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Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH
Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’A’, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.1176/Chd/2017 Assessment Year: 2007-08
Shri. Jai Pal Vs. The ITO Vill. Jaroda, Jagadhri Ward-3, Yamuna Nagar
PAN No. CJWPP5889F
(Appellant) (Respondent)
Assessee By : Shri. Rohit Goel Revenue By : Dr. Gulshan Raj
Date of hearing : 14/03/2018 Date of Pronouncement : 16/05/2018
ORDER PER DR. B.R.R. KUMAR A.M.
The present appeal has been filed by the Assessee against the order of Ld.CIT(A), Panchkula dt. 14/09/2015.
In the present appeal the Assessee has raised the following grounds:
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
assessee has received two cheques of an amount of Rs. 32,67,969/- and Rs. 3,41,79,688/- for the sale of the land. The assessee has offered an amount of Rs. 41,17,969/- (Rs. 8,50,000/- Cash + Cheque of Rs. 32,67,968/-) for taxation in the A.Y. 2007-08. The contention of the assessee that tax pertaining to the amount of Rs. 3,41,79,688/- would be offered to taxation after encashing the cheque issued as the sale deed stipulates cancellation of the deed in the event of dishonor of the post dated cheque.
However, the Assessing Officer has brought to tax the entire amount of sale consideration to tax in the current year invoking the provision of Section 54 of the Transfer of Property Act. The Assessing Officer held that the post dated cheque was encashed by the assessee on 14/08/2008 therefore the effective date of transfer would be 20/03/2007 the date of registered sale deed.
The Ld. CIT(A) confirmed the addition invoking section 2(47)(i) of the Income Tax Act.
Before us the Ld. AR brought to our notice that the matter has been squarely stands covered in a group of cases of Rajiv Kumar and others in ITA Nos. 17 , 18, 19 /CHD/2016 and in the case of Purushottam Kumar, Payal Kumari, and Pravin Kumar in ITA Nos. 968 and 969/CHD/2014, ITA Nos. 1185/CHD/2012, and ITA Nos. 970 & 971/CHD/2014. The relevant portion of the order is extracted hereunder:
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.
16(i) It would also strengthen the case of the assessee that in case of denial of land use change permission and development permission to the buyer, the sale deed would be cancelled between the parties. The assessee fur ther explained that when the undated cheque was not paid by the buyer company, one of the assessee Shri Tejinder Kumar filed a criminal Misc. No. 36372-M of 2007 which is decided by Hon'ble Punjab & Haryana High Court on 31.05.2007 (copy of which is placed on record) in which the petitioner prayed for direction to police authorities of District Yamuna Nagar to register a case against functionaries including the Managing Director of Zodiac Housing & Infrastructure Pvt. Ltd. for duping various agriculturists including the petitioner for committing fraud to grab their valuable agricultural land. Hon'ble High Court directed the Superintendent of Police, Yamuna Nagar to enquire into the complaints of petitioners in accordance with law and take action. It is, therefore, clear that till filing of the criminal Miscellaneous petition before Hon'ble Punjab & Haryana High Court, the buyer company had no intention to pay any amount to the assessee and others (agriculturists). The assessee further explained that when no action have been taken in the matter, Shri Tejinder Kumar & others further filed CWP No. 1908 of 2009 which is decided by Hon'ble Punjab & Haryana High Court vide judgement dated 05.02.2009 in which similar allegations were made for direction to the Superintendent of Police, Yamuna Nagar and others for taking legal actions against the Real Estate Developers & Builders who have duped/cheated hundreds of farmers in the area of Yamuna Nagar by alluring them to execute the sale deeds with a promise to pay sale consideration through cheques which later on bounced for want of sufficient funds. All the substantial amount remained unpaid. 16(ii) Hon'ble High Court, considering the serious allegations against the builders/buyers for cheating hundreds of farmers in District Yamuna Nagar directed the senior officers of the Crime Branch to look into the allegations of conniving with the builders alongwith Collector Yamuna Nagar to take immediate remedial action. Addl. DGP, Crime Branch was also directed to constitute Special Investigation Team to conduct fair investigations. These facts would also support the claim of the assessee that the buyer companies have no intention to pay any amount to the agriculturists who have executed sale deed in favour of the developers and the developers have not paid the substantial sale consideration to the agriculturists including the assessee. It is only when the investigation carried out by the State Police and Civil Authorities, as per directions of the Hon'ble Punjab & Haryana High Court, the substantial amount of sale consideration through undated cheque was cleared in favour of the assessee after several months. The provision of Negotiable Instrument Act provides that the negotiable instruments ( including cheque) would be valid for a period of six months but in the case of the assessee, with the intervention of Civil and Police authorities, as per directions of the Hon'ble Punjab & Haryana High Court, undated cheque of the assessee was cleared after about 15 months from the date of the sale deed because undated cheque is cleared on 16.06.2008 while sale deed was executed on 20.03.2007. The intention of the buyer company is, therefore, very clear from the beginning itself that the buyer company/builders never intended to pay substantial sale consideration to the assessee. The intention of the buyer company is also clear from the fact mentioned in the sale deed, affidavit and the attending circumstances. Though the sale deed is executed in the matter but the facts and circumstances above will clearly explain that the sale deed in-fact was a contract of sale of property only and it would not create any interest or charge in the property. The sale transaction shall take place on terms settled between the parties i.e. the contents of the sale deed and the affidavit executed by the buyer. 16(iii) The facts of the case also clearly reveal that full payment on account of sale consideration was essence of the contract not satisfied by the buyer company at the time of execution of the sale deed. There is no transfer of capital asset in assessment year 2007-08. Thus, no income/amount accrued or received by the assessee on account of transfer of capital asset or on account of any capital gains till 16.06.2008. Therefore, no capital gain arise in assessment year 2007-08.
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
gain in assessment year 2007-08. The revenue authorities are at liberty to take up this issue in assessment year 2009-10 if so advised in accordance with law. 23. In the result, ground No. 1 of these appeals are allowed and remaining grounds of claim of deduction/exemption under section 54B and 54F, commission and land value etc. stand disposed off. 24. In the result, both the appeals in ITA 18/2016 and ITA 19/2016 are allowed.
Since the matter stands squarely covered by the above judgments, we hereby delete the addition made by the Assessing Officer on account of capital gains. Further, since the benefit of reinvestments under section 54B and 54F stands to be assessed in the assessment year 2009-10, the department will be at liberty to take up this issues in that assessment year if so advised in accordance with law.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court.
Sd/- Sd/- (SANJAY GARG) (DR. B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 16/05/2018 AG Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR