KISHOR NAMDEVRAO KACHI,,PUNE vs. INCOME-TAX OFFICER, WARD - 5(2),, PUNE

आदेश / ORDER PER S. S. GODARA, JM :

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17.02.2022, 24.05.2022, 28.07.2022 and 29.08.2022 as well. He is accordingly proceeded ex-parte.

“6.3 DECISION: I have perused the assessment order and the submission made by the appellant as above carefully. I find from the assessment order that the assessee was engaged in many lending business and earning commission income as agent at Krishi Utpanna Bazar Samithi, Market Yard, Pune. The assessee was the owner of an agricultural land at Mundhwa and Kiwale of which Mundhwa land was assessee‟s ancestral property which he received as share on 07/11/1971, as detailed in the agreement made by the assessee with Kunal Shelters Pvt. Ltd. The Kiwale Land was purchased by the assessee on 10/03/1978. On 14/05/2008, on account of different joint venture agreement, the assessee had agreed, to develop the aforesaid properties with M/s. Kunal Shelters Pvt. Ltd. as per various terms and conditions as mentioned in clause „G‟, page no. 5 and clause „F‟, page no. 5 in respect of Mundhwa and Kiwale Land respectively. Both the lands were situated in Agricultural Zone, which remained in Agricultural Zone as on date of passing of the assessment order, as stated by the AO in para „C‟ page no. 3 of the assessment order. Both the parties had decided to terminate the above mentioned joint venture agreement

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and a cancellation deed dated 24/02/2009 was submitted in this regard and accordingly, the deposit amount received by the assessee was refunded to the said developer viz. M/s.Kunal Shelters Pvt. Ltd. Again, on 29/03/2010, an agreement was made by the assessee with M/s. Kunal Housing bywhich compensation receivable to the assessee from M/s. Kunal Shelters Pvt. Ltd. was fixed at Rs.60,00,000/- as per purchase deed. The said amount was determined as M/s. Kunal Shelters Pvt. Ltd. was not able to complete the transaction as per agreement dated 14/05/2008 and the said compensation of Rs.60,00,000/- was paid by M/s. Kunal Shelters Pvt. Ltd. by transferring the land at Survey no. 44A / 11F, Mundhwa admeasuring 20000 sq.ft, which was registered on 05/04/2010. The agreement price was fixed at Rs.60,00,000/- as per index-II of the registered deed, registered with sub-registered Haveli no. 9, dated 05/04/2010, the Market Value which was Rs.1,20,00,000/-.

6.3.1 The AO after perusing the above facts and examining the document had issued a show cause notice along with a questionnaire u/s. 142(1) of the Act referring to the provision of Sec. 56(i)(vii)(b) of the Act on 10/02/2014 inter-alia stating the aforesaid facts contending that notice was issued u/s. 148 of the Act on 28/03/2013 as the assessee did not file any return of income for A.Y. 2010-11, reopening the case u/s. 147 of the Act for the reasons that income to the extent of Rs.1,60,00,000/- had escaped assessment. It was informed that in response to the said notice, a return of income was filed on 16/07/2013 by the assessee for A.Y. 2010-11 declaring total income of Rs.61,77,260/-. The AO mentioned in the show cause letter that the above facts indicated that the assessee failed to furnish the return of income voluntarily u/s. 139(1) of the Act. The other facts also mentioned relating to Joint Venture agreement made by and between the assessee with

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M/s. Kunal Shelter Pvt. Ltd. etc. stating the facts of both land holdings of Mundhwa and Kiwale. The AO, had drawn the assessee‟s attention to the aforesaid provisions of section 56(i)(vii)(b) of the Act wherein it was stated that any immovable property without the consideration the stamp duty value of which exceed Rs.50,000/-, the stamp duty value of such property should be considered. As the index-II of the agreement registered on 05/04/2010 had reflected the market value at Rs.1,20,00,000/-, though the same was shown by the assessee at Rs.60,00,000/-, the said amount of Rs.1,20,00,000/- should be considered as the transaction price and be treated as income from other sources. The AO also pointed out in the said show cause letter that in F.Y. 2009- 10 relevant to A.Y. 2009-10, the assessee had paid Rs.40,00,000/- as the cancellation charge of Joint Venture Agreement with M/s. Kunal Shelters Pvt. Ltd., though the sources of such payments were not properly explained. The AO, therefore, asked the assessee to explain as to why the amount of Rs. 1,20,00,000/- as income from other sources and Rs.40,00,000/- as unexplained cash paid, as stated above, totaling to Rs.1,60,00,000/- should not be treated as assessee‟s income during the year.

6.3.1.1 The assessee vide letter dated 19/02/2014 submitted the facts relating to the development agreement executed with M/s. Kunal Shelters Pvt. Ltd. and contended that in the return of income for A.Y. 2010-11 filed on 16/07/2013, the compensation amount of Rs.60,00,000/- was offered for taxation as income from other sources and total income was disclosed at Rs.61,77,260/-. Referring to the provisions of section 56(1)(vii)(b) of the Act, the assessee contended before the AO that the compensation was fixed at Rs.60,00,000/- as per registered sale deed and the same should be considered as the assessee has not received any immovable property without consideration. The transaction,

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therefore in the case of the assessee is Rs.60,00,000/- and was not, without consideration. It was also contended that in the memorandum to Finance Bill 2013, the Finance Minister in connection with the aforesaid provisions had stated that the existing provision did not cover a situation where the immovable property had been received by an individual and HUF for inadequate consideration. The said provision of section 56 proposed to amend as to provide that where any immovable property was received for a consideration which was less than stamp duty value of the property by an amount of exceeding Rs.50,00,000/-, the stamp duty value of such property as exceeded such consideration, should be chargeable to tax in the hands of the individual or HUF as income from other sources. It was contended that considering the facts w.e.f. 01/04/2014 provisions of amended clause „b‟ became applicable where consideration stated in the agreement was less than the stamp duty value. It was further submitted before the AO that in the case of the assessee the consideration agreed for compensation was Rs.60,00,000/- and the value for stamp duty purpose was Rs.1,20,00,000/-. In view of facts stated above, the assessee had offered Rs.60,00,000/- as income from other sources correctly and such deeming provisions as applicable for A.Y. 2011-12 could be considered only cases of transfer of immovable property without consideration. Therefore, the amount of Rs.1,20,00,000/- being the stamp duty value could not be taxed in assessee‟s case. As regards the amount paid of Rs. 40,00,000/- to M/s. Kunal Shelters Pvt. Ltd., it was submitted that the payments were made after withdrawals from bank on different dates in which amount received from Kunal Shelters was mistakenly interpreted by the AO as unexplained cash, though the amount was withdrawn from banks. The assessee also furnished the details of bank account before the AO.

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6.3.1.2 The AO, however, could not accept the contention of the assessee referring to the provisions of section 56 further in detailed at page no. 9 of the assessment order. The AO in para 11, page no. 10 of the order contended that on perusal of cancellation deed, it was clear that the developer M/s. Kunal Shelter Pvt. Ltd. could not complete residential complex Project as per development agreement as expected by the assessee, as the lands which he was to purchase were not clear in title for the reason of reservation of Agricultural Zone and the same could not be converted into a Residential Zone due to financial stringency and recession in the real estate market. The developer M/s. Kunal Shelters Pvt. Ltd. had to cancel the development deeds of both the lands at Mundhwa and Kiwale owned by the assessee, resulted into execution of a cancellation deed. The AO contended that the assessee had received the amount of Rs.60,00,000/- for the land admeasuring 20,000 sq.ft, of Mundhwa vide survey no. 44A/11F, duly registered on 05/04/2010, the market value of which as per Index-II was Rs.1,20,00,000/-. The AO further stated that there was no loss or any risk to the assessee and therefore, it was crystal clear that the assessee had received the compensation „without any consideration‟ and the value of the land transferred to the assessee had attracted the provisions of section 56(1)(vii)(b) of the Act. The AO, therefore, found the contention of the assessee in this regard as erroneous and not acceptable and had treated the entire stamp duty value of Rs.1,20,00,000/- as assessee‟s income from other sources and added the same to the total income.

6.3.2 During the appellate proceedings, the appellant more or less made identical submission vide submission dated 30/11/2015. It was contended by the appellant stating the identical facts that as per the aforesaid provisions of section 56(vii)(b), if an assessee had received any immovable property without consideration, the stamp duty value of such property would be deemed to be the income of

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the assessee. The AO held that the property had been received by the assessee from M/s. Kunal Shelters without consideration and therefore, the income was taxable in accordance with the provisions of section 56(1)(vii)(b) of the Act. It was re-iterated by the assessee that the assessee had entered into an agreement with the above mentioned developer and the amount received from the said developer as compensation could not be taxed as income and should be reduced from the cost of the asset. The appellant referred to the provisions of section 51 of the Act contending that the amount forfeited on account of cancellation of deal was to be reduced from the cost of the asset and the forfeited amount could not he treated as income of the assessee. In the case of the assessee, the developer had paid deposit to the assessee and by paying compensation in kind, in substance, the assessee had partly forfeited the part of the advance / deposit received from the developer. The assessee relied on the decision of the Mumbai ITAT in this regard in the case of Smita N Shah, 94 TTJ 492. The assessee therefore submitted that the stamp duty valuation of Rs. 1,20,00,000/- was very high and further the issue could be referred to the DVO for determining the fair market value of the said property. It was, therefore, requested to delete the addition.

6.3.3 I do not find any merit in the submission and contention of the appellant. First of all, as apparent from the assessment order and also from the submission made by the appellant that the assessee entered into development agreements in respect of its two properties at Kiwale and Mundhwa lands on 14/05/2008 with M/s. Kunal Shelters Pvt. Ltd. for construction of the residential complex etc., despite of having full knowledge that both the lands were situated in Agricultural Zone and unless the said Zone was converted into Residential Zone, such residential complex could not be completed. Various terms and conditions were specified in the Joint Venture Agreement executed on !4/05/2008 vide clause „G‟,

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page no. 5 in respect of Mundhwa Land and vide clause „F‟, page no. 5 in respect of Kiwale Land. The said clauses had very well specified what the appellant was supposed to get from the developer. The lands were already put into the Joint venture for development and specified portion of the constructed area besides the cost of the land which the appellant was to receive had also been specified in the said agreement. This being so, the land transferred to the Joint Venture Agreement had fetched the cost as well as the constructed area to be received from the developer by the appellant. Had the project been completed as per the Joint Venture Agreement, the appellant would have received the required cost of land and the constructed area or any other compensation which had been prescribed in the various terms and conditions of the Joint Venture Agreement. Therefore, the subsequent cancellation deed made on 24/02/2009 could not in any circumstances reduce the cost of compensation which was supposed to receive by the appellant from the developer, in case of non-execution of the development agreement. The price was fixed in the compensation deed of Rs.60,00,000/- which had been received by the appellant as per agreed upon by and between the appellant and the developer. This was a self serving agreement by and between the parties. Therefore, the market value of the land‟s of Rs.1,20,00,000/- as per index-II of the purchase Deed of Mundhwa Land duly registered with sub-register Haveli- 9 on 05/04/2010, could not be brushed aside for considering the cost of the land, received as compensation from the developer by the appellant. Secondly, the appellant has contended that the stamp duty valuation of Rs.1,20,00,000/- was very high but this issue has not been raised before the AO. The appellant submitted during appellate proceedings, that the DVO could be referred for determination of fair market value of the impugned land under consideration for which compensation was settled at Rs.60,00,000/-. Since, the appellant had never raised this issue

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before the AO challenging the stamp duty valuation as very high and the compensation declared by the appellant was considered by him as correct, at this appellate stage such a contention cannot be raised. Thirdly, the appellant even after receiving the compensation of Rs.60,00,000/- from the developer M/s. Kunal Shelters Pvt. Ltd. had not disclosed the same by filing a return of income voluntarily u/s. 139(1) of the Act. On the other hand, the case was reopened by resorting to section 147/148 of the Act by issuing a notice on 28/03/2017 and the return was filed by the assessee on 16/07/2013 declaring the total income of Rs.61,77,260/-, which included the amount of Rs.60,00,000/ claimed as compensation received. The deliberate concealment of income of not disclosing the true and correct income including the compensation received of Rs.60,00,000/- is very much proved by the above fact and behavior of the appellant. The appellant had cited a decision of the Mumbai ITAT in the case of Smita N Shah, 94 TTJ 492 which, in view of the facts as detailed above, in my opinion, is misplaced. For all the aforesaid reasons, I hold that the AO was justified, in invoking the provisions of section 56(i)(vii)(b) of the I.T.Act, 1961 in the case of the appellant in respect of taxing the amount of Rs.1,20,00,000/- and he has rightly added the same to the total income in this year under consideration. No interference in AO‟s order in this regard is called for. The addition made of Rs.1,20,00,000/- is therefore, confirmed. Ground Nos. 2 & 3 raised by the appellant are accordingly dismissed.”

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applicable in the relevant previous year i.e. 2009-10. Mr. Murkunde could hardly dispute that the assessee had squared out his amount receivable of Rs.50 lakhs from M/s Kunal Shelters Pvt. Ltd. in lieu of receiving the land in issue which indeed formed inadequate consideration only. That being the case, the Revenue placed strong reliance on clause (ii) of section 56(1)(vii)(b)(i) of the Act that even a difference in consideration vis-à-vis the stamp value thereof; exceeding Rs.50,000/-, also attracts the impugned addition. We are afraid that such an interpretation of this latter limb of the main statutory provision would amount to retrospective applicability thereof, which substituted earlier clause (b) vide Finance Act, 2013 w.e.f. 01.04.2014 whereas the assessment year before us is 2010-11 only. Faced with this situation, we invoke strict interpretation in light of CIT vs. Dilip Kumar (2018) 9 SCC 1 (FB) (SC) to delete the impugned addition for this precise reason alone. Ordered accordingly.

Sd/- Sd/- (DR.DIPAK P.RIPOTE) (S.S. GODARA) लेखा सदस्य/ ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 17th November, 2022. Sujeet/Ashwini

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आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : अपीलाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(A)- 4, Pune. 4. The Pr.CIT-3, Pune. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “ए” बेंच, 5. पुणे / DR, ITAT, “A” Bench, Pune. गार्ा फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy //

Senior Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune.

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S.No. Details Date Initials 1 Draft dictated on 01.11.2022 2 Draft placed before author 16.11.2022 Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement on 7 Date of uploading of Order 8 File sent to Bench Clerk 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order