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Facts
Multiple assessees and the Revenue filed appeals concerning additions made after search operations, primarily regarding capital gains from property transactions across assessment years 2012-13, 2014-15, 2016-17, and 2017-18. Key disputes involved: 1) the validity of additions based on a relinquishment deed for property already sold, 2) the applicable assessment year for capital gains when a sale deed was executed earlier but registered later, and 3) whether a property partition constitutes a 'transfer' liable for tax.
Held
The Tribunal upheld the CIT(A)'s decisions, ruling that: 1) the relinquishment deed was invalid as the property rights were transferred earlier (in 2006), 2) the transfer of property relates back to the date of execution of the sale deed, not registration, and the relevant tax provisions (Sections 50C, 56(2)(vii)(b)) were not applicable in the earlier assessment year, and 3) a property partition does not amount to a 'transfer' for tax purposes. Issues regarding combined satisfaction notes under Section 153C were deemed academic due to decisions on merits. Consequently, all Revenue appeals were dismissed, and assessee appeals were allowed for statistical purposes.
Key Issues
The core issues were the taxability of a relinquishment deed when prior transfer occurred; the applicable assessment year for capital gains on a sale deed executed earlier but registered belatedly, applying the doctrine of relation back; and whether property partition constitutes a taxable transfer under the Income Tax Act.
Sections Cited
132, 153A, 153C, 2(47), 45, 47, 48, 50C, 53A, 56(2)(vii)(b)
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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SHRI K. NARASIMHA CHARY & SHRI MADHUSUDAN SAWDIA
आदेश / ORDER
PER BENCH : Challenging the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2012-13, 2014-15, 2016-17 and 2017-18, both the Revenue and Assessee preferred these appeals. Since the facts involved in all these appeals are same, we deem it just and convenient to dispose of all these appeals by way of this common order. However, based on the nature of addition and the common issues involved, we classify these appeals into certain groups for convenient disposal. 2. Brief facts necessary for disposal of these appeals are that pursuant to the search operations under section 132 of the Income Tax Act, 1961 (for short “the Act”) conducted in the case of M/s Goldstone Infratech Ltd and its other associated Companies on 9/11/2017 and basing on the material and enquiries pursuant thereto, notices under section 153A/153C of the Act were issued and on filing of the returns of income by the assessees, learned Assessing Officer completed the assessments by making certain additions. In appeal before the learned CIT(A), learned CIT(A) deleted certain additions against which the Revenue preferred appeals, and confirmed certain additions against which the assessees preferred appeals. 3. Inasmuch as many issues are common, as stated above, we deem it just and convenient to dispose of these appeals by way of this common order. Having heard the arguments and gone through the record, we find that in all the appeals filed by the assessees the learned CIT(A) confirmed the additions made by the learned Assessing Officer in respect of the lands which were the subject matter of the litigation in CS No. 14 of 1958 on the file of the Hon’ble High Court of Andhra Pradesh and subjected to the intervention by the State. Since the issue is common in all the appeals filed by the assessees in this batch of appeals, we proceed to decide such an issue of all the appeals together under one discussion.
4. So also, in all the appeals preferred by the Revenue for the assessment year 2012-13, the subject matter was the addition made based on the relinquishment deed dated 3/12/2011, in respect of which the learned CIT(A) granted relief stating that as on the date of the execution of the relinquishment deed, the releasers did not have any right, title or interest retained in them having executed the sale deed dated 2/1/2006. Since the common question that had arisen in this batch of appeals is the impact of the relinquishment deed dated 3/12/2011 and consequent transfer if any, we decide the same by way of a common finding in all such appeals.
Next coming to the appeals of the Revenue for the assessment year 2014-15 related to a question answered by the learned CIT(A) in favour of the assessees stating that when once the assessees, having received the entire sale consideration and executed the sale deed on 2/1/2006 and presented the same on the same day before the Sub Registrar for registration, though the registration took place in the assessment year 2014- 15, the effect of registration relates back to the date of execution of the sale deed and therefore, such a transaction cannot be brought to tax in the assessment year 2014-15. Revenue is aggrieved by this finding and filed to 323/Hyd/ 2021 and ITA No.3&4/Hyd/2022. In view of the commonness of the facts and the question of law involved in this issue, we answer this issue by way of a common finding.
Next coming to the Revenue appeals relating to the assessment year 2016-17, the common issue involved in all these matters, namely, whether a partition of the property, allegedly held jointly by all the parties to the partition prior to the partition deed, gives rise to transfer of any right, title or interest in any piece of property that had fallen to the share of any person under the partition deed, so as to bring the same to tax. Learned CIT(A)
answered this issue in favour of the assessees holding that the partition will not result in any transfer of property covered by the same. This issue will also be answered by way of a common discussion in all the appeals. 7. Lastly, we refer to the argument of the counsel on either side as to the effect of combined satisfaction recorded by the learned Assessing Officer under section 153C of the Act, if necessity arises. Now we shall proceed to deal with these aspects one after the other. to 301 /Hyd/ 2021 Appeals preferred by the assessee for the Assessment Year 2016-17
In all these appeals, the addition involved is in respect of the property, which happens to be the subject matter in CS No.14/1958 in respect of which the plea of the assessees is that the Hon'ble High Court held all the transactions in relation to such property were done by adopting dubious means and the Govt.of Telangana issued Notification dated 21/02/2018 stating that such property shall stand vested in the State under the provisions of the Hyderabad (Abolition of Jagirs) Regulation, 1358 Fasli and the title and ownership of such lands shall never be transferred or shall never be deemed to have been transferred to any person. Assessees have further been stating that the Hon'ble Apex Court pronounced the final judgement with respect to the ownership of such lands as of the subject matter of CS No.14/1958 by order dated 15/06/2023. According to the assessees under the Judgement, they lost ownership on the capital asset in question. Based on this, the assessees contend that, in these set of circumstances, charging of capital gains in the hands of the assessees does not arise.
At the outset, both the counsel submitted that the coordinate bench of the Tribunal took cognizance of these facts in the case of Smt. Indrani Prasad Vs. ACIT, and Severa Constructions Private Limited ACIT, & batch, and by order dated 8/4/2022 and 19/10/2022 thought it fit to restore the issue to the file of the learned Assessing Officer with a direction to record categorical finding with respect to owning of the capital asset, if any, by the assessee and the effect of the decision of the Hon’ble jurisdictional High Court on the ownership of the capital asset etc. Both the counsel submitted that such observations and finding of the coordinate benches in the above two cases are equally applicable to the facts of the appeals on hand, and the issue may be restored to the file of the learned Assessing Officer with a direction to record categorical finding with respect to owning of the capital asset, if any, by the assessee and the effect of the decision of the Hon’ble jurisdictional High Court on the ownership of the capital asset etc.
We have perused the orders of the coordinate bench. For the sake of completeness and guidance to the learned Assessing Officer, we deem it just and necessary to extract the relevant observations and findings of the coordinate benches in the above two cases. In Smt. Indrani Prasad Vs. ACIT (Assessment Year:2016-17) 08.04.2022, a coordinate Bench observed and held that, - “2. Coming to the assessee's sole substantive grievance that both the lower authorities have erred in law and on facts in making undisclosed income addition of the alleged capital gains income of Rs.16,66,666 in the course of assessment dt.27.12.2019 as upheld in the CIT(A)’s order, learned counsel’s first and former argument is that the very sale transfer deed herein stands annulled in hon'ble jurisdictional high court's detailed judgment dt.16.08.2018 and therefore, the impugned addition has no legs to stand.
The Revenue’s case on the other hand is that the assessee has raised the foregoing argument for the first time before the tribunal which requires afresh factual verification.
We have given our thoughtful consideration to the preceding rival submissions and find merit in both parties’ stands in principle. Case records prima facie suggest that hon'ble jurisdictional high court's common detailed judgment in W.P. Nos.11032, 11034 and 11037 of 2018 dt.16.08.2018 hereinabove has indeed quashed the Revenue’s action in issue therein. The fact also remains that whether or not the assessee’s capital asset forming subject matter of transfer herein is covered under the said decision or not indeed requires the Assessing Officer’s factual verification. We thus restore the instant issue back to the learned assessing authority for its fresh adjudication. We make it clear that in case it is found that the impugned transfer itself stands annulled, the impugned addition would be treated to be non-est since having no legs to stand. Ordered accordingly.”
Again in a similar case, namely, in Severa Constructions Private Limited ACIT, & batch (assessment year 2017-18), by order dated 19.10.2022, it was observed and held by a coordinate Bench that “9. …….. In the present case, the sole grievance of the assessee is that both the lower authorities passed an erroneous order by making addition of Rs.18,46,153/- u/s 50C of the Act. Ld.AR for the assessee argued that the title of the alleged property vide document no.3867/2016 dt.24.04.2016 was in dispute before the Hon’ble High Court of Telangana and in various other courts and as such the question of applicability of provisions u/s 45 and 50C of the Act will not arise and hence, the impugned addition has no legs to stand. Whereas, ld. DR before us contended that the assessee has raised the foregoing argument for the first time before the Tribunal which requires afresh factual verification. In view of the rival submissions of the parties and on perusal of the case record, we feel that the matter requires fresh adjudication for determination of capital gain arising out of the transfer of capital asset, which as per the case of the assessee is covered by the decision of jurisdiction High Court in the case referred W.P. Nos.11032, 11034 and 11037 of 2018 dt.16.08.2018 hereinabove. The Assessing Officer is directed to record categorical finding with respect to owning of capital asset, if any, by the assessee or not and the effect of decision of jurisdictional High Court on the ownership of the capital asset by the assessee. After deciding the factual issues referred hereinabove, the Assessing Officer shall conduct afresh assessment. In the light of the above, we restore the instant issue back to the learned assessing authority for its fresh adjudication. Ordered accordingly. “ 12. While respectfully following the observations and findings of the coordinate benches, we allow the request of the parties and set aside the impugned orders to the extent covered by the above observations of the coordinate benches and restore the issue to the file of the learned Assessing Officer to record categorical finding with respect to owning of capital asset, if any, by the assessee or not and the effect of decision of jurisdictional High Court on the ownership of the capital asset by the assessee. Grounds of these appeals are allowed for statistical purposes.
, 311, 313, 314, 315 and 316 /Hyd/ 2021) Departmental appeals for the Assessment year 2012-13
Brief facts relevant for this set of appeals is that one Cyprus investments Ltd claiming share in Ac. 48-00 guntas of land in survey No.172, Hydernagar village and such rights were assigned to seven parties, namely, M/s Sai Anupama Agencies Private Limited, M/s Kirthi Anurag Investments Private Limited, M/s Jayasri Agencies Private Limited, M/s Sai Keerthi Constructions Private Limited, M/s Sai Pavan Estates Private Limited, M/s Greater Golconda estates Pvt. Ltd and M/s India Telecom Finance Corporation Ltd, who in turn executed the sale deed dated 2/1/2006 in favour of M/s PS Parthasarathi by paying registration fee on 31/12/2005. Pending registration, six out of the seven parties referred to above, except M/s Kirthi Anurag Investments Private Limited executed a relinquishment deed dated 3/12/2011 for relinquishing their share of the land in favour of M/s Kirthi Anurag Investments Private Limited. On 26/6/2013 all those parties cancelled the relinquishment deed by way of a registered document. Thereafter the sale dated 2/1/2006 was registered on 20/11/2013.
According to the learned Assessing Officer the transaction of relinquishment falls in the definition of transfer under section 2(47) and, therefore, a sum of Rs.200,25,50,000/- being the stamp duty value of the relinquishment deed shall be brought to tax in the hands of the releasers at the rate of Rs.33,37,58,333/- each. On this premise, he levied a tax on this transaction in the hands of all the six people.
When the matter reached the learned CIT(A), learned CIT(A) on an appraisal of the entire evidence, held that the six parties who executed the relinquishment deed had already transferred their rights to Mr Parthasarathy by document dated 2/1/2006, and it was accepted by the Sub Registrar on 20/11/2013 and therefore, inasmuch as the rights of these six persons are already transferred in the year 2005-06 itself leaving nothing vested in them to be transferred under the relinquishment deed on 3/12/2011. Apart from this, learned CIT(A) also noted that the learned Assessing Officer taxed the transaction under the sale deed dated 2/1/2006 in the assessment year 2014-15 because such a document was registered on 20/11/2013, by taking the value of the property at the SRO rate available in the year 2006.
According to the learned CIT(A), therefore, inasmuch as the learned Assessing Officer does not dispute that the property was transferred under the sale deed dated 2/1/2006 and he taxed it accordingly on the SRO value of the year 2006 in the assessment year 2014-15; that having accepted the transfer in the year 2006 in favour of Parthasarathy, it is not permissible for the learned Assessing Officer to tax any transfer under the alleged relinquishment deed, which does not carry any sanctity from the inception that too when it was cancelled on 26/6/2013.
Learned CIT(A) further noted that the learned Assessing Officer while passing the assessment order noted that the land in dispute happened to be a government land and vide orders of the Hon’ble Apex Court it was found to be government land and never belonged to any person to transfer the same to any person; that pursuant to the findings of the Hon'ble Court the government passed a G0 stating that the subject matter of the dispute is a government land; and, that therefore, these assessees cannot transfer the same. Under the circumstances, learned CIT(A) allowed the contentions of the assessees and adjudicated the issue relating to the addition of Rs.33,37,58,333/-in favour of the assessees.
Aggrieved Revenue preferred these appeals. According to the Revenue, as on the date of relinquishment deed, there was no registration and consequently there was no transfer of any rights of the releasers under the alleged sale deed dated 2/1/2006; that the sale deed that was registered at a subsequent point of time cannot override a valid and legal earlier transaction under the relinquishment deed; that relinquishment is a form of transfer under section 2(47) of the Act; and that the learned Assessing Officer was well within his jurisdiction to bring the stamp duty value of the property to tax in equal proportion in the hands of all the releasers.
She further submitted that there is no evidence to show that pursuant to the sale dated 2/1/2006 any possession was delivered with reference to any specific boundaries, and therefore, there was no real transfer on 2/1/2006 in the eye of law. She, therefore, vehemently contended that earlier to the date of relinquishment deed, no transfer took place, no possession was delivered, nor was the property identified with reference to the meets and bounds and, therefore, the alleged transfer through the relinquishment deed is perfectly legal, valid and therefore, the learned Assessing Officer rightly levied tax on the transaction.
Per contra, learned AR submitted that all the assignees of the land from the Cyprus Investments Pvt. Ltd executed the sale deed and handed it over to the vendee, their part of the contract was complete on the day, and if for any reason attributable to the conduct of the vendee, the registration takes place at a later point of time, it does not mean that the assignees of the land from the Cyprus Investments Pvt. Ltd still retained any right, title or interest in the property, which stood divested under the sale deed dated 2/1/2006. Learned AR submitted that when the sale deed was registered at a later point of time, the learned Assessing Officer took cognizance of the transfer under the sale deed dated 2/1/2006 and, therefore, taxed the transaction in the assessment year 2014-15 with reference to the Sub Registrar value obtaining in the year 2006, and it goes without saying that the learned Assessing Officer accepted that the transfer took place in the year 2006 itself.
According to the learned AR, in such an event it is not open for the 21. learned Assessing Officer to tax the same transaction in the hands of the assessees in a situation where the assessees have already been divested themselves with the right, title and interest in the property.
We find force in the argument advanced by the learned AR basing on the doctrine of relation back, in respect of the sale deed that was executed on 2/1/2006 and registered on 20/11/2013. On this aspect section 47 of the Registration Act, 1908 is relevant and it deals with the effect of registration of documents relating to immovable property, inasmuch as it reads that a document registered under the Registration Act shall, if it is required by law to be registered, take effect from the time of its execution, and not from the time of its registration, unless a different intention is expressed in the document. This section essentially states that a document registered under the Registration Act, 1908, shall take effect from the time of its execution, provided it is required to be registered under the law.
The registration is a process that validates the document, but the operation of the document, namely, the transfer of ownership in the case of a sale deed relates back to the date of execution. It goes, therefore, without saying that a registered document operates from the time it would have commenced to operate if no registration had been required or made, and not from the time of its registration. This provision implies that the registration of a sale deed relates back to the date of its execution, provided the entire consideration has been paid for at the time of execution.
There is no dispute in this case that though the sale deed was registered on 20/11/2013, the sale was complete in all respects on 2/1/2006 itself and the document was presented for registration. The effect of the registration takes place from the date of sale deed itself and it does not admit of any doubt on this aspect. We therefore, concur with the findings of the learned CIT(A) that having executed the sale deed dated 2/1/2006 and not disputing the same, the assessees are divested of the right, title or interest to the property on 2/1/2006 itself and therefore, they did not retain any competency to transfer the same land under the relinquishment deed dated 3/12/2011 and more so, such relinquishment deed was cancelled by another deed on 26/6/2013 itself.
Apart from that, the learned Assessing Officer took cognizance of the said fact and also recognised that the registration of sale deed on 20/11/2013 will take effect from 2/1/2006 itself and that is the reason why, though the learned Assessing Officer brought such a transaction to tax in the assessment year 2014- 15, but adopted the rates applicable to the year 2006.
In the circumstances we do not find anything illegal or irregular in the findings of the learned CIT(A) in the impugned order to state that since the transfer for the land in dispute already took place in the year 2006 itself and accepted by the SRO, therefore, the 2011 deed is a dubious and an illegal deed and thus not be the basis for taxation for the same land in the assessment year 2012-13 and the same would be incorrect and improper, because the rights/property for transfer of the subject land was not vested with the transfer of assessees when they executed the 2011 deed as the same was already stood transferred in the year 2006 itself. We, accordingly, accept the contentions of the assessee and uphold the findings of the learned CIT(A). Grounds are answered accordingly dismissing Revenue’s appeals. to 323/Hyd/ 2021 and 3&4/Hyd/2022 (Departmental appeals for the Assessment Year 2014-15)
As stated earlier, the sale deed dated 2/1/2006 was submitted for registration before the sub registrar office on the day itself but for a variety of reasons registration was effected on 20/11/2013 vide the document No.7666/2013. Learned Assessing Officer is aware of all these facts, and as a matter of fact while computing the capital gains he took the SRO valuation as prevailing in the year 2006, but made addition of Rs.3,08,57,143/- as income under section 50C of the Act in respect of the entire property of acres 48-00 guntas being the alleged value of stamp duty estimated for registration by the registration authorities for the entire land as on 20/11/2013 in the hands of the assessees, and also in the hands of the vendee by name Sanjiva Parthasarathy.
When the assessee preferred the appeal, the Commissioner of Income Tax observed that the assessee submitted the sale deed dated 2/1/2006 before the sub registrar on the date itself for registration, and though the registration was effected on 20/11/2013, the possession of the land was handed over and the agreed amount was paid to the assessees and, therefore, the transfer was complete in all respects on the date of the sale deed itself but not on the date of registration. Learned CIT(A) also expressed the opinion that there is no requirement of registration as per the definition of “transfer” in the Act. According to him once the part performance was complete as per section 53A of the Act, the transaction is chargeable to tax in the year of the performance taking place itself and the document is presented for registration.
Learned CIT(A) further observed that it is undisputed fact that the document pertains to the year 2006 and also the SRO value was taken for the year 2006 which further fortifies the said fact of the year of presentation of the document and therefore the transaction was taxable only for the assessment year 2006-07 and not when the document was released as affected by the learned Assessing Officer in the assessment year 2014-15. For reaching this conclusion learned CIT(A) placed reliance on the decision of the Hon’ble Apex Court in the case of Sh. Sanjiva Lall vs. CIT dated 1/7/2014. In the same breath learned CIT(A) observed that section 56(2)(vii) (b) of the Act was not in the statute book in the year 2006 and therefore, the transaction cannot be taxed in the hands of Mr. Sanjiva Parthasarathy also.
Aggrieved Revenue preferred these appeals. Learned DR argued before us in the same lines of the assessment order and justified the assessment order stating that the learned Assessing Officer had no option but to follow the provisions under section 50C of the Act.
Per contra, learned AR placed reliance on the observations of the learned CIT(A) and submitted that having admitted that the sale transaction was reduced into writing on 2/1/2006 and the document was presented for registration on the day itself, and also having accepted the market value of the property by SRO as in the year 2006 at Rs.21.60 crores, it is not open for the learned Assessing Officer to tax the transaction in the year of registration and not in the year of its conclusion by payment of the entire sale consideration and delivery of possession.
He placed reliance on the decisions reported in Sanjiva Lall vs. CIT (2014) 46 Taxmann.com 300 (SC) for the principle that where the assessee having executed an agreement to sell in respect of the property, a valid transfer takes place within the meaning of section 2(47) by even executing the agreement to sell and by payment of the sale consideration and subsequent acts. He further submitted that the sale is complete in the financial year 2005-06 relevant for the assessment year 2006-07 only whereas the amended provisions of section 50C of the Act through Finance Act 2/2009 came into effect from 1/10/2009 and therefore the same are not applicable to the facts of this case. So also, he submitted that, as rightly observed by the learned CIT(A), the provisions under section 56(2)(vii) (b) of the Act were not there in the statute book in the year 2006 and therefore, no addition could be made in the hands of Parthasarathy also.
On careful consideration of the matter, we are of the considered opinion that when the learned Assessing Officer does not dispute the fact of the execution of sale deed on 2/1/2006 and its presentation for registration on the day itself, it is not open for the learned Assessing Officer to say that the transfer took place in the assessment year 2014-15 but not in the assessment year 2006-07. We find it difficult to hold that the findings of the learned CIT(A) as to the conclusion of the transfer of property in the year 2006-07 suffers any illegality or irregularity.
Now coming to the applicability of the provisions under section 50C of the Act, a reading of the provisions under section 50C of the Act makes it clear that the unamended provision essentially required the transferor to adopt the value adopted or assessed by the Stamp Valuation Authority, where the sale consideration was less than the stamp duty value, and in case of discrepancies between the actual sale price and the stamp duty value, the latter was deemed as the full value of consideration for computing capital gains under Section 48; whereas the insertion of the words “or assessable” by way of amendment through the Finance Act, 2009 implies that not only the value adopted or assessed by the Stamp Valuation Authority is considered for determining the full value of consideration, but also the value that is assessable by the authority is included. The introduction of the word "assessable" broadened the scope, extending this deeming provision to cases where the authority has not formally adopted or assessed a value but is still capable of determining or assessing the value under the provisions of law.
We, therefore, have no hesitation to hold that before the amendment, the application of Section 50C was limited to cases where the stamp valuation authority had either adopted or assessed a particular value for the property for the purpose of stamp duty whereas the amendment expanded the scope of the provision. In a sense, this means that the section now applies even in cases where the stamp valuation authority has not yet formally adopted or assessed a value, but it can assess the value of the property for the purpose of stamp duty. This situation comes into operation when the transferors did not do the stamp duty payment process at the time of the transfer. The word "assessable" ensures that the provision covers such scenarios where the authority may still assess the value even if it hasn't been formally adopted yet.
Since this amendment came into force w.e.f. 1/10/2009, the power to assess the value even if has not been formally adopted, would be available only after 1/10/2009. The essential requirement to apply the amended provision is that the transfer must take place after this amended provision coming into force.
So also, we do not find any reason to interfere with the findings of the learned CIT(A) that inasmuch as the provisions under section 56(2)(vii)(b) of the Act were not there in the statute in the year 2006, when the transfer actually took place, the addition made in the hands of the recipient of the property, namely, Mr. Sanjiva Parthasarathi should also be deleted and it cannot be taxed in the assessment year 2014-15. For all these reasons we are of the considered opinion that there are no valid grounds to interfere with the findings of learned CIT(A) and accordingly we uphold the same and dismiss the grounds of appeal of the Revenue.
312, 324 to 327 /Hyd/ 2021 (Department of appeals for the assessment year 2016-17)
Main question involved in all these appeals is whether the partition of property amounts to transfer of any interest therein to any of the sharers. Facts giving rise to this question are that three parties including the assessees reached an out-of-court settlement by executing a partition deed dated 10/3/2016. All the assessees are falling in one part of the parties to the partition deed and record reveals that the three parties partitioned about 47 acres of land and the 1st party comprised of eight entities got 16 acres of land thereof. The value of the entire 47 acres was determined as Rs.159,72,00,000/- by the stamp duty authority. Learned Assessing Officer took the same and valued the 16 acres got by the 1st party of eight entities at Rs.54,37,27,659/-and apportioned the same equally among eight entities at the rate of Rs.6,79,65,957/- and brought it to tax holding it to be the extent of right in the property obtained by each assessee to the partition deed.
Assessee preferred appeal before the learned CIT(A) and pleaded that the assessees and others were already owned and possessed the subject matter of the partition even before the partition deed and the partition did not lead to transfer of any new interest in the property to the assessees. On an appraisal of the facts and the material before him, learned CIT(A) observed that the partition does not transfer any right, title, or interest in the property from one person to the other but it is just a division of joint holding into individual shares by meets and bounds, and the partition in this matter was effected only to get rid of the pending litigation and to put a quietus to the same.
Learned CIT(A) rejected the contention of the learned Assessing Officer that the parties to the partition gained on account of the partition deed and inasmuch as there is no dispute as to the original claim of the parties to the partition to have a right in the 47 acres of the land, the compromise and the resultant partition does not result in any gain to any of the parties thereto. Learned CIT(A), accordingly, allowed the contention of the parties to the partition and held that no addition could be made on account of this partition in the hands of any of the parties to the partition.
Aggrieved Revenue filed these appeals. It is the contention of the learned DR that as on the date of the alleged partition deed, one of the parties acquired any clear title to the property covered therein inasmuch as there are certain disputes pending in respect of the same. When once the parties partitioned the property in which they did not have any clear title, it must be inferred that the parties acquired right, title or interest therein for the first time through the partition deed itself and therefore, to such extent that is liable for tax. 42. Learned DR stressed the observations of the learned Assessing Officer that the property covered by the partition deed was in dispute between the parties litigating before various courts and therefore, it cannot be said that the parties were in possession or enjoyment of the property jointly but only to get rid of the litigation they entered into the partition deed to have the clarity of their respective properties with reference to meets and bounds. On this premise learned DR justified the action of the learned Assessing Officer in bringing the value of property that had fallen to the share of the respective assessees to tax.
Per contra, learned AR submitted that vide preliminary decree dated 28/6/1963 passed in CS No. 14/1958, by virtue of purchase of land from M/s Cyrus Investments Ltd and late Nawab Kazim Nawaz Jung, all the parties covered under the partition deed acquired title to the property; that after taking into consideration of the various orders passed by the various courts, M/s Cyrus Investments Ltd and Nawab Kazim Nawaz Jung were jointly entitled to all lands including the land covered by the partition deed, all the parties under the partition deed acquired the title to the extent of 47 acres in survey No.80D of Hafizpet village, which was subsequently partitioned under the deed dated 10/3/2016 vide document No. 2630/2016; and, therefore, there is no transfer of property from one party to the other party under that document, since it is a simple partition deed dividing the status of the shares of the parties pursuant to the compromise reached by them. Learned AR, therefore, submitted that the learned CIT(A) rightly deleted the addition made on this account and there are no grounds to interfere with the same on this aspect.
We have gone through the record in the light of the submissions made on either side. There does not appear to be any dispute that the subject matter of the partition deed, namely, 47 acres of land in survey No. 80 D of Hafeezpet village for the subject matter of CS No. 14/1958 on the file of the Hon’ble High Court. It is a suit for partition and division of the Matruka properties of paigah. There is also no dispute that a preliminary decree was passed in the above suit by the Hon’ble High Court of Andhra Pradesh on 28/6/1963. Under such preliminary decree both M/s Cyrus Investments Ltd and Nawab Kazim Nawaz Jung were jointly entitled to allotment of all the movable and immovable properties covered under the Schedule thereto. There does not appear to be any dispute in respect of the fact that the parties to the present partition deed acquired the title to the property through the joint owners under the preliminary decree that was passed in CS No.14/1958 and it is that property that was sought to be partitioned under the partition deed dated 10/3/2016 vide document No.2630/2016.
As against these facts emanating from the record, though the learned Assessing Officer stated that the title to the property is not crystallized in any of the parties to the partition deed and it is only under the partition deed such parties acquired title to their respective shares shown in the partition deed, there is no basis for such observations of the learned Assessing Officer. No material is produced before us to show that prior to the partition, the property covered under the partition deed did not stand vested in any of the parties to the partition deed. In the circumstances we do not find any reason to hold otherwise than as pleaded by the parties and as found, as a matter of fact, by the learned CIT(A).
Turning to the question, whether or not partition creates a new right, title or interest in any of the parties to the partition deed in respect of the property covered thereunder, the issue is no longer res integra. In Gutta Radhakrishnayya v. Gutta Saravamma AIR 1951 Mad 213 after examining several authorities, the Hon'ble Court came to the conclusion that partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty, each one of the sharers had an antecedent title and therefore, no conveyance is involved in the process as a conferment of a new title is not necessary. In M.K.Stremann v. CIT AIR 1962 Mad 26 Hon'ble Madras High Court held that obviously no question of transfer of assets can arise when all that happens is separation in status though the result of such severance in status is that the property hitherto held jointly is held thereafter separately by the members.
While endorsing the said view, the Hon’ble Apex Court in the case of CIT vs. Keshavilal Lallubhai Patel AIR 1965 SC 1392, answered the question “is a partition of joint Hindu family property a transfer in the strict sense” in the negative. In Rajkumar Vs. Commissioner of Gift Tax (2014) 367 ITR 137, Hon’ble High Court of Andhra Pradesh observed that “the Supreme Court recognized the fact that a firm is not a recognized legal personality and no partner can hold any item of the assets, exclusively for himself. To put it in positive terms, each partner can be said to have held the entire assets, but to the extent of his share. Here again, the actual entitlement of the partner comes to be translated, if only the dissolution takes place, and the item of property is allotted to his share. The occasion for the member of a joint family or a co-owner or a partner to make a gift would arise only after his share is determined in the process of partition or dissolution, as the case may be. What has accrued as a result of partition or dissolution does not amount to any transfer at all”.
In the light of the above, we are of the considered opinion that the learned CIT(A) is right in his approach to hold that the partition does not amount to any transfer of right, title or interest in the property from the jointly held owners to the separate members, the assessees surrendered the property or rights in the property to get a better title in the leftover part of the property and therefore no addition could be made on this count. We accordingly dismiss the grounds of appeal
of the Revenue.
49. Lastly, basing on the decision of the Hon’ble Supreme Court in the case of DCIT vs. Suneel Kumar Sharma in Writ Appeal No. 830 to 834/2022, learned AR submitted that the satisfaction note is required to be recorded under section 153C of the Act for each assessment year and hence a consolidated satisfaction note recorded by the learned Assessing Officer in the case of the assessee is for the assessment years 2012-13, 2014-15, 2016- 17 and 2017-18 respectively is bad under law. He also placed reliance on the decision of the coordinate Bench of this Tribunal in the case of DCIT vs. M/s Adventures International Private Limited, where the Tribunal held that in case the learned Assessing Officer failed to substantiate as to which seized material/document referred to in the satisfaction note belongs to the particular assessment year, the assessment is bad under law and no addition could be made based on the combined satisfaction note.
50. Per contra, learned DR invited our attention to the satisfaction note that were recorded in these matters and submitted that in the table given in the satisfaction note, it clearly and specifically refers to the document and relevant pages, document number as per the SRO registration, document date and the estimated benefit accrued to the assessee etc., in a detailed manner and, therefore, it cannot be said that the learned Assessing Officer failed to substantiate as to which seized material/document referred to in the satisfaction note belongs to the particular assessment year etc.
51. Be that as it may, since we have reached a conclusion based on the merits of the case that the learned CIT(A) rightly deleted the additions made based on the relinquishment deed, partition deed and the additions made in the AY 2014-15 on the transaction concluded in the AY 2006-07, and granted relief to the assessees on merits, any discussion on this aspect will only be academic and accordingly no adjudication is required. We, therefore, refrain from adjudicating the same.
In the result, all the appeals filed by the assessee are allowed for statistical purposes and all the appeals filed by the Revenue are dismissed. Order pronounced in the open court on this the 19th March, 2025.