TaxTMI 
TaxTMI 
2021 (12) TMI 764
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....for the purpose of adjudication. ITA No.390/Ahd/2020 - Anil Rambhai Mevada - AY 2015-16 4. The captioned appeal has been filed against the revisional order of PCIT-3, Ahmedabad dated 16.03.2020 passed under section 263 of the Act whereby the assessment order passed by the Assessing Officer (A.O.) dated 30.10.2017 concerning Assessment Year (A.Y.) 2015-16 was sought to be set aside for reframing assessment in terms of supervisory directions. 5. As per its grounds of appeal, the assessee has essentially challenged the justification of revisional action of the PCIT as a consequence of which the A.O. was directed to pass the assessment order denovo after making enquiries and verifications on points set out in the revisional order. 6. A small delay of 45 days in filing captioned appeals before the tribunal is condoned at the request on behalf of respective Assessee having regard to ongoing pandemic situation prevailing in the country at the relevant time. No prejudice is shown to have caused to revenue. The appeals were thus admitted for adjudication on merits at the time of hearing. 7. Briefly stated, the assessee, an individual, filed its original return of income for A.Y. 2015-1....
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....ginal co-purchasers received Rs. 2.85 cr. each out of the sale consideration by virtue of being confirming parties to the sale agreement. The capital gains arising on such receipts for release of rights claimed to be vested by banakhat agreement was worked out to Rs. Rs. 2,66,01,375/- by the assessee. The assessee offered such surplus under the capital gains and availed indexation benefits and concessional tax treatment associated to such long term capital gains. As noted earlier, deduction against such capital gains were claimed under S. 54B of the Act which was withdrawn in the course of assessment and additional taxes were paid thereon. The AO after making enquiries in this regard as mandated under 'limited scrutiny' and after taking relevant documents in the form of banakhat and sale agreement etc. endorsed the claim of capital gains and consequently assessed the income at Rs. 2,12,73,200/ based on the revised computation of income. 9. After the completion of assessment, the PCIT in exercise of his revisionary powers issued show cause notice dated 22.01.2020 under section 263 of the Act requiring the assessee to show cause as to why the impugned assessment so framed under sect....
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....ctly with documentary evidences. 5. Please explain whether the capital gain on transfer of property has been shown correctly with documentary evidences. 6. Please reconcile the 26AS data with the income shown in ITR. 7. Please furnish copies of assessment orders for the last three years. 8. Details of bank accounts operated during the year under consideration along with Reconciliation Statements of each accounts. Bank accounts & Reconciliation Statement: In respect of bank accounts held by you either severally or jointly, please furnish the details of the same along with the copy of bank statement/pass-book and bank book as under: Name of the Bank/Branch A/c. No. Type of A/c Current/CC/ OD/Loan/ Savings Balance as per Bank (Rs.) Balance as per Books (Rs.) Difference, if any interest received during the year(Rs.) In case of difference in the balance, please furnish the bank reconciliation statement along with supporting documentary evidence. 9. It is also requested that the above information may please be furnished para wise, with complete details called for. Book-Bank Statement etc. along with th....
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....upon him in performance of quasi judicial functions. The A.O. has raised appropriate questions on both these points and after taking note of the documents filed before him in support of such claim, has found merit in stance of the assessee. The assessee, on his part, has fully substantiated the claim of capital gains arising on sale of property/rights therein with clinching evidence. Therefore, there was no perceptible reason for the A.O. to interfere with the income offered by the assessee dehors the tangible facts. ii) The PCIT has proceeded to set aside the assessment based on totally irrelevant & extraneous considerations. As contended, it was never the case of the assessee that he was the owner of plot (Survey No.847) giving rise to capital gains of Rs. 2,66,01,375/-. The assessee has all along claimed that while the assessee was not vested with ownership right nor was having the possession of the property, certain rights were accrued to the assessee on account of banakhat dated 25.08.2008 entered into between seller (Shri Kiran D. Patel) and the then proposed purchasers (Shri Dipak R. Bharwad, Shri Dhiren R. Bharwad & the assessee). It is in recognition of the right availab....
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....uation, where the banakhat is deemed to be void and not enforceable as viewed by PCIT, why will the seller part with huge amount to the assessee and other parties. The answer lies in the risk assessment of contracting parties; howsoever absurd such assessment might be. It is the sole wisdom of the transacting parties which will govern the quantum and character of receipt. vi) Such compensation on release of rights to sue in land parcel is clearly a capital receipt. Such compensatory receipts, not being property under S. 2(14) are not chargeable to tax at all and at best can be taxed under the head 'capital gains'. By bringing such non taxable income to capital gain tax, the revenue has not suffered at all. The PCIT completely lost sight of the fact that the compensation received cannot be seen dehors the banakhat rights and hence by no means could be brought to charge under the head 'income from other sources' erroneously concluded by the PCIT. The issue on nature of income is thus not even debatable. What is debatable is the correctness of taxes levied on such capital receipt for which long line of judicial precedents are in favour of the assessee. It is the error committed by t....
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.... of self-evident fact, no adverse conclusion would be possible against any confirming party in law. The assessee has duly declared income and limited ground is assessment under correct head. The action of the assessee to declare the income under the head 'capital gain' is fully supportable without any room for debate. The only debate possible is on the inherent chargeability of such income. Looking from any perspective, the order of the AO is, in no way, either erroneous or prejudicial to the interest of revenue. 14. As regards revision proposed in respect of other land transactions, it was fairly submitted that the assessee has no impending grievance towards the directions given in the revisional order in respect of capital gain arising on sale of land parcels bearing plot no.594/2 and 868/1/2 having regard to the fact that a positive consequential order has already been passed by the A.O. on appreciation of facts and evidences. The issue relating to other land parcels (other than survey no. 847) is thus academic and does not call for adjudication on merits. It was thus submitted that in the absence of any prejudice subsisting at present, the assessee does not seek to press again....
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....ers (Shri Kiran D. Patel) vide sale agreement dated 19.02.2015. The registered sale agreement however, has admittedly recognised the assessee and other two erstwhile co-purchasers as 'confirming parties' to facilitate a peaceful transfer of land parcel in favour of ultimate purchasers. In the process, the assessee and other two co-purchasers have received Rs. 2.85 crores each as compensation for relinquishment of their right to sue demand to arise by virtue of erstwhile banakhat. The assessee has offered the compensation so received in the capacity of a confirming party on sale of land parcel under the head 'capital gain'. The document namely banakhat agreement, sale agreement etc. were produced before the A.O. in the original assessment under limited scrutiny. The A.O. ascertained the quantum of the capital gains declared by the assessee and assessed the income offered by the assessee without any adjustments or realignment. The PCIT, however, in exercise of the revisional powers under section 263 of the Act has directed the A.O. to make property enquiries and verifications denovo on the issue. While setting aside the assessment order the PCIT observed that the A.O. should have tax....
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....onsideration of release of rights arising to him by Banakhat. Hence, the seller and the ultimate purchaser have, rightly or wrongly, perceived strength of such banakhat under general laws and in order to bring quietus to any potential dispute, have taken these co-purchasers onboard as confirming parties, as advised to them. The compensation awarded to the assessee and co-purchasers naturally have direct connect with such subsisting rights perceived by the sellers and purchasers. Compensation so received on release of such right, at best, falls within the ambit of expression of 'capital asset' defined in section 2(14) of the Act. Pertinent to note, the expression 'capital asset' as defined in section 2(14) of the Act of very wide import and connotation. Needless to say, the income emanating on relinquishment of a capital asset would give rise to capital gain as claimed by the assessee. Hence, we do not see potency in the claim of PCIT that such income is chargeable under the head "income from other sources" more so, in exercise of revisional jurisdiction which debars the revisional authority to interfere with a legally plausible view taken by the A.O. The stand of PCIT prima facie a....