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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRIVIKRAM SINGH YADAV & SHRIYOGESH KUMAR U.S
IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRIVIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRIYOGESH KUMAR U.S, JUDICIAL MEMBER
ITANo.102/Nag./2013 (Assessment Year : 2005–06)
SudhakarAtmaramTiple C/o Dadmal House Sakar Nagar, Ekarjuna …………… Appellant Warora, Chandrapur–442 907 PAN No: ATDPT9449A v/s ITO,Ward–3 Chandrapur–442 401 ..…….………. Respondent
Assessee by :None Revenue by : ShriG.N.Ninawe, JCIT
Date of Hearing – 01.06.2022 Date of Order – 10.06.2022
O R D E R PER SHRIVIKRAM SINGH YADAV, A.M.
This appeal filed by the assessee is directed against order of the learnedCommissioner of Income Tax (Appeals)-19, Nagpur, dated 11.12.2012 for the assessment year 2005–06 wherein the assessee has taken the following grounds of appeal.
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“1. On the facts and in the circumstances of the case the CIT(A)-19, Mumbai erred in upholding the order of the A.O levying the long term capital gains in the hands of the assessee. 2. On the facts and in the circumstances of the case the CIT(A}-19, Mumbai erred in upholding the order of the A.O levying the long term capital gains in the hands of the assessee by invoking provisions of section 50C of the I.T.Act
On the facts and in the circumstances of the case both the A.O and the CIT(A)-19, Mumbai erred in not considering the provisions of section 53A of Transfer of property Act,1882.
On the facts and in the circumstances of the case the provisions of section 45 of the Income Tax Act,, are not applicable to the assessee since there is no capital asset as on the date of execution of conveyance deed on 31.03.2005 and there is no transfer of any capital asset since the assessee does not hold any legal title to the land as on the date of execution of conveyance deed on 31.03.2005. The transaction is null and void.”
Briefly, the facts of the case are that the assessee is engaged in business of Flour Mill and derived income there from and notice under section. 148 was issued on 16.03.2009 and in response to the said
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notice, the assessee filed its return of income declaring total income of . 36,000/–. Thereafter, notice under section.142(1) was issued and necessary information/documentations were called for, which were examined by the Assessing Officer. As per the Assessing Officer, the assessee has sold a piece of land bearing survey No. 193/2 measuring an area of 3.24 hectors to M/s. Niyojit Mahasul Karmachari Gruha Nirman Sansthaat Warora through Shri Tulshiram Zamlaji Virutkar resident of Warora, vide sale deed dated 11.03.2005, which was duly registered before the Sub Registrar, Warora, district Chandrapur. As per the Assessing Officer, the value of the land adopted by the stamp valuation authority has been determined at .78,15,550/– as against the declared sale consideration of . 58,000/– and given that the value of the sale consideration is less than the value adopted by the stamp valuation authority. The provisions of section 50C are attracted in the instant case and accordingly, the assessee was issued a show–cause, the submissions so filed by the assessee were considered, but not found acceptable to the Assessing Officer. As per the Assessing Officer, the land was under the possession of the assessee till the date of transfer and the assessee’s submission that the possession was handover to the society in 1994 is an afterthought. It was further held by the Assessing Officer that provisions of section 53A of the transfer of the property Act are not applicable to the Income tax Act and further, the society is not a registered society to whom, the assessee has transferred the property
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and as such the land continues to remain under the possession of assessee himself and therefore by invoking provisions of section 50C and substituting the stamp duty valuation at . 78,15,550/– as against . 58,000/–. The liability under long term capital gains was determined at . 76,62,583/–.
Being aggrieved, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) after considering the submissions of the assessee and after calling for the remand report and the rejoinder filed by the assessee, confirmed the action of the AO and appeal of the assessee was dismissed. As per the ld. CIT(A), the admitted facts are that the appellant bid for the land in auction and land was transferred in his name after the auction. There is no credible evidence to show that the appellant transfer the said land to the society and the transfer deed signed with the society as so claimed by the assessee was not registered. As per the ld. CIT(A), the finding of the Assessing Officer that on the date of registration of the sale deed, the land was in the name of the appellant is in order and its supported by the documentary evidence and the land was in possession of the assessee as per 7/12 extract and therefore, the provisions of section 50C are clearly attracted. As per the ld.CIT(A), it is immaterial, who has paid for purchase of the land and where the argument of the assessee is considered to be correct that the appellant was only the front man and number of people contributed to pay the
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purchase price of the land, similar arguments can be advanced that the same set of the people can contribute towards payment of taxes. Accordingly, ld. CIT(A) held that the stamp duty value of the land being . 78,15,550/–, which is clearly higher than the value shown by the assessee in the sale deed, the value so adopted by the stamp duty authority shall for the purpose of the section 48 be deemed to be the full value of the consideration and therefore, in view of the express provisions of law and the fact that the sale deed was executed on 11.03.2005, the Assessing Officer was correct in adopting the stamp duty value for calculating the long term capital gains.
Against the said findings and order of the ld.CIT(A), the assessee is in appeal before us.
During the course of hearing, none appeared on behalf of the assessee. However, written submissions dated 12.04.2002 were filed by the assessee stating that the written submissions so filed may be considered while deciding the present appeal. In the written submissions, the assessee has submitted as under:–
“3.The brief facts of the case are as under: i) The assessee is an individual carrying on the business of running a flour mill (Atta Chakki). For the A.Y relevant to the p.y 2004-05 the assessee filed his return of income in response to notice issued u/s 147 of the Income Tax Act, 1961 on 22.12.2009 declaring total income of Rs.36000/-
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ii) The assessment for the A.Y 2005-06 was completed u/s 143(3) r.w.s 147 vide order dated 24.12.2009 assessing total income at Rs.76,98,580/- which included capital gain of Rs.76,62,583/-by invoking the provisions of section 50C. The assessment resulted in the huge demand of Rs.36,04,479/-. ii) Aggrieved by the said order the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Nagpur. The CIT(Appeals)-19, Mumbai holding the concurrent jurisdiction of CIT(A)-I, Nagpur upheld the order of the assessing officer. Hence this appeal. iv) During the previous year relevant to the assessment year 2005-06 the assessee has executed a CONVEYANCE DEED transferring an agriculture land bearing S.No.193/2, admeasuring 3H.24.R situated at Village Borda, TAH.Warora for a consideration of Rs.58000/- the market value of which was Rs.78,15,550/- for the purpose of levy of stamp duty.(Copy of the Original conveyance deed is enclosed at page No. 30 to 39 -Volume 2, English translation is enclosed at Page 3 to 5 - Volume 3 of the paper book) v) There was an auction on a piece of land bearing S.No.193/2, admeasuring 3H.24.R situated at Village Borda, TAH.Warora on 26.11.1990 called by Sub Divisional Officer, WaroraDistt. Chandrapuri.e the revenue authorities of Maharashtra Govt. vi) The said agriculture land was purchased by the assessee in an auction held on 26.11.1990 called by Sub Divisional Officer, WaroraDistt. Chandrapuri.e the revenue authorities of Maharashtra Govt., on behalf of the members of the proposed society of the members of the Revenue department "NIYOJEETMAHSULKARMACHARIGRUHNIRMANSANSTHA vii) The members of the Revenue department intended to purchase the above mentioned land and hence they formed a society named as "NIYOJEETMAHSULKARMACHARIGRUHNIRMANSANSTHA". viii) Since they were Govt. employees of the same revenue department they were barred from participating in the auction and hence they requested the assessee to make a bid on their behalf. ix) The assessee accepted the request and made the bid for an amount of Rs.58000/-. The Bid was made by the assessee on oral understanding that the land in question was to be transferred to the society immediately after taking the possession of the land. x) Sub divisional officer vide letter No.RRC-71/89-90 had confirmed and approved the bid under the provisions of section 208 of Maharashtra Land Revenue Act. NaibTahsildarWarora vide letter No.Naid.tah/91/303 dated 08.03.91 directedthe talathi to handover the possession of the said land to the asseseee. Accordingly the assessee was given possession of the land vide his letter dated 20.06.1991. The amount of the bid was paid in two installments of Rs.14,500/-on 26.11.90 and Rs.43500/- on 27.02.91. This amount was contributed by the members of the revenue department who formed a SOCIETY for purchasing the said plot. (Copy of the SDO order is enclosed at S.No.1,2and3 of Volume-2paper book.)
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xi) Immediately after receiving the possession of the plot on 20.06.1991 the assessee handed over the possession to the members of the society. The following facts confirm the same. a) First meeting of the society was called by the members on 19.12.90.Second and third meeting were called on 03.01.91 and 05.01.91. In the first meeting held on 19.12.90 the name of the society was finalized as "NIYOJEETMAHSULKARMACHARIGRUHNIRMANSANSTHA". (Minutes of the above meetings are enclosed at S.No.4to 13 of Vol 2 and English translation of the meeting are enclosed at page 7 and 8 of Volume-4 of the paper book). b) For the purchase and further development of the land bearing S.No.193/2, admeasuring 3H.24.R situated at Village Borda, TAH.Warora the society incurred expenses of Rs.64108/- upto 09.06.1991. Page No.14 is the summary of expenses. The society incurred Rs.58000/- for the BID AMOUNT for the purchase of land and further Rs.4000/- towards architects fees for planning and designing of Layout plan ,Plot measurement expenses Rs.200/- and other expenses.( The list of expenses and the vouchers are enclosed at S.No.14 to 18 of Vol-2 of the paper book and English translation of the List is enclosed at page 6 of Volume -4 of the paper book ). c) On 23.02.94, an agreement was entered into between the assessee and the society wherein at para 3 at page 1 it was clearly mentioned that the society has requested the assessee to make a bid in the auction on their behalf in respect of piece of land situated at MouzaBourda, PH No.14, KhasraNo.193/2. The amount of Bid of RS.58000/-was contributed by the members of the society which was paid on 26.11.90 and 27.02.91. At page No.4para 1 it is clearly mentioned that all the 83 members will have equal right on said land (copy of the agreement is enclosed at s.no.26 to 29 of Vol-2 and Englishtranslation of the Agreement is enclosed at page 1-2 of Volume -3 paper book). d) The sale deed in favour of the society could not be executed earlier because the member could not contribute the requisite amount of the stamp duty and litigation was pending against the said plot. At page No.4para 1 of the agreement dated 23.02.94 it is clearly mentioned that all expenses of civil suit presently pending at Civil Court, Warora will be borne by all members of the society. e) Your attention is invited to Para 1 of the "Abhihastantranlekh"(Conveyance Deed) executed on 31.03.2005 which mentions that: " The said agricultural land was put on auction by the Revenue Department for recovery of outstanding Government Dues. Whereas the said land was purchased in my name in an auction held as per the order of Sub Divisional Officer vide order no. R.M. No. 1/RRC71/89-90/ MauzaBordadt. 22.02.1991. That the said agricultural land was purchased in auction by collecting amount from members of proposed Society with the objective to develop residential colony for the employees of Revenue Department & the sale consideration was paid out of the amount collected from members of the proposed society & wasaccordingly deposited in Government Treasury. Therefore there was no investment made by me at the time of original purchase. As the below mentioned land was purchased from the amount collected from members, I (VENDOR) hereby transfer the said land in favor of the Society for benefit of members of society by way of this deed." : (English translation page 3 to 5 enclosed at Vol-3 paper book).
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f) 7/12 extract issued by the Govt. department also shows the name of the society as the person who is holding the possession of the saidland before the date of execution of sale deed on 31.03.2005.( Copyof 7/12 extract is enclosed at page no... of Vol.3 of paper book). ' 4. To summarize the above facts : i) The assessee never intended to purchase the land in auction. iiThe assessee was only a front man who made the bid on behalf of the society. iii) The entire consideration of the bid i.eRs.58000/- was contributed by the society members. iv) The assessee was only an AGENT whereas the DEFACTO owner was the society. v) The possession of the said land was transferred to the society immediately after receiving the possession by the assessee. vi) The society also carried out further expenses on the said land in respect of development of layout, architect fees etc. Page No.15 and 18 of 2nd paper bookare bills and receipt raised by Architect Umate and Associates on MahsoolKarmachariGrahaNirmansahakarisanstha, Warora for Rs.4000/- in respect of planning and designing layout plan at Kh.No.193/2, MouzaBorda, Tah. Warora.This clearly indicates that the society was the owner of the said piece of land and the possession was handed over by the assesee to the society on 20.06.1991. vii) The agreement dated 23.02.94 between the assessee and the society clearly mentioned that the society has requested the assessee to make a bid in the auction on their behalf in respect of piece of land situated at MouzaBourda, PH No.14, KhasraNo.193/2. The amount of Bid of RS.58000/- was contributed by the members of the society which was paid on 26.11.90 and 27.02.91. viii) The agreement further mentions that all the 83 members will have equal rights on said land. ix) The society has also carried out further expenses on the said land in respect of development of layout, architect fees etc. x) As per section 2 sub section 47 transfer, in relation to a capital asset, includes,- i) ............ ii............. iii) ............ iv) ………… v)Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of acontract of the nature referred to in section 53A of the Transfer ofProperty Act, 1882(4 of 1882); or... xi) Thus there is transfer of land from the assessee to the society as contemplated in clause (v) sub section (47) of section 2 of the I.T Act since the assessee has given the possession of the said land after receiving the entire consideration from the society.
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In the case of ChaturbhujDwarkadasKapadia Vs. Commissioner of Income Tax [(2003) 260 ITR 491(Bom)] the Honourable Bombay High Court held that "Under 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 s. 53A of the Transfer of Property Act would come within the ambit of s. 2(47)(v). (Copy of the order enclosed at page no.6 to 7 of Volume-3 of the paper book) 6. In the case of JASBIR SINGH SARKARIA, IN RE AUTHORITY FOR ADVANCE RULINGS reported at (2007) 294 ITR 196 held that " 'transfer' within the meaning of cl. (v) of s. 2(47) envisages a transaction under which the possession of immovable property is allowed to be taken or retained in lieu of part performance of a contract falling within the scope of s. 53A of Transfer of Property Act—It is at that point of time when such possession is allowed to be taken or retained that the deemed transfer takes place—Possession contemplated by cl. (v) need not necessarily be sole and exclusive possession—So long as the transferee is, by virtue of the possession given, enabled to exercise general control over the property and to make use of it for the intended purpose, cl, (v) of s. 2(47) will have its full play". (Copy of the order enclosed at page no.8 to 15 of Volume-3 of the paper book) 7. The above decisions clearly apply to the case of the assessee. Thus there is transfer of land from the assessee to the society as contemplated in clause (v) sub section (47) of section 2 of the I.T Act, during the F.Y 1991-92 since the assessee has given the possession of the said land after receiving the entire consideration from the society. And the society was exercising complete control over the property. 8. Both the A.O and the CIT(A) appeal erred in not appreciating the provisions of section 53A of the Transfer of Property Act, since the assessee has transferred the physical possession of the asset immediately after receiving the possession of the land to the society and the society has also paid the entire sale consideration of Rs.58000/- to the assessee during the F.Y 1991-92. The transfer is therefore complete u/s 2(47)(v) of the I.T. Act in the F.Y 1991-92. 9. Thus the capital gain if any to be charged in the case of the assessee on transfer of the said land should be in the F.Y 1991-92 and not F.Y.2004-05. Since the provisions of section 50C were introduced w.e.f 01.04.2003 by the Finance Act, 2002, the same are not applicable to the case of the assessee. 10. Considering the above facts and circumstances of the case the assessee humbly praysthat the order of the A.O levying the capital gains for the assessment year 2005-06 by invoking provisions of section 50C may kindly be cancelled. 11. Without prejudiced to the above it is further submitted as under: a) Immediately after the date of receiving the possession of the land by the assessee purchased in the auction on 20.06.1991, the said auction was cancelled by the Collector, Chandrapur vide order dated 27.04.1992 on theground that the proceedings ol the auction were not conducted in appropriate manner.(copy of the order is enclosed at page no 18 to 20 Vol 3 of the paper book) b) Against the said order the assessee filed a Civil Suit vide application dated 15.06.1992 in the Court of Civil Judge (Sr.DN.), Chandrapur, for grant of
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temporary injunction restraining the State of Maharashtra and NaibTahsildar, Warora from taking possession of the said land.(copy of the application is enclosed at page no.21 to 24 of Vol 3 of the paper book) c) The Hon,ble Court of Civil Judge (Sr.DN.), Chandrapur granted injunction vide order dated 08.10.2002 restraining the defendants from taking the possession of the said land till the decision of the suit filed by the assessee.(copy of the order is enclosed at page no.25 to 36 of Vol 3 of the paper book). d) The Civil Suit was finally decided on 31.03.2010 and the Civil Suit filed by the assesssee was DISMISSED by the Hon'ble Court with COST.(Copy of the order is enclosed at page no.37 to 43 of Vol 3 of the paper book) e) Against the said order the assessee has preferred an appeal before the Court of District Judge, Warora vide appeal dated 07.06.2010. f) The Honourable District Court vide order dated 29.02.2020 decided as under: 1) The Judgement and decree dated 31.03.2010 passsed by learned Civil Judge, Senior Division, Warora in R.C.S.no.03/2008(Old No.60/1992) is hereby set aside. 2) The order in question dated 27.04.1992 passed by the Collector is hereby set aside. However, he is asked to decide afresh by providing sufficient opportunity to both the sides. ' (Copy of the order is enclosed herewith). g) Thus as on the date of CONVEYANCE DEED executed on 31.03.2005 the assessee did not hold a VALID LEGAL TITLE to the land as the auction in which the land was purchased by the assessee was cancelled by the Collector, Chandrapur on 27.04.1992. Therefore the CONVEYANCE DEED executed on 31.03.2005 is NULL AND VOID ABINITIO. h) Since legally there is no capital asset in the hands of the assessee as on the date of conveyance deed there cannot be any legal transfer within the meaning of section 2(47) of the Income Tax Act,1961. Further the provisions of section 45 are also not applicable to the assessee since there is no legal transfer in the case of the assessee. Considering the above facts and circumstances of the case the assessee humbly prays that the capital gain levied by applying the provisions of section 50C may kindly be cancelled as the transaction is VOID AB INITIO.
The ld. DR is heard who has relied on the order and findings of the lower authorities.
We have heard the rival contentions and perused the material available on record. It is noted that the assessee has taken additional
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ground of appeal no. 4 stating that the provisions of section 45 of the Income Tax Act,, are not applicable since there is no capital asset as on the date of execution of conveyance deed on 31.03.2005 and there is no transfer of any capital asset since the assessee does not hold any legal title to the land as on the date of execution of conveyance deed on 31.03.2005 and the transaction is null and void on the basis of order of the District Judge, Warora dated 29.02.2020. It is claimed that order of the Collector, Chandapur dated 27.04.1992, which was under challenge at the time of assessement and first appellate proceedings, cancelling the auction has been set-aside and the Collector, Chandapur has been asked to decide the matter afresh after providing reasonable opportunity to the assessee. We find that this issue is fundamental and germane to decide the present matter and given that the order of the District Judge dated 29.02.2020 has been passed subsequent to passing of the impugned order dated 11.12.2012, therefore, we admit the additional ground of appeal so raised before us and to consider the order of the District Judge, in the interest of substantial justice, and the ground of appeal is set-aside to the file of the Assessing officer to decide the same taking into consideration the order of District Judge dated 29.02.2020 as well as proceedings before the Collector, Chandapur and any other documentation/information as so required after providing reasonable opportunity to the assessee.
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In light of above, other contentions raised by the assessee in support of other grounds of appeal are left open and not adjudicated upon. Since we have set-aside the aforesaid ground of appeal, other grounds of appeal are also set-aside to the file of the AO to examine the same afresh as per law taking after providing reasonable opportunity to the assessee and the assessee is at liberty to raise the contentions as so raised before us and as so advised.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 10.06.2022
Sd/– Sd/– YOGESH KUMAR U.S VIKRAM SINGH YADAV JUDICIAL MEMBER ACCOUNTANT MEMBER
NAGPUR, DATED: 10 .06.2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order KasarlaThirumalesh Sr. Private Secretary (A.R./Sr. P.S./P.S.) ITAT, Nagpur