M/s. Nischay Fab Pvt. Ltd., Ahmedabad V. The Jt. C.I.T.(OSD), Circle-5, Ahmedabad

ITA 2571/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0028 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 07-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Capital asset
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 2571/AHD/2016 ( ASSESSMENT YEAR : 2009-10) M/S. NISCHAY FAB PVT. LTD. 8, LAVANYA SOCIETY, NR. JALTARANG CLUB, VASNA, AHMEDABAD - 380007 / VS. JT. COMMISSIONER OF INCOME TAX (OSD) CIRCLE 5, AHMEDABAD ./ ./ PAN/GIR NO. : AABCN4115F ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI J. P. SHAH, ADVOCATE / RESPONDENT BY : SHRI JAMES KURIAN, SR.D.R. DATE OF HEARING 06/08/2018 !'# / DATE OF PRONOUNCEMENT 25/09/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-9, AHMEDAB AD (CIT(A) IN SHORT), DATED 30.08.2016 ARISING IN THE ASSESSMENT ORDER DATED 26.12.2011 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSES SMENT YEAR 2009- 10. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE ADS AS UNDER:- ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 2 - 1. THE C.I.T. (APPEALS) ERRED IN GOING FAR BEYOND THE DIRECTION OF THE TRIBUNAL WHILE RESTORING THE MATTER BACK TO HIM, AN D THEREFORE, HIS ORDER IS BAD. 2. WITHOUT PREJUDICE TO THE ABOVE, THE C.I.T. (APPE ALS) ERRED IN DISALLOWING THE AMOUNT OF RS.88,72,276/- PAID TO KE TAN SHAH, ALPA SHAH, JENAL PATEL AND DIPIKA PATEL IN COMPUTATION O F TAXABLE CAPITAL GAIN FROM SALE OF LAND TO M/S. WRITERS AND PUBLICATIONS LTD. AS PER THE SALE DEED OF 30.06.2008. 2. THE C.I.T. (APPEALS) OUGHT TO HAVE ALLOWED THE D EDUCTION OF THE SAID AMOUNT OF RS.88,72,276/- IN THE COMPUTATION OF CAPITAL GAIN. 3. BRIEFLY STATED, THE ASSESSEE, A DOMESTIC COMPANY , IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FABRICS FOR THE AY 2009-10 IN QUESTION. THE ASSESSEE FILED ITS RETURN OF INCOME WHICH WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF THE SCRUT INY ASSESSMENT, THE AO INTER ALIA NOTICED THAT THE ASSESSEE SOLD A PIECE OF LAND AT S ANAND FOR SALE CONSIDERATION OF RS.3,80,26,500/- ON WHICH LONG TERM CAPITAL GAINS (LTCG) OF RS.1,84,02,354/- WAS DECLARED FOR T AXATION. ON THE SAID LTCG, THE ASSESSEE INTER ALIA CLAIMED RS.88,72,276/- AS COST OF TRANSFER. IT WAS OBSERVED THAT THE ASSESSEE HAS PU RPORTEDLY INCURRED THE AFORESAID COST OF TRANSFER OF RS.88.72 LAKHS BE ING COMPENSATION PAID FOR CANCELLATION OF AGREEMENT TO SALE (BANAKHA T) ENTERED WITH GROUP OF FOUR PERSONS NAMELY (I) MR. KETAN V. SHAH, (II) MR. JENAL PATEL, (III) MS. DIPIKA PATEL AND (IV) MS. ALPA K. SHAH. ON INQUIRY IN THIS REGARD, IT WAS SUBMITTED BY THE ASSESSEE TO TH E AO THAT THE COMPENSATION OF RS.88.72 LAKHS WAS PAID FOR CANCELL ATION OF AGREEMENT TO SALE ENTERED WITH KETAN V. SHAH AND OT HERS FOR A CONSIDERATION OF RS.2,02,82,000/- ON 17.04.2008. B Y VIRTUE OF SALE AGREEMENT TO SALE, MR. KETAN V. SHAH AND OTHERS PAI D ADVANCE OF RS.24,13,537/- FOR PURCHASE OF LAND FROM THE ASSESS EE. HOWEVER, SUBSEQUENTLY, THE ASSESSEE RECEIVED MORE ATTRACTIVE OFFER FROM M/S. WRITERS & PUBLISHERS LTD. FOR PURCHASE OF LAND FROM ASSESSEE. THE OFFER FOR PURCHASE WAS MADE AT RS.3,80,26,500/- FOR THE LAND FOR WHICH AGREEMENT TO SALE WAS EARLIER ENTERED WITH MR. KETA N V. SHAH AND OTHERS. IN ORDER TO REMOVE ENCUMBRANCE ON THE LAND OWING TO ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 3 - AFORESAID BANAKHAT, THE ASSESSEE AGREED TO PAY 50% COMPENSATION OF THE INCREMENTAL PRICE RECEIVED FROM THE NEW PURCHAS ER I.E. M/S. WRITERS & PUBLISHERS LTD. WHICH WORKED OUT TO RS.88 .72 LAKHS. THE ASSESSEE THUS CONTENDED BEFORE THE AO THAT THE COMP ENSATION FOR CANCELLATION OF AGREEMENT TO SALE WAS PAID TO MR. K ETAN V. SHAH AND OTHERS AS IT WAS NOT POSSIBLE TO SALE THE LAND WITH OUT PAYMENT OF SUCH COMPENSATION. IT WAS THUS THE CASE OF THE ASSESSEE THAT SUCH COMPENSATION FORMS PART OF THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF CAPITAL ASSET UNDER S.48 OF THE ACT. 4. HOWEVER, ON A DEEPER SCRUTINY INTO FACTS, THE AO FOUND THAT THE NARRATIVE OF THE ASSESSEE OF INCURRING EXPENDITURE TOWARDS CANCELLATION OF AGREEMENT TO SALE ENTERED INTO WITH MR. KETAN V. SHAH AND OTHERS WAS ONLY A SHAM ARRANGEMENT TO LESSEN THE TAX BURDE N. THE AO MADE A DETAILED INQUIRY INTO THE FACTUM OF ADVANCE OF RS .24,13,537/- IN AGGREGATE PURPORTEDLY RECEIVED FROM MR. KETAN V. SH AH AND OTHERS IN CONSIDERATION OF AGREEMENT TO SALE ORIGINALLY ENT ERED INTO WITH THE ASSESSEE ON 17.04.2008. THE AO MADE INQUIRY FROM T HE BANKS OF THE ASSESSEE AS WELL AS SHRI KETAN V. SHAH & ORS. AND COLLECTED BANK STATEMENTS PERTAINING TO THESE PARTIES. ON A STUDY MADE ON THESE BANK STATEMENTS, THE AO FOUND THAT MR. KETAN V. SHAH GRO UP WERE MEN OF STRAW AND HAD NO MEANS AND CAPACITY TO MEET THE COS T OF SALE CONSIDERATION OF RS.2.02 CRORES EVENTUALLY TO BE PA ID ON ASSIGNED FOR PURCHASE OF LAND. AS PER THE BANAKHAT, THE AO FURT HER FOUND THAT THE CHEQUES PURPORTEDLY ISSUED BY MR. KETAN V. SHAH AND OTHERS TO THE ASSESSEE AGGREGATING TO RS.24.13 LAKHS TOWARDS ADVA NCE AGAINST PROPOSED SALE CONSIDERATION (RS.2.02 CRORE) WAS NOT ENCASHED BY THE ASSESSEE AT ALL BEFORE ENTERED INTO THE FRESH SALE AGREEMENT WITH M/S. WRITERS GROUP. THE AO IN FACT FOUND THAT THE RECIP IENT OF THE COMMISSION (MR. KETAN V. SHAH AND OTHERS) HAD NO BA NK BALANCE AT THE TIME OF ISSUE OF CHEQUES TOWARDS ADVANCE ON 17. 04.2008. NO ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 4 - PAYMENT WHATSOEVER WAS MADE TO THE ASSESSEE BY THE RECIPIENT OF THE COMPENSATIONS TILL THE DATE OF SALE AGREEMENT WITH THE M/S. WRITERS GROUP. THE AO ALSO NOTED THAT THE AFORESAID PAYMEN T OF ADVANCE OF RS.24.13 LAKHS WAS IN FACT ENCASHED OUT OF THE COMP ENSATION PAID BY THE ASSESSEE. THE ASSESSEE IN FACT FOUND TO HAVE H ANDED OVER AN AMOUNT OF RS.75,40,000/- BETWEEN 16 TH TO 18 TH JULY 2008 TO MR. KETAN V. SHAH AND OTHERS RS.13,32,276/- ON 14.08.2008. A PERUSAL OF THE BANK STATEMENT OF THE RECIPIENT OF COMPENSATION REV EALED THAT PAYMENT OF RS.24,13,000/- WAS ACTUALLY SOURCED OUT OF COMPE NSATION RECEIVED FROM THE ASSESSEE ITSELF. THUS, IN ESSENCE, RECIPI ENTS OF THE COMPENSATION NEVER PAID ANY AMOUNT WHATSOEVER FROM THEIR OWN RESOURCES. THE AO ALSO MADE INQUIRIES WITH MR. KET HAN V. SHAH AND RECORDED STATEMENT ON OATH UNDER S.131 OF THE ACT. IT WAS OBSERVED THAT THE ASSESSEE HAD SHOWN THE RECEIPT OF COMPENSA TION AS PROFESSIONAL CHARGES AGAINST WHICH EXPENSES OF DOUB TFUL NATURE WERE CLAIMED. IT WAS ALSO FOUND THAT MR. JENAL PATEL WA S DOING ELECTRICAL WORK AND MS. DIPIKA PATEL WAS A NURSE. MR. JENAL P ATEL WAS BROTHER- IN-LAW OF MR. KETAN V. SHAH. THE AO CATEGORICALLY FOUND THAT THIS GROUP OF BENEFICIARIES OF COMMISSION HAD NEITHER AN Y CAPACITY TO INVEST MONEY FOR PURCHASE OF LAND NOR THEY ACTUALLY PAID ANY ADVANCE FROM THEIR RESOURCES. IT WAS ALSO OBSERVED THAT MS . JENAL PATEL AND MS. DIPIKA PATEL WERE NO EVEN FILING INCOME TAX RET URNS AND WERE ONLY NAME LENDERS IN THE ENTIRE TRANSACTIONS. THE AO AC CORDINGLY MADE A DETAILED FINDINGS IN THE ASSESSMENT ORDER AND HELD THAT THE WHOLE ARRANGEMENT TOWARDS PAYMENT OF COMMISSION WITH MR. KETAN V. SHAH AND OTHERS WAS SHAM TO AVOID INCIDENCE OF TAX. THE AO ACCORDINGLY REJECTED THE EXPENDITURE INCURRED IN CONNECTION WIT H TRANSFER ARISING OUT OF PURPORTED BANAKHAT/AGREEMENT TO SALE ENTERED INTO WITH MR. KETAN V. SHAH AND OTHERS. CONSEQUENTLY, THE LONG T ERM CAPITAL GAIN DECLARED BY THE ASSESSEE WAS ENHANCED BY THE AMOUNT OF COMPENSATION OF RS.88.72 LAKHS ALLEGEDLY PAID TO MR. KETAN V. SH AH AND OTHERS. ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 5 - 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) WITHOUT ANY SUCCESS. 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. ON CONSIDERATION OF FACTS, THE CO-ORDINATE BENCH OF ITAT SET ASIDE AND REMANDED THE ISSUE BACK TO THE FILE OF TH E CIT(A) IN ITA NO. 2579/AHD/2013 ORDER DATED 26.08.2014. PURSUANT TO THE RESTORATION OF THE ISSUE TO THE FILE OF THE CIT(A), THE FIRST APPE LLATE AUTHORITY RE- EXAMINED THE WHOLE ISSUE IN THE LIGHT OF THE DIRECT ION OF THE CO- ORDINATE BENCH AND ALSO OBTAINED REMAND REPORT FROM THE AO. ON CIRCUMSPECTION OF THE FACTS AND CIRCUMSTANCES RE-VI SITED BY THE CIT(A) IN THE LIGHT OF EVIDENCES PLACED BEFORE HIM AS WELL AS THE REMAND REPORT, THE CIT(A) CAME TO THE CONCLUSION THAT THE AGREEMENT TO SALE PURPORTEDLY ENTERED WITH ORIGINAL PURCHASERS (MR. K ETAN V. SHAH AND OTHERS) WERE NOT LEGALLY ENFORCEABLE AT ALL. THE C IT(A) ALSO SUCCESSFULLY DEMONSTRATED IN THE SECOND ROUND OF PR OCEEDINGS THAT THE COMPENSATION PAID TO THE ORIGINAL PURCHASERS CAN BE EASILY INFERRED TO BE A CAMOUFLAGE BY THE ASSESSEE COMPANY HAVING REGA RD TO THE CHAIN OF EVENTS VISIBLE FROM THE DOCUMENTARY EVIDENCES. 8. IT WILL BE APT TO REPRODUCE THE RELEVANT PARA OF THE ORDER OF CIT(A) DEALING WITH THE ISSUE FOR READY REFERENCE: 3. FROM THE CHRONOLOGY OF EVENTS IT IS APPARENT TH AT THE APPELLANT HAS ENTERED INTO TWO SALE AGREEMENTS THE FIRST ONE SUPP OSEDLY WAS WITH KETAN SHAH AND OTHERS SIGNED ON 17/4/2008. THE SAID AGREE MENT AS PERUSED FROM THE RECORDS IS ON AN INDIAN NON-JUDICIAL STAMP PAPE R OF RS. 100/-. THE STAMP PAPER WAS PURCHASED FROM A STAMP VENDOR. THE SAID BANAKHAT AGREEMENT IS NEITHER NOTARISED NOR REGISTERED WITH THE SUB REGISTRAR, SANAND. IT IS ALSO SEEN FROM THE COPY OF THE AGREEM ENT THAT THE SAID AGREEMENT IS ONLY SIGNED BY THE PARTIES TO THE AGRE EMENT ONLY AT THE END OF THE AGREEMENT. REST OF THE PAGES ARE NOT INITILLED. THE SECOND SALE AGREEMENT WAS MADE BY THE APPELLANT ON 30/6/2008 WI TH M/S. WRITERS AND PUBLISHERS LTD. IT IS SEEN FROM THE AGREEMENT THAT STAMP DUTY OF MORE THAN RS. 18,63,000/- WAS PAID AND THE AGREEMENT WAS REGI STERED WITH THE SUB REGISTRAR, SANAND. IN BETWEEN THE TWO AGREEMENTS TH E APPELLANT HAS ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 6 - ENTERED INTO ANOTHER AGREEMENT WITH SHRI KETAN SHAH AND OTHERS ON 20/6/2008 I.E. 10 DAYS BEFORE THE AGREEMENT WITH M/ S. WRITERS AND PUBLISHERS LTD. IT IS OBSERVED FROM THE SAID AGREEM ENT THAT IT IS MADE ON INDIAN NON-JUDICIAL STAMP PAPER OF RS. 100/- AND IS SIMILAR TO THE AGREEMENT OF SALE MADE ON 20/4/2008. THE SAID AGREE MENT IS NOT REGISTERED WITH SUB-REGISTRAR, SANAND. THE STAMP PA PER USED FOR THE AGREEMENT ENTERED ON 20/4/2008 WAS BOUGHT ON 2/2/20 08 WHEREAS THE BANAKHAT CANCELLATION AGREEMENT ENTERED ON 20/6/200 8 WAS MADE ON THE STAMP PAPER PURCHASED ON 9/5/2007. IT MEANS THAT TH E STAMP PAPER USED FOR THE AGREEMENT FOR THE CANCELLATION OF THE SALE AGREEMENT WERE PROCURED/DATED PRIOR TO THE AGREEMENT OF SALE. THE AGREEMENT/BANAKHAT TO SALE DATED 20/4/2008 SIGNED BY THE APPELLANT WAS CANCELLED ON 20/6/2008. AS OBSERVED BY HON'BLE TRIBUNAL ONE HAS TO SEE WHETHER THE AGREEMENTS EXECUTED BY THE APPELLANT WITH THE ORIGI NAL PURCHASERS (SHRI KETAN SHAH AND OTHERS) ARE LEGALLY ENFORCEABLE OR N OT? 4. IT IS IMPORTANT TO REFER TO SEC.53A OF THE TRANSFER OF PROPERTY ACT(TPA) IN THIS CONTEXT. THE SECTION IS REPRODUCED BELOW :- 53A. PART PERFORMANCE.WHERE ANY PERSON CONTRACTS T O TRANSFER FOR CONSIDERATION ANY IMMOVEABLE PROPERTY BY WRITIN G SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CER TAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT , TAKEN POSSESSION OF 'THE PROPERTY OR ANY PART THEREOF, O R THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED O R IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTAN DING THAT WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSF ER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, THE TRANSFEROR OR ANY PERSON CLAIMI NG UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSF EREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSS ESSION, OTHER THAN A RIGHT EXPRESSLY 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 T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 5. IT CAN BE SEEN FROM THE ABOVE QUOTED SECTION THA T IT DEALS WITH THE PART PERFORMANCE OF CONTRACT. THERE ARE THREE MAIN COMPO NENTS IN ORDER TO PART PERFORM ANY TRANSFER OF PROPERTY CONTRACT. FIR STLY THERE HAS TO BE A SIGNED AGREEMENT REFLECTING THE CONSIDERATION OF TH E IMMOVABLE PROPERTY TO BE TRANSFERRED. SECONDLY, THE TRANSFEREE HAS IN PART PERFORMANCE OF THE CONTRACT HAVE TAKEN POSSESSION OF THE PROPERTY OR A NY PART THEREOF OR IS ALREADY IN POSSESSION THEREOF AND FINALLY THE TRANS FEREE HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT. FROM THE BANAKHAT/A GREEMENT TO SALE DATED 20/4/2008 IT IS APPARENT AND IS A MATTER OF FACT TH AT THE APPELLANT HAD ONLY ENTERED WITH SHRI KETAN SHAH & OTHERS INTO AN AGREE MENT FOR THE SALE OF LAND. IT IS A FACT THAT NOTHING BEYOND THIS AGREEME NT HAS BEEN DONE BY THE TRANSFEREES I.E. KETAN SHAH AND OTHERS IN ORDER TO FULFILL THE CONDITIONS AS PER SECTION 53A OF TPA. THE SAID PIECE OF LAND REMA INED IN POSSESSION OF THE APPELLANT WHICH WAS GIVEN ON LEASE TO ITS OWN P ARTNERSHIP FIRM I.E. GUJARAT STEEL AND PIPES. IT IS ALSO A MATTER OF FAC T THAT NO STEPS HAVE BEEN TAKEN BY THE TRANSFEREES IN FURTHERANCE OF THE CONT RACT. IT IS SEEN FROM THE ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 7 - CONTRACT/BANAKHAT DATED 20/4/2008 THAT AT PARA-6, 7 & 11 IT IS MENTIONED AS FOLLOWS: PARA-6 THE VENDORS(THE APPELLANT) WISHES TO SALE AN D THE PURCHASERS (SHRI KETAN SHAH AND OTHERS) ARE READY T O PURCHASE THE SAID LAND HAVE DECIDED TO ENTERED INTO THIS AGREEME NT TO SALE MEANS THE BANAKHAT ON FOLLOWING TERMS AND CONDITIONS WHIC H ARE BINDING TO BOTH THE PARTIES TO THIS AGREEMENT. IF ANY OF TH E PARTY FAILED IN PERFORMING AND COMPLETING, THE DEAL THE OTHER PARTY WILL BE ENTITLED TO GET THEIR RIGHTS THROUGH COURT OF LAW FOR SPECIF IC PERFORMANCE AND ENTITLED TO CLAIM ALL THE EXPENSES FOR THE SAME FROM THE OTHER PARTY. PARA-7 IT IS MENTIONED THAT THE PRICE HAS BEEN FIXE D AT RS.2,02,82,000/- AND THE PURCHASERS HAVE PAID A SUM OF RS.24,13,537/-, THE DETAILS OF CHEQUE NUMBER AND DA TE OF CHEQUE AND THE BANK AND BRANCH HAVE BEEN MENTIONED THEREAF TER. PARA-11 IT IS FURTHER MENTIONED THAT ALL THE PAYMEN TS AS MENTIONED IN THE BANAKHAT HAVE BEEN MADE TO BE CONSIDERED AS RECEIPT OF FULL AND FINAL SALE CONSIDERATION. 6. ALTHOUGH IT HAS BEEN MENTIONED IN THE SAID AGREE MENT THAT SHRI KETAN SHAH AND OTHERS HAVE MADE PAYMENT OF RS. 24,13,537/ -. IT IS A MATTER OF FACT AND AS POINTED OUT BY THE A.O AS WELL AS THE C IT(A) THAT THE PAYMENT OF RS. 24,13,537/- WERE RECEIVED BY THE APPELLANT A FTER 15TH JULY, 2008 I.E. ONLY AFTER THE AGREEMENT TO SALE THE SAME PIECE OF LAND TO M/S. WRITERS AND PUBLISHERS WAS REGISTERED WITH SUB REGISTRAR, S ANAND AND THE PAYMENTS IN THREE INSTALLMENTS WERE RECEIVED FROM T HEM. THE APPELLANT HAS RECEIVED RS. 24,13,537/- WHICH MAY BE CONSIDERED AS AN ACT IN FURTHERANCE OF THE CONTRACT AS PER SEC.53A OF THE TPA ONLY AFTE R CANCELLATION .OF THE SAID AGREEMENT ON 20/6/2008 AND THE SALE OF . LAND TO M/S. WRITERS AND PUBLISHERS LTD. IT IS SEEN FROM THE BANK ACCOUNT OF THE APPELLANT THAT IT HAS RECEIVED RS.24,13,537/- ON 17/7/2008 WHEREAS AS PER THE AGREEMENT DATED 20/4/2008 THE CHEQUES WERE DATED 17/4/2008 AN D SUPPOSED TO HAVE BEEN PAID BY SHR KETAN SHAH & OTHERS. FURTHER; IT H AS BEEN BROUGHT OUT BY THE A.O THAT SHRI KETAN SHAH AND OTHERS WERE ABL E TO MAKE THE PAYMENT OF RS. 24,13,537/- ONLY AFTER THE FUNDS WER E RECEIVED FROM THE APPELLANT. THE PERUSAL OF THE BANK ACCOUNT OF ALL T HE FOUR PERSONS REFLECT THAT THEY DID NOT HAVE FUNDS TO PART PERFORM THE CO NTRACT. THEREFORE, I AM OF THE CONSIDERED OPINION THAT SHRI KETAN SHAH & OT HERS CANNOT BE CONSIDERED TO HAVE PERFORMED ANY ACT EXCEPT FOR ENT ERING INTO WRITTEN AGREEMENT ON 20/4/2008 AS PER SEC.53A OF THE TPA. . 7. IN LIGHT OF THE ABOVE DISCUSSION THE QUES TION ARISES WHETHER THE SAID AGREEMENT DATED 20/4/2008 WAS ENFORCEABLE BY LAW ESPECIALLY UNDER THE SPECIFIC RELIEF ACT, 1877 OR NOT? HON'BLE TRIBUNAL AHMEDABAD IN THEIR JUDGMENT IN THE CASE OF SMT. SAPNABEN DIPA KBHAI PATEL VS ITO ITA NO.2414/AHD/2013 DATED 13/1/2016 HAVE DELIBERAT ED ON THIS ISSUE IN DETAILS. HON'BLE TRIBUNAL HAS REFERRED TO SEC.2(47) (V) OF THE L.T.ACT VIS-A- VIS SEC.53A OF THE TPA AND HAS ALSO REFERRED TO THE PROVISIONS OF SPECIFIC RELIEF ACT, 1877, AND SECTION 49 OF THE INDIAN REGI STRATION ACT AND ESPECIALLY THE PROVISO THEREOF. IT HAS BEEN HELD BY THE HON'BLE TRIBUNAL THAT IN THE SAID CASE THE AGREEMENT TO SALE (SIMILA R TO THE AGREEMENT ENTERED BY THE APPELLANT AND KETAN SHAH & OTHERS) H AS ASSIGNED RIGHTS OF CAPITAL NATURE TO THE BUYERS OF THE PROPERTY. HOWEV ER, IN THE CASE UNDER CONSIDERATION OR THAT OF THE APPELLANT ONE HAS TO S EE WHETHER THE BUYERS ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 8 - I.E. SHRI KETAN SHAH AND OTHERS WERE IN A POSITION TO FILE A SUIT FOR SPECIFIC PERFORMANCE OF CONTRACT UNDER THE SPECIFIC RELIEF ACT OR NOT AND COULD HAVE PURSUED THE APPELLANT TO REGISTER THE SA LE DEED IN THEIR FAVOUR. IT IS SEEN FROM THE ORDER OF A.O AS WELL AS CIT(A) THAT THE SAID BANAKHAT DATED 20/4/2008 IS CONSIDERED AS A SHAM AGREEMENT A ND DESERVES TO BE IGNORED. HON'BLE TRIBUNAL IN THE JUDGMENT OF SMT. S APNABEN DIPAKBHAI PATEL (SUPRA) HAS QUOTED VARIOUS JUDGMENTS OF TRIBU NALS AND HIGH COURT WHEREIN THE BUYER OF THE PROPERTY HAD ENTERED INTO A CONTRACT, HAD POSSESSION OR PART POSSESSION, HAD UNDERTAKEN CERTA IN ACTS IN FURTHERANCE OF THE CONTRACT AND HENCE THE AGREEMENT HAS ASSIGNE D RIGHTS ON THE BUYER OF THE PROPERTY WHICH ARE OF CAPITAL NATURE. IT IS ALSO SEEN FROM VARIOUS JUDGMENTS RELIED UPON BY THE HON'BLE TRIBUNAL THAT IN-THESE CASES WHEN A FINAL DEED OF SALE OF LAND HAS BEEN REGISTERED WITH THE REGISTRAR OF THE REVENUE DEPARTMENT OF STATE GOVERNMENT THERE HAS BE EN A CONFIRMING PARTY WITH WHOM THE EARLIER AGREEMENT/BANAKHAT TO S ALE HAS BEEN ENTERED UPON. IN THESE CASES, THE FINAL BUYER OF THE PROPER TY HAS PAID COMPENSATION TO THE CONFIRMING PARTIES DIRECTLY I N ORDER TO HAVE A CLEAR TITLE IN ITS FAVOUR. WHEREAS IT IS SEEN FROM THE C ASE UNDER CONSIDERATION THAT THE FINAL SALE OF LAND ENTERED WITH M/S. WRTIE RS AND PUBLISHERS LTD. HAS NO CONFIRMING PARTY TO IT. M/S. WRITERS AND PUB LISHERS HAVE MADE PAYMENTS ONLY TO THE APPELLANT IN THREE INSTALLMENT S PRIOR TO 30/6/2008 WHEN THE FINAL AGREEMENT TO SALE WAS ENTERED INTO B Y THEM. IT IS THE APPELLANT WHO HAS MADE PAYMENTS TO SHRI KETAN SHAH AND OTHERS AND NOT M/S. WRITERS AND PUBLISHERS LTD. M/S. KETAN SHAH & OTHERS HAVE NOT BEEN THE CONFIRMING PARTY TO FINAL SALE DEED OF THE LAND . THE A.O AND THE CIT(A) HAVE THUS CHALLENGED THE GENUINENESS OF THE AGREEMENT ENTERED INTO BY THE APPELLANT WITH SHRI KETAN SHAH & OTHERS . APART FROM ENTERING INTO THE SAID 'SHAM AGREEMENT TO SALE NEITHER THE APPELLANT NOR SHRI KETAN SHAH AND OTHERS HAVE TAKEN ANY STEPS IN FURTH ERANCE OF THE CONTRACTS IN TERMS OF EITHER POSSESSION OR IN TERMS OF PART PAYMENTS IN FURTHERANCE OF THE CONTRACT. THEREFORE, NO RIGHT CA N BE SAID TO HAVE BEEN ASSIGNED WHICH COULD BE OF CAPITAL NATURE ON SHRI K ETAN SHAH & OTHERS. SECONDLY, IN ABSENCE OF FULFILLMENT OF CONDITIONS O F SEC-53A OF THE TP ACT, IT CAN BE SAID THAT SHRI KETAN SHAH & OTHERS COULD NOT HAVE EVER ENFORCED THE AGREEMENT DATED 20/4/2008 UNDER THE SPECIFIC RE LIEF ACT. HON'BLE TRIBUNAL AT PARA-24 OF THEIR ORDER [SMT. SAPNABEN D IPAKBHAI PATEL (SUPRA)] HAS ALSO REFERRED TO SEC.49 OF THE INDIAN REGISTRATION ACT. AT PARA-25 OF THEIR ORDER HON'BLE TRIBUNAL HAS RELIED UPON THE JUDGMENT OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN REGULAR SECOND APPEAL NO.4946 OF 2011 IN THE CASE OF RAM KISHAN VS BIJEDER MANN. PARA 24 & 25 OF THE SAID JUDGMENT OF THE HON'BLE TRIBUNA L IS REPRODUCED BELOW:- '24. ON DUE CONSIDERATION OF THE ABOVE REASONING, W E ARE OF THE VIEW THAT AS FAR AS THE JUDGMENT OF THE HON'BLE SUP REME COURT IN THE CASE OF SURAJ LAMP & INDUSTRIES (SUPRA) IS CONC ERNED, IT IS ALTOGETHER IN DIFFERENT CONTEXT. THERE IS NO DISPUT E WITH REGARD TO THE PROPOSITION THAT TRANSFER OF AN IMMOVABLE PROPE RTY HAVING VALUE OF MORE THAN RS.100/-CAN ONLY BE COMPLETED BY WAY O F REGISTERED SALE DEED, AS CONTEMPLATED IN SECTION 17 OF THE REG ISTRATION ACT. THIS JUDGMENT DEALS WITH THE CONCEPT OF POWER OF AT TORNEY, LEASE, LICENCE ETC.. DEFINITION OF EXPRESSION 'TRANSFER' P ROVIDED IN SECTION 2(47) IS MORE WIDER THAN IN THE GENERAL LAW. AS OBS ERVED EARLIER, WHILE DEALING WITH THE ISSUE NO.(II), THE EXPRESSIO N 'TRANSFER' EMPLOYED IN SECTION 2(47) INCLUDES (A) ANY TRANSACT ION WHICH ALLOWS POSSESSION TO BE TAKEN/RETAINED IN PART PERF ORMANCE OF A ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 9 - CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TPA, AND (B) ANY TRANSACTION ENTERED INTO IN ANY MANNER WHIC H HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. IN THESE TWO EVENTUALITIES 'PROFITS ON AC COUNT OF CAPITAL GAINS WOULD BE TAXABLE IN THE YEAR ITA NO.2414/AHD/ 2013 IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO, EVEN IF A TRANS FER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETED UNDER THE GE NERAL LAW. IN THE PRESENT CASE, THERE IS A FINE DISTINCTION WHICH REM AINED UN-NOTICED AT THE END OF THE LD. CIT(A). ACCORDING TO THE ASSE SSEE, THE RIGHTS WHICH HAVE BEEN ALIENATED BY HER BY VIRTUE OF AGREE MENT DATED 4.4.2008 ARE THE RIGHTS OF CAPITAL NATURE. THESE RI GHTS HAVE BEEN ALIENATED IN FAVOUR OF SDS, THE LD.CIT(A) HAS REFER RED TO SECTIONS 17 AND 49 OF THE INDIAN REGISTRATION ACT, BUT, FAIL ED TO NOTICE THE PROVISO APPENDED TO SECTION 49 WHICH HAS BEEN INCOR PORATED BY WAY OF AMENDMENT SUBSEQUENTLY. THUS, IT IS PERTINENT TO TAKE NOTE OF SECTION 49 ALONG WITH PROVISO WHICH READS AS UNDER: '49. EFFECT OF NON-REGISTRATION OF DOCUMENTS REQUIR ED TO BE REGISTERED.NO DOCUMENT REQUIRED BY SECTION 17 OR B Y 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 AFFE CTING SUCH PROPERTY OR CONFERRING SUCH POWER, UNLESS IT HAS BE EN REGISTERED : PROVIDED THAT AN UNREGISTERED DOCUMENT AFFECTING IM MOVABLE PROPERTY AND REQUIRED BY THIS ACT OR THE TRANSFER O F PROPERTY ACT, 1882 (4 OF 1882), TO BE REGISTERED MAY BE RECEIVED AS EVIDENCE OF A CONTRACT IN A SUIT FOR SPECIFIC PERFORMANCE UNDER C HAPTER II OF THE SPECIFIC RELIEF ACT, 1877 (1 OF 1877), OR AS EVIDEN CE OF PART PERFORMANCE OF A CONTRACT FOR THE PURPOSES OF SECTI ON 53AOF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) OR AS EV IDENCE OF ANY COLLATERAL TRANSACTION NOT REQUIRED TO BE EFFECTED BY REGISTERED INSTRUMENT.' 25. SECTION 53A OF THE T.P. ACT PROVIDE A SHIELD TO DEFEND THE POSSESSION TAKEN BY VIRTUE OF THE AGREEMENT. THE VE NDEE CAN CLAIM PROTECTION OF THE POSSESSION EVEN AGAINST THE OWNER I.E. VENDOR, DURING THE PERIOD SALE DEED WAS NOT REGISTERED. THE PERSON WHO HAS ACQUIRED THE POSSESSION ON EXECUTION OF AGREEMENT A S REFERRED TO IN SECTION 53A MAY NOT BE ABLE TO PROTECT HIS POSSESSI ON ON ACCOUNT OF NON-REGISTRATION OF THE AGREEMENT, BUT FOR ALL OTHE R ITA NO.2414/AHD/2013 COLLATERAL PURPOSES, I.E. FOR TEND ERING THE AGREEMENT INTO EVIDENCE FOR SUIT FOR SPECIFIC PERFO RMANCE, ETC. IT IS TO BE TREATED AS VALID AGREEMENT. A CONTROVERSY IN THIS ASPECT HAD ARISEN WHETHER SUCH NON-REGISTERED AGREEMENT CAN BE ENTERTAINED IN EVIDENCE OR NOT IN A SUIT FOR SPECIFIC PERFORMANCE. A REFERENCE WAS MADE BEFORE THE DIVISION BENCH OF PUNJAB & HARYANA HIGH COURT IN REGULAR SECOND APPEAL NO.4946 OF 2011 IN THE CAS E OF RAM KISHAN VS. BIJEDER MANN. THE HON'BLE HIGH COURT HAS RESOLVED THE CONTROVERSY AND HELD THAT SUCH UNREGISTERED AGREEME NT CAN BE PRODUCED AS EVIDENCE IN SUIT FOR SPECIFIC PERFORMAN CE. IT CAN BE MADE BASIS OF SUIT FOR SPECIFIC PERFORMANCE. THE FI NDING RECORDED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THIS CASE REPORTED IN (2013) 1 PLR195 AS UNDER: ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 10 - '11. A CONJOINT APPRAISAL OF SECTIONS 53AOF THE TRA NSFER OF PROPERTY ACT, 1882, SECTIONS I7(IA) AND 49 OF THE I NDIAN REGISTRATION ACT, 1908, PARTICULARLY THE PROVISO TO SECTION 49 OF THE INDIAN REGISTRATION ACT, IN OUR CONSIDERED OPINION, LEAVES NO AMBIGUITY THAT, THOUGH, A CONTRACT ACCOMPANIED BY D ELIVERY OF POSSESSION OR EXECUTED IN FAVOUR OF A PERSON IN POS SESSION, IS COMPULSORILY REGISTRABLE UNDER SECTION 17(1A) OF TH E REGISTRATION ACT, 1908, BUT THE FAILURE TO REGISTER SUCH A CONTR ACT WOULD ONLY DEPRIVE THE PERSON IN POSSESSION OF ANY BENEFIT CON FERRED BY SECTION 53A OF THE 1882 ACT. THE PROVISO TO SECTION 49 OF THE INDIAN REGISTRATION ACT CLEARLY POSTULATES THAT NON-REGIST RATION OF SUCH A CONTRACT WOULD NOT PROHIBIT THE FILING OF A SUIT FO R SPECIFIC PERFORMANCE BASED UPON SUCH AN AGREEMENT OR THE LEA DING OF SUCH AN UNREGISTERED AGREEMENT INTO EVIDENCE. 12. A SUIT FOR SPECIFIC PERFORMANCE BASED UPON AN U NREGISTERED AGREEMENT TO SELL ACCOMPANIED BY DELIVERY OF POSSES SION OR EXECUTED IN FAVOUR OF A PERSON WHO IS ALREADY IN PO SSESSION, CANNOT, THEREFORE, BE SAID TO BE BARRED BY SECTION 17(1A) OF THE REGISTRATION ACT, 1908. 13. SECTION 17(1A) MERELY DECLARES THAT SUCH AN UNR EGISTERED CONTRACT SHALL NOT BE PRESSED INTO SERVICE FOR THE PURPOSE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. SECTION 17(1A) OF THE REGISTRATION ACT, 1908, DOES NOT, WHETHER IN SPECIF IC TERMS OR BY NECESSARY INTENT, PROHIBIT THE FILING OF A SUIT FOR SPECIFIC PERFORMANCE BASED UPON AN UNREGISTERED AGREEMENT TO SELL, THAT RECORDS DELIVERY OF POSSESSION OR IS EXECUTED IN FA VOUR OF A PERSON TO WHOM POSSESSION IS DELIVERED AND THE ITA NO.2414/AHD/2013PROVISO TO SECTION 49 OF THE INDIAN REGISTRATION ACT, 1908, PUT PAID TO ANY ARGUMENT TO THE CONTRARY . 14. WE, THEREFORE, HOLD THAT: (A) A SUIT FOR SPECIFIC PERFORMANCE, BASED UPON AN UNREGISTERED CONTRACT/AGREEMENT TO SELL THAT CONTAINS A CLAUSE R ECORDING PART PER- FORMANCE OF THE CONTRACT BY DELIVERY OF POSSES SION OR HAS BEEN EXECUTED WITH A PERSON, WHO IS ALREADY IN POSSESSIO N SHALL NOT BE DISMISSED FOR WANT OF REGISTRATION OF THE CONTRACT/ AGREEMENT; (B) THE PROVISO TO SECTION 49 OF THE REGISTRATION A CT, LEGITIMISES SUCH A CONTRACT TO THE EXTENT THAT, EVEN THOUGH UNR EGISTERED, IT CAN FORM THE BASIS OF A SUIT FOR SPECIFIC PERFORMANCE A ND BE LED INTO EVIDENCE AS PROOF OF THE AGREEMENT OR PART PERFORMA NCE OF A CONTRACT.' 8. THUS, RELYING ON THE JUDGMENT OF HON'BLE ITAT, A HMEDABAD IN THE CASE OF SMT. SAPNABEN D. PATEL (SUPRA) AND IT CAN B E SEEN FROM THE PARAS ABOVE THAT IN ABSENCE OF FULFILLMENT OF CONDITIONS U/S.53A OF THE TPA, IN ABSENCE OF POSSESSION OR PART POSSESSION OF THE LAN D AND IN ABSENCE OF PAYMENTS AS PER THE BANAKHAT DATED 20/4/2008 EVEN I F THE BANAKHAT TO SALE IS NOT REGISTERED IT CAN BE SAFELY CONCLUDED THAT T HE BUYERS TO THE PROPERTY I.E. SHRI KETAN SHAH & OTHERS COULD NOT HAVE GONE F OR A SUIT FOR SPECIFIC PERFORMANCE OF THE SAID AGREEMENT. NEITHER SEC.17(1 )(A) OF REGISTRATION ACT, 1908, NOR PROVISO TO SEC.49 OF THE INDIAN REGI STRATION ACT WOULD HAVE ASSIGNED ON SHRI KETAN SHAH & OTHERS AUTHORITY FOR FILING SUIT FOR SPECIFIC PERFORMANCE. THUS, I AM OF THE CONSIDERED OPINION T HAT THE AGREEMENT ENTERED ON 20/4/2008 EXECUTED BY THE APPELLANT WITH SHRI KETAN SHAH & ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 11 - OTHERS WAS NOT LEGALLY ENFORCEABLE AND HAS BEEN COR RECTLY HELD BY A.O AND THE THEN CIT(A) AS A 'SHAM AGREEMENT TO SALE.' 9. ON 20/6/2008 THE APPELLANT HAS ENTERED INTO ANOT HER AGREEMENT WITH SHRI KETAN SHAH AND OTHERS THROUGH A BANAKHAT OF RS. 100/- ON NON- JUDICIAL STAMP PAPER, CANCELLING THE AGREEMENT ENTE RED INTO BETWEEN THEM AND APPELLANT ON 20/4/2008. IN THE SAID AGREEMENT I T HAS BEEN MENTIONED AT PARA-1 THAT AS PER THE AGREEMENT DATED 17/4/2008 THE PARTIES WERE REQUIRED TO GET EXECUTED REGISTERED SALE DEED WITHI N A WEEK ON RECEIPT OF TITLE CLEARANCE CERTIFICATE. AT PARA-2 OF THE AGREE MENT DATED 20/6/2008 IT HAS BEEN MENTIONED THAT AS PER THE ORIGINAL BANAKHA T I.E. DATED 17/4/2008 THE PURCHASERS OUGHT TO HAVE OBTAINED TITLE CLEARAN CE CERTIFICATE, HOWEVER, NO ACTIONS HAVE BEEN STARTED SO FAR. IN THE SAME PA RAGRAPH IT HAS BEEN MENTIONED THAT M/S. KETAN SHAH & OTHERS HAVE IDENTI FIED ANOTHER BUYER NAMELY M/S. WRITERS AND PUBLISHERS LTD. AND AFTER N EGOTIATIONS THE SALE PRICE FOR THE SAME PIECE OF LAND HAS BEEN FIXED AT A HIGHER PRICE AS MENTIONED IN THE FIRST BANAKHAT DATED 17/4/2008. HO WEVER THIS HAS BEEN MADE SUBJECT TO THE CONDITION THAT M/S. KETAN SHAH & OTHERS WERE READY TO LIFT THEIR ENCUMBRANCE WITH THE CONDITION THAT 5 0% OF THE ADDITIONAL SALE PROCEEDS SHOULD BE RECEIVED FROM THE NEW PURCH ASER IS TO BE PASSED ON TO THEM. AS PER THE TERMS AND CONDITIONS REFLECT ED IN BANAKHAT CANCELLING THE EARLIER AGREEMENT, THE APPELLANT WOU LD PASS ON AN AMOUNT OF RS. 88,72,276/- TO M/S. KETAN SHAH. AND OTHERS. ACCORDINGLY, THE APPELLANT HAS ISSUED 8 CHEQUES TOTALLING TO RS.88,7 2,276/- TO M/S. KETAN SHAH & OTHERS. OUT OF THESE EIGHT CHEQUES, IT IS SE EN FROM THE BANK ACCOUNT OF APPELLANT AS WELL AS KETAN SHAH & OTHERS THAT CHEQUES AMOUNTING TO RS. 75,40,000/- WERE CREDITED TO THE A CCOUNT OF KETAN SHAH AND OTHERS BETWEEN 16TH TO 18TH JULY, 2008 WHEREAS CHEQUES AMOUNTING TO RS. 13,32,276/- HAVE BEEN CREDITED TO THE ACCOUNTS OF KETAN SHAH & OTHERS ON 14/8/2008. THE APPELLANT HAD ALSO AGREED TO RETURN BACK RS. 24,1 3, 537/- TO M/S. KETAN SHAH AND OTHERS (IT IS NOT KNOWN FROM THE RECORDS WHETHER THE APPELLANT HAS RETURNED THIS AMO UNT TO M/S. KETAN SHAH & OTHERS OR NOT AS THE BANK STATEMENT OF THE A PPELLANT WAS NOT AVAILABLE ON THE RECORD). IT IS MENTIONED AT PARA-5 OF THIS BANAKHAT THAT BOTH THE PARTIES HAVE AGREED TO RELEASE EACH OTHER FROM LIABILITY WHATSOEVER ARISEN ON ACCOUNT OF BANAKHAT DATED 17/4 /2008. 10. THE APPELLANT HAS RECEIVED RS. 50 LACS FROM M/S . WRITERS AND PUBLISHERS LTD. BY 30/5/2008. FURTHER THE APPELLANT HAS ALSO RECEIVED RS. 3,30,26,500/-FROM M/S. WRITERS AND PUBLISHERS LTD., ON 2/7/2008. THE BANAKHAT TO SALE DATED 17/4/2008 WAS CANCELLED ON 2 0/6/2008. IT IS ONLY DURING THE MONTH OF JULY I.E. FROM 16TH JULY TILL 1 9TH JULY ALL THE TRANSACTIONS BETWEEN THE APPELLANT AND M/S. KETAN S HAH & OTHERS HAVE TAKEN PLACE. ONLY ON 14/8/2008 AS MENTIONED EARLIER CHEQUES AMOUNTING TO RS. 13,32,276/- WERE PAID BY APPELLANT TO M/S. K ETAN SHAH & OTHERS. ON 16TH JULY AND 18TH JULY 208, THE APPELLANT HAS P AID RS. 75,40,000/- TO M/S. KETAN SHAH & OTHERS AND FROM THE SAME AMOUNT T HE APPELLANT HAS ALSO RECEIVED BACK RS. 24,13,537/- WHICH IS SUPPOSE D TO HAVE BEEN PAID BY M/S. KETAN SHAH & OTHERS AS PER THE FIRST BANAKHAT DATED 17/4/2008. IT IS DIFFICULT TO UNDERSTAND AS WHY CHEQUES AMOUNTING TO RS. 24,13,537/- WERE CREDITED TO ACCOUNT OF THE APPELLANT ON 17/7/2008 E SPECIALLY WHEN THE AGREEMENT TO CANCEL THE BANAKHAT OF SALE WAS ALREAD Y SIGNED ON 20/6/2008. AND AGAIN IN BANAKHAT SIGNED TO CANCEL T HE SALE AGREEMENT, THE APPELLANT HAS PROMISED TO RETURN RS. 24,15, 537/-. THERE WAS NO NEED TO REFER TO THE ADVANCE PAYMENT MADE BY KETAN SHAH & O THERS IN CANCELLATION AGREEMENT AS THE FUNDS HAD NEVER TRAVE LLED BETWEEN APPELLANT ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 12 - AND KETAN SHAH & OTHERS. THIS FURTHER CONFIRMS THAT THE SALE AGREEMENT TO SALE AS WELL AS CANCELLATION AGREEMENT WERE ALL AFT ERTHOUGHTS AND SHAM AGREEMENTS. THUS, IT CAN BE SEEN THAT AS ON DATE OF THE ENTERING INTO BANAKHAT FOR CANCELLATION OF EARLIER AGREEMENT TO S ALE WAS CONCERNED M/S. KETAN SHAH & OTHERS DID NOT HAVE THE POSSESSION OR PART POSSESSION OF THE SAID PROPERTY AS WELL AS HAD NOT PERFORMED ANY ACT IN FURTHERANCE OF THE BANAKHAT DATED 17/4/2008. AS HAS BEEN ALREADY HELD BY ME THAT THE SAID BANAKHAT KEEPING IN MIND SEC.53A OF THE TPA AND SEC .49 OF INDIAN REGISTRATION ACT R.W. ITS PROVISO COULD NOT HAVE AS SIGNED ANY ENFORCEABILITY OF THAT AGREEMENT IN LAW UNDER THE S PECIFIC RELIEF ACT AND HENCE THE BANAKHAT CANCELLING THE BANAKHAT TO SALE ALSO DOES NOT HAVE ENFORCEABILITY UNDER THE LAW FOR FILING OF SUIT OF SPECIFIC PERFORMERS. AS THE BANAKHAT TO SALE HAS NOT GIVEN ANY AUTHORITY TO M/S. KETAN SHAH & OTHERS TO FILE A SUIT UNDER SPECIFIC RELIEF ACT THE RE -IS NO QUESTION THAT THE BANAKHAT CANCELLING BANAKHAT TO SALE WOULD HAVE GIV EN AUTHORITY TO FILE SUIT FOR SPECIFIC PERFORMANCE UNDER CHAPTER-2 OF TH E SPECIFIC RELIEF ACT. 11. IT IS SEEN FROM VARIOUS BANK ACCOUNTS MAINTAINE D BY M/S. KETAN SHAH & OTHERS AND AS HAS BEEN RIGHTLY POINTED OUT B Y THE A.O THAT M/S. KETAN SHAH AND OTHERS DID NOT HAVE THE CAPACITY TO UNDERTAKE ANY ACT FOR FURTHERANCE OF THE ORIGINAL BANAKHAT DATED 17/4/200 8 ESPECIALLY IN TERMS OF FINANCIAL MEANS. IT IS EVIDENT FROM THE BANK STA TEMENTS OF M/S. KETAN SHAH & OTHERS WHICH ARE MADE PART OF THE ORDER OF A SSESSMENT. DURING THE ORIGINAL APPELLATE PROCEEDINGS AN AFFIDAVIT FROM M/ S. KETAN SHAH & OTHERS ON A STAMP PAPER DATED 28/5/2012 IS PLACED O N RECORD. IT IS SEEN FROM THE SAID AFFIDAVIT, AT PARA-3, IT IS MENTIONED THAT 'SOMEWHERE OR OTHERWISE WE COULD NOT ARRANGE FOR FUNDS AND TITLE CLEARANCE CERTIFICATE WITHIN THE STIPULATED TIME AND THEREFORE, CHEQUES R EMAIN UNPAID WITH THE COMPANY - NFDL' THUS IN THE SAID AFFIDAVIT M/S. KET AN SHAH & OTHERS HAVE ADMITTED THAT THEY COULD NOT PERFORM THE ACT F OR THE FURTHERANCE OF THE BANAKHAT DATED 17/4/2008. THE CHEQUES AMOUNTING TO RS. 24,13,537/- HAVE ALSO BEEN REFERRED TO AT PARA-2 OF THIS AFFIDA VIT. IT IS MENTIONED AT PARA-2 THAT M/S. KETAN SHAH & OTHERS HAD HANDED OVE R CHEQUES TO THE COMPANY (APPELLANT) WITH THE CONDITION TO DEPOSIT T HE CHEQUES ONLY AFTER THE CONFIRMATION FROM M/S. KETAN SHAH & OTHERS. THI S FURTHER PROVES THE FAILURE ONT HE PART OF M/S. KETAN SHAH & OTHERS TO ACT IN FURTHERAACE OF THE BANAKHAT DATED 17/4/2008. 12. IT MAY BE POINTED OUT HERE THAT M/S. KETAN SHAH & OTHERS HAVE DEPOSITED CHEQUES GIVEN BY THE APPELLANT AMOUNTING TO RS. 13,32,276/- IN THEIR ACCOUNTS, ON 14/8/2008. THE CAREFUL PERUSAL O F THE ACCOUNT NUMBERS REFLECTS THAT ALL THE FOUR ACCOUNTS IN THE NAME OF KETAN SHAH, ALPESH SHAH, JENAL PATEL AND DIPIKA PATEL ARE SERIALLY NUMBERED I.E. FROM 006701513828 TO 006701513831 AND HAVE ALL BEEN OPEN ED ON THE SAME DATE I.E. ON 11/7/2008 WITH ICICI BANK. THESE ACCOU NT SEEMS TO HAVE BEEN OPENED ESPECIALLY FOR RECEIVING RS. 13,32,276/-FROM THE APPELLANT COMPANY. FURTHER, FROM THE AFFIDAVIT DATED 28/5/201 2 FILED BY KETAN SHAH AND OTHERS IT CAN BE SEEN THAT THEY HAD NOT TAKEN A NY STEPS FOR OBTAINING TITLE CLEARANCE CERTIFICATE. THE TITLE CLEARANCE CE RTIFICATE IS OBTAINED BY THE BUYER OF THE PROPERTY WHICH IS NORMALLY GIVEN B Y AN ADVOCATE BASED ON THE SEARCH OR SCRUTINY OF PUBLIC DOCUMENTS AVAILABL E WITH THE SUB- REGISTRAR OF THE REVENUE DEPARTMENT AS WELL AS BY M EANS GIVING ADVERTISEMENT IN THE NEWSPAPER. NO SUCH EXERCISE WA S UNDERTAKEN BY M/S. KETAN SHAH & OTHERS. A 'BONAFIDE BUYER' NORMALLY TA KES PRECAUTIONARY MEASURES TO OBTAIN THE TITLE CLEARANCE CERTIFICATE IN ORDER TO PROTECT ITSELF FROM FURTHER DAMAGES THROUGH LITIGATION. THUS, IT I S APPARENT THAT M/S. ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 13 - KETAN SHAH & OTHERS WERE NOT INTERESTED IN GETTING THE SAID PROPERTY REGISTERED IN THEIR NAME AND AS DISCUSSED EARLIER T HE BANAKHAT AGREEMENT DATED 17/4/2008 AS WELL AS THE CANCELLATION AGREEME NT DATED 20/6/2008 WERE ONLY A PART OF AN 'ARRANGEMENT' BY THE APPELLA NT TO AVOID TAX ON THE SALE OF LAND. 13. HON'BLE TRIBUNAL HAS ALSO RAISED AN ISSUE WITH REGARD TO WHETHER THERE WAS ANY CONCRETE EVIDENCE PROVING THAT THE EN TIRE COMPENSATION PAID TO M/S. KETAN SHAH & OTHERS CAME BACK TO THE A SSESSEE COMPANY OR NOT? IT IS OBSERVED FROM THE RECORDS AVAILABLE AT T HE FIRST APPELLATE PROCEEDINGS AS WELL AS DURING THE CURRENT ASSESSMEN T PROCEEDINGS THAT NO SUCH ENQUIRY HAS FURTHER BEEN MADE BY THE A.O AND T HERE IS NO CONCRETE EVIDENCE TO THIS EFFECT. HOWEVER, THE CASE RECORDS WERE CALLED FOR AND WERE PERUSED FOR THE SAID PURPOSE. IT IS SEEN THAT RS. 75,40,000/- WHICH WERE PAID BY THE APPELLANT TO M/S. KETAN SHAH & OTH ERS ON 16TH AND 18TH JULY 2008, THE MAJORITY OF THE QUANTUM HAS BEEN WIT HDRAWN BY THE ACCOUNT HOLDERS AS 'CASH' FROM THEIR OWN BANK ACCOUNT. IN C ASE OF ALPA SHAH WHO HAD RECEIVED RS. 29,95,000/- SHE HAS PAID RS. 19,13 ,537/- BACK TO THE APPELLANT AS A PART OF ORIGINAL BANAKHAT ON 17/7/20 08. REMAINING RS. 10 LACS HAVE BEEN WITHDRAWN BY HER IN CASH. KETAN SHAH WHO RECEIVED RS. 28,25,000/- FROM THE APPELLANT AT 18/7/2008 HAVE WI THDRAWN RS. 27,50,000/-. IN -CASH ON 18/7/2008. SIMILARLY, JENA L PATEL AND DIPIKA PATEL WHO RECEIVED RS. 8,60,000/- EACH FROM THE APP ELLANT HAVE WITHDRAWN RS. 9 LACS IN CASH AND ALSO HAVE PAID BACK TO THE A PPELLANT AS A PART OF CHEQUE PAYMENT RELATING TO BANAKHAT DATED 17/4/2008 . 14. AN EXERCISE WAS UNDERTAKEN TO FIND OUT WHETHER KETAN SHAH, ALPA SHAH, JENAL PATEL AND DIPIKA PATEL HAVE OFFERED THE AMOUNT RECEIVED BY THEM FROM THE APPELLANT IN THEIR RETURN OF INCOME A S WELL AS FOR TAXATION OR NOT. IT WAS FOUND THAT NONE OF THEM HAVE FILED T HE RETURN OF INCOME FOR A.Y.2009-10. IT IS SEEN FROM THE ORDER OF ASSESSMEN T THAT AT PARA-6.8 IT IS MENTIONED BY THE A.O THAT SHRI KETAN SHAH AND SMT. ALPA SHAH WERE FILING INCOME-TAX RETURN AND SHRI JENAL PATEL AND SMT. DIP IKA PATEL WERE NOT FILING INCOME-TAX RETURNS. AT PARA 6.9 IT IS MENTIO NED THAT SHRI KETAN SHAH HAD SUBMITTED A COPY OF RETURN OF INCOME FILED FOR A.Y.2009-10 WHEREIN HE HAD SHOWN AMOUNT OF RS. 28,25,000/- PROFESSIONAL CH ARGES RECEIVED AGAINST WHICH HE HAD CLAIMED CERTAIN EXPENSES. ON G OING THROUGH THE CASE RECORDS IT IS OBSERVED THAT IN THE NOTE SHEET PORTI ON THE A.O HAS MENTIONED THAT KETAN SHAH HAS SUBMITTED THE RETURN OF INCOME VIDE NOTE SHEET ENTRY DATED 20/12/2011. HOWEVER, THE CASE RECORDS REFLECT THAT THE RETURN OF INCOME OF KETAN SHAH AND ALPA SHAH WERE NOT THERE I N THE CASE RECORDS. WHAT WAS AVAILABLE IN THE CASE RECORD WAS THE COMPU TATION OF INCOME OF KETAN SHAH AND SMT. ALPA SHAH. THUS, THE A.O WAS AS KED SPECIFICALLY TO INFORM FOR THE PRESENT APPELLATE PROCEEDINGS WHETHE R THE FOUR PERSONS HAVE FILED THEIR RETURN OF INCOME FOR A.Y. 2009-10 OR NOT, AND IF YES, THE A.O WAS REQUESTED TO SUBMIT THE COPIES OF THEIR RET URNS. THE A.O WAS INFORMED THAT THIS WAS ESSENTIAL TO VERIFY WHETHER THE FOUR PERSONS HAVE DECLARED THE CAPITAL GAIN TAX OR HAVE REFLECTED THE AMOUNT RECEIVED FROM THE APPELLANT IN THEIR RETURN OF INCOME OR NOT. 15. THE REMAND REPORT SUBMITTED BY THE A.O AND REJO INDER FILED BY THE APPELLANT ON THE REMAND REPORT ARE AS FOLLOWS :- '2. VIDE LETTER REFERRED ABOVE,-DIRECTIONS WERE ISS UED FOR SUBMISSION OF REMAND REPORT IN RESPECT OF UNDERGOIN G APPELLATE PROCEEDINGS IN THE ABOVEMENTIONED CASE. VIDE THIS L ETTER, IT HAS ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 14 - BEEN POINTED OUT THAT PARA 6.9 OF THE ASSESSMENT OR DER U/S 143(3) DATED 26/12/2011 CITES SUBMISSION OF THE INCOME-TAX DETAILS OF SHRI KETAN SHAH AND MS. ALPA SHAH DURING THE ASSESSMENT PROCEEDINGS BY THE ASSESSEE BEFORE THE THEN A.O. IN PURSUANCE OF THE APPELLATE PROCEEDINGS COPIES OF THESE RETURNS OF IN COME HAD BEEN ASKED FOR. ALSO, THE COPIES OF RETURNS OF SHRI JENA / PATEL AND MS. DIPIKA PATEL, TAKEN REFERENCE OF IN PARA 6.8 OF THE ASSESSMENT ORDER, HAVE A/SO BEEN ASKED FOR. 3. IN THIS REGARD, IT IS SUBMITTED THAT AS STIPULAT ED REPORT WAS BEING CONTEMPLATED, THE CASE RECORDS OF THE ASSESSE E WERE THOROUGHLY CHECKED. HOWEVER, INCOME TAX RETURNS OF SHRI KETAN SHAH AND MS. ALPA SHAH COULD NOT BE FOUND IN THE CA SE RECORDS OF THE ASSESSEE. THE ONLY AVAILABLE DOCUMENTS WERE COP IES OF THEIR LEDGERS AND FINAL ACCOUNTS (COPY ENCLOSED). THEREFO RE, REQUESTS WERE SENT TO JURISDICTIONAL A.O.S FOR OBTAINING COP IES OF ITRS (FILED FOR A.Y. 2009-10) NOT ONLY IN RESPECT OF SHRI JENAL PATEL AND MS. DIPIKA PATEL BUT ALSO IN RESPECT OF SHRI KETAN SHAH AND MS. ALPA SHAH AS ENUMERATED HEREUNDER: NAME OF THE PERSONS (SHRI/SMT) PAN JURISDICTION KETAN SHAH BBOPS2743G CIRCLE-5 (2) ALPA SHAH BEYPS8838H WARD-5 (2)(2). JENAL PATEL A01PP0226M WARD-7(1)(4) DIPIKA PATEL AOIPPQ413N WARD-7(1)(4) 4. IN RESPONSE TO THE REQUEST ISSUED, /TO, WARD-7(1 )(4) VIDE LETTER DATED 13/06/2016 SUBMITTED THAT SHRI JENA/ P ATEL AND MS. DIPIKA PATEL HAVE NOT FILED THEIR INCOME-TAX RETURN S FOR A.Y. 2009- 10. HOWEVER, NO REPLY WAS RECEIVED IN RESPECT OF OT HER TWO PERSONS. THEREFORE, SHRI RISHABH SHARMA, INSPECTOR OF THIS C HARGE WAS DEPUTED TO PERSONALLY VISIT AND OBTAIN COPIES OF IT R IN RESPECT OF SHRI KETAN SHAH AND MS. ALPA SHAH FROM THEIR RESPEC TIVE JURISDICTION. AS REPORTED BY THE SHRI SHARMA, SHRI KETAN SHAH AND MS. ALPA SHAH ALSO HAVE NOT FILED THEIR RETURN OF I NCOME FOR A.Y. 2009-10. AXIOMATICALLY, THEY ALSO HAVE NOT OFFERED THEIR CAPITAL GAINS TO TAX DURING THE YEAR. COPIES OF THE REPLIES RECEIVED FROM ITO, WARD-7(1 )(4) DATED 13/06/2016 AND ITD QUERIES RETURNING RELEVANT RESULT FOR SHRI KETAN SHAH AND MS. ALPA SH AH ARE ENCLOSED HEREWITH FOR REFERENCE. 5. IN CONCLUSION, YOUR LEARNED SELF IS REQUESTED TO DECIDE THE CASE IN LIGHT OF ABOVE FINDINGS.' THE APPELLANT SUBMITTED ITS REPLY TO THE REMAND REP ORT VIDE LETTER DATED 8/7/2016. THE SAME IS AS UNDER:- 1. WE ARE IN RECEIPT OF YOUR LETTER DATED 23.06.201 6 ENCLOSING THEREWITH THE REPORT RECEIVED FROM THE INCOME TAX O FFICER IN OUR APPEAL BEFORE YOUR GOOD SELF. BEFORE OFFERING COMME NTS, WE WOULD LIKE TO STATE AS FOLLOWS: ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 15 - 2. SHORTLY PUT, THE REPORT STATES THAT NOW THE RETU RNS OF KETAN SHAH AND ALPA SHAH, ARE NOT IN THE CASE RECORDS BUT COPI ES OF THEIR LEDGERS AND FINAL ACCOUNTS WERE THERE. THE PRESENT INCOME TAX OFFICER, WHOSE JURISDICTION OVER JENA/ PATEL AND DI PIKA PATEL.INFORMED THAT THEY HAVE NOT FILED RETURNS FOR ASST. YEAR 2009- 10. REGARDING KETAN SHAH AND ALPA SHAH, THE INSPECT OR REPORTED THAT EVEN THEY HAVE NOT FILED THE RETURN, AND THERE FORE, THEY HAVE NOT PAID TAX ON CAPITAL GAIN. 3. AS AGAINST THE ABOVE, WE DRAW YOUR KIND ATTENTIO N TO THE FOLLOWING OBSERVATIONS IN OUR ASSESSMENT ORDER BY T HE JOINT COMMISSIONER OF INCOME TAX IN PARA 6.9. 'SHRI KETAN SHAH, VIDE HIS STATEMENT RECORDED ON 15.12.2011, STATED THAT HE IS ENGAGED IN SOFTWARE DEVELOPMENT, INFORMATION TECHNOLOGY SERVICES AND CONSULTANCY IN THE NAME OF MANGAL TIRTH, A PROPRIET ARY CONCERN. HE SUBMITTED A COPY OF HIS RETURN OF INCOM E FILED FOR A.Y. 2009-10, IN WHICH HE HAD SHOWN THE AMOUNT OF RS. 28,25,000/- AS PROFESSIONAL CHARGES RECEIVED. HE CL AIMED CERTAIN EXPENDITURE AGAINST THIS INCOME. HE HAD REC EIVED THE SAID AMOUNT AS COMPENSATION FROM ASSESSEE BUT CHOOS E TO SHOW THE SAME AS INCOME FROM BUSINESS /PROFESSION. IF SO, THE EXPENSES CLAIMED BY HIM MIGHT BE BOGUS. IN THAT CAS E, WHAT WAS OFFERED AS INCOME AS NET PROFIT BY SHRI KETAN S HAH MIGHT BE THE ACTUAL COMMISSION EARNED BY HIM FOR ARRANGIN G THE TRANSFER. HE SUBMITTED THAT HE HAD SHOWN A PROFIT O F RS.9.81 LACS AND SHOWN THE SAME AS INCOME FROM BUSINESS AND , PROFESSION. SIMILAR IS THE CASE OF MS. ALPA SHAH. ...'(UNDERLINING BY US FOR EMPHASIS) ; 4. ADDITIONALLY, WE MUST POINT OUT THAT KETAN SHAH WAS EXAMINED ON OATH ON 15.12.2011 BEFORE THE ASSESSMEN T ORDER WAS PASSED. WE DRAW YOUR ATTENTION TO THE FOL LOWING ENGLISH TRANSLATION OF UNDER MENTIONED QUESTIONS AS KED AND: ANSWERED IN GUJARATI: 'Q-2 GIVE DETAILS OF YOUR BUSINESS. A-2 I AM A PROPRIETOR OF M/S MANGALTIRTH DOING BUSI NESS OF SOFTWARE DEVELOPMENT, INFORMATION SERVICE CONSUL TANCY SINCE LAST 6-7 YEARS AT MY ABOVE SAID RESIDENTIAL A DDRESS. Q-4 DO YOU AFFILIATED WITH ANY OTHER COMPANY EXCEPT THOSE MENTIONED IN Q-2 ABOVE? A-4 AT PRESENT, I AM DIRECTOR IN ABOVE SAID TWO COM PANIES VIZ. HALLMARK TECHNOLOGY PRIVATE LIMITED AND HETWEL L ENTERPRISE PRIVATE LIMITED, WHERE IN MY WIFE IS DIR ECTOR. 'Q-5 ARE YOU AND YOUR WIFE FILING INCOME TAX RETURNS? GIVE YOUR PAN CARD NUMBER AS WELL AS GIVE PA NUMBER S OF THE COMPANIES WHERE IN YOU ARE DIRECTOR AND STATE W HERE RETURN OF INCOME ARE BEING FILED. . '' A-5 INCOME T AX RETURN OF MYSELF AND MY WIFE ARE BEING FILED, COPY OF WHIC H ALONG WITH ITS ACKNOWLEDGEMENT AND COPY OF PAN CARD ARE ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 16 - PRODUCED BEFORE YOU. I DO NOT KNOW WHERE THE INCOME TAX RETURNS OF ABOVE SAID COMPANIES ARE BEING FILED I W ILL FIND IT OUT AND WILL PRODUCE ITS COPY. Q-6 DO YOU KNOW JENA/ H PATEL AND DIPIKA PATE! WHO ARE RESIDING AT 183, KOCHRAB GAM PATER I/AS, ELISBRIDGE , AHMEDABAD AND ALSO STATE THAT WHAT BUSINESS THEY AR E DOING? A-6 YES, I KNOW ABOVE SAID BOTH PERSONS VIZ. JENA/ H PAFE/ AND DIPIKA PATEL. JENAL H PATEL IS MY BROTHER IN LA W AND DIPIKA PATEL IS HIS WIFE. MY BROTHER JENAL PATEL IS CARRYING OUT ELECTRONIC REPAIRING WORK AND DIPIKA PATE/ IS SERVING AS NURSE IN CIVIL HOSPITAL -UN MEH TA HOSPITAL. THEY ARE NOT FILING INCOME TAX RETURNS, HOWEVER, THEY HAVE OBTAINED PA NUMBER. JENAL H PATEL PAN NO. AOIPP0226M DIPIKA PATEL PAN NO. AQIPP0413N THEIR RESIDENTIAL ADDRESS IS 183, PATELVAS, NEAR PA RBADI, KOCHRAB GAM, PALDI, AHMEDABAD. OH THEIR BEHALF I AM REPLYING BEFORE YOU THE NOTICES GIVEN TO THEM. THEI R ACCOUNTING MATTERS ALSO HANDLED BY ME.' AND MORE IMPORTANTLY, 'Q-7 ARE YOU INFORMED ABOUT THE COMPANY M/S NI SCHAY FAB PVT. LTD., SITUATED AT 8, LAVANYA SOCIETY, JALT ARANG CLUB, VASNA, AHMEDABAD? A-7 I, ALONG WITH ALPA SHAH, JENAL H PATEL A ND DIPIKA PATEL HAD DECIDED TO PURCHASE LAND SITUATED AT CHAC HARWADI, VASNA, TA.: SANAND FROM M/S NISCHAY FAB PVT. LTD. I N APRIL 2008 BY EXECUTING AGREEMENT TO SALE ON STAMP PAPER. Q-8 HOW DID YOU MADE PAYMENT TO NISCHAY FAB P VT. LTD. FOR PURCHASE OF LAND AND EXECUTION OF AGREEMENT TO SALE? A-8 FOR PURCHASE OF ABOVE SAID LAND WE MADE PAYMENT TO M/S NISCHAY FAB PVT. LTD. AS DETAILED BELOW: RS. 14,13,537/- CHQ. NO. 477319 ON UCO BANK NEAR V S HOSPITAL BRANCH DATED 17-04-2008. RS. 5,00,000/- CHQ. NO. 434712 ON UGO BANK NEAR V S HOSPITAL BRANCH DATED 17-04-2008. RS. 5.00.000/- CHQ. NO. 693313 ON BANK OF BARODA ELISBRIDGE BRANCH DATED 17-04-2008. OF THE ABOVE, CHEQUES OF RS.14.13.537/- AND RS. 5,0 0,000/- WERE GIVEN FROM BANK ACCOUNT OF ALPA SHAH AND WHERE AS CHEQUE OF RS.5,00,000/- ON BANK OF BARODA, I-DO NOT REMEMBER, FROM WHOSE ACCOUNT IT WAS GIVEN.- Q-9 WHETHER ABOVE SAID DEAL OF LAND PURCHASE BY AGREEMENT TO SALE (BANAKHAT), HAS BEEN COMPLETED OR NOT BY FINAL SALE DEED? A-9 NO FINAL SALE DEED WAS EXECUTED IN CASE OF ABOVE SAID DEAL OF LAND PURCHASE AND THE AGREEMENT TO SATE (BA NAKHAT) WAS CANCELLED IN JULY 2008. Q-10 PLEASE INFORM THAT UNDER WHICH CIRCUMSTANCES THE ABOVE SAID LAND DEAL WAS CANCELLED. A-10 WE HAVE SHOWN LAND TO DIVYA BHASKAR - NEWS PAPER OWNED BY COMPANY VIZ. WRITERS & PUBLISHERS LIMITED WHO WERE PLANNING TO PURCHASE SAID LAND, WE HAVE DECIDE D TO GIVE SAID LAND TO DIVYA BHASKAR AND CANCEL OUR DEAL . ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 17 - Q-11 PLEASE INFORM THE AMOUNT AT WHICH SALE PRICE WAS FIXED UNDER NEW DEAL WITH DIVYA BHASKAR BY CANC ELLING YOUR DEAL AND WHAT YOU GOT AGAINST CANCELLAT ION OF YOUR DEAL? A-11 NEW DEAL WITH DIVYA BHASKAR WAS FIXED AT RS.1,77,44,500/- (THIS IS NOT CORRECT FIGURE, CORRE CT AMOUNT IS S.3,80,26,500/-). AGAINST CANCELLATION OF OUR DE AL WITH M/S NISCHAY FAB PRIVATE LIMITED WE GOT RS. 88,72,276/- AMONGST ALL THE FOUR PERSONS AS UNDER: RS.28,25,000/-UNION BANK OF INDIA, ELISBRIDGE BRANC HCH.NO.842139 RS. 4,95,766/- --------------------------DO-------- --------CH.NO.842142 RS.29,95,000/- -------------------------DO--------- -------CH.NO.842135 RS. 5,28,562/- -------------------------DO--------- --------CH.NO.842143 RS. 8,60,000/- -------------------------DO--------- --------CH.NO.842138 RS. 1,53,974/- -------------------------DO--------- --------CH.NO.842144 RS. 860,000/- -------------------------DO---------- --------CH.NO.842137 RS. 1,53,974/- -------------------------DO--------- --------CH.NO.842145 OVER AND ABOVE WE GOT REFUND OF RS. 24,13,537/- WHI CH WAS GIVEN AS AN ADVANCE.' 5. IN THE PREMISES AFORESAID, WE REQUEST YOU TO BE KIND ENOUGH TO ALLOW THE ABOVE PAYMENT OF RS. 88,72,276/- MADE TO KETAN SHAH, A/PA SHAH, JENA/ PATE/ AND DIPIKA PATEL BEARING IN MIND BANAKHAT DATED 17.04.2008, CANCELLATION DEED DATED 20.06.200 8, SALE DEED DATED 30.06.2008 AND THE CONTENTS OF TRIBUNAL'S ORD ER.' 16. THUS, IT CAN BE SEEN THAT THE A.O HAS SUBMITTED THE REMAND REPORT WHEREIN THE A.O HAS SUBMITTED THAT THE CASE RECORDS WERE THOROUGHLY CHECKED BUT THE TAX RETURNS OF SHRI KETAN SHAH AND ALPA SHAH COULD NOT BE FOUND IN THE CASE RECORDS. THE A.O HAD SENT REQUEST TO JURISDICTIONAL A.OS FOR OBTAINING THE COPIES OF RETURNS OF FOUR PERSONS FOR A.Y.2009-10. THE AOS OF THESE FOUR PERSONS HAVE REPORTED THAT NONE O F THEM HAVE FILED THEIR RETURN OF INCOME FOR A.Y.2009-10. THE CONCERNED A.O HAD ALSO MADE A VERIFICATION FROM THE ITD SYSTEM AND FOUND OUT THAT FOR A.Y.2009-10 ALL THE FOUR PERSONS HAVE NOT FILED THEIR RETURN OF INC OME WHEREAS THE APPELLANT HAS ONLY RELIED UPON THE OBSERVATIONS OF THE A.O IN THE ASSESSMENT ORDER AS WELL AS THE REPLIES GIVEN BY SH RI KETAN SHAH IN THE STATEMENT RECORDED BY THE A.O. THEREFORE, THE FACT REMAINS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS REMAND PROCEEDINGS ALTHOUGH THE COMPUTATION OF INCOME AND CERTAIN LEDGER ACCOUN TS . WERE MADE AVAILABLE TO THE A.O BY KETAN SHAH AND ALPA SHAH, I T IS CLEAR THAT ALL THE FOUR PERSONS HAVE NOT FILED THEIR RETURN OF INCOME FOR A.Y.2009-10. THEREFORE, IT IS APPARENT THAT THE A.O. WAS RIGHT I N CONCLUDING THAT THE APPELLANT HAD ENTERED INTO SHAM AGREEMENTS, CIRCULA R ENTRIES AND THEREBY CREATING AN ARRANGEMENT TO AVOID TAX ON THE SALE OF LAND. 17. FROM THE FOREGOING IT CAN BE SEEN THAT THE REAS ONS FOR WHICH TRIBUNAL HAVE SET ASIDE THE MATTER BACK TO THE FILE OF CIT(A) STANDS ANSWERED. I AM OF THE CONSIDERED OPINION THAT THE D ECISION OF THE GIT(A) VIDE ORDER NO.CLT(A)-XL/234/JCIT.CIR-5/11-12 DATED 2/9/2013 IS CORRECT IN CONFIRMING THE ADDITION OF RS. 88,72,276/.- MADE BY THE A.O BY DISALLOWING THE CLAIM OF COMPENSATION PAID ON CANCE LLATION OF AGREEMENT TO SALE. THUS, THE CONTENTION OF THE APPELLANT STAN DS DISMISSED. ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 18 - 9. AGAINST THE DISMISSAL OF THE APPEAL OF THE ASSES SEE IN THE SECOND ROUND OF PROCEEDINGS BEFORE THE FIRST APPELLATE AUT HORITY, THE ASSESSEE HAS ONCE AGAIN KNOCKED THE DOOR OF TRIBUNAL. 10. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE VARIOUS SUBMISSION MADE ON BEHALF OF THE ASSESSEE BEFORE TH E LOWER AUTHORITIES AND SUBMITTED THAT THE FACTS EXISTING IN THE APPEAL DOES NOT CALL FOR ADVERSE INFERENCE. THE LEARNED COUNSEL STRENUOUSLY SUBMITTED THAT THE ASSESSEE HAD RECEIVED THREE CHEQUES FROM MR. KETAN V. SHAH GROUP IN PART CONSIDERATION/ADVANCE AGAINST BANAKHAT ENTERED INTO WITH THEM. THE REALIZATION OR OTHERWISE OF THE CHEQUE IS OF NO CONSEQUENCE ONCE THE CHEQUES WERE HANDED OVER TO THE ASSESSEE. THE CHEQUES PROVIDE REMEDY UNDER THE NEGOTIABLE INSTRUMENT ACT. THE CH EQUES SO ISSUED WERE ULTIMATELY REALIZED AT A LATER STAGE. THEREFO RE, THE BANAKHAT SO EXECUTED HAD PROVIDED AN ENFORCEABLE REMEDY TO MR. KETAN V. SHAH AND OTHERS AGAINST THE ASSESSEE. THUS, THE ASSESSE E WAS UNDER COMPULSION TO REMOVE THE ENCUMBRANCE TAGGED WITH TH E SALE OF LAND TO M/S. WRITERS GROUP. THE LEARNED COUNSEL THEREAFTER OBSERVED THAT THE CIT(A) HAS MISDIRECTED HIMSELF IN LAW AND ON FACTS IN TAKING GUIDANCE FROM THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WHICH HAS NO APPLICABILITY IN THE FACTS OF THE CASE . THE LEARNED COUNSEL FURTHER ASSERTED THAT THE ASSESSEE GAINED S UBSTANTIALLY ON CANCELLATION AND HAD SHARED ONLY A PART OF IT TO MR . KETAN V. SHAH AND OTHERS FOR ALIENATION OF THEIR RIGHTS ACCRUED BY VI RTUE OF THE BANAKHAT. THE LEARNED AR THEREFORE SUBMITTED THAT THERE WAS N O WARRANT FOR THE REVENUE AUTHORITIES TO FROWN UPON THE COST INCURRED BY THE ASSESSEE BY COST OF COMPENSATION PAID FOR CANCELLATION OF AGREE MENT TO SALE AND OUGHT TO HAVE ALLOWED THE AFORESAID EXPENDITURE WHI CH HAS DIRECT NEXUS WITH THE TRANSFER /SALE OF LAND IN QUESTION. THE LEARNED COUNSEL ACCORDINGLY SOUGHT REVERSAL OF THE ORDER OF THE AO AND RESTORATION OF CLAIM WAS MADE BY THE ASSESSEE. ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 19 - 11. LEARNED DR ON THE OTHER HAND RELIED UPON THE OR DER OF THE CIT(A). THE LEARNED DR IN FURTHERANCE SUBMITTED TH AT THE FACTS AND THE CHRONOLOGY OF EVENTS NARRATED BY THE CIT(A) CLE ARLY ENDORSES THE STAND OF THE AO THAT THE COMPENSATION PURPORTEDLY P AID TO MR. KETAN V. SHAH AND OTHERS WERE BOGUS AND A DEVICE TO AVOID LAWFUL TAXES PAYABLE ON GAINS ARISING ON SALE OF LAND. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL REFERRED TO AND RELIED UPON IN THE COURSE OF HEARING. THE ESSE NTIAL CONTROVERSY FOR ADJUDICATION BEFORE US IS TOWARDS MAINTAINABILI TY OF EXPENDITURE PURPORTEDLY INCURRED IN CONNECTION WITH SALE OF LAN D BY THE ASSESSEE SITUATED AT SANAND, GUJARAT. WHILE THE ASSESSEE HA S SOUGHT RELIEF ON ACCOUNT OF COMPENSATION PAID TO THE ORIGINAL PURCHA SERS NAMELY MR. KETAN V. SHAH AND OTHER IN LIEU OF CANCELLATION OF AGREEMENT TO SALE, THE REVENUE ON THE OTHER HAND CHALLENGED THE VERY A UTHENTICITY OF SUCH CLAIM. A PERUSAL OF THE CHRONOLOGICAL EVENTS NARRA TED BY THE CIT(A) IN SECOND ROUND OF PROCEEDINGS (AS REPRODUCED ABOVE ) INDICATES THAT THE CLAIM OF EXPENDITURE INCURRED ON ACCOUNT OF COM PENSATION AS DEDUCTIBLE FROM THE LTCG APPARENTLY LACKS IN BONAFI DE. THE CIT(A) HAS MADE THREADBARE ANALYSIS OF THE FACTS AND CIRCU MSTANCES OF THE CASE TO COME TO THE CONCLUSION THAT THE AGREEMENT T O SALE ENTERED INTO WITH ORIGINAL PURCHASERS WAS DEVOID OF LEGITIMACY A ND THE CONTRACT FOR SALE OF LAND WITH ORIGINAL PURCHASERS COULD NOT HAV E BEEN ACTED UPON AND WAS NOT LEGALLY ENFORCEABLE. THE CIT(A) ALSO F OUND ON FACTS THAT NO PAYMENT WAS MADE BY THE ORIGINAL PURCHASERS TO T HE ASSESSEE AS SOUGHT TO BE PORTRAYED IN CONSIDERATION OF BANAKHAT TILL THE DATE OF EXECUTION OF SALE DEED WITH M/S. WRITERS GROUP. TH E ADVANCE CONSIDERATION WAS ACTUALLY GIVEN LATER OUT OF SALE PROCEEDS/ TRANSFER TO THE ORIGINAL PURCHASERS BY THE ASSESSEE TOWARDS COM PENSATION. THE CIT(A) OBSERVED THAT NEITHER ANY PAYMENT WAS RECEIV ED NOR POSSESSION WAS GIVEN AND THEREFORE, THE CONTRACT FO R TRANSFER OF LAND TO ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 20 - THE ORIGINAL PURCHASERS COULD NOT HAVE ENFORCED AT ALL. THE ORIGINAL PURCHASERS WERE ALSO FOUND TO HAVE NOT DONE ANY ACT IN PURSUANCE OF THE PURPORTED AGREEMENT TO SALE. NO EFFORTS WERE M ADE TO OBTAIN TITLE CLEARANCE CERTIFICATE. THE CIT(A) CLEARLY DEMONSTR ATED FROM THE PATTERN OF BANKING TRANSACTIONS THAT APART FROM THE TOTAL LACK OF CAPACITY OF THE ORIGINAL OWNERS TO PERFORM THE CONT RACT OF PURCHASE OF LAND, PURCHASE CONSIDERATION HAS BEEN GIVEN BY THE ORIGINAL PURCHASERS TO THE ASSESSEE OUT OF THE ASSESSEES MONEY RECEIVE D BY WAY OF COMPENSATION. THE CIT(A) HAS ALSO FOUND THAT EITHE R THE OWNERS WERE NOT FILING THE RETURN OR COMPENSATION RECEIVED WAS SHOWN AS PROFESSIONAL SERVICES AGAINST WHICH EXPENSES HAVE B EEN CLAIMED. THE CIT(A) ALSO FROWNED UPON THE CLAIM AND OBSERVED THA T THE DATE OF EXECUTION ON PURPORTED AGREEMENT TO SALE AT WIDE VA RIANCE WITH THE DATE OF STAMP PAPER. IT WAS NOTICED THAT THE ORIGI NAL PURCHASERS HAVE WITHDRAWN THE COMPENSATION SO RECEIVED IN THEIR BAN K ACCOUNTS IN CASH IMMEDIATELY ON DEPOSITS. IN THE TOTALITY OF THE FA CTS, IT WAS CONCLUDED BY THE CIT(A) THAT THE ASSESSEE ENTERED INTO SHAM A GREEMENT WITH THE ORIGINAL PURCHASERS AND ARRANGEMENT TO CLAIM WRONGF UL EXPENDITURE TOWARDS TRANSFER OF LAND BY WAY OF CANCELLATION OF PURPORTED AGREEMENT TO SALE WHICH WAS NOT ENFORCEABLE AT ALL. WE FIND THAT SUFFICIENT EVIDENCES EXIST TO EXPOSE THE FALSITY OF THE VERSION OF THE ASSESSEE WITH RESPECT TO THE CLAIM OF EXPENDITURE P URPORTEDLY ARISING FROM CANCELLATION OF A NONEST BANAKHAT. SUBSTANTIA L EVIDENCE IN THE FORM OF CONDUCT OF THE ASSESSEE IN NOT DEPOSITING T HE PURPORTED CHEQUES STATEDLY RECEIVED FROM THE ASSESSEE IN RESP ONSE TO THE BANAKHAT AGREEMENT, ENCASHMENT OF CHEQUES FROM THE ORIGINAL PURCHASERS AFTER THE SALE DEED WITH THE REAL PURCHA SERS OUT OF THE VERY CONSIDERATION RECEIVED FROM THE ASSESSEE ON ACCOUNT OF CANCELLATION CLEARLY DEMONSTRATES THE BARE DISGUISE. THE ORIGIN AL PURCHASERS WERE ALSO NOT FOUND TO BE MAN OF SUBSTANCE TO COPE UP WI TH THE PURPORTED LAND DEAL OF SUCH MAGNITUDE. THIS APART, THE CIT(A ) HAS ALSO REFERRED TO THE MANY SURROUNDING CIRCUMSTANCES SUCH AS NON-E XISTENCE OF RETURN ITA NO. 2571/AHD/16 [M/S. NISCHAY FAB PVT. LTD. VS. JT.CIT(OSD)] A.Y. 2009-10 - 21 - OF INCOME, THE BACKGROUND OF THE PURPORTED ORIGINAL PURCHASERS, VARIATIONS IN THE DATES OF THE DEEDS QUA THE STAMP PAPER AND CIRCULAR ENTRIES INVOLVED TO ESTABLISH PRE-ORDAINED ARRANGEM ENT OF COLORABLE NATURE. WITHOUT ELABORATING FURTHER, WE ARE IN COM PLETE AGREEMENT WITH THE CONCLUSION DRAWN BY THE CIT(A) IN UPHOLDIN G THE ACTION OF THE AO ON THIS SCORE. THE ARGUMENTS RAISED ON BEHA LF OF THE ASSESSEE FOR NON-PRESENTATION OF CHEQUE ALLEGEDLY RECEIVED T OWARDS ADVANCE IS AUDACIOUS AND DOES NOT CONFIRM WITH THE NORMAL HUMA N CONDUCT. IN THE ABSENCE OF ANY RIGHT ACCRUED FROM SO CALLED AGR EEMENT TO SALE (WHICH WAS DEMONSTRATED TO BE WITHOUT PAYMENT, WITH OUT POSSESSION AND UNENFORCEABLE IN LAW), THE REVENUE WAS FULLY JU STIFIED IN NOT ENTERTAINING THE CONTRIVED LOSSES TOWARDS TRANSFER OF LAND. IN VIEW OF THE UNRELENTING INFERENCE AGAINST THE ASSESSEE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 25/09/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 25/09/201 8