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Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH
Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR
PER DR.B.R.R.KUMAR, A.M. :
This order shall dispose off both the above appeals filed by two different assessees because the issues are common in both the appeals. 2. The registry has brought to our notice that these appeals have been filed with the delay of 428 / 453 days. A letter was issued to the O/o CIT(A), Panchkula regarding the date of dispatch of the order. Vide letter dt. 08/03/2016 it was informed to the ITAT that the order of the appeal has been dispatched by speed post on 15/10/2015 and the same has not been received back. It was also conveyed that the assessee requested for copy of the appellate order vide letter dt. 31/10/2016 and a copy was sent to the assessee vide letter dt. 05/12/2016. 3. Before us the Ld. AR submitted his prayer for condonation of delay which reads as under :
That the order of CIT(A) dt. 14/09/2015 was received on 26/12/2016 . In fact the original order dt. 14/10/2015 was not received and subsequently assessee filed a letter to CIT(A) dt. 28/10/2016 received in the office of CIT(A) on 31/0/2016 asking for a copy of order if any passed in this case. The administrative officer of CIT(A) Panchkula vide office letter dt. 05/12/2016 sent a copy to assessee after which an appeal is filed.
That if we take the date of CIT(A) order and date of filing of appeal before the Hon’ble bench there is a delay of 457 days in filing of appeal which is to be condoned under the facts of the case narrated under para 1 above.
That a delay in filing of appeal had occurred due to late receipt of order from the office of CIT(A).
That I have not gained any benefit in late filing of appeal and I am keenly interested to pursue the appeal filed on merits.
Your attention is invited to the following decisions of different courts which suggest that if there is no ill intention the delay should be condoned as held in the case of :
a) Improvement Trust Ludhiana Vs. Ujagar Singh & Ors Civil Appeal No. 2395 of 2008 of June 9, 2010
b) Jayvant Sinh N Vaghela Vs. ITO 40 Taxmann. Com 491 (Guj)
c) Para Rice Mills Kurukshetra Vs. CIT Karnala ITA No. 657 of 2009
The assessee Shri Amar Singh has also filed an affidavit regarding non receipt of the order of the CIT(A) which reads as under: I, Amar Sigh S/o Shri. Attar Singh resident of Villate Jaroda, Jagadhri do hereby solemnly affirm and declare as under:
That the copy of order passed by CIT(A) under Appeal No. 23/YN/14-15 dt. 16/09/2015 and claimed to be dispatched on 21/09/2015 under No. 339 was never received by me.
That the request for providing copy of order was submitted to the office of CIT(A) vide letter dt. 28/10/2016 which was received in the office of CIT(A) on 31/10/2016 asking for a copy of order if passed in this case That in response of this letter the copy of CIT(A) order dt. 16/09/2015 was provided to me an immediately appeal is filed before Income Tax Appellate Tribunal Chandigarh.
A letter was also written under dt. 11/09/2017 RTI Act to Central Public Information Officer and Supdt of Post Offices Ambala for confirmation of delivery of Speed Post dt. 21/09/2015 and they have informed that preservation period of records relating to booking and delivery of speed post articles is six months only. Therefore no record for service of order is available with Post Office.
No affidavit in opposition has been filed by the Revenue nor any document affirming the receipt of the order by the assessee has been filed. Therefore we accept the averments made in the application for condonation of delay that no copy of the order was received by the assessee. As such there is no question of delay in filing the appeal. The application for condonation of delay becomes redundant and is therefore disposed as redundant.
The hearings resumed. 7. The order of the Shri. Amar Singh in ITA NO. 365/CHD/2017 is being taken as a lead order. 8. The grounds taken by the assessee are as under:
The learned CIT (Appeals) has erred in law and facts in confirming an addition of Rs. 1,88,43,554/- made by AO as long term capital gain on sale of agriculture land measuring 139 kanal 13 marla (20% share) for a consideration of Rs. 1,92,01,875/- 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
That learned CIT (Appeals) has erred in law and facts in not allowing the benefit of investments in new agriculture land amounting Rs. 1,83,36,650/- u/s 54B & 54F invested subsequent to the receipt of money against sale of agriculture land. 3. That learned CIT (Appeals) has erred in law and facts in adopting indexed cost of land valued on the basis of land value on 1-4-1981 at Rs. 3,58,321/-. 4. That learned CIT (Appeals) has erred in law and facts in confirming the AO action by not allowing the benefit of improvement cost of land.
That authorities below has erred in law and facts in reopening the assessment u/s 148.
We have heard ld. Representatives of both the parties, perused the findings of authorities below and considered the material available on record. The appeals are decided as under. 10. This appeal by assessee has been directed against the order of ld. CIT(Appeals) Panchkula dated 16/09/2015 for assessment year 2007-08. 13. In ground Nos.1, 2 & 3, assessee challenged the order of ld. CIT(Appeals) in upholding the addition of Rs. 1,88,43,554/- on account of long term capital gain on sale of agricultural land and in denying the deduction under section 54B of the Act. During the course of assessment proceedings, the Assessing Officer noted that assessee had sold land for consideration of Rs. 1,92,01,875/- through Registered Sale Deed dated 20.03.2007. The sale consideration comprised of Rs. 68,000/- in cash, Rs. 16,77,625/- by cheque dated 15.03.2007 and Rs. 1,74,55,250/- by cheque from M/s Stepping Stone Buildhome Pvt. Ltd. Jaipur. The proceeds of the aforesaid cheques were realized by assessee in March, 2007 and August, 2008 respectively. The assessee offered the part sale consideration of Rs. 17,45,625/- for capital gains during assessment year under appeal and the sale consideration of Rs. 1,74,55,250/- will be offered for taxation only after realization of post dated cheque. The Assessing Officer issued show
cause notice to the assessee and considering assessee's reply, referred to provisions of Section 54 of Transfer of Property Act in the assessment order. The Assessing Officer noted that claim of assessee that sale of land measuring 29 Kanal for Rs. 1,92,01,875/- will take effect at two different points of time when two different amounts for Rs. 17,45,65/- and Rs. 1,74,55,250/- were en-cashed, were not in consonance with the existing law. The assessee himself offered for tax an amount of Rs. 17,45,65/- ( cash and cheque) and for balance amount of Rs. 1.74 Cr, the assessee claimed that it will be offered for tax in assessment year 2009-10, was not in accordance with law. The assessee executed sale deed on 20.03.2007 and sale consideration was partly received and partly promised. The Assessing Officer observed that as per provisions of Section 54 of Transfer Property Act, it is clear that when the price is partly paid and partly promised, the immovable property is deemed to have been transferred on execution and registration of Sale Deed if the possession of property has been given to the buyer. The assessee’s claim that the possession of the property remained with the seller till the encashment of cheque on 15.06.2008 and cultivation of land was being done by the seller, is not maintained in view of the information collected from revenue authorities. The Assessing Officer did not accept claim of the assessee that possession of the property remained with him till encashment of the cheque because Tehsildar, Jagadhri has intimated that ‘intakal’ has been accepted before 31.03.2007 in the name of M/s Stepping Stone Buildhome Pvt.Ltd. and physical possession had already been handed over to the buyer. Therefore, whole of the sale consideration was held to be taxable in assessment year 2007-08 in appeal. The Assessing Officer distinguished the case law relied upon by assessee and concluded that entire sale consideration of Rs. 1.92 Cr is taxable in assessment year under appeal and computed long term capital gain of Rs. 1,77,11,375/-. 11. The assessee challenged the assessment order and addition before ld. CIT(Appeals), however, appeal of the assessee has been dismissed. 12. The ld. counsel for the assessee referred to the documents filed in the Paper Book and submitted that identical issue has been considered by ITAT, Division Bench, Chandigarh in group cases of Shri Rajiv Kumar Vs ITO and others in ITA 17/2016 vide order dated 29.06.2016. And affirmed in the case of Purshottam Kumar in ITA No. 968/CHD/2014. It was held by the Tribunal that there is no transfer of capital asset in assessment year 2007-08 and no capital gain accrues in assessment year under appeal and liberty was given to the
revenue to consider issue of capital gains in assessment year 2009-10. The issue is, therefore, covered in favour of the assessee by order of ITAT, Division Bench in the case of Shri Rajiv Kumar and others (supra), copy of the order is placed on record. 13. On the other hand, ld. DR relied upon orders of the authorities below and referred to their written submissions and submitted that the order in the case of Shri Rajiv Kumar (supra) is not applicable to the case of the assessee because possession was handed over to the buyer on the registration of the sale deed on 20.03.2007, information from Tehsildar was obtained to confirm that physical possession of the land was given to the buyer and khasra girdawari is changed in buyer’s name. Intakal was also done before end of the financial year i.e. 31.03.2007 and there was no pre condition in the sale deed. The buyer have become in possession of the property on execution of the sale deed. The cheque of balance amount of Rs.1.74 Cr was realized on 14/08/2008. No criminal case is filed by the buyer. The ld. DR, therefore, submitted that the facts are distinguishable from the case of Shri Rajiv Kumar (supra). 14. The ld. counsel for the assessee in the rejoinder submitted that facts are same as have been argued by ld. DR which have been considered in the case of Shri Rajiv Kumar (supra), therefore, issue is covered in favour of the assessee by order of ITAT in the case of Shri Rajiv Kumar (supra). 15. We have considered rival submissions and perused the material on record. The ITAT Chandigarh Bench in the case of Shri Rajiv Kumar V ITO & others vide order dated 29.06.2016 (supra) considered and decided identical issue in paras 5 to 21 as under : “5. The main issue have been raised on ground No. 1 above upholding the long term capital gain in assessment year under consideration i.e. 2007-08 amounting to Rs. 5,23,23,470/-.
The facts of the case are that the assessee filed return of income on 03.03.2008 declaring income of Rs. 99,990/- + agriculture income of Rs. 1,75,000/-. The Assessing Officer issued notice under section 148 of the Income Tax Act and also issued statutory notices. The assessee in reply thereto submitted that return filed in original may be treated as filed in response to notice under section 148 of the Act. The Assessing Officer noted that assessee had sold the land for a consideration of Rs. 5.50 Cr through a Registered Sale Deed dated 20.03.2007. The sale consideration comprise of Rs. 8,50,000/- in cash, Rs. 41,50,000/- vide cheque dated 15.03.2007 and Rs. 5 Crore vide cheque No. 009643 undated from M/s Link Infrastructure & Developers Pvt. Ltd., Delhi. The proceeds of the aforesaid cheques were realized by assessee in March, 2007 and 16.06.2008 respectively. The assessee in reply to the notices offered sale consideration of Rs. 50 lacs for tax during the year under consideration and balance amount of Rs. 5 Crore for assessment year 2009-10 on receipt basis.
6(i) The Assessing Officer issued show cause notice and after considering assessee's reply, referred to the provisions of Section 53A and 54 of Transfer of Property Act and Section 45 read with Section 2(47)(iv) of the Act as per para 7 of the assessment order. The Assessing Officer noted from the Sale Deed that the claim of assessee that sale of land measuring 80 Kanal for Rs. 5,50,00,000/- will take effect at two different points of time when two different cheques for Rs. 41,50,000/- and Rs. 5 Crore were encashed, was not in consonance with existing law. The assessee himself offered for tax an amount of Rs. 50 lacs during the year and for balance amount of Rs. 5 Crores, the assessee claimed that it will be offered for tax in assessment year 2009-10, which was not in accordance with law. The assessee executed Sale Deed on 20.03.2007 and the sale consideration was partly received and partly promised. The buyer issued cheque for Rs. 5 Crores undated bearing No. 009643 to the assessee and also contracted that the Sale Deed in question shall automatically be stand cancelled in the event of dishonour of post-dated cheque. The Assessing Officer framed the following questions to arrive at the decision :
i) If the amount of cheque of Rs. 5 Crore was realized, what will be the effective date of transfer ?
ii) If the amount of cheque of Rs. 5 Crores was not realized, what will be the fate of Rs. 50 lacs already paid by the buyer to the seller ?
6(ii) The Assessing Officer further observed that as per provisions of Section 54 of Transfer of Property Act, it is clear that when price is partly paid and partly promised, the immovable property is deemed to have been transferred on execution and Registration of the Sale Deed if the possession of property has been given to the buyer. The assessee deposed before the Registering Authority that possession of land was handed over to the vendee and nothing was due for payment. Entries of Mutation would be made by the purchaser company through its officers for which vendor will have no objection. The assessee's claim that the possession of the property remained with the seller till the encashment of undated cheque and cultivation of land was being done by the seller was not maintained in view of the information collected from the Revenue Authority.
6(iii) The Assessing Officer also observed that claim of assessee that one Sale Deed dated 20.03.2007 will have two different effective dates of transfer, were not according to law. The post-dated cheque, as promised, has since been encashed by the assessee on 16.06.2008, therefore, effective date of transfer in this case would be 20.03.2007 as per Registered Sale Deed. The submission of the assessee that there would be two different dates for the effective transfer, was held to be not tenable. Moreover, this claim of assessee that possession of the property in question remained with the assessee till encashment of the post-dated cheque was found false. The Tehsildar, Jagadhri has informed that Intakal had been accepted before the year end on 31.03.2007 in the name of M/s Link Infrastructure & Developers Pvt. Ltd., Delhi and physical possession had been handed over to the buyer. Accordingly, whole of the sale consideration of Rs. 5.50 Cr was held to be taxable in financial year 2006-07 relevant to assessment year 2007-08 under appeal. The assessee was taking shelter of the intention of the parties while transferring an asset to buyer. The assessee was trying to prove that possession of the land till encashment of post-dated cheque remained with the assessee. But, this intention of the seller was not corroborated with any circumstantial evidences and documents.
The Assessing Officer distinguished the case law relied upon by the assessee and concluded that the entire sale consideration of Rs. 5.50 Crore is taxable in assessment year under appeal i.e. 2007-08 and accordingly, computed the long term capital gain.
The assessee challenged the findings of the Assessing Officer before ld. CIT(Appeals). It was submitted before ld. CIT(Appeals) that assessee executed Sale Deed dated 20.03.2007 in favour of M/s Link Infrastructure and Developer Pvt. Ltd., Delhi. The total contracted consideration was Rs. 5.50 Crore. The sale consideration
was received as advance of Rs. 41,50,000/- vide cheque on 15.03.2007, cash of Rs. 8,50,000/- at the time of registration of the Deed on 20.03.2007 and balance Rs. 5 Crores through undated cheque which was later on encashed on 16.06.2008. As per terms of the Sale Deed, it was stipulated that in case the cheque of balance amount gets dishonoured, the Sale Deed shall stand automatically cancelled. The assessee referred to the terms of Sale Deed for cancellation of the Sale Deed on dishonour of undated cheque. Regarding possession, assessee has relied upon affidavit given by the buyer at the time of registration. The assessee submitted that assessee received sum of Rs. 50 lacs only as proceeds of the land and due tax/treatment was meted out to the aforesaid receipt.
8(i) The assessee further submitted that though the definition of transfer of capital asset under section 2(47) is extended w.e.f. assessment year 1988-89 to include any transaction involving the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the T.P. Act. A combined reading of the two sections shall infer that unless the transferee is unconditionally willing and ready to do all the acts which he is obliged to do under the contract, Section 53A cannot come into play. Whenever there is a sale/transfer of immovable property, the consideration has to be paid by the transferee to the transferor. If the transferee fails to give any consideration or is not able to carry out his part of the contract, there cannot be a valid sale. In the case of the assessee, there was not an absolute and complete sale as defined hereinabove. At the most, the sale deed in true sense was only a contract for sale and as such no interest or charge is created on the property. Since balance amount of Rs. 5 Crores was received during the assessment year 2009-10, hence, the taxability of the same is to be considered in that year only and not in assessment year under appeal i.e. 2007-08.
The assessee also referred to affidavit of the buyer to emphasize about transfer of possession at the time of payment as per post-dated cheque. The assessee submitted that sale in respect of amount of Rs. 50 lacs was completed during the year under appeal and the one covered under the cheque of Rs. 5 Crores (undated) was completed when the cheque got encashed on 16.06.2008 which falls in assessment year 2009-10. This position has been explained in the affidavit dated 20.03.2007 executed by the buyer. The assessee also submitted that tax liability has to be ascertained strictly in accordance with the terms of sale deed and not on the basis of assumption. As per terms of the sale deed, sale took place in two parts i.e. on 20.03.2007 and then on 16.06.2008. Thus, capital gain on amount of Rs. 4,84,06,250/- would not arise in assessment year 2007-08.
The ld. CIT(Appeals) considering the submission of the assessee, material on record and case law cited by assessee dismissed this ground of appeal of the assessee and held that Assessing Officer has rightly taxed the capital gain on entire sale consideration in the assessment year under appeal 2007-08. The findings of ld. CIT(Appeals) in para 6 to 6.13 of the impugned order are reproduced as under :
“6. I have gone through the facts of the case and written submission filed by the appellant. The AO had information available with him that the assessee had sold his share in land in Village Jaroda, Yamuna Nagar which was situated within 8 km. of municipal limits and the taxable capital gain was involved. The AO after obtaining due approval u/s 151(2), issued notice u/s 148 dated 21.08.2012 which was duly served on the appellant. The appellant was required to file return within 30 days of receipt of the notice. However, no compliance was made. Subsequently, notices u/s 142(1) dated 18.10.2013 and 03.12.2013 were issued but no compliance was made. Again a notice u/s 142(1) dated 08.01.2014 was issued and served upon the appellant. Subsequently, the appellant vide its reply dated 14.02.2014 submitted that return filed in original may be treated as filed in response to notice u/s 148 of the Act. 6.1 It is further noted that the appellant has sold agricultural land for a consideration of Rs.5,50,00,000/- through a sale deed registered on 20.03.2007. As per the deed, the sale consideration comprised of Rs.8,50,000/- in cash,
Rs.41,50,000/- through cheque dated 15.03.2007 and Rs.5,00,00,000/- through undated cheque. The first two payments were received during the year under consideration on which the appellant through letter offered capital gain on pro rata basis. The appellant has not offered the capital gain on the entire sale proceed as the balance amount of Rs.5,00,00,000/- was received by the appellant through undated cheque in subsequent year relevant to A.Y. 2009-10. The appellant has taken this view on the basis of clause in sale deed which says if the above cheque bounced then the sale deed itself is annulled. Thus, the appellant has taken the view that the complete transfer did not take place on the date of registration i.e. 20.03.2007 but in two parts, one during the year and second on the date of realization of entire sale consideration through undated cheque. 6.2 On the other hand, the AO rejected the appellant's stand by deciphering the meaning of sale as per section 54 of TP Act. The AO has observed that as per section 54 of TP Act, sale means transfer of the ownership in exchange for a price paid or promised or part paid or part promised. In sale, the seller absolutely transfer all rights in the property sold and no right is retained by him. This aspect of sale makes it distinguishable from other modes of transfer of immovable property. The AO has also observed that components of effective sales include the parties i.e. seller and buyer, the subject to sale, the transfer deed of conveyance and the consideration. All these components have been effected through sale deed dated 20.03.2007. The AO has also referred to the provisions of Registration Act and reached to the conclusion that in case of transfer of immovable property and registration thereof, the effected date of transfer is the date of registration. Thus, the AO rejected the claim of assessee that one registered sale deed will have two different dates of transfer for computation of capital gains.
6.3 Further, it is a fact that the sale deed was registered on 20.03.2007 and as per the verification from the Tehsildar, Jagadhri, the physical possession of land to M /s Link Infrastructure & Developers Pvt. Ltd. Delhi was confirmed. Change in girdawari in buyer's name was also confirmed. Intkal of the registry was accepted before the ending of year, i.e. 31.03.2007. There was no pre-condition for execution of sale deed. In fact, in the sale deed also the appellant has committed that nothing is due. The mutation would be entered or the officials of the company itself can mutate in their name, the seller will have no objection. Thus, as per provisions of Transfer of Property Act, the transfer was affected on 20.03.2007. In the instant case, there is intention of the seller to sell and buyer to purchase a property for a sum which is paid and promised to be paid, so sale has taken place on 20.03.2007 i.e. during year under consideration. Here, the reliance is placed on the decision of Hon'ble Tribunal Hyderabad 'A' Bench in the case of Dr. Maya Shenoy 23 DTR 140, wherein it was held that so long as transfer is made for a consideration it is immaterial that consideration will be received in future. Thus,the sale is complete even if price is intended to be paid. So sale has taken place during the year. 6.4 Further, there is a certainty in performance of contract and no right to revocation is stipulated in the sale deed or registration deed. The saving clause in the registration deed that in case of non realization of undated cheque, the agreement to sell shall stand cancelled is only a protection given to the seller for the purposes of filing his claim in the court of law in case of non realization of sale proceeds. It only states that the sale deed will stand cancelled but the registration having taken place and property having been transferred in the name of the buyers, the registration cannot be deemed to 'not have taken place'. As already stated this saving clause is only to protect the interest of seller and to facilitate the filing of claims etc. in court of law. It does not change the time of transfer of the capital asset. Further there is merit in observation that the saving clause was to take care of the eventuality which has not taken place, as, as on the date of the assessment, the payment has already been received. Therefore, even if the appellant's contention that there was a rider in the registration deed is accepted the time factors have eroded its effect. The AO is right in observing that such like clause does not state as to what will be the effective date of transfer if the cheque is realized and what will be fate of Rs.41,50,000/-, the advance which has been paid by the buyer to the
seller and which has already been offered for taxation, if the balance amount is not realized. 6.5 Further, regarding the possession, the registration deed clearly state that the possession has been handed over to the buyer on the date of registry i.e. 20.03.2007. It is to be noted that the document evidencing the transfer of property has been duly registered by the competent authority i.e. Registering Authority and the necessary mutation entry has also been done and accepted on 31.03.2007. In such circumstances one has to go by the entries in the land revenue records. Therefore, the appellant's contention, if any, that the crops were grown by the appellant is not well placed as these do not nullify the effect of what is stated in the Revenue records. The Tehsildar, Jagadhri informed that Intkal has been accepted before the year end on 31.03.2007 in the name of M/s Link Infrastructure & Developers Pvt. Ltd. Delhi. This shows that Intkal of the registry was accepted before 31.03.2007 and possession of the land was also not with the appellant till the encashment of the post dated cheque. 6.6 Regarding the affidavit of the buyer stating that the possession is subject to the clearance of post date cheque, it is noted the registration deed dated 20.03.2007 clearly states that the possession has been handed over to the buyer on the date of registry itself. It is to be noted that the document evidencing the transfer of property has been duly registered by the competent authority i.e. Registering Authority and the necessary mutation entry has also been done and accepted by 31.03.2007. Truly speaking such an affidavit is not valid in the eyes of law as it states something which is not borne out of legally valid documents and record. If such affidavit has to take precedents over the provisions of law it will only lead to anarchy. Naturally, in such circumstances one has to go by the entries in the land revenue records and sale deed. Therefore, the appellant's reliance on the buyer's affidavit for second date of sale is not well placed as these do not nullify the effect of what is stated in the revenue records and sale deed registered on 20.03.2007. 6.7 Regarding the claim of assessee that possession of property remained with the assessee' till the encashment of post dated cheque, there is contrary finding by the AO that the Tehsildar, Jagadhri informed that Intkal has been accepted before the year end on 31.03.2007 in the name of M/s Link Infrastructure & Developers Pvt. Ltd.Delhi This shows M/s Link Infrastructure & Developers Pvt. Ltd. Delhi. at Intkal of the registry was accepted before 31.03.2007 and possession of the land was also not with the appellant till the encashment of the post dated cheque. 6.8 The appellant has relied on the decision of Hon'ble High Court of Patna in the case of Smt. Raj Rani Devi Ramna Vs. CIT [1993] 201 ITR 1032. However, the fact of that case is distinguishable from the facts of instant case. In that case, the registered sale deed in respect of three sales clearly stipulated that only on payment of the entire consideration amount, the registration receipt and delivery of possession will be given evidencing the passing of title to the vendee. Whereas in the instant case, as per the registered sale deed the possession of land has already been handed over and the condition intended in case of dishonor of cheque, the sale deed in question shall automatically be stand cancelled. The registered deed, in the instant case, does not stipulate that the registration receipt and delivery of possession will be given after receipt of entire consideration amount. So, the decision of Hon'ble Patna High Court is not applicable in the instant case being on different facts. 6.9 The appellant in its submission has placed reliance in the cases of ITO Vs. Roop Singh [2010] 127 TTJ 377 (Del.); CIT Vs. Smt. Burfi [2010] 8 Taxman.com 248 (P&H); Vemanna Reddy (HUF) Vs. ITO [2009] 30 SOT 11 (Bang.); CIT Vs. Geetadevi Pasari [2009] 17 DTR 280 (Bom); ACIT Vs. A.R. Dahiya [2004] 89 ITD 377 (Chd.); CIT Vs. Vimal Kumar Surana [2004] 269 ITR 288 (Raj.) and Anusandhan Investment Ltd. Vs. ITO [2010] 40 SOT 205 (Mum.). On perusal of these judgments, it is noticed that the facts on these cases are distinguishable from the facts of the instant case. In the case of Roop Singh (supra), Smt. Burfi (supra), A.R. Dahiya (supra), the issues relate to taxability of interest on enhanced compensation received on compulsory acquisition of the land. In other cases, the Hon'ble Court/Tribunal have held that the transfer of capital asset takes place in the year of transfer, so, such decisions are in favour of revenue and not applicable on the facts of instant case where the appellant is claiming capital
gain at two points of time on receipt of part sale consideration by two cheques encashed on different dates falling in two financial years. Therefore, the appellant's reliance on these cases is not relevant to the facts of the instant case. 6.10 The appellant has further relied on the decision in the case of ACIT Vs. Hotel Harbour View [2009] 184 Taxman 42, wherein the Hon'ble ITAT, Cochin Bench on interpretation of section 2(47) r.w.s. 53A of the Act held that the transfer of possession of property takes place only when sale deed is executed and title of property is transferred from vendor to vendee. The appellant has also relied on the judgment of Hon'ble Madras High Court in the case of Smt. D. Kasturi Vs. CIT [2010] 323 ITR-40 wherein Hon'ble High Court held that where assessee had executed agreement for transfer in respect of property and given possession to party and received consideration, doctrine of part performance as per section 53 A of Transfer of Property Act was rightly invoked; subsequently act of assessee in executing power of attorney and sale deeds executed by PA holder on basis of such power of attorney would not in any way alter status of the parties to agreement. On perusal of these judgments, it is noticed that the appellant's reliance on these cases is misplaced as the facts are distinguishable from the facts of the instant case and the ratios given on the interpretation of section 2(47) is very well applicable in the appellant's case where the appellant has executed the sale deed on 20.03.2007 relevant to A.Y. 2007-08 and as per sale deed and revenue records the transfer of property has already happened and possession has also been granted. So, the appellant's .reliance in these cases does not support its contention for taxability of capital gains at two different points of time on receipts of part sale consideration in two financial years. Further, I make reference to the word 'transfer' of capital assets as in section 2(47) of the Act. The transfer in relation to a capital asset includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein. The definition of transfer u/s 2(47) is merely inclusive and does not exhaust other kinds of transfer (Sunil Sidharathbhai Vs. CIT 156 ITR 509 (SC)]. If a particular situation has not been contemplated specifically in section but is otherwise understood as transfer in common parlance, it clearly stands covered within the definition of term 'transfer' [CIT Vs. Singla Rice & General Mills 82 ITD 778 (Del.)]. Section 2(47) deals with various situations of 'transfer' and sub clause (v) deals with specific situation for considering 'transfer', if a transaction which involves allowing the possession of any immovable property. Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53 A of TP Act amounts to transfer. Generally, capital gain is taxable in the year in which the capital asset is transferred. There can be two different situations (i) transfer of immovable property when the documents are registered and (ii) transfer of immovable property when documents are not registered but there is part or full possession granted to the buyer. In the second situation even if the documents are not registered but the conditions of section 53A of TP Act are satisfied, then the ownership of the property is considered to be transferred. The 'transfer' as per section 2(47)(v) includes such second situation cases. This does not mean that in all situations the possession of property is pre-requisite before or during the registration of sale deed for effective transfer of capital assets. In the instant case, the transfer is by way of registered sale deed wherein it has been mentioned -'possession of land in question had been handed over to the purchaser company on the spot. Now the purchaser company has become owner in possession of the above land in my place'. This fact shows that there is a registered sale deed and according to sale deed the possession of land has already been transferred. The provisions of section 2(47)(i) recognizes the sale of the capital assets as a mode of transfer in relation to the capital asset. So, the 'transfer' of capital asset is covered by section 2(47)(i) of the Act and not by 2(47)(v) as contemplated by the appellant. In the judgment given by Hon'ble High Court of Bombay in the case of Chaturbhuj Dawarkadas Kapadia Vs. CIT 260 ITR 491, the Hon'ble Court observed that however/the mode of 'transfer' as per section 2(47)(v) read with section 53A of TP Act is in the cases of such agreements which are in the nature of development agreements where the possession has been transferred the agreement has been made but the title has not been transferred by way of registration. The Hon'ble High Court of Bombay in that case gave the findings as under :-
"There is a difference between contract on one hand and performance on the other hand. In instant case, the Tribunal as well as the department had come to the conclusion that the transfer took place during the accounting year ending 31.03.1996 as substantial payments were effected during that year and substantial permissions were obtained. In such cases of Development Agreements, one could not go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v). So , the Hon'ble High Court while examining the provisions of section 2(47)(v) read with section 53A of TP Act reached to the conclusion that the year of chargeability of capital gains is the year in which the contract is executed. 6.12 Further, a reference is made to the observations of Hon'ble Calcutta High Court in the case of CIT vs. Ganga Properties Ltd. 77ITR 637 which is reproduced as under :-
"Now, section 17(l)(b) of the Indian Registration Act, 1908, makes compulsorily registrable non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value ofRs.100 or upwards, to or in immovable property. And section 47 of the Registration Act says : a registered document shall, operate from the time from which it would have commenced to operate if no registration therefore had been required or made, and not from the time of its registration. It is well known that where an instrument which purports to transfer title to property requires to be registered, the title does not pass until registration has been effected. Section 47 of the Registration Act does not create a new title. It only affirms a title which has been created by the deed. The title is complete and the effect of registration is to make it unquestionable and absolute ; but by virtue of section 47, once registration is effected, the title relates back to the date of execution : vide Mulla on the Indian Registration Act, 6th edition, pages 164 and 165. "
A similar question was before the Hon'ble Andhra Pradesh High Court in the case of Addl. CIT v. G.M. Omar Khan (116 ITR 950) which is reproduced as under :
"3. Whether the profits or gains arising from the transfer of a 'capital asset' can be chargeable to income-tax if the transfer is effected in the previous year and if no amount is received? "
The Hon'ble High Court answered the question in favour of the Revenue. While answering the question in favour of the Revenue, the Hon'ble High Court observed as under :-
"The Madras High Court in T. V. Sundaram lyengar and Sons Ltd. v. CIT [1959137ITR 26 opined (per headnote):
"In order to attract liability to tax on capital gains under section 12B of the Indian Income-tax Act, 1922, it is sufficient if in the relevant accounting year profits have arisen out of the sale of capital assets, that is to say, if the assesses has a right to receive the profits. It is not necessary that the asses see should have received them. When once profits have arisen in the accounting year out of the sale of capital assets, what the parties did /subsequent to that year will not have any bearing on their liability to tax in respect of that year.” The Supreme Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185 held (per head note) :
"Before section 12B of the Indian Income-tax Act, 1922, could be attracted, title must pass by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. In the context 'transfer' meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property."
The Supreme Court also held that (ibid):
"The entries in the account books of the appellant and of the company on March 20, 1948, were irrelevant for the purpose of determining the date when the sale or transfer took place.
Title to the land and buildings and the plant and machinery and electrical fittings permanently embedded thereon could not pass to the company till the conveyance was executed and registered; and as -the sale deed was executed and registered only on November 22, 1948, no sale or transfer of these assets took place before April 1, 1948, and no capital gains arose in the relevant previous year. "
Therefore, the transfer is effective only from the date when the title passes to the other party. For determining the year of chargeability it is the date of effective transfer of title that is relevant and capital gains are assessable as income of the year in which the transfer took place, even though they may be realized later."
6.13 In view of aforesaid discussion, facts of the case and judicial pronouncements, it is held that the transfer of the property took place during the year under consideration, i.e., A.Y. 2007-08, and the AO has rightly taxed the capital gain arising from transfer of capital asset, on the entire sale consideration during the A.Y. 2007-08. Hence, this ground of appeal is dismissed.
The ld. counsel for the assessee reiterated the submissions made before authorities below. He has referred to PB-33 which is Sale Deed dated 20.03.2007 through which assessee received only meager advance of 10% and it was specifically mentioned in the sale deed that in case the undated cheque of Rs. 5 Crores is bounced, the sale deed will be automatically cancelled. He further submitted that on the same day i.e. on 20.03.2007, the buyer has executed the affidavit which is duly attested by Executive Magistrate, Jagadhri in which the buyer has specifically affirmed that sale deed of the land has been registered but the spot possession will be given at the time when company would be paying the total land amount of PDC cheque to the assessee. Until the amount of PDC cheque has not been paid, the buyer company cannot make discharge of any kind to the remaining persons etc. If the PDC cheque could not be paid at the mentioned time, then owner will made holder of the possession and sale deed will be cancelled and buyer company will be responsible for the loss of the trees and crops, building etc. and the property will remain with the assessee.
11(i) The ld. counsel for the assessee further submitted that sale deed was executed with advance because the buyer company will have to get land use changed from the Revenue authorities with permission to develop by raising construction. In case no land use change permission has been granted or construction is not allowed by the authorities, the buyer use to cancel the sale deed and advance many is refunded. He has, therefore, submitted that intention of the parties from the above facts shall have to be considered in the light of the material on record that no sale transaction has been done or completed in assessment year under appeal. The intention of the buyer was only to pay part amount and the substantial amount of Rs. 5 Cr would have been paid on completion of all the future transactions, i.e. permission to be obtained from the Revenue authorities. He has submitted that on the basis of the clause in the sale deed and affidavit of the buyer would clearly show that the transaction would take place only on encashment of the undated cheque i.e. on16.06.2008 when full consideration have been paid and possession of the land have been handed over to the buyer. The ld. counsel for the assessee further submitted that moreover the fraud has been committed by the buyer with the help of Revenue authorities on innocent villagers/sellers including the assessee who are illiterate and agriculturists by misrepresentation in the sale deed i.e. factum of post-dated cheque was not mentioned, the address of the buyer was fake. He has submitted that one of the assessee Tejinder Kumar has moved criminal Miscellaneous Petition 36372-M of 2007 against the State of Haryana and Others for direction to the Police Authorities of District Yamuna Nagar for registration of the
case against functionaries including the Managing Director of Zodiac Housing & Infrastructure Pvt. Ltd. Hon'ble High Court gave a direction to the Superintendent of Police, Yamuna Nagar to enquire into the complaints of petitioners vide order dated 31.05.2007, copy is placed on record.
11(2) The ld. counsel for the assessee submitted that only after intervention of the High Court and District authorities, the assessee is able to get en-cashed the undated cheque on 16.06.2008 whereby Rs. 5 Crore was received by assessee as sale consideration. Therefore, no income accrued or have been received by assessee in assessment year under appeal. Therefore, no capital gain is leviable in assessment year under appeal. He has also referred to PB-62 which is judgement of the Hon'ble Punjab & Haryana High Court dated 05.02.2009 in which also Shri Tejinder Kumar & others filed writ petition before High Court because the real estate Developers & Builders have duped several farmers in Yamuna Nagar area by alluring them to execute the sale deed with a promise to pay sale consideration through cheques which later on bounced for want of sufficient funds. Hon'ble High Court had taken the cognizance of the same and directed the investigation through senior officer of the Crime Branch to look into the allegations and even the Collector, Yamuna Nagar was directed to take remedial action. Special Investigation Team was formed under the head of Additional Director General of Poilice. The ld. counsel for the assessee, therefore, submitted that these facts will clearly reveal that there was no intention of the buyer to pay the sale consideration to the assessee in assessment year in appeal. The buyers duped the assessee and others and got the sale deed registered without giving any sale consideration and only after intervention of the High Court and various civil and police authorities, assessee got the amount of undated cheque. Therefore, no capital gain arises in the years under consideration.
The ld. counsel for the assessee relied upon following decisions : i) Decision of Hon'ble Punjab & Haryana High Court in the case of Hira Lal Ram Dayal V CIT 122 ITR 461. ii) Order of ITAT Chandigarh Bench in the case of CIT V Mrs. K.Atma Ram 6 CCH 202. iii) Order of ITAT Hyderabad Bench in the case of M/s Mali Florex Ltd. V DCIT in ITA 891/2011 dated 28.09.2012. iv) Order of ITAT Ahmedabad Bench in the case of Hansmukh Chottalal Patel Vs ITO in ITA 150/2012 dated 14.12.2012. Judgement of Hon'ble Patna High Court in the case of Smt. Raj Devi Ramna v) V CIT 201 ITR 1032. vi) Order of ITAT Kolkata Bench in the case of Chanchal Kumar Sirkar V ITO 50 SOT 289. 14. The ld. counsel for the assessee, therefore, submitted that no capital gain is leviable to tax in assessment year under appeal i.e. 2007-08 therefore, the whole addition is unjustified.
14(i) On the other hand, ld. DR relied upon orders of the authorities below and submitted that sale deed was executed on 20.03.2007 therefore, on the date of registered Sale Deed, there is a transfer of the title in favour of the buyer, therefore, sale is complete on 20.03.2007. As such, Capital gain is leviable in assessment year under appeal. He has submitted that merely because entire sale consideration was not received in assessment year under appeal, is no ground to allow relief to the assessee. He has relied upon decision of the Supreme Court in the case of Sanjiv Lal V CIT 365 ITR 389.
We have considered the rival submissions and perused the material on record. Hon'ble Hon'ble Punjab & Haryana High Court in the case of Hira Lal Ram Dayal V CIT (supra) held as under :
“It is no doubt true that evidentiary value has to be attached to a registered document but the said document cannot be a final word in the matter. It has to be remembered that capital gains accrue only if there is sale or any other transfer of the capital asset and if the assessee is able to prove that in fact no sale took place in that case no capital gains accured which could be assessed to income –tax. If the assessee, even in the face of the registered sale deed, is able to prove by cognet evidence and satisfy the Tribunal that no sale in fact took place, in that case, the Tribunal has to come to the conclusion that there was no capital gains. As is apartment from the observations made in the order of the Tribunal, the Tribunal was under the misapprehension that the registered sale deed was final and, therefore, refused to look into the other material produced by the assessee with a view to prove its case that the sale transaction was a sham transaction. It is, however, a different matter that the Tribunal may not feel convinced that the sale transaction was a sham transaction and refuse to rely on the material produced by the assessee for good reasons, but the said material had to be taken into considered and could not be ignored. The enquiry before the Tribunal was to be directed to find out whether there had been a sale and if the Tribunal comes to the conclusion that the sale had taken place, in that case, that capital gains tax would become payable. The matter can be viewed from another angle. It is a matter of daily happening that people, who want to avoid payment of tax, would sell the property by getting the sale deeds registered at under- estimated value. If it is held that the sale deed is final, in that case, the IT authorities will be debarred from looking into as to how much sale consideration passed under the transaction, which is not the law. The factum of sale and the proceeds are the real questions to be determined by the IT authorities. From what has been stated above, it is clear that the Tribunal fell into an error in refusing to examine the material put forth by the assessee to prove that the sale was a sham transaction.” 15(i) ITAT Chandigarh Bench in the case of CIT V Mrs. K. Atma Ram (supra) held as under :
“No doubt the question as to whether the registered deed is the last word for the transfer and whether oral evidence contrary to the terms of the registered deeds can be admitted for the purpose of nullifying the effects of registered documents is a question of law but the Tribunal had relied upon a decision of the Punjab & Haryana High Court in the case Hira Lal Ram Dayal vs.CIT (1980) 14 CTR (P&H) 88 : (1980) 122 ITR 461 (P&H), for the proposition that the registered sale deed is not the last word for transfer and, if there is evidence available on record that the two sale deed were bogus, sham or manipulated the assessee could not be subjected to capital gains tax on the transfer of the plots in question although this decision of the High Court relates, to a very important legal issue, the answer to which is highly controversial and ordinarily a reference over this question should have been made, no such reference can be made as the matter stands concluded by a decision of the jurisdictional High Court. 15(iii) ITAT Hyderabad Bench in the case of M/s Mali Florex Ltd. DCIT (supra) held as under :
We have heard both the parties and perused the material on record. The assessee entered into sale agreement on 25/2/2007 for sale of land admeasuring 15 acres 39 guntas. The assessee received Rs. 8 lakhs out of total consideration of Rs. 2.24 crores. According to the Assessing Officer there is a relinquishment of right over the property to the purchaser which amounts to transfer u/s. (47) of the Income-tax Act, 1961. In our opinion the conclusion of the Assessing Officer is farfetched. The assessee received only a meagre consideration of Rs. 8 lakhs and also the assessee still owner of the property. It is also brought to our notice that the assessee not parted the possession of the property. In such circumstances treating the transaction as transfer by holding as a relinquishment of right over the property is not justified. In the present case, the assessee executed only sale agreement on 3/2/2OO7 with the stipulation of executing the sale deed within a period of 6 months on terms and conditions stipulated there in, without transferring any right of ownership, use or possession of the property, or transferring any right over the income arising from such property to the purchaser and having decided to execute the sale deed in a future date the transaction of sale of properly was not completed in terms of section 2(47)
of the Act., specifically, read with the Sec 53A of Transfer of Property Act, 1882. We place reliance on the judgement of Patna High Court in the case of Smt. Raj Rani Devi Ramna vs. CIT ( 201 ITR 1032) wherein it was held that sale deed, though registered, stipulating a condition precedent that the property shall pass only on receipt of sale consideration, transaction did not take place on the date of registration of sale deed. We also place reliance on the order of the Delhi Tribunal in the case of ITO vs. Srnt. Satwavati Devi Verma (124 ITD 467) wherein held that the assessee having executed the agreement, which only contemplated the sale property to the purchaser on a future date on certain terms without transferring any right of ownership, and no possession of property is given or right to use the property or right received income arising in the property also not given to the purchaser, in such circumstances, it is not a transfer in terms of section 2(47) of the IT Act, 1961. We also place reliance on the decision of CIT vs. Rasiklal Maneklal (HUF) (177 ITR 198)(SC) wherein the apex court held, affirming the decision of the High Court, that there was neither an "exchange" nor a "relinquishment" and no capital gains arose from the transaction. An "exchange" involves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another. A "relinquishment" takes place when the owner withdraws himself from the property and abandons his rights thereto. It presumes that the property continues to exist after the relinquishment. Where, upon amalgamation, the company in which the assessee holds shares stands dissolved, there is non "relinquishment" by the assessee. In view of the above discussion, there is no relinquishment of right over the property. Accordingly, the appeal of the Revenue is dismissed.
15(iv) ITAT Ahmedabad Bench in the case of Hansmukh Chottalal Patel V ITO (supra) held as under :
“8. We have heard the rival submissions and perused the material on record. The factual matrix of the case is that Assessee had sold agricultural land admeasuring about 6534 sq. yd at Vadaj, Ahmedabad for a total consideration of Rs. 1,69,88,400/- and for which banakhat was executed and registered on 18.12.2006 and banakhat money of Rs.8.50 lacs was received by the Assessee. The conveyance deed in respect of the aforesaid land was executed and registered on 19.3.2008. As per the copy of the sales deed, the Assessee received the sales consideration in installments by way of forward dated cheques. The first installment was by way of 2 cheques dated 16.12.2006 of Rs.4.25 lacs each and the last cheque was dated 28.2.2009 was of Rs.21,69,200/-. As per the agreement it was agreed by both the parties that only after the encashment of the cheques, the seller will hand over the vacant and peaceful possession of the land to the buyer. From the translated copy of the deed of confirmation dated 4.2.2009 it is stated that the Assessee has handed over the vacant and peaceful possession of land to the purchaser on 4.2.2009 and the purchaser became the occupier of the land from 4.2.2009 and the purchaser was entitled to transfer the land in his name in the Government records from that date. Thus, the intention of the parties appears to transfer the possession of land on receipt of final amount and which in this present case had taken place on 4/2/2009. From the above facts it can be concluded that though the Assessee entered into agreement for sale on 19.3.2008, the actual rights and benefits in the land were transferred by the Assessee on receipt of the final installment i.e. in AY 2009.10. The Assessee has disclosed the capital gains in the return in AY 2009-10. The Revenue has not been in a position to controvert the aforesaid facts by bringing any contrary material on record.
8.1. In the case of Smt. Raj Rani Devi Ramna Vs CIT (1993) 201 ITR 1032 (Pat) the Hon'ble HC has held that the properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. 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. Thus the seller may retain the deed pending payment of price and in that case there is no transfer until the price is paid and the deed is delivered.
8.2. In the case of ITO vs Smt Satyawati Devi Verma (2010) 124 ITD 467, the Tribunal has concluded as under :
"Assessee having executed an agreement on 19th Oct.,1995, which only contemplated sale of a property at a future date on stipulated terms and conditions without transferring any right of ownership, use or possession in the corpus or the income arising from such property to the purchases, and executed the registered sale deed on 20th Dec., 2,007, the transaction of sale of property was not completed in terms of provisions of s. 2(47)(v) of IT Act, 1961, r/w s. 53A of Transfer of Property Act, 1882, at the time of execution of agreement dt. 19th Oct., 1995, and therefore, capital gain was not chargeable in asst. yr. 1996-97."
Considering the totality of facts and relying on the decisions of the H'ble HC in the case of Raj Rani Devi Ramna (supra) and of the Tribunal in the case of Satyawati Devi Verma (supra), we are of the view that the Assessee had given the possession of land in February-2009 to the purchaser and the purchaser could enjoy the fruits of property only after that date. In view of these facts we are of the view that the assessee has rightly treated the transfer of land in AY 2009-10 and therefore the AO was not right in taxing the income on sale of land in AY 2008-09. Thus this ground of the Assessee is allowed. We thus allow the appeal of the Assessee”.
Hon'ble Patna High Court in the case of Smt. Raj Devi Ramna V CIT 15(v) (supra) held as under :
The properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. 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. Thus the seller may retain the deed pending payment of price and, in that case, there is no transfer until the price is paid and the deed is delivered . In the percent case, from the statement of case itself as drawn up by the Tribunal, it is apparent that the parties had clearly intended that despite the execution and registration of sale deeds, transfer by way of sale will become effective only on payment of the entire consideration amount and in this background of facts, it has be held that there was no transfer of land covered by the three sale deeds in question during the period under consideration making the assessee liable for capital gains tax under s. 45—Nitai Chandra Naskar vs. Smt. Champaklata Debi (1919) 29 CJL 250, Panchoo Sahu vs. Janku Mandar AIR 1952 pat 263 and Shiva Narayan Sah vs. Baidya Nath Prasad Tiwary AIR 1973 pat 386 relied on.”
15(vi) ITAT Kolkata Bench in the case of Chanchal Kumar Sirkar V ITO (supra) held as under :
“Where the consideration for the transfer was received several months after the date of the transfer of property, the period of six months for making deposit under s 54EC should be reckoned from the date actual receipt of the consideration”.
15(vi) Hon'ble Bombay High Court in the case of CIT V Mrs. Hemal Raj Shete in IT Appeal No. 2348 of 2013 vide judgement dated 29.03.2016 held in para 7 to 12 as under:
Mr.Pinto, learned counsel for the Revenue urged that in terms of section 45(1) of the Act that transfer of capital asset would attract the capital gains tax. It is further submitted that the amount to be taxed under section 45(1) is not dependent upon the receipt of the consideration. In support of the above he invites our attention to Section 45(1)(A) and section 45(5) of the Act which in contrast brings to tax capital gains on amount received. In the above view, it is his submission that the
Assessing Officer was justified in bringing to tax entire amount of the respondent- assessee's share in Rs.20 crores referred to in the agreement dated 25th January, 2006 as maximum amount that could be received on the sale of shares in M/s. Unisol by its co-owners from M/s. RKHS.
In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007- 08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent- assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus in case M/s. Unisol does not make net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent-assessee as deferred consideration. The consideration of Rs.20 crores is not an assured consideration to be received by the Shete family. It is only the maximum that could be received. Therefore it is not a case where any consideration out of Rs.20 crores or part thereof (after reducing Rs.2.70 crores) has been received or has accrued to the respondent- assessee. As observed by the Apex Court in Morvi Industries Ltd. vs. CIT (1971) 82 ITR 835. “The income can be said to accrue when it becomes due.... The moment the income accrues, the assessee gets vested right to claim that amount, even though not immediately.” In fact the application of formula in the agreement dated 25th January, 2006 itself makes the amount which is receivable as deferred consideration contingent upon the profits of M/s.Unisol and not an ascertained amount. Thus in the subject assessment year no right to claim any particular amount gets vested in the hands of the respondent-assessee. Therefore, entire amount of Rs.20 crores which is sought to be taxed by the Assessing Officer is not the amount which has accrued to the respondent-assessee. The test of accrual is whether there is a right to receive the amount though later and such right is legally enforceable. In fact as observed by the Supreme Court in E.D. Sassoon & Co. Ltd. Vs. CIT (1954) 26 ITR 27 “It is clear therefore that income may accrue to an assesee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro .... .... ....”. In this case all the co-owners of the shares of M/s.Unisol have no right in the subject assessment year to receive Rs.20 crores but that is the maximum which could be received by them. This amount which could be received as deferred consideration is dependent/contingent upon certain uncertain events, therefore, it cannot be said to have accrued to the respondent-assessee. The Tribunal in the impugned order has correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in Commissioner of Income-Tax vs. M/s. Shoorji Vallabdas and Co. (1962) 46 ITR 144 “Income-Tax is a levy on income. No doubt, the Income-Tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax,even though in book-keeping an entry is made about a hypothetical income, which does not materialize.” In this case Rs.20 crores cap in the agreement is not income in the subject assessment year. It has been observed by the Apex Court in the case of K.P. Varghese vs. Income-Tax Officer, Ernakulam & Anr. 181 ITR Page 597 that one has to read capital gain provision along with computation provision and the starting point of the computation is “the full value of the consideration received or accruing”. In this case the amount of Rs.20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2007-08 for which there is no deferred consideration on application of formula), the Assessee has offered to tax the amounts which have been received on the application of formula provided in the agreement dated 25th January, 2006 pertaining to the transfer of shares.
The contention of the Revenue that the impugned order is seeking to tax the amount on receipt basis by not having brought it to tax in the subject assessment year, is not correct. This for the reason, that the amounts to be received as deferred consideration under the agreement could not be subjected to tax in the assessment
year 2006-07 as the same has not accrued during the year. As pointed out above, accrual would be a right to receive the amount and the respondent-assessee alongwith its co-owners have not under the agreement dated 25th January, 2006 obtained a right to receive Rs.20 crores or any specified part thereof in the subject assessment year.
In the above view there could be no occasion to bring the maximum amount of Rs. 20 crores, which could be received as deferred consideration to tax in the subject assessment year as it had not accrued to the respondent-assessee.
We find that both the Commissioner of Income-Tax (Appeals) and the Tribunal have in view of the clear clauses of agreement dated 25th January, 2006 have in the facts of the present case correctly held that the respondent-assessee and the co-owners of the shares did not have a right to receive Rs.20 crores in the subject assessment year.
In the above view, in the present facts the question of law as framed does not give rise to any substantial question of law. Accordingly, appeal is dismissed. No order as to costs”.
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. Uptil 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 further 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.
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 entire 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 in assessment year 2009-10 in accordance with law, if so advised.
In the result, ground No. 1 of appeal of the assessee is allowed.
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.
In the result, appeal of the assessee is allowed.”
The similar view has also been taken in the case of Purshottam Kumar in
ITA No. 968/CHD/2014 wherein the coordinate Bench has further added that
Whatever points have been raised by the ld. DR, have been considered by the Tribunal in the case of Shri Rajiv Kumar (supra). In the case of the assessee, the copy of sale deed is filed at page 49 of the Paper Book in which the last payment of Rs. 2,68,43,750/- is stated to have been made through cheque but no date is mentioned in the sale deed. The ld. DR referred to the cheque issued in this case having date 15.06.2008 is issued on execution of the sale deed. Therefore, cheque cannot be considered in isolation and shall have to be considered in the light of the facts mentioned in the sale deed in question. In the case of Shri Rajiv Kumar (supra), the Tribunal has considered the writ petition filed in the case of one of the assessee Shri Tejinder Kumar and others in which Special Investigation Team was formed under the head of Additional Director General of Police because various Real Estate developers and builders had duped several farmers in Yamuna Nagar area by alluring them to execute sale deeds with a promise to pay sale consideration through cheques which were later on bounced for insufficient funds. Therefore, all the contentions of ld. DR have already been considered in the case of Shri Rajiv Kumar (supra). The issue is, therefore, on identical facts in the case of the assessee as have been decided in the case of Shri Rajiv Kumar (supra). Therefore, following the order in the case of Shri Rajiv Kumar (supra), we are of the view that 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 authorities below and delete the entire addition on account of capital gains in assessment year under appeal. The Revenue is at liberty to consider the issue of capital gain in assessment year 2009-10 in accordance with law. The appeal of the assessee is, thus, allowed.
In view of the above, there is no need to decide remaining grounds of appeal claiming exemption under section 54B of the Act because the same has become infructuous and accordingly disposed off.
Since the facts of the case before us stands mutatis mutandis to the above mentioned cases which stands disposed off by a detailed reasoned order, we hereby allow the appeal of the assessee and delete the impugned additions made by the lower authorities. However the Revenue is at liberty to consider the issue of accrual or receipt of capital gain in the assessment year 2009-10 in accordance with law.
In view of the above there is no need to decide the remaining grounds of the appeal claiming the exemption under section 54B and reopening under section 148 of the Act, because the same have become in fructuous and accordingly disposed off.
In the result, both the appeal of different assessees are allowed.
Order pronounced in the open court.
Sd/- Sd/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 26/02/2018
AG Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR