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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI INTURI RAMA RAO & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER S.S. VISWANETHRA RAVI, JM :
This appeal by the assessee against the order dated 05-01-2017 passed by the Commissioner of Income Tax (Appeals)-1, Kolhapur [‘CIT(A)’] for assessment year 2011-12.
We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set ex-parte. Therefore, we proceed to dispose of the appeal by hearing the ld. DR and perusing the material available on record.
The assessee raised three grounds of appeal amongst which the only issue is to be decided is as to whether the CIT(A) is justified in confirming the order passed by the AO upholding the addition of Rs.1,36,76,512/- made on account of undisclosed sale transaction in the facts and circumstances of the case.
4. Heard ld. DR and perused the material available on record. We note that, the AO observed that the assessee fully extinguished the rights in the property to full extent by executing full and final registered sale deed. According to him, such a final sale deed is not revocable or cannot be cancelled in any eventuality as it is clear in the sale deed. He was of the opinion that the assessee extinguished its rights fully constituting the transfer of property. Accordingly, he recasted the trading account of assessee and made addition of Rs.1,36,76,512/- on account of undisclosed sale transaction. The CIT(A) confirmed the view of AO.
5. We shall consider the written submissions as filed before the CIT(A) in the form of paper book which is at Page Nos. 1 to 12. We note that the assessee engaged in construction business. The assessee had obtained a right of selling a property through an Irrevocable Power of Attorney dated 05-01-2009 from Shri Vijaysinhraje Madhavrao patwardhan, Sole Managing Trustee of Shri Ganpati Panchayatan Sansthan Sangli. The assessee explained during the course of assessment proceedings that he made a conditional sale deed in respect of the right in property acquired through above said Power of Attorney. The main condition in the sale deed was to give clear and marketable title vide Clause No. 3 of sale deed, we note that the payment of consideration on fulfillment of certain conditions were decided which are as under : Stage Amount Particulars 1 60,00,000/- Amount paid vide Cheque bearing Nos. 052702, 052703, 052704 of each Rs.20,00,000/- respectively dated 28-09-2010 drawn on Kalappanna Awade Ichalkaranji Janta Sahakari bank Ltd. Ichalkaranji Ganpati Peth, Sangli 4 30,00,000/- After the Order received from Mantralaya Mumbai regarding the possession of property giving to Shri Ganpati Panchayatan Sansthan. 3 75,00,000/- After the permission received from Sangli Miraj Kupwad Municipal Corporation for 2 FSI. 4 1) After measurement of property and entry of the same in the Property Register card 2) After demolishing the old building and construction of New shed on the said property. 5 75,00,000/- Three months after the work mentioned in Clause 6 above 6 75,00,000/- 150 days after the work mentioned in Clause 6 above 3,15,00,000/- Rs. In words – Rs. Three Crore Fifteen Lac only.
6. On perusal of the above, we note that it was also agreed that the assessee is responsible to get the possession of the property from the State Government at his own expenses and to give the clear and free from encumbrance to the purchasers. The assessee was required to get the property card in the name of purchaser at his own expenses. The assessee is also responsible to give reconciliation of the area of property purchased and if there is any excess area, assessee would receive additional consideration from the purchaser. Further, the assessee at his own expenses required to get plan approval from Municipal Corporation and the payment towards municipality should be borne by the purchaser. It was also agreed to fence the property the purchaser would reimburse only the cost of the sheets used for fencing. The assessee is responsible to demolish the existence structure and possession of open plot to the purchaser. It is pertinent to note that the assessee is entitled to full consideration only on the fulfillment of above said conditions. The time to complete all the above said conditions fulfilled is within from 15 months from the date of said agreement. We note that even fulfillment of above said conditions were explained before the AO which is reproduced at Page No. 4 and also before the CIT(A) which are reproduced at Page No. 5 of the impugned order. The contention of the assessee before both the authorities below was that the assessee could not fulfill any of the conditions mentioned in Clause 6 of the agreement and no payment due except Rs.60,00,000/- which was paid at the time of execution of sale deed. We also note that it was declared by the assessee that no possession given to the purchaser, no activity of land development as on the date during the course of First Appellate proceedings, no approval for construction was obtained from the Municipal Corporation and further the period of limitation for fulfilling the conditions as set out above were also expired.
7. We note that a paper book containing Page Nos. 1 to 134 were filed before us. We find the true English translation of sale deed dated 28-09- 2010 is at Page Nos. 13 to 18 of the paper book wherein in the sale deed we note that Parshwa Reality Sangli by its partner shown as purchaser. Sangli Ganpati Panchayatan Sansthan though its power of attorney holder by name Somnath Ramling Kore who is the assessee before us shown as seller. The background of the property is explained at Para No. 2 which is at Page No. 14 of the paper book wherein it was explained “there is no use of the said property for hospitalization and there is a compulsion for handing over the said property to the Ganpati Panchayatan Sangli. Accordingly, the Government of Maharashtra informed the same to the District Medical Officer vide letter dated 31-07-2007 and letter dated 01- 08-2008 regarding the return of the said property to Ganpati Panchayatan Sangli.” We find in Para No. 4 it was decided and agreed the balance amount of Rs.2,55,00,000/- (Rs.3,15,00,000/- - Rs.60,00,000/-) will be paid by the purchaser to the assessee i.e. Party No. 2B as per Schedule mentioned therein. The main recital as reflected in “i” is reproduced for ready reference : “i) The consideration shall be i-N accordance with the stages mentioned in the Schedule. If Party No. 2B is unable to fulfill the terms and conditions of the Agreement and no extension for this Agreement is given then the consideration made till the completion of a particulars stage would be the full and final consideration of this Agreement. In such situation, Party No. 2B shall not be entitled to any other consideration and the property shall fully vest in party No.1 on as is where is basis. Thereafter, all the responsibility relating to the said property shall be with Party No.1 in accordance with the schedule attached hereto. If Party No.1 fails to make payments to party No 2B in accordance with the attached schedule they shall be liable to pay interest @ 20% per annum as compensation for the delay. Such compensation or interest for delay can be recovered through legal proceedings by Party No. 2B. All the above terms and conditions and stages shall be completed by the Party No.2B within 15 months from the date of execution of this Deed and shall be entitled to stage wise consideration as described in the Schedule. If Party No. 2B fails to complete the work in accordance with the schedule within 15 months then it shall be liable to pay compensation @ compounded rate of 20% per annum on the total consideration of 3,15,00,000/- (Rs. Three Crores Fifteen lacs only. This compensation shall be reduced from the total consideration payable by Party No.1 to party No.2B. Party No. 1 shall give the statement of account thereof to Party No.2B every month by written communication. If the compensation amount equals the balance consideration payable to Party No, 2B then no further compensation shall be payable by Party No.1 to Party No. 2B and in such situation the consideration paid shall be deemed to be final and Party No.2B shall not have any claim of whatsoever nature in respect of the balance consideration or property thereof.”
On perusal of the above said recital where it is clearly reflecting that if Party No. 2B is unable to fulfill the terms and conditions of the Agreement, no extension is given, then the consideration made till the completion of particular stage would be the full and final consideration of this Agreement. As it clearly explains that the assessee is entitled to phase wise payment and the payment would be made on completion of particular stages. Therefore, it is clear the assessee is entitled to consideration on phase wise completion of certain terms and conditions. It is also clearly mentioned, if the Party No. 2B fails to complete the work in accordance with the Schedule within 15 months then he shall be liable to pay compensation at compound rate of 20% per annum. Therefore, as contended by the assessee as it appears from the record that it is a conditional sale on fulfillment of certain conditions. There is no dispute with regard to non-fulfillment of the conditions by the assessee in terms of phase wise completion and no evidence is brought on record by the AO nor ld. DR showing that the assessee fulfilled conditions and received the full consideration or any phase wise consideration apart from receipt of Rs.60,00,000/-. There is no dispute that offering of the receipt of Rs.60,00,000/- to the taxation by the assessee.
We find a true English translation at Page No. 25 of the paper book which is undated and unsigned issued to the assessee by the Parshwa Realty wherein it is noted that no amount involving the sale consideration paid to the assessee except of Rs.60,00,000/- paid till this date. We note that as it appears that the said certificate issued on the request of the assessee but however no date and signature is reflected in the said certificate. Therefore, we cannot give any credence to the said certificate which was issued to the assessee stating that no payment paid except Rs.60,00,000/-, but however, in view of our discussion made hereinabove, the order of CIT(A) is not justified in confirming the order of AO in making addition of Rs.1,36,76,512/- in the hands of assessee. Accordingly, the said addition is deleted and ground Nos. 1 to 3 raised in this regard are allowed.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 07th June, 2022.