M/S. UTTAMBHAI V. PATEL,,SILVASSA vs. THE INCOME TAX OFFICER, SILVASSA WARD,, SILVASSA

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 1311/Ahd/2017 (Assessment Year: 2012-13) (Virtual hearing) Mohanbhai R Varli, I.T.O., Opp: Dayat Falia, Piparia, Amli, Silvassa Ward, Vs. Silvassa. Silvassa. PAN No. AEIPV 0231 L Appellant/ assessee Respondent/ revenue

ITA No. 1312/Ahd/2017 (Assessment Year: 2012-13) M/s Uttambhai V Patel, I.T.O., Gayatri Temple, Mnadir Falia, Silvassa Ward, Vs. Silvassa. Silvassa. PAN No. AQGPP 2165 D Appellant/ assessee Respondent/ revenue

Appellant represented by Shri Hardik Vora, Advocate Respondent represented by Shri Vinod Kumar, Sr. DR Date of hearing 03/01/2023 Date of pronouncement 20/01/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by two different assessees are directed against the separate orders of learned Commissioner of Income Tax (Appeals), Valsad [in short, the ld. CIT(A)] both dated 17/03/2017 for the Assessment year (AY) 2012-13. In both these appeals, the assessee(s) has raised certain common grounds of appeal, facts in both appeals are common as both the appellants sold or purchased certain property jointly having equal share (50% each), wherein equal amount of capital gain was computed, therefore, with the consent of parties, both these appeals

ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. were clubbed, heard together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of facts, the appeal in ITA No. 1311/Ahd/2017 for the A.Y. 2012-13 is treated as a “lead case”. In this appeal, the assessee has raised following ground of appeal: “1. On the facts and circumstances of the, the ld. CIT(A) has erred in confirming the addition made by Ld AO of short term capital gain of Rs. 27,28,584/- as against correct short term capital gain computed by appellant of Rs. 6,32,057/-. 2. On the facts and circumstances of the case, the ld. CIT(A) has erred in making enhancement of short term capital gain of appellant.” 3. The appellant craves leave to add, amend, modify or delete any of the above grounds of appeal.” 2. Brief facts of the case are that the assessee is an individual, filed his return of income for A.Y. 2012-13 on 30/03/2013 declaring income of Rs. 2,96,200/-. The case was selected for scrutiny. During the assessment, the Assessing Officer noted that as per information (AIR) filed by Sub- Registrar, Silvassa, the assessee sold and purchased several immovable properties. The Assessing Officer summarised the details in the following manner: Sr. Property Details Sale Consideration Date No. amount (in Rs.) 1. Immovable property sold 65,25,000/- 12/03/2012 2. Immovable property sold 42,90,000/- 29/03/2012 3. Immovable property sold 9,00,000/- 19/03/2012 4. Immovable property purchased 99,00,000/- 11/08/2011 5. Immovable property purchased 62,25,000/- 12/03/2012 The Assessing Officer obtained information from Sub-Registrar, Silvassa with copies of purchase and sale deeds. Ongoing through such sales and purchase deeds, the Assessing Officer noted that the assessee along with 2

ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. Uttambhai V Patel (Assessee in ITA No. 1312/Ahd/2017) purchased non- agricultural land at Silvassa bearing Survey No. 233/1 admeasuring 33 acres for a sum of Rs. 33.50 lacs which was registered with Sub-Registrar on 11/08/2011. The Assessing Officer further noted that the assessee and his co-owner sold part of this land admeasuring 14.3 acres out of Survey No. 233/1/3 with co-owner for a sum of Rs. 42,90,000/-. Further part of survey No. 233/1/1 admeasuring 3 acres sold by assessee with his co-owner for a consideration of Rs. 9.00 lacs and the transaction was registered on 19/03/2012. The property sold by assessee are non- agricultural land (N.A. land) situated in Silvassa Municipal Area and no capital gain was offered in his return of income. 3. 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

ITA No. 1311 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. 4. 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/-

ITA No. 1311 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.” 4. Aggrieved by the additions, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed his detailed written submissions. The submissions of assessee is recorded in para 3.2 of order of ld. CIT(A). The assessee in his submission submitted the comparison of his working of short term capital gain as well as working of Assessing Officer in the following manner: Particulars STCG Worked out (Rs.) By the Appellant By the AO (A) S.R. No. 233/1, Silvassa 21,45,000/- 21,45,000/- (i) Sale Proceeds (233/1)(12/03/2012 4,50,000/- (ii) Sale Proceeds (233/1/1) Total 21,45,000/- 25,95,000/- Less: (i) Cost of Acquisition 16,75,000/- 16,75,000/- (12/08/2011) (ii) Transfer Expenses & Improvement 1,76,693/- 62,213/- cost STCG-(A) 2,93,307/- 8,57,787/- (B) S.R. No. 227/2, Silvassa: 32,62,500/- 32,62,500/- Sale Proceeds (227/2)(12/03/2012) Less (i) Cost of Acquisition 11,12,500/- 11,12,500/- (12/08/2011) (ii) Transfer Expenses & Improvement 18,44,150/- 2,79,203/- cost STCG-(B) 3,05,850/- 18,70,797/- Total STCG (A + B) 5,99,157/- 27,28,584/-. 5. 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

ITA No. 1311 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/-. 6. 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

ITA No. 1311 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.

ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. 7. 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

ITA No. 1311 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. 8. 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.

ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. 9. 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

ITA No. 1311 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. 10. 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.

ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr. 11. 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. 12. 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

ITA No. 1311 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. 13. 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 raised by assessee is partly allowed. No other submissions were raised about any other claim either on account of reduction in the cost on account of enhancement made by ld CIT(A). thus, the ground of appeal raised by the assessee is allowed. 14. In the result, this appeal of assessee is partly allowed. ITA No. 1312/Ahd/2017 in M/s Uttambhai V Patel A.Y. 2012-13 15. As recorded earlier the assessee has raised similar ground of appeal as raised in appeal in ITA No. 1311/Ahd/2017 for A.Y. 2012-13. The addition made by the Assessing Officer and confirmed by the ld. CIT(A) are also same as made and confirmed in ITA No. 1311/Ahd/2017 for A.Y. 2012- 13. Considering the fact that I have given part relief to the assessee, therefore, considering the principle of consistency, the appeal of ITA No. 1312/Ahd/2017 for the A.Y. 2012-13 is also partly allowed with similar findings. In the result, this appeal is also partly allowed. 16. In the result, both the appeals of the assessee are partly allowed. Order pronounced in the open court on 20th January, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 20/01/2023 *Ranjan 14

ITA No. 1311 and 1312/Ahd/2017 Mohanbhai R Varli Vs ITO & 1 Anr.

Copy to: 1. Assessee 2. Revenue 3. CIT(A) 4. CIT 5. DR 6. Guard File By order

Sr.Private Secretary, ITAT, Surat