The ACIT, Central Circle 1, RAJKOT-GUJARAT V. Shri Jasubhai Arjanbhai Vaghasia, JUNAGADH

ITA 452/RJT/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50025 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LD BHARTI
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.452/RJT/2007 (ASSESSMENT YEAR 2004-05) ACIT, CENT.CIR.1 VS SHRI JASUBHAI ARJAHBHAI VAGHA SIA RAJKOT 142, SHRINATH NAGAR SOCIETY GARBI CHOWK, JUNAGADH PAN : ADDPP8474H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI LD BHARTI RESPONDENT BY: SHRI JC RANPURA O R D E R PER N.R.S. GANESAN, JM THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-IV, AHMEDABAD DATED 13-03-2007 AND PERTAINS TO ASSESSME NT YEAR 2004-05. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS ADDI TION OF RS. 38,11,500 TOWARDS CAPITAL GAIN. 3. SHRI LD BHARTI, THE LD.DR SUBMITTED THAT THE ASS ESSEE ENTERED INTO AN AGREEMENT FOR SALE OF AGRICULTURAL LAND AT SURVEY N O.86 AT JHANJHARDA VILLAGE FOR A SALE CONSIDERATION OF RS.1 CRORE. THE TOTAL INVEST MENT IN THE LAND WAS RS.61,88,500. THEREFORE THE CAPITAL GAIN ARISING O UT OF THIS TRANSACTION IS TO THE EXTENT OF RS.38,11,500. THE ASSESSEE HAS SHOWN THE RECEIPT OF RS.16,000 EACH DURING PREVIOUS TWO YEARS AND THE BALANCE OF RS.29, 88,500 WERE RECEIVED DURING THE ASSESSMENT YEAR 2004-05. HOWEVER, THE ASSESSEE HAS NOT DISCLOSED THE BALANCE MONEY IN THE RETURN OF INCOME AND THE CAPIT AL GAIN WAS ALSO NOT DISCLOSED. THEREFORE, THE ASSESSING OFFICER ADDED A SUM OF RS.38,11,500 TOWARDS CAPITAL GAIN. HOWEVER, ON APPEAL BY ASSESS EE, THE CIT(A) DELETED THE SAME ON THE GROUND THAT THE TRANSACTION WAS NOT COM PLETE AND THE AGREEMENT ITA NO.452/RJT/2007 2 WAS ALSO CANCELLED. ACCORDING TO THE LD.REPRESENTA TIVE, THE ASSESSEE HAS RECEIVED THE PART OF PAYMENT OF CONSIDERATION AND T HEREFORE, THE CAPITAL GAIN HAS TO BE ASSESSED DURING THE YEAR UNDER CONSIDERATION. 4. ON THE CONTRARY, SHRI JC RANPURA, THE LD.REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT NO DOUBT THE ASSESSEE ENTERED INTO A N AGREEMENT FOR SALE OF AGRICULTURAL LAND AT SURVEY NO.86, JHANJHARDA VILLA GE. THE PAYMENT WAS MADE FOR RS.16,000 EACH DURING THE FINANCIAL YEARS 2001-02 A ND 2002-03 AND THE BALANCE AMOUNT OF RS.29,88,500 WAS MADE DURING THE YEAR 200 4-05. ALL THE DETAILS OF PAYMENT WERE SHOWN IN THE CASH FLOW STATEMENT. ACC ORDING TO THE LD.REPRESENTATIVE, THE CAPITAL GAIN WOULD ARISE FOR CONSIDERATION IF THE TRANSACTION OF SALE WAS COMPLETED AND ATTAINED FINALITY. ACCOR DING TO THE LD.REPRESENTATIVE, THE ASSESSEE NEVER GAVE POSSESSION TO THE BUYER AT THE TIME OF AGREEMENT NOR WAS ANY SALE DEED EXECUTED. THEREFORE, ACCORDING T O THE LD.REPRESENTATIVE, THERE WAS NO TRANSFER OF PROPERTY WITHIN THE MEANING OF T HE INCOME-TAX ACT. THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE, ADMITTEDLY, ENTERED INTO AGREEMENT FOR SALE OF THE AGRICULTURAL LAND FOR A S ALE PRICE OF RS.1 CRORE. THE COST OF THE LAND ADMITTEDLY IS RS.61,88,500. THE CONTEN TION OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT THE AGREEMENT FOR SALE WAS SUBSEQU ENTLY CANCELLED. FROM THE ORDER OF THE CIT(A) IT APPEARS THAT THE COPY OF THE CANCELLATION OF THE AGREEMENT WAS ALSO FILED BEFORE THE ASSESSING OFFICER. THE D EPARTMENT COULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT THE SALE DEED WAS EXECUTE D. 6. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(47) OF THE INCOME-TAX ACT. SECTION 2(47) OF THE INCOME-TAX AC T DEFINES TRANSFER. SECTION 2(47) INDICATES VARIOUS INSTANCES AS TRANSFER FOR T HE PURPOSE OF THE INCOME-TAX ACT. ONE OF THE INSTANCES IS IN TRANSACTION ALLOWI NG OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN ANY P ART PERFORMANCE OF THE ITA NO.452/RJT/2007 3 CONTRACT AS PROVIDED IN SECTION 53A OF TRANSFER OF PROPERTY ACT. IN THIS CASE, IT IS NOT THE CASE OF THE REVENUE THAT THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE PURCHASER. THE ONLY CASE OF THE REVENUE IS THAT PART PAYMENT WAS RECEIVED IN PURSUANCE TO THE SALE AGREEMENT. MERE RECEIPT OF PART SALE CONSIDERATION WITHOUT PARTING WITH POSSESSION OF TH E PROPERTY CANNOT BE CONSTRUED AS TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE INCOME-TAX ACT. IN OTHER WORDS, PARTING WITH POSSESSION OF TH E PROPERTY COUPLED WITH PART PAYMENT IS VERY ESSENTIAL FOR PART PERFORMANCE OF T HE CONTRACT, VIZ. THE AGREEMENT FOR SALE AS PROVIDED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. SINCE THE POSSESSION OF THE PROPERTY WAS NOT HANDED OVER, IN OUR OPINION, THERE WAS NO TRANSFER AT ALL. THEREFORE, THERE IS NO QUESTION O F ANY CAPITAL GAIN WHICH WOULD ARISE FOR CONSIDERATION. THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS CONFIRMED. 7. THE NEXT GROUND OF APPEAL IS ADDITION OF RS.17 L AKHS ON ACCOUNT OF UNEXPLAINED PAYMENT. WE HAVE HEARD THE LD.DR AND T HE LD.REPRESENTATIVE FOR THE ASSESSEE. THE ASSESSEE ENTERED INTO AN AGREEMENT F OR EXCHANGE OF LAND ON 21- 06-2003 IN SURVEY NO.30/1 AT JHANJHARDA VILLAGE FOR RS.1.27 CRORES. THE PRICE WAS SETTLED BY WAY OF EXCHANGE OF LAND SITUATE AT S URVEY NO.86, JHANJHARDA VILLAGE WHICH WAS VALUED AT RS.1 CRORE AND THE ASSE SSEE WAS TO PAY AN ADDITIONAL AMOUNT OF RS.27 LAKHS. AS PER THE AGREE MENT, RS.10 LAKHS WAS TO BE PAID WITHIN ONE MONTH FROM THE DATE OF THE AGREEMEN T AND THE BALANCE AMOUNT OF RS.17 LAKHS WERE TO BE PAID WITHIN 14 MONTHS FROM T HE DATE OF AGREEMENT. IT IS TO BE SEEN THAT THE VERY SAME LAND AT SURVEY NO.86, JH ANJHARDA VILLAGE THE ASSESSING OFFICER MADE ADDITION OF RS.38,11,500 TOW ARDS CAPITAL GAIN. THE ASSESSEE ACTUALLY PAID RS.10 LAKHS AND THE BALANCE AMOUNT OF RS.17 LAKHS WAS TO BE PAID IN DUE COURSE, I.E. WITHIN 14 MONTHS FRO M THE DATE OF AGREEMENT. AS PER THE AGREEMENT, THE POSSESSION OF THE PROPERTY R EQUIRED TO BE HANDED OVER ONLY ON FINAL PAYMENT. DUE TO FINANCIAL CONSTRAINT S, THE AGREEMENT WAS CANCELLED BY ANOTHER AGREEMENT DATED 30-04-2004. ACCORDINGLY THE ASSESSEE WAS NOT ITA NO.452/RJT/2007 4 PAID THE BALANCE AMOUNT OF RS.17 LAKHS. AS DISCUSS ED IN THE EARLIER PART OF THE ORDER FOR THE PURPOSE OF TRANSFER OF IMMOVABLE PROP ERTY IT IS TO BE NECESSARY TO HANDOVER THE POSSESSION OR THERE SHALL BE A RELINQU ISHMENT OF RIGHT OR TRANSFER OF INTEREST IN THE PROPERTY. IN THIS CASE, NO SUCH TR ANSFER OR RELINQUISHMENT OF RIGHT TOOK PLACE. IN FACT, THE AGREEMENT FOR EXCHANGE OF THE PROPERTY WAS SUBSEQUENTLY CANCELLED AND THEREAFTER, THE ASSESSEE HAD NOT PAID THE REMAINING AMOUNT OF RS.17 LAKHS. THE ASSESSING OFFICER MADE ADDITION OF RS.17 LAKHS ONLY ON THE PRESUMPTION THAT THE ASSESSEE WOULD HAVE PAI D THE SAME. IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEE HAD PAID THE ABOVE SAID SUM OF RS.17 LAKHS, IN OUR OPINION, NO ADDITION IS CALLED FOR. ACCORDINGLY, THE CIT(A) HAS RIGHTLY DELETED THE SAME. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS.25,34,929 TOWARDS UNEXPLAINED INVESTMENT. WE HAVE HEARD THE LD.DR AND THE LD.REPRESENTATIVE FOR THE ASESSEE. THE CONTENTION OF THE LD.DR IS THAT THE INVESTMENT MADE BY THE ASSESSEE IN PURCHASE OF PROP ERTY TO THE EXTENT OF RS.25,34,929 WAS MORE THAN THE FUNDS AVAILABLE WITH THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER MADE THE ADDITION. THE ASSES SEE EXPLAINED THAT DURING THE ASSESSMENT YEAR 2003-04 A SUM OF RS. 25 LAKHS WAS S HOWN AS INCOME AND FOR THE ASSESSMENT YEAR 2004-05 THE AVAILABLE FUND IS R S.9,42,256. THE CIT(A) FOUND THAT THE FUNDS AVAILABLE WITH THE ASSESSEE IS MORE THAN RS.47,77,184. IT IS ALSO FOUND BY THE CIT(A) THAT THE ASSESSEE HAS NOT PAID RS.17 LAKHS AS CLAIMED BY THE ASSESSING OFFICER. THIS FINDING OF THE CIT( A) WAS CONFIRMED BY THIS TRIBUNAL IN THE EARLIER PART OF THIS ORDER. THEREFO RE, TO THE EXTENT OF RS.17 LAKHS IT CANNOT BE CONSTRUED THAT THE ASSESSEE HAS PAID THE AMOUNT. BY TAKING INTO CONSIDERATION THE ASSESSMENT OF THE ASSESSEE FOR TH E ASSESSMENT YEARS 2003-04 AND 2004-05, IN OUR OPINION, THE ASSESSEE HAS AVAIL ABLE FUNDS FOR THE PURPOSE OF MAKING INVESTMENT IN THE PROPERTY. MOREOVER, THE A SSESSEE HAS ALSO SHOWN THE UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 2004-05 TO THE EXTENT OF RS.20 LAKHS. BY TAKING INTO CONSIDERATION ALL THESE FACT S, THE CIT(A) HAS RIGHTLY FOUND THAT THE ASSESSEE HAS SUFFICIENT FUNDS FOR THE PURP OSE OF MAKING INVESTMENT AND ITA NO.452/RJT/2007 5 THEREFORE, HE DELETED THE ADDITION OF RS.25,34,929. IN THE ABSENCE OF ANY MATERIAL WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 9. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03-06-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 03 RD JUNE, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-IV, AHMEDABAD 4. THE CIT, CENTAL-II, AHMEDABAD 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT