TaxTMI 
TaxTMI 
2019 (10) TMI 1166
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....r ay: 2008-09 and 2009-10 respectively . 2. 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 th....
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....roceeds together with consideration of Rs. 17,99,425/- for standing crops were deposited into the bank account as and when the installments of 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 th....
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....2008 and 9418 of 2008 , with aggregate sale value of Rs. 23,34,900/- for the aforesaid land. When the assessee appeared before the AO on 07.08.2015, a sworn statement of the assessee was 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 ....
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....t liable for incometax keeping in view provisions of Section 2(14)(iii) r.w.s. 10(37) of the 1961 Act and no income-tax is exigible on the said sum received by the assessee. The assessee also contended that since the assessee 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 in....
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....We do not have sufficient financial resources. In fact we had given him only Rs. 23.34 lakhs. In the land so acquired there were no agricultural produce nor agricultural activity was carried on. It is incorrect to suggest that the lands were agricultural in nature. Out of the 23.34 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 c....
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....ated we approached Shri Anthia Pancras and sought for refund of the amount As per my reply at the time of survey I reiterate that he returned the cheque. Q.No.3 by the assessee: Can you substantiate your claim that Shri Anthiah Pancras returned the cheque of Rs. 25 lakhs by documentary evidence Reply of Shri S.D. Settu: 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....
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....at your statement is incorrect and false. Please explain. Reply by Shri S.D. Settu: I deny the existence of agricultural activity thereon. We did not pay any compensation as claimed by you. When we visited the site we did not notice any agricultural produce or activity. I standby what I deposed on the date of survey u/s 133A. 3.8 The AO in order to verify assessee's claim that the land transferred were agricultural 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 s....
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....t cash received were deposited in his bank account maintained with IOB and it is only for the purposes of registration with the registration authorities, the said buyers along with Shri R.Purushothaman, Vellore, with a view to evade stamp duty and Income-tax got the said land transferred for a nominal consideration of Rs. 23,24,900/- which was the guideline value of the said land. The assessee also contended that there is a standing 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 p....
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.... of the said land. The AO also observed that this unregistered sale agreement does not contain any endorsement relating to the payment of cash made/received by respective parties. The AO observed that assessee had failed to explain sources of amount deposited in bank account and since sources are not explained with evidences , these cash deposits are treated as an unexplained investments u/s.69 of the 1961 Act. The AO also rejected 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:- ....
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.... 5.Aggrieved by appellate order dated 11.11.2016 passed by Ld.CIT(A), the assessee has filed this appeal before tribunal . The ld. Counsel for assessee submitted that the assessee sold his rural agricultural land at Velapadi Village, Arni Circle, Thiruvanammal District for a total consideration of Rs. 1.91 crores and amount was received in cash from the buyers which stood deposited in his bank account maintained with IOB. It was submitted that assessee is a Christian 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.....
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....ame was executed in ay: 2009-10 , on 11.09.2008. It was submitted by learned counsel for the assessee that Rs. 10 lakhs was paid for standing crops on the said land on the date of transfer . It was submitted that since the land was an agricultural land , the consideration cannot be brought to tax u/s.10(37) of the Act. The learned counsel for the assessee submitted that assessee has raised additional ground of appeal in ay:2009-10 challenging validity of reopening 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 purchase....
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....ount with IOB which information was passed on by Investigation Directorate, Chennai to the AO to verify sources of cash deposits and under the present factual matrix is an incriminating material in itself dehors the fact that no return of income was filed by the assessee originally for the impugned assessment year u/s 139(1) or 139(4) of the 1961 Act, rightly triggering invocation of provisions of Section 147 of the 1961 Act by the AO and in our considered view the reopening 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 prev....
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....8 of 2008, with aggregate sale value of Rs. 23,34,900/- for the aforesaid land. The said consideration stated in sale deed was guideline value notified by registering authorities. While entering into sale deed one more person also joined Mr. S.D.Settu and Mr Palani as buyer of the said land. The assessee's sworn statement was recorded by the AO on 07.08.2015 and based on averments made by the assessee , a survey action u/s 133A was conducted by the concerned AO's on 22.09.2015 on Mr. S.D.Settu and Mr. 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 a....
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.... three submersible pump sets for irrigating the lands. The ld VAO confirmed that sugarcane, ground nuts and paddy were grown in the said land at the time of transfer. The learned VAO confirmed that there was standing crop of sugarcane , ground nut and paddy grown on the said land at the time of transfer. The learned VAO also confirmed that land revenue of Rs. 500 was collected from the assessee. The learned VAO stated in his statement recorded by Revenue that the buyers got the land converted for real estate 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 learn....
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.... complete factual matrix of the case and on the touchstone of preponderance of probabilities, the buyers in order to wriggle out from the adverse and penal consequences arising under the provisions of the 1961 Act as well applicable stamp duty laws , owing to under-declaring of the value of property at Rs. 23.34 lacs at guideline value vide sale deeds dated 11.09.2008 as against actual value of Rs. 1.91 crores of the said land reflected in agreement to sale dated 07.01.2008 are denying the sale consideration 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 crore....
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....Mr. Palani.. Thus based on material on record on the touchstone of preponderance of probabilities, we are of the considered view that the assessee is telling a true version that consideration shown to have been reflected in sale deed dated 11.09.2008 was lower amount of Rs. 25.34 lakhs by the buyer with a view to evade stamp duty and income tax by the buyers while the real and actual sale consideration of the said property was Rs. 1,91,50,575/- as is reflected in the agreement to sale dated 07.01.2008 which 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 ....
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....s to the assessee to the tune of Rs. 50 lacs in cash on 07.01.2008 under said unregistered agreement dated 07.01.2008, provisions of Sec.2(47)(v) read with Section 45 of the 1961 Act cannot get attracted and transfer will not be deemed to be completed for the purposes of leviability of income-tax on capital gains earned by the assessee on the sale of land in the ay: 2008-09 owing to amendment in Section 17 and 49 of the Registration Act, 1908 by amendments brought by Registration and Other Related Laws( Amendment) 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 o....
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.... taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. 45. Capital gains - (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year 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 ....
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....ion not required to be effected by a registered instrument. Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus: "17(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." "49. Effect of non-registration of documents required to be registered. 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 Tra....
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....e said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no "transfer" can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question." We based on our above discussions also hold that the 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....