SMT SUMAN AGARWAL,MATHURA vs. ITO 3(4), MATHURA

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH: AGRA

BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER

I.T.A No. 301/Agra/2016 (ASSESSMENT YEAR-2007-08)

Smt. Suman Agarwal, W/o Sri ITO, Ward-3 (4), Mathura. Kanhjiya Lal Agarwal, H.No. C-4, Govind Nagar, Mathura. PAN No.BMYPA9760N (Assessee) (Revenue)

Assessee by Shri R. C. Tomar, AR Revenue by Shri Waseem Arshad, Sr.DR.

Date of Hearing 31.08.2017 Date of Pronouncement 21.11.2017

ORDER This is assessee’s appeal for assessment year 2007-08, raising the following grounds: “1. The learned CIT(A)-I, Agra has erred in law and on facts in holding the re-opening of the case u/s 147 as valid without appreciating the fact that the AO has not disposed off the objections of the appellant and he passed the assessment order ignoring the principles laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs ITO (2003) 259 ITR 19 (SC) and I.O.T. Infrastructure & Energy Services Ltd vs. ACIT (2010) 233 CTR 175 (Bom).

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a) Clause (v) of sub-section 47 of section 2 i.e. 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 section 53A of the Transfer of Property Act, 1882;

b) that the capital asset i.e. land was transferred on 21.8.2003 through registered agreement within the meaning of section 2(47)(v) of Income tax Act, 1961.

c) that the AO has not afforded any opportunity to the appellant to cross examine the power attorney holder whose statement has been recorded by the AO on the back of the appellant despite specific request made and also to cross examine the purchaser of the land.

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2(47) of Income tax Act, 1961, the transfer of property would be considered only when it has been sold and she failed to appreciate the provisions of clause (v) of Section 2(47) of Income tax Act, 1961.

As per records and information in possession, it is noticed that the seller namely Smt. Suman Agarwal, Govind Nagar, Mathura has sold off her plot situated at Mathura. On 21.04.2006, through a registered sale deed dated 21.04.2006,

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for a total sum of Rs.4,25,000/- being sale consideration whereas for stamp duty purpose the value by the registrar has been taken at Rs.13,57,492/-, thus as a result of transfer of capital asset there does arise capital gains in terms of provisions of section 50C of the Act, and the seller has not ever filed his return of income though the capital gains is chargeable to tax. In view of the above facts I have reasons to believe that capital gain chargeable to tax has escaped assessment at least to the tune of Rs.9,32,492/- and to assess it in the hands of the assessee by invoking the provisions of section 147 of the Act, issuance of notice u/s 148 is considered necessary.

“To The Income tax Officer-3(4) Room no. 210, Radhika Vihar, Mathura. Sir,

Sub:- Compliance of notice under section Income tax Act 1961 in the case Smt. Suman Agarwal w/o Kanhiya Lal Agarwal, (Govind Nagar, Mathura) r/o A-199 Kamla Nagar, Agra- Asstt. Year 2007-08-Regarding-

Please refer to your notices u/s 143(2) and u/s 142(1) dated 07/10/2014 and 1.12.2014 fixing the hearing on 08.12.2014. In

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this connection, it is submitted that your notice dated 1.12.2014 has been delivered to the assessee on 09.12.2014 and hence the assessee could not made compliance on the date fixed. It is further submitted that the photo stat copy of the statement recorded on 1.10.2014 of Sri Anil Kumar Kaushik attorney holder is not certified by your good-self although the assessee deposited copying fee of Rs. 100/- as per your directions and copy of challan sent to you.

2 However, the assessee submitted her explanation as under-

i) The assessee has already submitted that your notice under section 148 is illegal, invalid and baseless because:

(a) there is no escapement of income as contemplated in the reasons so recorded by your predecessor in office. The assessee has already submitted before you that the assessee received 98% sale consideration from the purchaser on the date of agreement i.e. on 21.8.2003 leaving a meager/notional amount of Rs. 10,000/- and the purchaser was allowed the possession of land. A power of attorney was also executed on the same day in favour of third party i.e. Sh Anil Kumar Kaushik on the instructions of the purchaser. Hence, the case of assessee is covered within the definition of transfer' as provided1 under section 2(47) (v) of Income tax Act, 1961 and the transaction falls in the year 2003-04.

(b) The notice u/s 148 dated 28.3.2014 does not show that any approval has been obtained from the Jt./Addl. CIT before issue

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of notice. The AO was requested through petition under section 6 of RTI Act, 2005 to supply the copy of the approval sanction/satisfaction, if any, obtained from the higher authorities before issue of notice under section 148 for the assessment year 2007-08. But the same has not been supplied on the ground that the notice u/s 148 read with section 147 dated 28.3.2014 was issued after having prior approval of Addl. Commissioner of Income tax, Range-3, Mathura and these very fact has been mentioned in the notice itself therefore, there is no requirement to make the details available as regards sanction which is nothing but a Departmental procedural correspondence to which assessee has no concern. The AO has thus not supplied the same. The ITO is incorrect to say that in the notice the facts are mentioned (a copy of notice dated 28.3.2014 is enclosed).

(c) The AO has not applied his mind while issuing notice u/s 148 dated 28/3/2014 which is clear from a perusal of the same. The AO has not strike off inapplicable words viz. assess/reassess the income/re-compute loss/depreciation. Similarly, the notice shows this notice is being issue after obtaining the necessary satisfaction of the Addl. Commissioner/Commissioner/Chief Commissioner of Income tax/The Central Board of Direct Taxes.

(d) A perusal of the reasons recorded shows that the AO has not applied his mind while recording the reasons in as much he worked out the escapement of income at Rs. 9,32,492/- treating

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the assessee as sole owner of the land in question while there are two co-owners and the AO has not initiated proceedings u/s 147/148 against the other co-owner for the reasons best known to him. Hence, the notice issued u/s 148 is illegal, invalid and baseless as there is no application of mind. Vide petition under section 6 of RTI Act, 2005 the AO was requested to furnish following information:

Have you initiated action under section 147 of Income tax Act, 1961 in the case of Smt. Krishna Anand w/o Sri Dinesh Kumar co-owner for the assessment year under consideration?

a) If yes, the date of issue of notice under section 148.

b) If not, the reasons for not initiating action under section 147.

The requisite information has not been furnished on the ground that Smt. Krishna Anand is not within the jurisdiction of Income tax Officer-3(4), Mathura, therefore, no information can be furnished. AO has neither forwarded petition of the assessee to the concerned AO for furnishing the required information nor informed the date, if any, on which he passed on intimation for initiating action u/s 147/148 against the lady.

ii) You raised following doubts on the agreement dated 21.08.2003 and sale deed dated 21.4.2006:

a) 'It is noticed that agreement dated 21.8.2003 was valid for one year only’. In this connection, it is submitted that when there is no objection on either side i.e. by the sellers and

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purchaser the validity of the said agreement cannot be challenged by third party. This is because the sellers received almost full amount of consideration at the time of agreement and the purchaser was allowed possession of the land. On the direction of the purchaser, the assessee executed a power of attorney in favour Anil Kumar Kaushik the person named by him so that there will be no difficulty in getting the sale deed executed at any time in future either in the name of purchaser or any other name as wish by the purchaser as the sellers have no concern with the land because they received 98% money on the date of agreement itself. Hence, the purchaser got the sale deed executed after 3 years through power of attorney holder whom the purchaser entrusted the work.

b) You have stated that 'there are two things contrary i.e. agreement and power of attorney drawn on same date with different wordings'. You have not understood the facts practically. The purchaser has made full payment of consideration i.e. 98% at the time of agreement to the sellers, the purchaser intended sellers to make a power of attorney in favour of the person named by him so that there will be no difficulty in getting the sale deed executed at any time in future either in the name of purchaser or any other name as wish by the purchaser as the sellers have no concern with the land because they received 98% money on the date of agreement itself and the purchaser was allowed possession of the land.

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c) It has been stated by you that sale deed executed on 21.4.2006 was for amount of Rs. 4,30,000/-. It is wrong to say that the sale deed dated 21.4.2006 was for amount of Rs. 4,30,000/-. A perusal of the starting first para of first page of sale deed clearly shows that 4,25,000/-. Similarly at page 8 it has been mentioned. ‘Va Avaj 4,25,000/- Rupaya Char Lakh Pachchees Hajar Rupaya Jiske Aadhe 2,12,500/- Rupaya Do Lakh Barah Hazar Panch Sau Rupaya Hote Hai. It is, therefore, clear that sale deed was executed for Rs. 4,25,000/-. At page 9 the receipt of Rs. 15.000/- is a typographical error which is Rs. 10,000/-.

d) With regard to the possession of land you recorded the statement of power attorney holder at the back of the assessee. The uncertified copy of the statement supplied to the assessee shows that he is broker and deals in purchase and sale of immovable properties on commission basis. A perusal of the same shows that the broker stated in his statement that "MALIKANA HAK 21.4.2006 KO HI DIYA GAYA HAI". MALIKANA HAK means registered ownership. The registered ownership i.e. MALIKANA HAK will naturally pass when sale deed is executed in somebody favour. The assessee has been stating repeatedly before your honour that the transferee was allowed possession of the land by the assessee and his co- owner on the same day when 98% sale consideration was received i.e. date of agreement and the date on which power of attorney was executed in favour of Sri Anil Kumar Kaushtk as per instructions of the transferee. Taking into account the

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legislative changes and the concept of ownership of immovable property coupled with the need for settling the judicial controversies which existed earlier in regard to disputes on beneficial ownership and registered ownership of property, the Supreme Court had taken the view that the legislative changes brought about in 1987 were only clarificatory in nature and, hence, retrospectively applicable and, therefore, took the view in CIT vs. Podar Cement (P) Ltd. (1997) 141 CTR (SC) 67: (1997) 226 ITR 625 (SC): TC S40.3564 that one need not be the registered owner of the property to be regarded as the owner thereof and that even in the absence of execution of conveyance deed and its registration, the beneficial owner must be regarded as owner of the property having the right to use and enjoy the property without being required to pay rent or to have any other obligation. Accordingly, the apex Court took the view that even though the amendments in sections 22 to 27 and section 2(47) read with section 45 were to be given effect from 1st April, 1988, the legislative amendments must be given retrospective effect, being clarificatory in nature.

e) The definition of transfer' has been denied by Section 2(47) of Income tax Act, 1961.

f) The clause (v) of sub-section (47) of section 2 which has been introduced by the legislature through Finance Act, 1987 which reads:

'any transaction involving the allowing of the possession of any immovable property to be taken or retained in part

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performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882)'

Section 53A of Transfer of Property Act, 1882 i.e. Part performance is as under:-

"Where any person contracts to transfer for consideration any immovable 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 of the contract and has done some act in furtherance of the contract, and the transferee has performed or is wilting 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:

Normally transfer of an immovable property worth Rs. 100/- or more is not complete without execution and registration of a conveyance deed. However, section 53A of the Transfer of Property Act envisages situations where under a contract for transfer of an immovable property, the purchaser has paid the

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price and has taken possession of the property, but the conveyance is either not executed or if executed it is not registered. In such cases the transferor is debarred from agitating his title to the property against the purchaser.

In assessee's case, the assessee along with her co-owner Smt. Krishna Anand entered into an agreement with Sri Suresh Chand Garg for sale of plot of land measuring 1234 sq. meter situated at Mauja Anyor Distt. Mathura on 21.8.2003 relevant to the year 20034)4 for a sum of Rs. 4,25,000/- and received advance of Rs. 4,15,000/- i.e. 98% of the sale consideration. This agreement was registered with the Dy. Registrar, Mathura and stamps duty of Rs. 17000/- was paid. The assessee has already submitted before you that the assessee received 98% money from the purchaser on the date of agreement i.e. on 21.8.2003 leaving a meager/notional amount of Rs. 10,000/- and the purchaser was allowed possession of land. A power of attorney was executed on the same day in favour of third party i.e. Sri Anil Kumar Kaushik as per instructions of the purchaser so that no problem in execution of sale deed may arise to the purchaser. The case of assessee is covered within the definition of 'transfer1 as provided under section 2(47) (v) of Income tax Act, 1961.

A plain reading of section 53A of the Transfer of Property Act shows that in order that a contract can be termed to be of the nature referred to in Section 53A of the Transfer of Property Act" it is one of the necessary preconditions that the transferee

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should have or is willing to perform his part of the contract. This aspect has been duly taken note of by the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT (260 ITR 491) (Bom) wherein their Lordships observed as follows:-

That in order to attract section 53A of Transfer of Property Act, the following conditions need to be fulfilled:

(a) There should be contract for consideration.

(b) It should be in writing;

(c) It should be signed by the transferor;

(d) It should pertain to the transfer of immovable property;

(e) The transferee should have taken possession of property;

(f) Lastly, transferee should be ready and willing to perform the contract.

In the case of the assessee all the above conditions are full- filled and hence the case of the assessee is covered with the provisions of section 2(47) (v) of Income tax Act, 1961 because:

i) The assessee along with her co-owner contracted to transfer a plot of land for consideration as per agreement dated 21.8.2003;

ii) It is in writing through agreement dated 21.8.2003.

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iii) It is i.e. agreement is signed by the transferors pertains to the transfer of land i.e. immovable property which is mentioned in the agreement dated 21.8,2003.

iv). The transferee was allowed possession of land on the date of agreement as the assessee received almost full amount of consideration. A power of attorney was also executed by the assessee and his co-owner in favour of third party i.e. Sri Anil Kumar Kaushik on the instructions of the transferee.

v) That the transferee was willing to perform his part contract which is clear from the fact that he made payment of consideration to the extent of 98% and got power of attorney executed in favour of third party and ultimately sale deed executed on 21.4.2006 through power of attorney holder in favour of transferee.

Hence, the transaction in question clearly falls in the year 2003-04 as the same is covered with the provisions of section 2(47(v) of Income tax Act, 1961. It may, however, be submitted that It is common knowledge when a person gives full payment of consideration i.e. 98% as to why he will not ask for possession and that too for continuous 3 years ? Your attention is again invited to page no 9 of the sale deed wherein it has been written ‘Beche Gaye Plot Bhukhand Par Kharidar Ka Bakai Kabja Va Kabja Malikana Apne Saman Pura Kara Diya’ This clearly indicates that me possession of land was given before the execution of sale deed i.e. at the time of agreement

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and on execution of sale deed the purchaser has been given registered possession of land like sellers i.e. Vakai Kabja.

It is, however, submitted if you still intend to apply the statement of the attorney holder against the assessee; the assessee may kindly be allowed to cross examine Anil Kumar Kaushik before completing the assessment. You are also requested to summon the transferee Sri Suresh Cnand Garg tor examination on oath and allow the assessee to cross examine him. The assessee is ready to deposit the diet money in this connection. The assessee may be informed about the amount of diet money to the deposited by her.

In view of the above facts it is clear that the transaction in question falls in the year 2003-04, invoking the provisions of section 147 for the assessment year 2007-08 is not valid. You are again requested to drop the proceedings u/s 147/148 accordingly.

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“5.3 I have gone through the assessment order, submissions of the assessee and the legal position in this regard. The AO has issued a notice to the assessee u/s 148 of the Income Tax Act, 1961, on the basis of Information received from registrar regarding execution of a sale deed which denoted the fact that the appellant had sold a land and capital gain on the same had to be taxed. Whereas the assessee submitted that under the newly substituted section 147, w.e.f. 1st April, 1989, the AO, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, has been empowered, subject to the provisions of sections 148 to 153, to assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147, or to re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the relevant assessment year.

Further as per the explanation of section 148(1), the terms specified under proviso (a) and (b) to serve notice are not applicable in the case the return has been furnished on or after 1st day of October, 2005…………………………….”

and:

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“Further as per the Supreme court ruling in the case of ACIT v/s Rajesh Jhaveri Stock Brokers Pvt. Ltd., if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. Since, in this case specific information was received by the AO from the Registrar regarding sale of the property which comes within the ambit of capital gain which was not completely reflected in the total income of the assessee. Therefore, the AO had reasons to believe that the income of the appellant had escaped assessment and therefore re-assessment proceedings have rightly been initiated by the AO.” Thus, evidently, the ld. CIT(A) did not address the assessee’s above 8. grievance.

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by a separate speaking order before passing the assessment order. This mandate of the law laid down by the Hon’ble Supreme Court has clearly been flouted, as the AO has not disposed of the assessee’s objections by a separate order before passing the assessment order. The ld. CIT(A) did not decide this issue, though the assessee had specifically raised it before the ld. CIT(A).

pass the assessment order. The assessee, no doubt, shall co-operate in the fresh proceedings before the AO. All pleas available under the law shall remain so available to the assessee.

Order pronounced in the open court on 21/11/2017.

Sd/- (A.D. JAIN) JUDICIAL MEMBER Dated 21 /11/2017 *AKV* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR