ACIT Central -2 Bhopal, Bhopal V. M/s Rishi Construction , Bhopal

ITA 220/Ind/2022

AI Insights

The case involves cross-appeals by the Revenue and the Assessee, Rishi Construction, against the orders of the CIT(A) and the AO concerning the assessment year 2015-16. The primary issue was the treatment of the sale proceeds from a land transaction involving M/s Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s Sagauya Mediservices Pvt. Ltd., where the Assessee claimed only a portion of the proceeds as income based on an unregistered agreement with M/s Govind Reality Pvt. Ltd. The AO added the entire sale proceeds as business income of the Assessee, which the CIT(A) later partially reversed but enhanced the income by Rs. 6,40,109. The Tribunal, referencing the Supreme Court's decision in Balbir Singh Maini, held that the unregistered agreement did not constitute a valid transfer of property, thus the Assessee could not claim the income from the entire sale proceeds.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130503 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 01-09-2022
• Other Referred Cases: CIT vs. Balbir Singh Maini (2017) 86 taxmann.com 94 (SC), Shrimant Shamrao Suryavanshi & Anr. v. Pralhad Bhairoba Suryavanshi (D) by LRs. & Ors., (2002) 3 SCC 676, Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs. (2004) 8 SCC 614, Smt. Sapnaben Dipakbhai Patel vs. ITO, (2016) 73 taxmann.com 288
• Laws Referred To: Income-tax Act, 1961, Transfer of Property Act, 1882, Registration Act, 1908
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; TDS
• Section: 143(3); 251; 73; 13

Judgement Text

Page 1 of 16 आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No. 220/Ind/2022 Assessment Year: 2015-16 ITO, 1(2), Bhopal बनाम/ Vs. Rishi Construction, F-11, Mansarovar Complex, Hoshangabad Road, Bhopal (Revenue / Appellant) (Assessee / Respondent) ITA No. 88/Ind/2023 Assessment Year: 2015-16 Rishi Construction, F-11, Mansarovar Complex, Hoshangabad Road, Bhopal बनाम/ Vs. ITO, 1(2), Bhopal (Assessee / Appellant) (Revenue / Respondent) PAN: AADFR7872A Assessee by Mrs. Nisha Lahoti and Shri Vijay Bansal, Ld. ARs Revenue by Shri P.K. Mishra, Ld. DR Date of He aring 27.07.2023 Date of Pronoun ce me nt 26.09.2023 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 29.06.2022 passed by learned Commissioner of Income-tax(Appeals)-3, Bhopal [“CIT(A)”], which in turn arises out of assessment-order dated 26.12.2017 passed by ITO, 1(2), Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 2 of 16 Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for assessment- year [“AY”] 2015-16, the revenue and assessee both have filed these cross- appeals. 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Brief facts leading to present appeal are such that the assessee is a partnership firm engaged in the business of civil construction. For the relevant AY 2015-16, the assessee’s return was subjected to scrutiny and assessment was framed u/s 143(3). While doing so, the AO observed that the assessee sold a land/plot to M/s Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s Sagauya Mediservices Pvt. Ltd. [“M/s Swami”] for Rs. 4,70,06,136/- and M/s Swami deducted TDS of Rs. 4,70,061/- u/s 194-IA for which the assessee claimed credit but the assessee declared turnover of Rs. 1,20,00,000/- only and not Rs. 4,70,06,136/-. The AO confronted the assessee qua this difference. In reply, the assessee claimed to have sold the impugned land to M/s Shri Govind Reality Pvt. Ltd. [“M/s Govind”] through agreement dated 26.02.2011, (without executing any sale-deed) for Rs. 1,20,00,000/- and received a sum of Rs. 10,00,000/- by cheque No. 616557 dated 21.02.2011. M/s Govind agreed to pay balance consideration of Rs. 1,10,00,000/- on receipt of building permission or 40 months of the agreement i.e. by 25.06.2014. The period can be further extended for 9 months with interest @ 12% per annum. Ultimately, the land was sold on 19.03.2015 to M/s Swami for Rs. 4,70,06,136/- but since the assessee was registered-owner of land, the sale- deed was executed by assessee in favour of M/s Swami in terms of Clause No. 12 of aforesaid agreement dated 26.02.2011. The assessee received consideration of Rs. 4,70,06,136/- directly from M/s Swami; retained Rs. 1,10,00,000/- and passed excess amount to M/s Govind. Thus, the assessee claimed that it’s share in the proceed was Rs. 1,20,00,000/- only as per agreement [which consists of Rs. 10,00,000 (+) Rs. 1,10,00,000] and Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 3 of 16 excess amount of Rs. 3,50,06,136/- [Rs. 4,70,06,136 (-) Rs. 1,20,00,000] belonged to M/s Govind. The assessee also filed an affidavit dated 23.10.2014 to AO, executed by Shri Om Prakash Kriplani, director of M/s Govind, in which he averred that M/s Govind had given consent to assessee for execution of sale-deed in favour of M/s Swami on the condition that the assessee shall pay amount in excess of Rs. 1,20,00,000/- to M/s Govind. This way, the assessee claimed before AO that it had rightly disclosed the turnover of Rs. 1,20,00,000/- and M/s Govind had rightly declared sale/profit of Rs. 3,50,06,136/-; both parties have declared their respective shares and paid taxes. But the AO was not satisfied with the submission made by assessee, who precisely held that M/s Govind was not at all owner of the assessee’ land and the assessee was trying to swindle the amount of Rs. 3,50,06,136/- as income of M/s Govind and eventually trying to evade tax by presenting an unrealistic picture of financial accounting. Finally, the AO rejected entire submission made by assessee and made an addition of Rs. 3,50,06,136/- as business income of assessee. Aggrieved, the assessee contested issue in first-appeal whereupon the CIT(A) deleted the addition of Rs. 3,50,06,136/- made by AO but, however, enhanced assessee’s income by Rs. 6,40,109/- (on a different footing to be discussed later). Now, the revenue and assessee both have come in these appeals. While the revenue is against the deletion of Rs. 3,50,06,136/- by CIT(A), the assessee is aggrieved by enhancement of Rs. 6,40,109/-. We shall first start with Revenue’s appeal and thereafter take-up Assessee’s appeal. Revenue’s ITA No. 220/Ind/2022: 4. The Revenue has raised following grounds: (i) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is correct in law in considering that M/s. Govind Reality Pvt. Ltd. was the deemed owner of impugned property, without appreciating the fact that the said agreement dated 26.02.2011, between M/s. Govind Reality Pvt. Limited and the assessee was not registered and hence, the same was not valid. Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 4 of 16 (ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is correct in law in ignoring the decision Hon'ble Supreme Court in the case of CIT vs. Balbir Singh Maini (2017) 86 taxmann.com 94 (SC) wherein it was observed that there is no contract in the eye of aw in force u/s 53A after 2001 unless the said contract is registered (as per amendments in Section 17(1A) and Section 49 of the Registration Act, 1908). (iii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is correct in law in not appreciating the fact that in absence of any valid agreement as well as registered sale deed executed between the appellant and M/s. Govind Reality Pvt. Ltd., the sale consideration of Rs. 4,70,06,136/- will be treated in the hands of appellant who is the registered owner of the property as per Government record as the registered sale deed was also by the appellant in favour of the purchaser M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Medi Services Pvt. Ltd. (iv) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is correct in law in not appreciating the fact that nowhere in the agreement dt. 28.02.2011, it is mentioned that the balance amount of Rs. 3,50,06,136/- (Rs. 4,70,06,136/- (-) Rs. 1,20,00,000/-) was payable to M/s. Govind Reality Pvt.Ltd. as balance sale proceeds. (v) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is correct in law in appreciating the fact that mere documentation of agreement and affidavit cannot be the ground for the assessee to prove that Rs. 3,50,06,136/- was payable to M/s. Govind Reality Pvt. Ltd. when the fact is that the transaction as reflected in the sale deed never refer to any such payment to M/s. Govind Reality Pvt. Ltd.” 5. In these grounds, the revenue challenges the CIT(A)’s action of deleting the addition of Rs. 3,50,06,136/- made by AO. The basic premise for such challenge is mentioned in ground No. (i) and (ii) where the revenue claims that M/s Govind was not owner of land in view of decision of Hon’ble Supreme Court in CIT Vs. Balbir Singh Maini (2017) 86 taxmann.com 94 (SC) because the agreement dated 26.02.2011 between assessee and M/s Govind was not registered. 6. To gain insight into how the lower-authorities have dealt the case of assessee, firstly we refer Para No. 7 to 14 of assessment-order wherein the AO has made this addition; the said paras are re-produced below: Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 5 of 16 “7. The assessee has sold a land admeasuring 34832 sq.ft. to M/s. Shri Govind Reality Pvt.Ltd. for a sum of Rs. 1,20,00,000/- for construction of a proposed hospital through an agreement dated 17.02.2011. During the F.Y. 2014-15, although, the assessee has received full and final consideration for sale of the property from M/s. Govind Reality Pvt. Ltd. And has accounted for the same in the relevant year, but the sale deed was not executed by the assessee and M/s. Shri Govind Reality Pvt.Ltd. Meanwhile, M/s. Shri Govind Reality Pvt.Ltd. sold the above said property on behalf of the assessee to Swami Vivekanand Institute of Neurology Neurosurgery & Spine and Sagauya Mediservices and Private Limited, but finally the sale deed was executed between the assessee and Swami Vivekanand Institute of Neurology Neurosurgery & Spine and Sagauya Mediservices and Private Limited, but finally the sale deed was executed between the assessee and Swami Vivekanand Institute of Neurology Neurosurgery & Spine and Sagauya Mediservices and Private Limited for an amount of Rs. 4,70,06,136/- and before advancing money to the assessee for the year under consideration, the purchaser has deducted TDS u/s 194IA amounting to Rs. 4,70,061/- which was claimed by the assessee for the relevant year. 8. The assessee vide his reply dt 30.11.2017 in para no.2 has submitted that out of total receipts of Rs. 4,70,06,136/-, Rs. 3,45,06,136/- has been received in bank account of the assessee and of the balance amount of Rs. 1,25,00,000/- has been made directly to Bank of India on behalf of Globus Housing Pvt. Ltd. This amount was necessarily to be paid to Bank of India to get the NOC from Bank of India for transferring such plot. 9. Further, the assessee has also submitted in para 3 of reply dated 30.11.2017, that the amount of sale consideration in books of M/s. Rishi is not in proportion to sales reflected in Form 26AS because the only share of sale consideration of M/s. Rishi Construction is Rs. 1,20,00,000/- and balance Rs. 3,50,06,138/-is of Shri Govind Reality Pvt. Ltd. As per the agreement of leaving their right of property. 10. Further in para 6 of the assessee on the similar date has also submitted that Shri Govind Reality Pvt.Ltd. consented to such sale of plot with a condition that M/s. Rishi Construction shall pay the balance amount of sale price i.e. ( Rs. 3,50,06,136/-) after retaining of Rs. 1,20,00,000/- to Shri Govind Reality Pvt.Ltd. out of sale proceeds as they have consented for such sale as per agreement dt. 26.02.2011. Furthermore, the assessee has also pointed para 16 of sale deed entered between the assessee and Swami Vivekanand Institute of Neurology Neurosurgery & Spine and Sagauya Mediservices and Private Limited which specifically mentions consent of Shri Govind Reality Pvt.Ltd. for sale of land under consideration. The assessee has even produced an affidavit dt. 23.10.2014 to justify his contention and to infer that Shri Govind Reality Pvt.Ltd. had its express consent for sale of such property and to contend that the sum of Rs. 3,50,06,136/- was the income of Shri Govind Reality Pvt.Ltd. and which was shown as income in the books of accounts and offered the tax for F.Y.2014-15 relevant to A.Y. 2015-16. Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 6 of 16 11. The aforesaid facts narrated by the assessee supra has been scrupulously analysed and corroborated with that of agreement dt 28.02.2011 which reads that there was deal of land admeasuring 34832 sq.ft. amounting to Rs. 1,20,00,000/- for construction of a proposed hospital between the assessee and Shri Govind Reality Pvt.Ltd., in which initial amount of Rs. 10,00,000/- was paid to the assessee vide cheque no. 616557 dt. 21.02.2011 as soon as the agreement was executed and the balance amount of Rs.1,10,00,000/- was to be paid after attaining the permission to build a hospital or within 40 months from the date of agreement or if it gets delayed further by extended time, interest of 12% was to be paid by the buyer to the seller and subsequently still the buyer fails to pay the balance amount, the agreement will stand cancelled. 12. Hence, on the aforesaid facts and plethora of justification submitted by the assessee, the striking point is that there is not even a single mentioned in the whole agreement dt. 28.02.2011 that goes off to bolster assessee’s contention that the balance amount of Rs. 3,50,06,136(4,70,06,136 – 12,000,000) out of sale proceeds was payable to Shri Govind Reality Pvt.Ltd. by the assessee. 13. Further, it is not out of place to mention that mere documentation of agreement and affidavit, cannot become the ground for the assessee to prove that Rs. 3,50,06,136/- belonged to Shri Govind Reality Pvt.Ltd., when actually no transaction of sale deed existed nor executed between the assessee and Shri Govind Reality for the relevant year. It is also not justified on the part of the assessee to present the issue on a unrealistic platform that income has been shown in the books of accounts of Shri Govind Reality Private Limited for the relevant year does not hold water when sale deed has been executed between the assessee and Swami Vivekanand Institute of Neurology Neurosurgery & Spine and Sagauya Mediservices and Private Limited for an amount of Rs. 4,70,06,136/- and credit of TDS u/s 194IA has been claimed by the assessee. 14. Thus the assessee’s contention and the matter deliberated on the foregoing paras clarify reflects that the assessee was trying to swindle the amount of Rs. 3,50,06,136/- as income of Shri Govind Reality and eventually trying to evade the tax net by presenting an unrealistic picture of financial accounting. Hence, on the facts and circumstances of the case, I have no alternative, but to add the difference of Rs. 3,50,06,136/- ( 4,70,06,136 – 12,000,000) as business income of the assessee. Penalty proceedings u/s 271(1)(c) is being separately initiated. ” 7. Now, we refer Para No. 3.1.2 to 3.1.5 of the order of first-appeal wherein the CIT(A) has deleted this addition; the said paras are re-produced below: “3.1.2 I have considered the facts of the case, plea raised by the appellant and finding of the AO. The facts narrated in assessment order are jumbled up Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 7 of 16 and need to be arranged in the chronology of events occurred in time. The brief facts are that the appellant initially entered into an agreement with M/s.Govind Reality Pvt.Ltd. for sale of property, admeasuring 34832 sq. ft. vide an agreement dt 26.02.2011. The property was sold for sale consideration of Rs. 1,20,00,000/- and the possession of the property was given to M/s.Govind Reality Pvt.Ltd. The appellant has received sum of Rs. 10,00,000/- vide cheque no. 616557 dated 21.02.2011 and the balance amount of Rs. 1,10,00,000/- was payable on receipt of building permission or within 40 months of the agreement i.e. on or before 25.05.2014. The period of payment can also be extended for further 9 months and interest charged @ 12% p.a. The appellant has received balance amount of Rs. 1,10,00,000/- on 19.02.2015. Thus, the appellant has received balance amount within 49 months of agreement. Thus, the appellant has received balance amount within 49 months of agreement. Thus, the conditions mentioned in clause 1 & 2 of the said agreement have not expired and the agreement can said to be in force as on date of receipt of full and final payment by the appellant from M/s.Govind Reality Pvt.Ltd. However, sale deed was not executed between the appellant and M/s.Govind Reality Pvt.Ltd. The properly was subsequently sold by M/s. Govind Reality Pvt.Ltd. (owner) to M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. for a sale consideration of Rs. 4,70,06,136/-. Since, the registered owner of the property was appellant as per government record, therefore, the registered sale deed was signed by the appellant in favour of M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. The registered deed was signed in the name of said party in compliance to the clause 12 of the agreement dt 26.02.2011, between appellant and M/s. Govind Reality Pvt.Ltd., which states that the buyer i.e. M/s. Govind Reality Pvt.Ltd. shall have vested rights to enter into an agreement for sale/transfer of the said property in the name of itself or in the name of any third party person/trust. Further, the seller i.e. the appellant, shall not raise any objection or create any hindrance on such transfer. Further, the transfer of such property has occurred on conditional consent from the buyer i.e. M/s.Govind Reality Pvt.Ltd. Therefore, the appellant could not sell the said property to any person without having any consent from M/s. M/s. Govind Reality Pvt.Ltd. The appellant has also filed copy of affidavit dt. 23.10.2014 issued by Shri Om Prakash Kriplani, Director of M/s. Govind Reality Pvt.Ltd. giving authority to the appellant to sell the plot to M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. with a condition that the appellant shall receive its share of Rs. 1,10,00,000/- and shall pay balance amount to M/s. Govind Reality Pvt.Ltd. The appellant in compliance, vide sale deed dt. 19.03.2015 sold the said plot to M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. for sale consideration of Rs. 4,70,06,136/-. The details of amounts received against said sale are as under :- Details of amount received from Date Amount Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 8 of 16 M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. 22.08.2014 25,00,000 M/s. Sagauya Mediservices Pt.Ltd. 22.08.2014 15,00,000 M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. 25.02.2015 1,07,00,000 M/s. Sagauya Mediservices Pt.Ltd. 25.02.2015 18,00,000 M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd. 18.03.2015 2,02,67,905 M/s. Sagauya Mediservices Pt.Ltd. 18.03.2015 1,02,38,232 Total 4,70,06,136 The appellant has received sale amount after deduction of TDS as per section 194IA of the Act amounting to Rs. 4,70,061/-. The appellant has retained amount of Rs. 1,10,00,000/- out of entire sum of Rs. 4,70,06,136/-and transferred balance amount to M/s. Govind Reality Pvt.Ltd. as per agreement dt 26.02.2011. The amount received by appellant (Rs. 1,20,00,000/-) and by M/s. Govind Reality Pvt.Ltd. ( Rs. 3,50,06,136/- ) has been fully offered to tax by each as per their share in property. The facts stated supra have not been doubted by the AO. All above transactions have been done as per the terms and conditions mentioned in the agreement to sale dated 26.02.2011. 3.1.3 The only reason for making impugned addition in the hands of appellant has been that M/s.Govind Reality Pvt.Ltd. was not the sole owner of the impugned property, therefore, is not entitled for any consideration against sale made to M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd.by the appellant. The only question which arises out here is whether the buyer i.e. M/s. Govind Reality P.Ltd. can be treated as owner/deemed owner of the impugned property. Section 53A of Transfer of Property Act states about part performance of any contract as per which ‘Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 9 of 16 possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract...’ In the instant case, the contract (agreement dt. 26.2.2011) has been partly executed within the meaning of provisions of section 53A of the Transfer of Property Act. 3.1.4 Now another question which arises out here is that whether the partly executed contract can be treated as de-facto transfer within the provisions of Income-tax Act, 1961. Hon'ble Supreme Court in the case of CIT vs. Balbir Singh Mainy, (2017) 86 taxmann.com 94 by throwing light on the objection of section 2(47)(vi) of the Act has held that ‘the object of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression “enabling the enjoyment of” takes colour from the earlier expression “transferring”, so that it was clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof, the maxim “noscitur a sociis” has been repeatedly applied by Supreme Court. A recent application of the maxim is contained in Coastal Paper Limited v. Commissioner of Central Excise, Visakhapatnam, (2015) 10 SCC 664 at 677, para 25. This maxim is best explained as birds of a feather flocking together. The maxim only means that a word is to be judged by the company it keeps. ‘The idea was to bring within the tax net, transactions, where, though title may not be transferred in law, there was, in substance, a transfer of title in fact.’ Explanation 2 to section 2(47) was also added by the Finance Act, 2012, with retrospective effect from 01.04.1962, for ready reference the Explanation 2 to section 2(47) is reproduced hereunder :- [Explanation – 2 For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.] Hence, from the decision of Hon'ble Apex Court and the Expln. 2 to section 2(47) of the Act, it becomes abundantly clear that when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction the assessee is out in possession of contract u/s 53A of Transfer of Property Act, it amounts to transfer as per provisions of section 2(47) of the Act and no registered deed of sale is required to constitute a transfer. In the instant case, the impugned agreement was signed between appellant and M/s. Govind Reality Pvt.Ltd. on 26.02.2011 and the agreement contained a specific clause for taking permission/authority from M/s. Govind Reality before transferring the same in the name of the said buyer or in the name of any other person/trust. The appellant has obtained an affidavit from the authorized person of M/s. Govind Reality Pvt.Ltd. and the appellant has received consideration as mentioned in the impugned agreement against the transfer of property. Therefore, the said transaction can be said to be a transfer within Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 10 of 16 the meaning of section 2(47) of the Act. Hon'ble ITAT Ahmedabad Bench in the cased of Smt. Sapnaben Dipakbhai Patel vs. ITO, (2016) 73 taxmann.com 288 has held that even arrangements conferring privileges of ownerships without transfer of title would come within the ambit of section 2(47)(v) of the Act. Thus, M/s. Govind Reality Pvt.Ltd. was the deemed owner of the said property. 3.1.5 Once, it has been established that M/s. Govind Reality Pvt.Ltd was the deemed owner of the property, the consideration received on sale of the said property would be taxed in the hands of the said party and not in the hands of appellant. Since, the appellant was the title holder of the said property under the Civil Law until the sale deed is executed, therefore, the appellant within the terms and condition of agreement dt. 26.02.2011 read with affidavit dt. 23.10.2014 transferred the said property in the name of M/s. Swami Vivekanand Institute of Neurology Neurosurgery & Spine and M/s. Sagauya Mediservices Pt.Ltd., on 19.03.2015 for sale consideration of Rs. 4,70,06,136/- The appellant after getting his balance amount of Rs. 1,10,00,000/- remitted the difference amount of Rs. 3,50,06,136/- to M/s. Govind Reality Pvt.Ltd. Both the parties have offered the amounts to tax while filing return of income. Therefore, the AO has totally erred in making addition on account of income from sale of property as business income in the hands of appellant without considering the facts of the case in entirety. Accordingly, addition of Rs. 3,50,06,136/- is hereby deleted.” 8. Since the entire case of assessee is revolving on the issue whether M/s Govind could be said to be owner of land on the basis of unregistered agreement with assessee, it is appropriate to refer the decision of Hon’ble Supreme Court in Balbir Singh Maini holding the field and relied upon by revenue in Grounds of appeal. The relevant paragraphs of decision are re- produced below: “18. Section 53A, as is well known, was inserted by the Transfer of Property Amendment Act, 1929 to import into India the equitable doctrine of part performance. This Court has in Shrimant Shamrao Suryavanshi & Anr. v. Pralhad Bhairoba Suryavanshi (D) by LRs. & Ors., (2002) 3 SCC 676 at 682 stated as follows: “16. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53A of the Act. The necessary conditions are: (1) there must be a contract to transfer for consideration of any immovable property; (2) the contract must be in writing, signed by the transferor, or by someone on his behalf; (3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained; Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 11 of 16 (4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof; (5) the transferee must have done some act in furtherance of the contract; and (6) the transferee must have performed or be willing to perform his part of the contract.” 19. It is also well-settled by this Court that the protection provided under Section 53A is only a shield, and can only be resorted to as a right of defence. See Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra (Dead) through LRs. (2004) 8 SCC 614 at 619, para 10. An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Registration and Other Related Laws (Amendment) Act, 2001. Amendments were made simultaneously in Section 53A of the Transfer of Property Act and Sections 17 and 49 of the Indian Registration Act. By the aforesaid amendment, the words “the contract, though required to be registered, has not been registered, or” in Section 53A of the 1882 Act have been omitted. Simultaneously, Sections 17 and 49 of the 1908 Act have been amended, clarifying that unless the document containing the contract to transfer for consideration any immovable property (for the purpose of Section 53A of 1882 Act) is registered, it shall not have any effect in law, other than being received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by a registered instrument. Section 17(1A) and Section 49 of the Registration Act, 1908 Act, as amended, read thus: “17(1A). The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then they shall have no effect for the purposes of the said Section 53A.” “49. Effect of non-registration of documents required to be registered. No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 12 of 16 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument.” 20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a “transfer” of a capital asset under Section 2(47)(v) of the Act, there must be a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression “of the nature referred to in Section 53A” in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression “of the nature referred to in Section 53A”. This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression “of the nature referred to in Section 53A” would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no “transfer” can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question.” [Emphasis supplied] 9. Thus, the Hon’ble Supreme Court has, after taking into account the effect of amendment in Section 17(1A) and Section 49 of the Registration Act, 1908 effective from year 2001, clearly held that an unregistered agreement “has no efficacy in the eyes of law, obviously no “transfer” can be said to have taken place under the aforesaid document.” Ld. Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 13 of 16 CIT(A) has however, in Para No. 3.1.4 of his order re-produced earlier, gone into another plank of section 2(47), namely section 2(47(vi) and Explanation to section 2(47), and thereby taken a view that even if the agreement dated 26.02.2011 was not registered, there was a “transfer” within the meaning of section 2(47). Based thereon, in Para No. 3.1.5, the CIT(A) has concluded that M/s Govind was deemed owner of the impugned land. However, in the first blush, we find a serious fallacy in the conclusion made by CIT(A) for the simple reason that the CIT(A) has missed a very important point that in present case, the assessee is engaged in business of real estate and the impugned land was part of stock of assessee which has given rise to income taxable under “Income from Business” head and not under “Income from Capital Gain” head. The provision of section 2(47) of Income-tax Act, 1961 is very clear and starts thus: “(47) ‘transfer’, in relation to a capital asset, includes, -- ” There cannot be any dispute that the term “capital asset” is used in Income- tax Act for taxation under “Income from Capital Gain” head and so the section 2(47) defining “transfer” is also relevant for that particular head; it is not at all relevant to ‘Income from Business” head. Therefore, in the present case, the CIT(A) has committed a serious error in placing reliance on section 2(47)(vi)/Explanation to section 2(47) and thereby hold M/s Govind as deemed owner. The CIT(A) has diverted his mind to a wrong provision of law and diverted himself from the ratio decided in Balbir Singh Maini. In the present case, the controversy between parties is precisely for “Income from Business” head and that too whether or not M/s Govind can be said to be owner of land on the basis of unregistered agreement. In our considered view, the answer is a clear “No” as per decision of Hon’ble Supreme Court decision in Balbir Singh Maini. Although we have confined to what has been wrongly adjudicated by CIT(A), we would like to add here that even for the purpose of Capital Gain head also, after decision of Hon’ble apex court Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 14 of 16 in Balbir Singh Maini, there is no sale or transfer of immovable property by an unregistered agreement. 10. Ld. DR for revenue also emphasised the strong objection made by AO in Para No. 14 of assessment-order that the assessee was trying to swindle the amount of Rs. 3,50,06,136/- as income of M/s Govind and eventually trying to evade the tax by presenting an unrealistic picture of financial accounting. On perusal of documents, we firstly find that the assessee-firm is constituted by 5 partners including (i) Shri Om Prakash Kriplani, and (ii) Shri Vashan Asnani. The unregistered agreement dated 26.02.2011 is executed between assessee-firm and Shri Vishan Asnani and the affidavit dated 23.10.2014 is signed by Shri Om Prakash Kriplani; both of these persons are directors of M/s Govind. Thus, the assessee-firm and M/s Govind are closely-related persons and effectively governed by same persons. Secondly, the assessee claims to have received a meagre advance of Rs. 10,00,000/- from M/s Govind and the balance sum of Rs. 1,10,00,000/- was even not received from M/s Govind’s pocket; the same was actually received from ultimate buyer M/s Swami but only appropriated towards the consideration payable by M/s Govind in terms of unregistered-agreement. Thirdly, the assessee has not even deducted/charged interest from M/s Govind as per Clause No. 2 of the impugned agreement for non-payment of consideration and still shared full sum of Rs. 3,50,06,136/- to M/s Govind. Fourthly, the contention of assessee that M/s Govind has declared the income of Rs. 3,50,06,136/- in its P&L A/c and therefore there is no evasion of tax is also meritless. It is true that M/s Govind has declared the income but a simple glance of the financial statements of assessee and M/s Govind makes it clear to any person of common sense that the audited P&L A/c of assessee shows a net profit of Rs. 37,02,451/- and the audited P&L A/c of M/s Govind shows a net profit of Rs. 1,16,82,835/- [on gross receipts of Rs. 23,85,10,980/- including the shared amount of Rs. 3,50,06,136/-]. That means, had there been no sharing of Rs. 3,50,06,136/-, M/s Govind would have suffered a substantial loss but for the sharing of consideration, the Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 15 of 16 income figures of both parties i.e. assessee as well as M/s Govind are balanced. In these circumstances, there is a prima facie merit in the conclusion taken by AO and emphasised by Ld. DR. 11. The above discussion brings us to conclude that M/s Govind cannot be treated as owner of the land on the basis of impugned unregistered agreement dated 26.02.2011 as per Hon’ble Supreme Court’s decision in Balbir Singh Maini. Therefore, we are inclined to uphold the order of AO and reverse the order of first-appeal. Ordered accordingly. The revenue’s appeal is allowed. Assessee’s ITA No. 88/Ind/2023: 12. The Assessee has raised following grounds: 1. On the facts and circumstances of the case and applicable law, the Ld. CIT(A)-III, Bhopal, erred in enhancing the income to the extent of Rs. 6,40,109/- which is contrary to the material on record and provisions of the Act, unjust and bad in law. 2. On the facts and circumstances of the case and applicable law, the Ld. CIT(A)-III, Bhopal erred in enhancing the income to the extent of Rs. 6,40,109/- towards interest income without considering the written submission and documentary evidences in proper perspective. 13. As we have seen in earlier discussion that the CIT(A), during first- appeal, deleted the addition of Rs. 3,50,06,136/- made by AO on the basis that he treated M/s Govind as owner of land from agreement dated 26.02.2011. Simultaneously, the CIT(A) also made enhancement u/s 251 on the basis that in terms of clause No. 2 of agreement, the assessee had not charged interest from M/s Govind for non-payment of consideration in time. Thus, the impugned enhancement of Rs. 6,40,109/- on account of interest income was an off-shoot of the acceptance of agreement dated 26.02.2011 by CIT(A). However, while adjudicating Revenue’s appeal in earlier part of this order, we have not accepted the transfer of ownership on the basis of said agreement to M/s Govind. Therefore, the necessary outcome shall be that the addition of interest made by CIT(A) cannot sustain. Hence, we are Rishi Construction, Bhopal ITA No. 220/Ind/2022 and 88/Ind/2023 – AY 2015-16 Page 16 of 16 inclined to delete the enhancement made by CIT(A). The assessee’s appeal is allowed. 14. Resultantly, both of these appeals are allowed. Order pronounced in the open court on 26.09.2023. Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore Ǒदनांक /Dated : 26.09.2023 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore