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TaxTMI 
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TaxTMI 
2023 (6) TMI 113
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....the parties, the appeal being ITA no. 802/Mum./ 2023 (in Mahendra Corporation) is taken up as a lead case, since the addition in this appeal has been made on a substantive basis, while in other appeals the addition is on a protective basis. ITA no. 802/Mum./2023 Assessee's Appeal - A.Y. 2011-12 (Mahendra Corporation) 3. In this appeal, the assessee has raised the following grounds:- "1. The Commissioner of Income Tax (Appeals) -50, Mumbai (hereinafter referred to as "the CIT(A)"] erred in upholding the action of the Assessing Officer [hereinafter referred to as "the AO"] in reopening the case of the assessee u/s 147/ 148 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] without appreciating that where an assessment is pursuant to search proceedings. assessment ought to be made with recourse to procedure laid in section 153A of the Act. Accordingly, the impugned reassessment proceedings and the reassessment order u/s 143(3) r.w.s 147 of the Act is bad in law and liable to be quashed: 2. The AO/CIT(A) failed to appreciate that the sum of Rs. 135 crores received-by the assessee was a capital receipt and not chargeable to tax and accordingly reopening the case o....
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....h Holdings Private Ltd, and the assessee in lieu of foregoing interest in the property named "Villa Nirmala" at Carmichael Road, Mumbai. In the year 1974, the assessee had entered into an agreement to purchase the said property vide agreement dated 20/12/1974. However, the seller had conveyed the said property to the tenants, instead of the assessee, by a registered deed of conveyance dated 03/05/1975. Subsequently, R A Realty Ventures Private Limited, the builder, entered into an agreement with the tenants/their heirs to transfer the property to the builder. This resulted in a legal dispute between the assessee and R A Realty Ventures Private Limited over the said property. In order to settle the dispute between the parties, the terms of settlement were set out in the original consent decree dated 28/01/2011. On the basis of information received from the Investigation Wing, Mumbai regarding the aforesaid search and seizure action, proceedings under section 147 of the Act were initiated in the case of the assessee, and notice under section 148 of the Act was issued to the assessee on 30/03/2018. In response to the said notice, the assessee filed its return of income on 18/05/2018 d....
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....submissions of the assessee and held that filing a suit for specific performance and/or damages against the original vendor has its basis in the original agreement dated 20/12/1974. By referring to Clause No.24 of the consent decree dated 28/01/2011, the AO held that the assessee agreed to forgo its rights/interest in the property in return for monetary payouts. Further, it was held that there is no mention of consent terms having been agreed in lieu of any right to sue and in fact, all the monetary payouts by R A Realty to the partners of the assessee were for foregoing the interest in the property "Villa Nirmala". Accordingly, the AO held that capital gain arose to the assessee on account of the transfer of its interest in the immovable property, which it acquired by way of a purchase agreement dated 20/12/1974. By referring to Clause No.10 of the consent decree dated 28/01/2011, the AO held that the assessee should have offered the capital gains for tax on relinquishment of its rights in favour of its partners in the previous year relevant to the assessment year under consideration, which the assessee firm has not offered. Thus, the assessee firm has neither offered capital gain....
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....s 28-46, it was also agreed that the assessee shall pay an advance of Rs.27,500 upon execution of the agreement. It is undisputed that the said advance payment was duly paid by the assessee to the vendor of the property. In Clause No. 14 of the aforesaid agreement, it was also agreed that in the event of the sale being not completed due to any wilful delay or default on the part of the vendor, the assessee, inter-alia, can file a suit for specific performance and/or damages against the vendor. However, on 03/05/1975, inspite of the Agreement to Sell with the assessee, the vendor decided to sell the aforesaid property to its tenants. In this regard, the vendor, i.e. Shrimant Maharaj Kumar Khanderao Shivajirao Gaekwar executed a conveyance deed dated 03/05/1975 conveying the property "Villa Nirmala" in favour of its tenants. From the perusal of the said conveyance deed dated 03/05/1975, forming part of the paper book from pages 50-58, it is evident that the purchasers, i.e. the tenants, were granted the right to possession of the property "Villa Nirmala", free from all charges. Pursuant to the aforesaid Deed of Conveyance, the property was transferred to the tenants, and the property....
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....or specific performance of Agreement of Sale dated 20th December 1974 for the relief/s more particularly set out therein." 14. Further, the reliance has also been placed, inter alia, on Clause No.24 of the consent terms dated 28/01/2011, which reads as under:- "In view of the above settlement recorded in the Consent Terms, the Plaintiff hereby release and relinquish all claims in Suit No. 70 of 1978 and/or in respect of the Suit Property." 15. Before proceeding further, it is pertinent to note that vide agreement dated 20/12/1974 entered into between the assessee and the vendor, the assessee only agreed to purchase and the vendor agreed to sell the property, i.e. Villa Nirmala, free from all encumbrances. This aspect is sufficiently evident from Clause No. 1 of the aforesaid agreement, on page 31 of the paper book. Thus, the agreement dated 20/12/1974 was not a Sale Deed, rather it was an Agreement to Sell, which was entered between the assessee and the vendor. This fact is further substantiated by Clause No.10, on page 39 of the paper book, which specifically provides that the sale shall be completed within 60 days from the date hereof. Thus, the question of transferring/selli....
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.... in this case, is something which will be the substitution for the original relief. It is in lieu of specific performance. There is no right then to claim the property but to be compensated for breach of an agreement to transfer the immovable property and in future. Once such a transfer cannot be obtained as the Decree for specific performance has been refused, then, the receipt of monetary sum cannot be taxed as claimed by the Revenue. This is apparent from a reading of paras 8 and 9 of the Division Bench Judgment. In these circumstances, the reliance placed on another Division Bench Judgment of this Court need not be considered. 26. In the present Appeal, the Tribunal failed to note that in this case as well the specific performance of the agreement was refused. It is erroneously held that the claim of the Assessee regarding specific performance had never been rejected by this Court. A reading of the order passed by the Division Bench leaves us in no manner of doubt that such a Decree was expressly denied. The Consent Terms may constitute an agreement or contract between the parties, however, a Consent Decree is passed after the agreement is placed before the Court and the Cour....
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....hat right got extinguished once the specific performance was refused. Even if the refund of earnest money or compensation is the relief granted, it is apparent on a reading of the Specific Relief Act, 1963 that the Court has power to grant relief of possession, partition or refund of earnest money if any person sues for specific performance of a contract for the transfer of immovable property. That power is to be found in section 22 of the Specific Relief Act, 1963. By section 21, the Court has a power to award compensation in certain cases and by sub-section (1) thereof, it is clarified that in a Suit for specific performance of a contract, the Plaintiff may also claim compensation for its breach, either in addition to, or in substitution of such performance. When such relief is claimed in substitution of performance, then, by virtue of sub-section (2) of section 21, the Court can award the Plaintiff compensation even if it decides the specific performance ought not be granted. However, there are specific provisions which the Plaintiff must comply with. Eventually, the jurisdiction to decree specific performance conferred in a Court is discretionary and it is not bound to grant su....