SATISH KUMAR MAGON,KOLKATA vs. ITO, WARD 55(4)/ KOLKATA, KOLKATA

Shri Satish Kumar Magon….……………………………………..……..…………………………….. Appellant C/o. N.P. Jain & Co. 3, Ho Chi Minh Sarani Kolkata – 700 0071 [PAN : AIBPM 8503 B] Income Tax Office, Ward-55(4), Kolkata…………………………………………….…….. Respondent 169, AJC Bose Road 2nd Floor Kolkata- 700 001 Appearances by: Shri N.P. Jain, Advocate, appeared on behalf of the assessee. Shri Ranu Biswas, Addl. CIT, Sr. DR, appearing on behalf of the Revenue Date of concluding the hearing : May 23rd, 2018 Date of pronouncing the order : June 15th, 2018 O R D E R Per J. Sudhakar Reddy :- This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-16, (hereinafter the ‘Ld. CIT(A)’), dt. 28/09/2016, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2008-09.

Assessment Year: 2008-09 Shri Satish Kumar Magon The assessee entered into an agreement for purchase of a flat and acquired certain valuable rights vide agreement dt. 20th March, 2004. The flat was not registered in the assessee’s name. The assessee transferred these rights to one Shri Motilal Bhattar, by way of an agreement dt. 25th May, 205. The possession of the flat was handed over to Shri Motilal Bhattar on 15/05/2007. This property was registered by the builder in favour of Shri Motilal Bhattar on 24/09/2009 relevant to the Assessment Year 2010-11. I also note that the nomination of Shri Motilal Bhattar was made on 12/05/2005 by the assessee to the builder, and the amount of Rs.33 Lakhs/- was paid to the assessee by Shri Motilal Bhattar on 07/10/2005, which is the Financial Year 2005-06, relevant to the Assessment Year 2008-09. The possession is supposed to have been handed over only on 15/05/2007, which is relevant ot the Assessment Year 2007-08. The date of handing over the possession is taken as the date of transfer by the Assessing Officer. The assessee also took this date as the date of transfer and offered short term capital gains.

In my view, what was acquired by the assessee were certain right over the immovable properties. As it is well settled, rights in an immovable property are a bundle of rights. As no registration was done in favour of the assessee. the assessee is not the owner of the property in question. He has only certain rights over this property. He could not have transferred the said immovable property to Shri Motilal Bhattar when he entered into an agreement with him on 25th May, 2005. What was sought to be sold by way of transfer to Shri Motilal Bhattar, was only such rights of the assessee to acquire the said immovable property i.e. a flat from the builder. When an immovable property is not the subject matter of transfer per se, and what is transferred is only certain rights in the immovable property, out of the bundle of rights, Section 53A of the Transfer of Property Act, 1882, is not attracted nor can be applied. As no agreement was registered this Section is also not attracted as held by the Hon’ble Supreme Court in the case of 15619 OF 2017 (ARISING OUT OF SLP (CIVIL) NO.35248 OF 2015) Commissioner of Income Tax Versus Balbir Singh Maini, judgement dt. 4th October, 2017. Vide para 20 of this judgement the Hon’ble Apex Court held as follows:- “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 Assessment Year: 2008-09 Shri Satish Kumar Magon 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. 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.” 4.1. Thus, the income in question on the capital gains cannot be brought to tax in the Assessment Year 2008-09 by applying Section 53A of the Transfer of Property Act, 1882, and not in the Assessment Year 2007-08. Thus, on this ground, the addition has to be deleted.

Section 50C of the Act, has been brought into the statute, w.e.f., 1/04/2003. The Assessing Officer chose to apply this Section.

4.2. As I have held that the transfer of rights in question cannot be brought to tax in this Assessment Year the question of applying Section 50C of the Act, does not arise. Hence, this ground of the assessee is allowed.

6. The assesse submitted evidence of sources of deposits made in Bank Account, which was sale of property by himself along with his family members. I have examined the evidence. I see no reason for the Assessing Officer or the ld. CIT(A) in not accepting the same. In the face of these evidences, the Assessing Officer in my view could not have made these additions. Even otherwise, Section 69 of the Act, cannot be applied to the facts of the case. Hence, the addition is hereby deleted. Accordingly Ground No. 3 is allowed.

Assessment Year: 2008-09 Shri Satish Kumar Magon 7. Ground No. 4 is against the levy of interest u/s 234B of the Act, and is consequential in nature.