SMT. CHANDRAVATI KAITHWAS,BHOPAL vs. THE ITO-1(1), BHOPAL

आदेश / O R D E R

PER KUL BHARAT, J.M: These two appeals by two different assessees

pertaining to different assessment years i.e. 2007-08 &

2008-09 are against order of the CIT(A)-2, Bhopal dated

10.2.2016. Since the issues are common, both the appeals

were heard and taken up together for the sake of

convenience and brevity.

Chandravati Kaithwas. The assessee has raised following

grounds of appeal:

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] 5. That the learned Assessing Officer erred and was not justified in not allowing the deduction u/s 54F of theAct at Rs.2,64,724/- and the Learned CIT(A) erred and was not justified in upholding the action of the Learned A.O. 6. That the learned Assessing Officer erred and was not justified in making an addition of Rs.3,00,000/- u/s 69 of the Act as unexplained investment and the learned CIT(A) erred and was not justified in upholding the action of the Learned A.O.

assessment. At the time of hearing, Ld. Counsel for the

assessee submitted that he does not wish to press these

grounds. Ld. D.R. has no objection. Hence, ground Nos.1

to 3 are dismissed as not pressed.

case of the assessee was reopened and the assessment u/s

143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter

called as ‘the Act’) was framed vide order dated 18.3.2013.

The A.O. after considering the facts applied stamp

valuation value in respect of property purchased and made

addition of Rs.11,15,057/-. The A.O. also made addition in

respect of unexplained investment in the purchase of 3

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] second hand bus and second hand Hyundai Santro Car

amounting to Rs.1,40,000/- and Rs.1,20,000/-

respectively. The A.O. also disallowed the claim of the

assessee made u/s 54F of the Act.

appeal before Ld. CIT(A), who after considering the

submissions dismissed the appeal. Now the assessee is in

further appeal before this Tribunal.

submitted that the authorities below failed to appreciate

the facts in right perspective. He submitted that in this

case, there was an encroachment and the assessee had to

enter into a registered agreement to sale, which was

executed on 31.5.2007 and possession was given. He

submitted that transfer for the purpose of income tax was

completed on 31.5.2007 and if at all, stamp valuation rates

were to be applied on the date of execution of agreement to 4

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] sale but not on the date when the sale deed was executed.

He has drawn our attention to the circle rates prevailing on

the date of execution of sale deed and execution of sale

agreement. He submitted that the coordinate bench of this

Tribunal in the case of Dara Singh Vs. ITO Ward-1(2),

Ghaziabad and ITA No.2213/Del/2018 has ruled that there

was no reason to believe that income of the assessee

escaped assessment u/s 147 of the Act. In view of the fact

that in the remand report assessing officer accepted the

fact that circle rate on the date of registered agreement to

sale was relevant for the purpose of section 50C of the Act.

The Tribunal while ruling so has relied upon the judgement

of the Hon'ble Allahabad High Court and the judgement of

Hon'ble Supreme Court rendered in the case of Sanjeev Lal

Vs. CIT 365 ITR 389. Ld. counsel for the assessee

submitted that the authorities below have wrongly

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] construed the provisions of section 50C of the Act and

applied on the facts of the assessee’s case.

supported the orders of the authorities below.

materials available on record and gone through the orders

of the authorities below. Undisputed facts as emerged from

the report as placed before us are that the assessee had

executed a registered agreement to sale and also a Power of

Attorney on 23.5.2007 and 31.5.2007 respectively. As per

the agreement to sale dated 31.5.2007, it is stated that the

entire sale consideration has been received on 20.3.2007.

The sale deed was executed by the registered power of

attorney of the assessee on 25.3.2008. It is also on record

that proceedings before the revenue authority in the court

of Tahsildar Govindpura circle, Bhopal was pending before

the execution of sale deed. The order dated 7.12.2007 of 6

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] the Nyayalay Tahsildar Nazul, Govindpur Bhopal is also

enclosed in the paper book at page Nos.50 to 57. The issue

before us is that whether the stamp value as on the date

when agreement to sale was executed or otherwise when

the sale deed was executed i.e. on 25.3.2008 is applicable.

For the sake of clarity, section 50C of the Act is reproduced

hereunder:-

“50C. Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. [Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer. Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.] “ 9. A bare reading of the above provision speaks that

where the consideration received or accruing as a result of 7

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] the transfer by an assessee of a capital asset being land or

building or both is less than the value adopted or assessed

by an authority of a State Government for the purpose of

payment of stamp duty in respect of such transfer, the

value so adopted or asset shall be for the purpose of

section 48 of the Act deemed to be the value of the

consideration received or accruing as a result of such

transfer. Now the crucial word in the provision is ‘transfer’

of a capital asset. The Hon'ble Supreme Court in the case

of Sanjeev Lal Vs. CIT (supra) has held as under:

“21. Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforestated definition, let us look at the facts of the present case where an agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between Shri Ranjeet Lal on one hand and the appellants on the other as Shri Ranjeet Lal had challenged the validity of the Will under which the property had devolved upon the appellants. By virtue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the 8

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal]

circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs.15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand. 22. In addition to the fact that the term "transfer" has been defined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income Tax Act and it is also said that equity and tax are strangers to each other, still this Court has often observed that purposive interpretation should be given to the provisions of the Act. In the case of Oxford University Press v. CIT [2001] 247 ITR 658/115 Taxman 69 this Court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions which subserve the object and purpose should also be made while construing any of the provisions of the Act and more particularly when one is concerned 9

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal]

with exemption from payment of tax. Considering the aforestated observations and the principles with regard to the interpretation of Statute pertaining to the tax laws, one can very well interpret the provisions of Section 54 read with Section 2(47) of the Act, i.e. definition of "transfer", which would enable the appellants to get the benefit under Section 54 of the Act. 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated. 25. In view of the aforestated peculiar facts of the case and looking at the definition of the term 'transfer" as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house.”

executed the sale deed without clearing encroachment. For

clearing encroachment, assessee had approached the

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] competent court, therefore, ratio laid down by the Hon'ble

apex court in the case of Sanjeev Lal Vs. CIT (supra) would

be applicable on the facts of the present case. The

assessing officer is therefore directed to adopt the valuation

as prevalent on the date of agreement to sale and compute

capital gain accordingly. There is another aspect of this

matter that valuation for the purpose of stamp duties and

adoption of the stamp valuation under the income tax laws

would stand on different footing. Keeping in view of such

factors in mind, revenue has brought an amendment w.e.f.

A.Y. 2010-11 to fix such lacunas.

ground that power of attorney and agreement to sale were

executed subsequent to receipt of sale consideration by the

assessee. He was of the opinion that these documents

were prepared to justify the cash deposits. In normal

circumstances, the suspicion of Ld. CIT(A) may be correct

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] but in the present case, where the property is not free from

encumbrance, sale consideration of such property would

always be lower than the market value. Moreover, no

enquiry is conducted from the buyers of the property with

regard to the date of payment of sale consideration.

Undisputedly, in the registered sale deed, date of receipt of

sale consideration does not find any mention. It merely

states that entire sale consideration has been received.

Under such circumstances, the A.O. ought to have made

enquiries from the buyers of the property. In the absence

of such enquiry and bringing some material suggesting

actual date of payment of sale consideration, it cannot be

considered with certainty that sale consideration was not

paid prior to execution of the sale deed. We therefore, are

unable to affirm the finding of the authorities below.

Ground No.4 of the assessee’s appeal is allowed.

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] 11. Ground No.5 is against rejection of the claim made u/s

54F of the Act. Apropos to this ground, Ld. Counsel for the

assessee contended that assessee and other owners had

constructed a residential house at plot Khasra 198/1/5

situated at Dhamkeda. For construction of this floor M/s.

Ram Traders was appointed as a contractor. On 28.4.2008

he raised a bill of Rs.11 lakhs after completing

construction till plinth level work. The amount was paid in

instalments through cash withdrawals from Allahabad

bank operated by Smt. Lalitha Devi Kaithwas and also

from her personal savings. This amount was claimed as

deduction u/s 54F of the Act. He submitted that the A.O.

ought to have given the benefit of section 54F of the Act.

The Ld. Counsel for the assessee submitted that the A.O.

has disallowed the claim merely on the basis that no

satisfactory evidence was produced. In support of this, he

submitted that Ld. CIT(A) confirmed this finding on the

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] basis that the builder was not paid by cheque. During the

course of hearing, Ld. Counsel for the assessee drew our

attention to the bill raised by Shri Ram Traders of Rs.11

lakhs enclosed at paper book page No.67. Ld. Counsel also

drew our attention to the bank statement where there is a

cash withdrawal of Rs.30 lakhs and Rs.70 lakhs. Apart

from that a sum of Rs.1,70,000/- is paid to Mr. Ashok. As

per assessee, this amount was utilised for the payment of

construction. Further, the assessee had withdrawn a sum

of Rs.98,888/- The bill is dated 28.2.2008.

materials available on record and gone through the orders

of the authorities below. The assessee has not brought any

material to prove nexus between the withdrawal of money

and payment to the contractor. It is noticed that the

withdrawals pertain to the assessment year 2006-07. 14

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] Except one entry, other entries are related to earlier years.

No explanation or nexus with the payment made to the

contractor and withdrawal of money. Therefore, the finding

of the Ld. CIT(A) is not justified. Ground No.5 of the

assessee’s appeal is rejected.

lakhs u/s 69 of the Act. Ld. Counsel for the assessee

reiterated the submissions as made in the written

submissions. It is stated that assessee had purchased a

second hand bus for Rs.1,40,000/- out of which

Rs.50,000/- was paid in cash out of her savings and

balance was paid out of old savings. Cash drawn by her

husband from Allahabad bank in which sale proceeds of

the property is credited.

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] 16. We have heard the rival submissions, perused the

materials available on record and gone through the orders

of the authorities below. The Ld. CIT(A) discarded the

explanation of the assessee on the ground that the

authorised representative neither filed any explanation nor

filed any documentary evidence in respect of source of

income. During the course of present proceedings, the

assessee has filed bank statement that suggests

withdrawal of the money. Therefore, keeping the totality of

facts in view and the evidence placed before us, we

therefore direct the A.O. to delete this addition. Ground

No.6 of the assessee is allowed.

17, Ground un numbered is general in nature and needs

no separate adjudication.

No.506/Ind/2016 is partly allowed.

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] 19. Now we take up ITA No.508/Ind/2016. Ground Nos.1,

2 & 3 are not pressed by the Ld. Counsel for the assessee

and the same are dismissed as not pressed.

Rs.12 lakhs made u/s 68 of the Act. The brief facts of the

case are that case of the assessee was reopened and the

assessment u/s 143(3) of the Act r.w.s. 147 of the Act was

framed vide order dated 18.3.2013. While framing the

assessment, the assessing officer made addition of Rs.12

lakhs on account of cash deposits in the SB account in SBI

and Allahabad banks. The assessing officer made addition

on the ground that no source of deposit was explained.

appeal before Ld. CIT(A). Before the Ld. CIT(A), it was

contended that a sum of Rs.12 lakhs was received as a sale

consideration which was deposited in the bank account.

However, the Ld. CIT(A) did not accept this contention of 17

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] the assessee. On the basis of that the agreement to sale

was executed subsequent to the receipt of sale

consideration. Against this, the assessee is in present

appeal. Ld. Counsel for the assessee reiterated the

submissions as made in the written submissions. The

submissions of the assessee are reproduced as under:

“3. During assessment proceedings appellant informed the Learned assessing officer that the Allahabad Bank account is the joint bank account with mother Smt. Lalitha Devi and this amount belongs to her. But the submission of the appellant was not considered and Rs.12,00,000/- was added u/s 68 of the Act, in the returned total income of the appellant. 4. Regarding sale transaction of land it is submitted as under:- • On 23.5.2007 power of attorney for sale of land at Village Damkheda, was given by Smt. Lalita Devi (Mother), Rajendra Kumar Kaithwas (Brother), & Smt. Chandravati Kaithwas (Wife) to Mohammad Shafiq Quereshi for sale of agricultural land at Khasra No.196/16 0.44 Acres & Khasra No.196/17 0.26 Acres,. Totalling to 0.70 Acres. PB Pg.No.7-20. • An agreement to sale of land was executed on 31.5.2007 for sale of this land to Smt. Radha Moochandani for Rs.16,50,000/-. The sale proceeds of Rs.16,50,000/- was received in cash on 20.3.2007. PB Pg.No.21-23. • On 25.3.2008 sale deed of this land was registered in which there is a reference of sale price Rs.16,50,000/- received in cash by the sellers. However, the government valuation of the property worked out to Rs.42,01,000/-. PB Pg.No.24-40. • In Assessments proceedings of all the three coowners the Learned Assessing Officer has added the difference in sale proceeds of Rs.16,50,000/- and stamp duty valuation of Rs.42,01,000/- in the total income of the sellers. PB Pg.no.41

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] 5. It is therefore submitted that Rs.12,00,000/- cash deposited in the Bank account of the appellant was deposited by her mother being joint account. The source of deposit is sale proceeds from sale of land which has been duly offered as capital gains by the respective co-owners. Hence the addition made is incorrect, un-lawful and deserves to be deleted by your Honours. “ 22. Ld. D.R. opposed these submissions.

materials available on record and gone through the orders

of the authorities below. The question whether sale

consideration was received by the assessee also came up

for our consideration in the case of Smt. Chandravati

Kaithwas in ITA No.506/Ind/2016, wherein we have after

considering the submissions accepted the ground of the

assessee on the basis that the A.O. had not carried out any

verification from the buyer of the land to ascertain the

actual date of payment of sale consideration. In the

present case also, no verification is made by the authorities

below. Under these facts, we are unable to affirm the

finding of the authorities below. The A.O., therefore, is

[ITA 506 & 508/Ind/2016] [Smt. Chandravati Kaithwas & Shri Ashok Kumar Kaithwas, Bhopal] directed to delete this addition. Ground raised in the

appeal is allowed.

separate adjudication is required.

No.508/Ind/2016 is partly allowed.

Order was pronounced in the open court on 11 .12.2018.

Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER

Indore; �दनांक Dated : 11/12/2018 VG/SPS

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Assistant Registrar, Indore