Coromandel Cables Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1779/CHNY/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7814 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 29-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 23-09-2013
• Court: TRIBUNAL
• Department Lawyers: ANURAGH SAHAY
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Capital asset converted into stock in trade; Capital asset; Business income; Cost of acquisition; Retraction; Reason to believe
• Section: 45(2); 133A; 80IB; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NOS. 1779 TO 1788/MDS/2013 / ASSESSMENT YEARS : 2006-07 TO 2011-12 M/S. COROMANDEL CABLES PVT. LTD., A-7, 6 TH CROSS STREET, INDIRA NAGAR, ADYAR, CHENNAI 600 020. PAN AAACC7190E ( /APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(3), CHENNAI - 34. RESPONDENT) . /ITA NOS. 1944 TO 1949/MDS/2013 / ASSESSMENT YEARS : 2006-07 TO 2011-12 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(3), CHENNAI - 34. ( /APPELLANT) V. M/S. COROMANDEL CABLES PVT. LTD., CHENNAI 20. RESPONDENT) / ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE / DEPARTMENT BY : SHRI ANURAGH SAHAY, CIT ! / DATE OF HEARING : 29.12.2015 '# ! / DATE OF PRONOUNCEMENT : 04.03.2016 - - ITA 1779 TO 1788/13 ETC. 2 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AS WELL AS B Y THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF TH E COMMISSIONER OF INCOME-TAX(APPEALS) DATED 28.8.2013 . SINCE THE ISSUES ARE INTERRELATED, THESE ARE CLUBBED TOGE THER, HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS IN APPEAL BEFORE US IN ITA NOS.1 779 TO 1784/MDS/2013 FOR THE ASSESSMENT YEARS 2006-07 TO 2 011-12 WITH REGARD TO TREATING THE JDA ENTERED INTO BETWEE N THE ASSESSEE AND DOSHI HOUSING ON 23.11.2005 RESULTED I N TRANSFER IN TERMS OF SEC.2(47)(V) OF THE I.T.ACT, AND THEREB Y ASSESSMENT OF CAPITAL GAINS IN THESE ASSESSMENT YEARS. THE AS SESSEE IS ALSO IN APPEALS BEFORE US, IN ITA NOS.1785 TO 1788/ MDS/2013 FOR RESTRICTING THE LEVY OF PENALTY TO 100% FROM 300% L EVIED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE ACT CONSEQUE NT TO ASSESSMENT OF CAPITAL GAINS IN THE ASSESSMENT YEARS 2006-07, 2009-10 TO 2011-12. - - ITA 1779 TO 1788/13 ETC. 3 3. THE REVENUE IS IN APPEALS BEFORE US IN ITA NOS.1 945 & 1946/MDS/13 FOR THE ASSESSMENT YEARS 2007-08 AND 20 08-09 FOR CANCELLATION OF PROTECTIVE ASSESSMENT FOR THESE ASS ESSMENT YEARS. THE REVENUE IS ALSO IN APPEALS BEFORE US IN ITA NO.1944, 1947, 1948 AND 1949/MDS/2013 FOR THE ASS T. YEARS 2006-07, 2009-10, 2010-11 AND 2011-12 WITH REGARD T O REDUCTION OF PENALTY FROM 300% TO 100% LEVIED BY THE ASSESSIN G OFFICER U/S.271(1)(C) OF THE ACT IN RESPECT OF THESE ASSESS MENT YEARS. 4. FIRST, WE TAKE UP THE APPEALS OF THE ASSESSEE IN ITA NOS.1779 TO 1784/MDS/2013. 4.1 THE FACTS OF THE CASE AS NARRATED FOR THE ASSES SMENT YEAR 2006-07 ARE THAT M/S. COROMANDEL CABLES PVT. LTD. ( FOR SHORT CCPL) IS INCORPORATED IN 1976 TO CARRY ON THE BUSIN ESS OF MANUFACTURE OF CABLES. HOWEVER, ON ACCOUNT OF OPER ATIONAL LOSSES AND DUE TO LABOUR UNREST, THE FACTORY AT PER UNGUDI, CHENNAI, WAS SHUT DOWN IN LATE 1990. SUBSEQUENTLY , THE FOUNDER PROMOTERS OF THE COMPANY SOLD THEIR ENTIRE STAKE IN THE COMPANY TO THE PRESENT SHAREHOLDERS NAMELY SMT. RAN I GOPINATH, SHRI T. CHINNADURAI AND SHRI M. GANESAN I N 2003. ON 23.11.2005 THE ASSESSEE COMPANY ENTERED INTO JOINT - - ITA 1779 TO 1788/13 ETC. 4 DEVELOPMENT AGREEMENT (JDA) WITH DOSHI HOUSING (FIR M) ON 23.11.2005 FOR CONSTRUCTION OF A RESIDENTIAL COMPLE X BY NAME ETOPIA-1. 4.2 THERE WAS A SURVEY OPERATION U/S.133A ON 24.1.2 012. IT WAS FOUND THAT THE ASSESSEE HAS NOT FILED THE RETUR N OF INCOME FOR THE ASST. YEARS 2006-07 AND 2007-08 TILL THE DA TE OF SURVEY. SUBSEQUENT TO SURVEY, THE ASSESSMENTS WERE REOPENED FOR THE ASST. YEARS 2006-07, 2007-08, 2008-09 AND 2009-10 B Y RECORDING THE REASONS. FOR THE ASST. YEAR 2006-07, LONG TERM CAPITAL GAINS WERE BROUGHT TO TAX BASED ON THE JDA DATED 23.11.2005, WHEREIN THE SHARE OF THE LAND-OWNER I.E . THE ASSESSEE OF 37.54% OF THE SALEABLE VALUE OF THE PRO PERTY WAS AGREED UPON. THE AO HAS ALSO OBSERVED THAT INSTEAD OF REACHING THE ENTIRE SHARE OF THE ASSESSEE TO ITS AC COUNT ABOUT ` 25 CRORES OF THE SHARE OF THE ASSESSEE HAVE BEEN DI VERTED TO DOSHI HOUSING, THE DEVELOPER WHICH IS ENJOYING THE EXEMPTION U/S.80-IB(10) IN THE FORM OF INTRODUCTION OF SRI M. G.SURENDRANATH AS PARTNER, WHO IS THE SON OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. HOWEVER, THERE WAS NO SALE OF FL ATS BY THE DEVELOPER TILL ASST. YEAR 2009-10. THE ASSESSEE HO LDS THAT THERE - - ITA 1779 TO 1788/13 ETC. 5 WERE NO CAPITAL GAINS ATTRACTED IN THE HANDS OF THE ASSESSEE FOR ASST. YEAR 2006-07, SINCE THERE WAS NO TRANSFER OF PROPERTY BASED ON AGREEMENT OF SALE, WHICH WAS NOT AGREED BY THE A.O. AND LONG TERM CAPITAL GAINS FOR 2006-07 WERE CHARGE D BASED ON JDA ON TRANSFER OF LAND. FOR ASST. YEARS 2007-08 A ND 2008-09, THE A.O. HAS PASSED THE ORDERS PROTECTIVELY, SINCE THE PROJECT HAS NOT TAKEN OFF TILL. SINCE THE ASSESSEE IS IN D ISPUTE WITH REGARD TO THE WORKING OF THE CAPITAL GAINS BASED ON THE MARKET VALUE DISREGARDING ITS OFFERING TO TAX ON THE BASIS OF GUIDELINE VALUE, THERE WAS A DENIAL OF COST OF IMPROVEMENT. 4.3 BEFORE THE CIT(APPEALS), THE ASSESSEE CHALLENGE D THE REOPENING OF ASSESSMENT ON THE REASON THAT THE ASSE SSMENT WAS REOPENED ONLY ON THE BASIS OF STATEMENT GIVEN B Y SMT. RANI GOPINATH ON JDA DATED 23.11.2005, AS THE MANAGING D IRECTOR OF THE ASSESSEE COMPANY, WHEREAS AGREEMENT OF SALE OF THE SAME DATE SHOULD PREVAIL. IT WAS ALSO CONTENDED BEFORE THE CIT(APPEALS) BY THE ASSESSEES COUNSEL THAT THERE W AS RETRACTION OF STATEMENT GIVEN BY SMT. RANI GOPINATH , WHICH WAS FILED BEFORE THE ACIT, COM. CIR.I(3) ON 22.2.2012. AGAINST THIS, THE CIT(APPEALS) OBSERVED THAT THE ASSESSMENT WAS R EOPENED - - ITA 1779 TO 1788/13 ETC. 6 AFTER DULY RECORDING THE REASONS AND ACCORDING TO H IM, REOPENING OF ASSESSMENT IS VALID. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE FIRST COMMON ISSUE WITH REGARD TO REOPENING OF ASSESSMENT IS IN ITA NOS. 1779, 1780, 1781 AND 1782 /MDS/2013 (A.YS. 2006-07 TO 2009-10). WE CONSIDER THE FACTS NARRATED FOR THE ASST. YEAR 2006-07, SINCE THE FACTS ARE SIMILAR IN ALL THESE ASST. YEARS. 6. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS , WHICH WAS ADVANCED BEFORE THE CIT(APPEALS). THE LD. DR R ELIED ON THE ORDER OF THE CIT(APPEALS). 7. WE HAVE GONE THROUGH THE REASONS RECORDED FOR REOPENING OF THE REASONS RECORDED FOR THE REOPENING . IN THIS CASE, THE ASSESSMENT WAS REOPENED TO CONSIDER THE T AX INCIDENCE ON ENTERING INTO JDA DATED 23.11.2005 WIT H DOSHI HOUSING. AFTER DULY RECORDING THE REASONS FOR REOP ENING, NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 30 .1.2012. 7.1 IN OUR OPINION, SECTION 147 AUTHORISES AND PERM ITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHAR GEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT - - ITA 1779 TO 1788/13 ETC. 7 YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN T HE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATI ON. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNO W OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESS MENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL E VIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER I S TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUE R WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. FOR INITIATION OF AC TION UNDER SECTION 147(A) FULFILLMENT OF THE TWO REQUISITE CON DITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCO ME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT TH E ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIA L ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEME NT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMA TION OF BELIEF - - ITA 1779 TO 1788/13 ETC. 8 BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUB JECTIVE SATISFACTION. 7.2 THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTIT UTED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIONS OF SECT ION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMST ANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSES SMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JU RISDICTION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED T O BE : FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE T HAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCA PED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON T O BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITH ER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH - - ITA 1779 TO 1788/13 ETC. 9 THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SA TISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTION TO IS SUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UND ER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER F OR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPE D ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE AS SESSMENT. IT IS, HOWEVER, TO BE NOTED THAT BOTH THE CONDITIONS M UST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO T O SECTION 147. THE CASE AT HAND IS COVERED BY THE MAIN PROVISION A ND NOT THE PROVISO. BEING SO, AS LONG AS THE INGREDIENTS OF S EC.147 ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO INITIAT E THE PROCEEDINGS U/S.147 OF THE ACT. WE HAVE NO HESITATION IN CONFI RMING THE ACTION OF THE AO IN REOPENING OF ASSESSMENT IN ALL THESE APPEALS AND REJECT THIS GROUND OF APPEAL OF THE ASSESSEE. - - ITA 1779 TO 1788/13 ETC. 10 8. THE NEXT COMMON GROUND IN ALL THE ABOVE APPEALS IS WITH REGARD TO INVOKING THE PROVISIONS OF SEC.2(47)(V) O F THE ACT BASED ON THE JDA ENTERED INTO BY THE ASSESSEE WITH DOSHI HOUSING ON 23.11.2005, WHICH WAS FOUND DURING THE C OURSE OF SURVEY U/S.133A OF THE ACT ON 24.1.2012. 9. THE FACTS OF THE ISSUE ARE THAT DURING THE COURS E OF SURVEY U/S.133A, JDA DATED 23.11.2005 WAS FOUND. ON THE S AME DAY, A SWORN STATEMENT OF SMT. RANI GOPINATH WAS RECORDE D U/S.131 OF THE ACT. SHE CONFIRMED THAT THE SHARE OF HER S ON FROM THE FIRM, SHOULD ALSO BE INCLUDED TO THE VALUE OF SALE CONSIDERATION AND IT AMOUNTS TO ` 25 CRORES. ACCORDING TO THE JDA, THE ASSESSEE HAS TO RECEIVE 37.54% OF TOTAL SALEABLE AR EA IN THE PROJECT ETOPIA-I. THE ASSESSEE HAS RECEIVED A CH EQUE NO.088218 DATED 24.11.2005 DRAWN ON CENTRAL BANK OF INDIA, CHENNAI -8 BY M/S. DOSHI HOUSING FOR ` 10,00,000/- WHICH WAS MENTIONED IN THE JDA DATED 23.11.2005. IT WAS ALSO RECORDED BY - - ITA 1779 TO 1788/13 ETC. 11 THE LOWER AUTHORITIES THAT THERE WAS ONE MORE AGREE MENT BETWEEN THE ASSESSEE AND THE SAME PARTY, WHERE IT I S ALSO REFLECTED THE SAME AMOUNT OF SALES. ACCORDING TO T HE ASSESSING OFFICER, THE ASSESSEE BEING VENDOR AND DOSHI HOUSIN G IS THE DEVELOPER, THE ASSESSEE IS LIABLE TO PAY CAPITAL GA INS IN VIEW OF JDA ENTERED INTO BY THE ASSESSEE WITH DOSHI HOUSING FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE, HEREIN, OFF ERED CAPITAL GAINS ARISING ON AGREEMENT OF SALE ON THE BASIS OF GUIDELINE VALUE FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10. 9.1 HOWEVER, THE ASSESSING OFFICER BROUGHT THE CAPI TAL GAINS ACCRUED TO THE ASSESSEE ON THE DATE OF JDA FOR THE ASSESSMENT YEAR 2006-07, BY PLACING RELIANCE IN THE CASE OF M/ S. T.V. SUNDARAM IYENGAR & SONS (37 ITR 26), THE ASSESSIN G OFFICER OBSERVED AS UNDER : I. THE JOINT DEVELOPER AGREEMENT EXECUTED ON 23.11. 2005 GAVE RAISE TO CAPITAL GAINS ON TRANSFER OF LAND FOR THE ASSESSMENT YEAR 2006-07. THE CONSIDERATION OF JOINT DEVELOPER AGREEMENT WAS TO BE SHARED IN THE RATIO OF 67.46% TO THE DEVE LOPER AND - - ITA 1779 TO 1788/13 ETC. 12 37.54% TO THE APPELLANT COMPANY IN RESPECT OF THE R ESIDENTIAL FLATS CONSTRUCTED. II) SMT. RANI GOPINATH CONFIRMED THE JOINT DEVELOPE R AGREEMENT BETWEEN PARTIES. III) SHARE OF PROFITS OF ABOUT ` 25 CRORES OF MR. SURENDRANATH FROM THE FIRM OF M/S. DOSHI HOUSE WAS PART OF THE S ALE PRICE FOR LAND. IV) COST OF IMPROVEMENT OF LAND AT ` 4,53,42,980/- WAS AN INCORRECT CLAIM. V) THE TOTAL CONSIDERATION FOR LAND IS ABOUT ` 35 CRORES. VI) FLATS RELATING TO THE SHARE OF THE APPELLANT WE RE SOLD FROM 2008 TO 2010. ACCORDINGLY, THE LONG TERM CAPITAL GAINS FOR THE AS SESSMENT YEAR 2006-07 PERTAINING TO THE 37.54% SHARE OF THE ASSESSEE IN THE JOINT DEVELOPER AGREEMENT WAS COMPUTED AS UN DER:- PARTICULARS AMOUNT TOTAL COST OF CONSTRUCTION OF ENTIRE PROJECT OF DOS HI HOUSING (PARA 8.3 OF ASSESSMENT ORDER) FOR THE FINANCIAL YEARS 2006-07 TO 2009-10 RELEVANT TO THE ASSESSMENT YEARS 2007-08 TO 2010-11 ` 32,52,42,147 SALE CONSIDERATION 37.54% SHARE OF APPELLANT COMPANY ` 12,20,95,902 LESS: INDEXED COST AS WORKED OUT AT PARA 11 OF THE ASSESSMENT ORDER WHICH WORKS OUT TO(0.1% OF SALE PRICE) ` 1,24,146 LONG TERM CAPITAL GAINS ` 12,20,07,920 ============= - - ITA 1779 TO 1788/13 ETC. 13 AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LD. AR SUBMITTED THAT THE ASSESSMENT PROCEE DINGS FOR THE ASSESSMENT YEAR 2006-07 WAS RE- OPENED CONSEQUENT TO THE SURVEY UNDER SECTION 133A OF THE ACT ON 24-1-2012 AND IN COMPLETING THE SAID RE-ASSESSME NT THE A.O. HAD SHIFTED THE INCIDENCE OF THE CAPITAL GAIN TAX F ROM THE LAND TRANSACTION HEREINBEFORE REFERRED TO BASED ON THE D EEMED TRANSFER THEORY AS PER SECTION 2(47)( V) OF THE ACT TO THE FIRST ASSESSMENT YEAR VIZ., 2006-07 AS WELL AS BASED ON T HE IMPOUNDED JDA, WHICH WAS ALSO ENTERED INTO WITH THE SAME PURCHASER ON THE SAME DATE AS WELL AS NOT REGISTERE D. 10.1 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSI NG OFFICER HAD COMPUTED THE LONG TERM CAPITAL GAIN ON THE PRES UMPTION OF THE POSSESSION VESTING WITH THE DEVELOPER AND OCCUR RENCE OF DEEMED TRANSFER WHILE REJECTING THE SALE AGREEMENT INASMUCH AS THE A.O. HAD FURTHER REFERRED TO THE SURVEY STATEME NT RECORDED FROM MRS.RANI GOPINATH. 10.2 FURTHER, THE LD. AR SUBMITTED THAT THE ASSESS ING OFFICER HAD QUESTIONED THE INDUCTION OF THE RELATED PARTIES IN M/S.DOSHI - - ITA 1779 TO 1788/13 ETC. 14 HOUSING, PARTNERSHIP FIRM, WHO WERE SHOWN AS PURCHA SERS IN THE SALE AGREEMENT RELIED UPON THE ASSESSEE COMPANY AND IN THE PROCESS THE ASSESSING OFFICER PRESUMED THAT THE PRO FITS IN THE PROCESS WOULD BE DIVERTED TO THE SAID PARTNERSHIP F IRM INASMUCH AS DUE TO THE AVAILABILITY OF DEDUCTION UNDER SECTI ON 80IB (10) OF THE ACT, THE TAX WAS ACCORDINGLY CONSIDERED TO BE E VADED. 10.3 ACCORDING TO THE LD. AR, THE LAND DEVELOPMENT EXPENSES INCURRED BY THE ASSESSEE COMPANY WERE ALSO QUESTION ED BY THE ASSESSING OFFICER IN THE REASSESSMENT ORDER AND ACC ORDINGLY THE SAID CLAIM FOR DEDUCTION WAS REJECTED IN ITS ENTIRE TY. 10.4 THE SAID ORDER OF THE ASSESSING OFFICER WAS C ONFIRMED BY THE CIT(APPEALS)-L, CHENNAI, IN HIS COMMON ORDER DA TED 28-8- 2013 AND THE SAID COMMON ORDER IS UNDER CHALLENGE B EFORE THIS BENCH IN THE PRESENT PROCEEDINGS. - 10.5 THE JOINT DEVELOPMENT AGREEMENT WAS NOT RELIED UPON BY THE ASSESSEE COMPANY SO AS TO ATTRIBUTE THE MOTIVE OF TAX EVASION WHILE QUESTIONING THE CONSTITUTION OF THE P ARTNERSHIP FIRM M/S.DOSHI HOUSING AND HENCE THE TRANSACTION RECKONE D THROUGH THE SAID JDA SHOULD BE TOTALLY REJECTED ESPECIALLY IN VIEW OF THE ASSESSEE COMPANY'S PERCEPTION/UNDERSTANDING OF THE SALE OF THE - - ITA 1779 TO 1788/13 ETC. 15 LAND AS SUCH TO THE SAID PARTNERSHIP FIRM AND CONSE QUENTIAL REPORTING OF LONG TERM CAPITAL GAINS IN THE ASSESSM ENT YEARS 2008-09 TO 2011-12. 10.6 THE PRESUMPTION OF POSSESSION TO APPLY THE DE EMED TRANSFER THEORY FOR TAXING THE ENTIRE CAPITAL GAINS IN THE FIRST ASSESSMENT YEAR, VIZ., 2006-07 IS ALSO NOT CORRECT INASMUCH AS, IF THE SALE AGREEMENT IS ACCEPTED, THEN THE COMPUTA TION OF LONG TERM CAPITAL GAIN (REPORTED IN THE RETURNS OF INCOM E FILED FOR ASSESSMENT YEARS 2008-09 TO 2011-12) SHOULD BE CONSEQUENTLY CONSIDERED AS CORRECT. 10.7 THE LD. AR SUBMITTED THAT IF THE ASSESSING OF FICER WANTS TO CONSIDER THE TRANSACTION FROM THE PERSPECTIVE OF THE IMPOUNDED JDA, THE RECENT DECISION OF THE PUNJAB AN D HARYANA HIGH COURT, IN THE CASE OF C.S.ATWAL V. CIT IN ITA NO.200 OF 2013(O&M) DATED 22.7.2015 HAS TO BE TAKEN INTO ACCO UNT. IT WAS HELD BY THE COURT IN THE CASE THAT THE DEEMED T RANSFER THEORY COULD NOT BE PRESSED INTO SERVICE FOR VARIOU S REASONS MORE FULLY SET OUT THEREIN. THE ASSESSEE COMPANY ST RONGLY RELIES UPON THE SAID DECISION FOR REJECTING THE SHIFTING O F THE INCIDENCE OF CAPITAL GAINS FOR TAXATION TO THE FIRST ASSESSME NT YEAR, VIZ., - - ITA 1779 TO 1788/13 ETC. 16 2006-07. 10.8 ACCORDING TO THE LD. AR, THE TAX EVASION CONS EQUENT TO THE IMPOUNDING OF THE JDA AS WELL AS QUESTIONING TH E CONSTITUTION OF THE PARTNERSHIP FIRM BY PURCHASER A RE NOT RELEVANT TO THE ISSUE UNDER CONSIDERATION AND THE ASSESSEE C OMPANY SUBMITS THAT THE JDA WAS NOT PRESSED INTO SERVICE B Y THEM FOR COMPUTING THE CAPITAL GAIN TAX WHILE CIRCUMVENTING THE DEEMED TRANSFER THEORY. 10.9 HE SUBMITTED THAT FIRST OF ALL, IN THE IMPLEME NTATION OF THE JDA, THE DEEMED TRANSFER THEORY CANNOT BE ROPED IN AND FURTHER IT IS TO BE NOTED THAT IF THE SURVEY RESULTS INCLUD ING THE DOCUMENTS IMPOUNDED AS WELL AS THE SWORN STATEMENTS ARE TAKEN INTO CONSIDERATION, IT IS FATAL FOR THE REVENUE'S CASE. IF THE ASSESSEE COMPANY IS CONSIDERED AS A JOINT DEVELOPER AS UNDER STOOD BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED FO R THE REASSESSMENT YEAR 2006-07, THE PROVISIONS OF SECTIO N 45(2) OF THE ACT SHOULD NOT BE OVERLOOKED WHILE THE SUBSEQUE NT SALE TRANSACTION SHOULD BE CONSIDERED FOR TAXATION UNDER THE HEAD 'INCOME FROM BUSINESS'. 10.10 FURTHER, THE LD. AR CONTENDED THAT IN TH E SURVEY - - ITA 1779 TO 1788/13 ETC. 17 STATEMENT THE MANAGING DIRECTOR OF THE ASSESSEE COM PANY HAD CONFIRMED IN ANSWER TO QUESTION NO.15 THAT THE IMPO UNDED JOINT DEVELOPMENT AGREEMENT WAS NOT ACTED UPON AS WELL AS NOT IN VOGUE. WITHOUT READING THE ENTIRE STATEMENT OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY, THE ASSESSING OFF ICER HAD BENT UPON TO TAKE SHELTER UNDER THE IMPOUNDED JDA A S WELL AS THE OTHER ANSWERS GIVEN IN THE SAID SWORN STATEMENT IN ORDER TO JUSTIFY SHIFTING OF THE CAPITAL GAINS TO THE FIRST ASSESSMENT YEAR, VIZ., 2006-07 IN WHICH YEAR THE SAID JDA WAS ENTERE D INTO. 10.11 EVEN IN THE FIRST PAGE OF THE REASSESSME NT ORDER FOR A. Y. 2006-07 THE ASSESSING OFFICER HAD RECOGNIZED THE ASSESSEE COMPANY'S BUSINESS AS EXPLOITATION OF LAND AND FURTHER WHILE GIVING HIS REPORT TO THE CIT -1, CHENNAI, FOR CONSI DERING THE EFFECT OF THE RETRACTION STATEMENT, THE ASSESSING OFFICER HAD NOT TAKEN THE ENTIRE COMPUTATION TO HIS LEGAL AS WELL AS LOGI CAL CONCLUSION. THE ASSESSING OFFICER IN THE SAID PROCE EDINGS BEFORE THE ADMINISTRATIVE CIT HAD CONFIRMED THE ROLE OF TH E ASSESSEE COMPANY AS A JOINT DEVELOPER. IF THE ABOVE UNDERST ANDING OF THE A.O. IS TAKEN TO BE CORRECT, THEN THE COMPUTATI ON OF LONG - - ITA 1779 TO 1788/13 ETC. 18 TERMS CAPITAL GAIN IN THE FIRST ASSESSMENT YEAR VIZ ., 2006- 07 IS CONSEQUENTLY NOT CORRECT AND NOT JUSTIFIABLE. 10.12 INASMUCH AS THE PROVISIONS OF SECTION 45 (2) OF THE ACT AS WELL AS THE BUSINESS PROFITS COMPUTATION SHOULD LEGALLY FOLLOW TO TAX THE SURPLUS AS BUSINESS PROFITS IN SUCH SCEN ARIO. 10.13 IN ANY EVENT THE STRICT PRESCRIPTION OF S ECTION 53A OF THE TRANSFER OF PROPERTY ACT WHICH IS THE PIVOT/FULCRUM OF THE PROVISIONS IN SECTION 2(47)(V) OF THE ACT, THE DEEM ED TRANSFER COULD NOT BE PRESUMED IN THE ABSENCE OF REGISTERED SALE AGREEMENT/JDA. CONSEQUENTLY THE COMPUTATION OF LONG TERM CAPITAL GAINS FOR THE ASSESSMENT YEAR 2006-07 INVOK ING SECTION 2(47)(V) OF THE ACT WOULD FALL TO THE GROUND. 10.14 HE SUBMITTED THAT THERE WAS NO SUBSTANTIAL GAIN TO THE REVENUE IN SHIFTING THE INCIDENCE OF THE CAPITAL GA IN TAXATION TO THE FIRST ASSESSMENT YEAR, VIZ., 2006- 07 AND THE T ABULATION CIRCULATED DURING THE COURSE OF HEARING WOULD FORTI FY THE SAID FACT AS WELL AS THE ARGUMENT TO SUPPORT THE PLEA BEFORE THE BENCH FOR INTERFERING IN THE MATTER IN QUASHING THE RE-ASSESS MENT FRAMED - - ITA 1779 TO 1788/13 ETC. 19 FOR THE ASSESSMENT YEAR 2006-07. 10.15 THE LD. AR SUBMITTED THAT THE TREATMENT IN THE HANDS OF THE OTHER DEVELOPER, M/S. DOSHI HOUSING IS ALSO VER Y CRITICAL TO RENDER DECISION IN THE PRESENT APPEALS AND WITHOUT CROSS VERIFYING THE FINANCIALS OF THE SAID PARTNERSHIP FI RM THE A.O. REJECTED THE REPORTING OF LONG TERM CAPITAL GAINS B Y THE ASSESSEE COMPANY IN THE SUBSEQUENT FOUR ASSESSMENT YEARS, VI Z., 2008- 09 TO 2011-12. IF THE PURCHASER/THE OTHER DEVELOPER BOOKED THE COST OF PURCHASE OF LAND IN THOSE ASSESSMENT YEARS, SHIFTING OF THE INCIDENCE OF CAPITAL GAINS TO THE FIRST ASSESSMENT YEAR, VIZ., 2006-07, IN SUCH CIRCUMSTANCES IS WHOLLY UNJUSTIFIE D. 10.16 THE LD. AR SUBMITTED THAT THE SWORN STATEMENT OF THE PARTNER OF THE PURCHASER WAS ALSO REFERRED TO BY TH E ASSESSING OFFICER IN THE REASSESSMENT ORDER FOR THE ASSESSMEN T YEAR 2006- 07 AND APPARENTLY IN THE SAID STATEMENT MARKED AS ' ANNEXURE G ' TO THE SAID REASSESSMENT ORDER FOR THE ASSESSMENT Y EAR 2006-07, IT WAS STATED IN ANSWER TO QUESTION NO.8 T HAT THE IMPOUNDED JDA WAS NOT ENFORCED AND IMPLEMENTED. THE SAID CRUCIAL ASPECT WAS NOT ADDRESSED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07. - - ITA 1779 TO 1788/13 ETC. 20 10.17 FURTHER, AS THE JOINT DEVELOPER/LAND OWNER , THE ASSESSEE COMPANY IS ALSO ENTITLED FOR DEDUCTION UND ER SECTION 80IB(10) OF THE ACT TO THE EXTENT OF THE PROFITS PR OPORTIONATELY EARNED BY THEM AND THE SURVEY RESULTS AS WELL AS TH E UNDERSTANDING OF THE A.O. CLEARLY INDICATE THE ROLE OF THE ASSESSEE COMPANY AS A JOINT DEVELOPER. HENCE, THE PROFIT/REVENUE TO BE RECKONED AT THE END OF THE HOU SING PROJECT (PROJECT COMPLETION METHOD) OR SUCH REVENUE TO BE R ECKONED PROPORTIONATELY BASED ON THE STAGE OF COMPLETION OF THE HOUSING PROJECT YEAR-ON-YEAR BASIS WOULD FORTIFY THE PLEA F OR ASSESSMENT UNDER THE HEAD INCOME FROM BUSINESS AS WELL AS THE CONSEQUENTIAL THE BENEFIT OF DEDUCTION UNDER SECTIO N 80IB(10) OF THE ACT. 10.18 HE RELIED ON THE JUDGMENT OF THE KARNATAK A HIGH COURT IN THE CASE OF CIT V. SHRAVANEE CONSTRUCTIONS, REPO RTED IN 81 CCH 253 HAS APPROVED THE EXIGIBILITY OF THE CLAIM F OR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT TO THE JOINT DEVE LOPER/LAND OWNER. SIMILARLY THE CO-ORDINATE BENCH OF THE APPEL LATE TRIBUNAL, RENDERED IN THE CASE OF SRI LAKSHMI BRICK INDUSTRIE S IN ITA NOS.1644 TO 1647/MDS/2012 HAS APPROVED THE S AID LEGAL - - ITA 1779 TO 1788/13 ETC. 21 CONSEQUENCE IN THEIR DECISION RENDERED ON 22-11- 20 12 IN GRANTING SUCH DEDUCTION TO THE JOINT DEVELOPER/LAND OWNER. 11. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT A SWORN STATEMENT U/S.131 WAS RECORDED FROM SMT. RANI GOPIN ATH ON 24.1.2012 DURING THE COURSE OF SURVEY U/S 133A. IN THE SWORN STATEMENT, INTER ALIA, SHE HAS ADMITTED THE SHARING OF THE SALE PROCEEDS FROM THE PROJECT BETWEEN THEIR COMPANY AND THE DEVELOPER AT 37.54% TO BE RECEIVABLE FROM THE SALE VALUE OF THE PROJECT TOWARDS THE COST OF THE LAND SOLD. SHE HAS ALSO ADMITTED THAT HER SON, SHRI M.G. SURENDRANATH WAS INDUCTED A S A PARTNER IN DOSHI HOUSING WHEREBY ABOUT ` 25 CRORES WERE DIVERTED AS HIS SHARE OF PROFITS IN THAT FIRM WHICH IS ENJOYING EXE MPTION U/S 80- IB(10) OF THE ACT. FROM THE SWORN STATEMENT RECORD ED U/S.131 OF THE ACT, FROM SMT. RANI GOPINATH ON THE DATE OF SUR VEY IT IS ALSO CLEAR THAT THE JDA IS IN VOGUE AND AMOUNTS PAID TO HER SON SRI SURENDRANATH OF ABOUT 25 CRORES BELONG TO CCPL ONLY . IN VIEW OF THE ABOVE, SHE HAS OFFERED THE ADDITIONAL INCOME OF ` 25 CRORES VOLUNTARILY. 11.1 THE LD. DR FURTHER SUBMITTED WITH REGARD TO RE TRACTION THAT THE STATEMENT ORIGINALLY GIVEN ATTAINS AUTHENTICITY ONLY WHEN - - ITA 1779 TO 1788/13 ETC. 22 PROPER EVIDENCES CONTRARY TO THE POSITION APPRAISED AND ACCEPTED IN THE SURVEY IS BROUGHT ON RECORD. THE D ECISIONS OF VARIOUS COURTS IN THIS REGARD IS CAPTURED AND MADE AVAILABLE FOR REFERENCE AS FOLLOWS : 1) SURJEET SINGH CHHABRA V. UNION OF INDIA (1 SCC 508) 2) DR. S.C. GUPTA V. CIT 248 ITR 782 (ALL) 3) NARAYAN BHAGAWANTHARAO GOSAVI BATAJIWALE VS. GO PAL AIR 1960 SC 100 4) V. KUNHANBU V. CIT (219 ITR 325) (KERALA) 11.2 FURTHER, THE LD. DR SUBMITTED THAT SMT. RANI G OPINATH IS WELL EDUCATED AND IS CONSCIOUS OF WHAT SHE WAS TELL ING AND SHE WAS ASSISTED AND ADVISED BY HER C.A., SRI RAMASUBRA MANIAM, HER SON SRI SURENDRANATH, HER BUSINESS PARTNERS SHR I MEHUL DOSHI AND HARSHAD DOSHI, DURING THE COURSE OF SURVE Y. SHE WAS NOT ALONE, HER OWN SON ALSO AGREED FOR THE FACTS DI SCLOSED BY SMT. RANI GOPINATH IN A LETTER FORM INDEPENDENTLY O N THE DAY OF SURVEY ITSELF AND THE SAME FACTS PUT TO SRI MEHIL D OSHI, PARTNER OF DOSHI HOUSING, WHO HAS ALSO CONFIRMED IN HIS STATEM ENTS GIVEN ON THE SAME DAY OF SURVEY. 11.3 THE LD. DR FURTHER SUBMITTED THAT IT IS EVIDEN T THAT THE - - ITA 1779 TO 1788/13 ETC. 23 STATEMENT GIVEN BY SMT. RANI GOPINATH IS ON THE FAC TUAL INFORMATION ADMITTED VOLUNTARILY. AS SEEN FROM THE ANSWER TO Q.22 OF HER STATEMENT, IT WAS ASKED WHETHER SHE HAS GOT ANYTHING ELSE TO SAY. FOR THAT SIMPLE QUESTION SHE SAID SO MANY THINGS LIKE SHE WILL CONSULT AND TAKE APPROVAL FROM HER C.A WHO WAS PRESENT DURING THE SURVEY PROCEEDINGS AND COME FORWARD TO OFFER THE ADDITIONAL INCOME OF ` 25 CRORES VOLUNTARILY, THAT SHE MAY BE EXCUSED FROM PENALTY, THAT SHE WILL COOPERAT E IN PAYING THE CORRECT DUES ETC. THIS DOES NOT SHOW ANY FORCE, THREAT OR COERCION. IT IS FURTHER EMPHASIZED THAT THE ASSESSE E WITH REGARD TO APPLICATION OF JDA EVEN THOUGH DENIED IN ANSWER TO QUESTION NO.15, SHE HAS ADMITTED HER MISTAKE IN ANSWER TO QU ESTION NO.16, WHEN CERTAIN EVIDENCES WERE DISPLAYED. THE REFORE, THE DISCLOSURE WAS VOLUNTARY IN NATURE. NO FORCE, THREA T OR COERCION WAS USED. ADMISSION GIVEN BY THE APPELLANT IS ONLY AFTER SHOWING THE FACTS GATHERED DURING SURVEY ITSELF. REFERRING TO Q.NO.16 AND ITS ENSUING ANSWER, SMT. RANI GOPINATH IS FURTHER AWARE THAT IN THE EVENT OF LIABILITY OF INCOME TAX IN THE DUE COU RSE SHE HAS ALSO MADE A FIXED DEPOSITS FOR ` 16 CRORES. THIS SHOWS THAT SHE IS AWARE THAT SHE IS LIABLE FOR MORE TAX THAN WHAT THE Y HAVE PAID. - - ITA 1779 TO 1788/13 ETC. 24 RECEIPTS AND AUTHORIZATIONS GIVEN BY SMT. RANI GOPI NATH TO THE BUILDER ALSO CLEARLY SHOWS THAT THE APPELLANT HAS T O GET AMOUNTS AS PER JDA WHICH ARE MORE THAN WHAT WAS DISCLOSED. THE JOINT MEETING CALLED FOR BETWEEN CCPL AND THE DOSHI HOUSI NG ON 14.4.2008 ALSO THROWS SOME LIGHT ON THE RATIONALE F OR SHARING RATIO AND THE BLOCK-WISE, FLOOR- WISE, AND F1AT-WIS E IDENTIFICATION FOR SUCH SHARING OF SALEABLE AREA BETWEEN THE APPEL LANT AND THE DOSHI HOUSING. THE AO HAS GOT INDEPENDENT EVIDENCES WHICH WERE DETAILED IN THE ASSESSMENT ORDER IN THE FORM O F IMPOUNDING MATERIALS WHICH SHOWS THE SHARING PATTERN BETWEEN T HE OWNER AND THE DEVELOPER. EVEN THE AFFIDAVIT GIVEN BY SHR I T. CHINNADURAI, ONE OF THE DIRECTORS OF THE ASSESSEE C OMPANY ALSO SHOWS SUCH SHARING PATTERN. THE INNUMERABLE AUTHOR IZATION LETTERS SIGNED BY SMT. RANI GOPINATH ADDRESSING TO DOSHI HOUSING ALSO SHOW THAT THE JDA DATED 23.11.2205 WAS IN OPERATION. WHICH MEANS SHARING OF 37.54% IS TRUE A ND CAPITAL GAINS DOES ATTRACT IN THE AY 2006-07. ALL THESE FA CTS SUPPORT TO THE STATEMENT GIVEN BY SMT. RANI GOPINATH, MD OF TH E ASSESSEE COMPANY. 11.4 HE SUBMITTED THAT IT IS SEEN FROM THE RECORD S THAT THE AO - - ITA 1779 TO 1788/13 ETC. 25 HAS GIVEN SEVERAL OPPORTUNITIES TO THE ASSESSEE TO GIVE BASIS FOR RETRACTION VIDE NOTICES U/S.142(1) DATED 21.3.2012 AND 4.4.2012. THE AR HAS APPEARED ON 28.3.2012 AND 17.4.2012, BUT NO CONTEMPORANEOUS EVIDENCE SUBSEQUENT TO SURVEY TO TH E EFFECT THAT JDA WAS NOT ACTED UPON WAS FILED. THEREFORE, RETRACTION IS INVALID. 11.5 THE ARGUMENT OF THE LD. AR THAT CIT HAS NO ROLE TO PLAY IN GIVING ADVISE TO THE AO ON THE RETRACTION STATEM ENT FILED BEFORE HIM BY SMT. RANI GOPINATH IS ALSO NOT CORRECT. THE RETRACTION LETTER WAS ADDRESSED TO THE COMMISSIONER AND FILED ORIGINALLY IN HIS OFFICE. ONLY A COPY WAS FILED BEFORE THE AO ON 22.2.2012. IN THE HIERARCHY A REPORT WAS CALLED FOR BY THE COMMIS SIONER TO DISPOSE OFF THE PETITION BEFORE HIM. IN THE SCHEME OF THINGS, THE AO HAS SUBMITTED HIS REPORT AND THE OPINION OF THE COMMISSIONER WAS COMMUNICATED OFFICIALLY BY THE INC OME-TAX OFFICER (HQS), ATTACHED TO THE O/O COMMISSIONER OF INCOME-TAX- I, CHENNAI. 11.6 REGARDING TAXING OF PROFITS IN THE HANDS OF TH E DEVELOPER WHICH WERE ATTRIBUTED TO THE ASSESSEE HOLDING THAT ` 25 CRORES - - ITA 1779 TO 1788/13 ETC. 26 PAID TO ONE OF THE PARTNERS WERE TAKEN AS PART OF S ALE PROCEEDS OF LAND HELD BY THE ASSESSEE, THE LD. DR SUBMITTED THAT THE ASSESSEE HOLDS THAT THERE CANNOT BE AN ACQUIESCE ON A STATUTORY PROVISIONS AND THE SHARE OF PROFITS OF SH RI SURENDERNATH CANNOT BE ATTRIBUTED TO THE LAND AS HE WAS A RIGHTFUL PARTNER. DOSHI HOUSING IS ENTITLED FOR DE DUCTION U/S.80IB(10) AND SHRI SURENDERNATH WAS ENTITLED FOR PROFIT OF ` 25 CRORES WHICH ARE AGAIN EXEMPT U/S.10(2A) OF THE ACT . 11.7 THE LD. DR ARGUED THAT THE JDA IS THE ESSENTIA L AND PRINCIPAL DOCUMENT BASED ON WHICH THE TRANSACTIONS HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE DEVELOPER. BY T HIS AGREEMENT, THE ASSESSEE IS DUE TO RECEIVE THE SALE PROCEEDS OF 37.54% OF CONSTRUCTED AREA IN THE PROJECT ETOPIA-I . THE EQUIVALENT MONIES WORTH STAGGERED OVER A PERIOD OF TIME TO APPROXIMATELY ` 35 CRORES. TAKING INTO ACCOUNT, THE UNSOLD PORTION AS ON DATE THE ACTUAL REALIZATION WAS FOUND TO BE MORE THAN ` 35 CRORES. HOWEVER, THE ASSESSEE IN ORDER TO SUPPR ESS THE TRUE AND CORRECT TAXABLE PROFIT WHICH SHOULD BE IN THE ORDER OF 35 CRORES, HAS SHIFTED THE PROFITS TO THE FIRM T O THE EXTENT OF - - ITA 1779 TO 1788/13 ETC. 27 ABOUT ` 25 CRORES IN THE FORM OF SHARE OF PROFITS OF SHRI. M.G.SURENDRANATH WHO HAS BEEN INDUCTED AS A PARTNER AFTER ATTAINING MAJORITY INTO THE FIRM DOSHI HOUSING WHIC H ENJOYED THE DEDUCTION U/S.80IB(10). NATURALLY, THE PARTNER ALSO GETS EXEMPTION U/S.10(2A) ON HIS SHARE OF PROFITS. THE A O HOLDS THAT THIS IS A SHAM TRANSACTION TO AVOID PAYMENT OF TAXE S IN THE HANDS OF THE ASSESSEE. THE SALE AGREEMENT PROVIDED IN ANNEXURE A AND B OF THE ASSESSMENT ORDER ARE NOT. T RUE BUT FABRICATED TO FACILITATE SHIFTING OF PROFITS AND AV OIDANCE OF PAYMENT OF TAXES. THESE FACTS WERE FOUND IN THE LIG HT OF JDA RECOVERED BY THE SURVEY PARTY DURING THE COURSE OF SURVEY. THE FACT OF SHIFTING OF PROFITS AND THE SHARE OF 37.54% RECEIVABLE BY THE ASSESSEE ARE CLEARLY STATED IN THE STATEMENTS G IVEN BY SMT. RANI GOPINATH, MEHUL DOSHI AND SURENDERNATH. , 11.8 ACCORDING TO THE LD. DR, FROM THE ARGUMENTS AB OVE AND IN THE LIGHT OF THE SUCCESSFUL REBUTTAL OF THE RETRACTION BY THE DEPARTMENT, IT IS SEEN THAT THE STATEMENTS GIVE N BY SMT. RANI GOPINATH ARE TRUE AND CORRECT AND THE ARRANGEM ENT DELINEATED IN THE JDA ARE TRUE AND THE APPELLANT HA S SUPPRESSED THE INCOME TO THAT EXTENT. THE ARGUMENTS OF THE - - ITA 1779 TO 1788/13 ETC. 28 APPELLANT ARE DEFEATED. 11.9 FURTHER, THE LD. DR SUBMITTED THAT THE AGREEMENT OF SALE, IT IS BELIEVED AS DOCUMENT IN VOGUE, THE AO H AS OBSERVED THAT NO SALE CONSIDERATION HAS BEEN FIXED FOR THE SALE OF 3 ACRES AND 34.5 CENTS OF LAND WHICH IS INC REDIBLE AND INTRIGUING. AN INDEPENDENT AGREEMENT OF SALE WOULD CERTAINLY PROPOSE THE SALE CONSIDERATION TO BE RECEIVED AND R ECEIVABLE PARTICULARLY FOR THE PURPOSE OF SURETY AND HARMONY BETWEEN THE CONTRACTING PARTIES. BUT, THERE IS AN ENFORCEAB LE JDA AT THE BACK-DROP, TO SUPPORT THE ACTUAL TRANSACTIONS. HENCE, THE PARTIES HAD NOT TAKEN CARE TO MENTION THE SALE VALU E IN IT. IT ONLY MENTIONS THAT THE ACTUAL SALE CONSIDERATION TO BE RECEIVED FROM BUYERS AS PER GUIDELINE VALUE WOULD B E SALE CONSIDERATION. THE DOCUMENT ALSO MENTIONS A RECEIPT OF ADVANCE OF ` 10 LAKHS ONLY VIDE CHEQUE NO.088218 DATED 24.11.2005 DRAWN ON CENTRAL BANK OF INDIA, CHENNAI 600 008. THE CHARACTERISTICS OF A TRUE AND INDEPENDENTL Y EXISTING SALE AGREEMENT ARE NOT EXHIBITED IN THIS SALE AGREE MENT. IT CLEARLY IMPLIES THAT THERE IS A CERTAIN OTHER DOCUM ENT WHICH ENSURES THE VENDOR OF THE LAND, IS NOT IN ANY WAY, DEPRIVED OF - - ITA 1779 TO 1788/13 ETC. 29 THE ACTUAL VALUE, THE LAND TRANSFER OUGHT TO GENERA TE. THIS DOCUMENT IS EXACTLY HIDDEN FROM VIEW OF THE DEPARTM ENT. THE APPARENT DEFICIENCY IN THE DOCUMENTATION WHICH WOUL D STAND THE TEST BEFORE THE COURTS, IN CASE OF DISHON OR OF THE TERMS AND CONDITIONS, IS SUFFICED BY THE JOINT DEVE LOPMENT AGREEMENT DATED 23.11.2005 COMPRISING 10 PAGES. IT INCORPORATES ALL THE ESSENTIAL QUALITIES A TRUE AGR EEMENT MUST POSSESS IN IT, IN STARK COMPARISON TO THE SALE AGRE EMENT DATED 23.11.2005. AS STATED EARLIER, THIS IMPORTANT RECOR D WAS HIDDEN FROM THE VIEW OF THE' DEPARTMENT, NEITHER WA S IT PRODUCED BEFORE THE .INCOME TAX OFFICER, WHILE THE FIRM WAS UNDER SCRUTINY NOR DURING THE RETURNS FILED FOR THE AY 2008-09 AND AY 2009-10 BEFORE THE ACTION U/S.133A AND THE R EVISED RETURNS FOR THE AYS 2006-07 TO 2009-10 FILED SUBSE QUENT TO REOPENING THE ASSESSMENTS. IN VIEW OF THE STATEMEN TS GIVEN BY SMT. RANI GOPINATH AND CORROBORATIVE EVIDENCE, I T IS CLEAR THAT ONLY JDA WAS IN OPERATION, NOT THE AGREEMENT O F SALE. 11.10 AS SEEN FROM THE ABOVE CONTENTIONS, TWO T HINGS ARE REQUIRED TO BE SEEN. (1) WHETHER TRANSFER HAS TAKEN PLACE AS ON 23.11.20 05 AND - - ITA 1779 TO 1788/13 ETC. 30 CAPITAL GAIN ARISES FOR THE AY 2006-07 AND (2) WHETHER THE ASSESSEE IS ENTITLED TO GET 37.54% AS ITS SHARE 11.11 IF THE AGREEMENT OF SALE IS TAKEN INTO A CCOUNT, THEN THE ABOVE TWO THINGS ARE NOT EVIDENT FROM IT BUT ARE CL EARLY DISCERNIBLE FROM THE JDA. AS SEEN FROM BOTH THE AGREEMENTS, BOTH ARE DATED 23.11.2005. HOWEVER, SINCE SMT. RANI GOPINATH AND OTHERS HAVE ADMITTED IN THEIR STATEMENTS THE AR RANGEMENT OF TRANSFER OF THE LAND TO THE DEVELOPER AS PER JDA AN D THE RETRACTION HAS BEEN SUCCESSFULLY COUNTERED BY THE DEPARTMENT, ALL THE TERMS AND CONDITIONS AS PER THE JDA ONLY ARE TA KEN AS APPLICABLE. AS PER THE JDA, THE TRANSFER OF LAND H AS TAKEN PLACE AND ALL THE TERMS AND CONDITIONS INCLUDING THE RIGH T TO SHARE OF 37.54% RECEIVABLE BY THE ASSESSEE ARE IN OPERATION. IT IS ALSO INTERESTING TO NOTE THAT BOTH THESE AGREEMENTS NOT ONLY ARE DATED SAME, BUT THE AMOUNT OF ` 10 LAKHS PAID AS ADVANCE THROUGH CHEQUE NO .088218 DATED 24.11.2005 DRAWN ON CENTRAL BANK, CHENNAI - 600 008 IN FAVOUR OF THE VENDOR IS ALSO SAME IN BOTH THE AGREEMENTS. THIS SHOWS THAT THE AGREEMENT OF SALE IS A TAILOR-MADE AGREEMENT WHICH WILL HELP THE ASSESSEE TO AVOID PAYMENT OF TAXES ON THE EVENTUALITY OF CAPITAL GAIN S - - ITA 1779 TO 1788/13 ETC. 31 ARISING ON TRANSFER OF ITS LAND. FURTHER TO PROVE T HAT THE TRANSFER OF THE PROPERTY HAS TAKEN PLACE ON 23.11.2005, RELIANC E CAN BE MADE ON NUMEROUS AUTHORIZATION LETTERS DULY SIGNED BY SMT. RANI GOPINATH ADDRESSED AND GIVEN TO DOSHI HOUSING, WHEREIN THE SECOND PARA TREADS AS UNDER : ..THESE FLATS ARE TOWARDS THE AREA RECEIVABLE B Y ME AS PER JOINT DEVELOPMENT AGREEMENT DATED 23.11.2005 AND ARE RECEIVED IN PARTIAL DISCHARGE OF THE JOINT DEVE LOPMENT AGREEMENT. THUS THE STATEMENTS GIVEN BY SMT. RANI GOPINATH AND OTHERS ALONG WITH THIS EVIDENCE IS SUFFICIENT TO PROVE THA T THE JDA IS IN OPERATION WITH EFFECT FROM 23.11.2005 AND THE SHARI NG RATIO AS PER JDA IS IN IMPLEMENTATION. 11.12 HE DREW OUR ATTENTION TO THE RELEVANT PART O F THE TRANSFER AS PER THE JDA IS REPRODUCED: 'AND WHEREAS THE OWNER HAVE REQUESTED THE DEVELOPER TO DEVELOP THE ENTIRE SAID PROPERTY OF 3 ACRES AND 34.5 CENTS MORE FULLY DESCRIBED IN SCHEDULE - A HEREUNDER. AND WHEREAS OWNER HAVE AGREED TO SELL TO THE DEVELOPER OR ITS NOMINEE 2 ACRES AND 8.68 CENTS OF LAND MORE FULLY DESCRIBED IN SCHEDULE-B HEREUNDER O UT OF THE SCHEDULE - A DETAILED PROPERTY, AND ACCEPT AS TOTAL SALES CONSIDERATION 37.54% OF THE AREA SANCTIONABLE ON THE ENTIRE LAND OF 3 ACRES AND 34.5 CENTS DESCRIBED IN - - ITA 1779 TO 1788/13 ETC. 32 SCHEDULE-A HEREUNDER, SUCH AREA ALLOTABLE TO THE OW NER MORE FULLY DESCRIBED IN SCHEDULE-C HEREUNDER'. ACCORDING TO THE LD. DR, IT IS CLEAR FROM THE ABOV E PARA THAT 62.45% OF LAND OR 2.68 ACRES OF LAND, HAVE BEEN SOL D OUT BY THE ASSESSEE COMPANY TO THE DEVELOPER IN VIEW OF WHICH THE SALE CONSIDERATION EQUALVENT TO 37.54% OF THE SALEABLE A REA WAS RECEIVABLE. 11.13 HE SUBMITTED THAT THE ASSESSEE HAS TAKEN ANOTHER STAND TO SHOW THAT THE TRANSFER HAS NOT TAKEN PLACE AS ON 23.11.2005 RELEVANT TO AY 2006-07. HE ARGUED THAT THERE WERE ENCUMBRANCES, POLICE CASES, COURT CASES AND OTHER L ITIGATIONS, WHICH WERE RESOLVED ONLY IN 2007. THE EXPLANATION OF THE ASSESSEE THAT TRANSFER HAS NOT TAKEN PLACE IN VIEW OF THE ABOVE WILL NOT HOLD GOOD. SEC. 2(47) OF THE ACT CLEARLY DEFINES WHAT IS TRANSFER AND IT IS APPROPRIATE TO HOLD THAT THE TRA NSFER OF THE LAND IN THE ASSESSEE'S CASE HAS TAKEN PLACE TRULY BY 23.11.2005 AS PER JDA U/S.2(47)(V) OF THE ACT WHICH READS AS UNDE R: 2(47) TRANSFER IN RELATION TO A CAPITAL ASSET, INCL UDES - (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION - - ITA 1779 TO 1788/13 ETC. 33 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882); IN VIEW OF THE STAND TAKEN BY THE AO, HE HAS RELIED ON THE DECISION OF THE HIGH COURT OF MADRAS IN THE CASE OF T.V.SUNDARAM LYENQAR & SONS REPORTED IN 37 ITR 26, WHEREIN IT WAS HELD THAT THE ASSESSEE IS LIABLE TO PAY TAX ON CAPITAL GAINS BASED ON THE CONSIDERATION, HE IS ENTITLED TO RECEI VE AT THE TIME OF TRANSFER, IRRESPECTIVE OF THE FACT NO CAPITAL GA INS ACCRUED ON ACTUAL RECEIPT OF LESSER SALES PRICE IN THE SUBSEQU ENT YEAR AND ALSO FOLLOWING THE JUDGMENTS IN THE CASES OF DR. MA YA SHENOY V. ACIT [124 TTJ (HYD.) 692] AND CHATURBHUJ DWARKADAS KAPADIA OF BOMBAY V. CIT (260 ITR 491). 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD. DR PLACED HEAVY RELIANCE ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DW ARKADAS KAPADIA V. CIT (SUPRA). THEIR LORDSHIPS OF THE BOM BAY HIGH COURT WERE EXAMINING THE SCOPE AND IMPORT OF SECTIO N 2(47)(V) WHICH WAS INTRODUCED W.E.F. 1 ST APRIL, 1988. THIS PROVISION, WHICH COVERS ONE OF THE MODES OF DEEMED 'TRANSFER', LAYS DOWN THAT THE SCOPE OF EXPRESSION 'TRANSFER' INCLUDES 'ANY TRANSA CTION INVOLVING - - ITA 1779 TO 1788/13 ETC. 34 THE ALLOWING OF, THE POSSESSION OF ANY IMMOVABLE PR OPERTY (AS DEFINED) TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRA NSFER OF PROPERTY ACT'. ELABORATING UPON THE SCOPE OF SECTIO N 2(47)(V), THEIR LORDSHIPS OBSERVED AS FOLLOWS : UNDER SECTION 2(47)(V), ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OR RETAINED IN P ART PERFORMANCE OF THE CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF SECTION 2(47)(V). THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWING CONDITI ONS NEED TO BE FULFILLED. THERE SHOULD BE CONTRACT FOR CONSIDERATION; IT SHOULD BE IN WRITING; IT SHOULD B E SIGNED BY THE TRANSFEROR; IT SHOULD PERTAIN TO THE TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOU LD HAVE TAKEN POSSESSION OF PROPERTY; LASTLY, TRANSFER EE SHOULD BE READY AND WILLING TO PERFORM THE CONTRACT . THAT EVEN ARRANGEMENTS CONFIRMING PRIVILEGES OF OWNERSHIP, WITHOUT TRANSFER OF TITLE, COULD FALL UN DER SECTION 2(47)(V). 12.1 THEIR LORDSHIPS, HAVING MADE THE ABOVE OBSERVA TIONS, TOOK NOTE OF THE FACT THAT SECTION 2(47)(V) WAS INT RODUCED IN THE ACT W.E.F. ASST. YEAR 1988-89 BECAUSE PRIOR THERET O, IN MOST CASES, IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT NO TRANSFER TOOK PLACE TILL EXECUTION OF CONVEYANCE. IT WAS ALS O NOTED BY THEIR LORDSHIPS THAT, IN THIS SCENARIO, ASSESSEE USED TO ENTER INTO AGREEMENTS FOR DEVELOPING PROPERTIES WITH THE BUILD ERS AND - - ITA 1779 TO 1788/13 ETC. 35 UNDER ARRANGEMENT WITH THE BUILDERS, THEY USED TO C ONFER PRIVILEGES OF OWNERSHIP WITHOUT EXECUTING CONVEYANC E, AND TO PLUG THAT LOOPHOLE, SECTION 2(47)(V) CAME TO BE INT RODUCED IN THE ACT. 12.2 THERE WAS NO DISPUTE ON WHETHER OR NOT THE CO NDITIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WERE SA TISFIED ON THE FACTS OF THE CASE BEFORE THE BOMBAY HIGH COURT. IT WAS IN THIS CONTEXT, AND AFTER ELABORATE ANALYSIS OF THE FACTS OF THE CASE BEFORE THEIR LORDSHIPS, THEIR LORDSHIPS ALSO OBSERV ED AS FOLLOWS: IF ON A BARE READING OF A CONTRACT IN ITS ENTIRETY , AN AO COMES TO THE CONCLUSION THAT IN THE GUISE OF AGREEM ENT FOR SALE, A DEVELOPMENT AGREEMENT IS CONTEMPLATED, UNDER WHICH THE DEVELOPER APPLIES FOR PERMISSION FR OM VARIOUS AUTHORITIES, EITHER UNDER POWER OF ATTORNEY OR OTHERWISE AND IN THE NAME OF THE ASSESSEE, THE AO I S ENTITLED TO TAKE THE DATE OF CONTRACT AS THE DATE O F THE TRANSFER UNDER SECTION 2(47)(V). 12.3 IT IS IMPORTANT TO BEAR IN MIND THAT SECTION 2(47)(V) REFERS TO 'POSSESSION TO BE TAKEN OR RETAINED IN PART PERF ORMANCE OF THE CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT' AND IN THE CASE BEFORE HON'BLE BOM BAY HIGH COURT, THERE WAS NO DISPUTE THAT THE CONDITIONS OF SECTION 53A WERE SATISFIED. IN OTHER WORDS, THE PROPOSITION LAI D DOWN BY THEIR LORDSHIPS CAN AT BEST BE INFERRED AS THAT WHEN COND ITIONS UNDER - - ITA 1779 TO 1788/13 ETC. 36 SECTION 53A ARE SATISFIED, AND WHEN THE ASSESSEE EN TERS INTO A CONTRACT WHICH IS A DEVELOPMENT AGREEMENT, IN THE G ARB OF AGREEMENT OF SALE, IT IS THE DATE OF THIS DEVELOPME NT AGREEMENT WHICH IS MATERIAL DATE TO DECIDE THE DATE OF TRANSF ER. HOWEVER, BY NO STRETCH OF LOGIC, THIS LEGAL PRECEDENT CAN SUPPO RT THE PROPOSITION THAT ALL DEVELOPMENT AGREEMENTS, IN ALL SITUATIONS, SATISFY THE CONDITIONS OF SECTION 53A WHICH IS A SINE QUA NON FOR INVOKING SECTION 2(47)(V). 12.4 IN ORDER TO INVOKE THE PRINCIPLES LAID DOWN B Y THE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPA DIA (SUPRA), IT IS, THEREFORE, NECESSARY TO DEMONSTRATE THAT THE CONDITIONS UNDER SECTION 53A OF THE TRANSFER OF PRO PERTY ACT ARE SATISFIED. THIS SECTION IS REPRODUCED BELOW FOR REA DY REFERENCE: SECTION 53A : PART PERFORMANCE-WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVAB LE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE TRANSFER CA N BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY P ART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSES SION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF TH E CONTRACT, - - ITA 1779 TO 1788/13 ETC. 37 AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREOF BY THE LAW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE, TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN THE RI GHT SPECIFICALLY PROVIDED BY THE TERMS OF THE CONTRACT; PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED BY US NOW) 12.5 A PLAIN READING OF THE SECTION 53A OF THE TRA NSFER OF PROPERTY ACT SHOWS THAT IN ORDER THAT A CONTRACT CA N BE TERMED TO BE 'OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT' IT IS ONE OF THE NECESSARY PRECONDITI ONS THAT TRANSFEREE SHOULD HAVE OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT. THIS ASPECT HAS BEEN DULY TAKEN NOTE OF B Y THE BOMBAY HIGH WHEN THEIR LORDSHIPS OBSERVED AS FOLLOW S: THAT, IN ORDER TO ATTRACT SECTION 53A, THE FOLLOW ING CONDITIONS NEED TO BE FULFILLED. (A) THERE SHOULD BE CONTRACT FOR CONSIDERATION; - - ITA 1779 TO 1788/13 ETC. 38 (B) IT SHOULD BE IN WRITING; (C) IT SHOULD BE SIGNED BY THE TRANSFEROR; (D) IT SHOULD PERTAIN TO THE TRANSFER OF IMMOVABLE PROPERTY; (E) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF PROPERTY; (F) LASTLY, TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM THE CONTRACT. 12.6 ELABORATING UPON THE SCOPE OF EXPRESSION 'H AS PERFORMED OR IS WILLING TO PERFORM', THE OFT QUOTED COMMENTAR Y 'MULLA-THE TRANSFER OF PROPERTY ACT' (9TH EDN. : PUBLISHED BY BUTTERWORTHS INDIA), AT P. 448, OBSERVES THAT: THE DOCTRINE OF READINESS AND WILLINGNESS IS AN EM PHATIC WAY OF EXPRESSION TO ESTABLISH THAT THE TRANSFEREE ALWAYS ABIDES BY THE TERMS OF THE AGREEMENT AND IS WILLING TO PERFORM HIS PART OF THE CONTRACT. PART PERFORMANCE, AS A STATUTORY RIGHT, IS CONDITIONED UPON THE TRANSFEREE 'S WILLINGNESS TO PERFORM HIS PART OF THE CONTRACT IN TERMS COVENANTED THERE UNDER. WILLINGNESS TO PERFORM THE ROLES ASCRIBED TO A PART Y, IN A CONTRACT IS PRIMARILY A MENTAL DISPOSITION. HOWEVER , SUCH WILLINGNESS IN THE CONTEXT OF SECTION 53A OF THE AC T HAS TO BE ABSOLUTE AND UNCONDITIONAL. IF WILLINGNESS IS STUDD ED WITH A CONDITION, IT IS IN FACT NO MORE THAN AN OFFER AND CANNOT BE TERMED AS WILLINGNESS. WHEN THE VENDEE COMPANY EXPRESSES ITS WILLINGNESS TO PAY THE AMOUNT, PROVID ED THE (VENDOR) CLEARS HIS INCOME TAX ARREARS, THERE IS NO COMPLETE WILLINGNESS BUT A CONDITIONAL WILLINGNESS OR PARTIA L WILLINGNESS WHICH IS NOT SUFFICIENT. - - ITA 1779 TO 1788/13 ETC. 39 IN JUDGING THE WILLINGNESS TO PERFORM, THE COURT MU ST CONSIDER THE OBLIGATIONS OF THE PARTIES AND THE SEQUENCE IN WHIC H THESE ARE TO BE PERFORMED.. 12.7 WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED IN THIS COMMENTARY ON THE PROVISIONS OF T HE TRANSFER OF PROPERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNES S TO PERFORM' FOR THE PURPOSES OF SECTION 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLE SS THE PARTY HAS PERFORMED OR IS WILLING TO PERFORM ITS OBLIGATI ONS UNDER THE CONTRACT, AND IN THE SAME SEQUENCE IN WHICH THESE A RE TO BE PERFORMED, IT CANNOT BE SAID THAT THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL COME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONLY ELEMENTARY THAT, UNLESS PROVI SIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED O N THE FACTS OF A CASE, THE TRANSACTION IN QUESTION CANNOT FALL WIT HIN THE SCOPE OF DEEMED TRANSFER UNDER SECTION 2(47)(V) OF THE IT AC T. LET US THEREFORE CONSIDER WHETHER THE TRANSFEREE, ON THE F ACTS OF THE PRESENT CASE, CAN BE SAID TO HAVE 'PERFORMED OR IS WILLING TO PERFORM' ITS OBLIGATIONS UNDER THE AGREEMENT. - - ITA 1779 TO 1788/13 ETC. 40 13. IN THE PRESENT CASE, THERE IS A JDA DATED 23.11 .2005 BETWEEN THE ASSESSEE AND DOSHI HOUSING AND ON THE S AME DAY, THERE IS ALSO A SALE AGREEMENT BETWEEN THE SAME PAR TIES. THERE IS ONE MORE SALE AGREEMENT ON THE SAME DAY. IN THE SALE AGREEMENT, THERE IS MENTIONING OF PAYMENT OF ` 10 LAKHS VIDE CHEQUE NO.088218 DATED 24.11.2005 DRAWN ON CENTRAL BANK OF INDIA, CHENNAI 600 08. IN THE TWO AGREEMENTS, I. E. SALE AGREEMENT AND JDA, IT IS NOT MENTIONED THAT THE PO SSESSION OF THE PROPERTY WAS HANDED OVER TO THE DOSHI HOUSING. IT IS SPECIFICALLY MENTIONED IN THE AGREEMENT OF SALE IN CLAUSE (5) AS FOLLOWS: THE VENDOR HAVE THIS DAY GIVEN A LICENSE TO PURCHASER TO ENTER INTO THE SAID PROPERTY FOR THE PROPOSED DEVELOPMENT. IT IS MADE ABUNDANTLY CL EAR THAT THE VENDOR HAS NOT HANDED OVER ABSOLUTE POSSESSION OF THE SAID PROPERTY TO THE PURCHASER. 13.1 CLAUSES 6 & 7 OF THE AGREEMENT ARE AS UNDER : 6. THE VENDOR HEREBY CONFIRMS THAT THE PURCHASER SHALL BE ENTITLED TO DEVELOP THE SAID PROPERTY BY PUTTING UP RESIDENTIAL COMPLEXES IN THE SAME AT THE COST OF TH E PURCHASER AND THAT THE VENDOR SHALL HAVE NO CLAIM WHATSOEVER TO SUCH DEVELOPMENT. 7. AS PER THE AGREEMENT OF EVEN DATE ENTERED BETW EEN PURCHASER AND VENDOR, THE PURCHASER SHALL ALSO - - ITA 1779 TO 1788/13 ETC. 41 DEVELOP THE SAID PROPERTY AS A DEVELOPER CONSTRUCT AND SELL BUILT UP AREAS IN THE SAID PROPERTY AND THE PURCHASER WILL SEPARATELY ENTER INTO BUILDERS AGRE EMENT WITH THE PROSPECTIVE PURCHASERS AND SHALL DEVELOP C ONSTRUCT AND DELIVER POSSESSION OF THE BUILT UP AREA DIRECTL Y TO ITS PROSPECTIVE PURCHASERS ON ITS OWN RIGHT, WITHOUT AN Y REFERENCE TO THE VENDOR 13.2 IT IS MENTIONED IN THE JDA DATED 23.11.2005 AT PAGE 3 AS FOLLOWS: AND WHEREAS THE OWNER HAVE REQUESTED THE DEVELOPER TO DEVELOP THE ENTIRE SAID PROPERTY OF 3 ACRES AND 34.5 CENTS MORE FULLY DESCRIBED IN SCHEDU LE A HEREUNDER. AND WHEREAS OWNER HAVE AGREED TO SELL TO THE DEVELOPER OR ITS NOMINEE 2 ACRES AND 8.68 CENTS OF LAND MORE FULLY DESCRIBED I N SCHEDULE B HEREUNDER OUT OF THE SCHEDULE A DETAILED PROPERTY AND ACCEPT AS TOTAL SALES CONSIDERATION 37.54% OF THE AREA SANCTIONABLE IN TH E ENTIRE LAND OF 3 ACRES AND 34.5 CENTS DESCRIBED IN SCHEDULE A HEREUNDER, SUCH AREA ALLOTABLE TO THE OWNER MORE FULLY DESCRIBED IN SCHEDULE C HEREUNDER 13.3 IT IS ALSO MENTIONED IN THE JDA DATED 23.11.20 05 AT PAGE 4 IN CLAUSE NO.3 AS FOLLOWS: 3. M/S.DOSHI HOUSING THIS DAY HAS GIVEN REFUNABLE DEPOSIT OF ` 10,00,000/- (RUPEES TEN LAKHS ONLY) VIDE CHEQUE NO.088218 DATED 24.11.2005 DRAWN ON CENTRAL BANK, CHENNAI 600 008, THE RECEIPT OF WHICH SUM OWNER DOTH HEREBY ACKNOWLEDGE. THIS ADVANCE SHALL BE REFUNDED WITHOUT INTEREST IN THE DEVELOPER AT THE TIME OF HANDING OVER THE BUILT UP - - ITA 1779 TO 1788/13 ETC. 42 AREAS OF THE OWNER SHARE AS PER THE JOINT DEVELOPMENT AGREEMENT. 13.4 HOWEVER, CLAUSE (2) OF THE AGREEMENT DATED 23. 11.2005 AT PAGE 9 OF THE PAPER BOOK READS AS FOLLOWS: 2. FROM NOW ONWARDS THE DEVELOPERS SHALL STEP INTO THE SHOES OF THE OWNERS AND SHALL PERFORM ALL THE DUTIES, RIGHTS AND OBLIGATIONS AS ENVISAGED IN THE SALE AGREEMENT DATED 23.11.2005. THE DEVELOPERS HAVE TAKEN POSSESSION OF THE PROPERTY AND THEY ARE ENTIT LED TO CONSTRUCT AND DEVELOP THE SCHEDULE MENTIONED PROPERTY AS PER THE SANCTIONED PLAN. 13.5 THUS, AS SEEN FROM THE JDA, THE POSSESSION HAS NOT BEEN GIVEN AND ALSO SALE CONSIDERATION IS QUANTIFIED AT 37.54% OF SANCTIONABLE CONSTRUCTION AREA. THE ASSESSEE ONLY RECEIVED REFUNDABLE DEPOSIT OF ` 10 LAKHS. AS SUCH, THE ASSESSEE HAS RECEIVED A MEAGRE AMOUNT AS REFUNDABLE DEPOSIT, WHI CH CANNOT BE CONSTRUED AS RECEIPT OF PART OF SALE CONSIDERATI ON. THERE IS NO EVIDENCE TO SHOW THAT THE DEVELOPER GOT APPROVAL OF THE BUILDING PLAN FROM THE MUNICIPALITY FOR CONSTRUCTION OF THE BUILDING. THE SANCTION OF THE BUILDING PLAN IS UTMOST IMPORTANT F OR THE IMPLEMENTATION OF THE AGREEMENT ENTERED BETWEEN THE PARTIES. WITHOUT SANCTION OF THE BUILDING PLAN, THE VERY GEN ESIS OF THE AGREEMENT FAILS. TO ENABLE THE EXECUTION OF THE AGR EEMENT, - - ITA 1779 TO 1788/13 ETC. 43 FIRSTLY, PLAN IS TO BE APPROVED BY THE COMPETENT AU THORITY. IN FACT, THERE IS NOTHING ON RECORD TO SHOW THAT BUILDING PL AN WAS GOT APPROVED ON OR BEFORE 31.3.2006 IN THE RELEVANT ASS T. YEAR 2006- 07. IF PERMISSION IS NOT GRANTED FOR CONSTRUCTION OF THE BUILDING, A DEVELOPER CANNOT UNDERTAKE CONSTRUCTION. AS A RES ULT OF THIS, THE CONSTRUCTION WAS NOT TAKEN PLACE IN THE ASSESSM ENT YEAR UNDER CONSIDERATION. NOTHING IS BROUGHT ON RECORD TO SHOW THAT THERE WAS DEVELOPMENT ACTIVITY IN THE PROJECT DURIN G THE ASSESSMENT YEAR 2006-07 OR ANY COST OF CONSTRUCTION WAS INCURRED BY THE DEVELOPER. HENCE, IT IS TO BE INFE RRED THAT NO AMOUNT OF INVESTMENT IN CONSTRUCTION WAS MADE BY TH E DEVELOPER IN THE CONSTRUCTION ACTIVITY DURING THE ASSESSMENT YEAR 2006-07 IN THIS PROJECT. 13.6 THE COST OF CONSTRUCTION IN THE NEXT ASST. Y EAR 2007-08 WAS ` 1,87,70,612/-. IT WOULD AMOUNT TO NON-INCURRING O F REQUIRED COST OF ACQUISITION BY THE DEVELOPER IN AS ST. YEAR 2006- 07 AND IT IS NOT POSSIBLE TO SAY WHETHER THE DEVELO PER PREPARED TO CARRY OUT THOSE PARTS OF THE AGREEMENT TO THEIR LOGICAL END. THE DEVELOPER IN THIS ASSESSMENT YEAR HAD NOT SHOWN ITS READINESS OR HAVING MADE PREPARATION FOR THE EXECUTION OF THE JDA. IN - - ITA 1779 TO 1788/13 ETC. 44 OTHER WORDS, THE DEVELOPER HAS NOT TAKEN STEPS TO M AKE IT ELIGIBLE TO UNDERTAKE THE PERFORMANCE OF THE AGREEMENT WHICH ARE THE PRIMARY INGREDIENT THAT MAKE A PERSON ELIGIBLE AND ENTITLED TO MAKE THE CONSTRUCTION. THE ACT AND CONDUCT OF THE D EVELOPER IN THIS ASSESSMENT YEAR SHOWS THAT INGREDIENTS ARE NOT FULFILLED. BEING SO, IT WAS CLEAR THAT IN THE YEAR UNDER CONSI DERATION, THERE WAS NO TRANSFER OF NOT ONLY THE FLATS AS SUPERSTRUC TURE BUT ALSO THE PROPORTIONATE LAND BY THE ASSESSEE UNDER THE JD A. FURTHER, THE TIME LIMIT FOR DEVELOPMENT OF THE PROPERTY IS A T 36 MONTHS FROM THE DATE OF COMMENCEMENT OF THE BUILDING CONST RUCTION SHALL BE RECKONED AS 30 DAYS AFTER THE RECEIPT OF S ANCTIONED BUILDING PLAN BY AUTHORITIES CONCERNED. BEING SO, A PPROVAL OF THE BUILDING PLAN IS FOREMOST IMPORTANT AND 30 DAYS FRO M THE SANCTIONED PLAN, TIME STARTS FROM COMPLETION OF DE VELOPMENT OF THE PROJECT AND THEREAFTER, THE DEVELOPER HAND OVER THE POSSESSION OF THE ALLOCATED AREA- DEVELOPED PROPERT Y TO THE ASSESSEE. 13.7 BUT THE FACT REMAINS THAT THE DEVELOPER HAD FAILED TO GET THE APPROVAL OF THE PLAN OR PERFORM ITS OBLIGATIONS UNDER THE JDA. EVEN OTHERWISE, THE ASSESSING AUTHORITIES HAS NOT B ROUGHT ON - - ITA 1779 TO 1788/13 ETC. 45 RECORD THE ACTUAL POSITION OF THE PROJECT EVEN AS O N THE DATE OF ASSESSMENT AND HE HAS NOT RECORDED THE FINDINGS WHE THER THE DEVELOPER STARTED THE CONSTRUCTION WORK AT ANY TIME DURING THE ASSESSMENT YEAR 2006-07. HE WENT ON TO PROCEED ON THE SOLE ISSUE WITH REGARD TO ENTERING INTO JDA AND THE STAT EMENT GIVEN BY SMT. RANI GOPINATH DURING THE SURVEY CONDUCTED U /S.133A OF THE ACT. FURTHER, HANDING OVER THE POSSESSION OF T HE PROPERTY IS ONLY ONE OF THE CONDITIONS U/S 53A OF THE TRANSFER OF PROPERTY ACT, BUT IT IS NOT THE SOLE AND ISOLATED CONDITION BECAUSE OF THE SUPPLEMENTARY AGREEMENT DATED 23.11.2005. IT WAS S TATED BY THE LD. DR THAT THE DEVELOPER HAS TAKEN THE POSSESS ION OF THE PROPERTY AND THE DEVELOPER WAS ENTERED INTO JDA TO DEVELOP THE PROPERTY AS PER SANCTIONED PLAN. IT CANNOT BE PRES UMED THAT ALL THE CONDITIONS REQUIRED U/S.2(47)(V) OF THE ACT ARE FULFILLED. ON THESE FACTS, IT IS NOT POSSIBLE TO HOLD THAT THE TR ANSFEREE WAS WILLING TO PERFORM ITS OBLIGATIONS IN THE FINANCIAL YEAR 2005-06 RELEVANT TO THE ASST. YEAR 2006-07, IN WHICH THE CA PITAL GAINS ARE SOUGHT TO TAX BY THE ASSESSING OFFICER. 14. WE ARE OF THE OPINION THAT THE CONDITION LAID D OWN UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS NO T SATISFIED IN - - ITA 1779 TO 1788/13 ETC. 46 THE ASSESSMENT YEAR 2006-07. ONCE WE COME TO THE CO NCLUSION THAT THE TRANSFEREE WAS NOT 'WILLING TO PERFORM', A S STIPULATED BY AND WITHIN MEANINGS ASSIGNED TO THIS EXPRESSION UND ER SECTION 53A OF THE TRANSFER OF PROPERTY ACT, ITS CONTRACTUA L OBLIGATIONS IN THIS PREVIOUS YEAR RELEVANT TO THE PRESENT ASSESSME NT YEAR 2006- 07, IT IS ONLY A COROLLARY TO THIS FINDING THAT THE DEVELOPMENT AGREEMENT DATED 23.11.2005 BASED ON WHICH THE IMPUG NED TAXABILITY OF CAPITAL GAIN IS IMPOSED BY THE AO AND UPHELD BY THE CIT(A), CANNOT BE SAID TO BE A 'CONTRACT OF THE NAT URE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT' AND , ACCORDINGLY, PROVISIONS OF SECTION 2(47)(V) CANNOT BE INVOKED ON THE FACTS OF THIS CASE. IN OUR OPINION, IN THE CASE OF CHATURBH UJ DWARKADAS KAPADIA V. CIT(SUPRA), UNDOUBTEDLY LAYS DOWN A PROP OSITION WHICH, MORE OFTEN THAT NOT, FAVOURS THE REVENUE, BU T, ON THE FACTS OF THIS CASE, THE SAID JUDGMENT SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS 'WILLINGNESS TO PERFORM' HAS B EEN SPECIFICALLY RECOGNIZED AS ONE OF THE ESSENTIAL ING REDIENTS TO COVER A TRANSACTION BY THE SCOPE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT AND THE REVENUE DOES NOT GET ANY AS SISTANCE FROM THIS JUDICIAL PRECEDENT. - - ITA 1779 TO 1788/13 ETC. 47 15. IN OUR OPINION, THAT IS CLEARLY AN ERRONEOUS A SSUMPTION, AND AN THE PROVISIONS OF DEEMED TRANSFER UNDER SECT ION 2(47)(V) COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THE PRE SENT CASE AND FOR THE ASSESSMENT YEAR IN DISPUTE BEFORE US. I N THE PRESENT CASE, THE SITUATION IS THAT THE ASSESSEE HAS NOT RE CEIVED ANY AMOUNT OUT OF TOTAL CONSIDERATION, THE TRANSFEREE I S AVOIDING ADHERING TO THE AGREEMENT AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO SHOW THAT THER E WAS ACTUAL CONSTRUCTION HAS BEEN TAKEN PLACE AT THE IMPUGNED P ROPERTY IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND ALSO TH ERE IS NO EVIDENCE TO SHOW THAT THE RIGHT TO RECEIVE THE SALE CONSIDERATION WAS ACTUALLY ACCRUED TO THE ASSESSEE. IT IS RECORD ED BY THE AO IN THE ASSESSMENT ORDER THAT THE DEVELOPER INCURRED COST OF CONSTRUCTION OF ` 1,87,70,612/- IN THE FINANCIAL YEAR 2006-07 RELEVANT TO THE ASST. YEAR 2007-08. WITHOUT ACCRUA L OF THE CONSIDERATION TO THE ASSESSEE, THE ASSESSEE IS NOT EXPECTED TO PAY CAPITAL GAINS ON THE ENTIRE AGREED SALES CONSID ERATION. WHEN TIME IS ESSENCE OF THE CONTRACT, AND THE TIME SCHED ULE IS NOT ADHERED TO, IT CANNOT BE SAID THAT SUCH A CONTRACT CONFERS ANY RIGHTS ON THE VENDOR/LANDLORD TO SEEK REDRESSAL UND ER SECTION - - ITA 1779 TO 1788/13 ETC. 48 53A OF THE TRANSFER OF PROPERTY ACT. THIS AGREEMENT OF JDA CANNOT, THEREFORE, BE SAID TO BE IN THE NATURE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT. IT CANNOT, THEREFORE, BE SAID THAT THE PROVISIONS OF S ECTION 2(47)(V) WILL APPLY IN THE SITUATION BEFORE US. 15.1 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED V IEW THAT THE ASSESSEE DESERVES TO SUCCEED ON REASON THAT THE CAP ITAL GAINS COULD NOT HAVE BEEN TAXED IN THIS ASSESSMENT YEAR I N APPEAL BEFORE US. 15.2 FURTHER, THE LD. DR RELIED ON THE SWORN STATEM ENT RECORDED FROM SMT. RANI GOPINATH. AS DISCUSSED EAR LIER, IN THE SWORN STATEMENT DATED 24.1.2012, SHE HAS OFFERED CA PITAL GAINS. IT WAS STATED THAT THE COMPANY HAD INTENTIONALLY AN D DELIBERATELY THROUGH A RUSE IN THE FORM OF INTRODUCING THE SON A S A PARTNER OF THE DEVELOPER FIRM, SUPPRESSED TAXABLE PROFITS AND SHE CONFIRMED THAT THE SHARE OF PROFITS OF HER SON FROM THE FIRM SHOULD ALSO BE INCLUDED TO THE VALUE OF SALE CONSIDERATION AND OFFERED TO TAX. HOWEVER, THOSE STATEMENTS WERE RETRACTED BY THE SAME PERSON VIDE LETTER FILED BEFORE THE CIT(APPEALS) ON 22.2.2012, - - ITA 1779 TO 1788/13 ETC. 49 WHICH IS KEPT ON RECORD. IN THAT LETTER, SHE STATE D THAT THE SURVEY TEAM VISITED THEIR OFFICE ON 24.1.2012 AT 9.30 AM. SHE WAS SUMMONED TO APPEAR BEFORE THEM. ACCORDING TO THAT, SHE APPEARED ON 2.30 PM AND DETAINED HER IN THE OFFICE UPTO 9.00 PM. SHE STATED THAT THE REVENUE AUTHORITY HAD FORC IBLY TAKEN SOME STATEMENTS AND ALSO SOME SIGNATURES FROM HER A ND, THEREFORE, SHE RETRACTED THE STATEMENTS GIVEN BY HE R. IN OUR OPINION, THE STATEMENT EVEN RECORDED FROM THE ASSES SEE U/S.132(4) OF THE ACT IS NOT CONCLUSIVE PROOF AS HE LD BY THE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. ASHOK KU MAR SONI (291 ITR 172). 15.3 FURTHER, THE SUPREME COURT IN THE CASE OF P ULLANGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERALA (91 ITR 18) OBSERVED THAT AN ADMISSION IS EXTREMELY AN IMPORTANT PIECE O F EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS IN CORRECT. THE MADRAS HIGH COURT IN THE CASE OF CIT V. S. KHADER K HAN SON (300 ITR 157) HELD THAT SEC.133A OF THE ACT, DOES N OT EMPOWER ANY INCOME-TAX AUTHORITY TO EXAMINE ON OATH. HENCE , ANY SUCH STATEMENT HAS NO EVIDENTIARY VALUE. THE SAME VIEW WAS TAKEN - - ITA 1779 TO 1788/13 ETC. 50 BY THE KERALA HIGH COURT IN THE CASE OF PAUL MATHEW S AND SONS V. CIT (263 ITR 101). SAME VIEW WAS ALSO TAKEN BY THE MADRAS HIGH COURT IN THE CASE OF CIT V. SENNIAPPAN (G.K.) 284 ITR 220. 15.4 FURTHER, CBDT VIDE INSTRUCTION F.NO. 286/2/200 3-IT(INV.II) DATED 10.3.2003, INSTRUCTED THAT THE OFFICERS SHOUL D NOT MAKE ANY ADDITION ON THE BASIS OF ADMISSION OF THE ASSESSEE IT SHOULD BE BASED ON THE INCRIMINATING MATERIAL. BASED ON TH E ADMISSION MADE BY THE SMT. RANI GOPINATH, THE AO FRAMED THE ASSESSMENT. HE RELIED ON JUDGMENT OF THE MADRAS HI GH COURT IN THE CASE OF T.V.SUNDARAM IYENGAR & SONS(SUPRA). NO W, ONE MORE ARGUMENT OF THE DR IS THAT THE ASSESSEE ARRANG ED AS ASSESSEES AFFAIRS IN SUCH A MANNER BY INTRODUCING SRI M.G.SURENDRANATH, SON OF THE MANAGING OF THE ASSES SEE COMPANY AS A PARTNER IN M/S. DOSHI HOUSING AND HE H AS RECEIVED A SUM OF ` 25 CRORES WHICH IS NOTHING BUT AMOUNT RECEIVABLE BY THE ASSESSEE TOWARDS THE SALE CONSIDE RATION SAID TO BE RECEIVED FROM DOSHI HOUSING AND IT IS A COLLU SIVE TRANSACTION AND THE TRIBUNAL MUST TAKE NOTE OF ALL THE FACTS WHICH FORM PART OF THE SAME TRANSACTION AND THE AUTHORITI ES ARE NOT - - ITA 1779 TO 1788/13 ETC. 51 DEBARRED FROM GOING INTO THE FACTS BROUGHT BEFORE T HEM AND IT WILL NOT BE PROPER TO OVERLOOK THE FACTS WHICH ARE CLEAR FROM THE RECORDS. ACCORDING TO THE DR, THE SUM AND SUBSTANC E OF THIS CASE IS THAT THE ASSESSEE SOLD THE IMPUGNED PROPERT Y TO M/S. DOSHI HOUSING AND THE SALE CONSIDERATION WAS ROUTED THROUGH SHRI M.G.SURENDRANATH, WHO IS SON OF SMT. RANI GOPI NATH, MANAGING DIRECTOR OF THE ASSESSEE COMPANY. ACCORDI NG TO THE DR, THE ENTIRE ISSUE IS REQUIRED TO BE CONSIDERED I N ITS PROPER PERSPECTIVE AND HAS TO BE TREATED AS ONE COMMON TRA NSACTION ENTERED THROUGH THREE SEPARATE AGREEMENTS BUT IN CO MMON PRINCIPLE UNDERLYING IS THAT IT IS A TRANSFER U/S.2 (47(V) OF THE ACT. 15.5 ADMITTEDLY, IN THIS CASE, SHRI MG SURENDRANATH WAS INDUCTED INTO THE PARTNERSHIP OF M/S. DOSHI HOUSING . ACCORDINGLY, HE RECEIVED A SUM OF ` 25,64,59,023/- DURING THE PERIOD FROM 1.4.2009 TO 31.3.2010, WHICH IS MENTION ED IN THE ASSESSMENT ORDER AT PAGE 80. SHRI M.G.SURENDRANATH IS AN INDEPENDENT ASSESSEE, HE IS MAJOR AND HE IS AT LIBE RTY TO ENTER INTO ANY AGREEMENT AS PER LAW. ACCORDING TO THE LD . AR, THE RECEIPT OF PROFIT FROM DOSHI HOUSING BY SHRI M.G.SU RENDRANATH, - - ITA 1779 TO 1788/13 ETC. 52 WHICH WAS ACCEPTED IN HIS HANDS CANNOT BE A REASON TO TREAT THE SAME AS TAXABLE IN THE HANDS OF THE ASSESSEE ON THE GROUND THAT MR. SURENDRANATH IS THE SON OF THE MANAGING DIRECTO R OF THE ASSESSEE COMPANY. WHENEVER THE LAW PERMITS, THE SH RI M.G.SURENDRANATH IS AT LIBERTY TO ENTER INTO ANY CO NTRACT TO CARRY ON HIS BUSINESS. THE AO INTERPRETED THE CREDIT O F ` 25,64,59,023/- BY DOSHI HOUSING TO THE ACCOUNT OF S HRI M.G.SURENDRANATH DURING THE PERIOD FROM 1.4.2009 TO 31.3.2010 AS A RECEIPT OF MONEY TOWARDS SALE VALUE OF THE LA ND PROPERTY BY THE ASSESSEE. 15.6 THIS EVIDENCE COLLECTED BY THE REVENUE AUTHORI TIES IS NOT SUFFICIENT TO ESTABLISH THE STAND THAT THE ASSESSEE HAS RECEIVED SALE CONSIDERATION OF THE PROPERTY THROUGH THE SON OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY IN THE AS ST. YEAR 2006-07 AND TO HOLD THAT OTHER TRANSACTIONS WERE ON LY PAPER TRANSACTIONS, WHICH ARE BOGUS. IT IS ALSO IMPROPER TO INFER THAT SMT. RANI GOPINATH BEING THE MANAGING DIRECTOR OF T HE ASSESSEE-COMPANY AT THE RELEVANT POINT OF TIME, CON TROLLED AND PUT THIS TRANSACTION THROUGH DIFFERENT MODE AND EAR NED INCOME TO AVOID THE TAX. IN OUR OPINION, THE ENTIRE EVIDENC E HAS TO BE - - ITA 1779 TO 1788/13 ETC. 53 APPRECIATED IN A WHOLESOME MANNER. WHEN THERE IS DOCUMENTARY EVIDENCE, THE SAME CANNOT BE OVERLOOKED , IF THERE ARE SURROUNDING CIRCUMSTANCES TO SHOW THAT THE CLAI M OF THE ASSESSEE IS OPPOSED NORMAL COURSE OF HUMAN THINKING AND CONDUCT AND HUMAN PROBABILITIES. EVEN HIGH DEGREE OF SUSPICION IS NOT REPLACE THE EVIDENCE ON RECORD. THIS PRINC IPLE HAS BEEN LAID DOWN BY THE SUPREME COURT IN TWO LEADING CASES VIZ., IN THE CASE OF CIT V. DURGA PRASAD MORE (82 ITR 540) AND M RS. SUMATI DAYAL V. CIT (214 ITR 801). EVEN APPLYING THIS PRI NCIPLE TO THE PRESENT CASE, WE ARE NOT IN A POSITION TO APPRECIAT E THE ARGUMENT OF THE LD. DR TO SHOW THAT THE CONDUCT OF THE ASSES SEE OPPOSED TO THE NORMAL COURSE OF HUMAN CONDUCT. 15.7 THE CIRCUMSTANCES SURROUNDING THE CASE ARE A LSO, IN OUR VIEW, NOT STRONG ENOUGH TO JUSTIFY THE REJECTION OF THE ASSESSEES ARGUMENT AS OUTRAGEOUS OR FALSE. WE HAVE CONSIDERE D THE BACKGROUND ON WHICH THE MANAGING DIRECTOR OF THE AS SESSEE COMPANY HAS GIVEN A SWORN STATEMENT DURING THE COUR SE OF SURVEY U/S.133A OF THE ACT AND ALSO CIRCUMSTANCES U NDER WHICH SHRI MG SURENDRANATH MADE A STATEMENT BEFORE THE AU THORITIES. WE HAVE ALREADY GIVEN THE REASONS AS TO WHY THESE S TATEMENTS - - ITA 1779 TO 1788/13 ETC. 54 CANNOT BE RELIED UPON. THERE WAS NO EVIDENCE COLLE CTED DURING THE COURSE OF SURVEY TO SHOW THAT THE ASSESSEE HAS ALREADY GIVEN THE POSSESSION OF THE PROPERTY TO THE DEVELOP ER AND THE DEVELOPER CARRIED OUT THE DEVELOPMENT ACTIVITY IN T HE ASST. YEAR 2006-07. FURTHER, EVEN IF, WE CONSIDER THE SALE AG REEMENT DATED 23.11.2005 AS VALIDLY EXECUTED SALE AGREEMENT, THER E IS NO MENTION OF THE SALE CONSIDERATION IN THAT SALE AGRE EMENT. IT WAS MENTIONED IN CLAUSE 2 OF THE SALE AGREEMENT THAT CO NSIDERATION PAYABLE AND DATE OF PAYMENT OF THE CONSIDERATION CA NNOT BE FIXED AT THE TIME OF SIGNING OF SAID SALE AGREEMENT AND THE SAME SHALL BE ACTUAL SALE CONSIDERATION REALISED FROM TH E PROSPECTIVE PURCHASERS OF UNDIVIDED SHARES IN THE SAID PROPERTY AT THE GUIDELINE VALUE FIXED BY THE REGISTRATION DEPARTMEN T OF GOVT. OF TAMILNADU PREVAILING AT THE TIME OF EACH SALE. THE VENDOR, THE PRESENT ASSESSEE AUTHORISED THE PURCHASER I.E. DOSH I HOUSING TO COLLECT THE SALE CONSIDERATION FROM THE PROSPECTIVE PURCHASERS ON BEHALF OF THE ASSESSEE AND THE SAID SALE CONSIDERAT ION SHALL BE PAID BY THE PURCHASER TO THE VENDER ON COMPLETION O F THE PROJECT AND ALSO IT WAS MENTIONED IN CLAUSE 5 THAT ABSOLUTE POSSESSION OF THE LANDED PROPERTY IN THE HANDS OF THE PRESENT ASSESSEE ALSO. - - ITA 1779 TO 1788/13 ETC. 55 THE SALE AGREEMENT WAS ENTERED INTO IN RESPECT OF 3 ACRES AND 34.5 CENTS OF LAND PROPERTY. HOWEVER, THE JDA WAS ENTERED FOR TRANSFER OF PROPERTY TO THE DEVELOPER TO THE EXTENT OF 2 ACRES AND 8.68 CENTS. THE CONDITIONS IN SALE AGREEMENT AND J DA ARE CONTRADICTORY EACH OTHER. AS PER SALE AGREEMENT, T HE ASSESSEE HAS NO RIGHT OVER CONSTRUCTED AREA. AS PER JDA, T HE ASSESSEE IS GOING TO RECEIVE 37.54% OF AREA SANCTIONABLE CONST RUCTED AREA. SEC. 50D IS NOT APPLICABLE FOR THE ASST. YEAR 2006- 07, WHICH IS CAME INTO OPERATION WITH EFFECT FROM 1.4.2013. THU S, SURROUNDING CIRCUMSTANCES DID NOT CONTAIN ANYTHING WHICH BELIED THE CLAIM OF THE ASSESSEE THAT THERE WAS NO TRANSFE R OF PROPERTY BY GIVING THE POSSESSION TO THE VENDOR. 16. WE HAVE ALSO GONE THROUGH THE LEDGER ACCOUNT EX TRACTED IN THE ASSESSMENT ORDER AT PAGE 80, WHICH SHOWS REC EIPT OF MONEY BY SRI M.G.SURENDRANATH FROM M/S. DOSHI HOUSI NG WHICH IS AS FOLLOWS : M.G. SURENDRANATH LEDGER ACCOUNT 1-APR-2009 TO 31-MARCH-2010 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2009 DR OPENING BALANCE 5,72,14,339 12-6-2009 CR THE SOUTH INDIAN BANK LTD. CH.NO.191723 PAYMENT 336 20,00,000.00 - - ITA 1779 TO 1788/13 ETC. 56 AMT PAID TO M.G. SURENDRANATH 10-8-2009 CR THE SOUTH INDIAN BANK LTD. CH.NO.192717 AMT PAID TO M.G. SURENDRANATH PAYMENT 617 15,00,000.00 25-9-2009 CR THE SOUTH INDIAN BANK LTD. CH.NO. 193264 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 813 25,00,000.00 30.10.2009 CR THE SOUTH INDIAN BANK LTD. CH.NO. 202204 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 997 30,00,000.00 3-11-2009 CR THE SOUTH INDIAN BANK LTD. CH.NO. 202222 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1020 40,00,000.00 26-11-2009 CR THE SOUTH INDIAN BANK LTD. CH.NO. 204698 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1149 60,00,000.00 12-12-2009 CR THE SOUTH INDIAN BANK LTD. CH.NO. 204768 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1248 100,00,000.00 11-1-2010 CR THE SOUTH INDIAN BANK LTD. CH.NO. 204864 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1149 50,00,000.00 29-1-2010 CR THE SOUTH INDIAN BANK LTD. CH.NO. 069590 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1485 65,00,000.00 13-2-2010 CR THE SOUTH INDIAN BANK LTD. CH.NO. 070049 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1564 105,00,000.00 19-3-2010 CR THE SOUTH INDIAN BANK LTD. CH.NO. 069930 AMOUNT PAID TO M. G. SURENDRANATH PAYMENT 1670 50,00,000.00 - - ITA 1779 TO 1788/13 ETC. 57 31-3-2010 CR PROFIT & LOSS A/C JOURNAL 442 19,92,44,684.62 5,60,00,000.00 25,64,59,023.62 20,04,59,023.62 CR CLOSING BALANCE 25,64,59,023.62 EVEN IF IT IS PRESUMED THAT IT IS A PART OF SALE CO NSIDERATION PAYABLE TO THE ASSESSEE, THAT CONSIDERATION NOT AT ALL RELATING TO THE ASST. YEAR 2006-07 TO UPHOLD THAT THERE WAS A T RANSFER IN THE ASST. YEAR 2006-07. ACCORDINGLY, IN OUR OPINION, N O CAPITAL GAIN ARISES IN THE HANDS OF THE ASSESSEE FOR THE ASST. Y EAR 2006-07 AND THE APPEAL OF THE ASSESSEE FOR THE ASST. YEAR I S TO BE ALLOWED. 16.1 FURTHER, THE REVENUE AUTHORITIES CANNOT START WITH THE QUESTION AS TO WHETHER THE IMPUGNED TRANSACTION IS A TAX DEFERMENT/SAVING DEVICE. BUT IT SHOULD APPLY THE L OOK AT TEST TO ASCERTAIN TRUE LEGAL NATURE OF THE TRANSACTION. TH E AUTHORITIES MAY INVOKE THE SUBSTANCE OVER FORM PRINCIPLE OR PIERCING THE CORPORATE VEIL TEST ONLY AFTER IT IS ABLE TO ESTAB LISH ON THE BASIS OF THE FACTS AND CIRCUMSTANCES SURROUNDING THE TRANSAC TION THAT THE IMPUGNED TRANSACTION IS A SHAM OR TAX AVOIDANT. EVE RY STRATEGIC PLAN SHOULD BE LOOKED AT IN A HOLISTIC MANNER. MER ELY BECAUSE THE TAX IS NOT PAYABLE OR RECEIVABLE COULD NOT MAKE THE ENTIRE - - ITA 1779 TO 1788/13 ETC. 58 TRANSACTION A SHAM OR A TAX AVOIDANT. IN OUR OPINI ON, THE JUDGMENT OF THE SUPREME COURT IN THE CASES OF MCDOW ELL AND CO. LTD. V. CTO [154 ITR 148] CANNOT BE APPLIED IN VIEW OF THE DECISION IN THE CASE OF UNION OF INDIA V. AZADI BA CHAO ANDOLAN [263 ITR 706] & VODAFONE INTERNATIONAL HOLDINGS B.V . VS. UNION OF INDIA & ANOTHER, 341 ITR 1 (SC). 16.2 IN THE PRESENT CASE, JDA WAS EXECUTED ENVISAGI NG CONSIDERATION MAINLY IN TERMS OF A PORTION OF BUILT -UP AREA. THE HANDING OVER OF POSSESSION OF THE PROPERTY BY THE L AND OWNER TO THE DEVELOPER IS NOT MENTIONED IN THE JDA AND IT IS TO BE CONSTRUED AS DEFERRED TILL THE HANDING OVER OF THE STIPULATED PORTION OF THE MARKED BUILT UP AREA BY THE DEVELOPE R TO THE LAND OWNER. UPTO THAT POINT OF TIME, THE DEVELOPER WAS ONLY LICENSED TO ENTER THE PROPERTY FOR THE LIMITED PURPOSE OF DE VELOPMENT AND CONSTRUCTION AS DISCUSSED EARLIER. THE TRANSFER D OES NOT TAKE PLACE IMMEDIATELY AND THE LIABILITY TO CAPITAL GAIN S DOES NOT ARISE UNTIL THE BUILT UP AREA EARMARKED FOR THE LAND OWNE R AS CONSTRUCTED AND HANDED OVER. HOWEVER, WHEN THE REG ISTRATION OF DOCUMENT TRANSFERRING UNDIVIDED INTEREST IN LAND IS DONE IN FAVOUR OF FLAT OWNER, THEN TO THAT EXTENT LIABILITY TO CAP ITAL GAINS TAX TO BE - - ITA 1779 TO 1788/13 ETC. 59 PAID BY THE ASSESSEE AS HELD IN THE CASE OF CHATURB HUJ DWARKADAS KAPADIA V. CIT, (260 ITR 491)(BOM.) CIT V. CITIBANK N.A .[261 ITR 570] (BOM) AND IN THE CASE OF R. VIJA YALAKSHMI V. APPU HOTELS P. LTD. [257 ITR 4](MAD). IN OUR OPINIO N, THE TRANSACTION EMANATING FROM THE JDA DATED 23.11.2005 CANNOT BE LIABLE TO BE TAXED IN THE ASST. YEAR 2006-07 IN TER MS OF SEC.2(47)(V) OF THE ACT. 16.3 FURTHER, AS HELD BY THE MADRAS HIGH COURT IN T HE CASE OF CIT V. G. SAROJA (301 ITR 124) THAT SEC. 2(47)(V) O F THE ACT COMES INTO OPERATION ONLY IF THE CONDITIONS OF SEC. 53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED AND A WRITTE N AGREEMENT BEING BASIC REQUIREMENT FOR INVOKING THE PROVISIONS OF SEC.53A OF THE TP ACT, THERE WAS NO TRANSFER OF PROPERTY U/S.2 (47)(V) OF THE ACT. WHEN THE ASSESSEE WAS THE DEVELOPER IN THE PO SSESSION OF THE PROPERTY AS PER WRITTEN AGREEMENT BETWEEN THE A SSESSEE AND THE DEVELOPER AND NO SALE CONSIDERATION RECEIVE D DURING THE RELEVANT PERIOD OF TIME AND CAPITAL GAIN IS NOT ASS ESSABLE IN THE ASST. YEAR. THE CRUX OF THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF G. SAROJA (SUPR) IS THAT SEC.2(47)(V) O F THE ACT COMES - - ITA 1779 TO 1788/13 ETC. 60 INTO THE AID OF THE DEPARTMENT ONLY IF THE CONDITIO NS OF SEC.53A OF THE TP ACT ARE SATISFIED. 16.4 THE MADRAS HIGH COURT IN THE CASE OF R. VIJAYA LAKSHMI V. APPU HOTELS LTD. AND OTHERS(257 ITR 4) HELD THAT DE VELOPMENT AGREEMENT IS EXECUTORY CONTRACT AND NOT BE CONSTRUE D AS AN AGREEMENT FOR SALE SIMPLICITOR. FURTHER, IT WAS HELD THAT POSSESSION OF THE PROPERTIES WAS GIVEN TO THE BUILD ER UNDER A DEVELOPMENT AGREEMENT FOR CONSTRUCTION FOR A SPECIF IED PERIOD, WHICH IS NOT A PERMANENT TRANSFER. SIMILAR ISSUE CA ME FOR CONSIDERATION BEFORE THE SUPREME COURT IN THE CASE OF SURAJ LAMPS & INDUSTRIES PVT. LTD. VS. STATE OF HARYANA A ND ANR. 183 [2001] DLT 1 (SC), WHEREIN IT WAS OBSERVED THAT THE TRANSFER OF POSSESSION OF IMMOVABLE PROPERTY AS PART PERFORM ANCE OF THE CONTRACT OF NATURE REFERRED TO IN SEC.53A OF THE TP ACT WITHOUT HAVING REGISTERED AGREEMENT OF SALE IS TAXABLE EVEN AFTER THE DATE OF AMENDMENT MADE IN THE REGISTRATION ACT, 190 8 AND IT WAS OBSERVED THE BELOW FACTS WHILE EXPRESSING ITS F INAL VERDICT ON THE ISSUE OF VALIDITY OF TRANSFER OR SALE OF IMMOVA BLE PROPERTY WITHOUT GOING FOR REGISTRATION OF BACKUP DOCUMENTS IMMEDIATELY IN SUPPORT OF GENUINELY CONCLUDED DEAL: - - ITA 1779 TO 1788/13 ETC. 61 - UNREGISTERED SALE AGREEMENT, GPA AND WILL TRANSFE RS DO NOT CONVEY TITLE AND DO NOT AMOUNT TO A TRANSFER OF IMM OVABLE PROPERTY. - FURTHER HELD THAT SUCH TRANSACTIONS CANNOT BE REC OGNIZED AS A VALID MODE OF TRANSFER - THE VALIDITY OF GENUINE AGREEMENT OF SALE AND POW ER OF ATTORNEY WOULD NOT BE AFFECTED ON THE BASIS OF ABOVE OBSERVA TION. -TRANSACTIONS EFFECTED THROUGH AN UNREGISTERED AGRE EMENT OF SALE, GPA AND WOULD NOT GET AFFECTED IF THESE WERE EXECUTED BEFORE THE DATE OF AMENDMENT MADE IN THE REGISTRATI ON ACT WHICH MAKES IT CLEAR THAT COMPULSORY REGISTRATION O F ALL DOCUMENTS IS NECESSARY W.E.F. 24 TH SEPT, 2001. -ALSO OBSERVED THAT THE UNREGISTERED SALE AGREEMENT , GPA AND WILL TRANSFERS COULD ALSO BE USED TO OBTAIN SPECIFI C PERFORMANCE OR TO DEFEND POSSESSION UNDER SECTION 53A OF THE TR ANSFER OF PROPERTY ACT. -IT WAS ALSO FINALLY CLARIFIED THAT ANY GENUINE OR GOOD FAITH TRANSACTIONS WOULD NOT BE INVALIDATED BY THIS DECIS ION. SINCE THE SUPREME COURT HAS PROTECTED THE GENUINE TRANSACTIONS, THOSE WERE EXECUTED PREVIOUSLY (BEFOR E THE DATE OF MAKING COMPULSORY REGISTRATION OF ALL TRANSFER DOCU MENTS UNDER THE REGISTRATION ACT, 1908) AND SUPPORTED BY UNREGI STERED DOCUMENTS, BY PROVIDING AN OPTION TO GET IT REGISTE RED AND CLAIM BETTER TITLE ON THE PROPERTY INVOLVED THEREIN, WE M AY INFER THAT TRANSFER OR SALE OF CAPITAL ASSETS TOOK PLACE UNDER THE CATEGORY OF DEEMED CONCEPT AS PER SECTION 2(47)(V) PRIOR TO THE AMENDMENT MADE IN THE REGISTRATION AND OTHER RELEVANT LAWS IN THE YEAR 2001 THROUGH UNREGISTERED AGREEMENT OF SALE/CONTRAC T OF SALE AS BACK UP DOCUMENT WOULD BE CONSIDERED AS TRANSFER FO R CAPITAL GAIN TAXATION. BUT THE TAXABILITY OF DEEMED TRANSF ER OF CAPITAL ASSETS AS PER SEC.2(47)(V) AFTER THE AMENDMENT MADE IN THE REGISTRATION AND OTHER RELEVANT ACT IN THE AMENDED ACT IN THE - - ITA 1779 TO 1788/13 ETC. 62 YEAR 2001 WOULD NOT AFFECT THE GENUINE TRANSACTION U/S.53A OF TP ACT. 16.5 THE DECISION OF THE SC IN THE CASE OF MYSORE MINERALS LTD. V. CIT [239 ITR 775], WHEREIN IT WAS HELD THAT REGISTRATION DOCUMENT IS NOT ESSENTIAL REQUIREMENT FOR TRANSFER OF PROPERTY UNDER THE ACT. FURTHER, REGARDING THE REGISTRATIO N, THE PLEA OF THE LD. AR IS THAT REGISTRATION UNDER TP ACT IS MUS T FOR TAXABILITY OF INCOME IN RESPECT OF JDA AND REFERENCE CAN BE MA DE TO CERTAIN COURT DECISIONS WHEREIN A VIEW HAS BEEN TAK EN THAT NOTWITHSTANDING THAT THE DOCUMENTS HAVE NOT BEEN RE GISTERED THE RIGHTS WILL BE DEEMED TO BE TRANSFERRED TO THE PERS ON HAVING THE POSSESSION OF THE PROPERTY FOR THE PURPOSE OF TAXAB ILITY OF INCOME. IN CASE OF CIT V. PODAR CEMENT (P.) LTD (1 997) 226 ITR 625 (SC), THE DISPUTE WAS REGARDING CHARGEABILITY O F INCOME FROM HOUSE PROPERTY IT WAS OBSERVED THAT HAVING REGARD T O OBJECT OF THE INCOME-TAX ACT, 1961, NAMELY 'TO TAX THE INCOME ', OWNER WAS THE PERSON WHO WAS ENTITLED TO RECEIVE INCOME F ROM THE PROPERTY IN HIS HANDS. ACCORDINGLY, THE SUPREME C OURT HAS TAKEN A VIEW THAT REGISTRATION FOR THE PURPOSE OF C ONFERRING OWNERSHIP RIGHT WAS NOT NECESSARY AS REGARDS TAXABI LITY OF - - ITA 1779 TO 1788/13 ETC. 63 INCOME RECEIVED IN RESPECT OF THE PROPERTY. FOLLOW ING THE VIEW TAKEN BY THE SUPREME COURT IN ABOVE CASE FULL BENCH OF THE GUJARAT HIGH COURT IN CIT V. MORMASJI MANCHARJI VAID [2001] 250 ITR 542 HAS HELD THAT CAPITAL GAIN ON THE TRANSFER HAS TO B E ASSESSED TO TAX IN THE ASSESSMENT YEAR RELEVANT TO PREVIOUS YEAR WITHIN WHICH THE DATE OF EXECUTION OF DEED OF TRANS FER FALLS AND NOT IN THE SUBSEQUENT ASSESSMENT YEAR IN WHICH THE DEED IS REGISTERED. 16.6 SIMILARLY, PUNJAB AND HARYANA HIGH COURT IN TH E CASES OF CIT V. DHIR & CO. COLONISERS (P.) LTD. [2007] 288 I TR 561 AND CIT V. FAIR DEAL TRADERS [2010] 327 ITR 34 (P&H) , WHEREIN THE ASSESSEES WERE HOLDING THE LAND AS STOCK-IN-TRADE A ND THEY TRANSFERRED THE LAND PIECES TO THE BUYERS AND RECEI VED THE CONSIDERATION. THE BUYERS ALSO CONSTRUCTED THE PROP ERTY THEREON. THE DOCUMENTS, HOWEVER, COULD NOT BE REGISTERED IN FAVOUR OF THE BUYERS BECAUSE OF RESTRICTION UNDER URBAN LAND CEILING ACT. THE COURT HELD THAT THE AMOUNTS RECEIVED FROM THE B UYERS WERE IN THE NATURE OF BUSINESS RECEIPTS AND NOTWITHSTAND ING THAT DOCUMENTS WERE NOT REGISTERED, THE LAND PLOTS UNDER REFERENCE COULD NOT BE TREATED AS STOCK-IN-TRADE OF THE ASSES SEE. THUS IT - - ITA 1779 TO 1788/13 ETC. 64 WAS HELD THAT THE MERE FACT THAT SALE DEED HAD NOT BEEN EXECUTED WAS NOT CONCLUSIVE FOR HOLDING THAT THE AM OUNT RECEIVED WAS ONLY EARNEST MONEY AND NOT TRADING REC EIPT. 16.7 FURTHER, THE HONBLE SUPREME COURT IN THE CAS E OF SARDAR GOVINDRAO MAHADIK AND ANR. V. DEVI SAHAI AND ORS. A IR 1982 SC 989, 1982(1) SCALE 191, (1982) 1 SCC 237, [1982] 2 SCR 186 HAS ANALYSED THE CONCEPT OF PART PERFORMANCE UNDER SECTION 53A OF TRANSFER OF PROPERTY ACT AND AFTER ANALYSING AND REFERRING TO VARIOUS CASE LAWS OBSERVED AS UNDER: TO QUALIFY FOR THE PROTECTION OF THE DOCTRINE OF P ART PERFORMANCE IT MUST BE SHOWN THAT THERE IS A CONTRA CT TO TRANSFER FOR CONSIDERATION IMMOVABLE PROPERTY AND T HE CONTRACT IS EVIDENCED BY A WRITING SIGNED BY THE PE RSON SOUGHT TO BE BOUND BY IT AND FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTA INED WITH REASONABLE CERTAINTY. THESE ARE PREREQUISITES TO IN VOKE THE EQUITABLE DOCTRINE OF PART PERFORMANCE. AFTER ESTAB LISHING THE AFOREMENTIONED CIRCUMSTANCES IT MUST BE FURTHER SHO WN THAT A TRANSFEREE HAD IN PART PERFORMANCE OF THE CONTRAC T EITHER TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREO F OR THE TRANSFEREE BEING ALREADY IN POSSESSION CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT. THE A CTS CLAIMED TO BE IN PART PERFORMANCE MUST BE UNEQUIVOC ALLY REFERABLE TO THE PRE-EXISTING CONTRACT AND THE ACTS OF PART PERFORMANCE MUST UNEQUIVOCALLY POINT IN THE DIRECTI ON OF THE EXISTENCE OF CONTRACT AND EVIDENCING IMPLEMENTATION OR PERFORMANCE OF CONTRACT. THERE MUST BE A REAL NEXUS BETWEEN THE CONTRACT AND THE ACTS DONE IN PURSUANCE OF THE - - ITA 1779 TO 1788/13 ETC. 65 CONTRACT OR IN FURTHERANCE OF THE CONTRACT AND MUST BE UNEQUIVOCALLY REFERABLE TO THE CONTRACT. IN VIEW OF ABOVE LEGAL POSITION, WHEREVER THE DEPAR TMENT CLAIMS IT TO BE TRANSFER UNDER SECTION 2(47) (V) OF THE AC T, IT HAS TO SATISFY THE CONDITIONS OF SECTION 53A OF TPA. ACCORDINGLY, IT HAS TO BE DECIDED IN THE LIGHT OF FACTS OF EACH CASE, WHETHER CONDITIONS OF SECTION 53A OF THE TP ACT HAVE BEEN FULFILLED AND C ONSEQUENTIALLY THERE IS A TRANSFER UNDER SECTION 2(47)(V) OF THE I T ACT NOTWITHSTANDING THAT RELEVANT DOCUMENTS HAVE NOT YE T BEEN REGISTERED IN FAVOUR OF THE DEVELOPER OR THE BUYER CONFERRING LEGAL RIGHTS IN THE PROPERTY. REFERENCE CAN BE MADE TO FO LLOWING DECISIONS WHEREIN THE ISSUE HAS COME UP BEFORE THE COURTS/TRIBUNAL AND HAS BEEN DECIDED IN THE LIGHT O F FACTS OF EACH CASE. 17. FURTHER, THE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V. CIT, (2003) 260 ITR 491 (BOM.) OBSERVED THAT THE DEVELOPMENT AGREEMENT DOES NOT TRANSFER TH E INTEREST IN THE PROPERTY TO THE DEVELOPER IN GENERAL LAW AND TH EREFORE, SECTION 2(47)(V) HAS BEEN ENACTED AND IN SUCH CASES , EVEN ENTERING INTO SUCH A CONTRACT COULD AMOUNT TO TRANS FER FROM THE - - ITA 1779 TO 1788/13 ETC. 66 DATE OF AGREEMENT ITSELF. FURTHER, IT WAS OBSERVED THAT IF THE CONTRACT, READ AS A WHOLE, INDICATES PASSING OF OR TRANSFERRING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER, THEN THE DATE OF THE CONTRACT WOULD BE RELEVANT TO DECIDE THE YEAR OF THE CHARGEABILITY. IN THE FACTS OF ABOVE CASE TH E ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH THE DEVELOPER ON 18- 8-1994 TO SELL HIS SHARE OF IMMOVABLE PROPERTY FOR A CONSIDER ATION WITH A RIGHT TO THE DEVELOPER TO DEVELOP THE PROPERTY IN A CCORDANCE WITH THE RULES AND REGULATIONS FRAMED BY THE GOVERNMENT. FOR THE PURPOSE OF OBTAINING NECESSARY PERMISSION AND APPRO VAL A POWER OF ATTORNEY WAS EXECUTED GIVING LIMITED POWER S WITH THE DEVELOPERS. THE DEVELOPER OBTAINED PERMISSIONS TILL THE FINANCIAL YEAR ENDING 31-3-1996 AND HAD ALSO PAID ALMOST SALE PRICE EXCEPT FOR THE SMALL AMOUNT. BOMBAY MUNICIPAL CORPO RATION, HOWEVER, ISSUED A COMMENCEMENT CERTIFICATE PERMITTI NG CONSTRUCTION ONLY ON 15-11-1996. ULTIMATELY THE POW ER OF ATTORNEY WAS EXECUTED ON 12-3-1999. THE ASSESSEE PA ID THE TAX ON CAPITAL GAIN IN A.Y. 1999-2000. THE DEPARTMENT C ONTENDED THAT TRANSFER HAD TAKEN PLACE DURING YEAR ENDED 31- 3-1996 RELEVANT TO A.Y. 1996-97 AND ACCORDINGLY, TAXED THE ASSESSEE IN - - ITA 1779 TO 1788/13 ETC. 67 A.Y. 1996-97. THE HONBLE HIGH COURT AFTER FULLY DI SCUSSING THE SCOPE OF CLAUSE (V) OF SECTION 2(47) OF THE ACT AND ALSO LAYING DOWN GUIDELINES FOR APPLYING THE CLAUSE HELD ON THE FACTS THAT THE TRANSFER HAD NOT TAKEN PLACE IN THE YEAR ENDED 31-3 -1996 AND ACCORDINGLY, CAPITAL GAIN WAS NOT CHARGEABLE IN A.Y . 1996-97. 17.1 IN THE CASE OF JASBIR SINGH SARKARIA REPO RTED IN 294 ITR 196 (AAR) AGAIN SCOPE AND IMPLICATION OF CLAUSE (V) OF SECTION 2(47) OF THE ACT HAD BEEN ANALYSED IN ORDER TO DECI DE WHETHER GIVING OF POSSESSION WITH GPA IN FAVOUR OF DEVELOPE R AMOUNTS TO TRANSFER TO GIVE RISE TO CHARGEABILITY OF CAPITAL G AIN. IN THE FACT OF ABOVE CASE INITIALLY AGREEMENT WAS ENTERED INTO WIT H DEVELOPER FOR SHARING OF BUILT-UP AREA. SUBSEQUENTLY, SUPPLEMENTA RY AGREEMENT WAS EXECUTED TO SELL AGREED SHARE IN BUILT-UP AREA ALSO TO DEVELOPER FOR MONEY CONSIDERATION, PAYABLE IN INSTA LLMENTS. IN PURSUANT TO ABOVE AGREEMENT GPA WAS EXECUTED TO GIV E TOTAL CONTROL TO DEVELOPER ALONG WITH POWER TO EXECUTE FU RTHER AGREEMENTS FOR SALE OF FLATS TO BUYERS. AAR HELD TH AT IN VIEW OF THE FACTS AND TERMS OF THE AGREEMENT, THERE WAS TRA NSFER OF CAPITAL ASSET AND CAPITAL GAIN WAS PAYABLE IN THE YEAR OF E XECUTION OF GPA, NOTWITHSTANDING THAT SOME OF THE INSTALLMENTS FOR THE - - ITA 1779 TO 1788/13 ETC. 68 CONSIDERATION WERE YET TO BE RECEIVED. IT IS STATED THAT BY VIRTUE OF SUPPLEMENTARY AGREEMENT THIS WAS A CASE OF OUTRIGHT SALE OF LAND AND NOT A CASE OF DEVELOPMENT OF PROPERTY. HOWEVE R, IT WAS HELD BY THE AAR IN THE CASE OF JASBIR SINGH SARKARIA, IN RE (2007) [294 ITR 196] THAT A LICENSE TO THE DEVELOPER TO ENTER UPON THE LAND AND TO DO CERTAIN PRELIMINARY WORK SUCH AS SURVEY, SETTING UP OF SITE/SALES OFFICE AND MAKE NECESSARY ARRANGEMENTS R EQUIRED FOR FUTURE CONSTRUCTION AND MARKETING DOES NOT AMOUNT T O POSSESSION. 17.2 IN THE CASE OF CIT V. ASHOK KAPOOR (HUF) (2007) 165 TAXMAN 569 (DEL.) A QUESTION REGARDING TRANSFER OF RIGHTS IN PROPERTY AND CHARGEABILITY OF CAPITAL GAIN HAD COME UP FOR CONSIDERATION BEFORE THE DELHI HIGH COURT. IN THE A BOVE CASE THE HIGH COURT HAS TAKEN A VIEW THAT TRANSFER HAS TAKEN PLACE AT THE TIME OF ENTERING INTO THE AGREEMENT WITH THE DEVELO PER FOR THE REASON THAT AS PER THE AGREEMENT THE DEALER HAD AGR EED TO ALLOCATE 50% OF SHARE IN THE PROPERTY TO BE BUILT A ND THE BUILDER WAS ALLOWED TO SELL THE AREA COMPRISED IN THE BUILD ERS ALLOCATION. ON THE BASIS OF CLAUSES OF THE AGREEMENT THE HIGH C OURT HAD HELD THAT CLAUSE OF AGREEMENT HAS ALL THE ELEMENTS OF TR ANSFER AT THE STAGE OF ENTERING INTO THE AGREEMENT AND, THEREFORE , THERE WAS - - ITA 1779 TO 1788/13 ETC. 69 INESCAPABLE CONCLUSION THAT THERE WAS TRANSFER OF P ROPERTY BY THE OWNER TO THE DEVELOPER. 17.3 IN THE CASE OF SMT. PRAMEELA KRISHNA V. ITO, (2014) 111 DTR (KAR.) 364/(2014) 221 TAXMAN 485 (KAR.) CONSIDERED BY HIGH COURT OF KARNATAKA THE FACTS WERE THAT AN A GREEMENT WAS ENTERED INTO BY THE LAND OWNER WITH A DEVELOPME NT COMPANY ON 30-6-1994. AS PER THE AGREEMENT 92% OF UNDIVIDED SHARE IN THE LAND WAS TO BE TRANSFERRED TO THE DEVELOPER AND 8% WAS TO BE RETAINED BY THE LAND OWNER. THE DEVELOPER HAS TO HANDOVER 8% OF BUILT-UP-AREA TO THE LAND OWNER ALONG WITH CO NSIDERATION OF ` 30 LAKHS. ` 10 LAKHS HAVE BEEN PAID DURING THE YEAR. SUBSEQUENTLY THE AGREEMENT WAS MODIFIED ON 27-2-199 6 AND CONSIDERATION WAS INCREASED TO ` 40 LAKHS IN CASH AND 8.5% OF BUILT-UP-AREA. THE DEVELOPER HAD FURTHER MADE PAYME NT OF ` 25 LAKHS, AGGREGATING TO ` 35 LAKHS OUT OF ` 40 LAKHS PAYABLE. THE DEVELOPER HAD TO CONSTRUCT SEVEN BLOCKS OF THE PROP ERTY. HE HAD PUT UP FOUNDATION FOR ALL SEVEN BLOCKS. HE HAS ALSO CONSTRUCTED SUPER STRUCTURE OF FOUR BLOCKS. AT THIS JUNCTURE TH E SAID AGREEMENT WAS CANCELLED. ANOTHER BUILDER WAS BROUGH T IN TO - - ITA 1779 TO 1788/13 ETC. 70 COMPLETE THE CONSTRUCTION. AN AGREEMENT DATED 8-1-2 003 WAS EXECUTED ALONG WITH EARLIER BUILDER BEING A CONFIRM ING PARTY. THE SUBSEQUENT BUILDER COMPLETED THE PROJECT. PURSUANT TO NOTICE U/S. 148 OF THE ACT THE LAND OWNER FILED RETURN FOR ASSE SSMENT YEAR 2003-04 SHOWING CAPITAL GAIN AND CONTENDED THAT THE POSSESSION OF LAND WAS HANDED OVER AT THE TIME OF ENTERING INT O THE AGREEMENT DATED 8-1-2003. ALL THE APPELLATE AUTHORI TIES EXAMINING THE FACTS HELD THAT POSSESSION OF THE LAN D HAVE BEEN HANDED OVER PURSUANT TO INITIAL AGREEMENT DATED 30- 6-1994. CONSIDERATION HAD ALSO BEEN SUBSTANTIALLY RECEIVED. SUBSTANTIAL WORK HAS ALSO BEEN DONE BY THE DEVELOPER PURSUANT T O ABOVE AGREEMENT. CONSEQUENTLY THE TRANSFER HAD TAKEN PLAC E AT THAT STAGE. THE HIGH COURT ALSO CONFIRMED THE HOLDING OF LOWER APPELLATE AUTHORITIES. 17.4 IN THE CASE OF CIT V. SMT. RADHA BAI, 272 ITR 264 (DEL.) , HOWEVER, IT WAS HELD THAT THOUGH POSSESSION HAD B EEN GIVEN TO THE DEVELOPER ALONG WITH RIGHT TO START TH E BOOKING OF VARIOUS FLATS AND TO RECEIVE SALE PRICE ETC. FROM P ROSPECTIVE BUYERS BUT LAND OWNERS/ASSESSEE CONTINUED TO BE THE OWNER OF - - ITA 1779 TO 1788/13 ETC. 71 THE LAND TILL DEVELOPMENT AND RECEIPTS WERE NOT IN THE NATURE OF BUSINESS INCOME FROM JOINT BUSINESS VENTURE WITH DE VELOPER. 17.5 THE SAME VIEW HAS BEEN TAKEN BY THE TRIB UNAL, COCHIN BENCH IN THE CASE OF G. SRINIVSAN V. DCIT (140 ITD 235) AND PUNE BENCH IN THE CASE OF MAHESH NEMICHANDRA GANESH WADE V. ITO (17 ITR (TRIB) 116). IN VIEW OF THE ABOVE D ISCUSSION, IN OUR OPINION, TO CONSIDER THE TRANSFER U/S.2(47(V) OF TH E ACT, REGISTRATION IS NOT MUST. 18. THE LD. AR RAISED ONE MORE PLEA THAT THE ASSESS EE SHOULD BE GRANTED DEDUCTION U/S.80IB OF THE ACT, IN RESPECT PROFIT DERIVED FROM HOUSING PROJECT IN THE VIEW OF THE JUD GMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF SHRAVANEE CONST RUCTIONS (SUPRA) CITED SUPRA. IN OUR OPINION, EVEN IF, IT I S PRESUMED THAT THERE IS A PROFIT FROM HOUSING PROJECT IN THIS ASST . YEAR, IT IS ONLY JOINT VENTURE CONSISTING OF THE ASSESSEE AND DOSHI HOUSING WHICH IS A SEPARATE ASSESSEE ASSESSABLE AS AOP AND NOT THE PRESENT ASSESSEE SO AS TO GRANT DEDUCTION. 19. THE TRIBUNAL IN THE CASE OF VIJAYA PRODUCTIONS (P) LTD. V. ADDL. CIT (134 ITD 19) HELD THAT IN A DEVELOPMENT A GREEMENT NO - - ITA 1779 TO 1788/13 ETC. 72 TRANSFER TAKES PLACE ON THE DATE OF EXECUTION OF TH E DEVELOPMENT AGREEMENT AS AT THAT STAGE THE RIGHT OF THE LAND LO RD IS AN INCHOATE RIGHT AND THE TRANSFER IF ANY TAKES PLACE ONLY WHEN THE BUILT UP AREA IS GIVEN TO THE LAND LORD BY THE DEVE LOPER. THEREFORE, THERE IS NO TRANSFER WITH THE MEANING OF SEC.2(47) OF THE ACT IN THE ASST. YEAR 2006-07. THE AFORESAID T HIRD MEMBER DECISION OF THE CHENNAI BENCH IS AKIN TO A SPECIAL BENCH DECISION AS HELD BY THE SPECIAL BENCH OF MUMBAI TRI BUNAL IN DY.CIT VS. OMAN INTERNATIONAL BANK REPORTED IN 100 ITD 285(SB) AND BY THE DELHI HIGH COURT IN P.C.PURI V. CIT REPORTED IN 151 ITR 584 AT PAGE 604. THUS, THE DECISION OF THE CHENNAI BENCH IS BINDING. ACCORDINGLY, ITA NO.1779/MDS/20 13 FOR THE ASST. YEAR 2006-07 IS PARTLY ALLOWED. 20. ITANO.1780/MDS/2013 : FOR THE ASST. YEAR 2007-08, THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME. T HEREFORE, AN ACTION U/S.133A WAS CONDUCTED IN THE CASE OF THE AS SESSEE AND CONSEQUENT TO THE SURVEY OPERATIONS, THE ASSESSEE F ILED A RETURN OF INCOME ON 10.4.2012 ADMITTING A GAIN OF ` 55,84,094/-. HOWEVER, THE SAID RETURN OF INCOME WAS LODGED BY TH E AO THAT THE SAME WAS FILED MUCH AFTER THE DUE DATE ENVISAGE D U/S.139(4) - - ITA 1779 TO 1788/13 ETC. 73 OF THE ACT. THE AO, THEREAFTER CAME TO THE CONCLUS ION THAT THE INCOME OF THE ASSESSEE AS DECLARED IN THE RETURN OF INCOME HAD ESCAPED ASSESSMENT AND THEREFORE, REOPENED THE ASSE SSEE BY ISSUE OF NOTICE U/S.148 OF THE ACT. THE ASSESSEE REQUESTED THAT THE RETURN ALREADY FILED ON 10.4.2012 MAY BE TAKEN AS THE RETURN FILED IN RESPONSE TO THE NOTICE U/S.148 OF THE ACT. THE AO COMPLETED THE ASSESSMENT VIDE ORDER DATED 14.6.2012 PASSED U/S.143(3) R.W.S.147 OF THE ACT ASSESSING THE TOTAL INCOME PROTECTIVELY AT `1,24,83,684/-. IN COMPLETING THE ASSESSMENT, THE AO REJECTED THE CLAIM OF EXPENDITURE INCURRED TOWARDS COST OF IMPROVEMENT OF ` 8,99,590/- 21. AS WE HAVE HELD IN THE ASST. YEAR 2006-07 T HAT THERE IS NO INSTANCE OF TAX ON CAPITAL GAINS IN TERMS OF SEC.2( 47)(V) OF THE ACT, THE ASSESSMENT IN THIS YEAR IS TO BE TREATED A S SUBSTANTIVE AND THE ASSESSEE IS DIRECTED TO PLACE NECESSARY EVI DENCE TOWARDS COST OF IMPROVEMENT AND THE AO HAS TO DECID E THE ISSUE AFRESH. ACCORDINGLY, THE LEVY OF INTEREST U/S.234A FOR THE ASST. YEAR 2007-08 IS TO BE COMPUTED, WHICH IS MANDATORY IN NATURE. - - ITA 1779 TO 1788/13 ETC. 74 21.1 IN THE RESULT, THE APPEAL FOR THE ASST. YEAR 2007-08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 22. ITA NO.1781/MDS/2013: AS DISCUSSED EARLIER, F OR THIS ASST. YEAR 2008-09, THE ASSESSMENT IS A REOPENED A SSESSMENT. THE ASSESSEE VIDE THE ORIGINAL RETURN OF INCOME FIL ED ON 16.11.2009, ELECTRONICALLY HAD DECLARED A TAXA BLE INCOME OF ` 1,21,68,651/-. CONSEQUENT TO THE NOTICE U/S.148, THE TAXABLE INCOME WAS SCALED DOWN TO ` 1,99,534/-. THE INCOME FROM BUSINESS WS A LOSS OF ` 68,32,357/- AND THE CAPITAL GAIN OF ` 66,32,823/- WAS SET OFF AGAINST IT. HOWEVER, THE L IABILITY TO TAX WAS COMPUTED ON THE CAPITAL GAIN AT SPECIAL RATE OF 20% AND A REFUND OF ` 18,67,344/- WAS CLAIMED. CONSEQUENT TO THE REOPENING, THE ASSESSEE CLAIMS TO HAVE REWORKED THE COMPUTATION BASED ON YEAR WISE SALE OF LAND AND RE- ORGANIZED THE PROFITS BETWEEN THE ASSESSMENT YEARS STARTING F ROM 2007-08. ACCORDING TO THE ASSESSEE, IT IS IN THIS CONTEXT TH AT WHILE THE ORIGINAL RETURN WAS NOT FILED FOR THE ASST. YEAR 20 07-08, A CAPITAL GAIN OF ` 55,84,094/- WAS OFFERED IN THAT YEAR, THROUGH A RE VISED RETURN. HOWEVER, THE AO COMPUTED THE INCOME OF THE ASSESSEE - - ITA 1779 TO 1788/13 ETC. 75 AT ` 1,41,81,540/- PROTECTIVELY WITHOUT CONSIDERING THE COST OF IMPROVEMENT. AGAINST THIS, THE ASSESSEE WENT IN AP PEAL BEFORE THE CIT(APPEALS), WHO CANCELLED THE PROTECTIVE ASSE SSMENT AS HE HAS CONFIRMED THE ASSESSMENT ORDER FOR THE ASST. YEAR 2006- 07 BASED ON THE JDA ENTERED INTO BETWEEN THE ASSESS EE AND DOSHI HOUSING ON 23.11.2005 BY OBSERVING THAT THERE IS A TRANSFER IN TERMS OF SEC.2(47)(V) OF THE ACT. 23. SINCE, WE HAVE VACATED THE FINDING OF THE CIT(A PPEALS), FOR THE ASST. YEAR 2006-07 BY OBSERVING THAT THERE IS NO TRANSFER U/S.2(47)(V) OF THE ACT, THE ASSESSMENT FOR THE ASS T. YEAR 2008- 09 IS TO BE TREATED AS SUBSTANTIVE AS DISCUSSED IN EARLIER PARAGRAPH FOR THE ASST. YEAR 2007-08 AND THE INCOME HAS TO BE COMPUTED ON LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSES SEE AND THE AO SHALL WORK OUT THE CAPITAL GAINS AFRESH. ACCORD INGLY, THE LEVY OF INTEREST U/S.234A FOR THE ASST. YEAR 2008-09 IS TO BE COMPUTED, WHICH IS MANDATORY IN NATURE. 24. REGARDING THE DENIAL OF COST OF IMPROVEMENT, IF THE ASSESSEE PLACES NECESSARY EVIDENCE, THE SAME TO BE - - ITA 1779 TO 1788/13 ETC. 76 CONSIDERED. THE ASSESSEE HAS PRODUCED A COPY OF AG REEMENT BETWEEN THE ASSESSEE AND CONTRACTOR ALLEGED TO HAVE BEEN ENTERED ON 11.5.2005. THE AO FOUND THAT THE AGREEM ENT LACKS CREDENCE MAINLY BECAUSE THE IMPOVERISHMENT OF THE A PPROPRIATE CONTENTS WHICH A TRUE AGREEMENT OUGHT TO INCORPORAT E IN IT. THE AO DID NOT BELIEVE THAT THE AMOUNTS WERE LEFT UNPAI D FOR A PERIOD OF 6 YEARS AND NO PROOF OF PAYMENT WAS ALSO SUBMITT ED. THE AO WAS OF THE OPINION THAT THE BILLS PROVIDED BY TA KSHIL TRADING P. LTD. CANNOT RELY UPON IN VIEW OF THE COMMERCIAL DEPARTMENT, MAHARASHTRA VIZ. MAHAVAT. 25. BEFORE US, THE LD. AR SUBMITTED THAT REPORT AS WELL AS DOCUMENT HAVE NO RELEVANCE WITH THE ASSESSMENT OF T HE ASSESSEE. HOWEVER, THE ASSESSEE HAS NOT PRODUCED A NYTHING TO PROVE THE COST OF CONSTRUCTION. IT IS THE DUTY OF THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE TO SHOW THAT THE ASSESSE E ACTUALLY INCURRED TOWARDS IMPROVEMENT OF CAPITAL ASSET. HOW EVER, THE ASSESSEE ASKED ONE MORE OPPORTUNITY TO SEE THE DOCU MENT COLLECTED BY THE A.O., WHICH WAS RELIED UPON BY HIM , AT THE BACK OF THE ASSESSEE. IN VIEW OF THIS, WE REMIT THIS IS SUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION AND THE ASSESSEE IS DIRECTED TO - - ITA 1779 TO 1788/13 ETC. 77 PRODUCE NECESSARY EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE, AS THE AO USED THE REPORT COLLECTED FROM THE COMMERCIAL DEPARTMENT, MAHARASHTRA VIZ. MAHAVAT WIT HOUT PROVIDING THE SAME TO THE ASSESSEE. ACCORDINGLY, IN THE ASST. YEAR 2009-10, LONG TERM CAPITAL GAINS ON THE SALE O F THAT PORTION OF THE LAND CORRESPONDING TO THE FLATS ALLOTTED TO THE ASSESSEES SHARE AND SALE OF FLATS CONSTRUCTED THEREON TO BE A SSESSED AS LONG TERM CAPITAL GAINS IN SALE OF LAND AND SHORT T ERM CAPITAL GAINS IN SALE OF FLATS. 25.1 IN THE RESULT, THE APPEAL FOR THE ASST. YE AR 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 26. ITA NO.1782/MDS/2013 : AS DISCUSSED IN ASST. Y EAR 2008-09, THE CAPITAL GAINS HAS TO BE COMPUTED BY TH E A.O. AFRESH. THE ASSESSEE HAS RAISED ONE MORE GROUND IN THE ASST. YEAR 2009-10 WITH REGARD TO SUSTAINING THE REJECTIO N OF PLEA FOR SET OFF OF BUSINESS LOSS AMOUNTING TO ` 84,94,770/- AGAINST THE CAPITAL GAINS. 27. ACCORDING TO THE REVENUE AUTHORITIES, LOSS ON A CCOUNT OF VARIOUS REASONS INCLUDES THE BOGUS COST ON IMPROVEM ENT OF - - ITA 1779 TO 1788/13 ETC. 78 CAPITAL ASSET ALSO. THE ASSESSEE HAS ALSO FILED TH E RETURN BELATEDLY. THE A.O. OBSERVED THAT THE SAID LOSS CANNOT BE CONSIDERED AND SET OFF AGAINST CAPITAL GAINS. AS S EEN FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS FILED RETURN OF INCOME ON 16.11.2009. IF THE ASSESSEE FILED RETURN OF INCOME WITHIN DUE DATE FOR FILING OF RETURN OF INCOME U/S.139(1) FOR THE ASST. YEAR 2009-10 I.E. 30.9.2010 OR WITHIN SUCH EXTENDED TIME , THE BUSINESS LOSS TO BE CONSIDERED AS SET OFF AGAINST C APITAL GAINS OF THE ASSESSEE FOR THE ASST. YEAR 2009-10. ACCORDING LY, THE ASSESSEES APPEAL IN ITA NO.1782/MDS/2013 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 28. ITA NO.1783 & 1784/MDS/2013 (A.YS. 2010-11 & 20 11- 12): THE APPEALS FOR THE ASST. YEARS 2010-11 AND 20 11-12 ARE DISPOSED OF AS DISCUSSED IN THE ASST. YEAR 2009-10. ACCORDINGLY, THE ASSESSEES APPEALS IN ITA NOS. 1783 & 1784/MDS/ 2013 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 29. NOW, WE TAKE UP THE REVENUES APPEAL IN I TA NOS.1945 & 1946/MDS/2013 (A.YS. 2007-08 AND 2008-09). THE I SSUE RAISED BY THE REVENUE IN THESE APPEALS IS WITH REGA RD TO - - ITA 1779 TO 1788/13 ETC. 79 CANCELLING THE PROTECTIVE ASSESSMENT FOR THE ASSESS MENT YEAR 2008-09 AS THE INCOME ASSESSED WAS BASED ON THE INC OME ADMITTED BY THE ASSESSEE. SINCE, WE HAVE CONFIRMED THE SUBSTANTIVE ASSESSMENT WITH CERTAIN DIRECTIONS IN T HE ASSESSEES APPEAL FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 , THE APPEALS OF THE REVENUE IN ITA NOS. 1945 & 1946/MDS/ 2013 FOR THE A.YS. 2007-08 AND 2008-09 ARE PARTLY ALLOWED FO R STATISTICAL PURPOSES. 30. ITA NOS.1785 TO 1788/MDS/13 (ASSESSEE) : THESE ARE PENALTY APPEALS DIRECTED AGAINST THE COMMON ORDER O F THE CIT(APPEALS) DATED 28.3.2013, WHEREIN THE CIT(APPEA LS) SUSTAINED THE PENALTY LEVIED U/S.271(1)(C) OF THE A CT AT 100% OF TAX SOUGHT TO BE EVADED INSTEAD OF 300% LEVIED BY T HE A.O. IN RESPECT OF QUANTUM ADDITIONS. THE AO AFTER OBSERVI NG THAT THE TRANSFER TOOK PLACE IN TERMS OF JDA DATED 23.11.200 5 FOR THE ASST. YEAR 2006-07, DETERMINED THE INCOME FOR THESE ASST. YEARS 2006-07, 2009-10, 2010-11 AND 2011-12, CORRESPONDIN GLY HE LEVIED PENALTY AT 300% OF TAX TO BE EVADED. ON AP PEAL, THE CIT(APPEALS) REDUCED IT TO 100%. AGAINST THIS, THE ASSESSEE IS - - ITA 1779 TO 1788/13 ETC. 80 IN APPEAL BEFORE US FOR ALL THESE FOUR ASST. YEARS. SIMILARLY, THE REVENUE IS IN APPEAL BEFORE US ON THE SAME ISSUE FO R REDUCTION OF PENALTY AT 100% OF TAX TO BE EVADED BY THE CIT(A PPEALS) IN ITA NOS.1944, 1947, 1948 & 1949/MDS/2013. 31. THE PENALTY FOR THE ASST. YEAR 2006-07 CANNO T BE SUSTAINED IN VIEW OF OUR DELETION OF ADDITION FOR THE SAID AS ST. YEAR BY OBSERVING IN EARLIER PARA THAT THERE IS NO TRANSFER IN TERMS OF SEC.2(47)(V) OF THE ACT. THEREFORE, ITA NO.1785/M DS/2013 IS ALLOWED. 32. SINCE QUANTUM ADDITION IS THE SUBJECT MATTER BE FORE US HERE IN ITA NOS.1780 TO 1784/MDS/2013 (A.YS. 2007-0 8 TO 2011- 12), WE HAVE REMITTED THE ISSUE IN DISPUTE TO THE F ILE OF THE AO FOR FRESH CONSIDERATION, AS SUCH, AT THIS STAGE, THERE IS NO QUESTION OF LEVY OF PENALTY U/S.271(1)(C) OF THE ACT FOR THESE ASST. YEARS. ACCORDINGLY. PENALTY ORDERS ARE VACATED AND APPEAL S OF THE ASSESSEE IN ITA NOS. 1786, 1787 & 1788/MDS/2013 ARE ALLOWED. 33. ITA NOS. 1947, 1948 & 1949/MDS/2013-A.YS. 2009- 10, 2010-11 AND 2011-12 (REVENUE): THE ISSUE RAISED BY THE - - ITA 1779 TO 1788/13 ETC. 81 REVENUE IN ITA NOS. 1947, 1948 AND 1949/MDS/2013 I S WITH REGARD TO RESTRICTING THE PENALTY U/S.271(1)(C) OF THE ACT FROM 300% OF TAX SOUGHT TO BE EVADED TO 100% LEVIED BY T HE ASSESSING OFFICER. SINCE, AS DISCUSSED EARLIER, TH E QUANTUM ADDITION IN THESE APPEALS IS THE SUBJECT MATTER BEF ORE US AND WE HAVE REMITTED THE ISSUE RELATING TO QUANTUM ADDITIO N TO THE FILE OF THE AO FOR FRESH CONSIDERATION, AT THIS POINT OF TI ME, PENALTY ORDER CANNOT STAND. ACCORDINGLY, ALL THESE THREE APPEALS OF THE REVENUE ARE DISMISSED. 34. IN ITA NO.1944/MDS/2013 - A.Y. 2006-07 ALSO, TH E GRIEVANCE OF THE REVENUE IS WITH REGARD TO RESTRICT ING THE PENALTY U/S.271(1)(C) OF THE ACT FROM 300% TO 100% LEVIED B Y THE ASSESSING OFFICER. SINCE, WE HAVE DELETED THE QUAN TUM ADDITION IN ASSESSEES APPEAL FOR THE ASST. YEAR 2006-07, TH IS PENALTY ORDER CANNOT STAND. ACCORDINGLY, THERE IS NO QUEST ION OF LEVY OF ANY PENALTY AND THE REVENUE APPEAL IN ITA NO.1944/M DS/2013 IS DISMISSED. 35. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN I TA NO.1779/MDS/2013 IS PARTLY ALLOWED, ITA NOS. 1780, 1781, 1782, - - ITA 1779 TO 1788/13 ETC. 82 1783, 1784/MDS.2013 ARE PARTLY ALLOWED FOR STATISTI CAL PURPOSES AND ITA NOS. 1785, 1786, 1787, 1788/MDS/2013 ARE AL LOWED. THE APPEALS OF THE REVENUE IN ITA NOS. 1945 & 1946/ MDS/2013 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NOS.1944, 1947, 1948, 1949/MDS/2013 ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 4 TH OF MARCH, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 4TH MARCH, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.