BHADRESHLABHSHANKAR JOSHI,MUMBAI V. DCIT, CC-4(1), MUMBAI

ITA 6528/MUM/2024

AI Insights

The case involves Bhadresh Labhshankar Joshi, the appellant, who appealed against the order of the Commissioner of Income Tax (Appeals)-52, Mumbai, which confirmed the addition of Rs. 1,09,74,896 under section 50C of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer following the sale of three properties by the assessee, where the sale consideration was significantly lower than the market value. The primary legal contention was whether the addition under section 50C was applicable in the assessment year 2012-13, given that the properties were sold and the deeds executed in the financial year 2010-11. The Tribunal, referencing decisions from the Supreme Court and other benches, concluded that the transaction was complete in the financial year 2010-11, and thus the addition under section 50C in the assessment year 2012-13 was not justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314203 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: DCIT vs. Romell Housing LLP, Kanwar Raj Singh (D) Th. LRS. Vs. Gejo (D) Th. LRS. & Ors., Suraj Lamps & Industries (P.) Ltd. vs. State of Haryana, CIT vs. Sun Engineering Pvt. Ltd., Ashwin C. Jariwala vs. ITO, M. Syamala Rao vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business income; Sale consideration of property below Jantri Value; Salary income; Reopening of assessment
• Section: 147; 148; 143(3); 54; 50C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.6528/MUM/2024 (Assessment Year : 2012-13) Bhadresh Labhshankar Joshi, 9-2/11, Challenger-4, Tahkur Village, Kandivali (East), Mumbai, Maharashtra – 400101 PAN : AABPJ5304P ............... Appellant v/s DCIT, Central Circle-4(1), Room No.1916, 19th Floor, Air India Building, Nariman Point, Mumbai - 400021 ……………… Respondent Assessee by : Shri Vijay Mehta Revenue by : Shri Leyaqat Ali, Sr.DR Date of Hearing – 08/04/2025 Date of Order - 09/05/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 06/11/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)-52, Mumbai, [“learned CIT(A)”], for the assessment year 2012-13. 2. In this appeal, the assessee has raised the following grounds: – ITA No.6528/Mum/2024 (A.Y. 2012-13) 2 “1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax, Appeal - 52, Mumbai erred in confirming the addition of Rs. 1,09,74,896/-u/s 50C of the IT Act, 1961. The application of provisions of section 50C is bad in law and the same needs to be deleted and returned income needs to be accepted. 2. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax, Appeal - 52, Mumbai erred in confirming the reopening of assessment u/s. 147 done by the Ld. AO. The same needs to be quashed on one or more grounds. 3. Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned Commissioner of Income Tax, Appeal - 52, Mumbai erred in completely disregarding the fact that transfer of properties had taken place during F.Y. 2010-11 relevant to A.Y. 2011-12 on execution of agreements on 30.12.2010 together with handling over the possession on that date and hence, provisions of section for transfer could not have been applied in A.Y. 2012-13. 4. Without prejudice to the above and without admitting, the learned Commissioner of Income tax, Appeal - 52, Mumbai erred in relying on the provisions of section 50C ignoring the fact that the valuation for the purpose of this section has to be considered based on the rates prevalent on the date of the first account payee cheques made for the purchase.” 3. The brief facts of the case are that the assessee is an individual and has earned income from salary, business income and interest. For the year under consideration, the assessee filed his return of income on 30.07.2012, declaring a total income of Rs.8,08,830/-. The return filed by the assessee was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the ITO – 29(1)(2), Mumbai, that the assessee has sold three properties at total consideration of Rs.83,81,125/-, whereas the market value of these properties was shown at Rs.2,23,20,000/-, proceedings under section 147 of the Act were initiated as the difference between the sale consideration and market value amounting to Rs.1,39,38,875/- was not offered to tax under section 50C of the Act. Accordingly, notice under section 148 of the Act was issued on 31.03.2019. In response to the notice issued under section 148 of the Act, the assessee filed his return of income on ITA No.6528/Mum/2024 (A.Y. 2012-13) 3 22.04.2019, declaring total income of Rs.8,08,830/-. Since the assessee has transferred three immovable properties at a price, i.e. Rs.83,81,125/-, which was lower than the market value at Rs.2,23,20,000/-, the Assessing Officer (“AO”) vide order dated 27.12.2019 passed under section 143(3) r.w. section 147 of the Act added the differential amount being Rs.1,39,38,875/- to the total income of the assessee under section 50C of the Act. The learned CIT(A), vide impugned order, upheld that the initiation of proceedings under section 147 of the Act and also upheld the addition made under section 50C of the Act, being the difference between the sale consideration and market value of the three immovable properties sold by the assessee. Being aggrieved, the assessee is in appeal before us. 4. We have considered the submissions of both sides and perused the material available on record. In the present case, there is no dispute regarding the fact that the assessee sold lands situated in District Raigad, Maharashtra, to M/s. Dynesty Homemakers Pvt. Ltd., through three deeds of conveyance which were registered on 27.04.2011, i.e., during the year under consideration. The AO, on the basis that the market value of these properties was higher than the sale consideration, made the impugned addition by bringing to tax the differential amount under section 50C of the Act. 5. During the hearing, the learned Authorized Representative (“learned AR”) submitted that deed of conveyance for all three sale transactions was executed by the assessee in the previous financial year, i.e., 2010-11 and the possession over the immovable property was also handed over to the purchaser, i.e., M/s. Dynesty Homemakers Pvt. Ltd., in the financial year ITA No.6528/Mum/2024 (A.Y. 2012-13) 4 2010-11. By referring to the conveyance deed entered into between the assessee and M/s. Dynesty Homemakers Pvt. Ltd., bearing Documents No. 4381/2011, 4391/2011 and 4320/2011, forming part of the paper book at pages 33-152, the learned AR submitted that even the payment for registration as well as stamp duty charges were also paid in the financial year 2010-11. Accordingly, the learned AR submitted that since all the formalities were completed in the financial year 2010-11, relevant to assessment year 2011-12, the impugned addition under section 50C of the Act cannot be made in the year under consideration, i.e., assessment year 2012-13. The learned AR further submitted that merely because the three deeds for conveyance were registered on 27.04.2011, i.e., during the year under consideration, the same would not make any difference to the fact that the entire transaction of sale of lands was undertaken in the immediately preceding assessment year. In this regard, the learned AR placed reliance upon the decision of the Co- ordinate bench of the Tribunal in DCIT vs. Romell Housing LLP as reported in (2024) 168 tamann.com 536 (Mumbai – Trib.). 6. On the other hand, the learned Departmental Representative (“learned DR”) by vehemently relying upon the order passed by the learned CIT(A) submitted that since the deeds for conveyance in respect of three sale transactions were registered in the year under consideration, therefore, the AO rightly made the addition under section 50C of the Act in this year. 7. From the perusal of the deeds of conveyance for sale of lands, forming part of the paper book at pages 33-152, we find that the same were entered into between the assessee and M/s. Dynesty Homemakers Pvt. Ltd. on ITA No.6528/Mum/2024 (A.Y. 2012-13) 5 30.12.2010. We further find that the stamp duty was also paid on the very same date, and the possession of the land was also handed over to the purchaser on 30.12.2010. We also find that the assessee acknowledged the receipt of full and final consideration in respect of the sale of lands at the time of execution of the deeds of conveyance on 30.12.2010. Therefore, we find that the execution of deeds of conveyance and all the other formalities, such as payment of stamp duty and handing over of possession, were completed in the financial year 2010-11, relevant to the assessment year 2011-12. It is further evident from the perusal of the deeds of conveyance that the same were registered on 27.04.2011. As per the Revenue, since the registration of the deeds of conveyance was done in the year under consideration, therefore, the impugned addition under section 50C of the Act has rightly been made by the AO in this year. On the contrary, it is the plea of the assessee that the deeds of conveyance shall operate from the date of their execution, i.e., 30.12.2010 in the present case, and therefore, the addition, if any, can be made only in the assessment year 2011-12. 8. We find that the Hon’ble Supreme Court in Kanwar Raj Singh (D) Th. LRS. Vs. Gejo (D) Th. LRS. & Ors., in Civil Appeal No.9098 of 2013, vide judgment dated 02.01.2024, while examining the provisions of section 47 of the Registration Act, 1908 held that when a compulsory registrable document is registered according to the Registration Act, it shall operate from a date before the date of registration, i.e., the date on which it is executed. We find that the Co-ordinate Bench of the Tribunal in Romell Housing LP (supra), after considering the aforesaid decision of the Hon’ble Supreme Court, held that ITA No.6528/Mum/2024 (A.Y. 2012-13) 6 the deed of conveyance shall operate from the date of its execution and not from the date of its registration. The relevant findings of the Co-ordinate Bench of the Tribunal, in the aforesaid decision, are reproduced as follows: - “9. Therefore, as per the provisions of section 56(2)(x)(b) of the Act, where any person receives any immovable property from any person or persons on or after 01.04.2017 either without consideration or for consideration, the stamp duty value of such property exceeding such consideration shall be considered as its income from other sources, if the amount of such excess is more than the amount mentioned in the section. In the present case, the assessee has challenged the very applicability of the provisions of section 56(2)(x) of the Act on the basis that the property was received prior to 01.04.2017. In this regard, much emphasis has been placed on the fact that the deed of conveyance and other formalities such as payment of stamp duty and handing over of the symbolic possession were completed on 31.03.2017. As per the assessee, the Registration Act, 1908 requires lodging the document for registration within four months from the date of execution. Accordingly, as per the assessee, the registration of the deed of conveyance was done in the month of April 2017, i.e., within the time permitted for registration. In order to decide this dispute, at this stage it is also relevant to determine the date from which the deed of conveyance is operative. The answer to the aforesaid query is relevant as if it is decided that the same is operative from the date of execution, i.e., 31.03.2017 then the present case clearly falls outside the purview of provisions of section 56(2)(x) of the Act. However, if the deed of conveyance is found to be operative from the date of registration, i.e., April, 2017 then the present case clearly falls within the ambit of section 56(2)(x) of the Act for determination of income of the assessee. 10. We find that the Hon’ble Supreme Court in Kanwar Raj Singh (D) Th.Lrs. vs. Gejo (D) Th. Lrs. & Ors., in Civil Appeal No.9098 of 2013, vide judgment dated 02.01.2024, while examining the provisions of section 47 of the Registration Act, 1908, which provides that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration, held that when a compulsory registerable document is registered according to Registration Act, it shall operate from a date before the date of its registration. The Hon’ble Supreme Court further held that if in a given case, a sale deed is executed and the entire agreed consideration is paid on or before execution of the sale deed, after it is registered, it will operate from the date of its execution. The relevant findings of the Hon’ble Supreme Court, in the aforesaid decision, are reproduced as follows: - “5. The High Court, in the impugned judgment, has relied upon Section 47 of The Registration Act, 1908 (the Registration Act), which reads thus: “47. Time from which registered document operates —A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.” 6.On plain reading of Section 47, it provides that a registered document shall operate from the time from which it would have commenced to operate if no ITA No.6528/Mum/2024 (A.Y. 2012-13) 7 registration thereof was required. Thus, when a compulsorily registerable document is registered according to the Registration Act, it can operate from a date before the date of its registration. The date of the operation will depend on the nature of the transaction. If, in a given case, a sale deed is executed and the entire agreed consideration is paid on or before execution of the sale deed, after it is registered, it will operate from the date of its execution. The reason is that if its registration was not required, it would have operated from the date of its execution. 7. Now, we come to the decision of the Constitution Bench in the case of Ram Saran Lall (Supra). In paragraph 8 of the judgment, the Constitution Bench held thus: “8. We do not think that the learned Attorney- General's contention is well founded. We will assume that the learned Attorney-General's construction of the instrument of sale that the property was intended to pass under it on the date of the instrument is correct. Section 47 of the Registration Act does not, however, say when a sale would be deemed to be complete. It only permits a document when registered, to operate from a certain date which may be earlier than the date when it was registered. The object of this section is to decide which of two or more registered instruments in respect of the same property is to have effect. The section applies to a document only after it has been registered. It has nothing to do with the completion of the registration and therefore nothing to do with the completion of a sale when the instrument is one of sale. A sale which is admittedly not completed until the registration of the instrument of sale is completed, cannot be said to have been completed earlier because by virtue of Section 47 the instrument by which it is effected, after it has been registered, commences to operate from an earlier date. Therefore, we do not think that the sale in this case can be said, in view of Section 47, to have been completed on January 31, 1946. The view that we have taken of Section 47 of the Registration Act seems to have been taken in Tilakdhari Singh v. Gour Narain [AIR (1921) Pat 150]. We believe that the same view was expressed in Nareshchandra Datta v. Gireeshchandra Das [(1935) ILR 62 Cal 979] and Gobardhan Bar v. Guna Dhar Bar [ILR (1940) II Cal 270].” (underline supplied) 8.The Constitution Bench held that Section 47 of the Registration Act does not deal with the issue when the sale is complete. The Constitution Bench held that Section 47 applies to a document only after it has been registered, and it has nothing to do with the completion of the sale when the instrument is one of sale. It was also held that once a document is registered, it will operate from an earlier date, as provided in Section 47 of the Registration Act. 9.Section 54 of the Transfer of Property Act, 1984 (the Transfer of Property Act) reads thus: “54. “Sale” defined —“Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Sale how made—Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. ITA No.6528/Mum/2024 (A.Y. 2012-13) 8 Contract for sale— A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.” 10. Every sale deed in respect of property worth more than Rs. 100/- is compulsorily registerable under Section 54 of the Transfer of Property Act. Thus, a sale deed executed by the vendor becomes an instrument of sale only after it is registered. The decision of the Constitution Bench only deals with the question of when the sale is complete; it does not deal with the issue of the date from which the sale deed would operate. Section 47 of the Registration Act does not deal with the completion of the sale; it only lays down the time from which a registered document would operate. 11. Now, coming to the facts of this case, the consideration was entirely paid on the date of the execution of the sale deed. The sale deed was registered with the interpolation made about the description/area of the property sold. The first defendant admittedly made the said interpolation after it was executed but before it was registered. In terms of Section 47 of the Registration Act, a registered sale deed where entire consideration is paid would operate from the date of its execution. Thus, the sale deed as originally executed will operate. The corrections unilaterally made by the first defendant after the execution of the sale deed without the knowledge and consent of the purchaser will have to be ignored. Only if such changes would have been made with the consent of the original plaintiff, the same could relate back to the date of the execution. It is not even the first defendant's case that the subsequent correction or interpolation was made before its registration with the consent of the original plaintiff. Therefore, in this case, what will operate is the sale deed as it existed when it was executed.” 11. From the aforesaid decision, it is thus discernible that the sale deed operates from the date on which it is executed and if any changes are made with the consent of both parties the same also relates back to the date of the execution of the sale deed. Therefore, having considered the provisions of section 47 of the Registration Act, 1908, as interpreted by the Hon’ble Supreme Court in the judgment cited supra, we are of the considered view that the deed of conveyance in the present case shall operate from the date of its execution, i.e. 31.03.2017.” 9. From the perusal of the impugned order, we find that the assessee relied upon the afore-noted decision of the Co-ordinate Bench of the Tribunal in Romell Housing (supra) as well as the decision of the Hon’ble Supreme Court in Kanwar Raj Singh (supra) before the learned CIT(A). However, the learned CIT(A), by placing reliance upon the decision of the Hon’ble Supreme Court in Suraj Lamps & Industries (P .) Ltd. vs. State of Haryana, reported in (2012) 340 ITR 1 (SC), rejected the submission of the assessee. From the perusal of ITA No.6528/Mum/2024 (A.Y. 2012-13) 9 the decision of the Co-ordinate Bench of the Tribunal in Romell Housing (supra), we find that similar reliance upon the decision of the Hon’ble Supreme Court in Suraj Lamps & Industries (P .) Lamp (supra) was placed by the First Appellate Authority in the facts of that case. We find that after considering the decision of the Hon’ble Supreme Court in Suraj Lamps & Industries (P.) Ltd. (supra), the Co-ordinate Bench of the Tribunal in Romell Housing LP (supra) observed as follows: - “14. During the hearing, the learned DR also placed reliance on the decision of the Hon’ble Supreme Court in Suraj Lamp and Industries Pvt. Ltd. (supra) to support the contention that the registered deed of conveyance is the only mode of legal transfer of immovable property. From the perusal of the aforesaid decision of the Hon’ble Supreme Court, we find that the issue under consideration before the Hon’ble Supreme Court was whether an immovable property can be sold by executing a general power of attorney. Answering the issue in negative the Hon’ble Supreme Court held that a general power of attorney does not convey any title nor create any interest in an immovable property and therefore an immovable property can be legally and lawfully transferred or conveyed only by registered deed of conveyance. From the perusal of the aforesaid decision, we find that the Hon’ble Supreme Court nowhere examined the issue as from which date the deed of conveyance shall become operational, which issue, as noted above, was examined by the Hon’ble Supreme Court in its decision rendered in Kanwar Raj Singh (supra).” 10. In this regard, the following observations of the Hon’ble Supreme Court in CIT vs. Sun Engineering Pvt. Ltd., reported in (1992) 198 ITR 287 (SC), become relevant: - “It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of the Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of the Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by the Court, to support their proceedings.” ITA No.6528/Mum/2024 (A.Y. 2012-13) 10 11. We further find that in Ashwin C. Jariwala vs. ITO, reported in (2017) 164 ITD 255 (Mum.–Trib.), the Co-ordinate Bench of the Tribunal, following the decision of the Hon'ble Andhra Pradesh High Court in M. Syamala Rao vs. CIT, reported in [1998] 234 ITR 140 (AP), held that since the registration of sale deed related back to the date on which agreement for sale was executed in favour of the buyer by the owner, the capital gain arises from such sale is to be assessed in the year of execution of sale deed and not in the year of registration of the same. The relevant findings of the Co-ordinate Bench, in the aforesaid decision, are reproduced as follows: - “6. We have heard the rival contentions and perused the record. Admittedly, the conveyance deed was executed on 31.3.2008 and the same was registered under the Registration Act on 1.7.2008. On a perusal of the conveyance deed, we notice that the possession of the property was also given to the buyers on 31.3.2008 and the assessee along with other co-owners have received the entire consideration before 31.3.2008. Hence, we agree with the contentions of the assessee that the impugned property has been transferred during the year relevant to the assessment year 2008-09 and hence the assessing officer was not justified in assessing the same in AY 2009-10. The Ld. A.R. submitted that the registration of deed on 1.7.2008 was only a formality and upon the registration of the deed, the conveyance would date back to the date of execution of the deed. We find support to the contentions of the assessee in the decision rendered by the Hon'ble Andhra Pradesh High Court in the case of M. Syamala Raov. CIT [1998] 234 ITR 140, wherein the Hon'ble High Court observed that the registration of the conveyance deed relates back to the date on which the agreement for sale was executed in favour of the buyer by the owner. In view of the above, the capital gain, if any, is assessable in AY 2008- 09 only.” 12. Therefore, in view of the facts and circumstances of the present case and judicial pronouncements as noted above, we are of the considered view that since the deeds of conveyance were executed amongst the parties in respect of sale of lands on 30.12.2010, addition under section 50C of the Act can only be made during the assessment year 2011-12. Thus, in the present case, the AO was not justified in making the impugned addition under section ITA No.6528/Mum/2024 (A.Y. 2012-13) 11 50C in the year under consideration. Accordingly, the addition made by the AO under section 50C of the Act is deleted. 13. Since the relief has been granted to the assessee on merits, the other grounds raised by the assessee, including challenging the reopening of assessment under section 147 of the Act, are rendered academic, and therefore are left open. 14. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 09/05/2025 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 09/05/2025 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "