The Brihan Maharashtra Sugar Syndicate Ltd, Pune V. Income-tax Officer, Ward - 7(2), Pune

ITA 2778/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4852 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Capital Gains
• Section: 54; 271(1)(c); 92

Judgement Text

आयकरअपीलीयअधिकरण “ए” न्यायपीठ पुणे में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM AND DR. DIPAK P. RIPOTE, AM आयकर अपऩल सं. / ITA No. 2778/PUN/2017 निर्धारणवषा / Assessment Year : 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd., “Chandrashekharan” 242, Shaniwar Peth, Pune - 411030. PAN No. AAACT 6335 L Vs The I.T.O. Ward 7(2), Pune. Appellant/ Assessee Respondent /Revenue Assessee by Shri M.R. Bhagwat - AR Revenue by Shri S.P.Walimbe - DR Date of hearing 24/03/2022 Date of pronouncement 08/04/2022 आदेश/ ORDER PER: DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeals)-5, Pune, (in short, the CIT(A) in Appeal No. PN/CIT(A)-5/ITO Wd.7(2), Pune/217/2016-17 dated 29/09/2017 for the Assessment Year 2014-15. The Assessee has raised following grounds of appeal: “1. The learned Commissioner (Appeals) erred in sustaining the addition of Rs. 51,20,661/- being Long Term Capital Gain from sale of land at village Mahalung even though there was no valid transfer of a capital asset by the assessee company. 2. The learned Commissioner (Appeals) erred in not properly appreciating the peculiar facts of the assessee‟s case while sustaining the addition. 3. The addition of Rs. 51,20,661/- be deleted and the assessee company‟s income, be reduced to that extent. 4. Such other orders be passed as deemed fit and proper. ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 2 5. The appellant prays for leave to add to, modify or amend his grounds of appeal and lead evidence.” 2. Brief facts of the case are that the appellant assessee is a company. As per the assessment order, assessee company was originally in the business of manufacture and sale of potable liquor, spirit, pharma products etc. The assessee company has suspended these business activities. During the year, assessee has shown income from capital gains and income from other sources. During the year, appellant assessee had sold a non-agricultural plot of land(impugned land) situated at village- Mahalung for Rs.63,50,000/- vide registered sale deed dated 01/11/2013 to Mr. Mustak Saheblal Shaikh. As per the registered sale deed, vacant and peaceful possession has been given to the purchaser. The purchaser has paid entire cost to the seller. Subsequently, vide another registered sale deed dated 16/11/2013, the appellant assessee purchased the said impugned non- agricultural plot of land from Mr. Mustak Saheblal Shaikh. 3. As per the assessment order, said transaction was not shown in the return of income. The A.O. based on the ITS data, during the assessment proceedings, asked the assessee to explain why capital gain arising from sale of land shall not be taxed. During the assessment proceedings, the assessee submitted before the A.O. that the company could not deliver vacant and peaceful possession of the property to the buyer namely Mr. Mustak Saheblal Shaikh. The assessee submitted an affidavit dated 30/11/2016 of Mr. Mustak Saheblal Shaikh. The content of the affidavit is as under: “I visited the site in person on the next day to plan my future development of the property. I intended to start with proper demarcation and fencing so as to secure my boundaries. To my utter surprise a few residents of the adjoining locality picked up a quarrel with me alleging that- ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 3 i) the land belonged to the adjoining school as its playground and I was a trespasser. ii) the land was used as a playground for the last more than 30 years and they will not allow any development of the land as it would deprive their children of their long standing playing space. ii) they will take up the matter with the Company and its management and see how anyone could encroach upon their children‟s playground. Since I was accompanied only by my family members, I did not indulge in any further altercation with them and beat a hasty retreat. I drew this fact to the attention of the Company and informed them that in terms of our sale deed it was the Company‟s responsibility to hand over me vacant and peaceful possession of my land. I implored the Company to take immediate steps to ensure that I have unhindered ingress and egress from the impugned property. I had given the Company a period of seven days to fulfil its commitment and warned the Company and its management that i will regard any failure on their part to do so as a breach of contract with resultant consequences. To my utter regret the Company could not resolve the issue to my satisfaction. I was left with no other option than to urge the Company to cancel the sale immediately and refund me my money or otherwise I may be constrained to institute civil and/or criminal proceedings against the Company and its Directors. The Company thereupon acceded to my demand and re-purchased the concerned land from me at the same price of Rs. 63,50,000/- and that document was registered with Sub Registrar Malshiras on 16 th November, 2013 at serial No. 4151/2013.” 3.1 Therefore, the assessee company submitted before the A.O. that in this case, there is no transfer of the land as per the provisions of Section 54 and 55 of the Transfer of Property Act. The company further submitted that there will not be any capital gain. 3.2 The A.O. in para 5 of the assessment order has given his findings which are as under: ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 4 “5. I have gone through the assessee submission carefully. In this regard, the Section 2(47) is reproduced as under: “Transfer, in relation to a capital asset, includes: - (1) The sale, exchange or relinquishment of the asset.” A transaction of sale of land has been executed by sale deed duly registered with the sub-registrar. From the sale deed, it is seen that total sale consideration has been received by the assessee and possession has been handed over to the purchaser. In view of the above and in term of condition laid down in section 2(47)(i) of the Income Tax Act, 1961, transfer of property has been affected and therefore gain arising from sale of land is taxable. The Capital gain is worked out as under: Sale consideration 6350000 Indexed cost of acquisition 1229339 Taxable Long Term Gain 5120661 A gain arising from sale of land worked out as above of Rs.51,20,661/- is added to the total income. Penalty proceedings u/s 271(1)(c) are being initiated separately for furnishing inaccurate particulars of income.” 4. Aggrieved by the order of the A.O., the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) has decided the issue as under: “4.5 I have perused the material on records and the submission made by the Appellant carefully. The Appellant has contended that, there was a clear violation on its part of the provisions of Sec. 54 and Sec. 55(1)(f) of the Transfer of Property Act, as the Company could not deliver vacant and peaceful possession of the property as demanded by the buyer. To buttress it claim, the Appellant has furnished a confirmation letter of the buyer. The Assessing Officer has held the transaction of sale to be completed as the terms and conditions of Sec. 2(47)(1) of the I.T. Act, 1961 were fulfilled. The Appellant has also claimed that, the provisions of Transfer of Property Act have to be taken into consideration to decide whether there was a transfer of the asset for the purpose of Capital Gains. 4.6 I tend to agree with the Assessing Officer, as the transaction of sale of land is by a Sale Deed duly registered with the Sub- Registrar. The sale consideration had been received by the Appellant and possession handed over to the purchaser. The terms and conditions of Sec. 2(47)(1) of the I.T. Act 1961 are ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 5 fulfilled. Therefore, as the transfer of property was affected, Capital Gains from the sale would be taxable. 4.7 The Appellant has also contended during the course of Appellant proceedings and in the Statement of Facts, filed with the Appeal memo that, it resorted to cancellation of the sale by a registered document dated 16/11/2013. A copy of the said document has been submitted during the course of Appellate proceedings. A perusal of this document clearly shows that it is a second Sale Deed between Mr. Mushtak Saheblal Shaikh (the original purchaser) and Brihan Maharashtra Sugar Syndicate Ltd. registered on 16/11/2013 for Rs. 63,50,000/-. This document also indicates that there was no conditional sale or transfer. Thus, this statement of „Cancellation Deed‟ as claimed by the Appellant. Similarly, the Sale Deed between Brihan Maharashtra Sugar Syndicate Ltd. and Mr. Mushtak Saheblal Shaikh was registered on 01/11/2013 for Rs. 64,50,000/- and there was no conditional sale or transfer in that Deed. Thus, the contention of the Appellant falls flat and the Assessing Officer has correctly held that, the Capital Gains accrued to the Appellant on this transaction. As this transaction was not shown in the Return of Income, the Appellant is taking shelter in the Transfer of Property Act whereas, all the terms and conditions of Sec. 2(47)(1) of the I.T. Act are fulfilled. The confirmation given of the purchaser to demonstrate the underlying conditions cannot be considered as it is self-serving for the purchaser also, as he resold the land to the Appellant. The Assessing Officer is also directed to verify whether any Capital Gains arise to the Purchaser Mr. Mustak Shaikh and take necessary action as per law to tax the right amount in the right hands. The addition due to Capital Gains made by the Assessing Officer is sustained. The Appellant fails in this ground of Appeal which are accordingly, dismissed.” 5. Before us, the ld. AR filed English version of the registered sale deed dated 01/11/2013 and 16/11/2013. Ld. AR also filed a paper book which contains copy of affidavit of Mr. Mustak Saheblal Shaikh. The ld. AR submitted that vide the registered sale deed dated 01/11/2013, the assessee company sold the non-agricultural plot of land to Mr. Mustak Saheblal Shaikh. The assessee company received total consideration; however, assessee company had not given possession of the plot to the buyer. Meanwhile the buyer Mr. Mustak Saheblal Shaikh claimed that he learnt that the land was being used as a playground by ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 6 the adjoining school for many years and the local people opposed any development of the said land. Therefore, the buyer asked the assessee company to refund the money. AR further submitted that in order to avoid litigations, the assessee company entered into another registered sale deed dated 16/11/2013 with Mr. Mustak Saheblal Shaikh and refunded his money back. Therefore, AR pleaded that there is no transfer as envisaged in the Transfer of Property Act, hence, there should not be any capital gain. Ld. AR stated that possession of land was not given to Mr. Mustak Saheblal Shaikh. AR further stated that the clause mentioned in the registered sale deed about handing over of vacant peaceful possession of land to the buyer Mr. Mustak Saheblal Shaikh is just a routine recital but in practicality no possession was given to the buyer. The AR relied on the decision of the Hon’ble Punjab & Haryana High Court in the case of Hira Lal Ram Dayal Vs CIT (1980) 122 ITR 461 (P&H) wherein the Hon’ble High Court has held as under: “7. After hearing the learned counsel for the parties, we are of the opinion that the Tribunal fell in legal error in recording the following finding; " If we are to ignore a document which is duly registered with the Sub-Registrar, we will be defeating the purpose of the Indian Registration Act of 1908, when an assessee intends to derive certain benefits from a statute, and that too the Indian Registration Act, where the registration of a document is a condition precedent and he cannot ignore the document so * registered, much less can we. Therefore, when the assessee contends that the sale deed executed and registered with the Sub-Registrar should be taken to be a sham and a bogus document and should be ignored we can do no better than condemn his contention, a contention which, if we may say so, is preposterous and 'dishonourable. We will not go by any other consideration but the one that the document before us is a registered document duly registered with the Sub- Registrar, and whatever it says has to be accepted on its face value. We have, therefore, no hesitation in agreeing with the revenue authorities that the registered document is a genuine ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 7 one and because the said document shows a consideration of Rs, 1,31,400 the sale consideration which passed is Rs. 1,31,400. The cost of the assets as shown is Rs. 12,887, Therefore, the capital gain has been rightly computed at Rs. 1,18,513 which we confirm. " 8. It is no doubt true that the evidentiary value has to be attached to a registered document but the said document cannot be a final word in the matter. It has to be remembered that capital gains accrue only if there is a sale or any other transfer of the capital asset and if the assessee is able to prove that in fact no sale took place in that case no capital gain accrued which could be assessed to income- tax. If the assessee, even in the face of the registered sale deed, is able to prove by cogent evidence and satisfy the Tribunal that no sale in fact took place, in that case, the Tribunal has to come to the conclusion that there was no capital gain. As is apparent from the observations made in the order of the Tribunal, the Tribunal was under the misapprehension that the registered sale deed was final and, therefore, refused to look into the, other material produced by the assessee with a view to prove its case that the sale transaction was a sham transaction. It is, however, a different matter that the Tribunal may not feel convinced that the sale transaction was a sham transaction and refuse to rely on the material produced by the assessee for good reasons, but the said material had to be taken into consideration and could not be ignored. As already observed, the enquiry before the Tribunal was to be directed to find out whether there had been a sale and if the Tribunal comes to the conclusion that the sale had taken place, in that case, the capital gains tax would become payable. The matter can be viewed from another angle. It is a matter of daily happening that people, who want to avoid payment, of tax, would sell the property by getting the sale deeds registered at an under-estimated value. If it is held that the sale deed is final, in that case, the I.T. authorities will be debarred from looking into as to how much sale consideration passed under the transaction, which is not the law. The factum of sale and the sale proceeds are the real questions to be determined by the I.T. authorities. From what has been stated above, it is clear that the Tribunal fell into an error in refusing to examine the material put forth by the assessee to prove that the sale was a sham transaction.” 6. The ld.DR for the Revenue relied on the orders of the A.O. and the ld.CIT(A). Ld.DR submitted that as per the registered sale deed, vacant and peaceful possession was given to the buyer on 01/11/2013 and the buyer had paid entire amount to the assessee. Ld. DR submitted that no buyer will pay such a big sum without verifying the land and without taking possession. Ld. DR ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 8 further submitted that the plea taken by the assessee is not verifiable and cannot be relied. Ld. DR specifically stated in any land transaction, the purchaser always carries out due diligence before entering the transaction. In this case, the purchaser has paid the entire amount to the seller, signed the registered sale deed, therefore, it is beyond human probability that the purchaser had not visited the land earlier or had not carried out due diligence before payment. 7. We have considered the rival contentions of both the parties and perused the material placed on record. The assessee has not denied the fact that the it had entered into a registered sale deed dated 01/11/2013. Assessee has not denied receipt of the entire sale consideration. However, assessee claims that no possession was given. This submission of the assessee regarding possession of the land is not being given is against the recital of the registered sale deed. The registered sale deed categorically mentions that peaceful and vacant possession has been handed over to the purchaser. It has been held by Hon’ble SC in the case of PLACIDO FRANCISCO PINTO (D) by LRs & VS JOSE FRANCISCO PINTO & ANR. CIVIL APPEAL NO. 1491 OF 2007 vide order dated SEPTEMBER 30, 2021, Quote, “ It is beyond dispute that a sale deed is required to be registered i.e. a document required by law to be reduced to the form of a document. Therefore, no evidence of any oral agreement or statement shall be admitted for the purpose of contradicting, varying, adding or subtracting from its terms. The proviso (1) of Section 92 of the Evidence Act on which reliance was placed is a proof of such fact which would invalidate any document such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration, or mistake in fact or law. Section 92 of the Evidence Act reads as under: “92. Exclusion of evidence or oral agreement. - When the terms of any such contract, grant or other disposition of 17 property, or any matter required by law to be reduced to the form of a document, have been proved ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 9 according to the last section, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms: Proviso (1).—Any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto; such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration, or mistake in fact or law.” 29. The respondents were free to prove fraud in execution of the sale deed. However, factually, the respondents have not alleged any fraud in their suit or in the written statement in the suit filed by appellant No. 1. The feigned ignorance about the nature of document cannot be said to be an instance of fraud. In the absence of any plea or proof of fraud, respondent No.1 is bound by the written document on which he admitted his signatures and of his wife. There is no oral evidence which could prove fraud, intimidation, illegality or failure of consideration to permit the respondents to lead oral evidence to dispute the sale deed dated 14.9.1970. Therefore, the judgments referred to by Mr. Mehta are of no help to support his arguments. Thus, the findings recorded by the First Appellate Court as affirmed by the High Court are clearly erroneous in law and are, thus, set aside. 30. Accordingly, the appeal is allowed and the judgment ” Unquote. Therefore, the recitals of the registered sale deed that the vacant and peaceful possession has been handed over to the purchaser have to be taken as the true fact. 7.1. It is not a claim of the assessee that it had not disclosed all the facts about the impugned land to the buyer Mr. Mustak Saheblal Shaikh. Therefore, it is not the claim of the assessee that it was a fraudulent transaction. It is also not the claim of the appellant assessee that he had no intention to enter in the transaction. In the Registered sale deed following things are specifically mentioned: ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 10 -Vacant and peaceful possession of the property has been given to the purchaser. -The purchaser has become the owner of the said property. -There is no encumbrance -Sale deed has been typed as per the Vendor, Purchaser’s knowledge and instructions. -Both the vendor and the purchaser have read the sale deed. -Both the vendor and the purchaser have understood the contents of the said sale deed and they agree and admit that the contents of the said sale deed are true and correct. 7.2 From the above clauses of the Sale deed, it can be inferred that both the vendors and Vendee have full knowledge of all the clauses mentioned in the Sale deed. There is no evidence filed by the AR to prove that the contents of the said registered sale deed are not true or are false. Therefore, it means the possession was handed over to the Purchaser, purchaser had paid entire consideration to the seller and the purchaser became the legal owner of the impugned land on 1/11/2013. Neither the purchaser nor the seller has filed any FIR against the so called villagers who opposed the buyer. The assessee is a legal owner of the property, if there were any encroachments, appellant assessee had not filed any evidence to prove the so-called encroachments, therefore, the said claim of the assessee is unsubstantiated. 7.2.1 The purchaser Mustak Saheblal Shaikh had paid the stamp duty and registration charges. 7.3 Secondly the Appellant after 15 days have purchased the impugned land from Mr. Mustak Saheblal Shaikh by entering into a registered Sale Deed, the said sale deed does not mention anything about the encroachments. There is no cancellation deed. This sale deed is an independent transaction. The second registered sale deed dated 16/11/2013 mentions Mr.Mustak Saheblal Shaikh as owner of the said impugned land. Thus, both the appellant and Mr. Mustak ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 11 Saheblal Shaikh had admitted before the registrar while registering the sale deed that Mustak Saheblal Shaikh is the owner of the impugned land on16/11/2013. Thus in the second recital also facts have been admitted both by the assessee and Mr.Shaikh. Thus on 16/11/2013, Mustak Saheblal Shaikh was the legal owner of the impugned land as per the registered sale deed dated 16/11/2013. 7.4 The assessee placed reliance on the “Affidavit” of Mr. Mustak Saheblal Shaikh dated 3/11/2016. This document is titled as “affidavit” on Rs.100/- stamp paper and it is notarised. This notarised document does not have more evidentiary value than the two registered Sale deeds. It was executed three years after the Sale deeds. It is a settled legal proposition that an affidavit is not evidence within the meaning of Section 3 of the Indian Evidence Act,1872 .Affidavits are therefore, not included within the purview of the definition of "evidence" as has been given in Section 3 of the Indian Evidence Act. Therefore, the said document is mere self-serving statement. 7.5 The assessee had relied on the decision of Hon’ble Punjab & Haryana high Court in the case of Hiralal Ram Dayal vs CIT 122 ITR461(PH). The Hon’ble High Court observed that “Tribunal fell into an error in refusing to examine the material put forth by the assessee to prove that the sale was a sham transaction”. The said case law is distinguishable on facts. In the case of Hiralal Ram Dayal(supra), it was claimed that the transaction was sham, and the ITAT had erred in refusing to examine the material put forth by the assessee. However, the facts of the case under consideration are different. In the present case, assessee has not claimed that the transaction is sham. In the present case, we have considered all the evidences put forth by the assessee. ITA 2778/PUN/2017 for A.Y. 2014-15 The Brihan Maharashtra Sugar Syndicate Ltd. Vs. ITO 12 7.5.1 All these things establish that there was a valid legal registered sale deed dated 01/11/2013 by which vacant and peaceful possession of the impugned land was given to the purchaser and the purchaser had paid entire consideration to the seller. Therefore, it is a transfer of capital asset and hence attract capital gain tax. 7.5.2 Therefore, the Assessment Order is upheld. Thus, the grounds of appeal no.1, 2, 3 raised by the assessee are dismissed. The ground number 4 & 5 are general in nature, does not need any adjudication, hence dismissed. 8. In the result, appeal of the Assessee is dismissed. Order pronounced on 8 th April, 2022. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददिधंक / Dated : 8 th April, 2022 / *SGR आदेशकीप्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : 1. अपऩलधर्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A) concerned 4. The Pr.CIT concerned 5. The DR, ITAT, “A” Bench, Pune. 6. गधर्ाफ़धइल / Guard File. आदेशधिपसधर / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपऩलऩय अनर्करण, पपणे/ITAT, Pune.