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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI N.K.BILLAIYA & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
The present appeal is filed by the assessee against the order of CIT(A)-23, Mumbai dated 25.02.2011 in respect of Assessment Year (AY) 2007-08, on the following grounds of appeal:
1. The Commissioner of Income Tax (Appeals) -23, Mumbai ("the CIT (A)") erred in confirming the Order of the Income Tax Officer 12(1)(4), Mumbai ("the ITO"), by which Order the Assessing Officer had brought to tax an amount of Rs.3,14,00,849/- as a long term capital gain.
2. The CIT(A) erred in confirming the order of the ITO that no transfer took place under the development agreement dated 26th October, 2001 ("the said development agreement") and in fact a transfer took place only by execution of Deed of Conveyance dated 8th December, 2006, even though the Assessing Officer had brought to tax a sum of Rs.1,12,18,261/- as capital gains in the Assessment Year 2006-2007 on the basis that there was a transfer pursuant to the execution of the development agreement.
3. The CIT(A) erred in holding that the capital gains/loss offered by Appellant in Assessment Year 2006-2007 was a well thought out device to evade the tax arising out of the transfer of the said Property by way of part performance of the contract under the said development agreement.
4. The CIT(A) erred in applying the provision of Section 50C in determining the full value of the consideration and failed to appreciate that even assuming the said provision applicable as the Appellant had disputed the market value of the Property, it was mandatory for the ITO to refer the valuation to the Valuation Officer.
5. The CIT(A) erred in holding that the reference to the Valuation Officer was not mandatory under the said Section 50C of the Act.
6. The CIT(A) failed to consider that the rights of the parties were crystallized under the said development agreement and by executing the said conveyance no fresh or further rights were created between the parties but the same was only granted pursuant to an existing obligation under the development agreement.
7. The above grounds are mutually exclusive and independent of each other and each is without prejudice to other.
The Appellant craves leave to add, amend, alter, delete, modify or change all or any grounds of Appeal at the time of or before the hearing of the Appeal.
2. The brief facts of the case are that the LR of the assessee filed his return of income on 31.07.2007,declaring total income of Rs. 3,25,581/- as the assessee died on 23.01.2007, the case was selected for scrutiny, statutory notice was served and after hearing the Assessing Officer (AO) made the addition u/s 50C of the I.T. Act of Rs. 3,14,00,889/- and initiated penalty proceeding against the assessee in which assessment order dated 24.12.2009 against which an appeal was filed before the CIT(A) and the ld. CIT(A) while disposing of the appeal of the assessee upheld the addition and dismissed the appeal in its order dated 25.02.2011 against which the present appeal is filed through legal heirs before us.
3. We have gone through the material available on record and have heard the ld. respective representative of the parties. 4. That while dealing with the issue the ld. CIT(A) in paragraph no. 2.3 of its order has considered as under: “2.3 The submissions made for the appellant, the assessment order and facts on record have been considered. The Assessing Officer has summarized the facts in his assessment order. The facts show that the appellant had entered into development agreement in the year 2001 which only conferred Development rights on M/s Sheth Enterprises. The title of the property was never conveyed to M/s Sheth Enterprises and as such, there was no transfer resulting in capital gains in the F.Y. 2001-02, nor has the appellant claimed that transfer took place in F.Y. 2001-02. In point of fact, the Development Agreement states that the owners had agreed to give authority or powers to the Developers for construction of buildings consuming entire FSI and TDR generated and acquired from outside ultimately for sale and transfer of the flats. Clause 6 of the agreement dated 26-02 - 2001 .specifically states that, this will not in any manner be construed or deemed that the Owners have handed over possession of the said property or any part or portion thereof u/s 53A of the Transfer Property Act in any manner whatsoever. The said Development Agreement there e clearly states that possession has not been handed over U/s 2(47)(v) any transaction involving allowing of possession to be taken over or retained in part performance of a Contract of the nature referred to in Sec 43A of the Transfer Property Act would come within the ambit of Sec. 2(47)(v). Sec.53A of the. Transfer Property Act requires the following conditions to be fulfilled - contract for consideration; it should be in writing; it should' be signed by the transferor: it should pertain to transfer of immovable property; the transferee should have taken possession of the property and the transferee should be ready and willing to perform his part of the contract. While other conditions have been fulfilled, the question is whether the possession of the art was given in F.Y. 2005-06 or 2006-07. The case of Chatarbhuj Dwarkadas Kapadia (supra) cited by the appellant states that where transaction allows possession to be taken in part performance of contract, the transaction would be treated as a transfer. The transfer would be held to be liable for capital gains if the major payment of sale considerations was handed over and possession also transferred, even if some part of the sale considerations still remains to be paid. In the present case, the issue is whether transfer of possession had been handed over in the F.Y. 2005- 06 or not. The appellant has claimed that possession was given in May 2005, however no proof of this assertion has been filed. In the absence of any supporting evidence it cannot be held to be completed in F.Y. 2005-2006. The Conveyance Deed which has been dated 08-12-2006 is the only document between the parties concerned which shows sale of the said property and therefore transfer is held to be completed in F.Y. 2006-07 which is relevant for A.Y. 2007-08. The Assessing Officer has given other surrounding circumstances which indicate that there was no transfer in A. Y. 2006-07. Thus the claim that the rights were crystallized in 2001 is only true to the extent of Development Agreement, right of ownership can be held to have arisen only vide the Deed of Conveyance dated 08-12-2006. In fact it is only the conveyance deed which speaks of possession that it shall be lawful for the purchasers from time to time and at all times heareafter peaceably and quietly to hold, enter upon, have, occupy, possess and enjoy the said premises hereby granted conveyed and assured. The Conveyance Deed does not state anywhere that possession was granted at any earlier date. The appellant's reliance upon the decision in Podar Cement Pvt Ltd (supra) is also misplaced, since the same states that in the context of Section 22 "Onwer" is a person who is 'entitled to receive income in his own right, that Sec.22 does not require registration of sale deeds. The case is inapplicable since the appellant has not shown by evidence that he was given possession in F.Y. 2005-06 (A.Y. 2006-07). Thus, the issue of registration is irrelevant in the facts of the present case. The appellant is therefore liable to be assessed for long term capital gains in the A.Y. 2007-08. The Assessing Officer has rightly brought the LTCG to- tax in A. Y. 2007-08.
The ld. AR of the assessee draw our attention to the assessment order of the assessee in respect of AY-2006-07 dated 29.12.2008 wherein the AO has accepted that possession of the said property was handed over in the FY 2005-06, and indexation has been worked out for FY 2005-06, the order of AO further contained the reference that sale consideration has been received in the FY 2001-02 and the cost inflation index was adopted for FY 2001-02, hence we restore this ground to the file of AO to verify the date of handing over the possession and passing over the sale consideration.
The next issue for our consideration is that CIT(A) erred in applying the provision of section 50C in determining the full value of consideration. While dealing with this ground, the ld. CIT(A) has observed as under: “It transpires that there is no discretion vested in the Assessing Officer u/s 50C regarding the fact whether the valuation made by the Stamp Duty authorities are to be adopted or not. The word 'shall' means it is mandatory u/s 50C(1) for the Assessing Officer to adopted the valuation done by the stamp duty authorities. In view of the fact that after consideration of the appellant's request the Assessing Officer exercising his discretion did not make reference to the Valuation Officer by the Assessing Officer, and the fact that under the provisions ,of the I.T. Act no such reference can be made once the assessment has been completed, the action of the Assessing Officer in determining the long term capital gain by invoking provisions of Section 50C of the Income Tax Act, in the case of the appellant is upheld and the grounds of appeal
on this issue are dismissed”.
7. We have seen that while determining the value, the AO has not referred the matter for determining the value of the property for its fair determination by the Valuation Officer as this issue is also remanded back to the AO for fresh consideration after seeking the valuation report in respect of the property transferred by the assessee.
8. In view of the above discussion, the appeal of the assessee is allowed for statistical purposes.
9. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on this 17th December 2015.