Satish Zumberlal Firodia, Ahmednagar V. Income tax Officer, Ahmednagar

ITA 669/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6786 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Set aside
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “SMC”, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. / ITA No.669/PUN/2017 नधा रण वष / Assessment Year : 2011-12 Satish Zumberlal Firodia, Flat No.101, Ist Floor, Sawaj Chambers, Khrist Galli, Ahmednagar – 414 001 PAN : AAEPF2051L Vs. ITO, Ward-1, Ahmednagar (Appellant) (Respondent) आदेश / ORDER PER R.S.SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A)-2, Pune on 08-08-2016 in relation to the assessment year 2011-12. 2. The assessee is aggrieved by the confirmation of addition of Rs.25,69,200/- on account of capital gain on transfer of land. 3. Tersely stated, the facts of the case are that an immovable property situated at Survey No.122/1, Kedgaon, Ahmednagar (hereinafter called `the property in question’) was sold through registered sale deed on 07-12-2010 jointly by 5 co-owners (all are brothers and sisters) for a sum of Rs.5.00 lakhs. The assessee is Appellant by Shri Shrenik R. Gandhi Respondent by Shri M.G. Jasnani Date of hearing 14-03-2022 Date of pronouncement 16-03-2022 ITA No. 669/PUN/2017 Satish Z. Firodia 2 one of such co-owners. No capital gain was offered by the assessee on account of this transaction. On being called upon to explain as to why no capital gain was declared in the return of income, the assessee submitted that the property in question was received in 1982 by Sh. Zumberlal Hemraj Firodiya, his father, as his share in the property of Firodiya family. On 20-08-1982, his father executed an unregistered agreement to sell in favour of Michael Oskar Parera and Rajendra Nathmal Katariya for a consideration of Rs.5.00 lakhs. A sum of Rs.50,000 was received and the remaining sum of Rs.4.50 lakh was to be received at the time of execution of sale deed. On the demise of his father in 1996, the property in question devolved to his successors, namely, the five children of Sh. Zumberlal Hemraj Firodiya, including the assessee. On the death of Sh. Micheal Oskar Parera, one of the purchasers, the five brothers and sisters executed another Unregistered Agreement to sell on 03-05-2001 with Ms.Rozline Michael Parera and Mr.Rajendranathmal Katariya. The assessee submitted before the AO that even though the Sale Deed was registered on 07-12- 2010 but Agreement to sell was made on 03-05-2001. Since the consideration of Rs.5.00 lakhs was received by his father, the assessee claimed that no capital gain was chargeable to tax in his ITA No. 669/PUN/2017 Satish Z. Firodia 3 hands. The AO perused the Sale Deed of 1982 produced by the assessee which was an unregistered document. He noted from the registered sale deed executed on 07-12-2010 that the possession of the property in question was given to the purchasers on that day by the 5 brothers and sisters including the assessee. As per 7/12 extract enclosed with the Sale Deed, names of the 5 brothers and sisters were appearing who handed over the possession of the property in question to the purchasers. As the assessee was one of the co-owners of the property and had also signed the Sale Deed as a co-owner, the AO held that capital gain was proportionately chargeable u/s.2(47) of the Act. The assessee’s argument that he was not the co-owner of the property in question because he had received three other properties, namely, Bank Road property; Old Cloth Market property; and Khrist Galli property, from his father in lieu of his share in the property in question hence, no capital gain was chargeable in his hands, did not find favour with the AO. The AO observed that the stamp value of the property in question was Rs.1,64,01,000/-. As the transfer took place on the execution of registered Sale Deed on 07-12-2010, the AO computed capital gain by taking stamp value as the full value of consideration as per section 50C of the Act at Rs.1.64 crore and determined the amount ITA No. 669/PUN/2017 Satish Z. Firodia 4 of long term capital gain at Rs.1.28 crore. The assessee’s 1/5 th share was computed at Rs.25,69,200/-. No relief was allowed in the first appeal. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 4. I have heard both the sides and gone through the relevant material on record. Multiple arguments were advanced by the ld. AR during the course of hearing, starting with that the assessee was not a co-owner but only a consenting party to the sale deed executed in 2010; the transfer took place in 2001 and not on registration of the sale deed; the registered sale deed of 2010 was set aside by the Tenancy Tribunal order; and, in any case, the AO erred in computing capital gain without making any reference to the DVO. I will espouse such arguments in seriatim for consideration and decision. I. Was the assessee a co-owner or a consenting party only? 5. The ld. AR vehemently argued that the assessee did not have any interest in the property at the time of its transfer either in 2001 or 2010 and hence no capital gain was chargeable to tax in his hands. This argument was founded on the submission that the assessee accepted three other properties, namely, Bank Road property; Old Cloth Market property; and Khrist Galli property in ITA No. 669/PUN/2017 Satish Z. Firodia 5 lieu of his share in the property in question. To substantiate this argument, he relied on an affidavit executed by him in this regard on 01-12-1990, whose copy has been placed at page 1 of the paper book. The ld. AR was directed to substantiate his argument of having received the above three properties in lieu of his share in the property in question with the help of a Court decree or any other registered document showing that these properties, which were hitherto under the ownership of his father, were received by him in lieu of his share in the property in question. The case was adjourned for enabling the ld. AR to place on record such evidence. On the next date also, the ld. AR could not place on record any Court decree or a testamentary or non-testamentary document to support his contention. He fairly admitted that no such evidence exists. However, he emphatically relied on the assessee’s affidavit dated 01-12-1990 and also the affidavit of his father made on 26-02-1994 to support the contention. 6. The ld. AR is harping on the contention of transfer of the above three properties in the assessee’s favour as a quid pro quo for giving up his share in the property in question with the help of his own affidavit. At this stage, it is significant to take note of the mandate of section 17(1) of the Registration Act with the caption ITA No. 669/PUN/2017 Satish Z. Firodia 6 “Documents of which registration is compulsory” providing, inter- alia, that non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property are required to be registered compulsorily. Section 49 of the Registration Act with the caption `Effect of non-registration of documents required to be registered’ provides that no document required by section 17 of the Registration Act or by any provision of the Transfer of Property Act to be registered shall, inter alia, affect any immovable property comprised therein or be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered. On reading section 17 in juxtaposition to section 49 of the Registration Act, it becomes evident that immovable property of the value of one hundred rupees and upwards requires compulsory registration for transfer and if it is not accordingly registered, the transfer shall not take effect. 7. A cursory glance at the above provisions transpires that an immovable property can be transferred from one person to another only by means of compulsory registration. If the registration is not ITA No. 669/PUN/2017 Satish Z. Firodia 7 done, no transfer takes place. Adverting to the facts of the case, it is seen that the assessee is claiming the receipt of three properties in the year 1990 from his father through an affidavit issued by self in that year, which was sought to be corroborated by an affidavit of his father issued in the year 1994. Neither any registered transfer Deed was executed in favour of the assessee anent to the above three properties nor any Court order has been produced to demonstrate that these were transferred by his father in lieu of the assessee giving up his share in the property in question. This does not support the case of the assessee. Immovable properties are not transferred through affidavit, as has been instantly claimed. 8. On the contrary, it can be seen from the Sale Deed dated 07- 12-2010 that the assessee has signed it as one of the five co-owners and not as a ‘Consenting party’. There is no reference in the registered Sale Deed 07-12-2010 to the alleged transfer of the above three properties in favour of the assessee in lieu of his giving up share in the property in question. In view of the fact that the assessee signed the registered Sale Deed as a co-owner and not as a consenting party and further that there is no legal document demonstrating the assessee giving up his share in the property in question in lieu of the three properties, I am not inclined to accept ITA No. 669/PUN/2017 Satish Z. Firodia 8 the contention of the ld. AR that the assessee was not a co-owner of the property in question at the time of the execution of the registered sale deed in 2010. 9. There is one more angle of this issue. The ld. AR made another submission that the Sale Deed executed on 07-12-2010 was stayed by an order dated 09-11-2013 passed by the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, an english translated copy of which has been placed on record. The relevant thing to be mentioned from that proceeding at this stage is that the name of the assessee is appearing in that order also as the owner transferring the property. A Para of the order on page 31 of the paper book records the submissions made by the five brothers and sisters including the assessee contending “Since the land belonged to 1) Lalchand Sheshmal Firodiya and 2) Zumbarlal Hemraj Firodiya the applicants have admitted the distribution of land and recording of successors therein”. It is absolutely clear from the submissions made by the assessee and other 4 brothers and sisters that the land in question originally belonging to his father had devolved upon the 5 brothers and sisters including the assessee as successors. In view of the foregoing discussion, it is clear that the argument made by the assessee about his having no interest in the property in ITA No. 669/PUN/2017 Satish Z. Firodia 9 question transferred, has no merit and is hereby rejected. This contention is, ergo, repelled. II. When the transfer of the property in question took place? 10. The ld. AR contended that the property in question was transferred in the year 2001 and the execution of the registered Sale Deed in the year under consideration does not involve any “transfer’ within the meaning of section 2(47) of the Act. He vehemently relied on the fact that the assessee’s father received Rs.50,000 out of total consideration of Rs.5.00 lakhs on executing Agreement to sell the property in the year 2001. The argument of the transfer taking place on 03-05-2001 is founded on the execution of an Agreement to Sell, which is an unregistered document. The Sale Deed was actually executed and registered on 07-12-2010 and the possession was also given to the buyers at that time as per such deed. 11. At this juncture, it is relevant to mention that section 53A of the Transfer of Property Act (TPA), prior to its amendment in 2001, construed completion of transfer on any person contracting to transfer for consideration any immoveable property by writing signed by him from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the ITA No. 669/PUN/2017 Satish Z. Firodia 10 transferee, in part performance of the contract, has taken possession of the property etc. and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that `the contract though required to be registered, has not been registered’ etc. in the manner prescribed therefore by the law for the time being in force, the transferor shall be debarred from enforcing against the transferee any right in respect of the property. The effect of this section was to treat the part performance of the contract, subject to the conditions given therein, as constituting transfer of immovable property notwithstanding the non- registration of the sale deed. Proviso to section 49 of the Registration Act, prior to 2001 amendment, also provided that an unregistered document affecting immovable property and required by this Act or the TPA, to be registered may be received, inter alia, as evidence of part performance of a contract for the purposes of section 53A of the TPA. Section 2(47)(v) of the Act provides that "transfer", in relation to a capital asset, includes: `any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property ITA No. 669/PUN/2017 Satish Z. Firodia 11 Act, 1882’. On a conjoint reading of section 2(47)(v) of the Act with section 53A of the TPA and section 17 and 49 of the Registration Act, before amendment, it transpires that part performance of the contract, subject to fulfilment of the stipulated conditions, amounted to transfer recognised by the Registration Act, giving rise to liability towards capital gain tax. 12. Such position of law underwent change by the Registration and other related Laws (Amendment) Act, 2001, the object of which was to do away with the part performance of the contract as amounting to transfer unless the sale deed is actually registered. To give effect to this intention, firstly, sub-section (1A) came to be added to section 17 of the Registration Act providing that: `The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of property Act, 1882 shall be registered if they have been executed on or after the commencement of the Registration and other related laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A.’. Simultaneously, proviso to section 49(1) of the Registration Act was amended to exclude the expression `or as evidence of part ITA No. 669/PUN/2017 Satish Z. Firodia 12 performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882’. Side-by-side, an amendment was also carried out in 2001 to section 53A of the TPA omitting the expression “the contract though required to be registered, has not been registered, or”. The net effect of these amendments is that the part performance of the contract without requiring registration, subject to fulfillment of certain conditions, which was hitherto considered as `transfer’ for the purposes of the TPA and the Registration Act, and also consequently the Act, ceased to be so. The position after the 2001 amendments is that registration of the documents is compulsory even in part performance of contract cases and the effects of non-registration apply to such cases in the same manner as to the other general cases requiring registration. Necessarily and as a sequitur, it follows that the mandate of section 17 of the Registration Act requiring the registration as a pre-condition for transfer, after the 2001 amendment, applies to all the clauses of section 2(47) dealing with the immovable property. Execution of an unregistered sale deed is no more treated as `transfer’ unless the sale deed is registered in the same manner, as the position has become after the 2001 amendments qua the ITA No. 669/PUN/2017 Satish Z. Firodia 13 transaction of part performance of contract as per section 53A of the TPA covered under section 2(47)(v) of the Act. 13. When the facts as prevailing in the extant case are viewed in the light of the above legal position, it becomes ostensible that the transfer of the property in question took place only on the execution of the registered sale deed in 2010 relevant to the assessment year under consideration and not in the year 2001 when the unregistered Agreement to sell was executed. Moreover, the ld. AR has not drawn my attention towards any material indicating that the capital gain on the transfer of the property in question was offered by the assessee or his father or anyone else at any point of time. This contention, ergo, fails. III. Effect of order of Tehsildar and Agricultural Lands Tribunal 14. The ld. AR gave another twist to the facts of the case by submitting for the first time before the Tribunal that the registered sale deed executed in the year 2010 was cancelled by the order dated 09-11-2013 passed by the Tehsildar and Agricultural Lands Tribunal, Ahmednagar. This being a new legal argument having bearing on the question under consideration, requires proper determination. ITA No. 669/PUN/2017 Satish Z. Firodia 14 15. I have gone through the English translated copy of the order passed by Tehsildar and Agricultural Lands Tribunal, Ahmednagar, in which there is a reference to some eight persons filing petition before the Tehsildar and Agricultural Lands Tribunal, Ahmednagar contending that they were the tenants of the property in question which could not have been transferred without their consent. In this order, there is a mention of certain provisions under the Tenancy Act, which provide for the Tenants enjoying the first right to purchase the property. The order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, records that : “the land was in permanent possession of the tenant and applicants were required to seek their permission before transferring the property”. It further records: `that in the present case, the disputed land appears to be in the permanent possession of the tenant. Hence, the transfer of the disputed land by the opponent Nos. 1 to 5 to the opponent Nos. 6 to 7 without following procedure prescribed vide section 164 (C) becomes legally untenable. Hence the disputed property is required to be transferred to the State Government vide section 84 (C)(3) and thereafter undertake further process vide section 84 (C)(4).... However I am convinced that immediate action vide section 84 (C)(4) will not be possible ITA No. 669/PUN/2017 Satish Z. Firodia 15 since the tenant has not submitted any details with respect to annual rent’. The operative part of the order reads as under: Order 1. Incidental to the disputed land, the transfer of the disputed land by the opponent Nos. 1 to 5 to the opponent Nos. 6 to 7 is declared legally invalid in terms of section 84 (C)(4). Of the Mumbai Tenancy and Agricultural Lands Act 1948. 2. The disputed property be surrendered to the State Government after the expiry of time period for appeal against this order. 3. The order be communicated to all the concerned.” 16. On going through the above order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, it is manifest that the transfer of the land in question by means of Sale Deed dated 07- 12-2010 came to be declared invalid and the disputed property was directed to be surrendered to the State Government after expiry of time period for filing of appeal against this order. On a pertinent query, the ld. AR submitted that the assessee did not file any appeal against the order passed by the Tehsildar and Agricultural Lands Tribunal, Ahmednagar and further that the disputed property was also not transferred to the State Government. He further claimed that the assessee has no knowledge of any appeal having been filed by other co-owners. Thus, it is manifest that there is an apparent contradiction in the part reply submitted on behalf of the ITA No. 669/PUN/2017 Satish Z. Firodia 16 assessee vis-à-vis the terms of the order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar. Firstly, the ld. AR has not drawn my attention towards either the relevant provision under which the Tehsildar and Agricultural Lands Tribunal set aside the registered sale deed or the copy of petition challenging the registered sale deed before such Tribunal. Secondly, arguendo, that the Tehsildar and Agricultural Lands Tribunal was competent to do so, then his order should have taken its logical conclusion, namely, the disputed property should have vested in the State Government after the expiry of the time for filing appeal against the order. Per contra, the ld. AR submitted that the property in question has not vested in the State Government. There are so many loose ends on this issue. The ld. AR denied to have any information about all such aspects, which in my considered opinion have an important bearing on the question. If the registered Sale Deed has itself been set-aside, to which the assessee is one of the co-owners as transferor and no further transfer has taken place inasmuch as the property has come back to the co-owners, then there cannot be any question of capital gain arising in the hands of the assessee. Au contraire, if the order of Tehsildar and Agricultural Lands Tribunal, Ahmednagar itself has been set-aside in further appeal, ITA No. 669/PUN/2017 Satish Z. Firodia 17 then, of course, the assessee will be obliged to pay tax on capital gain on the transfer of the property taking place by means of the registered Sale Deed on 07-12-2010 in the year under consideration. In the third scenario of the property in question getting vested in the State Government, again several consequences will follow as regards the timing and the amount of computation of capital gain. These aspects of the matter have remained unanswered. At this stage, it is relevant to mention that the argument about the order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, dated 9.11.2013 setting aside the registered sale deed executed in the year 2010, was taken up before the Tribunal for the first time. No such plea was there before the AO or the ld. CIT(A) that the sale made through registered Sale Deed 07-12-2010 was set-aside by the Tehsildar and Agricultural Lands Tribunal, Ahmednagar, even though the impugned order came to be passed in the year 2016, much after the order of the Tehsildar and Agricultural Lands Tribunal, Ahmednagar. Considering these peculiar facts, I am of the considered opinion that this issue needs consideration at the end of the AO in the hue of the above discussion. ITA No. 669/PUN/2017 Satish Z. Firodia 18 IV. Computation of capital gain – Reference to the DVO 17. The ld. AR stated that the assessee submitted before the AO that the stamp value was excessive and the matter of valuation be referred to the DVO, which the AO did not accept. I find that there is a categorical mention of this contention in the assessment order at page 8 para 7(e) of the assessment order. Section 50C(2) of the Act provides that where the assessee claims, inter alia, before the Assessing Officer that the value adopted etc. by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer. The word `may’ as used herein has been interpreted by the Hon’ble High Courts as `shall’, meaning thereby, that when the assessee makes a request to the AO for making a reference to the DVO, the AO is bound to do so and then adopt the value so determined in place of the stamp value as the full value of consideration in the computation of capital gains. Despite the specific request of the assessee, the AO did not make any such reference to the DVO and proceeded to compute capital gain on the basis of the stamp value only. ITA No. 669/PUN/2017 Satish Z. Firodia 19 18. In these circumstances, I am of the considered opinion that it would be in the fitness of things if the impugned order is set-aside and the matter is restored to the file of AO for re-deciding the issue afresh as per law in terms of discussion made herein above. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. 19. Before parting with the appeal, it is hereby clarified that all the decisions referred by both the sides, to the extent germane to the issues in appeal, have been taken into consideration. 20. In the result, the appeal is partly allowed for statistical purposes. Order pronounced in the Open Court on 16 th March, 2022. Sd/- (R.S.SYAL) उपा य / VICE PRESIDENT प ु णे Pune; दनांक Dated : 16 th March, 2022 Satish ITA No. 669/PUN/2017 Satish Z. Firodia 20 आदेश क त ल प अ े षत / Copy of the Order is forwarded to : 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. The CIT(A)-2, Pune 4. 5. The Pr.CIT-1, Pune वभागीय त न ध, आयकर अपील!य अ धकरण, प ु णे “SMC” / DR ‘SMC’, ITAT, Pune; 6. गाड फाईल / Guard file. आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 14-03-2022 Sr.PS 2. Draft placed before author 16-03-2022 Sr.PS 3. Draft proposed & placed before the second member -- JM 4. Draft discussed/approved by Second Member. -- JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *