DY. COMMISSIONER OF INCOME TAX , CIRCLE-3(1), HYDERABAD vs. D.SESHAGIRI RAO , HYDERABAD

O R D E R PER S.S.GODARA, J.M. : This Revenue’s appeal for AY.2009-10 arises against the CIT(A)-3, Hyderabad’s order dated 27-03-2018, in case No.0435 / DCIT-3(1) / Hyd / CIT(A)-3 / 2016-17, involving proceedings u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 [in short, ‘the Act’]; respectively. Heard both the parties. Case file perused.

“IX) Ground Nos.3, 4, 5 and 6 in appeal relates to capital gains and completing the assessment on protective basis. Facts of the case, grounds of appeal, assessment order and submissions of the appellant were perused. It is seen that the then CIT(A) vide order in ITA.No.91/DC-3(1)/CIT(A)-3/2015-16 dated 02-03-2016 had adjudicated on the matter and the appeal of the appellant had been allowed. The matter in this appeal which was decided on 02-03-2016 was charging of capital gains on the lands situated at Begumpet on the basis of agreement to sale entered by the appellant in the capacity of power of attorney holder by invoking the provisions of Section 50C. The relevant part of the order of the CIT(A)-3, Hyderabad dated 02-03-2016 is extracted below:

“5.I have carefully gone through the series of documents, submissions of the appellant, submissions made by 4 owners before income-tax authorities. As mentioned above, there have been series of unregistered/registered documents over a period of 60 years time. The deeds were subject of fulfillment of certain conditions/payments of certain amounts which were neither fulfilled nor paid fully. Ultimately, the original owners denied that they have signed on any document except the Memorandum of Understanding dated 29-12- 2010. Ultimately, the 4 owners entered an memorandum of Understanding with M/s.NDL Infratech (P) Limited on 29-12-2010 and received the payment as mentioned at para.2.k. it is also pertinent to mentioned that the property was subject to encroachment over a period of time the land of 8 acres has come down to Ac.4.16 cents. Even as on today, there are multiple litigations on the said property. Therefore, the value of the land cannot be equated with free hold land and Section 50C cannot be invoked. Further, the 4 owners vide cancellation deed dated 11-09-2009 revoked the General Power of Attorney given to Sri DSR vide document dated 07-03-1990. M/s. NDL Infratech (P) Limited and received the payment. Sri J. Lakshmaiah and Sri K.Madhusudhan Rao admitted long term capital gain in their respective income tax return for A.Y 2011-12. Sri K. Bhavani Shankar Rao in his letter to ITO (Intelligence), Guntur, dated 26-02-2014 admitted that he entered MOU with M/s NDL Infratech (P) Ltd and received the payment. Smt.N.Annapurnadevi expired on 02-05-2014.

In view of the discussions made, I am of considered opinion that the appellant had never acquired ownership as he never fulfilled the conditions mentioned in documents and ultimately money was paid to original owners by M/s.NDL Infratech (P) Limited, the purchaser. Therefore, the question of invoking Section 50C does not arise. Therefore, the grounds raised referring to ownership of land are treated a's allowed and the rest of grounds have become infructuous.

6. In the result, the appeal is allowed," Subsequently, the order of the CIT(A) was upheld by the Hon'ble ITAT, Hyderabad vide order dated 30-11-2017 in ITA.No.760/Hyd/2016 and CO.No.50/Hyd/2016 for Asst. Year 2007-08. The findings of the Hon'ble ITAT is extracted below : 7.1 It is clear from the above two agreements that transfer of 3.3 aces even though under GPA, KMR and others has received full consideration and handed over the property and clear title has already passed on to the assessee whereas in the case of second agreement, the land to the extent of 4.67 acres, KMR and others have received only part sale consideration of Rs. 2 lakhs and handed over the land with GPA and there are certain obligations on the part of the assessee as per the agreement, as cited above. There is no doubt that the possession of the land was in the hands of assessee under the fiduciary capacity under various clauses of GPA. Subsequently, on 20/11/1995, a sale agreement was entered into between four co- owners represented by GPA holder, i.e. assessee and M/s.NDL Estates Pvt. Ltd. for sale of 4.67 acres of land for a sale consideration of Rs.1,27,77,600/- and a part of sale consideration was paid to the extent of Rs.11 lakhs. It is pertinent to note that this agreement also was unregistered. As per the records and as claimed by the assessee, there were spate of litigations with regard to the above property with third parties between 1995 to 2006. On 5th September, 2006, a registration of sale-cum-GPA was entered into by the coowners represented by GPA holder i.e. assessee in favour M/s NDL Estates PVI. Ltd. for a sale consideration of Rs.11 lakhs. This document was initially not registered by Sub-registrar and on appeal, on directions of appellate authority, the same was registered on 16/12/2008. In the above agreement, it was recorded that it is not possible for the assessee to secure the presence of co-owners due to long lapse of time. In the year 2009, four registered sale deeds were entered into between 4 co-owners represented by their GPA holder assessee and M/s NDL Estates Pvt. Ltd. At the same time, assessee had sent letters to the co-owners on 05/09/2009 along with a DD drawn on Ing Vysya Bank, Hyderabad for Rs.5,50,000/- each in favour of the above coowners, later on, coowners returned the DDs and cancelled the GPA entered into with the assessee and also sent a legal notice. These averments were also confirmed by Shri J. Lakshmaiah and Sri K.Bhavani Shankar Rao. 7.2 It is clear from the above events that assessee was in possession of the land under GPA and he has not paid the sale consideration which was agreed between coowners and the assessee way back in 1990. It is clear from the fact that assessee has to carry on certain obligations agreed with co-owners in between there were civil litigations and even assessee has not paid the agreed amounts to the coowners. The assessee tried to pay the balance sale consideration only in the year 2009 after a period of 19 years which was returned by the coowners and accordingly GPA also was cancelled. It shows that assessee has never acquired ownership of the property as per the section 53A of the Transfer of Properties Act. "As per section 53A, where any property by writing signed by him or on his behalf from which the terms necessary to constitute the 'transfer' can be ascertained with reasonable certainty and transferee has part performance of the contract taken possession of the property or the transferee is already in possession and continues in possession in part performance of the contract, and has done some act in furtherance of the contract or has performed or is willing to perform his part of the contract, notwithstanding where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law''. In the given case, assessee has taken the possession of the property, but, failed to pay the sale consideration and has also not performed the obligations as per the GPA and it clearly shows that this does not constitute transfer with ascertained certainty, therefore, this transaction does not give proper right to the assessee to claim the ownership of the property. It is pertinent to note that coowners have also cancelled the power of attorney, which clearly demonstrates that assessee has no legal ownership on the property. Ownership can be said to be acquired when ownership along with possession passed on. In the given case, assessee, no doubt, has possession of the property only in the fiduciary capacity and not as owner of the property, moreover, assessee held the property without any title of the property. All along there are sale agreements entered into by the assessee with M/s NDL Estates Pvt. Ltd as a representative of the co-owners. As per the above discussion, in our considered view, assessee has never got ownership title on the land. 7.3 Since, assessee is not a real owner of the said property and transferred the property on the representative basis and transfer took place between coowners and M/s NDL Estates Pvt. Ltd, we can come to a conclusion that there is no transfer made by the assessee. We have noticed that AO has not considered the subsequent developments. Further, section 50C cannot be applied in the given case. Accordingly, we are in agreement with the findings of the Ld. CIT(A) and uphold the order of Ld.CIT(A). Hence, we dismiss the grounds raised by the revenue.

8. As we have dismissed the appeal of the revenue upholding the order of the Ld.CIT(A), the CO filed by the assessee becomes infructuous and, therefore, the CO is dismissed as infructuous.

9. In the result, appeal of the revenue as well as C.O. of the Assessee are dismissed. Pronounced in the open court on 30th November, 20I7. In this regard, it is noticed that the same issue was passed for Asst. Year 2009-10 on a protective basis by the Assessing Officer. Considering the Hon'ble ITAT had upheld the decision of the CIT(A) as discussed supra and respectfully following the cannons of judicial discipline, the decision of the Hon'ble ITAT, Hyderabad are followed for Asst. Year 2009-10 as the issue is identical to the issue dealt with by the Hon'ble ITAT in the appellant's own case for Asst. Year 2007-

08. Hence, Grounds No.3, 4, 5 and 6 in appeal are allowed. With reference to the above, the canons of judicial discipline which have been brought out by the Hon'ble Supreme Court in Jain Exports (P) Ltd., and Others vs. Union of India &. Others [3 SCC 579], Union of India & Others vs Kamlakshi Finance Corporation [55 ELT 433](SC) and the Hon'ble AP High Court in the case of State of Andhra Pradesh vs. CTO (169 ITR 564) are respectfully followed. The Hon'ble AP High Court in the case of State of Andhra Pradesh vs. CTO (169 ITR 564) while adjudicating a contempt of court case held: " It is clear from the judicial pronouncements above referred to that the authorities and the tribunals functioning within the jurisdiction of the court in respect of whom this court has the power of superintendence under article 227 are bound 10 follow the decisions of this court unless; on an appeal, the operation of the judgment is suspended. It is not permissible for the authorities and the Tribunals to ignore the decisions of this court or to refuse to follow the decisions of this court on the pretext that an appeal is filed in the Supreme Court which is pending or that steps are being taken to file an appeal. If any authority or the tribunal refuses to follow any decision of this court on the above grounds, it would be clearly guilty of committing contempt of this court and is liable to be proceeded against. We have come across innumerable instances where the authorities below, especially authorities entrusted with the collection of taxes and excise duties, refused to follow the decisions of this court on the ground that appeals were either filed or steps were being taken to file appeals, and raised fantastic tax demand and initiated proceedings for recovery of such taxes. The result was that this court was that this court was flooded with innumerable writ petitions. We need hardly observe that all this is totally irregular and should have been avoided. We cannot help putting on notice all the authorities concerned that this court would not hesitate to take stern action for contempt if decisions of this court are disregarded unless the operation of the judgments of this court is suspended by the Supreme Court." The ratio of the division bench decision of the Bombay High Court [S.H. Kapadia & V.C. Daga, JJ.] in the case of Bank of Baroda vs H.C. Shrivatsava (256 ITR 385) as brought out in Para 16 of the judgement/findings are brought to note as they are on the issue of judicial discipline. Para 16 of the judgement reads as follows: 'At this juncture, we cannot resist from observing that the judgement delivered by the Tribunal was very much binding on the assessing officer. The assessing officer was bound to follow the judgments in its letter and spirit It was necessary for the judicial unity and discipline that all the authorities below the Tribunal must accept as binding the judgement of the Tribunal. The Assessing Officer being inferior officer vis-a-vis the Tribunal, was bound by the judgment of the Tribunal and the assessing officer should not have tried to distinguish the same on untenable grounds. In this behalf, it will not be out of place to mention that in the hierarchical system of courts which exists in our country, it is necessary for each lower tiers including the High Court, to accept loyally the decisions of the higher tiers. It is inevitable in hierarchical system of courts that there are decisions of the Supreme Appellate Tribunals which do not attract the unanimous approval of all members of the judiciary. But the judicial system only works if someone is allowed to have the last word, and that last word once spoken is loyally accepted. The better wisdom of the court below must yield to the higher wisdom of the court above as held by the Supreme Court in the matter of CCE v. Dunlop India Ltd. AIR 1985 SC 330." X) In the result, the appeal is partly allowed”.

Order pronounced in the open court on 16th November, 2021