Ashalata Kulshrestha, Ahmedabad V. The ITO, Ward-7(1)(3), Ahmedabad

ITA 738/AHD/2019

AI Insights

Ashalata Kulshrestha appealed against the order of the Commissioner of Income Tax (Appeals) which confirmed the addition of Rs. 2,26,85,000 as short-term capital gains for the assessment year 2016-17. The dispute centered on the classification of capital gains from the sale of property. The property, originally purchased from Gujarat Housing Board in 1986, was sold to her daughter in 2006 and later reacquired in 2015 through a cancellation deed. The appellant argued that the property should be considered a long-term capital asset as it was held for more than 36 months, while the revenue treated it as a short-term capital asset due to the timing of the reacquisition. The Tribunal examined the legal implications of the cancellation deed and the nature of the property transfer.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 131510 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-10-2022
• Assessment Year: misc
• Appeal Filed On: 28-04-2022
• Other Referred Cases: Binny Mill Labour Welfare House Building Co-operative Society Ltd. vs. D.R. MruthyunjaAradhya, Sri K. Raju vs. Bangalore Development Authority, Satya Pal Anand vs. State of M.P, Smt. Kusum Lata vs. State of U.P. & ors, C. Ravi vs. Income Tax Officer
• Laws Referred To: Income Tax Act, 1961, Transfer of Property Act, 1882, Specific Relief Act, 1963
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: GUJARAT HOUSING; WAY OF A FRESH
• Keywords: Capital asset; Cost of acquisition; Capital Gains
• Section: 68; 69; 2; 143(3); 48

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Ashalata Ku lshreth a, 14, Radh ekrish an Banglow, Nr. Fire Station, Bo dakd ev, Ahmed ab ad PAN: AJMP K6 180G (Appellant) Vs The ITO, Ward-7(1)(3), Ah med abad (Resp ondent) Asses see b y : Shri S. N. Sopa rkar, A.R. Revenue by : Shri Atul Pandey , S r. D. R. Date of hearing : 04-10 -2 022 Date of pronouncement : 12-12 -2 022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-7, Ahmedabad in Appeal no. CIT(A)-7/36/2016-17, in proceeding u/s. 143(3) vide order dated 27/03/2019 passed for the assessment year 2016-17. 2. The assessee has raised the following Grounds of Appeal:- ITA No. 738 /Ahd/2019 Assessment Year 2016-17 I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 2 “1. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts in upholding that your appellant did not possess and owned the property for more than 36 Months by considering the cancellation deed executed on 30-07- 2015 as purchase deed and thereby confirming the addition of Rs. 2,26,85,000/- by considering it as a short term capital asset instead of long term capital asset. Your appellant, therefore, requests Honorable IT AT to consider the deed executed on 30-07-2015 as cancellation of the deed and not the purchase deed and thereby consider the transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/ s 54 of the IT Act, 1961. 2. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts by not accepting the fact that your appellant has occupied the property till the date of sale in 2015 and there were no transfer at all to the daughter in the year 2006 and hence the question of repurchase of the property was never arise. Your appellant, therefore, requests Honorable IT AT to consider the entire transaction as long term as per the provisions of section 2(29 A) of the IT Act, 1961 as claimed by your appellant in the return of income and thereby allow the deduction claimed u/s 54 of the IT Act, 1961. 3. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts in upholding that your appellant had entered into a sale agreement with her daughter for the entire property vide the Sale agreement dated 16 th March 2006 even though appellant has sold only 66.92 Sq. Mtrs land area with superstructure thereon as mentioned in the agreement itself. Hence, the Ld. CIT(A) erred in not giving relief of Rs. 1,77,72,651/- to the extent of the unsold property (the unsold land and superstructure area). And therefore alternatively in any case, your appellant request the Hon'ble ITAT to held that the portion of the unsold property i.e. land area 235.94 Sq. Mt. and Superstructure 133.92 sq. Mt. as long term capital assets as per provisions of section 2(29A) of the IT Act, 1961 and allow the deduction u/s 54 to that extent. 4. On the facts and circumstances of the case the Ld. CIT (A) erred in law and facts by considering the Cancellation deed executed on 30-07-2015 as willful thought for tax evasion. Since your appellant entered into cancellation deed for certain reasons and has already repaid the cancellation amount of Rs. 4,15,000/- through Cheque No. 102913 of South Indian Bank, Sarkhej Branch Dt. 02-07- 2016, there was no malafide intention on the part of your appellant. I, therefore, request Honorable ITAT to consider the entire transaction genuine and as long term transaction as per the provisions of section 2(29A) of the IT Act, 1961 and thereby allow the deduction claimed u/s 54 of the IT Act, 1961. 5. Your appellant craves leave to add, alter, amend, and/or delete any grounds as mentioned above during the course of the appeal hearing.” I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 3 3. The brief facts are that the assessee was allotted tenement No. 341, Saraswatinagar Housing Society, Vastrapur, Himmatlal Park, Ahmedabadunder "Bhada-Kharid System" by Gujarat Housing Board in the year 1979. Conveyance deed No. 13355 of the said property was executed on 10.10.1986 wherein cost of property was mentioned Rs. 52,500/-. In between the date of allotment and conveyance deed, assessee made alteration / extention in the said property vide Rajachitthi No. 12 in the case No. C/31/550 dated 21.01.1982. From 1979 to date of conveyance deed, the appellant was in occupation of the said property. Thereafter, the said property was sold out at Rs. 4,51,000/- by the assessee to her daughter Smt. Ami Pritesh Patel on 16.01.2006 vide deed No. 2452 of 2006 registered with Sub Registrar, Ahmedabad-3, Memnagar. Smt Ami Pritesh Patel took over possession of the said property after making payment of full sale consideration and also obtained Share Certificate in her name. Hence property was transferred to the daughter with all rights to use the property along with possession of the said property. 4. The assessee was of the view that when property was purchased by the appellant in 01.01.1979, total area of property was 302.86 sq. mtr. which included constructed area of 66.92 sq. mtr. and extra land of 235.94 sq. mtr. Subsequently, additional area of 133.72 sq. mtr. was constructed in the year 1982-83 and total constructed area came to be 200.64 sq. mtr. (133.72 + 66.92- refer page 151-154 of Paper-Book). Finally total area of property was 302.86 sq. mtrs. out of which constructed area was 200.64 sq. mtrs. and vacant land was 102.22 sq. mtr. Thereafter, when conveyance deed was I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 4 registered by Gujarat State Housing Board on 05.08.1986, land area was erroneously mentioned as 66.92 sq. mtrs. only. Notably, even in sale deed executed with the daughter of the assessee, land area was mentioned as 66.92 sq. mtr instead of total land area of 302.86sq. mtr. Due to this error, the appellant stated that there was no clear title in the hands of the daughter of the assessee since out of total land area of 302.86 sq. mtr., land area mentioned in the deed was only 66.92 sq mtr. On knowing such fact the appellant approached the Gujarat Housing Board to clarify the ownership of open land area of 235.94 sq. mtr. (302.86 - 66.92) in favour of the daughter of the appellant who was the owner of property at that time. However, it was informed that such change can be made with the original buyer only and not with reference to documents entered with the daughter of the assessee. Accordingly, a cancellation deed vide No. 5272 was executed on 31.07.2015 wherein transaction of sale of property to daughter vide sale deed No. 2452 was cancelled and stamp duty of Rs. 1,35,300 was paid on the same. Amount of Rs. 4,51,000/- received as sale consideration from daughter was returned to the daughter by the appellant. On 31 st July, 2015, the appellant executed "Sudharano Lekh" i.e. Alteration Agreement with the Gujarat Housing Board, clarifying that the ownership of open land of 235.96 sq. mtr and such agreement was registered with the office of registrar. Subsequently, the appellant sold the property on 09.10.2015 for total consideration of Rs. 2,31,00,000/- and long term capital gain was computed in the following manner (considering the date of purchase of property as 05.08.1986) : Particulars Amount I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 5 Total Sale Consideration 2,31,00,000 Less : Indexed Cost of Acquisition 46,48,326 Long Term Capital Gain 1,84,51,674 Less : Deduction u/s 54 (purchase of new house) 1,83,96,000 Net Long Term Capital Gain 55,674 During the course of assessment proceedings, the Assessing Officer held that the gain earned by appellant on sale of alleged property is short term capital gain and not long term capital gain since property was reacquired by the appellant on the date when sale deed with daughter was cancelled i.e. 30.07.2015. By getting the deed cancelled, the assessee gained right, interest and title of the property as per Transfer of Property Act on the same day. Since, property was sold on 09/10/2015 which is just 3 months from date of its acquisition being 30.07.2015, the gain earned was held to be short term capital gain since asset was held for less than 36 months. 4. In appeal, Ld. CIT(A) dismissed the assessee’s appeal with the following observations: “5.4 On overall consideration of facts, it is observed that the issue under consideration is whether sale deed executed between the appellant and the daughter can be cancelled and in case of cancellation of such deed whether ownership of property will vest with the I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 6 appellant as on the date of cancellation of sale deed (30.05.2015) or shall be revoked from the date of original purchase of such property (10.10.1986). It is observed that where sale deed is executed and registered, the owner completely loses his right over the property and the purchaser becomes the absolute owner. It is observed that any registered deed cannot be nullified by executing deed of cancellation since by execution and registration of sale deed, the properties are vested in the purchaser and cannot be divested by mere execution of a deed of cancellation. Hence once sale deed is registered and rights in a property are transferred along with possession, such transaction cannot be cancelled in any circumstances. The following decisions relied by the Assessing Officer are duly applicable to the facts of the present case: (i) Binny Mill Labour Welfare House Building Co-operative Society Ltd. vs. D.R. MruthyunjaAradhya - (ILR 2008 KAR 2245), it has been held as under: "Unilaterally he cannot execute what is styled as a deed of cancellation, because on the date of execution and registration of the deed of cancellation, the said person has no right or interest in that property. Normally what can be done by a Court can be done by the parties to an instrument by mutual consent. Even otherwise if the parties to a document agree to cancel it by mutual consent for some reason and restore status quo ante, it is possible to execute such a deed. An agreement to sale, lease or mortgage or partition may be canceled with the consent of the parties thereto. Because in the case of agreement of sale, lease, mortgage or partition, each of the parties to the said document even after the parties to the said document even after the execution and registration of the said deed retains interest in the property and, therefore, it is permissible for them to execute one more document to annual or cancel the earlier deed. However, it would not apply to a case of deed of sale executed registered. In the case of a sale deed executed- and registered, the owner completely loses his right over the property and the purchaser becomes the absolute owner. It cannot be nullified by executing deed of cancellation because by execution and registration of a sale deed, the properties are being vested in the purchaser and the title cannot be divested by mere execution of a deed of cancellation. Therefore, even by consent or agreement between the purchaser and the vendor, the said sale deed cannot be annulled. If the purchaser wants to give back the property, it has to be by another deed of conveyance. If the deed is vitiated by fraud or other grounds mentioned in the Contract Act, there is no possibilities of parties agreeing by mutual consent to cancel the deed. It is only the court which can cancel the deed duly executed, under the circumstances mentioned in section 31 and other provisions of the Specified Relief Act, 1963. Therefore, the power to cancel a deed vests with a Court and it cannot be exercised by the vendor of a property." (ii) In case of Sri K. Rajuvs Bangalore Development Authority (ILR 2011 KAR 12O), it has been held as under : " It is thus clear that when the sale deed executed and registered, the owner completely loses his right over the property and the purchaser, becomes the absolute owner. It cannot be nullified by execution of a deed of cancellation because by execution and registration of a sale deed, the properties are being vested in the purchaser and the title cannot be divested by mere execution of a deed of cancellation. Therefore, even by consent or agreement between the purchaser and the vendor, the said sale deed cannot be annulled. If the purchaser wants to give back the property, it has to be by another I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 7 deed of conveyance. If deed is vitiated by fraud or other grounds mentioned in the Contract Act, there is no possibility of parties agreeing by mutual consent to cancel the deed. It is only the Court which can cancel the deed duly executed, under the circumstances mentioned in Section 31 and other provisions of the Specified Relief Act, 1963. Therefore, the power to cancel the deed vests with a Court and it cannot be exercised by the vendor of a property. After execution and registration of the sale deed, the BDS cannot determine the validity of the sale deed. It can neither execute a cancellation deed unilaterally. It the BDS is of the view that the sale deed executed by it is contrary to law, it has to approach the Civil Court for its cancellation as perovided under Section 31 of the Specific Relief Act." 5.5 Reference is invited towards the provision of section 2(47) of the Income Tax Act, 1961 which defines "transfer" to include 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 Act, 1882 (4 of 1882). Section 2 (47) reads as under:— '2. Definitions (47) "transfer", in relation to a capital asset, includes,— (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond; or (v) 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 Act, 1881 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever)which has the effect of transferring, or enabling the enjoyment of, any immovable property.' Section 53A of the Transfer of Property Act defines "Part performance" in the following manner:— "Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee being already in possession, continues in possession in part performance of the contract 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 where there is an instrument of transfer that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract ; I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 8 Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. " 5.6 Under Section 2(47) of the Act, "transfer" is an inclusive definition and therefore it extends to events and transactions which may not otherwise be 'transfer' according to its ordinary popular natural sense; the definition also mentions such transaction as sale, exchange etc to which the word "transfer" would properly apply on its popular and natural import. Thus a reading of Sections 5 and 53-A of the Transfer of Property Act, 1882, shows that part performance is assumed where any person contracts to transfer for consideration, any immovable property and in pursuance of which possession is handed over to the other party towards part performance of the contract. 5.7 Reading Section 53A of the Transfer of Property Act, 1882 with Section 2(47) of the Income Tax Act, 1961 on facts, we find that the entrustment of the possession of the property to the daughter via registered sale deed makes it very clear that the transfer of property was intended by way of consideration for securing right, interest and possession in the property which was entrusted by the original owner to her daughter. When possession was given to the daughter of the appellant enabling exercise of general control in the property, in consideration whereof the assessee was given agreed consideration, all conditions of Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53A of the Transfer of Property 1882 were complied and such transfer is a valid transfer within the meaning of these sections. Such transfer once executed cannot be cancelled at a future date. The only recourse shall be retransfer of property to the original owner and such retransfer shall be independent transaction and cannot relate to previous transfer. 5.8 Hon’ble Supreme Court in case of Satya Pal Anand vs. State of M.P in CIVIL APPEAL NO. 6673 OF 2014 held that once the document is registered, it is not open to any authority, under the Registration Act, 1908, to cancel the registration. The bench also held that power conferred on the Registrar by virtue of Section 68 cannot be invoked to cancel the registration of documents already registered. Similarly, in the present case when property has been transferred to the daughter by the appellant in view of provisions of section 2(47) of Income Tax Act and section 53A of Transfer of Property Act, such transfer cannot be revoked at a later date. The only way of cancellation of original sale deed executed with the daughter of the appellant is by entering into a repurchase transaction wherein the rights in property shall be retransferred to the appellant from the date such property is repurchased and not from the original date of purchase of such property. 5.9 Similar question was raised before the Hon'ble Allahabad High Court in case of Smt. KusumLata v. State of U.P. &ors. In Writ - C No. - 2973 of 2016 dated 18.05.2018,Whether after a sale deed has been registered, the Registrar has any authority of law top cancel the registered sale deed under the provisions of the Registration Act, 1908. The Allahabad High Court held that Registering Authority cannot annul sale deed and made the following observations in the case: "That unless and until there is an express provision in the Act or in the Rules, no Government Order could be issued giving power to a Registering Authority to annul a I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 9 document on the administrative side. Such powers given would he. wholly arbitrary and against and against the provisions of the Act. That the State Government cannot, while taking recourse to the executive power of the State under Article 162, deprive a person of his property. Such power can be exercised only by authority of law and not by a mere executive fiat or order. That the language of Article 162 clearly indicates that the powers of the State executive do extend to matters upon which the State Legislature is competent to legislate and are not confined to matters over which legislation has been passed already. Where a particular subject is regulated by a legislative enactment, the field is said to be covered by such statute. In such matters and on such subjects the executive powers is circumscribed. That the executive exercising powers under Article 162 cannot issue orders which contravene provisions of a statute or are inconsistent with the same. The State in exercise of its executive power is charged with the duty and the responsibility of carrying on the general administration of the State. So long as the State Government does not go against the provisions of the Constitution or any law, the width and amplitude of its executive power cannot be circumscribed. So long as the Rules are not framed as enumerated under Section 69 of the Registration Act, a document cannot be annulled on the basis of the Government Order issued under Article 162 of the Constitution. If the document registered by the registering authority was illegal or if there was any irregularity then the course to question that was by invoking appropriate proceedings before a Civil Court. In view of the aforesaid observations, the Allahabad High Court held that once a sale deed has been registered, the registering authority does not have any power or authority under the Registration Act, 1908 to cancel the registration, even if an allegation of impersonation/fraud is alleged." 5.10 Vide above finding, Hon'ble Allahabad High Court has clarified that sale deed once registered cannot be annulled. Reference is invited towards the decision of Hon'ble Kerala High Court in case of Harbour View reported in 102 taKmann.com 185 wherein it has been clarified that where pursuant to agreement to sell, possession of land was handed over by assessee and sale consideration was received, provisions of section 2(47) would apply and mere fact that contract was subsequently terminated by mutual consent, would not help the assessee to wriggle out of purview of section 2(47). Following are the relevant findings of the Hon'ble High Court : "17. Hence, we find that the Tribunal went wrong in holding that the possession was not handed over in pursuance of the agreement for sale as contemplated under section 53A of the TP Act. Once the sale agreement comes under the provisions of section 53A of the TP Act, handing over of possession takes place and the provisions under section 2(47) would squarely apply. That apart, the argument of the learned senior counsel for the assessee that contract was subsequently rescinded will not be of any help because the contract was rescinded I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 10 only subsequent to the assessment year and what we are concerned for the purpose of the Act is the transactions which took place during the assessment year. The fact that the contract was subsequently terminated on mutual consent will not improve the case of the assessee to wriggle out of the purview of section 2(47) of the Act and the liability to pay tax on short-term capital gains under section 45 of the Act. 18. Here, to dispel any reasonable doubt which may arise, we extract below one of the conditions stated in Shrimant Shamrao Suryavanshi case (supra) "(6) the transferee must have performed or be willing- to perform his part of the contract." Here the agreement was rescinded between the parties but long after the assessment year in which, the agreement was entered into and possession handed over. At least when the returns were filed there was a right conferred on the transferee as per section S3A of the Transfer of Property Act. The transferor though subsequently was absolved from the rigour of section 53A ; in the close of assessment year was obliged to return the capital gains as per section 2(47)(v) of the Income-tax Act. The Income-tax Act by the definition clause includes a transaction in accordance with section 53A as a transfer in relation to a capital asset. The consequence flowing from the inclusive definition has to be given effect to as on the subject assessment year and the transferor being absolved subsequently from the rigour of section 53A as against the transferee is of no consequence in applying the rigour under the taxation enactment. The transaction failed and the parties settled between themselves, but the voluntary act of the parties cannot efface the tax liability. We hence answer the questions of law on the facts arising in the above case against the assessee and in favour of the Revenue. 19. It is however pertinent to note that capital gains can be calculated only after computing the value of the I/12th undivided share of land that was agreed to be transferred as per the agreement, and computation made in accordance with section 48 of the Act." 5.11 In the above decision, it has been clarified that subsequent cancellation of any agreement does not render the original sale deed and transfer u/s 2(47) of the Act invalid. The facts of above cases are duly applicable in case of appellant wherein subsequent cancellation of sale deed does not render the original sale of property to appellant's daughter which was a valid transfer within the meaning of section 2(47) of the Act as invalid. When right, title, interest and possession was transferred to the daughter of the appellant vide execution of Registered Sale deed on 16.01.2006 and all rights in the property have been enjoyed by her for a long time, such transfer being a valid transfer within the meaning of section 2(47) of the Act cannot become invalid by any subsequent cancellation of such deed. 5.12 Reference is invited to another decision of Hon'ble Kerala Court in case of C. Ravi reported in 325 ITR 417 which gpes step further and states that in case where agreement to sale has been executed but sale has not taken place and after cancelling agreement, sale was later made to brother of original transferee, but since possession was given and transferee was carrying on business for later years, assessee was not entitled to canvass for position that section 2(47)(v) was not applicable. Hence merely because possession in property was transferred and although sale deed was not registered, such transfer was considered as valid transfer within the meaning of section 2(47) of the Act. I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 11 5.13 In view of above facts and findings of various judicial authorities, it is held that property was transferred to the daughter of the appellant vide registered Sale Deed dated 16-01-2006 and cancellation of such sale deed subsequently shall not invalidate the transfer which took place in 2006. Hence the owner of the property from 16.01.2006 till 15.07.2015, being the date of cancellation of sale deed, was the daughter of the appellant. On the date of cancellation of original sale deed, the appellant became the rightful owner of the property once again from such date being 15.07.2015 and not from the original date of transfer of property by the Gujarat Housing Board in F.Y. 1986. In case of subsequent sale made on 09.10.2015, for computing period of holding, date of purchase shall be considered as 15.07.2015. It is on the date of cancellation of original sale deed that the appellant became the owner of the property. Before such cancellation, all the rights, title, interest, possession etc was enjoyed by the daughter of the appellant. The fact that property was owned by the daughter from 2006 till 2015 cannot be ignored since during such time the appellant had no right over the property. By cancellation of sale deed, such right enjoyed by the daughter shall not be effected or altered. 5.14 With respect to argument of Appellant that appellant did not transfer possession in said property to her daughter, on perusal of copy of Sale Deed executed on 16.01.2006, it is observed that Para No. 3, 4 and 5 specifically transfers all the rights, title, interest and possession in the said property to the appellant.lt has been clarified that all rights, authority and responsibility received by the appellant by Gujarat Housing Board at the time of purchase of property are transferred to the daughter without any alteration/ modification. The possession of property has also been transferred to the daughter. Hence argument of appellant that possession is not transferred to the daughter is found incorrect and therefore unacceptable. 5.15 Another argument of the appellant is that after sale of property to the daughter of the appellant, her name was not updated in the revenue records and hence the title of property was not cleared.lt is observed that such argument of the appellant is incorrect as the transfer was completed as per copy of index enclosed with registered deed No. 7206. Hence even as per said records, the daughter of the appellant was the rightful owner of the property at that time, hence argument of appellant is found incorrect. 5.16 Alternatively, the appellant argued that as per sale dated 16.01.2006, out of total land area of 302.86 sq. mtr., land admeasuring 66.92 sq. mtr. was only transferred to the daughter of the appellant^ hence . in case of balance land of 235.94 sq. mtr (302.86 less 66.92), the gain computed shall be long term capital gain since such portion of land was never transferred by the appellant to her daughter. Such argument of the appellant cannot be accepted in view of the fact that land area was erroneously mentioned as 66.92 sq. mtr in the sale deed and mentioned by the appellant herself. The consideration received by the appellant was in connection with entire area of the land and not only for 66.92 sq. mtr. of land. The daughter of the appellant enjoyed right of the entire property and not part of the property as mentioned by the appellant. The appellant herself has stated that area of land was erroneously mentioned in the sale deeds executed on 05.08.1986 and 16.01.2006. When the appellant has herself accepted the fact that area has been erroneously mentioned, there is no force in the argument that only such part shall be considered as transferred to the daughter and not the balance area of 235.94 sq I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 12 mtr more particularly when sale consideration offered was for entire area of 302.86 sq mtr. Hence such argument of the appellant is rejected 5.17 It is further observed that for cancellation of original sale deed, the appellant has paid stamp duty of Rs. l,35,300/-. The appellant has argued that stamp duty has been paid by mistake. Instead of buying a stamp paper of denomination of Rs. 100/-, the appellant mistakenly paid the stamp duty of Rs. 1,35,300. On knowing its mistake, the appellant applied for refund of such duty but since application was made after the expiry of specified time limit, no refund was granted to the appellant. I do not find force in the argument of appellant. It is difficult to accept that huge amount of stamp duty of Rs. 1,35,300/- would be paid on a mistaken belief. I find merit in the argument of the Assessing Officer that payment under the "Stamp Act" is required to be made as and when new documents are registered under "Transfer of Property Act. Since the appellant has made payment towards registered deed No. 5572 to the tune of Rs. 1,35,300/- as per information provided by Sub-Registrar, Ahmedabad, the transaction with respect to immovable property shall be considered as a fresh transaction. Payment of stamp duty itself suggests that a new deed has been registered through which the appellant had regained control over the alleged property. The reasons given by the appellant is unacceptable and substantiates the fact that ownership was retransferred to the appellant on 15.07.2015 vide cancellation deed which was duly registered by payment of Stamp Duty. This clarifies the intention of the appellant which was to repurchase the property through such cancellation deed through which the appellant became owner of the property from 15.07.2015 and before that date the real owner of property shall be the daughter of the appellant in lieu of valid transfer executed vide sale deed dated 16.01.2006. 5.18 The appellant has further stated that it has paid municipal taxes on the property even after such property was transferred to the daughter which means that even after transfer of property to daughter, she was the rightful owner. The appellant has enclosed municipal bills in support of her argument. On perusal of registered sale deed dated 16.01.2006, it is observed that vide Para No. 8, it has been specifically mentioned that any subsequent liability to pay municipal tax to Ahmedabad Municipal Corporation, light bill and maintenance charges shall be of the daughter of the appellant. It has been clarified that the daughter of the appellant is liable to pay such charges. It is immaterial whether appellant taxes pertaining to such property and such act of the appellant does not make her the rightful owner of the property more particularly when it is specifically mentioned in the registered sale deed that the actual liability to pay such charges shall be of the daughter of the appellant. Hence the argument of the appellant is not found correct and rejected. 5.19 Considering the above facts and legal implications, it is held that cancellation deed 5572 of 2015 31.07.2015 is required to be treated as fresh purchase deed as per transfer of Property Act and appellant shall be considered as owner of property from such date. In the circumstances, the resultant income on sale of property is required to be taxed as Short Term Capital Gain in the hands of appellant. Since property is held for less than 36 months and such gain is short term gain, the appellant is not liable to claim deduction u/s 54 of the Act. Hence, addition made by Assessing Officer on account of short term capital gain of Rs.2,26,85,000/- is upheld and related ground of appeal is dismissed.” I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 13 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) dismissing the assessee’s appeal. In appeal before us, the counsel for the assessee argued that in the instant set of facts, since the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled by way of a cancellation deed dated 30-07-2015, it has to be presumed that the sale of property by the assessee is a long-term gain, since property was in possession of the assessee since 05-08-1986. The counsel for the assessee drew our attention to copy of “cancellation deed ” at pages 173-182 of the paper book and submitted that since the deed was cancelled, therefore, the sale of property by the assessee was to be treated as long-term capital gains since the property has been held by the assessee since 1986. Alternatively, the counsel for the assessee argued that what was transferred by way of sale deed between the assessee and her daughter was only the superstructure admeasuring 66.92 m² and the balance adjacent land measuring 235-94 sq. metres was never transferred to the daughter, and hence, short-term capital gains, if at all, can be levied only in respect of the aforesaid superstructure and the balance open area/land which was sold by the assessee by way of sale agreement dated 09-10-2015 is to be treated as long-term capital gains in the hands of the assessee. In support of his contention, the counsel for the assessee drew our attention to various documents that as per the sale deed dated 16-03-2006 between the assessee and her daughter, only the superstructure was transferred and hence, short-term capital gain of any, was to be levied only in respect of the said superstructure measuring 66.92 m². 6. In response, the DR relied upon the observations made by the Ld. CIT(A) and assessing Officer in their respective orders. I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 14 7. We have heard the rival contentions and perused the material on record. In our considered view, both the arguments of the assessee cannot be accepted for the following reasons. With respect to the first argument that the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled subsequently after nine years by way of cancellation deed dated 30-07-2015, the Ld. CIT(A) has dealt with this aspect in great detail and has also produced a large number of judicial precedents directly on the subject, which have held that duly registered sale deed cannot be cancelled/annulled/ revoked by way of a subsequent deed. No specific case law or statutory provision has been produced by the counsel for the assessee to controvert the findings of Ld. CIT(A) in the appellate order. There is no prescribed provision of law or any procedure which has been brought to our notice in support of the argument that the subsequent deal has effectively cancelled the original registered sale deed after nine years from when it was entered. It may be useful to produce Section 31 of the Specific Relief Act, which states as below: “When cancellation may be ordered 31. (1) Any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled. (2) If the instrument has been registered under the Indian Registration Act, 1908 (16 of 1908), the court shall also send a copy of its decree to the officer in whose office the instrument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation.” 7.1 A perusal of the above provisions shows that there is no legal capacity for two parties to a transaction entered by way of registered deed to cancel I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 15 the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty of Rs. l,35,300/-. This also clearly indicates of the fact that the subsequent “cancellation” deed is only a fresh transfer by the daughter in favour of the assessee by way of a fresh transfer/sale deed upon the payment of full stamp duty. Accordingly, in our view, the subsequent “cancellation deed” has not annulled or cancelled revoked the original registered sale deed, but it is effectively a fresh transfer/sale deed by the daughter of the assessee in favour of the assessee. 8. The alternative argument of the assessee is that what the assessee is transferred was only the superstructure measuring 66.92 m² and accordingly, even if the subsequent cancellation deed were to be treated as a fresh sale/transfer deed by the daughter in favour of the assessee, even then the assessee is liable to pay short term capital gains only in respect of the sale of superstructure measuring 66.92 m² and the balance land should not be subject to tax as short-term capital gains. However, we observe that as per conveyance deed dated 10-10-1986, what has been conveyed by the Gujarat Housing Board to the assessee is flat number 304 with total area of 66.92 m². This is evident from page 3 of the aforesaid conveyance deed, where the details of the property and total area have been clearly mentioned (refer page 25 of the paper book filed by the assessee). It is observed that in the conveyance deed between the assessee and her daughter dated 16-03-2006, that exactly the same property in terms of dimensions has been transferred by the assessee to her daughter. Further, as per para 4, 5 and 6 of the above conveyance deed (refer pages 163-164 of the paper book filed by the I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 16 assessee), all the rights the said property have been transferred by the assessee to her daughter (Para 4: property in this way in the midst of the above boundaries of tenement No. M/41/304 as per its original rights and limits along with all the rooms, kitchen, latrine, bathroom situated therein and along with electric fittings and electric service in working condition and whatever other rights of ours therein and along with our rights, authorities and liabilities as mentioned in the conveyance deed M number 13355 executed in our name on 05-08-1986 and along with all rights of common use of common plot left in the said Saraswatinagar housing colony.....). A perusal of the document indicates that they are an identical reproduction of schedule A of the conveyance deed dated to 05-08-1986 and reading of the provisions does not seem to indicate that only a specific part relating only to the superstructure was sought to be transferred by the assessee to her daughter by the deed dated 16-03-2006, while the remaining land was to be retained by the assessee. Here, it would be pertinent to also analyse the submissions filed by the assessee before Ld. CIT(A) (page 152 of the paper book) wherein the assessee has mentioned that “upon knowledge of this fact, your appellant has approached the Gujarat Housing Board to clarify the ownership of such open land area of 235.94 m² in favour of my daughter”. Accordingly, the above submission of the assessee clearly indicates that by way of sale deed dated 16-03-2006, all rights in the property was sought to be transferred including that of the open land area and the sale deed was verbatim reproduction of the original conveyance deed dated 05-08-1986 in favour of the assessee. Another notable aspect is that it was only when the Gujarat Housing Board clarified that the correction in respect of open land area can be made in the name of the assessee only and I.T.A No. 738/Ahd/2019 A.Y. 2016-17 Page No. Ashalata Kulshrestha vs. ITO 17 not in the name of the daughter, that the said property was transferred back to the assessee for carrying out the necessary rectification in the property records. In view of the above, in our considered view, we find no infirmity in the order of Ld. CIT(A) when he has held that the entire transaction, looking into the instant set of facts, would qualify as short-term capital gains in the hands of assessee. 9. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 12-12-2022 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/12/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद