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Facts
The AO reopened assessment for AY 2007-08, making additions for an unexplained investment of Rs. 40 lakhs u/s 69, long-term capital gain on agricultural land sale, and unexplained bank deposits of Rs. 1,01,85,800/- u/s 68. The assessee contended the Rs. 40 lakhs came from land sale proceeds, the agricultural land was outside municipal limits (no capital gain), and the bank deposits were also from land sales. The CIT(A) deleted all these additions, leading to the Revenue's appeal.
Held
The tribunal upheld the CIT(A)'s deletion of the Rs. 40 lakhs addition (Ground 1), confirming it came from land sale proceeds. For capital gains (Grounds 2 & 4), the tribunal agreed with the CIT(A) that 'transfer' under Section 2(47) occurred in AY 2010-11, not AY 2007-08, as full consideration and possession were secured only after a dispute settlement in 2010, despite earlier sale deeds. However, for unexplained bank deposits (Ground 3), the tribunal found that the CIT(A) erroneously accepted all deposits as sale proceeds and remanded the issue back to CIT(A) for fresh assessment regarding specific interest income and cash deposits. The assessee's cross-objection was dismissed as not pressed.
Key Issues
1. Whether an investment of Rs. 40 lakhs was unexplained income or derived from legitimate land sale proceeds. 2. The correct assessment year for capital gains on agricultural land sale, considering the definition of 'transfer' under Section 2(47) when sale deeds are executed but full consideration and possession are delayed by disputes. 3. Whether all bank deposits were fully explained as agricultural land sale proceeds or if certain components (interest, cash) remained unexplained.
Sections Cited
147, 143(3), 147/148, 69, 2(47), 54, 68, 53A
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Income Tax Appellate Tribunal, DELHI BENCHES : A : NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Revenue against the order dated 16.02.2015 of the Commissioner of Income Tax (Appeals), Rohtak (hereinafter
CO No.151/Del/2018 referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No.215/2013-14 arising out of the appeal before it against the order dated 25.03.2013 passed u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ITO, Ward-3, Sonepat (hereinafter referred to as the Ld. AO). The assessee has filed cross objection.
The case of the assessee was reopened on the basis of reassessment notice u/s 147/148 as the assessee was found to have made an investment of Rs.40 lakhs in an agreement to sell. During assessment, the assessee had explained that he had received Rs.40 lakhs as the sales consideration of ¼ share of ancestral land. However, the ld. AO was not satisfied and he called for the information from the bank which were not provided by the assessee and observing that the assessee has only a pension account considered the investment of Rs.40 lakhs as unexplained and made addition u/s 69 of the Act.
2.1 Further, the ld. AO, on the basis of the reply of the assessee, made addition on account on account of long-term capital gain for the sale of agricultural land. The assessee had claimed that agricultural land sold in the year is out of municipal limit of 8 Kms and, therefore, no question of capital gain is there. However, the District Revenue Officer, Sonepat had confirmed to AO that the land is at a distance of 1 Km from the Municipal Limit of Sonepat and accordingly, the ld. AO had made the addition.
CO No.151/Del/2018 2.2 Further, the ld. AO had found that there were credit entries in a bank account with PNB Sonepat and in Central Bank of India of Rs.91,59,465/- and Rs.10,26,335/-, respectively. Considering the same to be also undisclosed/ unexplained income, an addition of Rs.1,01,85,800/- was made. The ld.CIT(A) has deleted the additions for which the Revenue is in appeal raising following grounds:- “i) On the facts and circumstances of the case the Ld. CIT (A) has erred in law & on facts in deleting the addition of Rs. 40,00,000/- made by the A.O. without appreciating the fact that as per agreement dated 18.12.2006 a cash of Rs.40,00,000/- was received by the assessee wherein a cheque of Rs.39,04,024/- has been deposited in the bank account on 28.04.2006. ii) On the facts and circumstances of the case the Ld. CIT (A) has erred in law & on facts in deleting the addition of Rs. 2,57,70,427/- made by the A.O. on account of Capital Gain stating that the Capital Gain Liability shall accrue to the HUF without appreciating the fact & law that the land is an ancestral property does not automatically brings it in the ambit of HUF property. iii) On the facts and circumstances of the case the Ld. CIT (A) has erred in law & on facts in deleting the addition of Rs.1,05,85,800/- made by the A.O. on account of additional cash deposited & interest accrued over it. In the last part of her order the issue of addition u/s 68 is connected with HUF & agricultural land, making the decision ambiguous. iv) On the facts and circumstances of the case the Ld. CIT (A) has erred in law & on facts in deciding that Capital Gain would arise in the assessment year 2010-2011 instead of assessment year 2007-2008 in which part performance had taken place ignoring the provisions of Section 2(47) of the Income-tax Act, 1961 & Section 53A of the Transfer of Property Act, 1882. iv) On the facts and circumstances of the case the Ld. CIT (A) has erred in law & on facts in deciding that Capital Gain would arise in the assessment year 2010-2011 instead of assessment year 2007-2008 in which part performance had taken place ignoring the provisions of CO No.151/Del/2018 Section 2(47) of the Income-tax Act, 1961 & Section 53A of the Transfer of Property Act, 1882. v) The appellant craves leave to add, amend, alter, modify, delete and or change any of the above grounds on or before the date of hearing.”
3. Heard and perused the record. Based on the material before us and the arguments the ground wise findings are as follows.
4. Ground No.1: In regard to this ground, the ld. DR has primarily relied the order of the ld. AO. However, what comes up is that the fact of deposit of Rs.49,04,024/- on 28.04.2006 in the PNB Account of the assessee as part of sale proceeds of land is an admitted fact and, thus, the ld.CIT(A) has also taken into consideration the fact that out of this deposit received form sale of land the assessee has withdrawn a sum of Rs.10 lakhs on 02.06.2006 and Rs.30 lakhs on 18.12.2006 to explain the availability of Rs.40 lakhs for entering into further agreement to purchase property. Thus, with regard to this addition, the findings of the ld. CIT(A) require no interference. Ground No.1 is decided against the Revenue.
5. Grounds No.2 & 4: In regard to these grounds, the ld. DR has primarily relied the judgement of the Hon’ble Supreme Court in the case of Sanjeev Lal vs. CIT in Civil Appeal Nos.5899-5900 of 2014 arising out of SLP(C) Nos.16958-59 of 2013, order dated 1st July, 2014 to submit that the ld.CIT(A) has fallen in error in holding that the capital gain would arise in the assessment 4
CO No.151/Del/2018 year 2010-11 instead of AY 2007-08. He stressed on the fact that the sale deeds were executed on 27.04.2006 and 27.05.2006 and, therefore, the ld. AO was right in making addition on account of capital gains and the ld.CIT(A) has erred in holding that the actual transfer was affected in AY 2010-11. So, the assessee cannot be taxed in the year under consideration.
In this context, the ld. AR has brought on record certain facts submitting that there was a dispute between the parties which was settled by way of a compromise deed dated 21st March, 2010 on the basis of which the civil dispute before the court was settled and it was subsequent to this compromise of 21st March, 2010 that the sale transaction actually stood concluded and, thus, there is no error in the findings of ld.CIT(A). To support his contention he has relied the order of Pune Tribunal in the case of Appasaheb Banurao Lonkar vs. ITO in dated 2nd January, 2019 to submit that relying on the Hon’ble Supreme Court decision in the case of CIT vs. Balbir Singh Maini in Civil Appeal No.15619 of 2017, the Bench has held that for the purpose of section 2(47) of the Act, transfer in relation to capital asset should be construed in the context to fact when the transaction is actually completed, after settling the dispute and mere execution of sale deed is not sufficient.
After giving thoughtful consideration to the matter on record, it comes up as an admitted fact that at the time of execution of sale deed in the year 2006 the assessee along with his brothers had sold the agricultural land by way of five 5
CO No.151/Del/2018 sale deeds for a total sale consideration of Rs.4,95,76,932/- and a part payment of sum of Rs.1,24,05,662/- was paid by way of cheque which was encashed. However, the balance sale consideration of Rs.3,71,71,270/- was paid by post dated cheques which were dishonoured and for which there was litigation between the parties and, subsequently, compromise was effected on 21st March, 2010 in furtherance of which the amount was paid and, thereafter, the physical possession of the entire land was transferred to the prospective vendee. As a matter of fact, on account of court injunction, the title in the land was not conveyed under the registered sale deed and the final and complete transfer only occurred in March, 2010 when the complete consideration was paid and possession was handed over to the prospective vendee.
7.1 We are of the considered view that ld.CIT(A) has fairly concluded that mere execution of the sale deed without actually passing the complete sale consideration could not be considered to be the case of transfer for the purpose of section 2(47) of the Act and it was only when the title and possession of any other interest in the form of an encumbrance passes in the immovable property, it can be concluded as a ‘transfer’ for the purpose of section 2(47) of the Act. This transfer of title and possession culminating in the year 2010 could, thus, have been made taxable in AY 2010-11 and not in relevant AY 2007-08 when though sale deed were executed but complete consideration had not passed. The contract there upon continued to be voidable and issue was subjudice. The CO No.151/Del/2018 judgement relied by ld. DR is thus distinguishable on facts where issue was of giving benefit of section 54 of the Act. Thus findings of the ld.CIT(A) on this account require no interference. The ground has no substance. The same are decided against the Revenue.
Ground No.3: The ld. DR pointed out that the ld.CIT(A) has decided the issue of deposits in the bank account in a cursory manner without considering that there were ambiguities in the explanations of the entries on behalf of the assessee. In this context, it comes up that the ld.CIT(A) has primarily on the sustained the claim of the assesse on the basis of income received from sale of agricultural land considering the deposits in the bank accounts wto be from sale proceeds. 8.1 However, what comes up is that as per the assessee’s own case the deposit in the PNB of Rs.91,59,465/- is explained with the following details:- Date Amount 28.04.2006 26,25,610/- Explained as sale proceeds from sale of agricultural land. 07.06.2006 15,00,000/- Cash not explained 08.08.2006 48,16,441/- Explained as sale proceeds from sale of agricultural land. 02.09.2006 81,544/- Interest not explained 16.11.2006 951/- Minor cheque not explained. 02.03.2007 1,34,919/- Interest not explained Total 91,59,465/-
CO No.151/Del/2018 8.2 Similarly, in regard to deposit in the central Bank of India of Rs.10,26,335/-, the assessee has given following explanation:-
Date Amount 05.05.2006 1,69,627/- Explained as part of sale proceeds from sale of agricultural land. 05.05.2006 4,48,047/- Explained as part of sale proceeds from sale of agricultural land. 10.07.2006 4,227/- Interest not explained 31.12.2006 4,434/- Interest not explained 30.03.2007 4,00,000/- Cash not explained Total 10,26,335/-
The aforesaid makes it apparent that the ld.CIT(A) has fallen in error in accepting the source of all deposits from the sale proceeds alone. However, there is interest income and certain cash deposits which were not considered independently. Thus, with regard to these entries of interest income and cash deposits, we restore the issue to the files of ld.CIT(A) to seek explanation of the assessee and make a fresh assessment on the basis of the same. This ground of the Revenue is allowed for statistical purposes.
As a consequence of the above determination of the grounds as above, the appeal of the Revenue is allowed partly.
CO No.151/Del/2018 11. The Cross Objection filed by the assessee was not pressed. Hence, the same is dismissed.