Vineeth Suryanarayana Raju Alluri, Hyderabad V. Asst. Commissioner of Income Tax, Circle-7(1), Hyderabad

ITA 162/Hyd/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8254 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB-A
• Assessment Year: 2010-2011
• Appeal Filed On: 06-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Capital Gains
• Section: 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A. No. 162/HYD/2020 Assessment Year: 2010-11 Vineeth Suryanarayana Raju Alluri, HYDERABAD [PAN: AQPPA3089E] Vs Assistant Commissioner of Income Tax, Circle-7(1), HYDERABAD (Appellant) (Respondent) For Assessee : Shri K.C.Devdas, AR For Revenue : Shri B.Sunil Kumar, DR Date of Hearing : 25-10-2021 Date of Pronouncement : 17-11-2021 O R D E R PER S.S.GODARA, J.M. : This assessee’s appeal for AY.2010-11 arises from the CIT(A)-5, Hyderabad’s order dated 10-12-2019 passed in case No.CIT(A),Hyderabad / 5 / 10113 / 2018-19, involving proceedings u/s.144 r.w.s.147 of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused. 2. The assessee has raised his twin substantive grounds challenging correctness of Section 144 r.w.s.147 proceedings followed by long term capital gains addition amounting to Rs.1,95,41,500/- made in the course of assessment dt.04-12- ITA No. 162/Hyd/2020 :- 2 -: 2017 and upheld in the CIT(A)’s order vide following detailed discussion: “6. Decision: In the Form No.35 the date of receipt of the order which is appealed against is mentioned as 04.12.2018, whereas the order was passed on 04.12.2017. The appeal has been filed on 31.12.2018 which is in time as per the date mentioned in Form No. 35. However, the ITNS-51 indicates that the assessment order was served by affixture on 05.12.2017. Thus, it is clear from records that the service was not on the appellant as such and the address which was available at the time of assessment, the appellant was not found and the same was served by affixture. There is also a change of address as what has been mentioned in the assessment order and the recovery notice which has been sent and further the address from which the appeal has been filed. considered the above facts, it can be fairly concluded that the order was not served on the appellant through regular service and when the appellant received the order, the appeal was filed. Therefore the appeal is considered on time for the year under consideration and decided on merits as under. In the instant case, the appellant had entered into an Agreement of sale cum GPA with M/s JVK Infra vide registration document no.4058/2009 dated 02/11/2009 for a total consideration of Rs.3,90,83,000/ - along with another person. As the appellant did not furnish any return of, income for the corresponding year, the AO issued a notice uls 148 on 30-03-2017 and since there was no response from the appellant, the AO completed assessment u/s.144 rws 147 on 04.12.2017 by determining capital gains of Rs. 1,95,41,500/- (Appellant's share being 50% of Rs.3,90,83,000). During the course of appeal proceedings, the appellant submitted that the agreement of sale cum GPA with M/s JVK Infra vide registration document no. 4058/2009 dated 02/11/2009 was subsequently cancelled vide registration document no.4248/2011 dated 03/09/2011 and the advance amount of Rs.65,00,000/- received at the time of registration of agreement of sale was returned to M/s JVK Infra. The appellant furnished copies of the agreement of sale dated 02/11/2009 and cancellation deed dated 03/09/2011 in support of its claim. The same were forwarded to the AO and a remand report was called for. The AO, in his remand report, did not comment on the merits of the additional evidence filed by the appellant and instead merely stated that the documents were not available during the course of assessment proceedings and assessment was completed u/s 144 ITA No. 162/Hyd/2020 :- 3 -: r.w.s. 147 of the Act. The Range head, in the forwarding letter of the remand report, stated that the original sale deed is a separate transaction and also the cancellation· deed relates to a separate transaction and therefore capital gains computed on the basis of sale deed is not to be affected due to subsequent cancellation deed in respect of above immovable property. The remand report was given to the appellant's AR and comments were called for. No further substantiation was made by the appellant. It is to be noted that as per the agreement of sale cum GPA executed on 02/11/2009, the appellant had received advance consideration of Rs.65,00,000/- and has delivered the vacant physical possession of the land to the vendee. As per provisions of section 2(47)(v) of the Act, the same amounts to transfer. The relevant portion of section 2(47)(v) of the Act is reproduced as under: "2(47) 'transfer', in relation to a capital asset, includes,- (v) 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 53A of the Transfer of Property Act, 1882." In the instant case, handing over of possession has taken place and the provisions under section 2(47) are squarely applicable and thus the appellant is liable to pay capital gains on the said transfer during the year. Subsequent cancellation of the agreement of sale does not impact the chargeability of tax on account of transfer as per section 2(47) of the Act and the liability to pay tax on capital gains. The same view has been held by the Hon'ble High Court of Kerala while adjudicating on a similar issue in the case of CIT Vs Harbour View in Appeal No. 33 of 2010 vide order dated 24/09/2018. The relevant part of the judgment is reproduced as under: "Once the sale agreement comes under the provisions of section 53A of the TP Act, handing over of possession takes place and the provisions under section 2(47) would squarely apply. That apart, the argument of the learned senior; counsel for the assessee that contract was subsequently rescinded will not be of any help because the contract was rescinded only subsequent to the assessment year and what we are concerned for the purpose of the Act is the transactions which took place during the assessment year. The fact that the contract was subsequently terminated on mutual consent will not improve the case of the assessee to wriggle out of the ITA No. 162/Hyd/2020 :- 4 -: purview of section 2(47) of the Act and the liability to pay tax on short-term capital gains under section 45 of the Act. 18. Here, to dispel any reasonable doubt which may arise, we extract below one of the conditions stated in Shrimant Shamrao Suryavanshicase (supra) : "(6) the transferee must have performed or be willing to perform his part of the contract." Here the agreement was rescinded between the parties but long after the assessment year in which the agreement was entered into and possession handed over. At least when the returns were filed there was a right conferred on the transferee as per section 53A of the Transfer of Property Act. The transferor though subsequently was absolved from the rigour of section 53A ; in the close of assessment year was obliged to return the capital gains as per section 2(47)(v) of the Income-tax Act. The Income-tax Act by the definition clause includes a transaction in accordance with section 53A as a transfer in relation to a capital asset. The consequence flowing from the inclusive definition has to be given effect to as on the subject assessment year and the transferor being absolved subsequently from the rigour of section 53A as against the transferee is of no consequence in applying the rigour under the taxation enactment. The transaction failed and the parties settled between themselves, but the voluntary act of the parties cannot efface the tax liability. We hence answer the questions of law on the facts arising in the above case against the assessee and in favour of the Revenue." In view of the aforesaid decision of the Hon'ble High Court, the action of the AO in taxing the capital gains during the year is upheld. However, in the interest of natural justice, the AO is directed to compute the capital gains after giving the benefit of indexed cost of acquisition, if any, as per law and record. The penalty proceedings are separate proceedings and are not the subject matter of the present adjudication. In view of the above, the ground no.1, 2 and 3 are dismissed accordingly”. The ground no.4 and 5 being general in nature need no adjudication. To sum up, the appeal is dismissed”. ITA No. 162/Hyd/2020 :- 5 -: 3. We have given our thoughtful consideration to rival pleadings against and in support of the foregoing long term capital gains addition on merits. There is hardly any dispute that the assessee had entered into the agreement of sale cum GPA on 02-11-2009 which has been treated as “transfer” of the capital asset u/s.2(47)(v) of the Act. It is further not an issue that he had thereafter executed a cancellation deed dt.03-09- 2011. Both these are registered documents only. The Assessing Officer’s remand report dt.18-03-2019 had duly accepted the factum of cancellation of the former sale agreement in the latter deed as well. 4. The Revenue’s vehement contentions in support of the impugned capital gains addition are that once the former agreement has been treated as a valid transfer, the impugned addition flows therefrom as the necessary consequence. We find no merit to express our agreement with Revenue’s instant argument. We make it clear that the assessee and his vendee had never performed all the necessary conditions and more particularly, the former never received the entire amount of consideration of Rs.3,90,83,000/- but only a part thereof amounting to Rs.65 lakhs. The question as to whether the said part payment only could amount to a full-fledged transfer u/s.2(47)(v) of the Act in such an instant has to be accepted in assessee’s favour and against the department in this factual backdrop. We find force in former’s stand that all the terms and conditions of the agreement were subject to the final settlement only. We also quote Chainrup Sampatram Vs. CIT (1953) 24 ITR 481 (SC) that such an anticipated income could ITA No. 162/Hyd/2020 :- 6 -: never be recorded; till its realization, going by conservative principle in accountancy. We accordingly delete the impugned addition going by the very analogy. No other ground has been pressed before us. 5. This assessee’s appeal is partly allowed in above terms. Order pronounced in the open court on 17 th November, 2021 Sd/- Sd/- ( A. MOHAN ALANKAMONY ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 17-11-2021 TNMM ITA No. 162/Hyd/2020 :- 7 -: Copy to : 1.Vineeth Suryanarayana Raju Alluri, 68, Indu Fortune Fields Fourth Phase, KPHB, Hyderabad. 2.The ACIT, Circle-7(1), Hyderabad. 3.CIT(Appeals)-5, Hyderabad. 4.Pr.CIT-5, Hyderabad. 5.D.R. ITAT, Hyderabad. 6.Guard File.