AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2022 (12) TMI 689
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Your appellant, therefore, requests Honorable IT AT to consider the deed executed on 30-07-2015 as cancellation of the deed and not the purchase deed and thereby consider the transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/ s 54 of the IT Act, 1961. 2. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts by not accepting the fact that your appellant has occupied the property till the date of sale in 2015 and there were no transfer at all to the daughter in the year 2006 and hence the question of repurchase of the property was never arise. Your appellant, therefore, requests Honorable ITAT to consider the entire transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/s 54 of the IT Act, 1961. 3. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts in upholding that your appellant had entered into a sale agreement with her daughter for the entire propert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r making payment of full sale consideration and also obtained Share Certificate in her name. Hence property was transferred to the daughter with all rights to use the property along with possession of the said property. 4. The assessee was of the view that when property was purchased by the appellant in 01.01.1979, total area of property was 302.86 sq. mtr. which included constructed area of 66.92 sq. mtr. and extra land of 235.94 sq. mtr. Subsequently, additional area of 133.72 sq. mtr. was constructed in the year 1982-83 and total constructed area came to be 200.64 sq. mtr. (133.72 + 66.92- refer page 151-154 of Paper-Book). Finally total area of property was 302.86 sq. mtrs. out of which constructed area was 200.64 sq. mtrs. and vacant land was 102.22 sq. mtr. Thereafter, when conveyance deed was registered by Gujarat State Housing Board on 05.08.1986, land area was erroneously mentioned as 66.92 sq. mtrs. only. Notably, even in sale deed executed with the daughter of the assessee, land area was mentioned as 66.92 sq. mtr instead of total land area of 302.86sq. mtr. Due to this error, the appellant stated that there was no clear title in the hands of the daughter of the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erved that the issue under consideration is whether sale deed executed between the appellant and the daughter can be cancelled and in case of cancellation of such deed whether ownership of property will vest with the appellant as on the date of cancellation of sale deed (30.05.2015) or shall be revoked from the date of original purchase of such property (10.10.1986). It is observed that where sale deed is executed and registered, the owner completely loses his right over the property and the purchaser becomes the absolute owner. It is observed that any registered deed cannot be nullified by executing deed of cancellation since by execution and registration of sale deed, the properties are vested in the purchaser and cannot be divested by mere execution of a deed of cancellation. Hence once sale deed is registered and rights in a property are transferred along with possession, such transaction cannot be cancelled in any circumstances. The following decisions relied by the Assessing Officer are duly applicable to the facts of the present case: (i) Binny Mill Labour Welfare House Building Co-operative Society Ltd. vs. D.R. MruthyunjaAradhya - (ILR 2008 KAR 2245), it has been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e nullified by execution of a deed of cancellation because by execution and registration of a sale deed, the properties are being vested in the purchaser and the title cannot be divested by mere execution of a deed of cancellation. Therefore, even by consent or agreement between the purchaser and the vendor, the said sale deed cannot be annulled. If the purchaser wants to give back the property, it has to be by another deed of conveyance. If deed is vitiated by fraud or other grounds mentioned in the Contract Act, there is no possibility of parties agreeing by mutual consent to cancel the deed. It is only the Court which can cancel the deed duly executed, under the circumstances mentioned in Section 31 and other provisions of the Specified Relief Act, 1963. Therefore, the power to cancel the deed vests with a Court and it cannot be exercised by the vendor of a property. After execution and registration of the sale deed, the BDS cannot determine the validity of the sale deed. It can neither execute a cancellation deed unilaterally. It the BDS is of the view that the sale deed executed by it is contrary to law, it has to approach the Civil Court for its cancellation as perovided unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract ; Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. " 5.6 Under Section 2(47) of the Act, "transfer" is an inclusive definition and therefore it extends to events and transactions which may not otherwise be 'transfer' according to its ordinary popular natural sense; the definition also mentions such transaction as sale, exchange etc to which the word "transfer" would properly apply on its popular and natural import. Thus a reading of Sections 5 and 53-A of the Transfer of Property Act, 1882, shows that part performance is assumed where any person contracts to transfer for consideration, any immovable property and in pursuance of which possession is handed over to the other party towards part....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istration Act, 1908. The Allahabad High Court held that Registering Authority cannot annul sale deed and made the following observations in the case: "That unless and until there is an express provision in the Act or in the Rules, no Government Order could be issued giving power to a Registering Authority to annul a document on the administrative side. Such powers given would he. wholly arbitrary and against and against the provisions of the Act. That the State Government cannot, while taking recourse to the executive power of the State under Article 162, deprive a person of his property. Such power can be exercised only by authority of law and not by a mere executive fiat or order. That the language of Article 162 clearly indicates that the powers of the State executive do extend to matters upon which the State Legislature is competent to legislate and are not confined to matters over which legislation has been passed already. Where a particular subject is regulated by a legislative enactment, the field is said to be covered by such statute. In such matters and on such subjects the executive powers is circumscribed. That the executive exercising....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y subsequent to the assessment year and what we are concerned for the purpose of the Act is the transactions which took place during the assessment year. The fact that the contract was subsequently terminated on mutual consent will not improve the case of the assessee to wriggle out of the purview of section 2(47) of the Act and the liability to pay tax on short-term capital gains under section 45 of the Act. 18. Here, to dispel any reasonable doubt which may arise, we extract below one of the conditions stated in Shrimant Shamrao Suryavanshi case (supra) "(6) the transferee must have performed or be willing- to perform his part of the contract." Here the agreement was rescinded between the parties but long after the assessment year in which, the agreement was entered into and possession handed over. At least when the returns were filed there was a right conferred on the transferee as per section S3A of the Transfer of Property Act. The transferor though subsequently was absolved from the rigour of section 53A ; in the close of assessment year was obliged to return the capital gains as per section 2(47)(v) of the Income-tax Act. The Income-tax Act by the definition clause ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... valid transfer within the meaning of section 2(47) of the Act. 5.13 In view of above facts and findings of various judicial authorities, it is held that property was transferred to the daughter of the appellant vide registered Sale Deed dated 16-01-2006 and cancellation of such sale deed subsequently shall not invalidate the transfer which took place in 2006. Hence the owner of the property from 16.01.2006 till 15.07.2015, being the date of cancellation of sale deed, was the daughter of the appellant. On the date of cancellation of original sale deed, the appellant became the rightful owner of the property once again from such date being 15.07.2015 and not from the original date of transfer of property by the Gujarat Housing Board in F.Y. 1986. In case of subsequent sale made on 09.10.2015, for computing period of holding, date of purchase shall be considered as 15.07.2015. It is on the date of cancellation of original sale deed that the appellant became the owner of the property. Before such cancellation, all the rights, title, interest, possession etc was enjoyed by the daughter of the appellant. The fact that property was owned by the daughter from 2006 till 2015 canno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the sale deeds executed on 05.08.1986 and 16.01.2006. When the appellant has herself accepted the fact that area has been erroneously mentioned, there is no force in the argument that only such part shall be considered as transferred to the daughter and not the balance area of 235.94 sq mtr more particularly when sale consideration offered was for entire area of 302.86 sq mtr. Hence such argument of the appellant is rejected 5.17 It is further observed that for cancellation of original sale deed, the appellant has paid stamp duty of Rs. l,35,300/-. The appellant has argued that stamp duty has been paid by mistake. Instead of buying a stamp paper of denomination of Rs. 100/-, the appellant mistakenly paid the stamp duty of Rs. 1,35,300. On knowing its mistake, the appellant applied for refund of such duty but since application was made after the expiry of specified time limit, no refund was granted to the appellant. I do not find force in the argument of appellant. It is difficult to accept that huge amount of stamp duty of Rs. 1,35,300/- would be paid on a mistaken belief. I find merit in the argument of the Assessing Officer that payment under the "Stamp Act" is requ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such date. In the circumstances, the resultant income on sale of property is required to be taxed as Short Term Capital Gain in the hands of appellant. Since property is held for less than 36 months and such gain is short term gain, the appellant is not liable to claim deduction u/s 54 of the Act. Hence, addition made by Assessing Officer on account of short term capital gain of Rs.2,26,85,000/- is upheld and related ground of appeal is dismissed." 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) dismissing the assessee's appeal. In appeal before us, the counsel for the assessee argued that in the instant set of facts, since the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled by way of a cancellation deed dated 30-07-2015, it has to be presumed that the sale of property by the assessee is a long-term gain, since property was in possession of the assessee since 05-08-1986. The counsel for the assessee drew our attention to copy of "cancellation deed " at pages 173-182 of the paper book and submitted that since the deed was cancelled, therefore, the sale of property by the assessee was to be treated as long-term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled. (2) If the instrument has been registered under the Indian Registration Act, 1908 (16 of 1908), the court shall also send a copy of its decree to the officer in whose office the instrument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation." 7.1 A perusal of the above provisions shows that there is no legal capacity for two parties to a transaction entered by way of registered deed to cancel the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty of Rs. 1,35,300/-. This also clearly indicates of the fact that the subsequent "cancellation" deed is only a fresh transfer by the daughter in favour of the assessee by way of a fresh transfer/sale deed upon the payment of full stamp duty. Accordingly, in our view....