SMT. SHREE JAIN ,MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -5(2), MUMBAI

3. The Id. CIT(A) erred in holding that levy of interest u/s.234A, 234B and 234C of the Income Tax Act, 1961 is mandatory. The Appellant denies her liability for such interest.

4. The Id. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s.271(1)(c) is premature. The Appellant denies her liability for such penalty.

She further transferred, assigned and set over all her rights, title and interests in 2016-17 Smt. Shree Jain the property free from all encumbrances to and in favour of the purchaser (SLEPL).

3.1 The AO also found that TDS @ 1% amounting to Rs.8.96,000 on the sale consideration Rs.8,96,00,000/- has been deducted and deposited in government treasury by the said purchaser. Even Form 26AS for AY 2016-17 of the assessee shows the above transaction and TDS. The assessee has also not refunded back the TDS amount of Rs.8.96,000 to the said buyer, if the sale did not materialize.

The AO also observed that the Reserve Bank of India has officially stopped the barter system from 1.12.2015. The assessee neither filed duly registered “cancellation deed" against sale deed dated 07.08.2015 nor filed any registered "exchange deed" showing exchange of her impugned land with the specific flats received in exchange, showing area and valuation of the flats against the area and valuation of the land. The AO referred to section 2(42A) of the Act which defines a short-term capital asset, i.e. a capital asset held for 36 months or less.

In this case, the purchase date of said Land was 03.09.2012 as per registered “Sale Deed” and the date of sale was 07.08.2015 as per the registered “Sale Deed” dated 07.08.2015. Since the period of holding was less than 36 months, it was a "short-term capital gain”. The AO, accordingly, computed STCG of Rs.4,56,13,937/-. He also referred to the decision of Hon’ble Delhi High Court in case of CIT vs. Rohtak Textile Mills Ltd., 138 ITR 195 (Del.) where it was held that 2016-17 Smt. Shree Jain capital gain arising from transfer of capital asset is chargeable to tax in the year of transfer, even though consideration was not ascertained and was in dispute.

The assessee raised grounds on validity of reopening as well as merits of addition. The CIT(A) dismissed the grounds on both issues. Regarding the reopening, he observed that there was no assessment u/s 143(3) and the return of the assessee was only processed u/s 143(1) of the Act. He dismissed the ground by observing as under:-

“6.2. As observed by Hon'ble Supreme Court, in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd [2007] 161 Taxman 316/291 ITR 500 (SC), "At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief.” “6.3 In 411 ITR 321, Avirat Star Homes Venture (P) Ltd. Vs ITO (Bom HC), the Hon'ble Jurisdictional High Court held as under in para 10. "In our opinion, the information supplied by the investigation wing to the Assessing Officer thus formed a prima facie basis to enable Assessing Officer to form a belief of income chargeable tax having escaped assessment. Therefore, it cannot be stated that the Assessing Officer did not have reason to believe that income chargeable to tax had escaped assessment.” “6.4. Guidance is also drawn from the decision of Hon'ble Apex Court in case of DCIT vs MR Shah Logistics P Ltd (arising out of Special Leave to Appeal (C) No. 22921/2019 dated 28.03.2022)”

21. In Phool Chand BajrangLal & Ors. vs. Income Tax Officer & Ors after reviewing the previous case law, and concluding that a valid reopening is one, preceded by specific, reliable and relevant information, and that the sufficiency of such reasons is not subject to judicial review the only caveat being that the court can examine the record, if such material existed.

23. It is therefore, clear that the basis for a valid re-opening of assessment should be availability of tangible material, which can lead the AO to scrutinize the returns for the previous assessment year in question, to determine, whether a notice under Section 147 is called for.

2016-17 Smt. Shree Jain 29. Another aspect which should not be lost sight of is that the information or "Tangible material which the assessing officer comes by enabling re-opening of an assessment, means that the entire assessment (for the concerned year) is at large. the revenue would then get to examine the retums for the previous year, on a clean slate as it were. Therefore, to hold- as the High Court did, in this case, that since the assessee may have a reasonable explanation, is not a ground for quashing a notice under Section 147. As long as there is objective tangible material (in the form of documents, relevant to the issue) the sufficiency of that material cannot dictate the validity of the notice." 6.5 Further, in the case of the assessee return was accepted u/s 143(1) of the IT Act and hence there was no question of change of opinion and therefore on this basis, the notice issued was valid. This aspect is squarely covered by the judgment in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 161 Taxman 316/291 ITR 500 (SC).” 4.1 Regarding the merits of the addition the CIT(A) dismissed the grounds taken up by the assessee by giving the following findings:

“7.3. Facts of the case and submission of the assessee have been examined. It is seen that the assessee had purchased a property of 03 acres 20 guntha in Survey No. 416/1 at Devanahalli Village, KasabaHobli, Devanhalli Taluk, Bangalore for consideration of Rs. 4,37,50,000/- on 03.09.2012. Thereafter, the assessee had sold this land to M/s. Sanchaya Land and Estate Pvt. Ltd (SLEPL) vide sale deed dated 07.08.2015 for Rs. 8,96,00,000/- The SLEPL has also deducted TDS of Rs. 8,96,000/- Though the assessee has mentioned that she has not received any consideration, in the sale deed it was mentioned that assessee has given acknowledgment for sale consideration of Rs. 8.96,00,000/- Further, even though the assessee has submitted that she has not claimed TDS, it does not change the character of the transactions. Though the assessee has mentioned that in the absence of payment, the sale deed turned out to be void, she has neither filed cancellation deed against the sale deed dated 07.08.2015 nor has filed exchange deed showing exchange of the land with the specific flats received in exchange showing area and valuation of each vis a vis land area and valuation. Further, the assessee has not refunded back TDS of Rs. 8,96,000/- to the buyers if the sale did not materialize. Also, the RBI has officially stopped barter system from 01.12.2015 The assessee has not able to explain to and substantiate on one to one basis, the plots, its area and its valuation with the flats which are stated to be have Smt. Shree Jain been received in exchange, the area of said flats and valuation of said flats. 7.4. In view of the above facts, it is seen that the assessee has not shown short term capital gain of Rs. 4,56,13,937/- in respect of sale of land on 07.08.2015. Further, in the decision of CIT v/s Rohtak Textile Mills Ltd (1982) 138 ITR 195 (Delhi), it was held that capital gains arising from transfer of a capital asset is chargeable to tax during the previous year in which the transfer took place, even though the consideration was not ascertained and was in dispute. Therefore, addition of Rs. 4,56,13,937/- made by the AO as short-term capital gain into the hands of the assessee is confirmed.”

5.1 As regards the merits of the addition, the Ld. AR has made similar submission as was made before the AO and CIT(A). He submitted that though TDS was deducted by the purchaser but the appellant has not claimed any credit for such TDS. He also submitted that there was no barter exchange but land was sold but sale consideration was received and subsequently certain flats were received by the assessee. Since no consideration was received in the impugned 2016-17 Smt. Shree Jain assessment year and the flats were received in AY2019-20, the assessee has rightly shown long-term capital gain of Rs.11,25,61,056/- in AY 2019-20. The Ld. AR relied on the decision of Hon’ble Patna High Court in the case of Raj Rani Devi Ramna vs. CIT, 201 ITR 1032 (Pat.) He therefore, requested the addition made should be deleted.

The purchaser has also deducted TDS of Rs.8,96,000/- and deposited the same in the government account. There was a valid transfer of the capital asset by way of a registered sale deed. Therefore, there was short-term capital gain because the period of holding was less than 36 months.

7.1 In ground No.1, the appellant has challenged validity of reopening u/s 147 of the Act. The Ld. AR has relied on the submissions made before the CIT(A).

The CIT(A), after detailed discussion, dismissed the ground by holding as under:-

“6.2. As observed by Hon'ble Supreme Court, in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd [2007] 161 Taxman 316/291 ITR 500 (SC), "At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief.” “6.3 In 411 ITR 321, Avirat Star Homes Venture (P) Ltd. Vs ITO (Bom HC), the Hon'ble Jurisdictional High Court held as under in para 10. "In our opinion, the information supplied by the investigation wing to the Assessing Officer thus formed a prima facie basis to enable Assessing Officer to form a belief of income chargeable tax having escaped assessment. Therefore, it cannot be stated that the Assessing Officer did not have reason to believe that income chargeable to tax had escaped assessment.” “6.4. Guidance is also drawn from the decision of Hon'ble Apex Court in case of DCIT vs MR Shah Logistics P Ltd (arising out of Special Leave to Appeal (C) No. 22921/2019 dated 28.03.2022)”

21. In Phool Chand BajrangLal & Ors. vs. Income Tax Officer & Ors after reviewing the previous case law, and concluding that a valid reopening is one, preceded by specific, reliable and relevant information, and that the sufficiency of such reasons is not subject to judicial review the only caveat being that the court can examine the record, if such material existed.

2016-17 Smt. Shree Jain is at large. the revenue would then get to examine the retums for the previous year, on a clean slate as it were. Therefore, to hold- as the High Court did, in this case, that since the assessee may have a reasonable explanation, is not a ground for quashing a notice under Section 147. As long as there is objective tangible material (in the form of documents, relevant to the issue) the sufficiency of that material cannot dictate the validity of the notice." 6.5 Further, in the case of the assessee return was accepted u/s 143(1) of the IT Act and hence there was no question of change of opinion and therefore on this basis, the notice issued was valid. This aspect is squarely covered by the judgment in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 161 Taxman 316/291 ITR 500 (SC).” 7.2. We find that the CIT(A) has discussed in detail the subject issue and authorities precedents and has given reasons for dismissing the ground. It is not in dispute that there was no regular assessment u/s 143(3) of the Act. The return filed by the assessee was only processed u/s 143(3) of the Act. Therefore, the argument of the assessee that the AO has considered all the facts and issues relating to the income shown in the return of income including STCG is not correct. The AO had credible information that the appellant did not disclose short-term capital gain on sale of capital asset being land in her return of income. The CIT(A) has relied on the decisions of Hon’ble Supreme Court in case of Rajesh Jhaveri Stock Broker Pvt. Ltd. (supra), MR Shah Logistics Pvt. Ltd. (supra), Phoolchand Bajranlal & Ors. (supra) and decision of the jurisdictional High Court in case of Avirat Star Homes Venture (P) Ltd. (supra) and held that there was no change of opinion and notice was validly issued. The Ld. AR has not been able to controvert the finding of the CIT(A) by bringing on record any new

“NOW THIS DEED OF SALE WITNESSETH AS FOLLOWS:

2016-17 Smt. Shree Jain a) A sum of Rs. 8,87,04,000/- (Rupees Eight Crores Eighty Seven Lakhs and Four... Thousand Only) by Cheque No.242107 drawn on Axis Bank, RT Nagar Branch, Bangalore. b) A sum of Rs.8,96,000/- (Rupees Eight Lakhs and Ninety-Six Thousand Only) by way of tax deduction at source under section 194 IA of the Income-tax Act, 1961 remitted to the Income-tax Department. the receipt of which the VENDOR do hereby acknowledge in full and final settlement and acquit the PURCHASER from making any further payments whatsoever, the VENDOR do hereby GRANTS, CONVEYS, ASSIGNS, TRANSFERS, SELLS AND SETS OVER all her right, title and interest in the SCHEDULE B PROPERTY together with all the easements, advantages, liberties thereto held and enjoyed absolutely free from all encumbrances of whatsoever description TO AND IN FAVOUR OF THE PURCHASER herein and all the estate, right, title, interest, claim and demand whatsoever of the VENDOR into or upon the same and every part thereof TO AND IN FAVOUR OF THE PURCHASER TO HAVE AND TO HOLD the same as the sole and absolute owner thereof for themselves, successors, executors, assigns, administrators and legal representatives absolutely and forever together with title deeds, writings, documents and all other evidences of title.”

8.1 It is clear from the above that the property was duly transferred vide sale deed dated 07.08.2015. There was a valid transfer of a capital asset, being the impugned land, in the instant case u/s 2(47) of the Act. The Hon’ble Supreme Court in case of Suraj Lamp and Industries Pvt. Ltd. vs. State of Haryana, 340 ITR 1 (SC) held that immovable property can be legally and lawfully transferred or conveyed only by a registered deed of conveyance. Subsequently, the Hon’ble Supreme Court, again, in the case of Ramesh Chand (D) through LRs v. Suresh Chand & Anrs, Civil Appeal No. 6377 of 2012, dated 01.09.2025, after examining Sections 5 and 54 of the Transfer of Property Act and surveying the earlier 12 2016-17 Smt. Shree Jain decision in Suraj Lamp and Industries (Supra), has reiterated that in the case of tangible immovable property, transfer of ownership can be effected only by a duly stamped and registered instrument of conveyance. In the present case, the capital asset (land) was sold by a registered sale deed. Therefore, there is a valid transfer of the property by the assessee on 07.08.2015. Under the Income-tax Act, capital gains are taxable in the year in which the transfer of the capital asset takes place regardless of when the actual sale consideration is received. The right to receive sale consideration arising from a completed transfer triggers capital gains tax even if the money is paid in instalments or later. For immovable, property transfer is complete upon registration of the sale deed, handover of the possession or when the buyer is given the rights to the property, even if full amount is not received. Income is taxed when it is received or accurred, meaning thereby that the accrual of the right to receive the money is enough. In the instant case, the appellant has duly transferred the property by way of a registered sale deed dated 07.08.2015 (AY 2016-17). Therefore, the right to receive the consideration has accrued to the assessee. As stated by the AO and CIT(A), no registered cancellation deed or registered exchange deed was produced by the appellant. No such document was also submitted to us. Hence, there was a valid transfer u/s 2(47) of the Act and the AO has rightly made additions of the resultant STCG.

(PAT) relied upon by the Ld. AR is not applicable because in that case there was a condition precedent as to the payment of consideration. However, in the instant case, there is no such condition that the sale would be effective only on payment of entire consideration. The registered deed and the relevant part extracted above does not put any such restrictive condition on the transfer of the immovable properties. In fact, it was made clear that entire consideration was received and all rights in the land were transferred to the purchaser. Hence, the decision relied upon would not come to the rescue of the assessee. On the other hand, in the light of the decisions of the Hon’ble Supreme Court in cases of Suraj Lamp and Industries Pvt. Ltd. and Ramesh Chand (D) through LRs v.

Suresh Chand & Anrs, (supra), the transfer is complete. The law declared by Hon’ble Supreme Court is binding an all Courts and Tribunals in India, as per Article 141 of the Constitution. We also find that the Hon’ble Supreme Court has dismissed the SLP (460 ITR 493) against the order of Hon’ble Kerala High Court in case of CIT vs. Harbour View 409 ITR 599 (Ker.) where it was held that when pursuant to agreement to sale, possession of land was handed over by the assessee and sale consideration was received, provisions of section 2(47) of the Act would apply and mere fact that contract was subsequently terminated by mutual consent, would not improve case of the assessee to wriggle out of the 2016-17 Smt. Shree Jain preview of section 2(47) of the Act. In view of the above facts and authoritative precedents, there was liability to pay short term capital gain tax because the property was held for a period of less than 36 months. We find no infirmity in the order of CIT(A).

8.3 As regards the claim of the assessee that the LTCG capital gain arose on receipt of 84 flats from the SLEPL in lieu of sale amount in AY 2019-20, there is no legal basis for such claim. As held by the Hon’ble Supreme Court in case of Tarulata Shyam vs. CIT 108 ITR 345 (SC), two principles deductible from section 4(1) are: (i) that the tax is levied on the total income of the assessee and (ii) each previous years is a distinct unit of time for the purpose of assessment, and the profits made or liabilities or losses incurred before or after the relevant previous year is wholly immaterial in assessing the profits of that year unless there is statutory provision to the contrary. Therefore, the income offered in AY 2019-20 by the appellant is not material in making the assessment of total income in the subject AY 2016-17. The AO shall independently determine such income in accordance with law in the year in which it has been offered. We are not expressing any opinion on the said issue in this order. In the result, we hold that the AO has correctly taxed the income as sale of land as STCG, which was rightly confirmed by the CIT(A). Accordingly, the ground is dismissed.

Levy of interest under the above provisions of the Act are mandatory, as held by the Hon’ble Supreme Court in case of Anjum M.H. Ghaswala 252 ITR 1 (SC).

Hence, the ground is dismissed.

Order is pronounced on 11.03.2025