AMIT KUMAR TYAGI,GHAZIABAD vs. DECI, CIRCLE-1,, GHAZIABAD

Following grounds have been raised by the assessee: “1. The order of the learned Commissioner of Income-tax (Appeal) erred in law and facts by way of confirming the addition of Rs. 12,99,95,547/-as capital gain.

That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeal) has erred in upholding the addition of Rs. 12,99,95,547/- made by the AO on account of capital gain to the returned income of Rs 15,47,110/- without considering the conditional sale deed of property and ignoring the facts of disputed matters.

That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeal) has further erred in summarily ignoring the contemporary & conclusive evidence filed before him and rejected them without giving any proper reasoning for the same.

That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeal) has erred in ignoring the settled principles of taxing real income as laid down by the Hon’ble Supreme Court in various pronouncements.”

The assessee has filed e-return of income on 31.08.2015 declaring total income of Rs.15,47,110/- which was processed u/s 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for scrutiny through CASS and the issue of capital gains has been examined.

Background of the transaction: Father of the assessee Sh. Ashok Tyagi has purchased land located at Khasra No. 962, Noor Nagar, Ghaziabad, UP for Rs.3,18,835/- in joint ownership with one Mrs. Kamlesh and the assessee. As per purchase deed share of the assessee was 50% of the total land and out of which assessee had executed sale deed for 50% of his share on 4th of September 2013 with M/s Goel Flexible Packaging Pvt. Ltd. for a consideration of Rs.13,15,00,000/- in which the cheques amounting to Rs.10 crore were post dated which must be honoured by the proposed buyer. But later, out of PDC of Rs.10 crore only one cheque of Rs.2 crore honoured and four

As per the assessee, the transaction between the assessee and buyer M/s Goel Flexible Packaging Pvt. Ltd. through sale deed was conditional and the same can be treated as sale of land if and only if condition to be fulfilled mentioned in the sale deed must be honoured by the proposed buyer and considering these facts the transaction should be treated as agreement to sale unless the buyer satisfy conditions mentioned in the sale deed.

Since, the cheque issued of Rs.8 crore were dis-honoured and conditions inbuilt in the sale deed not fulfilled in totality by the buyer therefore the transaction could not be treated as sale of the land.

The Assessing Officer did not accept the contention of the assessee and brought amount as per the sale deed to the capital gain tax. The revenue held that the receipt of the money is immaterial once the sale deed has been duly executed before the prescribed authorities. The revenue relied on the bare provisions of the act and held that there was no evidence of dis- honour of the cheque presented before the revenue authorities.

The suit came up first before this Court on 11th May, 2016 and thereafter on 2nd June, 2016, 25th July, 2016 and finally vide order dated 5th August, 2016 summons for appearance were ordered to be issued. 3. Vide order dated 14th December, 2017, leave to defend was granted to the defendants.

The defendants, besides filing the written statement, have also filed a Counter-Claim for recovery of Rs.2 crores paid to the plaintiff as part sale consideration and the pleadings in the suit and the Counter-Claim have been completed.

The defendants filed IA No.4931/2019 under Order XII Rule 6 of the CPC on which also the pleadings were completed.

The aforesaid application being IA No.4931/2019 was listed yesterday for hearing. Mr. M.S. Rahman, Advocate

Finding that it was the plea of the defendants in IA No.4931/2019 under Order XII Rule 6 of the CPC that, (i) it was expressly mentioned in the Sale Deed, that if the post-dated cheques for balance sale consideration were not honoured on presentation, the Sale Deed shall be treated as cancelled; (ii) the plaintiff has concealed the factum of having filed Civil Suit No.770/2016 in the Court of Civil Judge, Ghaziabad, for the relief of declaration that the sale deed being without payment of consideration was null and void and of no effect, it was yesterday enquired from the counsel for the plaintiff, that once it was so, what was the entitlement of the plaintiff to the relief of recovery of Rs.8 crores sought.

The counsel for the plaintiff, yesterday stated that Ghaziabad suit was only for the relief of injunction and not for the relief of declaration as null and void of the Sale Deed.

However the defendants, along with the application under Order XII Rule 6 of the CPC have filed a copy of the plaint in the Ghaziabad suit in Hindi language and a reading whereof showed the relief claimed therein to be of declaration as null and void of the Sale Deed.

However yesterday the counsel for the plaintiff kept on denying that the suit was for the relief of declaration. Owing to the counsel for the defendants being not available on first call, the matter was passed over.

On passover, the counsel for the defendants appeared but the counsel for the plaintiff did not appear inspite of the Court waiting for him for a considerable time and as recorded in yesterday’s order. It was enquired from the counsel for the defendants yesterday, whether the defendants were willing to disclaim all rights in the land and to deliver possession thereof back to the plaintiff.

The counsel for the defendants stated that the defendants were so willing.

However adverse orders against the plaintiff were deferred yesterday and the matter posted for today.

Today, Mr. M.S. Rahman, Advocate has again appeared for the plaintiff and states that he did not know about the

The plaintiff present in Court, on enquiry in vernacular states that on delivery of possession, he is willing to refund Rs.2 crores to the defendants.

I have perused the english translation of the Sale Deed in Hindi language, filed by the plaintiff himself. The same inter alia provides as under:

Section 55(4)(b) of the Transfer of Property Act, 1882 provides, that in the absence of a contract to the contrary, the seller is entitled, where ownership of the property has passed to the buyer before payment of whole of purchase money, to a charge upon the property in the hands of the buyer, from the date the possession is delivered. The same indicates that, merely because a registered sale deed is executed, does not mean that the ownership of the property has passed from the seller to the buyer and the parties, in the sale deed, may provide otherwise and in which case the agreement between the parties will prevail. Here, the parties are found to have provided otherwise. Here, the parties have made the sale contingent on the encashment of the cheque for sale consideration. Chapter III of the Contract Act, 1872 also provides for contracts to be contingent. Thus, the ownership of the property was to pass from the plaintiff as seller to the defendants as buyer, not merely by registering of sale deed, but by encashment of cheque given by defendants to plaintiff for sale consideration and which contingency, admittedly has not occurred. The plaintiff, on such contingency, had option to either sue for specific performance of agreement to sell evidenced by sale deed or for recovery of damages if any suffered by breach on part of defendants. The plaintiff, by instituting the suit at Ghaziabad, for

I have enquired from the counsel for the defendants, whether the defendants have dealt with the property in any manner whatsoever to the detriment of the plaintiff and/or have mortgaged the same or created any third party rights in the same.

The counsel for the defendants states that the defendants have not done any such thing.

The defendants are bound by the aforesaid statement and which, if found to be erroneous, shall make the defendants liable for contempt of the Court.

The counsel for the defendants also states that the defendants will agree to the declaration as null and void of the Sale Deed before the Ghaziabad Court or before any other forum and shall, in furtherance thereto, do all other things, as the defendants may be required to do and if the property has been mutated from the name of the plaintiff to the name of the defendants, shall also have the mutation reversed.

Resultantly, the suit filed by the plaintiff, being CS(OS) No.229/2016, for recovery of Rs.8 crores from the defendants, is found to be misconceived and is dismissed. 23. Decree sheet be prepared.

The Counter-Claim of the defendants is entitled to succeed for recovery of Rs.2 crores from the plaintiff. Though the plaintiff could have claimed compensation for breach of contract from the defendants, but has not done so. However, the claim of the defendants for interest is not found to be justified in law, inasmuch as, it is the defendants who have reneged from the transaction and have also been in possession of the property till now. Thus, the defendants are found entitled to interest on Rs.2 crores only for future, after 60 days from the decree.

A decree is accordingly passed, in favour of the defendant No.1, who alone is the purchaser under the Sale Deed, and against the plaintiff, for recovery of Rs.2 crores with interest @ 10% per annum after 60 days of this order, till payment/recovery.”

From the order, it can be deciphered that the entire transaction has been recalled, the sale deed has been made null and void and the assessee has been also directed to refund the amount received from M/s Goel Flexible Packaging Pvt. Ltd. It is also the fact that the asset in sale is still in the possession of the assessee.

On going through the entire factum of the issue, we hold that the decision of the revenue was based on the evidences before them and since the matter has been settled finally by the order of the Hon’ble High Court, at this juncture, we have no hesitation to hold that no capital gains are taxable in the hands of the assessee as there was neither transfer of any capital asset nor absolute receipt of any amount.