Income-tax Officer, V. Shri Deepak Shivram Pathare, Ahmednagar

ITA 779/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9557 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Additional evidence
• Section: 142(1); 131; 148; 144

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! ' , $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.779/PUN/2014 ' ' / ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, WARD 4, AAYAKAR BHAVAN, BEHIND NATRAJ HOTEL, AURANGABAD ROAD, AHMEDNAGAR. . / APPELLANT V/S SHRI DEEPAK SHIVRAM PATHARE, A/P KAREGAON, TAL. SHRIRAMPUR, DIST. AHMEDNAGAR. PAN : BGIPP3103L . / RESPONDENT / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : SHRI MAHAVEER JAIN ( / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) - IT/TP, PUN E DT.23.01.2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- / DATE OF HEARING : 04.04.2017 / DATE OF PRONOUNCEMENT: 21.04.2017 2 2.1 ASSESSEE IS AN INDIVIDUAL STATED TO BE PRIMARILY ENGAG ED IN AGRICULTURAL ACTIVITIES AND DERIVING INCOME FROM IT. AO RECEIV ED INFORMATION FROM INCOME TAX OFFICER, WARD 1(3), PUNE ABOUT THE TRANSFER OF LAND BY ASSESSEE ON 03.10.2005 AND THE SALE CONSIDERATION RECEIPTS ON SALE OF LAND RESULTING INTO THE CA PITAL GAINS. AO THEREAFTER ISSUED SUMMONS U/S 131 OF THE AC T ON 18.10.2010 AND SERVED ON THE ASSESSEE ON 19.01.2011. AO NOTED THAT ASSESSEE DID NOT RESPOND TO THE SUMMONS. THEREAFTER NOTICES U/SEC.148 / 142(1) OF THE ACT WERE ISSUED BUT THE SAME ALSO REMAINED UN-COMPLIED BY THE ASSESSEE. AO THEREAFTER PASSED ASSESSMENT ORDER U/SEC 144 R.W.S 147 OF THE AC T ON 16.12.2011 AND DETERMINED THE LONG TERM CAPITAL GAINS AT RS.66,77,250/- AND AGRICULTURAL INCOME AT RS.2,00,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A) WHO VIDE ORDER DT.23.01.2014 ALLOWED THE APPEAL OF T HE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS.66,77,250/- ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT IN CASE OF A DEVELOPMENT AGREEMENT WIT H CERTAIN CONDITIONS THERE IS NO TRANSFER OF PROPERTY AND PROCEEDED TO INCORRECTLY RELY UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CHATURBHUJ DWARKADAS KAPADIA V S. COMMISSIONER OF INCOME TAX (APPEALS) (260 ITR 491). 3. BEFORE US, AT THE OUTSET, LD. D.R. SUBMITTED THAT THE S OLE CONTROVERSY IS WITH RESPECT TO DELETING THE ADDITION ON A CCOUNT OF LONG TERM CAPITAL GAINS. 3 4. AO HAD RECEIVED INFORMATION FROM ITO THAT ASSESSEE HA D TRANSFERRED LAND FOR AMONARA TOWNSHIP PROJECT AT HADAP SAR, PUNE ON 03.10.2005 TO CITY CORPORATION LIMITED AND HAD RECEIVED SALE CONSIDERATION. ON THE BASIS OF INFORMATION COLLECTED BY AO FROM CITY CORPORATION LIMITED, PUNE, IT WAS NOTICED BY HIM THAT ASSESSEE HAD ENTERED INTO DEVELOPME NT AGREEMENT FOR LAND FOR WHICH THE SALE CONSIDERATION WAS RS.47,00,000/- WHEREAS THE STAMP VALUATION WAS RS.1,15,23,000/-. HE NOTICED THAT ASSESSEE HAD NOT FILED THE RETURN OF INCOME NOR HAD RESPONDED TO THE NOTICE U/S 1 48 OF THE ACT. HE WAS OF THE VIEW THAT PROVISIONS OF SEC.50C OF THE ACT WAS APPLICABLE AND PROPOSED TO TAX LONG TERM CAPITAL GAINS ON THE MARKET VALUE OF LAND OF RS.1,15,23,000/-. IN THE ABSENCE OF ANY INFORMATION FROM THE ASSESSEE, AO WORKED OUT THE LONG TE RM CAPITAL GAINS AT RS.66,77,250/- AND MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO DELETED THE ADDITION BY HOLDING AS UNDER : 2 . 12 I HAVE CAREFULLY CONSIDERED THE FA C TS OF THE CASE . I FIND THAT THE APPEL L AN T DID NOT A P P E AR B EFORE TH E LE ARNED AO HEN C E , THE LEA R NED AO HA S PA S S E D THE ASSESSMENT ORDER U/S 144. A CCORDINGL Y , THE A PPELLANT' S EN TIRE SUBMISSION FILED BEFORE ME SHOULD CONSTITUTE ADDITIONAL EVIDENCE. HOWEVER, I F I ND THAT THE LEARNED AO HAD OBTAINED A COPY OF THE DEVELOPMENT AGREEMENT DATED 03.10.200 5 BETWEEN THE APPELLANT AND CITY CORPORATION LIMITED PUN E FROM CITY CORPORATION L I MITED . THEREFORE, I DO NOT CONSIDER THE DEVELOPMENT AGREEMENT AS ADDITIONAL EVIDENCE FILED BEFORE ME AND I DO NOT REFER THE SAM E TO THE LEARNED AO UNDER RULE 46A . I PROCEED TO DECIDE THIS APPEAL . 2.13 IN THIS CASE, THE LEARNED AO HAS COMPUTED LON G TERM CAPITAL GAIN WHEREAS THE APPELLANT HAS CONTENDED TH AT THERE IS NO 'TRANSFER' AS THE APPELLANT COULD NOT H ANDOVER POSSESSION OF THE LAND AS IT DID NOT HAVE POSSESSIO N OF THE LAND WITH HIM. THE APPELLANT HAS DRAWN ATTENTION TO THE 4 VARIOUS CLAUSES OF THE AGREEMENT IN SUPPORT OF THIS CONTENTION. I HAVE GONE THROUGH THE AGREEMENT AND I FIND MYSELF IN AGREEMENT WITH THE APPELLANT. 2.14 THE CAPITAL GAIN U/S 45 OF INCOME TAX ACT IS L EVIED IF THERE IS 'TRANSFER' OF THE CAPITAL ASSET U/S 2(47) OF THE INCOME TAX ACT. ONE OF THE MOST COMMONLY MODE OF TRA NSFER IS OF 'SALE' OF PROPERTY. IN THIS CASE, THE AGREEME NT BEING DEVELOPMENT AGREEMENT, THERE IS NO 'TRANSFER' OF PR OPERTY BY WAY OF SALE. OTHER MODE OF 'TRANSFER U/S 2(47) IS PART-PERFORMANCE. PART PERFORMANCE U/S 53A OF TH E TRANSFER OF PROPERTIES ACT IS AS UNDER: 53A. PART PERFORMANCE 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 THE CONTRACT, THOUGH REQUIRED TO BE REGISTERED , HAS NOT BEEN REGISTERED, OR, 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: 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 T HEREOF. 2.15 FROM THE ABOVE, IT CAN BE STATED THAT PART- PERFORMANCE HAS FOLLOWING CHARACTERISTICS : 1. THE CONTRACT ENTERED INTO ON BEHALF OF THE TRANSFER OR AND THE TRANSFEREE MUST BE IN RESPECT OF AN IMMOVABLE PROPERTY. 2. THE CONTRACT MUST BE A WRITTEN CONTRACT. 3. THERE MUST BE SOME CONSIDERATION. 4. THE CONTRACT MUST STATE THE TERMS OF THE TRANSFER W ITH REASONABLE CERTAINTY. 5. THE TRANSFEREE MUST HAVE TAKEN THE POSSESSION OF TH E PROPERTY AS A RESULT OF THE CONTRACT OR CONTINUED I N POSSESSION IF HE WAS ALREADY IN THE POSSESSION. 5 6. THE TRANSFEREE MUST HAVE DONE SOME ACT IN FURTHERAN CE OF THE CONTRACT. 7. ACTS DONE PRIOR TO THE AGREEMENT CANNOT BE DEEMED T O BE THE PART PERFORMANCE OF THE CONTRACT. 8. THE TRANSFEREE MUST HAVE PERFORMED HIS PART OF THE CONTRACT OR MUST BE WILLING TO PERFORM IT. 2.16 ONE OF THE MOST IMPORTANT INGREDIENTS OF PART- PERFORMANCE IS THAT THE TRANSFEROR HANDS OVER POSSE SSION TO THE TRANSFEREE IN FURTHERANCE TO THE CONTRACT. FACT S OF THIS CASE SHOW THAT THE CONDITIONS OF HANDING OVER OF TH E POSSESSION TO THE PURCHASER AND WILLINGNESS TO PERF ORM REMAINING CONDITIONS OF CONTRACT ARE NOT MET WITH. THIS SITUATION IS SQUARELY COVERED BY THE JUDGMENT OF TH E HONOURABLE BOMBAY HIGH COURT IN THE CASE OF CHATURBUJ DWAKARADAS KAPADIA VS CIT 2003 260 ITR 491 (BOM). THE HONOURABLE COURT HAS HELD THAT CAPITAL GAIN CAN NOT BE LEVIED IN THE CASE OF DEVELOPMENT AGREEMENT, IF THE POSSESSION OF THE PROPERTY IS NOT HANDED OVER TO TH E PURCHASER. 2.17 FURTHER, ITAT HYDERABAD IN THE CASE OF FIBRAS INFRATECH PVT LTD V ITO ITA NO 477/HYD/2013 DATED 03.01.2013 HAS HELD THAT WILLINGNESS OF THE DEVELOP ER TO PERFORM ITS PART OF THE CONTRACT IS ALSO NECESSARY TO CONSTITUTE PART-PERFORMANCE. IN THIS CASE, THE DEVE LOPER WAS NOT WILLING TO PERFORM ITS PART UNLESS THE APPELLAN T HANDS OVER POSSESSION TO HIM AND PERFORMS HIS PART OF THE CONTRACT. THE PERUSAL OF THE RELEVANT PART OF THIS DECISION SHOW THAT EVEN FROM THIS PERSPECTIVE, THERE IS NO P ART PERFORMANCE AND CONSEQUENTLY THERE IS NO TRANSFER U /S 2(47). THE HONOURABLE ITAT HAS HELD THAT, 55 WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED IN THIS COMMENTARY ON THE PROVISIONS OF T HE TRANSFER OF PROPERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNESS TO PERFORM' FOR THE PURPOSES OF SECTIO N 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PA RT OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLESS TH E PARTY HAS PERFORMED OR IS WILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT, AND IN THE SAME SEQUENCE IN WHICH THESE ARE TO BE PERFORMED, IT CAN NOT BE SAID THAT THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL COME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONLY ELEMENTARY THAT, UNL ESS PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPER TY ACT ARE SATISFIED ON THE FACTS OF A CASE, THE TRANS ACTION IN QUESTION CANNOT FALL WITHIN THE SCOPE OF DEEMED TRANSFER UNDER SECTION 2(47)(V) OF THE IT ACT. 2.18 IN VIEW OF THE LAW LEVIED BY THE JURISDICTIONA L HIGH COURT, I HOLD THAT THE CAPITAL GAIN CANNOT BE LEVIE D IN THE FACTS OF THE APPELLANT'S CASE AND ACCORDINGLY I DEL ETE THE ADDITION MADE BY THE LEARNED AO BY WAY OF COMPUTATI ON OF CAPITAL GAIN. 6 AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 4. BEFORE US, LD. D.R. TOOK US THROUGH THE FINDINGS OF LEARN ED AO AND SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE LD.CIT(A) AND SUPPO RTED THE ORDER OF LD.CIT(A). 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO COMPUTATION OF CAPITAL GAINS AND ITS TAXABILITY. WE FIND THAT LD.CIT(A) WHILE DECIDING THE ISSUE AND AFTER PERUSING THE DEVELOPMENT AGREEMENT ENTERED BY THE ASSESSEE WITH CIT Y CORPORATION LIMITED, PUNE HAS UPHELD THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO TRANSFER BECAUSE ASSESSEE DID NOT HAVE THE POSSESSION OF LAND AND THEREFORE COULD NOT HAVE HANDEDOVER THE POSSESSION. HE HAS FURTHER GIVEN A FINDING THAT SINCE THE AGREEMENT WAS A DEVELOPMENT AGREEMENT, THERE WAS NO TRANSFER OF PROPERTY BY WAY OF SALE AND EVEN THE INGRED IENTS OF PART PERFORMANCE AS PER SEC.53(A) OF THE TRANSFER OF PRO PERTY ACT CANNOT BE SAID TO HAVE BEEN ATTRACTED, SO AS TO A TTRACT THE PROVISIONS OF CAPITAL GAINS TAX AND FOR THE AFORESAID PROPO SITION, LD.CIT(A) HAD RELIED ON THE DECISION OF THE HONBLE BOMBAY H IGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. COMMISSIONER OF INCOME TAX, (2003) 260 ITR 491 (BOM) AND ANOTHER DECISION OF HYDERABAD TRIBUNAL. BEFORE US, REVENU E HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FIND INGS OF 7 LD.CIT(A) NOR HAS POINTED OUT AS TO WHY THE RATIO OF DECI SION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS (SUPRA) CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE AFORESAID FACTS, WE FIND N O REASON TO INTERFERE WITH THE LD.CIT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON 21 ST DAY OF APRIL, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE; ! DATED : 21 ST APRIL, 2017. YAMINI ( ) *!+, -,! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. COMMISSIONER OF INCOME TAX-I, PUNE. COMMISSIONER OF INCOME TAX (A) II, PUNE. #$% &&'(, * '(, / DR, ITAT, A PUNE; %+, - / GUARD FILE. ( / BY ORDER, //// // TRUE COPY // T // // TRUE COPY // //TRUE COPY// . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.