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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR
आदेश / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER:
Both these appeals are filed by assessee, being ITA Nos. 27 &
28/Chny/2017 which are directed against separate appellate order(s) in
ITA No. 18/CIT(A)-13/208-09 and ITA No. 17/CIT(A)-13/2009-10 both dated 11th November, 2016 , passed by learned Commissioner of Income
Tax (Appeals)-13, Chennai (hereinafter called “the Ld.CIT(A)”), for
assessment years 2008-09 & 2009-10 respectively , the appellate
proceedings had arisen before learned CIT(A) against separate
ITA Nos.27 & 28/Chny/2017 :- 2 -:
assessment order(s) dated 31.03.2016 and 28.03.2016 respectively
passed by learned Assessing Officer(hereinafter called “the AO” ) both u/s.
143(3) read with Section 148 of the Income-tax Act,1961 (Hereinafter
called “the Act”) for ay: 2008-09 and 2009-10 respectively .
The grounds of appeal raised by assessee in memo of appeal filed
with the Income-Tax Appellate Tribunal, Chennai (hereinafter called “the
Tribunal”) read as under:-
ay: 2008-09:
The order of the learned Commissioner of Income tax Appeals-13, Chennai is opposed to law and facts.
The learned C.I.T (A) erred in not accepting the appellant's submission that land sold by him was agricultural in nature and the capital gain on its sale was exempt under section 10 (37) (i) of the I.T. Act in as much as the land was not situated in an area referred to in item (a) of sub clause (iii) of clause (14) of section 2 of the Act.
The learned C.I.T. (A) erred in not accepting the appellant's submission that the area in which the land was situated had not been notified by the Central Government as an urban area under clause (b) of clause section 2 (14) and for that reason also did not fall within the category of "Capital Asset".
The learned C.I.T. (A) erred in not accepting the appellant's submission that the land was sold for Rs.1,91,50,575/- as per the agreement dated 7.1.2008 and that the sale proceeds together with consideration of Rs.17,99,425/- for standing crops were deposited into the bank account as and when the installments of payments were received from the buyers. (Part payment of Rs.82,00,000/- in the accounting period relevant for Asst. Yr 2008-09 and balance of Rs.1,27,50,000/- in accounting period relevant for Asst. Yr 2009- 10).
The learned C.I.T (A) erred in concurring with the view of the Assessing Officer that the agreement had no evidentiary value as it had not been registered.
The CIT (A) erred in not recognizing the well known fact that Guideline Values are different from Market Values and at times they varied widely. In particular he failed to recognize that in this case the registration had been got done for the guideline value which was much lower than its market value.
The CIT(A) failed to see that it was illogical on the part of the Assessing Officer to have brought to assessment the capital gain on the sale of the land (computed with reference to the consideration stated in the registered document) in the Asst. Year 2008-09 when the sale deed was registered on 11.09.2008 relevant for the assessment year 2009-10.
For these and other grounds that may be urged with leave of the Honourable Tribunal it is submitted that the appellate order may be cancelled as not rendering any justice,
ITA Nos.27 & 28/Chny/2017 :- 3 -:
ay: 2009-10:
The order of the learned Commissioner of Income tax Appeals-13, Chennai is opposed to law and facts.
The learned C.I.T (A) erred in not accepting the appellant's submission that land sold by him was agricultural in nature and the capital gain on its sale was exempt under section 10 (37) (i) of the l.T. Act in as much as the land was not situated in an area referred to in item (a) of sub clause (iii) of clause (14) of section 2 of the Act. 3. The learned C.I.T. (A) erred in not accepting the appellant's submission that the area in which the land was situated had not been notified by the Central Government as an urban area under clause (b) of clause section 2 (14) and for that reason also did not fall within the category of "Capital Asset". 4. The learned C.I.T. (A) erred in not accepting the appellant's submission that the land was sold for Rs.1,91,50,575/- as per the agreement dated 7.1.2008 and that the sale proceeds together with consideration of Rs.17,99,425/- for standing crops were deposited into the bank account as and when the installments of payments were received from the buyers. (Part payment of Rs. 82,00,000 received in the accounting period relevant for Asst. Yr 2008-09 and balance of Rs.1,27,50,000/- received in accounting period relevant for Asst. Yr 2009-10). 5. The learned C.I.T (A) erred in concurring with the view of the Assessing Officer that the agreement had no evidentiary value as it had not been registered. 6. The CIT (A) erred in not recognizing the well known fact that Guideline Values are different from Market Values and at times they varied widely. In particular he failed to recognize that in this case the registration had been got done for the guideline value which was much lower than its market value.
For these and other grounds that may be urged with leave of the Honourable Tribunal it is submitted that the appellate order may be cancelled as not rendering any justice.
2.2 The assessee has also raised additional grounds of appeals for ay:
2009-10 , which reads as under:
“The learned CIT(A) erred in not observing that the Assessing Officer had admittedly issued the 148 notice merely on the basis of information received from the Investigation Directorate and not on the basis of any recorded “ satisfaction” of his own indicating that income had escaped assessment and in such circumstances the 148 notice was not legally valid. 2. The learned CIT erred in not examining with reference to the records whether the Principal C.I.T. had in fact given his approval for the issue of 148 notice and if approval given whether such approval was given after recording his own satisfaction about any escapement of income to tax.”
3.These are two appeals filed by the assessee for ay’s: 2008-09 & 2009-
10 respectively. First we shall take up assessee’s appeal for ay: 2008-09.
The AO received information from Investigation Directorate, Chennai to
ITA Nos.27 & 28/Chny/2017 :- 4 -:
examine sources for cash deposits appearing in assessee’s saving bank
account No.177901000001600 maintained with Indian Overseas Bank,
Girivalam Road, Tiruvannamalai(IOB) for the period from October, 2007 to
February, 2015, which led AO to issue notice to the assessee u/s.148 of
the 1961 Act , dated 27.03.2015 for ay: 2008-09 , which was admittedly
issued beyond four years from the end of assessment year but within six
years from the end of the assessment year. The assessee originally did
not file his return of income for ay: 2008-09 with Revenue but on
31.03.2015, the assessee furnished his return of income in pursuance to
the aforesaid notice u/s. 148 of the Act , dated 27.03.2015 for ay: 2008-
09 admitting ‘nil’ income.
3.2 The assessee had claimed that it had entered into an agreement to
sell dated 07.01.2008 with Shri S.D.Settu & Shri Palani (both prospective
purchasers) which was duly witnessed by three independent witnesses for
sale of acre 25.36-and-half cents of land to aforesaid purchasers for
undertaking real estate business for an agreed consideration of
Rs.1,91,50,575/-. The assessee had claimed that he was paid a sum of
Rs.50 lakhs as advance in cash. The assessee claimed that it was agreed
that balance payment of Rs.1,41,50,575/- was to be paid within six
months. The assessee also claimed that it handed over possession of the
above said land to the purchasers. The assessee claimed that later the
sale became absolute as evidenced by copies of seven sale deeds all
dated 11.09.2008 numbered as 9446 of 2008 to 9451 of 2008 and 9418
of 2008 , with aggregate sale value of Rs.23,34,900/- for the aforesaid
ITA Nos.27 & 28/Chny/2017 :- 5 -:
land. When the assessee appeared before the AO on 07.08.2015, a sworn
statement of the assessee was recorded by the AO and based on
averments made , a survey u/s.133A was conducted in the cases of Shri
S.D.Settu & Shri Palani on 22.09.2015 , who were purchasers of aforesaid
lands from the assessee. The said survey was conducted by ITO, Ward-1,
Vellore and ITO, Ward-2, Tiruvannamalai respectively. Consequent to
survey u/s.133A in the cases of Shri S.D.Settu & Shri Palani, in order to
have corroborative facts, proceedings of the chief examination of the
assessee and his cross-examination of Shri S.D.Settu & Shri Palani were
conducted on 17.02.2016 . The assessee had claimed that he entered
into an agreement to sell dated 07.01.2008, wherein he agreed to sell his
land admeasuring acre 25.36 and half cents of land , for a total
consideration of Rs.1,91,50,575/-. The assessee claimed that it received `
50 lacs in cash as advance at the time of entering into an agreement to
sell of his land from the purchasers on 07.01.2008. The assessee claimed
that out of aforesaid advance of ` 50 lacs received as cash on 07.01.2008,
the assessee deposited Rs.45 lakhs in cash with IOB, Girivalam Road,
Tiruvannamalai on 08.01.2008 while balance amount of Rs.5 lakhs of cash
was retained by the assessee which was deposited subsequently with the
same Bank. The assessee also claimed that following amounts in cash
aggregating to Rs.1,59,00,000/- were also deposited with the same bank
account with IOB on various dates as mentioned below:
Date of receipt Amount (Rs.) 04.03.2008 25,00,000 15.03.2008 7,00,000
ITA Nos.27 & 28/Chny/2017 :- 6 -:
24.07.2008 50,00,000 02.08.2008 20,00,000 05.09.2008 15,00,000 11.09.2008 10,00,000 11.09.2008 22,00,000 27.09.2008 10,00,000 Total 1,59,00,000
3.3 It is claimed that the said sum deposited with the IOB represents
balance consideration of ` 1,41,50,575/- out of total sale consideration of
` 1,91,50,575/- , further a sum of ` 13,09,425/- was stated to be received
by assessee in cash towards consideration for standing crop on the said
land at the time of transfer of land. It was claimed that an amount of `
5,00,000/- which was originally retained by assessee out of advance of `
50,00,000/- received on 07.01.2008 was deposited in bank account with
IOB. The agreement to sell dated 07.01.2008 was produced by assessee
in original before AO as contemporaneous evidence in support of his claim.
The buyers Shri S.D.Settu & Shri Palani along with one Shri
R.Purushothaman of Vellore got sale deed executed from assessee in their
favour for a total consideration of Rs.23,24,900/- on 11.09.2008 by way
of seven independent sale deeds . The AO after noticing the difference to
the tune of Rs.1,68,15,675/- (Rs.1,91,50,575/- - Rs.23,34,900/-)
between the value shown in agreement to sell and sale deed, proposed to
make additions to the income of the assessee as an unexplained
investment u/s.69 of the Act , wherein it was proposed by the AO to bring
to income-tax an amount of Rs.82,00,000/- as income of the assessee as
income from other sources as an unexplained credit appearing in bank
account of the assessee for ay: 2008-09 , while balance amount was
ITA Nos.27 & 28/Chny/2017 :- 7 -:
proposed by the AO to be brought to income-tax in subsequent year i.e.
ay: 2009-10 when the said amount was found to be credited in bank
account of the assessee. The assessee on its part contended before the
AO that these are rural agricultural land and were not liable for income-
tax keeping in view provisions of Section 2(14)(iii) r.w.s. 10(37) of the
1961 Act and no income-tax is exigible on the said sum received by the
assessee. The assessee also contended that since the assessee had
identified nature of receipt, source of funds and persons who had given
the said sum of amount to the assessee, provisions of Section 69 of the
1961 Act has no applicability in the instant case.
3.4 The said Shri. S.D.Settu during the course of survey conducted u/s
133A of the 1961 Act on 22.09.2015 , in his statement recorded during
survey operations submitted as under:
"Q.No.19: Do you know Shri Anthiah Pancras and what is the business relationship between you? Reply of Shri S.D.Settu: I do not know him directly. My business associate Shri Palani of Arani introduced Shri Anthiah Pancras through a broker by name Shri Rasheed Bhai who indicated that there is prospective seller in Anthiah Pancras who is the owner of some lands. Through Rasheed Bhai myself and Shri Palani purchased 23.36 acres of lands in Velapadi Village, Arni Tk on 11-09-2008 through seven separate sale agreements for a consideration of Rs.23,34,900/-. This did not include any registration charges. Q.No.20: Now I am showing you a copy of the agreement to sell dated 07-01-2008 executed with Shri Antniah Pancras according to which a sum of Rs.1,91,50,575/- is stated to be agreed consideration. This agreement bears your signature as well as the signature of Shri Palani. Please offer your explanation, Reply of Shri S.D.Settu: The aforesaid lands were initially negotiated for Rs.1,10,00,000/- and a sum of Rs.25 lakhs was given as advance and another sum of Rs.25 lakhs was given- by the way of cheque of Andhra Bank, Vellore. When we paid advance we did not inspect the lands properly because those lands were shown to me at the time of sun-set at 7.00 p.m. Thereafter when we subsequently visited the lands we found there were high tension electric towers and the lines and lands were surrounded by lake. This apart there was Srilankan Refugee camp was there in the vicinity of lands. Being shocked with these we approached Shri Anthiah Pancras and requested him to refund the advance given. Initially, Shri Anthiah Pancras refused to refund the advance. Thereafter, in consultation with his friends and also keeping in view the deficiencies existed in and around the lands Shri
ITA Nos.27 & 28/Chny/2017 :- 8 -:
Anthiah Pancras returned the cheque of Rs.25 lakhs. Thereafter Shri Anthiah Pancras executed absolute deed for Rs.23,34,000/-towards sale of 23.36 acres of lands. We have not given any excess payment beyond this amount to him. Because we had no inclination to purchase them. Furthermore, we categorically state that Shri Anthiah Pancras was also left with no other alternative except to selling us. Q.No.21. ................
Reply of Settu :...... Q.No.22: Shri Anthia Pancras has given a sworn statement before the Income Tax Dept. that in connection with the aforesaid sale transactions he had received Rs.1.91 crores in the F.Ys. 2007-08 and 2008-09 and the same were deposited in SBI (sic IOB), Thiruvoodal Br. Thiruvannamalai. Further, you had also given Anthiah Pancras Rs.13,09,425/- as compensation for standing crops. Please state the sources through which these payments were made.
Reply of Shri S.D.Settu: The aforesaid statement of Shri Anthiah Panels is not true. For myself, Shri Palani and Shri Purushothaman we did not have the capacity to the extent of Rs.2 crores for being paid to Shri Anthiah Pancras. We do not have sufficient financial resources. In fact we had given him only Rs.23.34 lakhs. In the land so acquired there were no agricultural produce nor agricultural activity was carried on. It is incorrect to suggest that the lands were agricultural in nature. Out of the 23.34 acres purchased we incurred an additional expenditure of Rs.40 lakhs for converting the same into 250 saleable plots. So far, 50 plots have been sold and the balance 200 plots remains unsold. From the same site we had made a lay-out of additional 450 plots and we are proposing to sell the same through lottery dip.”
3.5 During the course of survey conducted by Revenue u/s 133A of the
1961 Act on 22.09.2015, Shri Palani concurred with the statement of Shri
S.D.Settu that one Shri Rasheed Bhai introduced the assessee to them
and that he purchased 23.36 acres lands in 2008 by availing ` 8 lacs as
loan from Axis Bank . He further stated that total investment is around `
24 lacs was made for purchase of aforesaid land along with Shri S.D.Settu
and Shri Palani.
3.6 The said Shri S.D.Settu and Shri Palani admitted to have purchased
the aforesaid land for ` 24 lacs along with Mr Palani , but denied
consideration of Rs.1,91,50,575/- having been paid by them for
purchasing the aforesaid land. Shri S.D.Settu did not denied the existence
ITA Nos.27 & 28/Chny/2017 :- 9 -:
of agreement to sale dated 07.01.2008 wherein consideration was stated
to be of Rs 1,91,50,575/- . He also admitted that initially they agreed for
consideration of Rs.1,10,00,000/- but later found that high tension electric
towers and lines are in the said land and that the said land is also
surrounded by lake. Further, they found that Srilankan Refugee Camps
are existing in the vicinity of the lands . It is claimed by buyers that these
adverse factors/reasons got them to reduce consideration for sale of land
to Rs.23.34 lakhs. Shri Palani concurred with the statement of Shri
S.D.Settu.
3.7 Both Shri S.D.Settu & Shri Palani were cross-examined by assessee
on 17.02.2016 and in cross examination , Shri S D Settu agreed with the
existence of the agreement to sale dated 07.01.2008, which is as under:
7.1 Cross-examination of asseseee Shri Anthiah Pancras on Shri S.D.Settu dated 17.2.2016: Qn. No.1 by the assessee : Do you agree with the existence of agreement dated 07-01- 2008 ? Reply of Shri S.D. Settu: Yes. We both who are present here in response to summons u/s 131 agree with the existence of agreement to sell dated 07-01-2008. This agreement bears the signatures of myself, my business associate Shri Palani and Shri Anthiah Pancras. This agreement was witnessed at the time of execution by three independent witnesses viz. 1) Shri T.Adhimoolam, s/o Shri Thiruvengadam, Perangiyur, 2) Shri R, Settu Annamalai, s/o Shri Rajagopat who is none other than brother of Shri Palani herein prospective purchaser and 3) Shri A Akbar, s/o Abdul Rahman, E.B. Nagar, Arani, The five stamp paper worth Rs.100 were purchased by Shri R.Palani, Arani from Shri E.Velu, Stamp vendor, Arani bearing 99AA, 829269 Register No. 302 to 306. Q.No.2 by the assessee: Whether it is a fact that you had given amount to me as per the agreement dated 07-01-2008. Reply of Shri S.D. Settu As already stated in reply to Q.I9, 20 and 22 given in my statement dated 22-09-2015 1 have narrated the sequence of events from the signing of agreement till completion of absolute sale. Initially we have given Rs.25 lakhs in cash and another 25 lakhs in cheque. Subsequently, we did not satisfy with the ambiance of the lands located we approached Shri Anthia Pancras and sought for refund of the amount As per my reply at the time of survey I reiterate that he returned the cheque.
Q.No.3 by the assessee: Can you substantiate your claim that Shri Anthiah Pancras returned the cheque of Rs.25 lakhs by documentary evidence
ITA Nos.27 & 28/Chny/2017 :- 10 -:
Reply of Shri S.D. Settu: I do not have any evidence to substantiate that the cheque was given and cheque was returned. However, it is a fact that I had given a cheque and same was returned to me and the relevant bank account cheque leaves were not available with me.
Q.No.4 by the assessee: Do you want to say that the agreement dated 07-01-2008 stood cancelled in the light of deposition dated 22-09-2015.
Reply of Shri S.D. Settu: Since the agreement to sell dated 07-01-2008 was not subjected to registration I had not chosen to cancel the agreement. In real estate trade practice normally we used to enter into number of agreements and those agreements would remain cancelled due to non pursuance of the deal. I hereby confirm that there is no evidence for deviation of contractual amount from ` 1.91 cr. to 23.34 lakhs nor that agreement dated 07-01-2008 was superseded by some other fresh agreement,
Q.No.5 by the assessee: I say that after entering to agreement dated 07-01-2008 and upon receipt of Rs.25 lakhs in cash and Rs.25 lakhs by way of Andhra Bank cheque before entering to seven absolute sale deeds dated 11-09-2008 you both have given me the following amounts.
Date of receipt Amount (Rs.) 04-03-2008 25,00,000 15-03-2008 7,00,000 24-07-2008 50,00,000 02-08-2008 20,00,000 05-09-2008 15,00,000 11-09-2008 10,00,000 11-09-2008 22,00,000
Thereafter after conclusion of sale on 11-09-2008 you had given me Rs.10 lakhs which you enabled me to deposit the same in Indian Overseas Bank, Girivalam Br. Tiruvannamalai. For these payments I had given endorsement on the reverse side of the photocopy of the agreement which is in your possession.
Reply by Shri S.D. Settu: We both, S.D.Settu and Palani categorically deny the above. Other than Rs.25 lakhs given on 07-01-2008 at the agreement stage we as a buyers neither paid any amounts nor you received any amounts from us. Therefore, question of any endorsement evidencing receipt of payment from us by you does not arise.
Q.No.6 by the assessee: I wish to point out that in the seven absolute sale deeds that recitals therein indicate that you had paid Rs.23.34 lakhs on the date of registration This suggest you had paid ` 23.34 lakhs towards the entire extent on 11-09-2008. Is it a fact?
Reply by Shri S.D. Settu: We categorically deny having paid any amount on the date of absolute sale deed i.e. 11-09-2008 to you. Apart from payment of Rs.25 lakhs at the time of agreement we did not pay any amount.
Q.No.7 by the assessee; As per the agreement dated 07-01-2008 and also seven sale deeds dated 11-09-20O8 the assets transferred were agricultural in nature. Similarly, VAO, Velapadi Village, Arani, in his statement before ITO on 12-02-2016 has confirmed that on the date of agreement there were agricultural lands were in existence. However, it is observed from the statement u/s 133A on 22-09-2015 you have deposed that the assets sold were not agricultural in nature. In the statement in reply to Question no.22 you denied having paid any amount towards compensation for standing crops to the extent of Rs.13,09,425/- which was claimed to be receipt by me from you. I say that your statement is incorrect and false. Please explain.
ITA Nos.27 & 28/Chny/2017 :- 11 -:
Reply by Shri S.D. Settu: I deny the existence of agricultural activity thereon. We did not pay any compensation as claimed by you. When we visited the site we did not notice any agricultural produce or activity. I standby what I deposed on the date of survey u/s 133A.
3.8 The AO in order to verify assessee’s claim that the land transferred
were agricultural land summoned Shri R.Devaraj, Village Administrative
Officer (VAO) , Revenue Department, Government of Tamil Nadu, Velapadi
Village, Arani Taluk u/s 131 of the 1961 Act, who stated in an statement
recorded that agricultural activities were undertaken on the said land at
the time of transfer and there were standing crops of sugarcane, ground
nut and paddy and Rs.500/- was collected as land Revenue. The ld. VAO
stated that there were three submersible pump sets for irrigating the
lands. It was stated by learned VAO that as per revenue records these
lands before transfer were agricultural in nature. He also confirmed that
Velapadi Village is situated 1KM away from Arani Town. It was stated by
learned VAO that Velapadi Village is not part of the Arani Town and still
categorized as rural area, not forming part of Arani Town for
administrative purposes. The learned VAO stated in its statement that
said buyers Shri S.D. Settu and others after getting possession of the land
after registration got the said lands converted into saleable plots for real
estate activities. The learned VAO stated that after transfer of the said
land, from 2008-09 land revenue at ` 250 was collectible which remained
unpaid. It was stated by ld. VAO that prior to transfer, these lands were
fertile agricultural land with irrigation facility but after transfer, the buyers
developed the land by spreading ‘Morambu soil’ on these lands to level
them and these lands were recognized as lay-outs by Arani Panchayat. It
ITA Nos.27 & 28/Chny/2017 :- 12 -:
was confirmed by learned VAO that there are two high tension electric
lines passing through the lands standing on the concrete pillars erected by
the E.B. Department. The learned VAO confirmed that the lands were
registered for guideline value determined by registration authorities which
was ` 1 lacs per acre. He also confirmed based on his enquiries with
villagers that in financial year 2007-08 , there was a price movement in
the land due to real estate activity and the market prices of good location
land could be Rs.3 lakhs per acre. However, he also submitted that this
land could not fetch ` 1.91 crores at that time which as per him based on
his enquiries with the villagers were highly inflated price. It was also
submitted by learned VAO that later the buyers converted the said land
into saleable plots for the real estate activity. The assessee was given
copies of the sworn statements recorded of Shri S.D.Settu , Palani and the
VAO.
3.9The assessee had claimed that he sold rural agricultural lands which
are beyond the purview of capital gains taxation , keeping in view
provisions of Section 2(14)(iii) read with Section 10(37) of the 1961 Act
and the assessee claimed that even provisions of Section 68 of the 1961
Act cannot be invoked for cash deposits in the bank account. The
assessee filed certificate from Panchayat office to support its contention.
The assessee contended that he received Rs.1,91,50,575/- from buyers
for sale of acre 25.36 and half cents of land at Velapadi Village which is
evidenced by unregistered agreement of sale dated 07.01.2008 executed
ITA Nos.27 & 28/Chny/2017 :- 13 -:
by buyers Shri S.D.Settu & Shri Palani. He also confirmed that cash
received were deposited in his bank account maintained with IOB and it is
only for the purposes of registration with the registration authorities, the
said buyers along with Shri R.Purushothaman, Vellore, with a view to
evade stamp duty and Income-tax got the said land transferred for a
nominal consideration of Rs.23,24,900/- which was the guideline value of
the said land. The assessee also contended that there is a standing crops
of sugarcane, ground nuts and paddy grown when the lands were
transferred , and an excess amount over and above agreed consideration
of ` 1.91 crores was received from the buyers towards the said standing
crop which was deposited in his bank account. The assessee also
contended before AO that sale consideration which was received in cash
was deposited in his bank account. Further, the assessee contended that
statement of learned VAO which was based on revenue records and
enquiries made from local villagers is more credible. The assessee
contended that on-money is quite prevalent in India in real estate
transactions and there is nothing new about the same and that the
agreement of sale dated 07.01.2008 clearly evidences that total
consideration paid was Rs.1,91,50,575/- and sale agreement were entered
into for Rs.23.34 lakhs as per guideline value as per registration
authorities which was shown by the buyers in sale agreement to evade
Income-tax liability and Stamp duty. The assessee contended that buyers
have admitted that they agreed to purchase the land for Rs.1.1 Crs. in
their statement recorded before the AO and that they have come out with
ITA Nos.27 & 28/Chny/2017 :- 14 -:
theory of high tension towers and lines going through the land, Srilankan
Refugee Camp and lake, etc, to show that they got the land at reduced
price of ` 23.34 lacs. It was contended by assessee before the AO that no
buyer will pay consideration of Rs.50 lakhs at the time of signing of the
agreement when the total consideration would have been Rs.23.34 lakhs.
3.10 The AO disbelieved the contentions of the assessee and held that
these lands are within municipal limits of Arani Town as deposed by
learned VAO, dated 12.02.2016 . The AO observed that Shri S.D.Settu &
Shri Palani in their statement recorded before AO had stated that the
consideration for land to be ` 23.34 lacs and further VAO has stated in his
deposition before the AO on 12.02.2016 that value of the land could be in
between ` 1 lacs to Rs.3 lacs per acre and in any case it could not be Rs.8
lakhs per acre as claimed by the assessee. The AO observed that due to
passing of high tension lines and power cables along the lands, the value
of ` 8 lacs per acre is exaggerated. Further, it was observed by the AO
that this agreement of sale dated 07.01.2008 is an unregistered document
and the stand of the party to the said agreement are contrasting. The AO
observed that the said agreement is not enforceable and does not have
binding nature between the parties to the agreement . The AO observed
that unregistered agreements can be given due weightage only if both the
parties confirm the dealing on enquiry or clinching evidences relating to
payments are brought on record. The AO observed that evidences on
record and enquiries revealed that assessee could not have received huge
ITA Nos.27 & 28/Chny/2017 :- 15 -:
consideration as mentioned in the agreement. As per AO , since parties
are giving conflicting version, this unregistered agreement to sale dated
07.01.2008 loses evidentiary value. The AO also observed that there is no
evidence on record to prove that assessee received cash which was
deposited in bank from the buyers of the said land. The AO also observed
that this unregistered sale agreement does not contain any endorsement
relating to the payment of cash made/received by respective parties. The
AO observed that assessee had failed to explain sources of amount
deposited in bank account and since sources are not explained with
evidences , these cash deposits are treated as an unexplained investments
u/s.69 of the 1961 Act. The AO also rejected contentions of the assessee
that gains arising from sale of these lands by the assessee were exempt
under provisions of the 1961 Act because the land was rural agricultural
land not liable to tax u/s 2(14)(iii) read with Section 10(37) of the 1961
Act. The AO based on the enquiry with the office of SRO, Arani adopted
guideline value for these lands at ` 40,000/- per acre in financial year
2000-01, vide assessment order dated 31.03.2016 passed by AO u/s.
143(3) read with Section 148 of the 1961 Act.
4.Aggrieved by an aforesaid assessment framed by AO, the assessee filed
first appeal with Ld.CIT(A) who after considering submissions of the
assessee, dismissed the appeal of the assessee vide appellate order dated
11.11.2016 by holding as under:-
ITA Nos.27 & 28/Chny/2017 :- 16 -:
“1 have given careful consideration to the findings given by the AO in the assessment order and the appellant's submissions made during the assessment proceedings, during the appeal proceedings and accordingly the issue is adjudicated as under;
The sale agreement dt.7.1.2008 is an unregistered document and stand on the parties to the sale agreement are contrasting. Moreover, such sale agreement is not enforceable and does not have binding nature between the parties to the agreement. Due weightage to the sale agreement can only be given even if it is unregistered sale agreement provided contracting parties confirm the sale agreement. In the instant case, the contracting parties do not see eye to eye regarding the terms of agreement and therefore, the sale agreement loses its evidentiary value. Accordingly, the claim of the appellant that the payments are received on various dates corresponding with the deposits made in 1OB, Tiruvannamalai is not supported by any evidence. Moreover, the unregistered sale agreement does not contain any endorsement relating to payment of cash made/received by the respective parties.
Thus, relying on the version of VAO regarding the Fair Market Value of the land and as per VAO the land transaction in the particular area has deposed about the assessee's land which can fetch Rs.3 lakhs per acre. VAO has also stated that the land could not have been sold for higher price at Rs.8 lakhs per acre. Accordingly, in absence of any documentary evidence relating to payment, the assumption cannot be drawn that assessee would have sold land measuring 23.5 acres at Rs.8 lakhs per acre.
Therefore, the cash deposits in assessee's IOB account in no. 177901000001600 cannot be considered as sourced from sale of land. Hence remains unexplained. The cash deposits are unexplained investment u/s 69 of the Act. Accordingly, the action of the AO considering the deposits dated 07.01.2008 for Rs.50,00,000/- 04.03.2008 for Rs.25,00,000/-, 15.03.2008 for Rs.7,00,000/-. Thus, total of Rs.82,00,000/-, the AO has considered Rs.23,34,900/- as full value consideration liable to LTCG as discussed above. The balance amount of Rs.58,65,100/- is treated as unexplained investment u/s 69 of the Act for FY 2007-08. The action of the AO is accordingly confirmed on this issue and the appellant's ground is dismissed.”
5.Aggrieved by appellate order dated 11.11.2016 passed by Ld.CIT(A),
the assessee has filed this appeal before tribunal . The ld. Counsel for
assessee submitted that the assessee sold his rural agricultural land at
Velapadi Village, Arni Circle, Thiruvanammal District for a total
consideration of ` 1.91 crores and amount was received in cash from the
buyers which stood deposited in his bank account maintained with IOB. It
was submitted that assessee is a Christian Priest and utilized the sale
proceeds for purpose of constructing school. It was explained that there
was an agreement to sale dated 07.01.2008 entered into by assessee with
Shri.D.Settu & Shri R. Palani for selling these land for a total consideration
of Rs.1,91,50,575/- with total area of around 25 acres and 36 ½ cents of
ITA Nos.27 & 28/Chny/2017 :- 17 -:
rural agricultural land. It was explained by learned counsel for the
assessee that said agricultural land was purchased by buyers for the
purposes of real estate development and after taking possession divided
the aforesaid land into plots for re-selling as part of their real estate
business, Rs.50 lakhs was paid by buyers in cash at the time of entering
into an agreement to sale dated 07.01.2008 , while balance amount was
to be paid of Rs.1.41 Crs. within six months. It was explained that buyers
took more time to pay the amount and part payment was only received in
ay: 2008-09 , while balance remaining payments were received in the
subsequent year. It was submitted by learned counsel for the assessee
that guideline value of the said land was Rs. 1 lacs per acre and buyers
finally got registered aforesaid agriculture land in their favour on
11.09.2008. It was submitted that agreement to sale dated 07.01.2008
was an unregistered agreement executed on 07.01.2008 as there was no
requirement earlier to have a registered agreement of sale within State of
Tamil Nadu. Thus, the assessee submitted that these are agricultural
lands which are beyond purview of being treated as capital asset within
the meaning of Sec.2(14) and exemption from income-tax is available on
gains earned on sale of aforesaid agricultural land u/s.10(37) . It was
submitted that the aforesaid land is situated in Velapadi Village Panchayat
which is within 2 to 3 kms of Arani Town. The assessee relied upon the
decision of the Hon’ble Madras High Court in the case of CIT v. P. J.
Thomas reported in (1995) 211 ITR 897(Mad.). So, it was submitted by
learned counsel for the assessee that AO applied amended provisions
ITA Nos.27 & 28/Chny/2017 :- 18 -:
while making additions in the case of the assessee relevant to the ay:
2008-09 & 2009-10 and held the said land to be capital assets. The
learned counsel for the assessee claimed that for relevant period , the
assessee rightly claimed exemption u/s.10(37) of the Act. It was
submitted that nearest Municipality is 52 kms away . It was submitted
that said agricultural land was not a notified land nor it falls within notified
municipality. It was submitted by learned counsel for the assessee that
the said land was registered for guideline value of Rs.23.34 lakhs while
actual sale proceeds of the said land were Rs.1,91,50,575/-. It was
submitted by learned counsel for the assessee that entire sale proceeds
were deposited in bank account of the assessee maintained with IOB,
which was used for constructing school. It was submitted that at the time
of agreement of sale dated 07.01.2008 , part consideration of Rs.50 lakhs
was paid by buyers to the assessee in cash. It was submitted that
registered document for sale of the said property were not entered in ay:
2008-09 , while same was executed in ay: 2009-10 , on 11.09.2008. It
was submitted by learned counsel for the assessee that Rs.10 lakhs was
paid for standing crops on the said land on the date of transfer . It was
submitted that since the land was an agricultural land , the consideration
cannot be brought to tax u/s.10(37) of the Act. The learned counsel for
the assessee submitted that assessee has raised additional ground of
appeal in ay:2009-10 challenging validity of reopening of the concluded
assessment by invoking provisions of Section 147/148 of the 1961 Act ,
but on being confronted admitted that the assessee did not originally filed
ITA Nos.27 & 28/Chny/2017 :- 19 -:
return of income with the Department for ay: 2009-10 and it is only on
31.03.2015, the return of income was filed and hence there cannot be any
question of change of opinion as in the absence of original return of
income, the AO could not have formed any opinion. The assessee also
admitted that there were cash deposits of more than Rs.2 Crs. in his bank
account.
5.2The Ld. DR submitted that assessee has deposited Rs.2 Crs. in his
bank account . The learned DR submitted that assessee purchased said
land for Rs.15,000/- per acre in 2000 and further purchased said land in
2006 for Rs.50,000/- per acre. Now, it is claimed that the assessee sold
the said land for Rs.8 lakhs per acre. She drew our attention to Page No.7
of the Assessment Order and answer to Question No.7 of statement
recorded of learned VAO. Our attention was drawn by ld. DR to the
statement of the buyers wherein they confirmed having made payment of
Rs.25 laksh in cash and Rs.25 laksh by cheque . Our attention was drawn
by learned DR to English translation of agreement for sale dated
07.01.2008 which is placed at Page No.65 of the Paper Book. Our
attention was also drawn to the cross-examination undertaken by the
assessee of Shri D.Settu & Shri Palani. The Ld.DR drew our attention to
provisions of Sec. 124(3) and submitted that assessee has not challenged
jurisdiction of the AO and now at this stage it cannot challenge the
jurisdiction of the AO keeping in view provisions of Sec. 124(3) of the
1961 Act.
ITA Nos.27 & 28/Chny/2017 :- 20 -:
We have heard rival contentions and perused the material placed on
record included cited case laws. We have observed that assessee is
Catholic Priest. The assessee did not originally filed any return of income
with Revenue for the impugned ay: 2008-09. The AO received information
from Investigation Directorate , Chennai to examine sources of cash
deposits appearing in assessee’s saving bank account number
177901000001600 maintained with Indian Overseas Bank, Grivalam Road,
Tiruvannamalai for the period October, 2007 to February 2015. The case
of the assessee was reopened by Revenue for framing assessment u/s 147
read with Section 143(3) of the 1961 Act, wherein notice dated
27.03.2015 u/s 148 of the 1961 Act was issued by AO to the assessee for
ay: 2008-09. The said notice was admittedly issued after four years from
the end of assessment year but within six years from the end of the
assessment year but the fact remains that the assessee had not originally
filed any return of income for ay: 2008-09 u/s 139(1) or u/s 139(4) of the
1961 Act. The assessee furnished its return of income for the first time
pursuant to notice issued by the AO u/s 148 of the 1961 Act admitting ‘nil’
income , on 31.03.2015 . The fact remains that the assessee did not filed
its return of income originally u/s 139(1) of the 1961 Act or even did not
filed it belatedly within time prescribed u/s 139(4) of the 1961 Act and
there were huge cash deposits in his bank account with IOB which
information was passed on by Investigation Directorate, Chennai to the
AO to verify sources of cash deposits and under the present factual
matrix is an incriminating material in itself dehors the fact that no return
ITA Nos.27 & 28/Chny/2017 :- 21 -:
of income was filed by the assessee originally for the impugned
assessment year u/s 139(1) or 139(4) of the 1961 Act, rightly triggering
invocation of provisions of Section 147 of the 1961 Act by the AO and in
our considered view the reopening by the AO under the provisions of
Section 147/148 of the 1961 Act needs to be upheld. The information
received by the AO from Investigation Directorate , Chennai intimating
about verifying sources of cash deposits in his IOB bank account was
tangible incriminating material coming to the possession of the AO rightly
triggering invocation of Section 147 of the 1961 Act. Similar situation
prevailed in ay: 2009-10 wherein the assessee filed its return of income
only on 31.03.2015 which is much beyond the time prescribed even for
filing of belated return of income u/s 139(4) of the 1961 Act and such a
return cannot be claimed to be a valid return by the assessee. Thus, even
for ay: 2009-10 similar situation had prevailed as was in ay; 2008-09 and
we uphold reopening of the assessment by the AO u/s 147 of the 1961 Act
for both the ay’s viz. ay: 2008-09 and 2009-10. Now proceeding to the
facts of the case , it is observed that the assessee had sold acre 25.36 and
half cents of land situated at Velapadi Village in Arani Circle. The assessee
has claimed that he received consideration of Rs.1,91,50,575/- from
buyers which was claimed by assessee to be evidenced by an unregistered
agreement of sale dated 07.01.2008 entered into by the assessee with
the buyers. The assessee claimed that he was paid ` 50 lacs in cash as
advance on signing of this agreement to sale on 07.01.2008, out of which
` 45 lacs was deposited by assessee in his bank account with IOB
ITA Nos.27 & 28/Chny/2017 :- 22 -:
immediately on the next day i.e. 08.01.2008 and balance ` 5 lacs was
stated to be retained by assessee which was claimed to be deposited later
in his bank account. The assessee has claimed that entire consideration
was paid by the buyers in cash over a period of time till the execution of
sale deed on 11.09.2008 which was claimed by assessee to have been
deposited in his bank account maintained with IOB. The details of further
deposit of ` 1,59,00,000/- of cash by assessee in his bank account with
IOB as stated by assessee as supported by bank statement of assessee is
as under:-
Date of receipt Amount (Rs.) 04.03.2008 25,00,000 15.03.2008 7,00,000 24.07.2008 50,00,000 02.08.2008 20,00,000 05.09.2008 15,00,000 11.09.2008 10,00,000 11.09.2008 22,00,000 27.09.2008 10,00,000 Total 1,59,00,000
The said unregistered agreement of sale dated 07.01.2008 along with
bank statements were produced by the assessee before authorities during
the course of assessment and appellate proceedings. The assessee has
also filed paper book before the tribunal. The assessee has also claimed
that excess amount so received in cash by him over and above stated
total consideration of ` 1,91,50,575/- represents payments made by
buyers for standing crop on the said land on the date of transfer. The
assessee has also claimed that possession of the land was given by him to
the buyers on execution of agreement to sale dated 07.01.2008.
ITA Nos.27 & 28/Chny/2017 :- 23 -:
However, the sales deed were executed by assessee with the buyers on
11.09.2008 vide seven sales deeds numbered as 9446 of 2008 to 9451 of
2008 and 9418 of 2008, with aggregate sale value of ` 23,34,900/- for the
aforesaid land. The said consideration stated in sale deed was guideline
value notified by registering authorities. While entering into sale deed one
more person also joined Mr. S.D.Settu and Mr Palani as buyer of the said
land. The assessee’s sworn statement was recorded by the AO on
07.08.2015 and based on averments made by the assessee , a survey
action u/s 133A was conducted by the concerned AO’s on 22.09.2015 on
Mr. S.D.Settu and Mr. Palani. The Revenue recorded statements of Shri
S.D.Settu and Mr Palani during course of survey operations and their
cross examination by assessee was allowed by Revenue on 17.02.2016.
The buyers Shri S.D.Settu & Shri Palani in their statements recorded
before Revenue and their cross examination by assessee, however,
admitted to have entered into and signed agreement to sale dated
07.01.2008 with the assessee for purchase of aforesaid land. They also
admitted that witnesses as are mentioned in this agreement dated
07.01.2008 were genuine witnesses, one of the witnesses was brother of
one of the buyer Mr Palani. The stamp papers for this agreement to sale
dated 07.01.2008 was also admittedly bought by Mr Palani, the buyer.
The final sale agreement for transfer of these land was entered into on
11.09.2008 for a total consideration of ` 23.34 lacs which happened to be
guideline value of the property as notified by registering authorities . The
buyers also admitted that initially they agreed for consideration of ` 1.10
ITA Nos.27 & 28/Chny/2017 :- 24 -:
crores for purchasing said land but later on they found that there are high
tensile power towers and cable going through the land , lake was around
the land and there were Srilankan Refugee Camps near to the said land
which in the opinion of the buyers were negative factors adversely
influencing the market value of the land and which made these buyers to
renegotiate price to ` 23.34 lacs with the assessee as against the agreed
consideration of ` 1.10 crores as contended by the buyers. It is claimed by
the buyers that they initially agreed for price of ` 1.10 crores for purchase
of these lands without even seeing the land relying on the statement of
the broker and advanced ` 50 lacs, out of which ` 25 lacs in cash and ` 25
lacs by cheque without seeing the land and later renegotiated the price
with the assessee for ` 23.34 lacs after coming to know of these adverse
features present in the said land which in our considered view on
touchstone of preponderance of probabilities is highly unlikely and the
buyers are not coming out with the truth for obvious reasons to save them
from various adverse actions which may follow against them under the
provisions of the 1961 Act and the applicable stamp duty laws. The
entering of final sale deeds on 11.09.2008 at the guideline value of the
property also indicates that there is an clear attempt of suppression of
true consideration of the value of property if the entire factual matrix is
considered in totality. It is not a mere incidence that sales deed were
executed on guideline value as notified by registering authorities but
reflect careful planning to conceal income and evade taxes. The AO also
summoned learned Village Administrative Officer(VAO) u/s 131 of the
ITA Nos.27 & 28/Chny/2017 :- 25 -:
1961 Act , whose statement was recorded and he confirmed based on
government records that agricultural activates were carried on in the said
land at the time of transfer of the aforesaid land . It was confirmed by ld
VAO that the said land was fertile agricultural land at the time of transfer
and there were three submersible pump sets for irrigating the lands. The
ld VAO confirmed that sugarcane, ground nuts and paddy were grown in
the said land at the time of transfer. The learned VAO confirmed that
there was standing crop of sugarcane , ground nut and paddy grown on
the said land at the time of transfer. The learned VAO also confirmed that
land revenue of ` 500 was collected from the assessee. The learned VAO
stated in his statement recorded by Revenue that the buyers got the land
converted for real estate activities and land revenue of ` 250 is collectible
from the buyers which remained unpaid. The learned VAO is a government
official employed by State of Tamil Nadu and his aforesaid averments
recorded in statement were based on government records and cannot be
lightly brushed aside. These government records are maintained in normal
course of conduct by government authorities and presumption unless
rebutted is that these records are true and correct. The learned VAO also
stated that buyers spent approx. Rs 40 lacs after purchase of the said land
for leveling the land to make it fit for real estate activities which were then
recognized as lay-outs by Arani Panchayat. The learned VAO also stated
based on his enquiry with the villagers that there was some price
increases of the land in that area in the year 2008 due to increased
market activities and that the land value should be around ` 3 lacs per
ITA Nos.27 & 28/Chny/2017 :- 26 -:
acre based upon his enquiry with villagers . The learned VAO no doubt
also stated that price of ` 8 lacs per acres is on higher side and this land
cannot fetch this much higher price. The buyers have denied to have paid
` 50 lacs in cash at the time of signing of the agreement to sale dated
07.01.2008 but stated that cash of ` 25 lacs and cheque of ` 25 lacs was
paid to the assessee at the time of signing of the agreement dated
07.01.2008. It was stated by the buyers that cheque of ` 25 lacs was
returned by the sellers to the buyers on renegotiation of the price of the
said land owing to defects as cited above . On being asked by the
authorities , the said buyers expressed inability to give details of said
returned cheque of ` 25 lacs ,while the assessee on its part is consistently
denied having received any cheque of Rs 25 lacs at the time of entering of
agreement to sale dated 07.01.2008 rather the assessee is consistently
maintaining the stand that cash of ` 50 lacs was given by the buyers on
07.01.2008 when agreement to sale was entered into. The assessee
claimed to have deposited ` 45 lacs in cash with IOB on 08.01.2008 while
` 5 lacs was retained by the assessee which also was claimed to be
deposited by assessee later with its IOB bank account. The assessee has
deposited around ` 2 crores in his bank account till the time sale deed was
executed on 11.09.2008. The sale deeds were initially required to be
executed within six months of the execution of the aforesaid agreement to
sale dated 07.01.2008 but it is claimed by assessee that owing to financial
difficulties in raising funds, the buyers requested assessee to extend date
of execution of sale deed and finally on 11.09.2008 , the said sale deeds
ITA Nos.27 & 28/Chny/2017 :- 27 -:
were executed for sale of said land with one more person joining in as
buyer of the said land along with Mr. S.D.Settu and Mr. Palani. Thus, as is
seen the assessee has taken consistent stand as to sale consideration of
the land sold by him and as to agricultural activities being carried on the
said land before its transfer/sale, which stand had not been shaken till
before us. In our considered view keeping in view complete factual matrix
of the case and on the touchstone of preponderance of probabilities, the
buyers in order to wriggle out from the adverse and penal consequences
arising under the provisions of the 1961 Act as well applicable stamp duty
laws , owing to under-declaring of the value of property at ` 23.34 lacs at
guideline value vide sale deeds dated 11.09.2008 as against actual value
of ` 1.91 crores of the said land reflected in agreement to sale dated
07.01.2008 are denying the sale consideration to be ` 1.91 crores, This
differential reflects payment of on-money for acquiring the aforesaid
property which is quite prevalent in India in real estate transactions. The
buyers are now coming out with story of adverse features in the said land
such as high tension tower and power cables running through the land ,
lakes and refugee camps around the land. It is unbelievable that the
buyers did not see the land before entering into an agreement to sale
dated 07.01.2008 and made advance payment of ` 50 lacs without even
seeing the land. It is also highly unbelievable that the sellers agreed for
reduced consideration of ` 23.34 lacs as against consideration of ` 1.10
crores as itself admitted by buyers of the said land whence the buyers
brought to notice of the assessee as to adverse features in the said land.
ITA Nos.27 & 28/Chny/2017 :- 28 -:
Even if we go with the version of buyers that they initially agreed for
consideration of ` 1.10 crores for acquiring the aforesaid property, no
seller will renegotiate the said land for paltry amount of ` 23.34 lacs as
against original agreed consideration of ` 1.10 crores which was itself
admitted by buyers to have initally agreed upon. If we go with the version
of the buyer that only cash of ` 25 lacs was paid in advance while ` 25
lacs was paid vide cheque which was returned by the assessee on
renegotiation, it is highly unlikely that any seller who has taken advance
of ` 25 lacs against the agreed consideration of ` 1.10 crores ( buyer
version of initial agreed consideration) will suddenly agree for
consideration of ` 23.34 lacs on being pointed out with some adverse
features in land rather in such scenario , the seller will either refund the
said advance or if it is utilized then in that situation the seller will ask
buyers to wait till new buyers are located. Thus, in our considered view
the assessee is coming out with true facts that he did received
consideration of ` 1.91 crores towards sale of his property which is
evidenced by an unregistered agreement dated 07.01.2008 executed on
stamp papers. The buyers admitted to this agreement dated 07.01.2008
as well to their signatures appended to this agreement dated 07.01.2008
but only differed as to the consideration paid for acquiring the said
property. It is obvious that if buyers agrees to consideration of ` 1.91
crores as per agreement to sale dated 07.01.2008 , as against the value
of ` 23.34 lacs reflected in sale deed dated 11.09.2008 which happened to
be guideline value notified by registering authorities, obviously they will be
ITA Nos.27 & 28/Chny/2017 :- 29 -:
saddled with financial liabilities to pay taxes, interest and penalty for
concealing their income and furnishing of inaccurate particulars of income.
Further, there could be prosecution launched by authorities for being party
to engaging in payments of on-money in property transactions. Even, the
stamp paper for entering into an agreement to sale dated 07.01.2008 was
bought by one of the buyer Mr Palani and even witnesess were held by the
buyers to be genuine and one of the witness happens to be brother of Mr.
Palani.. Thus based on material on record on the touchstone of
preponderance of probabilities, we are of the considered view that the
assessee is telling a true version that consideration shown to have been
reflected in sale deed dated 11.09.2008 was lower amount of Rs.25.34
lakhs by the buyer with a view to evade stamp duty and income tax by
the buyers while the real and actual sale consideration of the said
property was Rs.1,91,50,575/- as is reflected in the agreement to sale
dated 07.01.2008 which under the circumstances cannot be ignored rather
the said agreement to sale dated 07.01.2008 was duly acted upon and
consideration moved based on said agreement dated 07.01.2008 which
finally found its way into assessee’s bank account with IOB by way of cash
deposits. It is not an mere incident or a chance that the said property
was registered at value which is the guideline value , but rather it was a
carefully and well planned crafted device/mechanism to evade taxes and
deprive authorities of their legitimate dues of taxes and stamp duty . Even
, learned VAO has also stated in statement recorded before the AO based
on his enquiries with the villagers that the market price was around ` 3
ITA Nos.27 & 28/Chny/2017 :- 30 -:
lacs per acre at that point of time of the land in that area as there was
increased market activities in the year 2008 and not ` 1 lacs per acre as is
recorded in the sale deed dated 11.09.2008. The learned VAO has also
stated that this land however could not fetch ` 8 lacs per acre at that point
of time. The learned VAO has given such statement based on enquiries
with the villagers and not based on any government records and has also
prayed that this statement of his should not be used against him.
However, in the instant case , we have an agreement to sale dated
07.01.2008 reflecting sale consideration to be Rs.1,91,50,575/-, which
agreement is not denied by the buyers rather only sale consideration
reflected in said agreement is denied by the buyers . The stamp paper
were bought by one of the buyers and genuinity of the witnesses were
also confirmed by the buyers and infact one of the witness happens to be
the brother of one of the buyer . The only dispute raised by buyers is to
the quantum of value of sale consideration for acquiring said land for
which reasons are obvious so as to protect them from rigors under the
provisions of the 1961 Act and the applicable stamp duty laws. The
assessee is also party to such a collusive and clandestine act of indulging
in on-money transaction in the sale of aforesaid property whereby instead
of receiving money through banking channels , the assessee received
entire sale consideration of ` 1.91 crores in cash and later executed the
sale deed for ` 23.34 lacs on 11.09.2008 in favour of the buyers
suppressing the sale consideration knowingly well that the actual sale
consideration received by him was ` 1.91 crores for sale of said land. The
ITA Nos.27 & 28/Chny/2017 :- 31 -:
assessee has produced evidences in the form of land Revenue records to
evidence that it was an agricultural land at the time of transfer of land.
The agreement to sale dated 07.01.2008 also stipulates that buyers were
handed over possession of the land at the time of the execution of the
agreement . In our considered view , this is a case of unregistered
agreement dated 07.01.2008 which agreement is upheld by us to be true
and correct document for determining the sale consideration for transfer
of property but even if possession of the land was handed over by
assessee to buyer on 07.01.2008 as part of the contract and part
payments were made by the buyers to the assessee to the tune of ` 50
lacs in cash on 07.01.2008 under said unregistered agreement dated
07.01.2008, provisions of Sec.2(47)(v) read with Section 45 of the 1961
Act cannot get attracted and transfer will not be deemed to be completed
for the purposes of leviability of income-tax on capital gains earned by
the assessee on the sale of land in the ay: 2008-09 owing to amendment
in Section 17 and 49 of the Registration Act, 1908 by amendments
brought by Registration and Other Related Laws( Amendment) Act, 2001
w.e.f. 24.09.2001. There were simultaneous amendments made in Section
53A of The Transfer of Property Act, 1882. Thus, this unregistered
agreement of sale dated 07.01.2008 shall not affect the immovable
comprised therein as is provided in amended Section 49 of the
Registration Act, 1908 and hence the transfer shall be deemed to be
completed only in ay: 2009-10 when the registered sales deed stood
executed by the assessee in favour of the buyers on 11.09.2008. The
ITA Nos.27 & 28/Chny/2017 :- 32 -:
assessee has received payments towards consideration of sale of land
both in ay: 2008-09 and 2009-10. However this agreement to sale dated
07.01.2008 is admissible as an evidence of sale consideration of ` 1.91
crores stipulated therein. The assessee has also claimed that payments to
the tune of ` 82 lacs were received in previous year relevant to ay:2008-
09 while rest of the consideration was received in previous year relevant
to ay: 2009-10. Thus, we hold that capital gains arising on transfer of
said land shall be brought to tax only in ay: 2009-10 when the registered
sales deed stood executed. The decision of Hon’ble Supreme Court in the
case of CIT v. Balbir Singh Maini dated 04.10.2017 in Civil Appeal No.
15619 of 2017 arising out of SLP(Civil) no. 35248 of 2015 & Ors. is
relevant , wherein Hon’ble Supreme Court held as under:
“17. The relevant sections that are necessary for us to decide the present matter are as under: Transfer of Property Act "53A. Part performance. - Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract,and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:
ITA Nos.27 & 28/Chny/2017 :- 33 -:
Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.] Income Tax Act Section 2 - Definitions In this Act, unless the context otherwise requires, – (47) "transfer", in relation to a capital asset, includes, — (i) to (iv)** ** ** (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. 45. Capital gains - (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. 48. Mode of computation - The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:
(i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto:" 18. Section 53A, as is well known, was inserted by the Transfer of Property Amendment Act, 1929 to import into India the equitable doctrine of part performance. This Court has in Shrimant Shamrao Suryavanshiv. Pralhad Bhairoba Suryavanshi [2002] 3 SCC 676 stated as follows: "16. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53-A of the Act. The necessary conditions are:
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(1) there must be a contract to transfer for consideration of any immovable property; (2) the contract must be in writing, signed by the transferor, or by someone on his behalf; (3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained; (4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof; (5) the transferee must have done some act in furtherance of the contract; and (6) the transferee must have performed or be willing to perform his part of the contract."
It is also well-settled by this Court that the protection provided under Section 53A is only a shield, and can only be resorted to as a right of defence. Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra [2004] 8 SCC 614 , para 10. An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in Section 53A of the Transfer of Property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words "the contract, though required to be registered, has not been registered, or" in Section 53A of the 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908 Act have been amended, clarifying that unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument. Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus: "17(1A). The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement,
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then they shall have no effect for the purposes of the said Section 53A." "49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall—
(a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument." 20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a "transfer" of a capital asset under Section 2(47)(v) of the Act, there must be a "contract" which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression "of the nature referred to in Section 53A" in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression "of the nature referred to in Section 53A". This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression "of the nature referred to in Section 53A" would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said
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contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no "transfer" can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question.”
We based on our above discussions also hold that the said land was an
agricultural land as agricultural operations were duly carried on by
assessee on the said land at the time of transfer/sale . It is already stated
on oath by learned VAO based on government records as well evidenced
through various government records produced by assessee that
agricultural operations were carried on in that land when the
transfer/sales took place. The VAO also confirmed based on government
records that there was standing crops of sugarcane, ground nut and paddy
and Rs.500/- was collected as land Revenue. The ld. VAO stated that
there were three submersible pump sets for irrigating the lands. This
contention of the assessee also stood accepted on the touchstone of
preponderance of probabilities that the consideration received over and
above the sale consideration of ` 1.91 crores mentioned in agreement to
sale dated 07.01.2008 was towards standing crops . However, so far as
whether the assessee is entitled for exemption on sale of aforesaid
agricultural land within the provisions of Section 10(37) read with Section
2(14)(iii) of the 1961 Act is concerned, we are of the considered view that
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this issue requires re-consideration by learned Assessing Officer who shall
adjudicate this issue afresh after making proper enquiries and verifications
with local authorities and of the area where the said property was situated
and such enquiries/verifications as the AO may consider necessary so as
to arrive at conclusion whether said land is capital asset as defined u/s
2(14) of the 1961 Act exigible to tax or is entitled for exemption from tax
u/s 10(37) of the 1961 Act . Under these circumstances, we remit this
issue back to the file of the AO for fresh determination after making
necessary enquiries and verifications so as to determine whether or not
the said land is eligible for exemption from capital gains under the
provisions of the 1961 Act or is exigible to capital gains tax. The assessee
is directed to produce all relevant evidences /material in support of its
contention that capital gains earned from sale of said land are exempt
from income-tax within four corners of provisions of the 1961 Act, which
evidences/material shall be admitted by the AO in the interest of justice
and thereafter adjudicated on merits in accordance with law . TheNeedless
to say that the AO shall give proper and adequate opportunity of being
heard to the assessee in accordance with principles of natural justice in
accordance with law in the denovo assessment procedings. We order
accordingly.
In the result, the appeal filed by the assessee for ay: 2008-09 shall
stand partly allowed for statistical purposes.
Our decision for ay: 2008-09 shall apply mutatis mutandis to the appeal
filed by the assessee for ay: 2009-10. We order accordingly.
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In the result, appeal filed by the assessee for ay: 2009-10 shall stand partly allowed for statistical purposes. 10. In the result, both the appeals filed by the assessee for ay: 2008-09 and 2009-10 stand partly allowed for statistical purposes.
Order pronounced on the 21st October, 2019, in Chennai.
Sd/- Sd/- (एन.आर.एस. गणेशन) (र"मत कोचर) (N.R.S. GANESAN) (RAMIT KOCHAR) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
चे�नई/Chennai, 2दनांक/Dated: 21st October, 2019. TLN
आदेश क. ,�त"ल3प अ4े3षत/Copy to: 1. अपीलाथ+/Appellant 4. आयकर आयु5त/CIT 2. ,-यथ+/Respondent 5. 3वभागीय ,�त�न�ध/DR 6. गाड( फाईल/GF 3. आयकर आयु5त (अपील)/CIT(A)