SH. JAI PAL,JAGADHRI vs. ITO, W-3, YAMUNANAGAR

The Ld. CIT(A) has erred in law and facts in confirming an addition of Rs. 3,68,96,060/- made by Assessing Officer as long term capital gain on sale of agriculture land measuring 109 Kanal 7.5 marla (50% share) for a consideration of Rs. 3,75,97,656/- by holding the transfer of land in the year under consideration despite the fact that only 10% of the sale consideration was received during the year and balance 90% consideration was received on 14/08/2008 i.e; AY 2009-10. 2. That Ld. CIT(A) has erred in law and facts in not allowing the benefit of investments in new agriculture land amounting Rs. 3,38,43,091/- under section 54B & Rs. 25,00,000/- under section 54F invested subsequent to the receipt of money against sale of agriculture land. 3. That Ld. CIT(A) has erred in law and facts in adopting indexed cost of land valued on the basis of land value on 01/04/1981 at Rs. 14,03,194/-. 4. That Ld. CIT(A) has erred in law and facts in confirming the Assessing Officer action by not allowing the benefit of improvement cost of land. 5. That authorities below has erred in law and facts in reopening the assessment under section 148. 3. Brief facts of the case are that the Assessing Officer issued notice under section 148 based on the information regarding the sale of land by the assessee in village Jaroda on 20/03/2007 to M/s Sunshine Buildtech Pvt. Ltd. Jaipur. The

In the instant case, the sale deed dated 20.03.2007 in question mentioned the sale consideration of Rs. 5.50 Crores out of which advance of Rs. 50 lacs have been given on the date of execution of the sale deed. The substantial balance consideration of Rs. 5 Crores was to be paid through undated cheque No. 009643. Further, it is mentioned that due to bouncing of the aforesaid cheque, sale deed will be cancelled. Therefore, essential condition of the sale deed is transfer of the property on full payment made by the purchaser. On the same day, the buyer M/s Link Infrastructure & Developer P. Ltd. through Shri Parveen Kumar executed an affidavit dated 20,.03.2007 duly attested by the Executive Magistrate, Jagadhari. In this affidavit, the buyer has mentioned/affirmed that though sale deed of the land has been registered but the spot possession will be given at the time when total sale consideration of the PDC cheque is given to the owner. Until the amount of the cheque has not been paid, buyer company cannot make discharge of any kind to the remaining persons etc. The possession shall remain with the owner and in case of cancellation/delay, the buyer company shall be responsible for all the losses and expenses to the owner. Since the date of sale deed dated 20.03.2007 and affidavit of the buyer dated 20.03.2007 are related to the alleged transfer of property, therefore, contents of the affidavit would be relevant to consider the entire facts and circumstances of the case because it would support the contention of the assessee that the sale deed was executed only with intention that buyer company thereafter, can obtain land use change from the revenue authority with permission to raise the development in the agricultural land.

The sale deed cannot be a final word in the matter. Our view is supported by the decisions referred to above. Capital gain accrues only if there is a sale or transfer of capital asset. The assessee is able to prove on face of sale deed, affidavit executed by the buyer and the cogent evidence on record that no sale took place on 20.03.2007 i.e. the day when sale deed was registered. The documents/material produced on record proved no sale transactions completed on 20.03.2007. The material and evidence brought on record, thus, cannot be ignored. The contents of sale deed, affidavit and undated cheque of Rs. 5 Crores and orders of Hon'ble Punjab & Haryana High Court clearly proved that the buyer company manipulated the sale deed to dupe the assessee and other agriculturists. Undated cheque of Rs. 5 crores shows no intention of the buyer to pay any sale consideration in future to complete the transaction. The undated cheque itself shows that buyer company was not definite of the payment within the time-bound period. The intention of the parties shall have to be considered on the facts and circumstances of the case. The registration is prima-facie proof of an intention to transfer but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed or possession. The properties do not necessarily pass as soon as the instrument is registered, the true test is the intention of the parties. In the instant case, the sale of property depends upon full payment and the buyer company obtaining land use change permission and development permission etc. The authorities below only considered the sale deed was final but ignored the other material evidence on record. Accrual would be right to receive the amount but no right accrued as assessee was intentionally duped by the buyer. Since one of the assessee Shri Tejinder Kumar & others have made allegation against the developers/buyers conniving with the Revenue Authorities and directions have been issued to take action into the matter by forming a Special Investigation Team also, therefore, the mutation done by the Revenue authorities in favour of buyers as per registered Sale Deed would not be significant to declare any capital gain accrued or arise in the assessment year under appeal. The decisions relied upon by the assessee clearly apply to the facts and circumstances of the case. The decision in the case of Sanjeev Lal Vs CIT (supra) relied upon by ld. DR is distinguishable on facts of the case and would not support case of the revenue. 18. Considering the above discussion and material on record, we are of the view there is no transfer of capital asset in assessment year 2007-08. There is no accrual or receipt of any income in favour of the assessee on account of capital gains in assessment year 2007-08. Therefore, whole of the addition in assessment year under appeal i.e. 2007-08 is unjustified. We, accordingly, set aside the orders of the authorities below and delete the enti re addition on account of capital gains in assessment year under appeal, however, revenue authorities are at liberty to consider the issue of accrual or receipt of capital gain 39 in assessment year 2009-10 in accordance with law, if so advised. 19. In the result, ground No. 1 of appeal of the assessee is allowed. 20. In view of the above findings, there is no need to decide the remaining grounds of appeal with regard to claiming exemption under section 54B and 54F alongwith deduction on account of commission and considering fair market value of the property. These grounds have become infructuous in view of the finding above that no capital gain accrued or arises in assessment year under appeal. These issues may be considered by both the parties in the year when capital gain would arise. These grounds, therefore, stand disposed off. 21. In the result, appeal of the assessee is allowed. I T A 18 /2016 ( Shri Banarsi Lal) & ITA 19/2016 ( Shri Tej inder Kumar ) 22. In both the appeals, issues are same as have been consideration in ITA 17/2016. In ITA 18/2016, assessee challenged the upholding of long term capital gain amounting to Rs. 5,06,25,600/- and in ITA 19/2016, assessee challenged upholding of long term capital gain amounting to Rs. 4,99,37,010/-. The issue is identical as have been considered in ITA 17/2016. We, therefore, 40 following the reasons for decision in case of Rajiv Kumar (supra), set aside the orders of authorities below and delete the entire additions on account of long term capital