Anusuya M.Hemdev, CHENNAI V. ACIT Non Corporate Circle 3, CHENNAI

ITA 2651/CHNY/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6250 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Audit objection; Principle of natural justice; Reassessment proceedings; Capital Gains
• Section: 147; 148; 54; 143(3); 54F

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.2651/Chny/2018 (िनधाBरण वषB / Assessment Year: 2012-13) Anusuya M. Hemdev, No.2, 1 st Street, Haddows Road, Nungambakkam, Chennai – 600 006. बनाम/ V s. ACIT Non-Corporate Circle-3, Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAG P M -5 9 7 6 - M (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri S. Sridhar (Advocate) – Ld. AR थ की ओरसे/Respondent by : Shri ARV Sreeenivasan (Addl. CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 02-08-2022 घोषणा की तारीख /Date of Pronouncement : 17-08-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of the order of Learned Commissioner of Income Tax (Appeals)-4, Chennai [CIT(A)] dated 23-07-2018 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r/w s. 147 of the Act on 28-12-2017. The grounds taken by the assessee are as under: 1. The order of The Commissioner of Income Tax (Appeals) - 4, Chennai dated 23.07.2018 in I.T.A.No.66/2017-18/CIT(A)-4 for the above-mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. ITA No.2651/Chny/2018 - 2 - 2. The CIT (Appeals) erred in sustaining the re-assessment(s) completed in assuming jurisdiction u/s 147 of the Act and ought to have appreciated that the order of re-assessment(s) was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 3. The CIT (Appeals) failed to appreciate that there was no tangible/fresh materials available with the Assessing Officer warranting invocation of the provisions in section 147 of the Act and further ought to have appreciated that the change of opinion on the part of the Assessing Officer was wrong, erroneous, unjustified, incorrect and not sustainable in law. 4. The CIT (Appeals) failed to appreciate that the reopening of the assessment based on the audit objection without independent application of mind on the part of the Assessing Officer would indicate the absence of 'reasons to believe' thus vitiating the initiation of the re-assessment proceedings in terms of section 147 of the Act. 5. The CIT (Appeals) went wrong in recording the findings in this regard from para 10 to para 15 of the impugned order without assigning proper reasons and justification. 6. The CIT (Appeals) erred in disallowing the claim of exemption u/s 54F of the Act in the computation of Long-Term Capital Gains overlooking the provisions in Section 2(47) of the Act without assigning proper reasons and justification. 7. The CIT (Appeals) failed to appreciate that having noticed the actual flow of money for the purpose of investment and further having noticed the taking over the possession of the reinvested property, the action of sustaining the disallowance of Section 54 was wrong, erroneous, unjustified, incorrect and not sustainable in law. 8. The CIT (Appeals) failed to appreciate that the decision of the Supreme Court and other judicial precedents in proper perspective thus vitiating the action in this regard. 9. The CIT (Appeals) went wrong in recording the findings in this regard from para 18 & para 19 of the impugned order without assigning proper reasons and justification. 10.The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law. As is evident, the assessee is aggrieved by denial of deduction u/s 54. 2. The Ld. AR assailed the validity of reassessment proceedings and also contested the issue on merits. The Ld. Sr. DR, on the other hand, supported the orders of lower authorities and relied upon the decision of Hon’ble Supreme Court in the case of CIT V/s Balbir Singh Maini (86 Taxmann.com 94). Having heard rival submissions and after perusal of case records, our adjudication would be as under. ITA No.2651/Chny/2018 - 3 - Assessment Proceedings 3.1 The assessee admitted income of Rs.53.85 Lacs which was accepted in scrutiny assessment u/s. 143(3) of the Act on 27-08-2014. However, the case was reopened and notice u/s. 148 of the Act was issued on 31-03-2017 which is within 4 years from the end of relevant AY i.e., 2012-13. The reasons were provided to the assessee and the assessee objected to reassessment proceedings. However, the objections were rejected by a speaking order dated 13-12-2017 following the prescription of GKN Driveshafts (India) Ltd. (259 ITR 190. 3.2 It transpired that the assessee along with her sisters held 2 acres of land with building therein. A part of the property to the extent of 11 grounds was sold for a sale consideration of Rs.291.50 Lacs and accordingly, assessee’s share therein worked out to be Rs.145.75 Lacs. The assessee derived Long Term Capital Gain of Rs.102.57 Lacs. To claim exemption u/s. 54 of the Act, the assessee entered into agreement of sale on 30-03-2012 with Mr. Vivek Grover and Mrs. Dhrithi Grover for purchase of Flat No.8, College Road, Chennai for a consideration of Rs.165 Lacs. However, upon enquiry, it was found that the property was not registered in the name of the assessee till date. The Ld. A.O opined that to claim exemption u/s. 54 of the Act, the assessee should have purchased the property through a registered sale deed. However, this was not done and the assessee entered into a mere agreement for sale only. 3.3 The Hon’ble Supreme Court in the case of CIT vs. Balbir Singh Maini (supra) discussed the legal impact of unregistered Joint Development Agreement. The Hon’ble Court held that fulfillment of ITA No.2651/Chny/2018 - 4 - conditions of Sec.53A of Transfer of Property Act itself was not enough to consider a transfer within the meaning of Sec. 2(47) of the Act. It was further held that after the commencement of amendment act, 2001, an unregistered agreement would have no effect in law for the purposes of Sec.53A. In short, there is no agreement in the eyes of law which could be enforced u/s 53A of the Transfer of Property Act. In order to qualify as a transfer u/s 2(47)(v), there must be contract which could be enforced in law u/s 53A of Transfer of Property Act. A reading of Section 17(1A) and Sec.49 of the Registration Act shows that in the eyes of law, there is not contract which could be taken cognizance of for the propose specified in Sec.53A. Relying upon the same, the deduction claimed by the assessee was denied by Ld. AO. Appellate proceedings 4. The assessee assailed the validity of reassessment proceedings on the ground that the same was triggered on the basis of audit objection and therefore, the reopening was nothing but mere change of opinion. However, the Ld. CIT(A) rejected the same on the ground that reassessment could be resorted to on the basis of information gathered from audit party if some factual errors were committed by the assessing officer or AO failed to apply the relevant provisions of the act and AO failed to appreciate the facts of the case in proper perspective. Reliance was placed on the decision of Hon’ble High Court of Madras in CIT V/s First Leasing Co. of India Ltd. (241 ITR 248) as well as on the decision of Hon’ble Supreme Court in the case of CIT V/s PVS Beedies Pvt. Ltd. (237 ITR 13) to support the conclusion. Further, the assessment could be reopened based on information provided by some other government office or organization. No such examination or ITA No.2651/Chny/2018 - 5 - verification was done during original assessment order and therefore, there was no question of change of opinion as held by jurisdictional High Court in ALA firm V/s CIT (102 ITR 622) as well as in Revathy CP Equipment Ltd V/s DCIT (241 ITR 856) further supported by the decision of Hon’ble Supreme Court in the case of Ess Kay Engineering Co. Pvt. Ltd. V/s CIT (247 ITR 818). 5. On merits also, the view of Ld. AO was endorsed and it was held as under: - 16. Coming to the merits of the case, the only unregistered Agreement for Sale dated 30/03/2012 vide which the appellant assessee had claimed to have purchased Flat No.8, College Road, Chennai for a consideration of Rs. 1,65,00,000/-, could be considered as valid document for conveyance claiming deduction u/s 54F of the Act. The contention of the appellant assessee is that she had paid the entire sale consideration Rs.1,65,00,000/- as per the Agreement of sale to the sellers of property and possession of the flat was also delivered to the appellant assessee. It is also contended that the Agreement for sale was irrevocable. The appellant assessee has interpreted the provisions of section 2(47) of the Income Tax Act and section 53A of the Transfer of Property Act to define that through the impugned Agreement for sale, the appellant assessee had become ‘owner’ of the flat as envisaged u/s. 54F of the Act. It is also contended that for the purpose of section 54F, there is no requirement of registered Sale Deed. 17. On the other hand, the A.O has relied on the recent decision of the Hon’ble Supreme Court in the case of CIT vs. Balbir Maini, dated 04/10/2017 wherein the legal implication of unregistered Joint Development Agreement has been discussed in details. I have perused the impugned assessment order of the AO in the light of the above decision of the Hon'ble Apex Court and have found that the AO has very judiciously and correctly applied the ratio of this judgement to the present case of the assessee and has disallowed the claim of the assessee u/s 54F of the Act. I do not find any infirmity in the finding of the AO in this regard. 18. In the above referred decision of the Hon'ble Supreme Court, it has been held that fulfilment of section 53A of the Transfer of Property Act itself is not enough to consider a transfer within the meaning of section 2 (47) of the Income Tax Act subject to the amendments made to Sections 17 and 49 of the Indian Registration Act. The amendments to the sections were brought in 2001. Accordingly, amendments were also made simultaneously in section 53A of the Transfer of Property Act and sections 17 and 49 of the Indian Registration Act. By the aforesaid amendments, it has been clarified that unless the document containing the contract to transfer for consideration any immovable property is registered, it shall not have any effect in law as far as the provisions of section 53A of the Transfer of Property Act are concerned. It is also pertinent to mention here that for getting a document registered, the contracting parties/party has to pay Stamp Duty and Registration Charges to government exchequer as envisaged under the ITA No.2651/Chny/2018 - 6 - Indian Registration Act. Whereas, on the other hand, the contracting party/parties normally do not pay any amount towards Stamp Duty and Registration Charges if the immovable property is transferred by way of unregistered Agreement of Sale or Power of Attorney. 19. Therefore, in the light of the above decision of the Hon'ble Court, the meaning of word ‘purchase’ of residential house as mentioned in section 54 and 54F of the Act, needs to be interpreted. Accordingly, the ownership of new house property for claiming deduction u/s 54/54F has to be through a registered document of conveyance on which the applicable Stamp Duty and Registration Charges have been paid to government exchequer, Since in the present case of the assesses, the impugned property has been acquired by the assessee through unregistered Agreement of Sale, in my considered opinion, the appellant assessee has filed to fulfil the conditions laid down in section 54F of the Act. It is also pertinent to mention here that the impugned immovable property which was claimed to have been purchased by the assessee during the F.Y, 2011-12, has remained unregistered even till date. Hence, in view of the above discussions, this ground of appeal of the assessee is also rejected. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 6. We find that the issue is in very narrow compass. The basis facts are not in dispute. The only question to be decided on merits is whether the assessee could be granted deduction u/s 54 merely on the basis of unregistered Agreement to Sale couple with possession which never fructified into registered Sale Deed till date? 7. From the facts, it emerges that the assessee has earned Long- Term Capital Gains of Rs.102.19 Lacs against which the assessee has claimed deduction u/s 54 on the strength of agreement for sale for purchase of flat. The assessee is stated to have taken a possession of the same. However, it is undisputed fact that the agreement has not fructified into registered sale deed and the full ownership rights have not been acquired by the assessee. Pertinently, the agreement is unregistered document which is executed as early as on 30-03-2012. 8. The provisions of Sec.54 enable the assessee to claim deduction of Long-Term Capital gains provided the assessee, within specified ITA No.2651/Chny/2018 - 7 - period, purchases or construct a residential house. The term purchase, in our considered opinion, has to be absolute purchase since the object of the beneficial provision is to encourage investment in housing. An agreement to sale, till it translates into conveyance of full ownership rights, by way of registered documents, is merely an agreement and do not result into transfer of ownership absolute. It only given partial rights out of bundle of rights to the parties intending to purchase the property. However, till actual conveyance happens, it could not be said that the assessee has purchased the houses property. Another fact to be noted is that the agreement has never fructified into registered sale deed till date despite the fact that the assessee has paid full consideration of Rs.165 Lacs and the document was executed on 30-03-2012. No valid circumstances which have impeded the registration of final deed have been adduced by the assessee. Further, this agreement is unregistered one and therefore, the adjudication of Hon’ble Supreme Court in the case of CIT vs. Balbir Singh Maini (supra) would apply wherein it was held that fulfilment of Sec.53A of Transfer of Property Act itself was not enough to consider a transfer within the meaning of Sec. 2(47) of the Act. It was further held that after the commencement of amendment act, 2001, an unregistered agreement would have no effect in law for the purposes of Sec.53A. In short, there is would be no agreement in the eyes of law which could be enforced u/s 53A of the Transfer of Property Act. In order to qualify as a transfer u/s 2(47)(v), there must be contract which could be enforced in law u/s 53A of Transfer of Property Act. A reading of Section 17(1A) and Sec.49 of the Registration Act shows that in the eyes of law, there is not contract which could be taken cognizance of for the propose specified in ITA No.2651/Chny/2018 - 8 - Sec.53A. Therefore, the unregistered document as entered into by the assessee could not be considered as fulfilment of requirement of Sec.54. Therefore, the adjudication of lower authorities on merits could not be faulted with. 9. The Ld. AR has relied on the decision of this Tribunal in N. Ramaswamy V/s ITO (113 Taxmann.com 289) which deal with a case of perpetual lease agreement by which the assessee took possession of the property for unlimited period. The bench, after considering the provisions of Sec.269UA(2)(iii)(f), held that acquisition of property by perpetual lease exceeding period of 12 years, has to be construed as purchase within the meaning of Sec.54F. The same is not the case here and this case law is not applicable to the facts of case before us. 10. Having said so, upon perusal of computation of income u/s 148, it is seen that the amount of deduction claimed by the assessee is Rs.99.35 Lacs. The Ld. AO is directed to verify the same and restrict the addition to that extent only. Ground Nos. 6 to 9 stand dismissed except to the extent of restricting the addition to the extent of deduction claimed by the assessee in the return of income. In Ground No.10, the assessee has pleaded for violation of principle of natural justice. However, the same is without any substance since adequate opportunities have been provided to the assessee to substantiate its stand. 11. So far as the legal grounds are concerned, we find that the regular assessment was framed u/s 143(3) and the case was reopened within 4 years. There is nothing on record which would show that any such verification of examination was carried out by Ld. AO during ITA No.2651/Chny/2018 - 9 - regular assessment proceedings. The proceedings were triggered on the basis of Audit Objection which certainly constitutes ‘information’. As long as there is independent application of mind by Ld. AO to arrive at conclusion that there was escapement of income, this information could certainly be utilized to arrive at this formation of belief. The case laws as cited by the Ld. CIT(A) duly support the validity of reassessment proceedings. We are in complete agreement with the adjudication of Ld. CIT(A), in this regard, in the impugned order. Ground Nos. 1 to 5 stands dismissed. 12. The appeal stands partly allowed in terms of our above order. Order pronounced on 17 th August, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे+ई / Chennai; िदनांक / Dated : 17-08-2022 EDN/- आदेश की Vितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF