the equitable doctrine of part performance. This Court has in Shrimant Shamrao Suryavanshiv. Pralhad Bhairoba Suryavanshi [2002] 3 SCC 676 stated as follows: "16. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53-A of the Act. The necessary conditions are: (1) there must be a contract to transfer for consider....
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....No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument." 20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was righ....
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....e said land was an agricultural land as agricultural operations were duly carried on by assessee on the said land at the time of transfer/sale . It is already stated on oath by learned VAO based on government records as well evidenced through various government records produced by assessee that agricultural operations were carried on in that land when the transfer/sales took place. The VAO also confirmed based on government records that there was standing crops of sugarcane, ground nut and paddy and Rs. 500/- was collected as land Revenue. The ld. VAO stated that there were three submersible pump sets for irrigating the lands. This contention of the assessee also stood accepted on the touchstone of preponderance of probabilities that the consideration received over and above the sale consideration of Rs. 1.91 crores mentioned in agreement to sale dated 07.01.2008 was towards standing crops . However, so far as whether the assessee is entitled for exemption on sale of aforesaid agricultural land within the provisions of Section 10(37) read with Section 2(14)(iii) of the 1961 Act is concerned, we are of the considered view that this issue requires re-consideration by learned Assessin....