SHRI MOHANBHAI R. VARLI,,SILVASSA vs. THE INCOME TAX OFFICER, SILVASSA WARD,, SILVASSA

On perusal of other sale and purchase deeds, the Assessing Officer noted that the assessee with Uttamchand Patel purchased non-agricultural land in revenue survey No. 227/2/69/1 admeasuring 21.75 acres of Rs. 22,25,000/- which was registered on 12/08/2011. On further perusal of other sale deed registered on 12/03/2011, the Assessing Officer noted that the assessee sold the said land with his co-owner at Rs. 65,25,000/- which is also non-agricultural land situated at Silvassa Municipal area and no short term capital gain was shown in the return of income. The Assessing Officer issued show cause notice to the assessee to file computation of capital gain earned on sale of non-agricultural land which has not been offered for taxation. The assessee vide his submission dated and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. 20/03/2015, furnished working of short term capital gain. The said working was not found in order by the Assessing officer. In the computation of short term capital gain, the assessee claimed huge expenses on account of transfer expenses. The assessee was again asked vide order sheet entry dated 20/03/2015 to furnish proof/details of expenses claimed in respect of non-agricultural land. The assessee submitted copies of seven bills aggregating of Rs. 6,76,125/- on account of levelling of land. On perusal of such bills, the Assessing Officer noted that one bill of Rs. 2.00 lacs were issued by Ramesh B. Mohite was not in bill format and merely a quotation and not allowable. Accordingly, the Assessing Officer allowed expenses of Rs. 4,45,800/-. The Assessing Officer computed capital gain in the following manner: “1. Land mentioned in para No.

Sale consideration (14.3 acre) Rs. 42,90,000/- Sale consideration (3 acre) Rs. 09,00,000/- Total sale consideration Rs. 51,90,000/- Less: Cost of purchase Rs. 33,50,000/- Stamp duty Rs. 00,99,500/- Registration charges Rs. 00,24,926/- Cost of improvement Rs. Nil Rs. 34,74,426/- Short term capital gain Rs. 17,15,574/- 2. Land mentioned in Para No. 5 Total sale consideration Rs. 65,25,00,000/- Less Cost of purchase Rs. 22,25,000/- Stamp duty Rs. 00,65,800/- Registration charges Rs. 00,16,481/- N.A. Land charges Rs. 00,30,325/- Cost of improvement Rs. 04,45,800/- Rs. 27,83,406/- Short term capital gain Rs. 37,41,594/- Total short term capital gain (1 + 2) Rs. 54,57,168/- and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. The assessee was having 50% share and remaining was of Uttambahi V. Patel, accordingly, 50% of capital gain of Rs. 27,28,584/- was added to the income of assessee.”

The assessee further explained that the Assessing Officer while calculating capital gain made certain modifications i.e. (i) sale proceed of survey No. 233/1/1 admeasuring 3 acres was taken at Rs. 9,00,000/- (assessee’s share is 50%), (ii) the assessee has incurred transfer cost and cost of improvement for survey No. 233/1 at Rs. 1,76,693/- and the Assessing Officer allowed only Rs. 62,213/- and (iii) the assessee has and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. incurred transfer cost and cost of improvement of revenue survey No. 227/1 at Rs. 18,44,150/-, the Assessing Officer allowed only Rs. 2,79,203/-.

The assessee further submitted that in sale deed dated 19/03/2012 with regard to revenue survey No. 233/1/1, the sale deed contained the reference of cheque dated 28/03/2012 bearing No. 395568, 395569 and 395570 drawn of Dena Bank of Rs. 3.00 lacs each. Such consideration was not received by assessee and the same cannot be taxed. To substantiate such contention, the assessee furnished his bank statement for Financial Year (FY) 2010-11 and 2012-13. The assessee further stated that he produced Rajesh K Mehta during the hearing and filed his affidavit. The assessee further stated that Rajesh K Mehta was holding possession of land from last 11 years and he demanded huge amount from assessee and his co-owner, ultimately, it was mutually decided to transfer a piece of land without any consideration. Consideration was mentioned in the sale deed for the purpose of registration. Cheques mentioned on the sale deed were never realised either by assessee or by his co-owner. Such fact was admitted by the said purchaser before the Assessing Officer as well as Joint Commissioner of Income Tax (JCIT). There is no evidence that such sale consideration was passed from Rajesh K Mehta to the assessee. To support such contention, the assessee relied on the decision of Hon’ble Bombay High Court in the case of CIT Vs Hemal and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. Raju Sheth (2016) 70 (I) ITCL 362 wherein it was held that any contingent differed consideration could not be taxed in the hands of the until such consideration is actually received or accrued. Such sale deed was executed without consideration would have been blocked for a limited period as Rajesh K Mehta was holding possession of land for more than 11 years. Filing of Civil suit was not considered as a prudent step being time consuming and expenses. The assessee and his co-owner took such step to avoid civil litigation. On the basis of such submission, the assessee claimed that a levy of short term capital gain on Rs. 9.00 lacs are not justifiable. On not allowing Rs. 62,213/- in respect of transfer and improvement cost for revenue survey No. 233/1 instead of actual cost of Rs. 1,76,693/-. The assessee stated that the Assessing Officer allowed only stamp cost and registration charges and not considered the other expenses. For revenue survey No. 227/1, the assessee incurred cost of Rs. 18,44,150/- and allowed only Rs. 2,79,203/- i.e. only stamp cost and registration charges and other nominal expenses. The assessee explained that he and his co-owner have incurred following cost: Amount Rs. Nature of expense 15,55,000/- Paid to Nani Navla Patel and other 4 persons in respect of purchase of land bearing S.R. 227/2/69/1 at Moje Dadra Nagar Haveli, Silvassa. Total cost Rs. 37,80,000/- Less- Document for Rs. 22,25,000/- 9,00,000/- Paid for land at Village-Morkhal, S.R. No. 112/26. Both amounts were paid in order to follow the direction given by Hon’ble Collector, Dadra Nagar Haveli (U.T) 9,03,854/- Expenses incurred in connection with soil filing, land levelling and getting vacant possession from the persons who were owing possessing of the land prior to its sale. and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr.

The ld. CIT(A) after considering the assessment order and submissions of assessee, noted that the assessee has claimed payment of Rs. 15.55 lacs and Rs. 9.00 lacs paid to Nani Navla Patel and others in respect of purchase of land vide S.R. No. 227/2, Rs. 9.00 lacs paid for land at village Morkhal, S.R. No. 112/26 as per direction of Collector of Dadra Nagar Haveli and Rs. 9,03,854/- as expenses incurred in connection with land levelling, soil filling and getting vacant and peaceful possession from occupant. With regard to payment of Rs. 15.55 lacs and Rs. 9.00 lacs paid to Nani Navla Patel and others for purchase of land vide S.R. No. 227/2, it is noted that the assessee has referred the order of revenue department Dadra and Nagar Haveli dated 24/4/2010 to justify such expenses of Rs. 15.55 lacs. In para 18 of said order, it is referred that the seller’s widow Nani Navla and others shall purchase agricultural land i.e. Survey No. 22/2 admeasuring 0.80 hectare out of 1.56 hectare of village Falandi from sale consideration of this land till that time the land records will not be mutated in favour of purchasers. On the basis of such observation, the ld. CIT(A) was of the view that from the said order, it was mandated that widow of Nani Navla will purchase 0.80 hectare of land at village Falandi out of sale consideration of land at S.R. No. 227/2. The assessee purchased land vide sale deed dated 12/08/2011 and the said sale deed nowhere mentioned over and above Rs. 22,25,000/- for 2.75 acres of land for SR No. 227/2. Thus, as per clause (18) of order of and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. revenue department, the assessee was not required to pay any such amount. Such condition was on the sale, that prior to mutation of land in favour of purchaser, only to safeguard the interest of widow of land of plot of S.R. No. 227/2, therefore, there is no justification for claiming such cost of payment of Rs. 15.55 lacs. Therefore, the affidavit about the claiming of receipt of Rs. 15.55 lacs and 9.00 lacs has no relevance. With regard to expenses of Rs. 9,03,854/- on account of improvement cost, the ld. CIT(A) was of the view that the assessee has not furnished any evidence other than those filed before the Assessing Officer. Such expenses were verified by the Assessing Officer during the assessment and out of total bill of Rs. 6,76,125/-, Rs. 4,45,800/- was allowed by the Assessing Officer for cost of improvement.

On the other deduction of cost by Rs. 9.00 lacs in respect of 3 acres of land sold to Rajesh K Mehta, on the plea of assessee that no sale consideration was received, the ld. CIT(A) was of the view that such contention is not acceptable as the sale consideration is clearly mentioned in the sale deed. The affidavit and bank account that no amount was received has no relevance as the sale deed clearly contained the reference of sale consideration. On the basis of aforesaid observation, the ld. CIT(A) upheld the addition made by the Assessing Officer. Further aggrieved, the assessee has filed the present appeal before the Tribunal. and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr.

I have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (Sr. DR) for the revenue and have gone through the orders of the lower authorities carefully. The ld. AR of the assessee submits that he has very limited submission before the Tribunal. The ld. AR submits that the Assessing Officer erred in calculating capital gain on consideration of Rs. 9.00 lacs (Rs. 4.5 lacs for each of the assessee) about the sale of land in Survey No. 233/1 to Rajesh K Mehta. Rajesh K Mehta was holding possessing of impugned land for more than 11 years and was demanded huge money to clear encumbrances. After mutual discussion, it was decided that the assessee and his co-owner will transfer three (3) acres of land without any cost. The sale consideration received in the sale deed was not received as the cheque was not realised. Such fact was confirmed by the purchaser by filing confirmation in the form of affidavit. Further copies of bank statement of assessee as well as purchaser was furnished showing that such cheque was never realised. In such circumstances, the lower authorities were not justified in considering such sale consideration. The ld. AR submits that only income earned, accrued or received or realised is to be taxed and not on a hypothetical basis. Since no such amount was received by the assessee, therefore, cannot be considered for taxation. The ld. AR further submits that the assessee along with other co-owner purchased land in Survey No. 227/2/69/1 situated at Moje and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. Dadra & Nagar Haveli from Nani Navla Patel and others vide sale deed dated 22/08/2011 for a sale consideration of Rs. 37,80,000/-. As per para 18 of order of Collector, Dadra & Nagar Haveli dated 24/04/2010 that the sellers of land shall purchase agricultural land from the sale consideration and till that time land record shall not be mutated in favour of purchaser. Thus, in order to get peaceful possession and complete ownership, the assessee paid Rs. 9.00 lacs to seller i.e. Nani Navla Patel and others to purchase agricultural land in the name of sellers. Such amount was borne equally by assessee as well as other co-owner. To support such contention, the assessee filed copy of order of Collector, Dadra & Nagar Haveli dated 24/04/2010, affidavit of seller in Gujarati along with its English translation.

On the other hand, the ld. Sr. DR for the revenue supported the order of ld. CIT(A). The ld. Sr. DR for the revenue submits that the assessee is claiming reduction of sale consideration of Rs. 9.00 lacs in respect of sale of three acres land sold out of Survey No. 233/1 to Rajesh K Mehta on the plea that the said sale consideration was never received and Rs. 9.00 For consideration of Rs. 9.00 lacs, the assessee is claiming that no such consideration was received, though, it is recorded in the sale deed. The assessee has relied upon the affidavit filed by Rajesh K Mehta. Such affidavit is self-serving certificate, however, the sale deed reflects the fact other than the contents of affidavit. and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr.

So far as the reduction on account of Rs. 15.55 lacs and Rs. 9.00 lacs paid to Nani Navla Patel on the pretext that as per the order of Collector, Dadra & Nagar Haveli, Widow of Nani Navla Patel was required to purchase 0.80 hectare out of 1.56 hectare of Survey No. 20/2 from the sale consideration received by Nani Navla Patel and her family, otherwise, the name of purchaser would not have been mutated. The ld. Sr. DR for the revenue submits that the assessee purchased this land vide purchase deed dated 12/08/2011. There is no reference in such purchase deed about any payment over and above consideration of Rs. 22.25 lacs. Thus, as per clause (18) of order of Collector, Dadra & Nagar Haveli dated 24/04/2010 neither the assessee nor his co-owner was required to pay any further amount. In fact, seller (Nani Navla Patel) was required to purchase a land out of sale consideration received from assessee. Such condition was put on the seller other than widow prior to mutation of land in favour of purchaser only to safeguard the interest of widow. The assessee has no justification to claim expenses of Rs. 15.55 lacs and Rs. 9.00 lacs.

I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. I find that the assessee is seeking reduction of sale consideration of Rs. 9.00 lacs out of sale consideration of three acres of land sold out of Survey No. 233/1 to Rajesh K Mehta. The sum and substance of contention of assessee is that and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. Rajesh K Mehta was occupying the said land and to remove the encumbrances three acres of land was given to him to remove all his encumbrances, though, in the sale deed, the consideration of Rs. 9.00 lacs was shown. To prove such contention, the assessee has placed on record the copy of his bank statement as well as bank statement of Rajesh K Mehta. On careful perusal of bank statement of Rajesh K Mehta, I find cheque Nos. 395568, 395569 and 395570 all dated 28/03/2012 drawn on Dena Bank was never encashed or realised either from bank account of Rajesh K Mehta or in the account of assessee. Thus, consideration shown in the sale deed was never passed/received by assessee. Shri Rajesh K Mehta has confirmed his fact in his affidavit. Thus, the said amount was not received by the assessee. It is settled position under law that income which has earned or accrued can only be taxed. In my considered view, once it is shown and proved on record that Rs. 9.00 lacs is not received by the assessee, so such income cannot be considered for taxation in the hands of assessee. So the assessee get relief to that extent.

So far as other amount which consists of Rs. 15.55 lacs and Rs. 9.00 lacs which was allegedly incurred by assessee for purchasing of land in the name of Nani Navla Patel as per the direction of Collector, Dadra & Nagar Haveli, I am fully convinced with the order of ld. CIT(A) that there is no condition precedent in the sale deed dated 12/08/2011. Moreover, such ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. condition was on the seller of land to maintain minimum standard of area of land to safeguard their interest. Therefore, I do not find any justification for allowing such expenses while calculation capital gain. Accordingly, we uphold the order of ld. CIT(A) qua this issue. In the result, grounds of appeal