Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 9234 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-06-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC
Next Hearing Date
20-04-2017
Assessment Year
2006-2007
Appeal Filed On
21-04-2016
Judgement Text
- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 784/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 NANDKISHOR MURLIDHAR WALVE, S. NO. 129, FLYVIEW RESIDENCY, WARJE, MALWADI, PUNE - 411 052 PAN : AAQPW9201R .... / APPELLANT / V/S. INCOME TAX OFFICER, WARD - 3(4), PUNE / RESPONDENT . / ITA NO. 785/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 YAMUNA M. WALVE, BUILDING NO. A - 1, FLAT NO. 2, NURSINHA SARASWAT SOCIETY, KOTHRUD, PUNE - 411 038 PAN : AAPPW7192Q .... / APPELLANT / V/S. INCOME TAX OFFICER, WARD - 3(4), PUNE / RESPONDENT . / ITA NO. 786/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 ASHOK MURLIDHAR WALVE BUILDING NO. A - 1, FLAT NO. 2, NURSINHA SARASWAT SOCIETY, KOTHRUD, PUNE - 411 038 PAN : ACZPV3743Q .... / APPELLANT 2 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 / V/S. INCOME TAX OFFICER, WARD - 3(4), PUNE / RESPONDENT . / ITA NO. 787/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 DILIP MURLIDHAR WALVE D - 2/4, POPULAR NARAG, WARJE MALWADI, PUNE - 411 052 PAN : AAQPW8711Q .... / APPELLANT / V/S. INCOME TAX OFFICER, WARD - 3(4), PUNE / RESPONDENT . / ITA NO. 788/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 ANIL MURLIDHAR WALVE S. NO. 129, FLYVIEW RESIDENCY, WARJE MALWADI, PUNE - 411 052 PAN : AAQPW8709E .... / APPELLANT / V/S. INCOME TAX OFFICER, WARD - 3(4), PUNE / RESPONDENT . / ITA NO. 1662/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 SMT. KAMAL BHARAT SHINDE BUILDING NO. A 1, FLAT NO. 2, NRUSINHA SARASWAT SOCIETY, KOTHRUD, PUNE - 411 038 PAN : AZJPS 4398H .... / APPELLANT / V/S. INCOME TAX OFFICER, WARD - 3(4), PUNE / RESPONDENT 3 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 APPELLANT BY : NONE (WRITTEN SUBMISSION) RESPONDENT BY : SHRI ALOK MALVYA / DATE OF HEARING : 25.05.2017 / DATE OF PRONOUNCEMENT : 3 0 .06.2017 / ORDER PER SUSHMA CHOWLA , JM THESE SIX APPEAL S FILED BY THE DIFFERENT ASSESSEE S ARE AGAINST THE SEPARATE ORDER S OF THE CIT(A) - 3, PUNE DATED 27.01.2016 / 06.06.2016 RESPECTIVELY RELATING TO ASSESSMENT YEAR 2006 - 07 AGAINST THE OR DER PASSED UNDER SECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THESE BUNCH OF APPEALS RELATING TO DIFFERENT ASSESSEE ON SAME ISSUE , WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3 . THE APPEAL S WERE FIXED FOR HEARING FOR THE FIRST TIME ON 23.08. 20 16 AND THE L D. AR FOR THE ASSESSEE SOUGHT ADJOURNMENT ON THE NEXT DATES OF HEARING I .E 19.10. 20 16, 06.12. 20 16 AND 20.04. 20 16 AND THE APPEAL S WERE ADJOURNED AT THE REQUEST OF L D. AR FOR THE ASSESSEE. ON 23.05. 20 17, NONE APPEARED ON BEHALF O F THE ASSESSEE BUT WRITTEN SUBMISSIONS WERE FILED BY THE RESPECTIVE ASSESSEE S AND THE L D. DR FOR THE REVENUE SOUGHT TIME FOR PERUSING THE SAID WRITTEN SUBMISSION S IN DETAIL . THE MATTER WAS HEARD ON 25.05. 20 17 AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE WERE PLACED ON RECORD. IN VIEW THEREOF , THE MATTER IS DECIDED EX - PARTE THE ASSESSEE BY TAKING INTO CON SIDERATION WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND ARGUMENT OF L D. DR FOR THE REVENUE. 4. THE ASSESSEE IN ITA NO. 784/PUN/2016 HAS RAISED FOLLOWING GROUNDS OF APPEAL : - 4 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 1. LOWER AUTHORITIES HAVE ERRED IN REJECTING APPELLANTS CLAIM THAT NO CAPITAL G AIN IS ACCRUED OR ARISEN DURING PREVIOUS YEAR TO ASSESSMENT YEAR 2006 - 07. APPELLANT PRAYS TO DELETE THE AMOUNT CHARGED AS CAPITAL GAIN. 2. WITHOUT PREJUDICE TO GROUND 1 ABOVE, IF IT IS HELD THAT CAPITAL GAIN IS TAXABLE FOR A.Y. 2006 - 07, APPELLANTS CLAIM OF DEDUCTION U/S 54F, SAME MAY BE PLEASE BE ALLOWED. 3. APPELLANT PRAYS FOR JUST AND EQUITABLE RELIEF . 4. INTEREST CHARGED U/S. 234B ETC MAY BE PLEASE BE CANCELLED. 5. PROCEEDING U/S. 147/148 AND ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 148 BE DEC LARED AS BAD IN LAW. 6. APPELLANT PRAYS TO ADD, ALTER, AMEND AND/ OR WITHDRAW THE GROUND/S DURING THE PROCEEDINGS. 5 . THE ISSUE INVOLVED IN THE PRESENT BUNCH OF APPEALS IS IN RELA TION TO THE CAPITAL GAINS ARISING ON THE SALE OF LAND AT WARJE, PUNE. THE CLAIM OF THE ASSESSEE IS THAT NO CAPITAL GAINS ON SALE OF THE SAID ASSET HAD ACCRUED OR ARISEN DURING THE YEAR UNDER CONSIDERATION . W ITHOUT PREJUDICE , I N GROUND OF APPEAL NO. 2 , THE ASSESSEE CLAIMS THAT IN CASE CAP ITAL GAIN IS HELD TAXABLE IN THE YEAR UNDER APPEAL THEN CLAIM OF DEDUCTION U/S. 54F OF THE ACT BE ALLOWED TO THE ASSESSEE. THE NEXT ISSUE RAISED BY THE ASSESSEE IS CHARGING OF INTEREST U/S. 23 4 B OF THE ACT. THE ASSESSEE BY WAY OF GROUND NO. 5 IN APPEAL HAS RAISED ISSUE THAT THE PROCEEDINGS U/S. 147/148 OF THE ACT AND ASSESSMENT ORDER U/S. 143(3) R.W.S 148 BE DECLARED BAD IN LAW. IT MAY BE HEREIN ITSELF MENTIONED THAT WRITTEN SUBMISSIONS HAVE BEEN FILED BY THE ASSESSEE IN ITA NO S . 784 TO 788/PUN/2016 AND ALS O IN THE ITA NO. 1662/PUN/2016. THE YEAR UNDER APPEAL IS ASSESSMENT YEAR 2006 - 07 AND THE ASSESSEE ALONG WITH OTHER ASSESSEE S HAD SUCCEEDED TO THEIR FATHER LATE MURLIDHA R WALVE S INTEREST IN THE LAND AT WARJE, PUNE. THE FACTS AND ISSUES IN RELATION TO THESE APPEALS ARE SIMILAR. HOWEVER, IN ORDER TO ADJUDICA TE THE ISSUES, WE REFER TO FACTS IN ITA NO. 784/PUN/2016. 5 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 6. BRIEF LY IN THE FACTS OF THE CASE, THE ASSESSEE HAD NOT FILED RETURN OF INCOME AND ACCORDINGLY NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 18.03.2011 AND THE ASSESSEE IN RESPONSE TO THE SAID NOTICE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 16,53,180/ - . THE ASSESSEE SOUGHT REASONS RECORDED FOR ISSUING NOTICE U/S. 148 OF THE ACT, WHICH WERE COMMUNICATED TO THE ASSESSEE. HOW EVER, THE OBJECTION RAISED BY THE ASSESSEE TO THE NOTICE U/S 148 OF THE ACT, WAS REJECTED BY THE ASSESSING OFFICER AND THE SAME WERE COMMUNICATED TO THE ASSESSEE. IN THE RETURN OF INCOME, THE ASSESSEE HAD DECLARED INCOME FRO M BUSINESS AT RS. 39,900/ - AND L ONG TERM CAPITAL GAIN ON TRANSFER OF DEVELOPMENT PRICE OF LAND AT WARJE AT RS. 23,93,830/ - ( 18 SHARES). FURTHER, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 54F OF THE ACT AT RS. 7,80,741/ - . THE ASSESSEE WAS ASKED TO EXPLAIN TAXABILITY OF LO NG TERM CAPITAL GAINS. THE ASSESSEE IN THIS REGARD SUBMITTED THAT IT HA D ENTERED INTO DEVELOPMENT AGREEMENT ON 08.09.05 WITH M/S KAKADE CONSTRUCTION COMPANY FOR TO TAL CONSIDERATION OF RS.3,00,00,000/ - . THE ASSESSEE HAD OFFERED TAX ON CAPITAL GAIN IN THE RE TURN OF INCOME. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ALLEGED THAT SAME WAS NOT LIABLE TO BE TAX ED UNDER THE HEAD INCOME FROM CAPITAL GAINS IN THIS YEAR . IN THIS REGARD, IT WAS POINTED OUT THAT AS AGAINST SALE CONSIDERATION OF RS. 3,00,00,000/ - , THE VALUE ADOPTED BY STAMP AUTHORITY WAS RS.3,26,13,500/ - . THE ASSESSEE POINTED OUT THAT IT HAD GIVEN IRREVOCABL E POWER OF ATTORNEY TO MR. SANJAY KAKADE, PARTNER OF M/S KAKADE CONSTRUCTION COMPANY ON THE SAME DAY TO CARRY OUT THE ACTIVIT IES OF DEVELOPMENT OF PROPERTY AS ENVISAGED I N THE DEVELOPMENT AGREEMENT. M/S . KAKADE CONST RUCTION COMPANY PAID RS. 50,00,000/ - VIDE VARIOUS CHEQUES TO ALL CO - OWNERS AS PER DEVELOPMENT AGREEMENT. HOWEVER, SUBSEQUENT CHEQUES AS STATED IN THE DEVELOPMENT AGREEMENT WERE RETURNED BACK UNPAID AS THE SAME WERE NOT HONOURED BY OWNER, M/S KAKADE CONSTRUCTION COMPANY. THE 6 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 ASSESSEE STATES THAT NE ITHER BY DEVELOPMENT AGREEMENT NOR BY POWER OF ATTORNEY, POSSESSION HAD BEEN GIVEN TO M/S KAKADE CONSTRUCTION COMPANY. THE ASSESSEE STATES THAT NEITHER PHYSICAL POSSESSION NOR SYMBOLIC POSSESSION WAS EVER GIVEN TO M/S KAKADE CONSTRUCTION COMPANY. IT WAS FU RTHER STRESSE D BY ASSESSEE BEFORE THE ASSESSING O FFICER THAT EVEN AS ON THE DATE PHYSICAL POSSESSION OF THE PLOTS OF LAND WAS WITH WALV E FAMILY. THE ASSESSEE THUS ALL EGED THAT TRANSFER OF PROPERTY A S DEFINED U/S 2(47)(V) OF THE ACT AND 53 A OF TRANSFER OF P ROPERTY ACT, 1882 HAD NOT TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION . HENCE , GAIN ON TRANSFER OF LAND WAS NOT LIABLE TO TAX U/S. 45 OF THE ACT. THE ASSESSEE POINTED OUT THAT BY FILING RETURN OF INCOME, TOTAL TAX WAS PAID ALONG WITH INTEREST. HOW EVER, LIABILITY FOR TAX FROM DEVELOPMENT AGREEMENT WITH M/S KAKADE CONSTRUCTION COMPANY WAS DENIED IN THE YEAR UNDER CONSIDERATION , S INCE THERE WAS NO TRANSFER OF PROPERTY. THE ASSESSING OFFICER REJECTED THE CONTENTION RAISED BY THE ASSESSEE IN VIEW OF REGISTERED DOCUMENTS I.E DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S KAKADE CONSTRUCTION COMPANY DATED 08.09 . 20 05. THE P LEA OF THE ASSESSEE THAT PURCHASER HAD PAID RS. 50,00,000/ - AND SUBSEQUENT CHEQUES ISSUED WERE RETURNED BACK AS NOT HONOURED BY M/S KAKADE CONSTRUCTION COM PANY , WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS OF THE VIEW THAT IF IN TH E RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD RIGHT TO RECEIVE PROFITS, THEN CONDUCT OF THE PARTIES IN THE SUBSEQUENT YEAR WOULD NOT HAVE ANY BEARING ON THAT LIABILITY AS HELD IN THE CASE T.V SUNDARAM IYENGAR AND SONS LTD. VS. CIT 37 ITR 26 (SC) . 7. REFERRING TO THE PROVISION U/S. 48 OF THE ACT, THE ASSESSING OFFICER HELD THAT CHARG EABILITY OF CAPITAL GAINS ON WAS BASED ON FULL VALUE OF CONSIDERATION RECEIVED / ACCRUING AS A RESULT OF TRANSFER. HE FURTHER REFER R ED TO SECTION 2(47)(V) OF THE ACT AND PO INTED OUT THAT THE TRANSACTION IN RELATION TO IMMOVABLE PROPERTY 7 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 WOULD INCLUDE ANY TRANSACTION ALLOWING POSSESSION OF THE PRO PERTY IN PART PERFORMANCE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THE ASSESSEE HAD ALSO EXECUTE D IRREVOCABLE GENERAL POWER OF ATTORNEY IN FAVOUR OF PURCHASER AND THE ASSESSEE HAD ENT ERED INTO TRANSACTION AND HAD GIVEN POSSESSION OF THE PROPERTY WITHOUT GETTING SALE REGISTER ED AS WITHIN PUR VIEW OF TRANSFER COVERED U/S. 2 (47)(V) OF THE ACT. RELIANCE W AS PLACED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ D. KAPADIA VS. CIT, 260 ITR 491 ( BOM.) WHEREIN IT WAS HELD THAT PART PERFORMANCE OF A CONTRACT IS A TRANSFER WITHIN THE MEANING O F PROVISIONS OF SECTION 2(47) OF THE ACT. ACCORDINGLY, LONG TERM CAPITAL GAINS OF RS.23,93,830/ - ON TRANSFER OF DEVELOPMENT RIGHTS IN LAND AT WARJE, PUNE AS SHOWN WAS HELD TAXABLE IN ASSESSMENT YEAR 2006 - 07. 8. THE COMMISSIONER OF INCOME TAX (APPEALS) NOTE D THAT THE SAID PROPERTY WAS UNDER DISPUTE WHICH WAS PENDING BEFORE THE HONBLE BOMBAY HIGH COURT AND THE OWNERS I.E GROUP OF ASSESSEES HAD SOLD THE PROPERTY ALONG WITH ENCUMBRANCES AS PER DEVELOPMENT AGREEMENT DATED 08.09. 20 05. THE DEVELOPER HAD TO PURSUE THE LEGAL CASES AFTER OWNER HAD ELIMINATED RIGHTS IN THE PROPERTY. THE NEXT POINT NOTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT T HE CONTENTION OF THE ASSESSEE THAT OUT OF CONSIDERATION OF RS. 3,00,00,000/ - SUM OF RS. 50,00,000 / - WAS PAID AND THE BALANCE POST DATED CHEQUES OF RS. 2,50,00,000/ - HAD NOT BEEN HONOURED BY DEVELOPER . HENCE, CLAIM OF THE ASSESSEE WA S THAT THE TOTAL CONSIDERATION HA D NOT BEEN PAID AND TRANSFER WAS INVALID. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPE ALS) NOTED THAT IN LIEU OF THE REMAINING AMOUNT OF CONSIDERATION , THE DEVELOPERS HA D ALLOTTED THE CO - OWNERS RESIDENTIAL FLATS IN ANOTHER HOUSING PROJECT CONSTRUCTED BY KAKADE CONSTRUCTION COMPANY. THEREFORE, IT COULD NOT BE STATE D THAT THE 8 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 ASSESSEE HAD NOT RECEIVED THE CONSIDERATION. THE ASSESSEE HAD MADE CLAIM OF DEDUCTION U/S. 54F OF THE ACT AGAINST THE SAID FLAT PURCHASED FROM KAKADE CONSTRUCTION COMPANY ON 24.11. 20 06 FOR RS. 19,87,030/ - WHICH WAS PAID BY WAY OF ADJUSTMENT OF CONSIDERATION RECEIVABLE AGAINST THE SALE OF LAND. THE COMMISSIONER OF INCOME TAX (APPEALS) THUS OBSERVED : - THE SITUATION EMERGES THAT THE APPELLANT HAS RECEIVED WHATEVER CONSIDERATION WAS DUE, IN A SUBSTANTIVE MANNER AN D THE APPELLANT CANNOT BE ALLOWED TO TAKE THE PLEA THAT SINCE THOSE INITIAL CHEQUES WERE DISHONOURED WITHIN THE MEANING OF THE AGREEMENT, THE AGREEMENT IS INVALIDATED. IT IS TO BE APPRECIATED THAT NOT ONLY HAVE THE CO - OWNERS BEEN ALLOTTED THE FLATS WITHOUT ANY CONSIDERATION, THEY HAVE AT NO POINT AGITATED AGAINST THE NON - PAYMENT OF THE DUE CONSIDERATION. THERE IS NO EVIDENCE TENDERED OF ANY DISPUTE BETWEEN SHRI SANJAY KAKADE AND THE CO - OWNERS OF THE LAND. 9. NEXT, THE COMMISSIONER OF INCOME TAX ( APPEALS) NOTED THAT AS PER CLAUSE 6 OF THE AGREEMENT, DEVELOPER SHALL HONOUR THE SCHEDULE OF PAYMENT AND AS PER CLAUSE 7 IF THE PAYMENT IS NOT P AID AS PER SCHEDULE, THE OWNER WA S ENTITLED TO TERMINATE THIS AGREEMENT BY GIVING TWO MONTHS NOTICE IN WRITING. THE COMMI SSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE SAME WAS N EVER DONE BY OWNERS AND HENCE, ARGUMENT OF THE ASSESSEE THAT THE AGREEMENT IS AB - INITIO INVALIDATED DUE TO NON - PAYMENT AS PER SCHEDULE IS FALLACIOUS AND SELF - SERVING ARGUMENT. 10. ANOTHE R POINT RAISED BY THE ASSESSEE WA S THAT NO CONSTRUCTION COULD BE STARTED ON THE LAND AS THE ASSESSEE HIMSELF HAD SUBMITTED THAT THE LAND I S HIGHLY DISPUTED AND THE SUIT WA S PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. THE ASSESSEE CLAIMED THAT HE HAD MADE PAYMENT OF LAND REVENUE IN SUBSEQUENT YEARS AND HENCE THE LAND WAS IN HIS POSSESSION. THE COMMISSIONER OF INCOME TAX (APPEALS) SET ASIDE THE PLEA OF THE ASSESSEE, SINCE P ROPERTY WAS UNDER DISPUTE AND TILL SETTLEMENT OF THE SUIT, LAND RECORDS WERE DULY MAINTAINED IN THE NAME OF ORIGINAL OWNERS . THE COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED HI S OBSERVATION BY HOLDING THAT CLAUSE 10 CLEARLY STATES THAT THE OWNERS HAVE 9 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 G RANTED THE RIGHT TO ENTER THE PROPERTY AND HAVE DELIVERED THE POSSESSION OF THE PROPERTY ON THE DATE OF AGREEMENT. IT IS ALSO STATED THAT IN CASE OF NON - PAYMENT OF THE CONSIDERATION WITHIN 24 MONTHS, THE OWNER WILL HAVE THE RIGHT TO TERMINATE THE AGREEMENT . FIRSTLY IT IS NOTED THAT THE FLAT GIVEN IN LIEU OF THE CHEQUES WERE ALLOTTED ON 24.11. 20 06 WHICH IS WITHIN THE PERIOD OF 24 MONTHS OF THE DATE OF AGREEMENT ON 05.09.2005 AND SECONDLY IF SO AGGRIEVED THE APPELLANT SHOULD HAVE TAKEN RECOURSE TO THE RIGHT O F TERMINATION OF THE AGREEMENT. IT IS ALSO TO BE SEEN THAT AS PER THE SCHEDULE OF PAYMENT THE APPELLANT WAS TO RECEIVE CHEQUES AT DIFFERENT DATES BETWEEN 24.01.2005 TILL 21.03.2007. SO THE SCHEDULE OF PAYMENT ITSELF WAS STRETCHED BETWEEN A PERIOD OF 2 4 MON THS. THE ALLOTMENT OF THE FLAT BY KAKADE CONSTRUCTION COMPANY, IN LIEU OF THE BOUNCED CHEQUES, HAS IN FACT BEEN DONE WITHIN THE SAID PERIOD. IT IS AN INESCAPABLE FACT THAT FOR THE APPELLANT TO SUBSTANTIATE THE THEORY OF NO TRANSFER, HE HAS TO FIRST DEM ONSTRATE THAT HE HAS INITIATED LEGAL ACTION FOR TERMINATION OF THE SAID AGREEMENT. SINCE HE HAS FAILED TO DO SO, THE AGREEMENT STANDS . THE COMMISSIONER OF INCOME TAX (APPEALS) THUS UPHELD THE ORDER OF THE ASSESSING OFFICER IN TREATING THE TRANSFER OF PROP ERTY HAVING OCCURRED IN ASSESSMENT YEAR 2006 - 07. 11. THE SECOND ISSUE RAISED BY THE ASSESSEE WAS IN RESPECT OF CLAIM OF DEDUCTION U/S 54F IN RESPE CT OF PROPERTY AT WARJE, PUNE OUT OF WHICH FLAT WAS ALLOTTED IN LIEU OF THE CONSIDERATION FOR LAND BY M/S. KAKADE CONSTRUCTION COMPANY. THE ASSESSEE CLAIM ED DEDUCTION U/S. 54 OF THE ACT. T HE COMMISSIONER OF INCOME TAX (APPEALS) HOWEVER , UPHELD THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF DENIAL OF DEDUCTION U/S 54F OF THE ACT, T HE COMMISSI ONER OF INCOME TAX (APPEALS) HELD THAT ASSESSEES ALTERNATE CLAIM U/S. 54 OF THE ACT WAS NOT ELIGIBLE AS DEDU CTION COULD ONLY BE CLAIMED ON THE TRANSFER OF A BUILDING BEING A RESIDENTIAL HOUSE. HOWEVER, THE ASSESSEE HAD FAILED TO FURNISH ANY EVIDENCE THAT THE ASSESSEE HAD IMMOVABLE PROPERTY ON THE 10 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 TRANSFERRED LAND. THE CLAIM OF THE ASSESSEE U/S. 54F WAS ALSO REJECTED IN ABSENCE OF ANY EVIDENCE HAVING BEING FILED OF PURCHASING NEW RESIDENTIAL HOUSE WITHIN STIPULATED TIME . THE CHARGING OF INTEREST U/S. 234A, 234B, 234C AND 234D OF THE ACT WAS HELD TO BE CONSEQUENTIAL. THE GROUND OF APPEAL NO. 5 AGAINST THE INITIATION OF PROCEEDINGS U/S. 147/148 OF THE ACT , WAS DISMISSED AS BEING ACADEMIC IN VIEW OF ADJUDICATION OF THE SPECIFIC GROUNDS ON MERIT S . 12. THE ASSE SSEE IN THE WRITTEN SUBMISSION HAS POINTED OUT THAT IN RESPONSE TO THE NOTICE U/S . 148 OF THE ACT, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING INCOME FROM CAPITAL GAINS WHICH WAS WITHDRAWN AS PER THE REVISED COMPUTATION OF INCOME FILED. THE ASSES SEE CLAIMED THAT SINCE NO POSSESSION WAS ALLOTTED DURING THE YEAR UNDER APPEAL AND HENCE NO CAPITAL GAIN HAD ARISEN . THE ASSESSEE FURTHER SUBMITTED THAT AFTER PAYMENT OF RS. 50,00,000/ - OUT OF TOTAL CONSIDERATION OF RS. 3,00,00,000/ - , BALANCE CHEQUES WERE NOT HONOURED BY THE DEVELOPERS. FURTHER , THE ASSESSEE CLAIMED THAT IT HAD NOT GIVEN ANY POSSES SION OF THE LAND TO SHRI SANJAY D. KAKADE AND EVEN THE LICENSE TO ENTER THE PREMISES AS PER CLAUSE 10 OF THE AGREEMENT , WAS REVOKED FOR NON PERFORMANCE OF CONTRAC T WHERE IN BALAN CE CHEQUES WERE NOT HONOURED. THE A SSESSEE FURTHER STRESSES THAT ON 23 .09. 20 06 NOTICE WAS GIVEN FOR THE TERMINATION OF THE CONTRACT AND THEN DEVELOPER ARRANGED A MEETING IN WHICH TERMS OF SUPPLEMENTARY AGREEMENT WERE DECIDED AND EXECUTED ON 26 .09. 20 06. THE ASSESSEE STRESSES THAT IT HAD INITIATED LEGAL ACTION AFTER GIVING NOTICE IN THE MONTH OF JANUARY, 2006/23.09. 20 06 AND LICENSE TO ENTER INTO THE LAND WAS REVOKED, WHICH RESULT ED IN RENEGO TI ATI ON AND PART PAYMENT BY WAY OF ALLOTMENT OF FLATS IN THE PROJECT OF KAKADE CONSTRUCTION COMPANY AND THEN POST DATED CHEQUES WERE ISSUED. T HE ASSESSEE CLAIMED T HAT ON 2 3 .0 9 . 20 06 POSSESSION WAS NOT ALLOTTED ONLY LICENSE TO ENTER WERE RESTORED. HENCE, NO POSSESSION WAS GIVEN AND DEVELOPER HAD 11 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 FAILED TO PERF ORM OF THE CONTRACT . THUS, NO TRANSFER OF PROPERTY WAS ENVISAGED IN TERMS OF SECTION 2 (47) (V) OF THE ACT. FURTHER REFERRING TO MEMORANDUM OF UNDERSTANDING AND PAYMENT OF R S. 12,50,000/ - TO SHRI SUYOG RAUT DATED 25.01. 20 08 FOR VACATING THE PREMISES IN HIS POSSESSION , WHICH WAS ENTERED INTO , PROVES THE FACT THAT POSSESSION WAS NOT GIVEN TO THE DEVELOPER. 13. ANOTHER ISSUE RAISED IN THE APPEAL OF ASHOK MURLIDHAR WALVE AND YUMANA WALVE IS ON ACCOUNT OF PAYMENT OF RS. 12,50,000/ - EACH TO MR. SUYOG RAUT FOR OCC UPYING OF THE PROPERTY. TH E ASSESSEE CLAIMED THAT AS PER MEMORANDUM OF U NDERSTANDING DATED 25.01. 20 08, THERE WAS PROMISE FOR VACATION OF THE PREMISES ON TOTAL PAYMENT OF RS. 25,00,000/ - . THE ASSESSING OFFICER HAD DENIED DEDUCTION ON THIS ACCOUNT IN VIEW OF THE FACT THAT ASSESSEE HAD VOLUNTARILY CREATED THE SAID LIABILITY. THE ASSESSEE PLEADS THAT THE AMOUNT P AID FOR CLEARING ENCUMBRANCES WAS TO BE ALLOWED AS DEDUCTION WHICH HAS BEEN REJECTED BY THE ASSESSING OFFICER. THE COMMISSIONE R OF INCOME TAX (APPEALS) ON SURMISE HELD THAT THE ASSESSEE HIMSELF HAD CREATED THE ENCUMBRANCES. 14. COMING TO THE G ROUND RELATING TO VALIDITY OF INITIATION OF PROCEEDINGS U/S. 147/148 OF THE ACT , WAS NOT PRESSED BY THE ASSESSEE. T HE ASSESSEE FILED WRITTEN SUBMISSION AND ALSO FILED PAPER BOOK ALONG WITH VARIOUS DOCUMENTS AND THE AGREEMENT. 15. THE LD. DR FOR THE REVENUE ON THE OTHER HAND PLACED RELIANCE ON THE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER. 16. ON PERUSAL OF RECORD AND THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, THE ISSUE WHICH ARISES IN THE PRESENT SET OF APPEALS IS AGAINST THE COMPUTATION OF INCOME FROM LONG TERM CAPIT AL GAINS. THE ASSESSEE IN ALL THE APPEALS HAD ALSO 12 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 RAISED THE ISSUE AGAINST THE REOPENING OF ASSESSMENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. THE ASSESSEE IN THE WRITTEN SUBMISSIONS HAS NOT PRESSED THE GROUND OF APPEAL RELATING TO THE VALIDITY OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. THUS, THE GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 17. NOW, COMING TO THE MERITS OF THE ISSUE RAISED I.E. IN RELATION TO COMPUTATION OF INCOME FROM LONG TERM CAPITAL GAINS ON SALE OF LAND WHICH WAS JOINTLY OWNED BY THE ASSESSEE BEFORE US AT WARJE, PUNE. THE ASSESSEE ALONG WITH HIS OTHER FAMILY MEMBERS HAD REC EIVED THE SAID LAND JOINTLY AS LEGAL HEIRS OF LATE MR. MURLIDHAR WALVE. THE ASSESSEE ENTERED INTO DEVELOPMENT AGREEMENT WITH KAKADE CONSTRUCTION CO. ON 08.09.2005 FOR THE SALE OF SAID LAND FOR TOTAL CONSIDERATION OF RS.3 CRORES. THE COPY OF THE SAID AGRE EMENT IS PLACED AT PAGES 59 TO 156 OF THE PAPER BOOK. AS PER THE TERMS OF SAID AGREEMENT, PART CONSIDERATION OF RS.50 LAKHS WAS PAID TO ALL THE CO - OWNERS ON 24.01.2005 AND 08.09.2005 AS PER CLAUSE 4 OF THE AGREEMENT. THE BALANCE CONSIDERATION OF RS.2.50 CRORES WAS TO BE PAID BY POSTDATED CHEQUES ON 22.12.2005 AND 21.09.2006 I.E. WITHIN PERIOD OF 24 MONTHS. HOWEVER, CHEQUES DATED 22.12.2005 WERE NOT HONOURED AND THE ASSESSEE CLAIMS THAT IN THE MONTH OF JANUARY, 2006 A LETTER WAS GIVEN TO MR. SANJAY KAKADE STATING THAT THE POSSESSION OF THE LAND IS NOT GIVEN TO YOU; NOT TAKEN BY YOU, HOWEVER, EVEN LICENSE TO ENTER THE PREMISES, AS PER CLAUSE 10 OF THE AGREEMENT IS REVOKED FOR THE REASON OF NON - PERFORMANCE OF CONTRACT. THE CLAIM OF ASSESSEE BEFORE THE AUTHO RITIES BELOW WAS THAT NOTHING WAS DONE BY THE DEVELOPER FOR THE PAYMENTS DUE ON 22.12.2005 AND FURTHER FOR THE PAYMENTS DUE ON 21.09.2006 , HE SENT A MESSAGE FOR NOT DEPOSITING THE CHEQUES. THE ASSESSEE CLAIMS TO HAVE ISSUED NOTICE ON 23.09.2006 FOR TERMIN ATION OF CONTRACT. HOWEVER, ALL THESE LETTERS HAVE 13 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 NOT BEEN PRODUCED BEFORE THE TRIBUNAL AS THE SAME ARE MIS - PLACED. THEREAFTER, THE TERMS OF CONTRACT WERE RE - NEGOTIATED BETWEEN THE PARTIES AND SUPPLEMENTARY AGREEMENT WAS EXECUTED ON 26.09.2006. AS PER THE SAID AGREEMENT, IN LIEU OF CASH AMOUNT TO BE PAID, THE PURCHASER M/S. KAKADE CONSTRUCTION CO. AGREED TO ALLOT FLATS TO THE RESPECTIVE ASSESSEES IN LIEU OF CASH CONSIDERATION DUE TO THEM. THE COPY OF SAID AGREEMENT IS PLACED AT PAGES 395 TO 416 OF THE PAPER BOOK. 18. THE ASSESSEE IN THE FIRST INSTANCE WHILE FILING THE RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT OFFERED INCOME FROM LONG TERM CAPITAL GAINS ON SALE OF HIS SHARE IN THE SAID PROPERTY AT WARJE, PUNE. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED A REVISED COMPUTATION OF INCOME WITHDRAWING THE INCOME FROM CAPITAL GAINS OFFERED TO TAX ON THE PLEA THAT NO POSSESSION WAS PARTED DURING THE PREVIOUS YEAR TO ASSESSMENT YEAR 2006 - 07. THE SAID REVISED COMPUTATION IS PLACED AT PAGES 55 TO 58 OF THE PAPER BOOK. THE ASSESSEE HAS PLEADED BEFORE THE AUTHORITIES BELOW THAT IT HAD NOT HANDED OVER THE POSSESSION OF THE LAND TO THE PURCHASER, HOWEVER, LICENSE WAS GRANTED TO ENTER THE SAID PROPERTY . VIDE CLAUSE 10 OF THE SAID AGREEMENT, IT WAS ALSO AGREED UPON THAT IF THE PROMOTERS FAILS TO PAY THE BALANCE PAYMENT AS MENTIONED IN CLAUSES (A) AND (B) TO THE OWNER WITHIN 24 MONTHS, THEN THE OWNER SHALL HAVE RIGHT TO TERMINATE THE LICENSE OF THE DEVEL OPER. THE PERUSAL OF PREAMBLE TO THE AGREEMENT REFLECTS THAT THERE WAS A DISPUTE VIS - - VIS PURCHASE OF THE SAID PROPERTY BY LATE MURLIDHAR BAPUJI WALVE. THE ORIGINAL OWNER VIDE AGREEMENT TO SELL DATED 14.02.1966 HAD AGREED TO SELL THE SAID PROPERTY TO LA TE MR.MURLIDHAR BAPUJI WALVE AND IN PART PERFORMANCE OF THE SAID AGREEMENT, HAD PUT HIM IN THE POSSESSION OF THE SAID PROPERTY. THE ORIGINAL OWNER SIMULTANEOUSLY, SOLD THE SAID PROPERTIES TO SHRI 14 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 MADHAVRAO BAPURAO KATHILKUTE VIDE SALE DEED DATED 04.08.196 6. THE FATHER OF ASSESSEE THEREAFTER, FILED SPECIAL CIVIL SUIT NO.127/1966 IN THE CIVIL COURT AT PUNE FOR SPECIFIC PERFORMANCE AND THE SAME WAS PARTLY DECREED IN HIS FAVOUR. THE FIRST APPEAL NO.112/1983 FILED BEFORE THE HONBLE BOMBAY HIGH COURT WAS FULL Y DECREED IN FAVOUR OF THE PLAINTIFF VIDE JUDGMENT DATED 18.02.1994 AND IT WAS HELD THAT THE SALE DEED DATED 04.08.1966 WAS ILLEGAL, CANCELLED AND SET ASIDE AND THE DEFENDANTS WERE ORDERED TO CONVEY THE SAID PROPERTIES TO THE HEIRS OF LATE MURLIDHAR WALVE. HOWEVER, SHRI KATHILKUTE FILED LATTERS PATENT APPEAL NO.107/1994 BEFORE THE HONBLE BOMBAY HIGH COURT WHICH WAS PENDING AS ON THE DATE OF AGREEMENT ENTERED INTO BY THE ASSESSEE BEFORE US WITH M/S. KAKADE CONSTRUCTION CO. I.E. DATED 08.09.2005. IN THE PR EAMBLE TO THE AGREEMENT, IT IS ALSO MENTIONED THAT THE PUNE MUNICIPAL CORPORATION IN ITS DEVELOPMENT PLAN HAD SHOWN PORTION ADMEASURING ABOUT FIVE ACRES OUT OF SAID PROPERTIES , FOR VARIOUS RESERVATIONS. THE ASSESSEE OWNER HAD PROTESTED AGAINST THE SAID RESERVATIONS AND HAD ALSO TAKEN NECESSARY STEPS TO CLEAR THE SAID RESERVATIONS. ANOTHER DISPUTE IN RESPECT OF SAID PROPERTIES WAS ALSO PENDING BEFORE THE HONBLE BOMBAY HIGH COU RT BEARING LP NO.107/1994. ALL THESE ENCUMBRANCES WERE PUT TO THE DEVELOPER AND BOTH THE PARTIES ENTERED INTO THE DEVELOPMENT AGREEMENT FOR GRANT OF DEVELOPMENT RIGHTS BY THE OWNERS TO THE DEVELOPER M/S. KAKADE CONSTRUCTION CO. FOR SUM OF RS.3 CRORES. T HE SAID DEVELOPMENT AND CONSTRUCTION RIGHTS WERE GRANTED IN RESPECT OF SAID PROPERTIES ON AS IS WHERE IS BASIS TO THE DEVELOPER ON THE TERMS AND CONDITIONS AGREED UPON. THE FIRST CONDITION WAS THE PAYMENT OF PART CONSIDERATION OF RS.50 LAKHS ON 24.01.20 05 AND 08.09.2005. THE BALANCE CONSIDERATION AS POINTED OUT ABOVE WAS TO BE PAID ON 22.12.2005 AND 21.09.2006. THE DEVELOPER HAD TO PAY THE ENTIRE BALANCE CONSIDERATION WITHIN PERIOD OF 24 MONTHS FROM THE DATE OF AGREEMENT, FOR WHICH POSTDATED CHEQUES WE RE ISSUED WHICH ARE MENTIONED IN THE SAID 15 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 AGREEMENT ITSELF. AS PER CLAUSES 6 AND 7, TIME WAS THE ESSENCE OF CONTRACT AND IN CASE THE DEVELOPER FAIL ED TO MAKE THE PAYMENTS AS AGREED IN CLAUSE 5, THEN THE OWNER I.E. THE ASSESSEE WAS ENTITLED TO TERMINATE TH E AGREEMENT BY GIVING TWO MONTHS WRITTEN NOTICE. IT WAS ALSO AGREED THAT IN CASE THE AGREEMENT IS TERMINATED BY THE OWNER, THEN THEY SHALL REFUND THE AMOUNT PAID BY THE DEVELOPER WITHOUT ANY INTEREST, HOWEVER, THE OWNER SHALL BE ENTITLED TO FORFEIT / DEDU CT SUM OF RS.10 LAKHS. AS PER CLAUSE 9, IT WAS AGREED THAT THE DEVELOPER AT HIS OWN COST AND RESOURCES HAD TO GET THE RESERVATIONS CLEARED FROM THE CONCERNED GOVERNMENT AUTHORITIES. IT WAS SPECIFICALLY AGREED BETWEEN THE PARTIES THAT THE DEVELOPER SHALL NOT BE ENTITLED TO DELAY THE PAYMENTS AS AGREED UPON ON ANY GROUNDS INCLUDING THE CLEARANCE OF RESERVATIONS OR THE COURT CASE S OR ULC ORDER OR ON ANY OTHER GROUNDS. THE GRANT OF DEVELOPMENT RIGHTS WAS ON AS IS WHERE IS BASIS, UNDER WHICH THE OWNER HAD N O OBLIGATION OR RESPONSIBILITY TO CLEAR THE RESERVATIONS OR COURT CASES OR TO OBTAIN ANY ORDER OR PERMISSION. 19. VARIOUS TERMS WERE AGREED UPON BETWEEN THE PARTIES IN RESPECT OF PROJECT AND ITS SALE THEREOF AND THE LINKED ASPECTS WHICH ARE NOT IN DISPU TE. THE ONLY ISSUE IS WHETHER THE ASSESSEE AS PER THE SAID AGREEMENT HAD PARTED POSSESSION AND HAD RECEIVED PART CONSIDERATION IN PART PERFORMANCE OF THE CONTRACT, THEN IN SUCH CIRCUMSTANCES, IS THE INCOME FROM LONG TERM CAPITAL GAINS ARISES IN THE YEAR U NDER CONSIDERATION. THE LINKED FACTOR WHICH HAS BEEN REFERRED IN THE PARAS HEREINABOVE IS IRREVOCABLE POWER OF ATTORNEY GIVEN TO MR. SANJAY KAKADE OF M/S. KAKADE CONSTRUCTION CO., UNDER WHICH HE HAD THE RIGHT TO CARRY OUT ALL THE ACTS AND DEEDS IN RELATIO N TO THE DEVELOPMENT OF THE SAID PROPERTY. THE ASSESSEE HAS TIME AND AGAIN IN THE WRITTEN SUBMISSIONS STRESSED THAT IN THE YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2006 - 07 THOUGH IT HAD ENTERED INTO AN AGREEMENT TO SELL BUT SINCE ON 22.12.2005 ITSELF , WHERE THE DEVELOPER HAS NOT 16 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 PAID THE BALANCE CONSIDERATION TO THE ASSESSEE, THEN THE AGREEMENT DOES NOT SURVIVE AND SINCE THE NEXT PART PAYMENT HA D ALSO NOT BEEN PAID, THE AGREEMENT WAS NOT GIVEN EFFECT TO AND CONSEQUENTLY, IT CANNOT BE SAID THAT THE TRANSACTIO N AS ENVISAGED UNDER SECTION 247(5) R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT HA D BEEN COMPLETED , MAKING THE ASSESSEE LIABLE TO PAY THE CAPITAL GAINS TAX ON THE TRANSFER OF HIS SHARE IN THE SAID PROPERTY AT WARJE, PUNE. ANOTHER ASPECT WHICH NEEDS TO BE K EPT NOTE OF IS THE SECOND AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S. KAKADE CONSTRUCTION CO., UNDER WHICH INSTEAD OF CASH CONSIDERATION, HE HA D ALLOTTED FLATS TO EACH OF THE CO - OWNERS OF THE PROPERTY SOLD BY THEM. 20. BOTH THE AUTHORITIES BELOW HAVE HELD THE ASSESSEE LIABLE FOR TAXABILITY ON ACCOUNT OF CAPITAL GAINS ARISING ON SALE OF RESPECTIVE SHARES IN THE PROPERTY ON THE GROUND THAT AS PER THE TERMS OF AGREEMENT, WHERE THE ASSESSEE HAD NEGOTIATED AND SETTLED THE PRICE FOR SALE AND ACCEPTED PA RT CONSIDERATION AND ALSO GIVEN POSSESSION OF THE SAID PROPERTY I.E. WHATEVER PORTION WAS AVAILABLE WITH THEM AND PURCHASER HAD AGREED TO RECEIVE THE BALANCE CONSIDERATION IN 24 MONTHS, THEN THE INCOME FROM CAPITAL GAINS ARISES IN THE HANDS OF ASSESSEE , EV EN IF THE CONDITION OF RECEIVING THE PART CONSIDERATION IN FUTURE HAS NOT BEEN FULFILLED. BOTH THE AUTHORITIES BELOW HAVE HELD THE ASSESSEE LIABLE TO PAY THE CAPITAL GAINS TAX ON THE SAID TRANSACTION, WHERE THE POSSESSION HAS BEEN HANDED OVER. ADMITTEDLY , COMPLETE PHYSICAL POSSESSION WAS NOT WITH THE ASSESSEE BECAUSE OF VARIOUS DISPUTES AND RESERVATIONS . 21. IN THIS REGARD, THOUGH THE ASSESSEE IN THE WRITTEN SUBMISSIONS HAS NOT REFERRED TO THE DECISION OF HONBLE HIGH COURT OF PUNJAB & HARYANA IN C.S. A TWAL VS. CIT IN ITA NO.200 OF 2013 (O&M), JUDGMENT DATED 22.07.2015 ; BUT THE FACTS AND ISSUE RAISED IN THE SAID APPEAL ARE SIMILAR TO THE FACTS AND ISSUES RAISED IN 17 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 THE PRESENT SET OF APPEALS. IN THE FACTS OF THE CASE BEFORE HONBLE HIGH COURT OF PUNJAB & HARYANA, THERE WAS AN AGREEMENT TO SELL PIECE OF LAND FOR DEVELOPMENT, UNDER WHICH THE SALE CONSIDERATION WAS TO BE PAID IN PARTS AND BESIDE PART CASH CONSIDERATION , THE SELLERS WERE ENTITLED TO RECEIVE A FLAT IN THE BUILDING PROPOSED TO BE CONSTRUCTED ON THE SAID PROJECT ITSELF. HOWEVER, BECAUSE OF CERTAIN CLEARANCE NOT BEING GRANTED BY THE STATE AUTHORITIES AND BECAUSE OF INTERVENTION OF THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE DEVELOPMENT OF SAID PROJECT, THE PROJECT WAS SHELLED AND THE ASSESS EE HAD NOT RECEIVED BALANCE PART CONSIDERATION NOR THE ASSESSEE HAD RECEIVED THE FLAT IN THE SAID PROJECT. THE PLEA OF ASSESSEE WAS THAT IN VIEW OF VARIOUS OBSTACLES, THE ASSESSEE WAS NOT IN A POSITION TO RECEIVE PART CASH CONSIDERATION AND CONSIDERATION IN THE FORM OF FLAT AND BECAUSE OF THE CIRCUMSTANCES, THE ASSESSEE PLEADED THAT IT COULD NOT BE HELD LIABLE TO PAY THE CAPITAL GAINS ON THE COMPLETE CONSIDERATION AGREED UPON BETWEEN THE PARTIES. THE ASSESSEE IN THE INDIVIDUAL CASES HAD ALREADY OFFERED CAPITAL GAINS TAX ON THE AMOUNT IT HAD RECEIVED IN THE RESPECTIVE YEARS ON TRANSFER OF PORTION OF LAND . THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN C.S. ATWAL VS. CIT (SUPRA) CONSIDERED THAT THE FOLLOWING ISSUES EMERG ED FOR CONSIDERATION AND ADJUDICATIO N: - 9. THE FOLLOWING ISSUES EMERGE FOR CONSIDERATION AND ADJUDICATION: - (I) SCOPE AND LEGISLATIVE INTENT OF SECTION 2(47)(II), (V) AND (VI) OF THE ACT; (II) THE ESSENTIAL INGREDIENTS FOR APPLICABILITY OF SECTION 53A OF 1882 ACT; (III) MEANING TO BE ASSIGNED TO THE TERM POSSESSION? (IV) WHETHER IN THE FACTS AND CIRCUMSTANCES, ANY TAXABLE CAPITAL GAINS ARISES FROM THE TRANSACTION ENTERED BY THE ASSESSEE? 22. THE HONBLE HIGH COURT OF PUNJAB & HARYANA TOOK INTO CONSIDERATION THE DEFINITION OF TRANSFER UNDER SECTION 2(47) OF THE ACT WITH SPECIAL REFERENCE TO PROVISIONS OF CLAUSE (V) AND (VI) INTRODUCED BY THE FINANCE ACT, 1987 W.E.F. 01.04.1988 AND ALSO NOTED THE DECISIONS OF VARIOUS HONBLE HIGH COURTS AND 18 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 ALSO HONBLE BOMBAY HIGH COURT IN CHA TURBHUJ DWARKADAS KAPADIA VS. CIT (2003) 260 ITR 491 (BOM) AND HELD AS UNDER: - 17. ADVERTING TO CLAUSE (VI) OF SECTION 2(47) OF THE ACT, IT MAY BE NOTICED THAT THE SCOPE AND AMBIT OF THIS CLAUSE AS EXPLAINED BY CBDT IN ITS CIRCULAR NO.495 DATED 23.9.1987 HAS ALREADY BEEN REPRODUCED ABOVE. ON PERUSAL OF THIS CLAUSE, IT WOULD BE CLEAR THAT IT WAS INTENDED TO COVER THOSE CASES OF TRANSFER OF OWNERSHIP WHERE THE PROSPECTIVE BUYER BECOMES OWNER OF THE PROPERTY BY BECOMING A MEMBER OF A COMPANY, COOPERATIVE SOCI ETY ETC. IN THE PRESENT CASE, JDA WAS EXECUTED BETWEEN THE SOCIETY AND THE DEVELOPERS AND THERE WAS NO TRANSACTION INVOLVING THE DEVELOPER BECOMING MEMBER OF A COOPERATIVE SOCIETY/COMPANY ETC. IN TERMS OF SECTION 2(47) (VI) OF THE ACT. THE SURRENDER OF RIG HT TO OBTAIN PLOT BY THE MEMBERS WAS FOR FACILITATING THE SOCIETY TO ENTER INTO THE JDA WITH THE DEVELOPERS. THERE WAS NO CHANGE IN THE MEMBERSHIP OF THE SOCIETY AS CONTEMPLATED UNDER SECTION 2 (47)(VI) OF THE ACT. EQUALLY CLAUSE (II) OF SECTION 2(47) OF T HE ACT HAS NO APPLICABILITY IN AS MUCH AS THERE WAS NO EXTINGUISHMENT OF ANY RIGHTS OF THE ASSESSEE IN THE CAPITAL ASSET AT THE TIME OF EXECUTION OF JDA IN THE ABSENCE OF ANY REGISTERED CONVEYANCE DEED IN FAVOUR OF THE TRANSFEREE IN VIEW OF JUDGMENTS IN AL APATI VENKATARAMIAH VS. CIT, (1965) 57 ITR 185 (SC) AND ADDITIONAL CIT VS. MERCURY GENERAL CORPORATION (P) LIMITED, (1982) 133 ITR 525 (DELHI). 23. IN RESPECT OF INGREDIENTS FOR APPLICABILITY OF SECTION 53A OF TP ACT, THE SAID PROVISIONS WERE ANALYZED BY THE HONBLE HIGH COURT AND REFERENCE WAS MADE TO VARIOUS DECISIONS AND IT WAS HELD AS UNDER: - 24 THUS, IT WOULD MEAN THAT SECTION 53A OF 1882 ACT HAS BEEN BODILY TRANSPOSED INTO SECTION 2(47)(V) OF THE ACT AND THE EFFECT OF IT WOULD BE THAT SECTION 53 A OF 1882 ACT SHALL BE TAKEN TO BE AN INTEGRAL PART OF SECTION 2 (47)(V) OF THE ACT. IN OTHER WORDS, THE LEGAL REQUIREMENTS OF SECTION 53A OF 1882 ACT ARE REQUIRED TO BE FULFILLED SO AS TO ATTRACT THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT. 24. THEREA FTER, THE HONBLE HIGH COURT CONSIDERED THE QUESTION OF POSSESSION WHICH WAS ONE OF THE ESSENTIAL CONDITIONS FOR ENFORCEABILITY OF SECTION 53A OF THE TP ACT AND ALSO REFERRED TO THE JUDGMENT DELIVERED BY THE AUTHORITY FOR ADVANCE RULING (AAR) IN RE JASBIR SINGH SARKARIA (2007) 294 ITR 196 (AAR) AND TOOK NOTE OF VARIOUS CLAUSES OF AGREEMENT BETWEEN THE PARTIES AND ALSO THE CALUSES OF IRREVOCABLE POWER OF ATTORNEY ISSUED AND IT WAS THE CASE OF REVENUE BEFORE THE HONBLE HIGH COURT THAT WHERE THE DEVELOPMENT A GREEMENT HAS BEEN EXECUTED FOLLOWED BY REGISTERED SPECIAL POWER OF ATTORNEY AND WHEN READ TOGETHER , SUPPORTED THE VIEW THAT THE PROVISIONS OF SECTION 53A OF THE TP ACT 19 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 STOOD FULFILLED AND AS A NECESSARY COROLLARY TRANSACTION WAS EXIGIBLE TO CAPITAL GAINS T AX UNDER SECTION 2(47)(V) R.W.S. 45 OF THE ACT IN THE HANDS OF ASSESSEE. AFTER REFERRING TO VARIOUS CLAUSES OF THE AGREEMENT UNDER PARAS 39 TO 42, THE HONBLE HIGH COURT HELD AS UNDER: - 43. IN VIEW OF PRECEDING ANALYSIS, IT IS REITERATED THAT FROM THE CUMULATIVE EFFECT OF COVENANTS CONTAINED IN JDA DATED 25.2.2007 READ WITH REGISTERED SPECIAL POWER OF ATTORNEY DATED 26.2.2007, IT CANNOT BE HELD THAT THE MANDATORY REQUIREMENTS OF SECTION 53A OF 1882 ACT WERE COMPLIED WITH WHICH STOOD INCORPORATED IN SECT ION 2(47) (V) OF THE ACT. ONCE THAT WAS SO, IT COULD NOT BE SAID THAT THE ASSESSEE - APPELLANTS WERE LIABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINING LAND WHICH WAS NOT TRANSFERRED BY THEM TO THE DEVELOPER/BUILDER BECAUSE OF SUPERVENING EVENT NOT ON ACCOU NT OF ANY VOLITION ON THEIR PART. 44. VIEWED FROM ANOTHER ANGLE, IT CANNOT BE SAID THAT ANY INCOME CHARGEABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINING LAND HAD ACCRUED OR ARISEN TO THE APPELLANT - ASSESSEE IN THE FACTS OF THE CASE. CONSIDERING THE ISSUE OF TAXABILITY OF INCOME WITH REGARD TO ITS ACCRUAL OR RECEIPT AS THE BASIS FOR CHARGING INCOME TAX, THE APEX COURT IN COMMISSIONER OF INCOME TAX, BOMBAY CITY VS. MESSRS SHOORJI VALLABHDAS & CO. (1962) 46 ITR 144 (SC) OBSERVED THAT INCOME TAX IS A LEVY ON INCOME AND WHERE NO INCOME RESULTS EITHER UNDER ACCRUAL SYSTEM OR ON THE BASIS OF RECEIPT, NO INCOME TAX IS EXIGIBLE. THE RELEVANT OBSERVATIONS READ THUS: - INCOME TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME - TAX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY TO TAX IS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR ITS RECEIPT; BUT THE SUBSTANCE OF THE MATTER IS THE INCOME, IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN TOUGH IN BOOKKEEPING, AN ENTRY IS MADE ABOUT A ' HYPOT HETICAL INCOME ' WHICH DOES NOT MATERIALIZE. WHERE INCOME HAS, IN FACT, BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINS THE INCOME OF THE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MAY BE PAYABLE. WHERE, HOWEVER, THE INCOME C AN BE SAID NOT TO HAVE RESULTED AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT, EFFECT MIGHT, INCINERATION CIRCUMSTANCES, HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. THIS PRONOUNCEMENT WAS APPLIED BY THE SUPREM E COURT IN GODHRA ELECTRICITY CO. LIMITED VS. CIT, (1997) 225 ITR 746 (SC) AND FOLLOWED BY THE CALCUTTA HIGH COURT IN CIT VS. BALARAMPUR COMMERCIAL ENTERPRISES LIMITED, (2003) 262 ITR 439 (CAL.). 25. THE CONCLUSION OF THE HONBLE HIGH COURT THUS, WAS AS UNDER: - 46. WE SUMMARIZE OUR CONCLUSIONS AS UNDER: - 1 . PERUSAL OF THE JDA DATED 25.2.2007 READ WITH SALE DEEDS DATED 2.3.007 AND 25.4.2007 IN RESPECT OF 3.08 ACRES AND 4.62 ACRES RESPECTIVELY WOULD REVEAL THAT THE PARTIES HAD AGREED FOR PRO - RATA TRANSFER OF LAND. 2 . NO POSSESSION HAD BEEN GIVEN BY THE TRANSFEROR TO THE TRANSFEREE OF THE ENTIRE LAND IN PART PERFORMANCE OF JDA DATED 25.2.2007 SO AS TO FALL WITHIN THE DOMAIN OF SECTION 53A OF 1882 ACT. 20 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 3 . THE POSSESSION DELIVERED, IF AT ALL, WAS AS A LICENCEE FOR THE DEVELOPMENT OF THE PROPERTY AND NOT IN THE CAPACITY OF A TRANSFEREE. 4 . FURTHER SECTION 53A OF 1882 ACT, BY INCORPORATION, STOOD EMBODIED IN SECTION 2(47)(V) OF THE ACT AND ALL THE ESSENTIAL INGREDIENTS OF SECTION 53A OF 1882 ACT WERE REQUIRED TO BE FUL FILLED. IN THE ABSENCE OF REGISTRATION OF JDA DATED 25.2.2007 HAVING BEEN EXECUTED AFTER 24.9.2001, THE AGREEMENT DOES NOT FALL UNDER SECTION 53A OF 1882 ACT AND CONSEQUENTLY SECTION 2(47)(V) OF THE ACT DOES NOT APPLY. 5 . IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE APPELLANT THAT WHATEVER AMOUNT WAS RECEIVED FROM THE DEVELOPER, CAPITAL GAINS TAX HAS ALREADY BEEN PAID ON THAT AND SALE DEEDS HAVE ALSO BEEN EXECUTED. IN VIEW OF CANCELLATION OF JDA DATED 25.2.2007, NO FURTHER AMOUNT HAS BEEN RECEIVED AND NO ACTION THEREON HAS BEEN TAKEN. IT WAS URGED THAT AS AND WHEN ANY AMOUNT IS RECEIVED, CAPITAL GAINS TAX SHALL BE DISCHARGED THEREON IN ACCORDANCE WITH LAW. IN VIEW OF THE AFORESAID STAND, WHILE DISPOSING OF THE APPEALS, WE OBSERVE THAT THE ASSESSEE APPE LLANTS SHALL REMAIN BOUND BY THEIR SAID STAND. 6 . THE ISSUE OF EXIGIBILITY TO CAPITAL GAINS TAX HAVING BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE QUESTION OF EXEMPTION UNDER SECTION 54F OF THE ACT WOULD NOT SURVIVE ANY LONGER AND HAS BEEN RENDERED ACADEMIC. 7 . THE TRIBUNAL AND THE AUTHORITIES BELOW WERE NOT RIGHT IN HOLDING THE ASSESSEE - APPELLANT TO BE LIABLE TO CAPITAL GAINS TAX IN RESPECT OF REMAINING LAND MEASURING 13.5 ACRES FOR WHICH NO CONSIDERATION HAD BEEN RECEIVED AND WHICH STOOD CANCELLED AND INCAPAB LE OF PERFORMANCE AT PRESENT DUE TO VARIOUS ORDERS PASSED BY THE SUPREME COURT AND THE HIGH COURT IN PILS. THEREFORE, THE APPEALS ARE ALLOWED. 26. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL BEFORE THE TRIBUNAL IS SIMILAR TO THE ISSUE BEFORE THE HONBLE HIGH COURT OF PUNJAB & HARYANA. THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL IS THAT THE SAID TRANSACTION OF SALE OF SAID PROPERTY HAS NOT BEEN COM PLETED IN ASSESSMENT YEAR 2006 - 07 BUT STANDS POSTPONED / MODIFIED BECAUSE OF SUPPLEMENTARY AGREEMENT DATED 26.09.2006 ENTERED INTO BY THE ASSESSEE WITH M/S. KAKADE CONSTRUCTION CO. THE ASSESSEE HAS TIME AND AGAIN PLEADED THAT THE POSSESSION OF SAID ASSET HAS NOT BEEN GIVEN TO THE DEVELOPER BECAUSE OF RESERVATIONS, COURT CASES AND VARIOUS OTHER ISSUES. UNDOUBTEDLY, THE ASSESSEE DID NOT HAVE COMPLETE POSSESSION OF LAND SINCE THERE WERE CERTAIN RESERVATIONS ON LAND BY THE STATE GOVERNMENT AND ALSO BECAUSE OF THE DISPUTE IN RELATION TO THE SAID PROPERTY. IN THE TOTALITY OF THE 21 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE ADMITTEDLY, THE ASSESSEE THOUGH HAD ENTERED INTO AGREEMENT TO DEVELOP THE SAID PROPERTY AND IT WAS AGREED BETWEEN THE PARTIES THAT THE ASSESSEE ALONG WITH CO - OWNERS ARE ENTITLED TO RECEIVE RS.3 CRORES AGAINST THE SALE OF SAID PROPERTY. THOUGH THE ASSESSEE HAD RECEIVED AN ADVANCE FROM M/S. KAKADE CONSTRUCTION CO., HOWEVER, IN VIEW OF THE DEVELOPER NOT PAYING THE BALANCE AMOUNT WHICH WAS DUE ON 22 .12.2005 ONLY, WHICH FALLS IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAVING ISSUED NOTICE TO THE DEVELOPER IN THIS REGARD, THE TRANSACTION IS NOT FULFILLED AND ONCE THE TERMS OF PAYMENT HAVE NOT BEEN FULFILLED AND WHERE THE POSSESSION HAS BEEN GIVEN TO THE DEVELOPER TO ENTER UPON TO CARRY OUT THE NECESSARY ACTIVITIES OF DEVELOPING THE LAND AND SUCH POSSESSION BEING HANDED OVER IS NOT TO BE CONSTRUED AS COVERED UNDER SECTION 53A OF THE TP ACT. IN ANY CASE, THE ASSESSEE DID NOT HAVE PEACEFUL VACANT POSSE SSION OF THE LAND. HENCE, W HERE THERE WAS FAILURE TO PERFORM THE CONTRACT IN TERMS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT AND ALSO IN VIEW OF THE FACT THAT POSSESSION HAS NOT BEEN PARTED AND ONLY LICENSE TO ENTER WAS GRANTED, EVEN IF POSSESSION WA S GRANTED, THE CAPITAL GAINS DOES NOT ARISE BECAUSE OF THE DISPUTE BETWEEN THE PARTIES, WHICH HAD NULLIFIED THE TERMS OF AGREEMENT. CONSEQUENTLY, THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT ARE NOT APPLICABLE. IN THE FACTS OF THE CASE ON A LATER DATE, SUPPLEMENTARY AGREEMENT WAS EXECUTED WHICH RELATES TO THE SUCCEEDING YEAR AND HENCE, THERE IS MERIT IN THE PLEA OF ASSESSEE THAT THE CAPITAL GAINS ON SALE OF SAID LAND DOES NOT ARISE IN ASSESSMENT YEAR 2006 - 07. THE ASSESSING OFFICER IS AT LIBERTY TO LOOK INTO THE FACTUAL ASPECTS AND DETERMINE THE ASSESSABILITY OF CAPITAL GAINS ON SALE OF LAND IN APPROPRIATE ASSESSMENT YEARS. CONSEQUENTLY, IT IS HELD THAT NO CAPITAL GAIN ARISES IN THE HANDS OF ASSESSEE IN THE CAPTIONED ASSESSMENT YEAR. THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE WHICH WERE LINKED TO CHARGEABILITY OF CAPITAL GAINS IN THE HANDS OF ASSESSEE AND DEDUCTION 22 ITA NO S. 784 TO 788/PUN/2016 & ITA NO. 1662/PUN/2016 UNDER SECTIONS 54 AND 54F OF THE ACT AND OTHER DEDUCTIONS BECOME ACADEMIC. CONSEQUENTLY, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 2 7 . THE FACTS AND ISSUE IN ITA NOS.785/PUN/2016 TO 788/PUN/2016 & 1662/PUN/2016 ARE SIMILAR TO THE FACTS AND ISSUE IN ITA NO.784/PUN/2016 AND THE DECISION IN ITA NO.784/PUN/2016 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.785/PUN/2016 TO 788/PUN/2016 & 1662/PUN/20 16 . 2 8 . IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRO NOUNCED ON THIS 3 0 T H DAY OF JUNE , 201 7 . S D / - ( SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE; / DATED : 3 0 T H JUNE , 2017 . SB/GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS) - 3, PUNE. 4. THE PR. CIT - 2 , PUNE. 5. , , , - / DR SMC, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // /ASSISTANT REGISTRAR , / ITAT, PUNE
