TaxTMI 
TaxTMI 
2023 (11) TMI 277
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....e in the facts of the present case. The impugned order has been passed on a mis-appreciation of the facts of the case and the legal provisions and is therefore liable to be set aside. (B) The CIT(A) erred in upholding the order of the AO to re-open the present case, in as much as, all the primary and material facts for framing the assessment under Section 143(3) of the Act were before the CIT(A) and therefore there was no escapement of income as contemplated under the provisions of Section 147 of the Act. Further, the fact that the sale of property at Peddar road had not taken place. was before the Learned CIT(A). The re-opening of assessment is therefore bad in law and needs to be set aside. (C) The CIT(A) erred in upholding the order of the AO, in as much as, it is settled law that re-opening proceedings cannot be initiated to verify the same details and facts as produced discussed and decided upon at the time of the original assessment. There has to be tangible evidence to do the same and in the facts of the present case. There is a complete absence of tangible evidence to initiate re- assessment proceedings. (D) The CIT(A) erred in upholding the order....
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....of Long Term Capital Gain of Rs. 49,50,11,429/-. (I) The Learned C.I.T.(A), erred in confirming the order of the AO on addition of the advances received of Rs. 51,00,000 without appreciating the facts of the case that the above amounts were disputed and litigation proceedings were going on in respect thereof. The amount is liable to be refunded pending the decision of the Court. The same could not be therefore taxed in the hands of the Appellant. (J) The Learned C.I.T.(A), erred in confirming the order of the AO on addition of the advances received of Rs. 19,60,000 without appreciating the facts of the case that the agreement is entered into but the same is not yet duly signed by all the parties to the agreement. (K) The Learned C.I.T.(A), erred in confirming the order of the AO in not reducing the cost of Rs. 10.29,700/-, appearing on the stock of Inventory in Annexure III while treating the advance of Rs. 19,60,000/- received towards Versova property. (L) The CIT(A) erred in not adjudicating the additional grounds raised before him by the Appellant on the ground that the same did not arise out of the order passed before AO, without appreciating....
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....ereafter, notice under Section 142(1) and 143(2) were issued and served on the Appellant. Vide order dated 30.03.2014, passed under Section 143(3) read with Section 147 of the Act, the Assessing Officer computed income of the Appellant at INR 50,22,52,930/- after making addition of Long Term Capital Gains of INR 49,50,11,429/-, and addition of INR 70,60,000/- in connection with the advance of INR 51,00,000/- and INR 19,60,000/- received and retained by the Appellant as non-refundable advance relating to sale of properties. 4. Being aggrieved, the Appellant preferred appeal against the Assessment Order, dated 30.03.2014, before the CIT(A) which was dismissed, and therefore, the Appellant has preferred the present appeal on the grounds/additional ground reproduced in paragraph 2 to 2.1 above which are taken up hereinafter in seriatim. Ground No. (A) to (D) along with Additional Ground No. 1 5. By way of Ground No. (A) to (D) the Appellant has challenged the jurisdiction of the Assessing Officer to frame assessment under Section 143(3) read with Section 147 of the Act. 5.1. We have considered the rival submissions and perused the material on record. On going through the re....
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....not be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woolle....
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....er to take steps under Section 143(3) of the Act would not render the Assessing Officer powerless as the Assessing Officer would be free to initiate proceedings under Section 147/148 of the Act provided the ingredients of Section 147 of the Act are fulfilled. At the stage of issue of notice, what is required to be considered is whether the Assessing Officer had the relevant material on which a reasonable person could have formed requisite belief that income has escaped assessment. Whether the materials would conclusively prove the escapement of income and/or whether the material is sufficient or not does not require consideration at that stage. In our view, in the facts and circumstances of the present case, the Assessing Officer had sufficient tangible material to form belief that income has escaped assessment for the Assessment Year 2009-10. Further, in our view, the provisions contained in Clause (b) of Explanation 2 to Section 147 of the Act would also get attracted in the case of the Appellant and income would be deemed to have escaped assessment. Thus, we hold that the order passed by CIT(A) on this issue does not suffer from any infirmity. Ground No. (A) to (D) as well as ad....
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....alance Sheet as on 31.03.2009, the amount of INR 5.51 Crores and INR 45 Crores were shown as advance received towards sale of the Property. Further, the cheques of INR 4 Crores and INR 5 Crores, which were returned to the sister concerns i.e., Raja Ramdev Associates and M/s. Meera Homes respectively, along with an amount of INR 36 Crores was shown under the head 'Loans and Advances'. After 2009, as the Purchaser was unable to repay the balance amount of INR 45 Crores, and the 5 Cheques of INR 9 Crores were returned, only an amount of INR 5.51 Crores was reflected as advance towards sale of Property. She submitted that since the balance consideration of INR 45 Crores was never actually received by the Appellant from the Purchaser, the Assessing Officer erred in taking the entire consideration of INR 50 Crores while computing the capital gains income in respect of the alleged transfer of the Property. 6.3.1. She further submitted that the Purchaser failed to make the payment of balance consideration and comply with the Consent Terms, and therefore, an Agreement for Cancellation of Sale, dated 20.09.2008 (hereinafter referred to as the 'Cancellation Agreement') was executed....
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....e Cancellation Agreement was placed before the Assessing Officer just 4 days before the time barring of the assessment proceedings (i.e. on 27.03.2014). When confronted by the Assessing Officer regarding the delay in furnishing the Cancellation Agreement, the Appellant cited health conditions, demise of his wife and pendency of court cases in disputes with the tenants. The Ld. Departmental Representative submitted that the Appellant had changed his stand during the assessment proceedings to avoid tax liability and produced the alleged Cancellation Agreement as a matter of afterthought as till 27.03.2014 the Appellant had not even mentioned about Cancellation Agreement. Referring to the Agreement for Sale, she submitted that the Agreement for Sale did not provide any details of pending disputes with the tenants even though the Appellant had contended that he was tied up in disputes with the tenants. She also pointed out that the Appellant had expressed inability to produce the partner of the Purchaser-firm before the Assessing Officer. Referring to the observations of the Assessing Officer in paragraph 5.12 of the Assessment order, she submitted that the Assessing Officer had rightl....
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....llant, more so when the books of the Appellant are unaudited. 6.4.3. The Ld. Departmental Representative opposed the admission of the additional evidence being copy of Property Card produced by the Appellant as additional evidence under Rule 29 of the Income tax (Appellate Tribunal) Rules, 1963, to substantiate that the ownership of the property is still lying with the Appellant. She submitted that the Appellant had failed to provide cogent reasons for not furnishing the aforesaid Property Card before Assessing Officer or the CIT(A). According to her, the non-submission becomes more glaring when considered in light of the fact that the Appellant was made aware of the reasons for reopening by the Assessing Officer vide letter dated 03.07.2012. Hence, she submitted the same may not be admitted at such a later stage. 6.4.4. In view of the above, she submitted that there was clearly transfer of Property in terms of Section 2(47)(i) of the Act. However, without prejudice to the above, she submitted that the provisions of Section 2(47)(v) of the Act were also attracted since the same did not require transfer of the Property. She submitted that the transaction between the Appellant ....
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....ice the Appellant had no right title or interest in the Property was manifestly wrong. The Assessing Officer and the CIT(A), relying upon the aforesaid public notice, incorrectly concluded that possession was given to the Purchaser without even confronting the Appellant with the same. She reiterated that there was no transfer as contemplated under Section 2(47) of the Act read with Section 53A of the TPA and hence, the computation of Long Term Capital Gains of INR 49,50,11,429/- and the addition thereof to the total income of the Appellant was erroneous and liable to be set aside. 6.6. We have considered the rival submission and taken into consideration the material on record including written submission filed by both the sides. The Assessing Officer rejected the aforesaid contention of the Appellant. 6.7. The pivotal issue that arises for consideration is whether the transactions undertaken between the Appellant and Purchaser resulted in 'transfer' of the Property from the Appellant to Purchaser in terms of Section 2(47) of the Act. In this regard, the Revenue has relied upon provisions of Section 2(47)(v) of the Act which read as under: "2(47) Transfer in relation ....
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....I and III to the Agreement for Sale contained list of tenants/occupants, whereas Annexure IV contained particular of dispute with tenants/occupants. As per Clause 11 of the Consent Terms, the Appellant confirmed that the Purchaser was put in to possession of the Property to the extent the same was occupied by the tenants/occupants referred to in the Agreement for Sale who would attorn to the Purchaser. The Appellant also confirmed that the Purchaser was given vacant possession of the Ground Floor premises admeasuring 120 Sq.ft. in building No. 11 of RCC structure and part of the basement area admeasuring about 750 Sq.ft. of which the Appellant had obtained possession from their respective tenants/occupants. Further, Clause 17 of the Consent Terms, provided for conveyance/transfer of the Property by way of sale to the Purchasers subject to fulfillment of conditions specified therein. The aforesaid Consent Terms were placed before the Hon'ble Bombay High Court and vide judgment, dated 29.05.2008, the suit for specific performance was disposed of in terms of the Consent Terms. As per Clause 18 of the Consent Terms, the parties agreed to accept the decree drawn up in terms of Consent T....
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....ll he has granted license and right of entry as recorded herein. The Vendor shall not be responsible and or bound and liable to give vacant possession of said part of the said property occupied by occupants and tenants. The Purchasers shall not be entitled to demand vacant possession thereof or any part thereof from Vendor nor shall be entitled to administer requisition on the said ground nor the Purchasers shall be entitled to revoke modify cancel terminate or dispute the present Agreement or ask for reduction in consideration. Any such demand of Purchasers shall amount to breach of the terms of this Agreement. The Purchasers have entered into present Agreement fully knowing the rights of said occupants and tenants. The Vendor shall help and assist the Purchasers to obtain consent/NOC from said occupants/tenants" 6.12. On perusal of Clause 4(b) of the Agreement, it can be seen that the Appellant continued to in the physical possession of the Property till the Consent Terms were recorded and granted only license and right of entry to the Purchasers by way of the aforesaid Consent Terms. Further, on perusal of Clause 11 of the Consent Terms it emerges that it also dealt with hand....
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....e had, by virtue of that transaction, a right to enter upon and exercise the acts of possession effectively. In the case before us there is no document granting any irrevocable right to the Purchaser. Further, the Assessing Officer has not set up a case that the license granted by the Appellant to the Purchaser permitted the Purchaser to exercise control/management over the entire Property. The Assessing Officer had proceeded on incorrect understanding that the Purchaser was put in possession of the Property. In our view, decision was rendered in facts and circumstances different from those in the present case, and therefore, does advance the case of the Revenue in the facts and circumstances of the present case. 6.14. We note that the Ld. Authorised Representative for the Appellant had also relied upon the judgment in the case of CIT Vs. Balbir Singh Maini : [2017] 398 ITR 531 (SC) to contend that since Agreement for Sale is not registered the provisions of Section 53A of the TPA would not be attracted. The relevant extract of the aforesaid judgment of the Hon'ble Supreme Court read as under: "19. It is also well-settled by this Court that the protection provided under....
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....rmance 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 right in stating that in order to qualify as a "transfer" of a capital asset under Section 2(47)(v) of the Act, there must be a "contract" which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression "of the nature referred to in Section 53A" in Section 2(47)(v) in order to arrive at the opposite conclusion. This....
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....ment of any right by the Appellant in the Property. 6.17. There being no transfer in terms of Section 2(47)(v) of the Act, the question of any capital gains arising in the hands of the Appellant does not arise. Accordingly, addition of INR 49,50,11,429/- on account of Long Term Capital Gains is deleted. 6.18. We note that while computing capital gains the Assessing Officer had taken into consideration the amount of INR 5 Crores paid by the Purchaser to the Appellant which has, admittedly, being retained by the Appellant. The Agreement to Sale has not resulted in transfer of the capital assets. During the course of hearing, it was contended on behalf of the Appellant the that amount of INR 5 Crores received by the Appellant was not liable to tax in the hands of the Appellant for the reason that (a) the amount was received prior to 01/04/2015 when the provisions of Section 56(2)(ix) of the Act came into effect, and (b) the Appellant had reinvested the amount in purchase of another immovable property situated at Plot No. 172 (Old No. 69), Ramrkishna Mission Road Khar, Mumbai - 400052 having CTS No. E/562 under Scheme No. IV of Santacruz Town Planning Scheme admeasuring about 668....
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....ney received and retained by the assessee in respect of such negotiations shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition Provided that where any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such sum shall not be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition." 6.23. Accordingly, the amount of INR 5 Crores would have to be reduced from the cost for which the Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted. 6.24. In view of paragraph 6.6. to 6.23 above, the occasion to deal with rest of the contentions/pleas raised by the Appellant/Revenue does not arise. The application for additional ev....
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....aid amount of INR 51,00,000/- with the Property. 7.3. In appeal before us, both the sides reiterated their respective contentions/stands. We note that the Appellant claims that the amount of INR 51,00,000/- is refundable. However, since 2007 the same has been lying with the Appellant. There is no material on record to show that steps for recovery have been made by Mr. Tarunkumar Dhumavat. The Appellant had also entered into a subsequent transaction with the Purchaser for the Property which did not result in transfer. The Appellant claims to be the owner of the Property as on date. Clearly the amount of INR 51,00,000/- has been retained by the Appellant. Nothing prevented the Appellant from refunding the aforesaid amount. Further, in the Balance Sheets also the Appellant does not admit that amount of INR 51,00,000/- is payable/refundable to Mr. Tarunkumar Dhumavat as the aforesaid amount has been reflected against the name of the Property (i.e. 'Peddar Road') and not against name of Mr. Tarunkumar Dhumavat (so as to amount to admission of debt). 7.4. We have held that there is no transfer of the Property during the relevant previous year and therefore, the amount of INR 51,00,....