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Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI H.S. SIDHU, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
ITA No. 5804/DEL/2015 and are cross appeals by the assessee and revenue preferred against the order of the ld. CIT(A) – 24, New Delhi dated 28.08.2015 pertaining to assessment year 2012-13. is appeal by a different assessee preferred against the order of the ld. CIT(A)-24, New Delhi dated 28.08.2015 pertaining to assessment year 2012-13. Since common issues are involved in these three appeals, they were heard together and are being disposed off by this common order for the sake of convenience and brevity.
Common facts in all these appeals relate to the alleged transfer of ancestral property situated at 7/5283, Block-D, Krishna Nagar, Karol Bagh New Delhi. Facts of the case are that the assessee Shri Shailender Kumar Gautam had 30% share in the ancestral property.
The other two co-owners were Smt Pushpa Gautam and Vishvajit Gautam having share of 45 % and 25 % respectively.
On 09.09.2011, the co-owners agreed to sell the ancestral property to one Shri Mohit Mittal for a consideration of Rs.7.5 Crores. Copy of Agreement to sell is placed at PB Pages 32-36. The three co- owners received Rs.1.25 crore as earnest money which was Rs.85 lakhs by way of cash and Rs.40 lakhs by way of cheque. On 11.01.2012, a further amount of Rs. 2 crores was paid by Shri Mohit Mittal. The assessee received Rs. 60 lakhs as his 30% share which was in the form of cheque of Rs. 6 lakhs and cash of Rs. 54 lakhs. On 20.01.2012, Shri Mohit Mittal further paid an amount of Rs. 60 lakhs. The assessee received Rs. 18 lakhs being 30% of his share. As per the agreement, the balance amount of Rs.3.65 crores was to be paid on 23.01.2012. Since this amount could not be paid on the said date, the time period was extended to 30.01. 2012. On 27.01.2012, when Shri Mohit Mittal came to the premises of the assessee carrying cash of Rs. 2.48 crores a search operation was conducted and Rs. 2.48 crores was seized from Shri Mohit Mittal.
4. Pursuant to search and seizure of the cash, a dispute arose between the co-owners and Shri Mohit Mittal which led to filing of petition before the Hon'ble High Court by Shri Mohit Mittal. To bring to an end a prolonged litigation, dispute was settled by entering into cancellation of the agreement on 17.01.2013. As per cancellation agreement, the co-owners paid back a sum of Rs. 1.20 crore to Shri Mohit Mittal and balance amount was forfeited. The main contention of the assessee is that there was no sale of any property during the year under consideration. The Assessing Officer was of the firm belief that the co-owners were to receive balance amount of Rs. 1.17 crores after adjusting 2.48 crores seized from Shri Mohit Mittal. Accordingly, the Assessing Officer computed the assessee Shri Shailender Gautam’s share @ 30% and made an addition of Rs. 35.10 lakhs.
5. The assessee carried the matter before the ld. CIT(A) and pleaded that the amount of Rs. 1.17 crores was never received by the assessee. The ld. CIT(A) was convinced with the contention of the assessee and directed the Assessing Officer to delete the addition of Rs. 35.10 lakhs in the hands of the assessee.
6. However, the ld. CIT(A) was of the firm belief that the assessee has entered into an agreement to sell the property during the year and has received part payment and has also given part possession. Therefore, invoking the provisions of section 2(47)(v) r.w.s. 53A of the Transfer of Property Act, 1882, the ld. CIT(A) issued notice for enhancement of income.
The assessee strongly opposed the notice of enhancement, but the ld. CIT(A) was convinced that since the property has been transferred during the year under consideration for a consideration of Rs. 7.50 crores in terms of agreement to sell dated 9.9.2011 and since the share of the assessee was 30%, the ld. CIT(A) added Rs. 2.25 crores and enhanced the income of the assessee.
Against this, the assessee Shri Shailender Gautam is before us and the Revenue is in appeal against the deletion of addition of Rs. 35.10. lakhs. The assessee Shri Vishwajeet Gautam is also in appeal in for addition of his share of income on the enhancement made by the ld. CIT(A).
The ld. CIT(A) after analyzing the provisions of section 53A of the Transfer of Property Act 1882 r.w.s 2(47)(v) & (vi) of the Act observed that the following preconditions must exist to invoke the aforesaid provisions:
1, There must be a contract to transfer of immovable property.
2. There must a consideration for the transfer.
3. The contract must be in writing, signed by the transferor or someone on his behalf.
The writing must be in such word from which the terms necessary to constitute transfer must be ascertained.
The transferee must in part performance of the contract take possession of the property, or in part thereof.
The transferee must have done some act in furtherance of the contract 7. The transferee must have perform or be willing to perform his part of the contract.”
On the aforesaid preconditions the ld. CIT(A) examined the facts of the case in hand by analyzing the following chart:
S.No Date Event . 09.09.2011 Signing of agreement between the 1. transferors and transferee. 2. 09.09.2011 Advance payment made by transferee Rs. 40,00,000/- by cheque Rs. 85,00,000/- by cash 3. 11.01.2012 Payment made by transferee Rs. 20,00,000/- by cheque Rs. 1,80,00,000/-by cash 4. Payment made by transferee Possession of two rooms handed over to 20.01.2012 Rs. 60,00,000/- by cheque transferee 5. Exact date not Date, of completion of agreement known, but extended to 30.01.2012. entered in agreement 6 27.01.2012 Payment of Rs. 2,48,00,000/- in cash to be given to the owners, but transaction interrupted due to search action. .. .
From the above chart, the ld. CIT(A) found that the assessee has received part payment. Further, on analyzing the statement of Shri Mohit Mittal recorded u/s 132(4) of the Act, the ld. CIT(A) noted that Shri Mohit Mittal has taken possession of ground floor of the property and a room on the first floor. The ld. CIT(A) concluded by holding that the transferee has also taken part possession of the property. On finding that part payment was following by part possession, therefore, transfer has taken place in the light of provisions of section 53A of the Transfer of Property Act, 1882.
We do not find any force in the conclusion of the ld. CIT(A) because in our understanding of law qua the facts in issues, provisions of section 2(47)(v) of the Act the r.w.s 53A of the Transfer of Property Act 1882 are not applicable because this issue is now well settled by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Balbir Singh Maini CS Atwal 398 ITR 531 wherein it was held that : “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 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. “
The ld. DR has strongly objected to the reliance of the aforesaid judgment by the Hon'ble Supreme Court by stating that this decision was in the context of development agreement where part of the property was to be returned to the buyer after construction. The ld. DR continued by stating that in the case in hand, the handing over of the possession to the buyer was permanent and the assessee had no right over the property once it was handed over.
Before proceeding further, let us examine the provisions of section 53A of the Transfer of Property Act, 1882 relating to part performance and the same read as under:
“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 2[***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor 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: 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.”
From the above, it is quite clear that the transferee either had performed or is willing to perform his part of the contract. Facts on record show that Shri Mohit Mittal was not willing to perform his part of the contract which culminated into litigation and FIR and writ petition before the Hon'ble Delhi High Court. The dispute was ultimately settled by cancellation of the agreement which means that the transfer never happened. No doubt, the settlement for cancellation of agreement took place on 17.01.2013 i.e. after the close of the assessment year under consideration. But this fact cannot be ignored while invoking the provisions of section 53A of the Transfer of Property Act when it was very much available before the Assessing Officer while framing the assessment order. The ITAT Mumbai Bench it the case of General Glass Company [P] Ltd Vs. DCIT dated 07.12.2006 has held that “When transferee, by his conduct and by his deeds, demonstrates that he is unwilling to perform his obligations under the agreement, the date of agreement ceases to be relevant. In such a situation, it is only the actual performance of transferee's obligations which can give rise to the situation envisaged in Section 53A of the Transfer of Property Act. “
On the given facts of the case in hand, we are of the opinion that the transferee was not willing to perform his obligations in the FY itself though the litigation took place in the succeeding year. Moreover, the Hon'ble Supreme Court in the case of CIT Vs. Balbir Singh Maini C.S Atwal [supra] has clearly laid down the principle that no contract in the eyes of law is enforced u/s 53A of the Transfer of Property Act after 2001 unless the said contract is registered and undisputed fact is that the agreement relied upon by the Revenue authorities is an unregistered agreement. Respectfully following the ratio laid down by the Hon'ble Supreme Court [supra] we set aside the finding of the ld. CIT(A) and direct to delete the impugned additions.
In the result, Revenue’s appeal in and 5805/DEL/2015 are allowed.
The order is pronounced in the open court on 05.06.2018.