Dnyaneshwar Narayan Mulik, Pune V. Deputy Commissioner of Income-tax,

ITA 826/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1879 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-11-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 24-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Capital asset; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Question of law; Cost of acquisition; Fair market value; Wrong claim; Valuation report; Onus to prove
• Section: 143(3); 45(5); 133A; 260A; 147; 131

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.826/PN/2014 ASSESSMENT YEAR : 1999-2000 DNYANESHWAR NARAYAN MULIK, OPP. MARUTI MANDIR, AT. PO. VADGAON SHERI, TAL. HAVELI, DIST. PUNE 411 014. PAN : ABLPM1350R . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE. . RESPONDENT / APPELLANT BY : SMT. DEEPA KHARE / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 09.03.2016 / DATE OF PRONOUNCEMENT: 16.05.2016 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS AGA INST THE ORDER OF CIT(A)-II, PUNE DATED 13.12.2013 RELATING TO ASSESS MENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME-TAX ACT, 19 61 (IN SHORT THE ACT) DATED 07.07.2011 RELEVANT TO ASSESSMENT YEAR 1999-2 000. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL :- 1. THE LEARNED DCIT HAS CLEARLY ERRED IN LAW & ON FACTS IN NOT FOLLOWING THE STRICT DIRECTION OF ITAT WHICH WAS TO COMPUTE CAPIT AL GAINS ON SALE OF FSI ON THE CONSIDERATION ACTUALLY RECEIVED BY THE APPELLANT. 2. THE LEARNED DCIT HAS CLEARLY ERRED IN LAW & ON F ACTS IN NOT FOLLOWING THE STRICT DIRECTION OF ITAT TO GIVE CROSS EXAMINATION OF PARTNERS OF M/S. KOLTE PATIL ENTERPRISES TO THE APPELLANT. 2 ITA NO.826/PN/2014 A. THE LEARNED DCIT HAS GRANTED CROSS EXAMINATION O F ONLY ONE PARTNER OF KOLTE PATIL ENTERPRISES & THAT TOO AT THE FLAG E ND OF THE DATE OF PASSING THE ORDER. B. THE LEARNED DCIT HAS CLEARLY GONE BEYOND HIS JUR ISDICTION, WHEN THE DIRECTION OF HONORABLE ITA T PUNE BENCH WAS TO ALLO W OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE 225 PURCHASERS OF FSI. HERE, THE LEARNED DCIT HAS GROSSLY ERRED IN NOT EVEN ISSUING SUMMONS TO THE 225 SO CALLED PURCHASERS BUT HAS DIRECTED TO THE DE VELOPER / BUILDER TO PRODUCE THESE PURCHASERS. 3. THE LEARNED DCIT HAS ERRED IN LAW & ON FACTS IN MAKING AN ADDITION OF RS. 26900000 UNDER THE HEAD CAPITAL GAINS ARISING ON SA LE OF FSI TO THE PROSPECTIVE BUYERS IN CONTRAVENTION OF THE SPECIFIC DIRECTION O F HONOURABLE ITAT, PUNE. 4. THE LEARNED DCIT HAS ERRED IN FRAMING THE PRESEN T ASSESSMENT ORDER ON THE BASIS OF THE DECISION OF HONORABLE JOINT CIVIL COUR T SENIOR DIVISION, PUNE IN THEIR SPECIAL CIVIL SUIT NO. 264 / 99 & 763 / 99, WHICH I S NOW ADMITTED BEFORE HIGH COURT MUMBAI & THUS SUB-JUDICE. THE LEARNED DCIT HAS ERRE D IN NOT APPRECIATING THAT THE AMOUNT RECEIVED BUT IN DISPUTE COULD NOT BE TAXED, WHEN THE SAME WAS CLEARLY BROUGHT TO HIS NOTICE & THE SUPREME COURT DECISIONS IN THE RESPECT WERE SIGHTED TO HIM. 5. THE LEARNED DCIT HAS ERRED IN CALCULATING THE AM OUNT OF CONSIDERATION RECEIVED TO THE APPELLANT AT RS. 18800000/- BY WAY OF DEVELOPMENT & CONSTRUCTION OF 5 COMPLEXES BEING MANGAL KARYALAYA, GARDEN HOTEL, C INEMA HALL, HOTEL, RESIDENTIAL BUNGALOW WHEN THE VALUATION THERE OF IS CLEARLY IN DISPUTE. A. THE LEARNED CIT (A) & THE LEARNED DCIT HAS CLEAR LY ERRED IN LAW IN NOT CONSIDERING THE VALUATION REPORT SUBMITTED BY T HE APPELLANT IN RESPECT OF VALUATION OF PART CONSTRUCTION OF AMENIT Y SPACES. THE LEARNED CIT (A) & THE LEARNED DCIT HAS NOT EVEN COM MENTED ON ITS SUBMISSION. 6. THE LEARNED DCIT & THE LEARNED CIT (A) HAS ERRED IN NOT GIVING ME OPPORTUNITY OF PRESENTING THE VALUATION OF THE LAND AS TO 01.04.1981 & CONSIDERED IT AT RS. 5/- PER SQ. FT. SU MOTTO WITHOUT HEARING MY SIDE ON THE ISSUE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS & APPELLATE PROCEEDINGS I HAVE PRESENTED MY VALUATION REPORT WHICH IS GOT DONE FROM GOVERNMENT REGISTERED VALUER. 7. THE LEARNED DCIT HAS ERRED IN CALCULATING THE AM OUNT OF RS. 2100000/- IN THE TOTAL CONSIDERATION RECEIVED WHEN THE SAME WAS RECEIVED AS REFUNDABLE DEPOSIT & IS STILL SHOWN AS LIABILITY IN MY BOOKS OF ACCOUN T. 8. THE APPELLANT CRAVES TO ADD, DELETE, ALTER, AMEN D OR MODIFY ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. THE PRESENT CASE HAS A LONG CHEQUERED HISTORY. T HE MATTER HAS TRAVELED TO THE TRIBUNAL (ITAT) FOR THE THIRD TIME ON THE SA ME CAUSE OF ACTION. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE IS THAT THE D IRECTIONS OF THE TRIBUNAL 3 ITA NO.826/PN/2014 GIVEN ON TWO OCCASIONS IN THE PAST HAVE NEITHER BEE N COMPLIED BY THE REVENUE IN LETTER NOR IN SPIRIT AND THE ASSESSMENT FRAMED I S NOT CONSISTENT WITH THE LEGAL POSITION ENUNCIATED IN THIS REGARD. 4. A BRIEF RECITAL OF RELEVANT FACTS PERTINENT TO C ASE WOULD BE NECESSARY FOR ADJUDICATION IN THIS THIRD ROUND OF PROCEEDINGS BEF ORE TRIBUNAL. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN TRADING OF AGRICULTURAL IM PLEMENTS. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31.08.1999 DISC LOSING TOTAL INCOME OF RS.14,49,000/- AND AGRICULTURAL INCOME OF RS.2,16,0 00/-. A SURVEY WAS CONDUCTED UNDER SECTION 133A OF THE ACT AT THE BUSI NESS PREMISES OF THE ASSESSEE ON 28.01.2001. DURING THE COURSE OF SURVEY ACTION AND SUBSEQUENT ENQUIRIES, IT WAS FOUND THAT THE ASSESSEE HAS EARNE D INCOME ON SALE OF LAND WHICH IS NOT REFLECTED IN THE RETURN OF INCOME. CON SEQUENTLY, PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE INITIATED TO ASSE SS THE ALLEGED ESCAPEMENT. PURSUANT THERETO, RE-ASSESSMENT ORDER WAS FINALIZED ON 19.03.2003 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.4,10,98,480/ - AS AGAINST THE RETURNED INCOME OF RS.14,49,000/-. THE SUBJECT MATTER OF DIS PUTE AS PER THE AFORESAID REASSESSMENT ORDER WAS THE CHARGEABILITY OF CAPITAL GAINS ON TRANSFER OF FSI (FLOOR SPACE INDEX) IN THE FACTS OF THE CASE. THE C APITAL GAIN WHICH ALLEGEDLY ESCAPED ASSESSMENT WAS COMPUTED BY THE AO AT RS. 3, 92,74,464/-. THE SALE CONSIDERATION OF IMPUGNED FSI OF 101252 SQ.FT WAS C OMPUTED AT RS. 4,12,69,550/- APPLYING RATE AT 550/- PER SQ. FT AS PER AGREEMENT DATED 20-06- 1996. THE INDEXED COST OF ACQUISITION OF PROPORTION ATE FSI WAS COMPUTED AT A FAIR MARKET VALUE AS ON 1-4-1981 AT RS. 19,94,986/- ( REVISED TO RS.33,82,297 IN THE FINAL ASSESSMENT ORDER PRESENTLY APPEALED AGAINST ) . THE REASSESSMENT ORDER BRINGING THE PURPORTED CAPITAL GAINS ON SALE OF FSI TO TAXAT ION BY THE AO WAS CHALLENGED BEFORE THE CIT(A). THE CIT(A), HOWEVER, CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER VIDE ITS ORDER DATED 31.12.2003 O N THE PREMISE THAT THE ASSESSEE WAS ENTITLED TO RECEIVE THE CONSIDERATION IN CASH AND/ OR IN KIND DUE THE TRANSFER / SALE OF FSI STATED TO HAVE BEEN EFFE CTED IN AY 1999-2000. AGAINST THIS ORDER, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE ITAT, PUNE. THE ASSESSEE INTER ALIA CHALLENGED THE ORDER OF THE REVENUE ON THE GROUND THAT THERE IS NO TRANSFER OF FSI BY VIRTUE OF AGREEMENT OF THE ASSESSEE WITH 4 ITA NO.826/PN/2014 DEVELOPER M/S KOLTE PATIL ENTERPRISES DATED 20-06-1 996. THE CO-ORDINATE BENCH OF ITAT, PUNE VIDE ITS COMBINED ORDER DATED 2 1.06.2005 ( FIRST ORDER) FOR THE AY 1997-98, 1998-99 & 1999-2000 CONCLUDED O N APPRECIATION OF FACTS EXISTING IN THE CASE THAT THERE WAS A TRANSFER OF FSI AS ENVISAGED UNDER SECTION 2(47)(V) OF THE INCOME TAX ACT, 1961 ( THE ACT). HOWEVER, THE CASE WAS SET-ASIDE TO THE FILE OF THE ASSESSING OFFICER ALBEIT FOR THE LIMITED PURPOSE OF DE NOVO EXAMINATION OF QUANTUM OF CAPITAL GAINS TO BE RIGH TLY ASSESSED INTER-ALIA IN ASSESSMENT YEAR 1999-2000 ALONG WITH ASSESSMENT YEARS 1997-98 AND 1998-99. THE ASSESSING OFFICER WAS FURTHER DIR ECTED BY THE ITAT TO MAKE ALL THE INFORMATION/DOCUMENTS FILED BEFORE HIM BY T HE BUILDER/DEVELOPER FIRM NAMELY KOLTE PATIL ENTERPRISES AVAILABLE TO THE A SSESSEE AND GIVE THE OPPORTUNITY OF EXAMINATION TO THE ASSESSEE AS PER L AW. AS A CONSEQUENCE TO THE ORDER OF THE ITAT DATED 21.06.2005, THE ASSESSING O FFICER ONCE AGAIN COMPLETED THE ASSESSMENT PROCEEDINGS UNDER S. 143(3 ) R.W.S. 254 OF THE ACT VIDE ORDER DATED 29.12.2006. THE INCOME TOWARDS CAP ITAL GAINS WERE RE- COMPUTED AT RS. 8,83,15,353/-. THIS ORDER WAS AGAIN CHALLENGED BEFORE THE CIT(A). THE CIT(A) IN THE SECOND ROUND OF PROCEEDIN GS BEFORE IT FURTHER ENHANCED THE IMPUGNED CAPITAL GAINS TO RS. 10,26,16 ,503/- VIDE ITS ORDER DATED 20/09/2007. AN APPEAL WAS ONCE AGAIN PREFERRED BEFO RE THE ITAT, PUNE AGAINST THIS ORDER OF THE CIT(A). THE CO-ORDINATE B ENCH OF ITAT, PUNE ONCE AGAIN VIDE ITS ORDER DATED 22.02.2011 SET-ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO RE-ASSESS THE MATTER AFTER GIVING OF OPPORTUNITY OF CROSS-EXAMINATION OF CERTAIN WITNESS ES REFERRED TO IN PARA 7 OF ITS ORDER WHICH IS REPRODUCED IN PARA 6.4 OF THIS O RDER. 5. AS A SEQUEL TO THE DIRECTIONS OF THE ITAT, PUNE, THE ASSESSING OFFICER ONCE AGAIN COMPLETED THE ASSESSMENT VIDE ORDER DATE D 07.07.2011 FOR THE THIRD TIME. THE CAPITAL GAIN FOR TAXATION PURPOSES WAS CO MPUTED AT RS. 2,35,17,703/. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 13.12.2013. THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL IN THE THIRD ROUND OF PROCEEDINGS AGAINST THE AFORESAID ORDER OF THE CIT(A). 5 ITA NO.826/PN/2014 6. TO PUT THE FACTS IN PERSPECTIVE, AS NOTED BY THE ITAT IN ITS FIRST ORDER DATED 21-06-2005, THE ASSESSEE OWNED ANCESTRAL LAND BEARING SURVEY NO.16/1 AT MAUZE WADGAON SHERI, TAL. HAVELI, DIST. PUNE, AD MEASURING 8 HECTARES 25 ARES I.E. ABOUT 20 ACRES. DURING THE FINANCIAL YEAR 1996-97, THE ASSESSEE ENTERED INTO AN AGREEMENT DATED 20-06-1996 ( DEVELO PMENT AGREEMENT ) WITH DEVELOPER M/S KOLTE PATIL ENTERPRISES AND AGREED TO SELL A PROPORTIONATE UNDIVIDED SHARE OF FSI FOR A CERTAIN PORTION (ADMEA SURING APPROX. 10 ACRE) OF THE ABOVE PROPERTY FOR A SALE PRICE OF RS. 550 PER SQ.FT. AS PER THE DEVELOPMENT AGREEMENT, THE DEVELOPER WAS TO DEVELOP THE SAID LA ND AND PROMOTE OWNERSHIP SCHEME BY CONSTRUCTING BUILDING/ APARTMENTS FOR AND ON BEHALF OF THE PROSPECTIVE FLAT PURCHASERS. AS PER TERMS OF AGREEM ENT, THE DEVELOPER/BUILDER M/S KOLTE PATIL ENTERPRISES WAS ENTITLED TO SALE UN DIVIDED FSI AVAILABLE IN THE ABOVE PROPERTY TO PROSPECTIVE FLAT / TENEMENT PURCH ASERS FOR A CONSIDERATION OF RS.550 PER SQ.FT. AS PER PARAGRAPH 3 (PAGE 6) OF TH E AGREEMENT NOTED AS UNDER :- THE OWNERS DO HEREBY AGREE TO SELL TO EACH OF THE PROSPECTIVE FLAT/TENEMENT PURCHASERS (WHO SHALL ENTER INTO AN AGREEMENT WITH PROMOTER/DEVELOPER) PROPORTIONATE UNDIVIDED SHARE OF FSI IN THE PROPERT Y DESCRIBED IN SCHEDULE B WRITTEN HEREUNDER, FOR THE CONSIDERATION OF RS.550/ - (RS. FIVE HUNDRED FIFTY ONLY) PER SQ.FT. IT SHALL BE RESPONSIBILITY OF PROMOTER/DEVEL OPER TO COLLECT THE SAID AMOUNT OF CONSIDERATION FROM INDIVIDUAL PROSPECTIVE PURCHASER , AT THE TIME OF AGREEMENTS AND/OR CONVEYANCE BETWEEN OWNERS AND FLAT PURCHASER , AND HAND OVER THE SAME TO THE OWNERS, AS PER ACTUAL COLLECTIONS. 6.1 IT WAS AGREED THAT THE PROMOTER/DEVELOPER WOULD BE RESPONSIBLE TO COLLECT SAID AMOUNTS FROM THE PROSPECTIVE PURCHASER S AT THE TIME OF AGREEMENT AND HANDOVER THE SAME AS PER ACTUAL REALISATIONS. T O FACILITATE GIVING EFFECT TO THE AFORESAID AGREEMENT, THE ASSESSEE ALSO SIMULTAN EOUSLY EXECUTED A GENERAL POWER OF ATTORNEY ON THE SAME DATE I.E. DATED 20.06 .1996 IN FAVOUR OF THE BUILDER/DEVELOPER M/S KOLTE PATIL ENTERPRISES. THE ASSESSEE ENTERED INTO YET ANOTHER AGREEMENT WITH THE BUILDER/DEVELOPER ON 20. 06.1996 WHICH IS TERMED AS AGREEMENT (COMPLEXES). BY VIRTUE OF THIS AGREE MENT, THE BUILDER/DEVELOPER WAS REQUIRED TO CONSTRUCT CERTAIN AMENITIES AND COMPLEXES BEING MANGAL KARYALAYA, GARDEN HOTEL, CINEMA HALL, HOTEL, RESIDENTIAL BUNGALOW, ETC. AND COST OF CONSTRUCTION THEREOF WAS AGREED TO BE ADJUSTED AGAINST THE AMOUNT DUE AND PAYABLE BY M/S KOLTE PAT IL ENTERPRISES SO COLLECTED ON ACCOUNT OF SALE/TRANSFER OF FSI AT RS.550 PER SQ .FT. IN TERMS OF EARLIER 6 ITA NO.826/PN/2014 AGREEMENT ENTERED ON THE SAME DAY. A SURVEY WAS CO NDUCTED UNDER SECTION 133A OF THE ACT ON THE ASSESSEE ON 28-01-2001. ENQU IRIES WERE CONDUCTED BY THE AO FROM BUILDER/ DEVELOPER - M/S KOLTE PATIL EN TERPRISES. THE LETTERS FROM DEVELOPER TO THE AO ALLEGED SALE OF FSI DURING ACCO UNTING YEAR RELEVANT TO AY 1997-98, 1998-99 AND 1999-2000. ON THE BASIS OF INF ORMATION RECEIVED FROM THE BUILDER/ DEVELOPERS, THE ASSESSING OFFICER ASSE SSED THE CAPITAL GAIN ON TRANSFER OF PARCEL OF LAND AT RS.3,92,74,464/- FOR THE IMPUGNED ASSESSMENT YEAR 1999-2000. THE ASSESSEE CONTENDED BEFORE THE ITAT T HAT CLAIM OF DEVELOPER TO HAVE SOLD FSI TO PROSPECTIVE BUYERS IS NOT BASED ON ANY DOCUMENTARY EVIDENCES. CERTAIN ALLOTMENT CUM AGREEMENT LETTERS PURPORTEDLY ISSUED TO SO CALLED PURCHASERS OF FSI BY THE DEVELOPERS IS THE B ASIS OF TRANSFER CLAIMED BY THE DEVELOPERS. THE ASSESSEE CONTENDED THAT THE ALL OTMENT CUM AGREEMENT LETTERS WERE MERELY ON PLAIN PAPERS AND NOT ANY JUD ICIAL PAPERS. THESE PLAIN LETTERS WERE FALSELY INTRODUCED AND FILED BEFORE AO BY THE DEVELOPERS AS AN AFTER THOUGHT TO SUBSTANTIATE ITS FALSE CLAIM AND C AUSE TROUBLE TO THE ASSESSEE. THIS WAS SO DONE BECAUSE THE POWER OF ATTORNEY AND AGREEMENT BOTH DATED 20- 06-1996 WERE TERMINATED SUBSEQUENTLY. LIKEWISE, ANO THER AGREEMENT FOR CONSTRUCTION OF AMENITIES SUCH AS CINEMA HALL, HOTE L, MANGAL KARYALAYA ETC. WERE ALSO CANCELLED. THERE WAS NO EXECUTION AND RE GISTRATION OF BONAFIDE DEED OF SALE IN FAVOUR OF FLAT / TENEMENT PURCHASERS FOR SALE OF FSI RIGHTS. THERE IS NO TRANSFER OF FSI AS THERE WERE NO REGISTERED SALE DEED IN FAVOUR OF THE PURPORTED FLAT PURCHASERS. NO POSSESSION WERE GIVEN TO THE FLAT OWNERS EITHER. THE ASSESSEE REQUESTED FOR CROSS EXAMINATION OF THE PARTNERS AND CERTAIN OTHER KEY PERSONS OF DEVELOPERS TO EXPLODE THE MYTH AND U NEARTH THE TRUTH. THE MAIN PLEA OF THE ASSESSEE WAS THAT THE ORDER OF THE REVE NUE IS BASED ON UNSUBSTANTIATED AND UNPROVED FALSE CLAIMS OF DEVELO PERS TOWARDS SALE OF FSI TO THE PREJUDICE OF THE ASSESSEE. THE TRIBUNAL RELYING ON THE DEFINITION OF TRANSFER UNDER S. 2(47) AND THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT (2003) 260 ITR 491 (BOM) CAME TO THE CONCLUSION THAT TRANSFER IN THE PRESENT CASE CA N BE INFERRED WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT. HOWEVER, TH E TRIBUNAL ALSO NOTICED THAT COMPUTATION OF CAPITAL GAINS MADE IS BASED ON THE INFORMATION/ LETTERS FURNISHED BY THE BUILDER/ DEVELOPER TO THE AO OF TH E ASSESSEE. NO CROSS 7 ITA NO.826/PN/2014 EXAMINATION OF PARTNERS OF KOLTE PATIL ENTERPRISES IN RELATION TO ITS CONTENTS OF VARIOUS COMMUNICATIONS MADE BY THEM TO AO WAS PROVI DED AS DEMANDED BY THE ASSESSEE. THUS, THE ITAT SET-ASIDE THE ORDER AN D REMANDED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTIONS F OR MAKING AVAILABLE ALL THE INFORMATION/DOCUMENTS FILED BEFORE THE ASSESSING OF FICER BY THE BUILDER/DEVELOPER TO THE ASSESSEE AND TO GIVE OPPOR TUNITY OF CROSS-EXAMINATION AND COMPUTE THE QUANTUM OF LONG TERM CAPITAL GAIN( LTCG) TO BE ASSESSED AS MAY BE ATTRIBUTABLE TO ASSESSMENT YEARS INVOLVED NA MELY 1997-98, 1998-99 AND 1999-2000. 6.2 IN CONSEQUENCE TO THE AFORESAID ORDER OF ITAT I N THE FIRST ROUND, THE ASSESSING OFFICER PASSED ASSESSMENT ORDER UNDER SEC TION 143(3) R.W.S. 254 OF THE ACT DATED 29.12.2006 WHEREBY HE COMPUTED THE CA PITAL GAIN AT RS.8,83,15,353/- AND TOTAL INCOME WAS DETERMINED AT RS.9,01,39,370/-. AS NOTED EARLIER, THE CIT(A) ENHANCED THE CAPITAL GAIN OF RS.8,83,15,353/- TO RS.10,26,16,503/- AFTER GIVING ALLOWANCE OF INDEXED COST. THUS, THE INCOME WAS ENHANCED BY RS.1,43,01,150/-. THE ENHANCEMENT W AS EFFECTED BY THE CIT(A) FOR THE REASON THAT THE AO HAD WRONGLY ADOPT ED THE FSI OF 166460 SQ. FT. AS AGAINST THE FSI OF 173879 SQ.FT. CLAIMED BY THE ASSESSEE BEFORE THE CIVIL COURT IN ONGOING LITIGATION. 6.3 THE ASSESSEE ASSAILED THE ORDER OF CIT(A) PASS ED IN THE SECOND ROUND OF PROCEEDINGS BEFORE THE ITAT ONCE AGAIN. FOR THE SAK E OF COMPLETENESS, IT WILL BE QUITE USEFUL TO REPRODUCE THE CONTENTIONS OF THE ASSESSEE HIGHLIGHTING CRUCIAL FACTS COMPREHENSIVELY BEFORE THE ITAT IN TH E SECOND ROUND OF PROCEEDINGS. THE RELEVANT PORTION IS QUOTED AS UND ER: 4. BEFORE THE TRIBUNAL, THE LD. A.R. REITERATED TH E SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW WITH ASSERTION THAT M/S. KOLTE PA TIL ENTERPRISES (DEVELOPER) WAS NOT THE PURCHASER OF THE PROPERTY, BUT WAS ONLY ENTRUSTED T O EFFECT THE SALE OF THE PROPORTIONATE LAND OF THE ASSESSEE TO THE ULTIMATE BUYERS OF FLATS/UNI TS AND THEREFORE, THE POSSESSION AND POWER OF ATTORNEY GIVEN TO THEM DO NOT HAVE RELEVANCE FOR DETERMINING THAT THERE WAS ANY TRANSFER OF LAND TO THEM. THE AUTHORITIES BELOW SHOULD HAVE DETERMINED THE QUESTION OF TRANSFER WITH REFERENCE TO EACH INDIVIDUAL PURCHASER OF FLAT/UN IT. SHE SUBMITTED THAT THE SO-CALLED 225 SALE AGREEMENTS WERE FICTIONAL AND THEY WERE IN ALL SHAM AND INEFFECTIVE IN LAW. THUS THE COMPUTATION OF CAPITAL GAIN COULD NOT BE BASED ON T HE SAME. THE LD. A.R SUBMITTED FURTHER THAT THE LD CIT(A) ALSO FAILED TO CONSIDER THAT THE ORDER DT. 21ST JUNE 2005 OF THE TRIBUNAL 8 ITA NO.826/PN/2014 IN ITA NO. 994, 995/PN/2003 AND 315/PN/2005 HAS NOT BEEN FULLY COMPLIED WITH BY THE A.O. SHE SUBMITTED THAT NO FSI HAS BEEN SOLD DURING THE YEAR. SHE ALSO REFERRED THE FOLLOWING LIST OF EVENTS REPRODUCED BY THE LD CIT(A ) AT PAGE NO. 18 & 19 OF THE FIRST APPELLATE ORDER. SR.NO. DATE EVENTS 1 4.10.95 LAND AT S.NO.16/1 VADGAON SHERI, PUNE -14 RELEASED U/S(1) OF ULC ACT 1976. 2 20.6.96 AGREEMENT WITH KOLTE -PATIL ENTERPRISES, PUNE FOR SELLING UNDIVIDED FSI ON LAND AT S.NO. 16/1 VADGAON SHERI , PUNE 411 014, TO THE PROSPECTIVE BUYERS OF A FLAT / TEN EMENT PURCHASERS, WHO SHALL ENTER INTO AN AGREEMENT WITH THE PROMOTER/BUILDER. 3 20.6.96 POWER OF ATTORNEY IN RESPECT OF LAND OF SR. NO. 16/1VADGAON SHERI, PUNE 411 014 WAS GIVEN TO SH RI. RAJESH A. PATIL & MILIND D. KOLTE IN ORDER TO FACIL ITATE THE AGREEMENT TOOK PLACE AS ABOVE. 4. 20.06.96 ASSESSEE ENTERED INTO AN AGREEMENT FOR CONSTRUCTION OF MANGAL KARYALAYA, GARDEN, HOTEL, CINEMA H ALL & RESIDENTIAL BUNGALOW. 5. 21.06.96 SUPPLEMENTARY AGREEMENT ENTERED WITH M/ S. KOLTE PATIL ENTERPRISES, PUNE 6. 08.08.96 COLLECTOR, PUNE, PASSED THE N.A. ORDER FOR ABOVE LAND. 7 31.08.97 RETURN OF INCOME TAX FOR A.Y. 1997 -98 FILED. 8 05.06.98 PLAN SANCTIONED BY PMC 9 12.11.98 ASSESSEE TERMINATED AGREEMENT DT. 20.06.1996 FOR CONSTRUCTION OF AMENITIES FOR THE ASSESSEE. 10 24.12.98 POWER OF ATTORNEY DT. 20.06.1996 CANCELLED. 11 31.12.98 FACT OF CANCELLATION OF POWER OF ATTORNEY PU BLISHED IN LOCAL NEWSPAPER. 12 05.01.99 ASSESSEE CANCELLED AGREEMENT FOR SALE OF FSI T O PROSPECTIVE BUYERS DT. 20.06.1996 & 21.06.1996 13 13.01.99 FACT OF CANCELLATION OF AGREEMENT PUBLISHED I N LOCAL N EWSPAPER. 14 17.02.99 RETURN OF INCOME FOR A.Y. 1998 -99 FILED. 15 - VARIOUS CIVIL SUITS FILED BY THE ASSESSEE AGAI NST KOLTE PATIL ENTERPRISES. 16 31.08.99 RETURN OF INCOME FOR A.Y. 1999 -2000 FILED. 17 12.01.01 LETTER BY KOLTE PATIL ENTERPRISES TO THE ASSESSING DCIT, CIRCLE 2(4) PUNE 18 31.01.01 LETTER BY KOLTE PATIL ENTERPRISES TO THE ASSESSING DCIT, CIRCLE 2(4) PUNE 19 08.02.01 LETTER BY KOLTE PATIL ENTERPRISES TO THE ASSESSING DCIT, CIRCLE 2(4)PUNE. 20 11.12.01 SEARCH & TITLE REPORT OF ADV. VAMAN S. SOLANKAR OBTAINED 21 15.12.01 LETTER FROM P M C STATING DATE OF COMMENCEM ENT AS 9 ITA NO.826/PN/2014 12.11.1998 22 20.02.03 REMAND REPORT SUBMITTED BY AO TO CIT(A) CONTAINING DETAILS & COPIES OF ALLOTMENT LETTER. 23 21.06.05 ORDER OF ITAT, PUNE PASSED DIRECTING RE ASSESSMENT IN THE MATTER BY GIVING CROSS EXAMINATION TO THE ASSESSE E OF CERTAIN PERSONS 24 30.12.06 RE -ASSESSMENT PROCEEDINGS COMPLETED BY LEARNED DCIT, CIRCLE-II, PUNE 5. THE LD. A.R. REFERRED PAGE NO. 39, CONTENTS OF C LAUSE NO. 3 AT PAGE NOS. 6 OF THE AGREEMENT DATED 20TH JUNE 1996 WITH THE DEVELOP ER, COPY MADE AVAILABLE AT PAGE NOS. 384 TO 406 OF THE PAPER BOOK. IN THIS CLA USE NO.3 AT PAGE NO. 6, IT WAS AGREED UPON THAT IT SHALL BE RESPONSIBILITY OF PROM OTER/DEVELOPER TO COLLECT THE AGREED AMOUNT OF CONSIDERATION FROM INDIVIDUAL PROS PECTIVE PURCHASER AT THE TIME OF AGREEMENT AND /AS BEYOND THE CONVEYANCE BETWEEN THE OWNERS AND FLAT PURCHASERS AND HAND OVER THE SAME TO THE OWNER AS PER ACTUAL C OLLECTIONS. THE DEVELOPER, HOWEVER, VIOLATED THESE TERMS OF AGREEMENT AS NONE OF THE AGREEMENTS OR CONVEYANCE WERE EXECUTED BY THE DEVELOPER WITH/TO T HE BUYERS WITH CONSENT OF THE OWNER AS NONE OF THESE DOCUMENTS HAS BEEN SIGNED BY THE OWNER AS PER THE TERMS OF THE AGREEMENT. THE DEVELOPER, THE POWER ATTORNEY HO LDER WAS SUPPOSED TO ENTER IN AGREEMENT WITH THE PURCHASER FOR CONSTRUCTION OF FL AT/TENEMENT. THUS, IF AT ALL THE PROMOTER/DEVELOPER CLAIMS TRANSFER OF ANY FSI TO AN Y OF THE SO-CALLED BUYERS, HE WAS FIRST SUPPOSED TO PRODUCE THE AGREEMENT WITH THE SA ME BUYER FOR CONSTRUCTION OF THE FLAT/TENEMENT. IN THE PRESENT CASE, THE DEVELOPER/P ROMOTER HAS NOT BROUGHT ANY AGREEMENT FOR CONSTRUCTION OF FLAT/TENEMENT WITH TH E SAME BUYER. THE SO-CALLED CLAIM OF TRANSFER OF FSI VIDE LETTER DATED 13TH JANUARY 2 001, 28TH JANUARY 2001 AND 10.2.2001 HAS BEEN FURNISHED BY THE DEVELOPER TO SU BSTANTIATE HIS CLAIM FOR TRANSFER OF FSI, HAVE BEEN FURNISHED FOR THE FIRST TIME DURI NG THE COURSE OF ENQUIRY DIRECTED BY THE LD CIT(A). THESE LETTERS WERE NOT MADE AVAIL ABLE BEFORE THE A.O THOUGH IT WAS SPECIFICALLY ASKED BY THE A.O TO SUBSTANTIATE H IS CLAIM FOR TRANSFER OF FSI. THESE LETTERS DO NOT CONTAIN THE SIGNATURES OF THE SO-CAL LED PURCHASERS OF FSI. THEIR IDENTITY, ADDRESS HAVE ALSO NOT BEEN WRITTEN ON THO SE ALLOTMENT LETTERS. THE LD. A.R. SUBMITTED FURTHER THAT AS PER THE DIRECTIONS OF THE TRIBUNAL, THE ASSESSEE HAD REQUESTED THE A.O FOR ALLOWING HIM CROSS-EXAMINATIO N OF DEVELOPER/BUILDER AND CERTAIN OTHER PERSONS WHO WERE CLAIMED TO BE THE SO -CALLED PURCHASER OF FSI. THE A.O, HOWEVER, DID NOT ALLOW THE SAID REQUEST OF THE ASSESSEE. INSTEAD, THE A.O ALLOWED CROSS-EXAMINATION OF MR. MILIND KOLTE INSTE AD OF MR. RAJESH A. PATIL, WHO WAS THE OTHER PARTNER OF THE DEVELOPER FIRM, WHO HA D ACTUALLY DEALT WITH 89% OF THE SALE DEEDS AND THUS, HE WAS FULLY CONVERSANT WITH T HE ALLEGED TRANSACTIONS. OUT OF 225 SALE DEEDS REGISTERED, 200 WERE REGISTERED ON 1 5.12.1998, WHICH WERE SIGNED BY MR. RAJESH PATIL. ON THE CONTRARY, MR. KOLTE HAD SI GNED ONLY 25 SALE DEEDS REGISTERED ON 16.12.1998. BOTH THESE PARTNERS WERE POWER OF ATTORNEY HOLDER FOR THE FIRM ON BEHALF OF THE ASSESSEE. EVEN THE A.O HELD T HAT NON-ATTENDANCE OF MR. RAJESH PATIL FOR CROSS-EXAMINATION WOULD NOT SUFFICE THE P URPOSE FOR WHICH THE TRIBUNAL HAD SET ASIDE THE MATTER. THE LD. A.R. SUBMITTED FURTHE R THAT ON QUERIES REGARDING THE EXISTENCE OF SO-CALLED PURCHASERS AND ACTUAL HANDIN G OVER OF MONEY BY THE DEVELOPER TO ASSESSEE AS AGREED UPON, MR. KOLTE HAS GIVEN EVASIVE REPLY. THE LD. A.R. SUBMITTED FURTHER THAT SENSING FOUL PLAY BY TH E DEVELOPER, THE ASSESSEE HAD CANCELLED THE AGREEMENT DATED 20TH JUNE 1996 AND PO WER OF ATTORNEY OF THE SAME DATE I.E. 20.6.1996. VARIOUS CIVIL SUITS WERE FILED BY THE ASSESSEE AGAINST THE DEVELOPER. SHE SUBMITTED THAT IN ANSWER TO QUESTION NOS. 16 & 17, SHRI KOLTE REPLIED THAT HE DID NOT KNOW AS TO WHETHER THE AMOUNT COLLE CTED BY M/S. KOLTE PATIL ENTERPRISES FOR SALE OF FSI WAS APPEARING IN THE BA LANCE SHEET OR INCOME-TAX RETURN AS ALSO THE INCOME OF THE FIRM BY WAY OF SALE OF SU PER STRUCTURE ITSELF PROVED THAT THE REGISTERED SALE DEEDS WERE FAKE DOCUMENTS ONLY AND WERE REGISTERED IN ORDER TO CREATE THIRD PARTY INTEREST AND ALSO TO BRING THE A SSESSEE IN TROUBLE BEFORE THE 10 ITA NO.826/PN/2014 INCOME-TAX AUTHORITIES. IN ANSWER TO QUESTION NOS. 22 AND 23, MR. KOLTE REPLIED THAT HE DID NOT KNOW WHETHER THERE WERE SOME ALLOTMENT L ETTERS ISSUED BY HIS FIRM OR NOT AND THE IDENTITIES OF PEOPLE TO WHOM THE FIRM SOLD FSI WAS ALSO NOT KNOWN TO HIM. IN REPLY TO QUESTION NO. 24, MR. KOLTE ANSWERED THAT S IGNATURE FOR ACCEPTANCE OF FSI WAS NOT NECESSARY. THE LD. A.R. SUBMITTED THAT AS P ER REPORT OF THE COLLECTOR(STAMPS), SIGNATURE OF OTHER PARTY IS A MU ST AND THIS FACT HAS BEEN CERTIFIED BY THE COLLECTOR (STAMPS) IN HIS CERTIFICATES. SHE SUBMITTED THAT THERE REMAINS SEVERAL CONTRADICTIONS IN THE CROSS-EXAMINATIONS OF SHRI. KOLTE. IN REPLY TO QUESTION NO. 25, HE SUBMITTED THAT ADDRESSES OF PURCHASES WE RE AVAILABLE IN HIS OFFICE AND HE HAD TO VERIFY OFFICE RECORDS WHEREAS IN REPLY TO QU ESTION NO. 30, HE COULD NOT COMMENT ANYTHING. UNDER THESE CIRCUMSTANCES, IT COU LD BE SAFELY INFERRED THAT THE SO CALLED BUYERS WERE NOT IN EXISTENCE AND NO TRANSFER HAS BEEN TAKEN PLACE. MR. KOLTE ALSO COULD NOT ANSWER AS TO WHETHER HIS FIRM WAS SU PPOSED TO SALE SUPER STRUCTURE CORRESPONDING TO THE AVAILABLE FSI OR NOT. THE LD. A.R. SUBMITTED THAT IN ANSWER TO QUESTION NO. 34, MR. KOLTE CLAIMED THAT FSI ADMEASU RING 3,63,622 SQ. FT. WAS SOLD. SAME IS NOT CORRECT AS IT HAS BEEN ARGUED EARLIER T HAT NO FSI WAS EFFECTIVELY TRANSFERRED AS ALL THE 225 REGISTERED SALE DEEDS WE RE AB-INITIO VOID AND THERE WAS NO OTHER REGISTERED DOCUMENTS OTHER THAN THE SAME. THE STATEMENTS GIVEN BY MR. KOLTE WAS MISLEADING AND NOT SUPPORTED BY FACTS . THE LD. A.R. SUBMITTED FURTHER THAT THE TRIBUNAL ON FIRST OCCASION VIDE ITS ORDER DATED 21. 6.2005 HAS MADE OBSERVATIONS ABOUT THE COMPLETION OF TRANSFER OF LAND AS PER CLA USE (V) OF SECTION 2(47) OF THE ACT RELATING TO THE LAND BETWEEN ASSESSEE AND THE DEVEL OPER AND NOTHING HAS BEEN COVENANTED ABOUT THE TRANSFER OF FSI BETWEEN ASSESS EE AND THE BUYERS. ADMITTEDLY, THE DEVELOPER WAS NOT THE PURCHASER OF THE LAND BUT THEY HAD TO SALE THE FSI AFTER DEVELOPMENT AGAINST CONSIDERATION RECEIPT ON BEHALF OF THE ASSESSEE MAKING ASSESSEE A SIGNATORY ON EACH COVENANT. LD. A.R. SUBMITTED TH AT MR. KOLTE PATIL DURING HIS STATEMENT HAD CLAIMED THAT HE HAD PAID RS. 13 CRORE S TO THE ASSESSEE. HE CLAIMED TO HAVE BEEN PAID RS. 21 LAKHS AS DEPOSIT, RS. 58 LAKH S TOWARDS ALLEGED FSI SALE, RS.4,50,000,00/- BY WAY OF ALLOCATED CONSTRUCTION A ND RS. 7,68,94,875/- TOWARDS DAMAGES DEBITED. SHE SUBMITTED THAT THE FACTUAL POS ITION IS THAT THE ASSESSEE GOT ON RECORD THE PART CONSTRUCTION VALUED AT RS. 38.12 LA KHS (APPROXIMATELY), THEREFORE, THE AMOUNT CLAIMED FROM ASSESSEE WAS 11.81 TIMES HI GHER THAN THE REAL ONE. 6.4 TAKING NOTE OF THE SUBMISSIONS ON BEHALF OF THE ASSESSEE AS NOTED ABOVE AND HAVING REGARD TO THE TOTALITY OF CIRCUMSTANCES, THE TRIBUNAL ITS SECOND ORDER DATED 22.02.2011 ONCE AGAIN REMANDED THE MATT ER BACK TO THE FILE OF THE ASSESSING OFFICER TO AFFORD OPPORTUNITY OF CROSS-EX AMINATION OF THE WITNESSES AS REQUESTED BY THE ASSESSEE AND RE-COMPUTE THE CAP ITAL GAIN, IF ANY, IN THE HANDS OF THE ASSESSEE OUT OF THE TRANSACTIONS IN QU ESTION. THE RELEVANT OPERATIVE PARA OF THE TRIBUNAL ORDER IN THIS REGARD IS REPRODUCED HEREUNDER :- 7. CONSIDERING THE ABOVE SUBMISSIONS, WE ARE OF TH E VIEW THAT THE DIRECTIONS OF THE TRIBUNAL VIDE ITS ORDER DT. 21ST JUNE 2005 ON F IRST OCCASION HAS NOT BEEN PROPERLY COMPLIED WITH BY THE A.O. THOUGH LAW OF EVIDENCE AN D EQUITY DOES NOT APPLY IN THE MATTERS OF INCOME-TAX IN ITS STRICT SENSE, STILL JU STICE IS REQUIRED TO BE DONE WHILE ADJUDICATING THE MATTER OR FRAMING THE ASSESSMENT. THE AUTHORITIES BELOW SHOULD HAVE DETERMINED THE QUESTION OF TRANSFER WITH REFER ENCE TO EACH INDIVIDUAL PURCHASER OF FLAT/UNIT. CAPITAL GAIN IN THE HANDS OF THE ASSESSEE IS REQUIRED TO BE COMPUTED ON THE AMOUNT ACTUALLY RECEIVED BY THE ASS ESSEE, ESPECIALLY WHEN THERE IS SERIOUS DISPUTE BETWEEN THE ASSESSEE AND DEVELOPER ON THE VALIDITY OF THE SALE TRANSACTIONS ENTERED INTO BY THE DEVELOPER WITH 225 INDIVIDUALS AND ON THE PASSING 11 ITA NO.826/PN/2014 OF COLLECTED MONEY BY THE DEVELOPER TO THE ASSESSEE , ON THOSE ALLEGED TRANSACTIONS. IT IS AN ESTABLISHED PROPOSITION OF LAW THAT A.O. IS R EQUIRED TO FRAME JUST AND PROPER ASSESSMENT. WHEN AN ASSESSEE PROPOSES TO GIVE EVIDE NCE OF A MATERIAL FACT GOES TO THE ROOT OF THE MATTER AND REQUEST FOR SUMMONING SO ME WITNESSES IN THIS REGARD, IT IS THE DUTY OF THE A.O TO ALLOW THE SAME, ESPECIALLY W HEN THERE WAS SPECIFIC DIRECTIONS TO THIS EFFECT BY THE TRIBUNAL TO THE A.O. IT WAS N OT CORRECT TO SAY BY THE AO THAT THE CALLING OF SO-CALLED BUYERS AND SHRI RAJESH PATIL, THE OTHER PARTNER OF THE DEVELOPER FIRM M/S. KOLTE PATIL ENTERPRISES ( WHO REMAINED PA RTY ON BEHALF OF THE FIRM TO 200 SALE-DEEDS EXECUTED ON 15.12.1998 OUT OF TOTAL SALE DEEDS OF 225) WAS NOT RELEVANT ON THE PART OF THE ASSESSEE. IT IS RIGHT OF THE CLA IMANT TO ESTABLISH ITS CLAIM BY FURNISHING EVIDENCE. SUCH DENIAL OF SUCH RIGHT BY T HE A.O IS SERIOUS IN NATURE AS IT GOES AGAINST THE MOST REQUIRED PRINCIPLE OF NATURAL JUSTICE. EVEN FOR COMPUTATION OF CAPITAL GAIN IN THE HANDS OF ASSESSEE, AS FELT BY T HE TRIBUNAL ON FIRST OCCASION IN ITS ORDER DT. 21ST JUNE 2005 THAT AFFORDING OPPORTUNITY TO CROSS EXAMINE TO THE ASSESSEE ON THE INFORMATION/DOCUMENTS FILED BY BUILDER, DEVE LOPER WAS NECESSARY. IT WAS NECESSARY ALSO BECAUSE A.O WHILE COMPUTING CAPITAL GAIN IN THE HANDS OF THE ASSESSEE HAD RELIED UPON THE INFORMATION/DOCUMENTS FILED BEFORE HIM BY THE BUILDER/DEVELOPER, VALIDITY OF WHICH HAS BEEN DISPU TED BY THE ASSESSEE. UNDER THE CIRCUMSTANCES, EXAMINATION OF THE STATED BUYERS, AT LEAST SOME OF THEM CHOOSEN BY THE ASSESSEE OUT OF 225 WAS NECESSARY TO VERIFY THE CLAIMED SELLING OF FSI TO THEM BY THE DEVELOPER. THE A.O WAS VERY MUCH EMPOWERED TO S ECURE THE PRESENCE OF A WITNESS WHO AVOIDS HIS PRESENCE BEFORE HIM. IN OUR VIEW, IN THE PRESENT CASE, SHRI RAJESH PATIL, THE OTHER PARTNER OF THE DEVELOPER FI RM WHO HAD ENTERED INTO 200 SALE DEEDS ON BEHALF OF THE DEVELOPER IS AN IMPORTANT WI TNESS FOR VERIFICATION OF ACTUAL FACT OF THE ALLEGED TRANSACTION. SIMILARLY 225 PURC HASERS ARE EQUALLY IMPORTANT WITNESSES TO VERIFY THE ACTUAL TRANSACTION TO COMPU TE CAPITAL GAIN, IF ANY, IN THE HANDS OF THE ASSESSEE OUT OF THOSE TRANSACTIONS WIT H THE SAID PURCHASERS. SINCE THE A.O HAS FAILED IN HIS DUTY BY DENYING OPPORTUNITY T O THE ASSESSEE TO CROSS-EXAMINE ABOVE STATED RELEVANT WITNESSES DESPITE SPECIFIC RE QUEST OF THE ASSESSEE TO THIS EFFECT AND DIRECTIONS OF THE TRIBUNAL ON ITS FIRST OCCASIO N IN THIS REGARD, WE ARE HAVING NO OPTION BUT TO REMAND THE MATTER TO THE FILE OF THE A.O TO AFFORD OPPORTUNITY TO CROSS EXAMINE THE ABOVE STATED WITNESSES AS REQUESTED BY THE ASSESSEE AND COMPUTE THE CAPITAL GAINS IF ANY IN THE HANDS OF THE ASSESSEE O UT OF THE TRANSACTIONS IN QUESTION. SINCE IT IS AN OLD MATTER AND FURTHER OPPORTUNITY I S GIVEN TO THE PARTIES, THE A.O IS DIRECTED TO COMPUTE THE CAPITAL GAIN, IF ANY, IN TH E HANDS OF THE ASSESSEE WITHIN 4 MONTHS FROM THE DATE OF RECEIPT OF THE PRESENT ORDE R. IT IS NEEDLESS TO MENTION THAT WHILE DETERMINING CAPITAL GAIN, IF ANY, IN THE HAND S OF THE ASSESSEE BASED ON EVIDENCE AS DIRECTED, THE A.O WILL AFFORD ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS ARE THUS ALLOWED FOR STATISTI CAL PURPOSES. 6.5 A BARE READING OF THE ORDER OF THE ITAT IN THE SECOND ROUND OF PROCEEDINGS AS NOTED ABOVE WOULD REVEAL THAT THE IT AT NOTICED THAT EARLIER DIRECTIONS OF THE ITAT WERE NOT PROPERLY COMPLIED W ITH BY THE AO. THE MATTER WAS ONCE AGAIN REMANDED BACK TO THE FILE OF THE AO WITH DIRECTIONS NAMELY (I) FOR ALLOWING CROSS EXAMINATION OF THE PARTNERS OF D EVELOPER M/S KOLTE PATIL ENTERPRISES INCLUDING MR. RAJESH PATIL (II) FOR ALL OWING THE ASSESSEE TO CROSS EXAMINE PURPORTED 225 PURCHASERS OF FSI (III) TO CA LCULATE THE LONG TERM CAPITAL GAINS, IF ANY, ON THE CONSIDERATIONS ACTUAL LY RECEIVED BY THE ASSESSEE HAVING REGARD TO THE OUTCOME OF SUCH ENQUIRIES AND CROSS EXAMINATIONS. 12 ITA NO.826/PN/2014 6.6 THE ITAT INTER ALIA NOTICED FACT OF SERIOUS DISPUTES SUBSISTING BETWEEN THE ASSESSEE AND DEVELOPER ON THE VALIDITY OF SALE TRANSACTIONS ENTERED INTO BY THE DEVELOPER WITH 225 INDIVIDUALS AND THE PASSING OF COLLECTED MONEY BY THE DEVELOPER TO THE ASSESSEE ON THOSE ALLEGED TRANSACT IONS. IN THIS BACKGROUND, DIRECTIONS WERE GIVEN TO COMPUTE THE LTCG ON ACTUAL AMOUNT RECEIVED AS NOTED ABOVE. 7. HOWEVER, THE AO SHOWED ITS RESISTANCE TO ACCEPT THE DIRECTIONS OF THE ITAT PASSED IN THE SECOND ROUND ON THE PRETEXT THAT AN APPEAL UNDER S. 260A HAS BEEN PREFERRED BEFORE THE JURISDICTIONAL HIGH C OURT. THE AO CITED VARIOUS REASONS WHICH ACCORDING TO HIM RENDERED THE ORDER O F THE ITAT UNWORKABLE. IT WAS NOTED BY THE AO THAT ALLOWING CROSS EXAMINATION OF 225 PURCHASERS OF FSI IS CONTRADICTORY TO ITS OWN CONCLUSION DRAWN IN ITS EARLIER ORDER DATED 21-06- 2005. THE DIRECTION OF THE ITAT TO COMPUTE THE LTCG WITH REFERENCE TO AMOUNT ACTUALLY RECEIVED WAS ALSO FOUND NOT JUSTIFI ED BY THE AO. ACCORDING TO THE AO, THE ASSESSEE IS LIABLE FOR TAXATION OF ENTI RE CAPITAL GAINS IRRESPECTIVE OF RECEIPTS OF SALE PROCEEDS OR OTHERWISE AS PER THE S CHEME OF TAXATION. 7.1 IN CONSEQUENCE OF THE ORDER OF THE ITAT IN THE SECOND ROUND HEREINABOVE REFERRED, THE AO IN THE THIRD ASSESSMEN T ORDER DATED 07/07/2011 WHICH IS SUBJECT MATTER OF PRESENT APPEAL INTER ALIA NOTED THAT (I) CIVIL COURT IN THE CIVIL SUIT FILED BY THE ASSESSEE AGAINST M/S KO LTE PATIL ENTERPRISES AND OTHERS, HAS CONCLUDED THAT ALL THE AGREEMENTS ENTER ED BY THE ASSESSEE WITH M/S KOLTE PATIL ENTERPRISES INCLUDING THE 225 AGREEMENT S FOR SALE OF FSI ARE VALID. FOR COMING TO THIS CONCLUSION, HE NOTED THAT THE CI VIL COURT HAS EXAMINED ALL THE PURCHASERS. THEREFORE, THE DIRECTIONS OF THE IT AT TO CARRY OUT SAME AGAIN IS AN EXERCISE OF FUTILITY. (II) THE AO ALSO NOTED THE DIRECTIONS OF THE ITAT THAT CAPITAL GAINS QUANTUM IS TO BE DETERMINED FROM MONI ES RECEIVED FROM THE PURCHASERS OF FSI AFTER EXAMINING THEM AND QUESTION ED THE WISDOM OF ITAT ON THE GROUND THAT THESE PURCHASERS WERE NEVER A PA RTY IN THE ORIGINAL AGREEMENT DATED 20/06/1996 ON THE BASIS OF WHICH CA PITAL GAIN IS TO BE DETERMINED. 13 ITA NO.826/PN/2014 7.2 THE AO ALSO NOTED THAT ORDER OF THE CIVIL COURT DATED 03/01/2007 HOLDING THE TRANSFERS AS VALID AND BUYERS OF FSI AS GENUINE BEING SUB JUDICE BEFORE JURISDICTIONAL HIGH COURT AND THEREFORE, THE ITAT COULD NOT HAVE GIVEN THE DIRECTIONS TO REEXAMINE THE SAID PURCHASERS FOR THE PURPOSES OF DETERMINING THE VALIDITY OF VARIOUS AGREEMENTS. HE FURTHER NOT ED THAT ITAT ITSELF HAS NOTED THAT AGREEMENT FOR SALE OF FSI IS VALID AND THEREFO RE ASCERTAINING THE GENUINENESS OF TRANSACTIONS RELATING TO SALE OF FSI TO 225 PURCHASERS IS ERRONEOUS. 7.3 THE AO ALSO BENEVOLENTLY NOTED THAT CROSS EXAMI NATION OF SHRI RAJESH PATIL PARTNER OF THE DEVELOPER FIRM WAS CARRIED O UT ON 23/06/2011 IN TERMS OF DIRECTIONS OF THE ITAT. THE WITNESS, SHRI PATIL ALL THROUGHOUT RELIED UPON THE JUDGMENT OF THE CIVIL COURT WHERE ACCORDING TO HIM, THE MATTER OF GENUINENESS OF THE SALE AGREEMENTS OF FSI AND EXISTENCE OF THE PURCHASERS HAVE BEEN ESTABLISHED AFTER EXAMINING THE SAID PURCHASERS. TH E AO STRONGLY RELIED UPON THE FINDINGS OF THE CIVIL COURT TO THE EFFECT THAT THE EXISTENCE OF NAME OF PERSONS IN SALE DEEDS CANNOT BE DOUBTED. THE OTHER FINDING OF THE CIVIL COURT IS TO THAT THE DEVELOPERS HAVE NOT EXCEEDED THE POWERS CONFERRED ON THEM BY POWER OF ATTORNEY WHEN THE SALE DEEDS WERE EXECUTED WAS ALSO REFERRED. THE CIVIL COURT HAD INTER ALIA ALSO NOTED THAT THIRD PARTY INTEREST WAS DULY CREAT ED IN THE SUIT PROPERTY BEFORE THE ALLEGED TERMINATION OF AGREEMENT. 7.4 THE AO ALSO MADE AVERMENTS TO THE EFFECT THAT I N TERMS OF THE DIRECTIONS OF THE ITAT FOR CROSS EXAMINATION OF 225 PURCHASERS , A SUMMON U/S 131 WERE ISSUED TO SHRI RAJESH PATIL PARTNER OF THE DEVELOPE R FIRM TO PRODUCE THESE WITNESSES. HOWEVER, HE EXPRESSED HIS HELPLESSNESS A S THE DEVELOPER HAS NOT PRODUCED THE WITNESS IN TERMS OF SUMMONS UNDER S. 1 31. NOTWITHSTANDING ABOVE, THE AO ON THE BASIS OF OBSERVATIONS OF CIVIL COURT AND IN VIEW OF THE SPECIFIC FINDINGS OF THE ITAT ABOUT TRANSFER BEING VALID, CONCLUDED THAT AGREEMENTS ENTERED BY THE ASSESSEE WITH DEVELOPERS AND BY THE DEVELOPERS WITH OTHER PURCHASERS OF FSI ARE VALID AND TRANSFER OF C APITAL ASSET HAS TAKEN PLACE. FOR DETERMINATION OF QUANTUM OF CAPITAL GAINS, THE AO EXTENSIVELY REFERRED TO THE ORDER OF THE CIVIL COURT WHEREIN IT WAS ADJUDIC ATED THAT THE ASSESSEE IS 14 ITA NO.826/PN/2014 ENTITLED TO RECEIVE A GROSS CONSIDERATION OF RS. 21 ,57,91,400/- AND AMOUNT OF RS. 18,35,11,400/- IS RECEIVABLE FROM THE DEVELOPER S AFTER ADJUSTMENT OF ACTUAL AND DEEMED RECEIPTS. HOWEVER, HE PROCEEDED TO MAKE ASSESSMENT AS PER AMOUNT ACTUALLY RECEIVED WHICH WAS DETERMINED BY HI M AT RS. 2,35,17,703/- ON THE BASIS OF CIVIL COURT ORDER. 7.5 PLACING RELIANCE ON THE OBSERVATIONS IN THE CIV IL COURT ORDER NOTED ABOVE, THE AO COMPUTED CAPITAL GAINS AT RS. 20,70,2 9,103/- IN THE THIRD ROUND OF PROCEEDINGS. NONETHELESS, IN TERMS OF DIRECTIONS OF THE ITAT, THE AO NOTED ACTUAL RECEIPTS AS SUM OF (A) RS. 21,00,000/- RECEI VED BY ASSESSEE AS DEPOSITS ADJUSTIABLE AGAINST THE SALE CONSIDERATION (B) RS. 58,00,000/- AS PART OF THE CONSIDERATION (C) ACTUAL EXPENDITURE OF RS. 1,88,00 ,000 AS DETERMINED BY CIVIL COURT ON CONSTRUCTIONS AND DEVELOPMENT OF MANGAL KA RYALAYAS, GARDEN HOTEL, CINEMA HALL, HOTEL ETC. AS PER SUPPLEMENTARY AGREEM ENT NOTED ABOVE. 8. THE CIT (A) IN THE THIRD ROUND OF APPEAL AFFIRME D THE ORDER OF THE ASSESSING OFFICER AND THUS DISMISSED THE APPEAL OF THE ASSESSEE. 9. AGGRIEVED THERETO, THE ASSESSEE KNOCKED THE DOOR OF THE TRIBUNAL ON THE THIRD OCCASION. 10. LD. AUTHORISED REPRESENTATIVE MS. DEEPA KHARE A PPEARING FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ORDER OF THE ASSESSING OFFICER APPEALED AGAINST WAS PASSED WITHOUT COMPLIANCE OF THE DIRECT IONS OF THE EARLIER ORDERS OF THE ITAT IN PREVIOUS TWO ROUNDS OF APPEAL. SHE ADVE RTED OUR ATTENTION TO THE AGREEMENT DATED 20/6/1996 READ WITH POWER OF ATTORN EY WHICH IS THE GENESIS OF ENTIRE DISPUTE. SHE SUBMITTED WITH VIGOR THAT THE D EVELOPER IS NOT THE PURCHASER OF THE PROPERTY PER SE BUT WAS ONLY ENTRUSTED TO EFFECT THE SALE OF THE PROPORTIONATE FSI ON LAND TO THE ULTIMATE BUYERS OF FLATS/ UNITS. POSSESSION THUS GIVEN IS ONLY PERMISSIVE POSSESSION AND IS OF NO RE LEVANCE FOR DETERMINING FACTUM OF TRANSFER. SHE VOCIFEROUSLY SUBMITTED THAT THE SO CALLED 225 SALE AGREEMENTS WERE FICTIONAL AND SHAM AND HENCE THERE IS NO ULTIMATE TRANSFER TO THE ACTUAL BUYERS IN TERMS OF THE AGREEMENT. THE IN CIDENCE OF CAPITAL GAINS THUS 15 ITA NO.826/PN/2014 DOES NOT ARISE. IT WAS THEREAFTER SUBMITTED THAT TH E AGREEMENT AND POWER OF ATTORNEY TOWARDS SALE OF FSI WAS SUBSEQUENTLY CANCE LLED AND WITHDRAWN. SHE ALSO HARPED ON FACT THAT IT IS AN ADMITTED POSITION THAT CROSS EXAMINATION OF THE PURPORTED PURCHASERS OF FSI WAS NOT GIVEN TO THE AS SESSEE. THE AO MERELY STATES IN A SUMMARY MANNER THAT M/S KOLTE PATIL WER E CALLED UPON TO PRODUCE THE WITNESSES WHICH THEY FAILED TO DO. IN THE ABSEN CE OF CROSS EXAMINATION, EXACT PRICE RECEIVABLE BY THE ASSESSEE IF ANY, AS A FIRST STEP CAN NOT BE DETERMINED. IT IS THE CASE OF THE ASSESSEE THAT TH E PARTIES WERE INTRODUCED FOR ULTERIOR PURPOSES TO INTRODUCE BOGUS TRANSFERS OF F SI BY DEVELOPER AT A DATE PRIOR TO CANCELLATION WITH A MOTIVE TO INVALIDATE T HE ACT OF CANCELLATION OF AGREEMENT AND POA BY ASSESSEE. THE ACT OF CROSS EXA MINATION WOULD HAVE REVEALED THESE FACTS AND WOULD HAVE THROWN LIGHT ON OTHER ASPECTS SUCH AS MODE OF PAYMENT RECEIVED FROM ALLEGED BUYERS IF ANY ETC. THUS, CROSS EXAMINATION IN THE FACTUAL MATRIX WAS INDISPENSABLE TO ARRIVE AT THE QUANTUM OF TAXABLE CAPITAL GAINS IF ANY. THE LD. AR FURTHER CO NTENDED THAT THE CROSS EXAMINATION OF THE OTHER PARTNER SHRI RAJESH PATIL ENDED UP AS AN EMPTY FORMALITY. SHRI PATIL DID NOT REVEAL ANY WORTHWHI LE INDEPENDENT FACTS RELATING TO SALE OF RESIDENTIAL UNITS AND SWEEPINGLY RELIED UPON THE CIVIL COURT ORDER. THE BOOKS OF ACCOUNTS OF THE DEVELOPERS WERE ALSO N OT CALLED FOR VERIFICATION TO FIND OUT HOW THE PRICE WAS PAID TO THE DEVELOPER BY THE PURPORTED CUSTOMERS AND HOW IT IS ACCOUNTED FOR. THEREFORE, THE ONUS TO PROVE THE GENUINENESS OF SALE TO ALLEGED CUSTOMERS REMAINS TO BE DISCHARGED IN TERMS OF DIRECTIONS OF ITAT. 10.1 THE LD. AR ALSO STRIDENTLY ASSAILED THE AVERME NTS OF THE AO THAT THE DIRECTIONS OF THE ITAT ARE OPPOSED TO THE SCHEME OF THE ACT AND NOT WORKABLE OR NOT CORRECT. SHE RELIED UPON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF BANK OF BARODA VS. H C SHRIVASTAVA 256 ITR 385 TO SUBMIT THAT JUDICIAL DISCIPLE REQUIRES THAT AO IS BOUND TO FOLL OW THE JUDGMENT OF TRIBUNAL IN LETTER AND SPIRIT. SHE SUBMITTED THAT THE AO HAS EXPRESSLY CONTRAVENED THE DIRECTIONS OF ITAT. THE ORDER IS THUS BAD IN LAW AN D REQUIRES TO BE QUASHED. 16 ITA NO.826/PN/2014 10.2 THE LD. AR NEXT CONTENDED THAT ENTIRE BASIS OF COMPUTATION OF CAPITAL GAINS IN THE THIRD ROUND IS ORDER OF THE CIVIL COUR T. IT WAS SUBMITTED THAT THE AO FACTUALLY ERRED IN CONCLUDING ON THE BASIS OF CI VIL COURT ORDER THAT ALL THE 225 PURCHASERS WERE EXAMINED BY THE CIVIL COURT. SH E SUBMITTED THAT A READING OF THE COURT ORDER WOULD SHOW THAT MOST OF THE PERS ONS HAVE MERELY FILED WRITTEN SUBMISSIONS AND THEIR SAY HAS BEEN CONSIDER ED BY THE COURT TO DETERMINE THE ISSUE RAISED BEFORE IT IN CIVIL PROCE EDINGS. THE IDENTITY OF THE WRITTEN SUBMISSION FILERS HAVE NOT BEEN VERIFIED BY THE CIVIL COURT IN THE COURSE OF TRIAL. SHE SUBMITTED THAT THE ORDER OF THE CIVIL COURT IS PATENTLY ERRONEOUS AND AN APPEAL HAS BEEN FILED AGAINST THE ORDER WHIC H HAS ALSO BEEN ADMITTED BY THE HONBLE BOMBAY HIGH COURT. THE ASSESSEE HAS TAK EN A SPECIFIC GROUND THEREIN THAT ONLY ONE PERSON NAMELY MR. ANIRUDHHA D ESHPANDE HAS PERSONALLY ATTENDED THE PROCEEDINGS. 10.3 THE LD AR MS. KHARE ASSERTED THAT ENTIRE GAMUT OF TRANSACTIONS ARE IN SERIOUS DISPUTE SINCE ORDER OF THE CIVIL COURT HAS NOT ATTAINED ANY FINALITY AND HAVE BEEN DISPUTED AND THE HONBLE HIGH COURT WAS P LEASED TO ADMIT THE SAME. IT WAS THUS CANVASSED THAT THE ACTION OF THE AO IN PLACING SOLE RELIANCE ON THE ORDER OF THE CIVIL COURT IS NOT JUSTIFIED IN THE CI RCUMSTANCES. SHE SUBMITTED THAT TRIBUNAL IN THE EARLIER OCCASIONS HAS TAKEN NO TE OF THE CIVIL PROCEEDINGS BUT DID NOT DIRECT TO PROCEED ON ITS ORDER. SHE SUB MITTED THAT THE PRINCIPLE IN LAW IS ALSO WELL SETTLED TO SAY THAT THE OUTCOME OF THE CIVIL PROCEEDINGS DOES NOT DETERMINE THE SCOPE OF PROCEEDINGS UNDER THE IN COME TAX ACT. THE POWERS OF TAX AUTHORITIES AND SCOPE OF INCOME TAX ASSESSME NTS ARE NOT AFFECTED BY CIVIL SUITS. FOR THIS PROPOSITION, LD. AR RELIED UPON TH E FOLLOWING DECISIONS NAMELY V DATCHINAMURTHY AND ANOTHER VS. ASST. DIR. OF INSP ECTION 149 ITR 341 ( MAD.) ; KESHAVLAL PUNJARAM & ORS. VS. CIT 141 ITR 4 66 ( GUJ.) ; CHHATRASHINGJI KESARISINGHJI THAKORE VS. CIT 59 ITR 562 (SC). 10.4 MS. KHARE NEXT CONTENDED THAT IN VIEW OF THE S UBSISTING DISPUTE, THE INCOME CANNOT BE TAXED IN THE RELEVANT ASSESSMENT Y EAR. RELIANCE WAS PLACED ON THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT LTD. 161 ITR 524 & CIT VS. ABDUL M ANNAN SHAH 17 ITA NO.826/PN/2014 MOHAMMED 248 ITR 614 (BOM.). IT WAS NEXT CONTENDED THAT THE FIRST ORDER OF ITAT HAS DECIDED THE QUESTION OF TRANSFER QUA ASSESSEE AND DEVELOPER ON THE GROUND THAT THE POSSESSION HAS BEEN GIVEN AND POWER OF ATTORNEY WAS EXECUTED IN FAVOUR OF THE DEVELOPER WHICH GOES TO SHOW THAT TRANSFER WAS EFFECTED BASED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIYA REPORTED IN 260 ITR 491(BOM.). T HE QUESTION OF COMPUTATION OF CAPITAL GAINS WAS SET ASIDE TO BE DE CIDED AFRESH AND THUS WAS KEPT OPEN. THE AO WAS EMPOWERED TO COMPUTE THE CAP ITAL GAINS ONLY AFTER GIVING OPPORTUNITY OF CROSS EXAMINATION AS WELL AS MATERIAL FURNISHED BY THE DEVELOPER BEFORE THE AO. SHE SUBMITTED THAT CAPITAL GAINS WOULD BE CHARGEABLE IN THE CIRCUMSTANCES ONLY WHEN THE CONSIDERATION AC CRUES AND STANDS VESTED WITH THE ASSESSEE AND NOT IN ANY PRIOR YEARS. THE A GREEMENT IS A TRIPARTITE AGREEMENT WITH REFERENCE TO ASSESSEE, DEVELOPER AND PROSPECTIVE BUYERS. THE AGREEMENT DOES NOT CONTEMPLATE ANY CONSIDERATION FL OWING FROM DEVELOPER TO THE ASSESSEE. THE RECEIPT OF CONSIDERATION TO THE A SSESSEE IS DEPENDENT ON SALE TO THE ULTIMATE BUYERS. THE FINDING OF THE TRIBUNAL IN THE FIRST ROUND MERELY DECIDES THAT THERE IS TRANSFER WITHOUT DECIDING THE QUESTION OF YEAR OF TRANSFER AS WELL AS THE QUANTUM OF CAPITAL GAINS. THE MATTER THEREFORE WAS SET ASIDE FOR THREE ASSESSMENT YEARS AND ONLY IN ONE YEAR I..E. 1999-2000 THE CAPITAL GAIN HAS BEEN TAXED BY AO, DECIDING THAT IN AY 1997-98, 1998-99 THERE WAS NO FSI CRYSTALISED AND HENCE QUESTION OF TRANSFERRING THE FSI DOES NOT ARISE AT ALL. THE SECOND ORDER OF THE TRIBUNAL FURTHER EXPLAINS THE F IRST DIRECTION TO MEAN THAT TRANSFER HAS TO BE UNDERSTOOD WITH REFERENCE TO EAC H PROSPECTIVE BUYER SO AS TO DETERMINE CONSIDERATION ON THE BASIS OF TRANSFER OF FSI TO EACH BUYER AND THE CONSIDERATION THEREFROM. THERE IS NO INCONSISTENCY IN THE TWO ORDERS. THE SECOND ORDER OF ITAT CONSIDERS THE FIRST ORDER OF T RIBUNAL AND FURTHER EXPLAINS AND GIVES FURTHER DIRECTIONS TO GIVE CROSS EXAMINAT ION OF PARTNERS OF KOLTE PATIL ENTERPRISE AND 225 BUYERS, WHICH WAS NOT AT ALL DON E. BOTH THE DIRECTIONS ARE BINDING AND HAVE TO BE FOLLOWED BY THE AO. FIRST DI RECTION IS ABOUT TRANSFER AND SECOND DIRECTION IS ABOUT THE COMPUTATION. 10.5 THE LD. AR ALSO MADE REFERENCE TO THE ADMITTED OBSERVATIONS OF THE AO IN 2(D) OF THE ORDER APPEALED AGAINST, WHEREIN THE AO NOTED THAT ADDRESSES OF 18 ITA NO.826/PN/2014 THE PURPORTED BUYERS ARE SKETCHY. SHE SUBMITTED T HAT THIS FACT ALSO CAST SHADOW IN THE BONAFIDES OF THE PURPORTED BUYERS AS CLAIMED. THE SOURCE OF AMOUNT RECEIVED, IF ANY, FROM PURPORTED BUYERS IS A LSO QUITE PERTINENT IN THE CONTEXT. 10.6 IT WAS NEXT CONTENDED ON BEHALF OF THE ASSESSE E THAT THE TRIBUNAL DID NOT DECIDE WHETHER THE CONSIDERATION HAS ACCRUED FROM T HE TRANSFER OR NOT. IT WAS IN THE SECOND ROUND WHERE ASSESSMENT WAS FRAMED TAKING CONGNISANCE OF 225 PURPORTED SALE AGREEMENTS FOR THE FIRST TIME. THE L D. AR REITERATED THAT THE SALE ALLOTMENT / AGREEMENTS WERE BOGUS AND SHAM. INSPITE OF THIS STAND, THE SALE CONSIDERATION AS PER THOSE AGREEMENTS WAS TAXED BY THE AO WITHOUT OPPORTUNITY FOR CROSS EXAMINATION WHICH WAS REQUIRE D AS DIRECTED BY THE ITAT IN THE SECOND ROUND FOR THIS PURPOSE. THE LD. AR AD DED THAT IN THE THIRD ROUND, THE AO SIMPLY ACTED ON THE ORDER OF CIVIL COURT WIT HOUT CARRYING OUT ANY INDEPENDENT INQUIRY IN CONTRAVENTION OF THE DIRECTI ONS OF THE ITAT. 10.7 IT WAS ALSO CONTENDED THAT TAXABILITY OF CAPIT AL GAINS IS BASED ON CHARGE UNDER S. 45 AS WELL AS COMPUTATION AS PER SECTION 4 8 OF THE ACT. BOTH THE SECTION FORM INTEGRATED CODE TO TAX THE CAPITAL GAI NS. IT IS THE CASE OF THE LD. AR ON BEHALF OF THE ASSESSEE THAT CONSIDERATION DID NOT ACCRUE SINCE THE AGREEMENT GIVING RISE TO TRANSACTIONS FELL UNDER DI SPUTE AND ON THE GROUND THAT NO REAL INCOME DID ACCRUE IN THE INSTANT CASE. SUCH DISPUTED INCOME CANNOT BE TAXED. THE AMOUNT CAN BE TAXED ONLY WHEN THE DISPUT E IS RESOLVED. SHE FURTHER NOTED THAT THE CIVIL COURT HAS REFERRED TO AN AMOUN T OF RS. 20 CRORES TO BE PAYABLE BY THE DEVELOPER. THE ENTIRE AGREEMENT IS F OR 10 ACRES OUT OF WHICH ONLY 4.5 ACRES HAVE BEEN DEVELOPED. BALANCE LAND CO ULD NOT BE DEVELOPED OWING TO DISPUTES. THE DEVELOPER IS ENFORCING THE A GREEMENT FOR THE BALANCE LAND AND FOR WHICH RS. 20 CRORES WERE OFFERED. IT W AS SUBMITTED THAT THE ASSESSEE WANTS TO RETRIEVE BALANCE LAND AND CLAIMS CANCELLATION OF AGREEMENT AND THEREFORE THE WHOLE AGREEMENT IS FRUSTRATED. SH E REITERATED THAT THE ASSESSEE HAS CANCELLED THE POWER OF ATTORNEY AS WELL AS THE SECOND AGREEMENT FOR CONSTRUCTION OF AMENITIES BY THE DEVELOPER. THE LD. AR FURTHER PLACED RELIANCE ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHEMOSYN LTD. 19 ITA NO.826/PN/2014 371 ITR 427 (BOM.) WHEREIN HONBLE HIGH COURT HAS CONSIDERED THE QUESTION REGARDING CONSIDERATION ACCRUED AND HAS HELD THAT O N REAL INCOME THEORY, NO CONSIDERATION WAS ACCRUED. THE LD AR SUBMITTED THAT THERE IS NO COGENT MATERIAL ON RECORD TO DEMONSTRATE THAT THE DEVELOPE R HAS PAID ANY CONSIDERATION EXCEPT SOME MEAGER SUM OF RS. 58 LACE S. THE ORIGINAL CONSIDERATION CLAIMED TO HAVE BEEN PAID BY THE DEVE LOPER WAS IN THE FORM OF CONSTRUCTION OF AMENITIES, THE VALUATION OF WHICH W AS CLAIMED AT RS. 13 CRORES. THE DEVELOPER HAS NOT BEEN ABLE TO PROVE THIS CONST RUCTION EXPENDITURE BEFORE THE CIVIL COURT EVEN WITH REFERENCE TO THE BOOKS OF ACCOUNT. THIS FACT HAS BEEN NOTED BY THE CIVIL COURT AND ULTIMATELY 1.88 CRORE HAS BEEN CONCLUDED TO HAVE BEEN INCURRED BY THE DEVELOPER FOR THE AMENITIES TO BE CONSTRUCTED FOR THE ASSESSEE. THE AGREEMENT FOR AMENITIES HAS BEEN CANC ELLED AND THE CIVIL COURT HAS, ON THE CONTRARY, ORDERED THE ASSESSEE TO REPAY THE AMOUNT OF RS.1.88 CRORES TO THE DEVELOPER TOGETHER WITH DAMAGES OF RS . 23 LACS. 10.8 TO SUM UP, THE LD. AR FOR THE ASSESSEE IN THE LIGHT OF VARIOUS SUBMISSIONS NOTED ABOVE SUBMITTED THAT CONSIDERATIO N FOR TRANSFER HAS NOT ACCRUED AND CRYSTALLIZED IN FAVOUR OF ASSESSEE AND THEREFORE PLEADED FOR REVERSAL OF THE ORDER OF THE LOWER AUTHORITIES. 10.9 IN THE ALTERNATIVE, AND WITHOUT PREJUDICE, IT WAS SUBMITTED THAT CAPITAL GAINS ON THE AMOUNT OF RS. 58 LACS BEING AMOUNT ACT UALLY RECEIVED FROM DEVELOPER PURSUANT TO EXECUTION OF AGREEMENT COULD ONLY BE BROUGHT TO TAXATION DURING THE YEAR UNDER REVIEW. 11. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORD ER OF THE AO AND CIT(A) APPEALED AGAINST. HE SUBMITTED THAT IN THE LIGHT OF THE ORDER OF THE CIVIL COURT ON THE SAME VERY DISPUTE, THE ASSESSMENT HAS BEEN F RAMED WHICH DOES NOT CALL FOR ANY INTERFERENCE. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE KEY ISSUE FOR ADJ UDICATION IN THIS THIRD ROUND OF LITIGATION BEFORE US IS THE YEAR OF TAXABILITY O F CAPITAL GAINS ARISING ON 20 ITA NO.826/PN/2014 TRANSFER OF FSI BY THE ASSESSEE TO THE DEVELOPER WH EN THE RAGING CONTROVERSY ABOUT THE BONAFIDES OF THE ULTIMATE BUYERS OF FSI O F THE DISPUTED PROPERTY IS SUBSISTING IN THE CASE. THE THRUST OF THE ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT TRANSFER ALTHOUGH DETERMINED TO HAVE BEEN EFFE CTED BETWEEN THE ASSESSEE AND THE DEVELOPER, THE CONSIDERATION THEREFROM FLOW S ONLY FROM THE ULTIMATE FLAT BUYERS AND NOT FROM DEVELOPERS PER SE. THUS, T HE CONSIDERATION CAN BE TAXED ONLY IN THE YEAR IN WHICH IS IT IS RECEIVED F ROM THE FLAT BUYERS IN CONSIDERATION OF TRANSFER OF FLAT. THE BONAFIDES OF THE SALE AGREEMENT WITH ALLEGED 225 BUYERS HAS BEEN SERIOUSLY DISPUTED. IT IS THE CASE OF THE ASSESSEE THAT THE PERSONS WHO ARE POSING THEMSELVES AS PURCH ASERS HAVE NOT PAID ANY AMOUNT TOWARDS CONSIDERATION. THE SALE DEED WITH AL LEGED 225 BUYERS WERE MALICIOUSLY SHOWN TO HAVE BEEN EXECUTED ON 15/12/19 98 AND 16/12/1998 I.E. PRIOR TO NOTICE OF CANCELLATION OF AGREEMENT DATED 24/12/1998 TO FALSELY CREATE THIRD PARTY INTEREST PRIOR TO CANCELLATION. AS ALLE GED BY THE ASSESSEE, THE DEVELOPER HAS HATCHED A CONSPIRACY TO DUPE THE ASSE SSEE AND MISUSED THE POWER OF ATTORNEY AND PREPARED A FALSE AND BOGUS 22 5 SALE DEEDS IN THE NAME OF DIFFERENT PERSONS TO SHOW THAT THIRD PARTY INTER EST IS CREATED IN THE PROPERTY IN DISPUTE TO OVERCOME THE CANCELLATION OF AGREEMEN T AND POWER OF ATTORNEY. IT IS THUS THE PLEA OF THE ASSESSEE THAT IN THE BACKGR OUND OF SUCH FACTS, TO ESTABLISH THE BONAFIDES OF THE SALE AGREEMENTS, CROSS EXAMINA TION OF SO CALLED BUYERS WERE NECESSARY AS DIRECTED BY THE ITAT WITHOUT WHIC H CONSIDERATION CAN NOT BE DETERMINED IN THE HANDS OF THE ASSESSEE. THE NEX T PLANK OF CONTENTION OF THE ASSESSEE IS WHETHER CONSIDERATION CAN BE TAXED IN THE IMPUGNED ASSESSMENT YEAR 1999-2000 ON THE FACE OF SERIOUS DI SPUTES SUBSISTING IN THE TRANSACTIONS AND WHEN THE ASSESSEE HAS RECEIVED ONL Y SOME PALTRY AMOUNT ON EXECUTION OF DEVELOPMENT AGREEMENT. WE ALSO INTER ALIA TAKE NOTE OF THE AVERMENTS OF THE ASSESSEE THAT APPEAL AGAINST THE O RDER OF THE CIVIL COURT IS STATED TO HAVE BEEN ADMITTED AND LITIGATION IS PEND ING BEFORE THE HONBLE HIGH COURT FOR ADJUDICATION OF RAGING CONTROVERSY. 13. FROM THE PREVIOUS ORDER OF THE ITAT DATED 22/02 /2011, WE OBSERVE THAT THE COMPUTATION OF CAPITAL GAINS ARISING ON TRANSFE R OF PROPERTY HAS BEEN MADE CONTINGENT UPON THE AMOUNT ACTUALLY RECEIVED BY THE ASSESSEE FOR WHICH 21 ITA NO.826/PN/2014 SPECIFIC DIRECTIONS WERE GIVEN TO ENABLE THE ASSESS EE TO CROSS EXAMINE THE PURPORTED BUYERS OF UNDIVIDED INTEREST IN FSI. WE A LSO NOTE THAT ONGOING LITIGATION IS INDICATIVE OF THE FACT THAT SERIOUS D ISPUTES ARE IN EXISTENCE BETWEEN THE ASSESSEE AND THE DEVELOPER ON THE VALIDITY OF S ALE TRANSACTIONS ENTERED INTO BY THE DEVELOPER WITH 225 INDIVIDUALS AND ON THE PA SSING OF COLLECTED MONEY BY THE DEVELOPER TO THE ASSESSEE ON THESE ALLEGED T RANSACTIONS. IT APPEARS FROM THE SUBMISSION OF THE ASSESSEE THAT THE DEVELOPMENT WORK IS STAGNATED IN CERTAIN PORTION OF LAND OWING TO ERUPTION OF DISPUT E. THUS, THE ISSUE OF TAXABILITY OF CAPITAL GAINS IS REQUIRED TO BE TESTE D IN THE CIRCUMSTANCES WHERE TRANSACTIONS OF TRANSFER ARE BESET WITH SERIOUS DIS PUTE. 14. TO UNDERSTAND THE NUANCES OF LEGAL POSITION OF CHARGEABILITY OF CAPITAL GAINS IN RESPECT OF DISPUTED TRANSACTIONS, IT IS DE SIRABLE TO REFER TO CERTAIN JUDICIAL PRECEDENTS THROWING LIGHT IN THE ISSUE. 14.1 THE RELEVANT HEAD NOTE OF THE DECISION OF APEX COURT IN THE CASE OF CIT VS. HINDUSTAN HOUSING(SUPRA) RELIED UPON ON BEHALF OF THE ASSESSEE IS REPRODUCED HEREWITH FOR READY REFERENCE. INCOMEACCRUALENHANCED COMPENSATION FOR ACQUISIT ION OF LANDASSESSEE'S LAND ACQUIRED BY GOVERNMENTINITIAL COMPENSATION FIXED ENHANCED BY A RBITRATORAPPEAL AGAINST THE ENHANCEMENT BY THE STATE GOVERNMENT BEFORE THE HIGH COURTTHIS IS DIST INGUISHABLE FROM THE CASE WHERE THE RIGHT TO RECEIV E PAYMENT IS ADMITTED AND ONLY QUANTIFICATION OF LIAB ILITY IS TO BE SETTLED ADDITIONAL COMPENSATION NOT TAXABLE AS THE ASSESSEE HAS NOT GOT THE ABSOLUTE RIGHT TO R ECEIVE THE ADDITIONAL COMPENSATION HELD : ALTHOUGH THE AWARD WAS MADE BY THE ARBITRATOR ON 29 TH JULY, 1955 ENHANCING THE AMOUNT OF COMPENSATION PAYABLE TO THE ASSESSEE, THE ENTIRE AMOUNT WAS IN D ISPUTE IN THE APPEAL FILED BY THE STATE GOVERNMENT. INDEED, THE DISPUTE WAS REGARDED BY THE COURT AS RE AL AND SUBSTANTIAL, BECAUSE THE ASSESSEE WAS NOT PERMITTED TO WITHDRAW THE SUM DEPOSITED BY THE STAT E GOVERNMENT ON 25TH APRIL, 1950 WITHOUT FURNISHING A SECURITY BOND FOR REFUNDING THE AMOUNT IN THE EVENT OF THE APPEAL BEING ALLOWED. THERE WAS NO ABSOLUTE RIGHT TO RECEIVE THE AMOUNT AT THAT STAGE. IF THE APPEAL WAS ALLOWED IN ITS ENTIRETY, THE RIGHT TO PAYMENT O F THE ENHANCED COMPENSATION WOULD HAVE FALLEN ALTOGETHER. THE VERY FOUNDATION OF THE CLAIM MADE BY THE ASSES SEE WAS IN SERIOUS JEOPARDY AND NOTHING WOULD BE DUE IF THE APPEAL WAS DECIDED AGAINST THE ASSESSEE. THERE IS A CLEAR DISTINCTION BETWEEN CASES SUCH AS THE PRESENT ONE, WHERE THE RIGHT TO RECEIVE PAYMENT IS IN DISP UTE AND IT IS NOT A QUESTION OF MERELY QUANTIFYING THE AMOU NT TO BE RECEIVED, AND CASES WHERE THE RIGHT TO REC EIVE PAYMENT IS ADMITTED AND THE QUANTIFICATION ONLY OF THE AMOUNT PAYABLE IS LEFT TO BE DETERMINED IN ACCO RDANCE WITH SETTLED OR ACCEPTED PRINCIPLES.E.D. SASSOON & CO. VS. CIT (1954) 26 ITR 27 (SC) : TC39R.313 RELI ED ON; KEDARNATH JUTE MFG. CO. LTD. VS. CIT (1971) 82 ITR 363 (SC) : TC16R.668 DISTINGUISHED; CIT VS. JAI PARKASH OM PARKASH CO. LTD. (1961) 41 ITR 718 (PUNJ ) : TC39R.500, KHAN BAHADUR AHMED ALLADIN & SONS VS. CIT (1969) 74 ITR 651 (AP) : TC39R.661, TOPANDA S KUNDAN MAL VS. CIT (1976) CTR (GUJ) 507 : (1978) 114 ITR 237 (GUJ) : TC39R.662 AND ADDL. CIT VS. NEW JEHANGIR VAKIL MILLS CO. LTD. (1979) 10 CTR (GUJ) 61 : (1979) 117 ITR 849 (GUJ) : TC22R.196 APPROVED; CIT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD. (1977) 108 ITR 380 (CAL) : TC39R.660 AFFIRMED. (PARAS 5 & 8) CONCLUSION : 22 ITA NO.826/PN/2014 INCOME DID NOT ACCRUE TO ASSESSEE WHERE, THOUGH THE ARBITRATOR AWARDED ENHANCED COMPENSATION FOR ACQUISITION OF ASSESEE'S LAND, THE STATE GOVERNMENT HAD FILED APPEAL THERE AGAINST AS THE VERY RIGHT O F ASSESEE TO RECEIVE ENHANCED COMPENSATION WAS PUT IN JEOPARDY. 14.2 SIMILARLY, THE RELEVANT HEAD NOTE OF THE DECIS ION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABDUL MANNAN SHAH MOHAMMED( SUPRA) RELIED ON BEHALF OF THE ASSESSEE IS ALSO REPRODUCED HEREWITH FOR REA DY REFERENCE. APPEAL (HIGH COURT)SUBSTANTIAL QUESTION OF LAWA CCRUAL OF INCOMELANDS OWNED BY ASSESSEE ACQUIRED UNDER LAND ACQUISITION ACTSTATE GOVERNMENT MOVED T HE HIGH COURT AGAINST THE AWARD MADE IN FAVOUR OF ASSESSEE WHICH INCLUDED INTEREST ON ADDITIONAL COMP ENSATIONPENDING THE APPEAL ASSESSEE WAS PERMITTED TO WITHDRAW THE AMOUNT WHICH WAS DEPOSITED IN COURT ON GIVING SECURITYIT WAS NOT TAXABLE AT THAT STAGEN O SUBSTANTIAL QUESTION OF LAW ARISESAPPEAL DISMISSED CIT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD. (1986) 58 CTR (SC) 179 : (1986) 161 ITR 524 (S C) : TC 39R.624 FOLLOWED . CONCLUSION : WHEN THE GOVERNMENT HAD APPEALED AGAINST THE COMPEN SATION AWARD AND THE ADDITIONAL AMOUNT OF COMPENSATION WAS DEPOSITED IN THE COURT, IT WAS NOT TAXABLE AT THAT STAGE; NO SUBSTANTIAL QUESTION OF LAW ARISES. 14.3 THE TAXABILITY OF CAPITAL GAINS IN CASE OF DIS PUTED TRANSACTIONS HAVE ALSO BEEN ADDRESSED BY THE HONBLE BOMBAY HIGH COURT IN CHEMOSYN LTD. ( SUPRA). IN THIS CASE, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT WITH DIPTI BUILDERS TO DEVELOP A PLOT OWNED BY THE ASSES SEE FOR A CONSIDERATION OF RS.16.11 CRORES AND CONSTRUCTION OF 18,000 SQ.FT. O F BUILT UP AREA FREE OF COST. THIS WAS RESCINDED BY A TRIPARTITE AGREEMENT DATED WAS ENTERED INTO BETWEEN DIPTI BUILDERS, A NEW BUYER AND THE ASSESSEE UNDER WHICH THE PLOTS WERE TRANSFERRED TO THE NEW BUYER FOR A TOTAL CONSIDERAT ION OF RS.29.11 CRORES. THE ASSESSEE OFFERED ONLY RS.16.11 CRORE TO TAX AS CAPI TAL GAINS. IT CONTENDED THAT THE CONSIDERATION IN THE FORM OF CONSTRUCTED AREA O F 18000 SQ.FEET WAS NEITHER RECEIVED NOR HAD ACCRUED AND NO OCCASION TO BRING I T TO TAX COULD ARISE. HOWEVER, THE AO & CIT(A) REJECTED THE CONTENTION BY RELYING ON CHATRUBHUJ DWARKADAS KAPADIA VS. CIT 260 ITR 491 (BOM) AND HEL D THAT CAPITAL GAINS ACCRUED ON THE EXECUTION OF THE DEVELOPMENT AGREEME NT. THIS WAS REVERSED BY THE TRIBUNAL BY RELYING ON KALPATARU CONSTRUCTION O VERSEAS 13 SOT 194 (MUM) AND CIT VS. SHIVSAGAR ESTATES 204 ITR 1 (BOM) ; HELD BY THE HIGH COURT DISMISSING THE APPEAL; IN CH ATURBHUJ DWARKADAS KAPADIA, THE ISSUE WAS TO DETERMINE THE YEAR IN WHI CH THE PROPERTY WAS TRANSFERRED FOR THE PURPOSE OF CAPITAL GAINS. IN TH IS CASE THE ISSUE IS WHAT IS THE CONSIDERATION RECEIVED FOR THE TRANSFER OF AN ASSET . NO INCOME IS ACCRUED OR 23 ITA NO.826/PN/2014 RECEIVED OF THE VALUE OF 18000 SQ.FEET OF CONSTRUCT ED AREA UNDER THE DEVELOPMENT AGREEMENT BECAUSE THE SAID AGREEMENT WA S NOT ACTED UPON AS IT CAME TO BE SUPERSEDED/MODIFIED BY THE TRIPARTITE AG REEMENT. THIS WAS THE POSITION WHEN THE RETURN OF INCOME WAS FILED. ON TH E APPLICATION OF THE REAL INCOME THEORY, THERE WOULD BE NEITHER ACCRUAL NOR R ECEIPT OF INCOME TO WARRANT BRINGING TO TAX TO THE CONSTRUCTED AREA OF 18,000 S Q.FT WHICH HAS NOT BEEN RECEIVED BY THE ASSESSEE. FOR COMING TO AFORESAID C ONCLUSION, THE HONBLE COURT PLACED RELIANCE ON CIT VS. SHOORJI VALLABHDAS 46 ITR 144 (SC). 14.4 SIMILARLY, WE ALSO NOTICE ANOTHER VERY RECENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HE MAL RAJU SHETE IN ITA NO. 2348 OF 2013 ORDER DATED 29/03/2016 WHICH IS ALSO G ERMANE TO THE ISSUE. THE HONBLE JURISDICTIONAL HIGH COURT HELD IN THIS CASE THAT DEFERRED CONSIDERATION DEPENDENT ON A CONTINGENCY DOES NOT ACCRUE UNLESS T HE CONTINGENCY HAS OCCURRED AND IS NOT LIABLE TO CAPITAL GAINS TAX IN YEAR OF TRANSFER UNDER S. 45 AND S. 48 OF THE ACT. IN THIS CASE, THE ASSESSING O FFICER ON PERUSAL OF THE AGREEMENT DATED 25TH JANUARY, 2006 WAS OF THE VIEW THAT UNDER THE AGREEMENT, THE ASSESSEE AS WELL AS OTHER CO-OWNERS (SHETE FAMI LY) OF SHARES OF M/S. UNISOL WERE TO RECEIVE IN AGGREGATE A SUM OF RS.20 CRORES AND PROCEEDED TO TAX ENTIRE AMOUNT OF RS.20 CRORES IN THE SUBJECT ASSESSMENT YE AR IN THE HANDS OF ALL CO- OWNERS. THE COMMISSIONER OF INCOME-TAX (APPEALS) OB SERVED THAT THE AGREEMENT DATED 25TH JANUARY, 2006 ALSO PROVIDED FO R DEFERRED CONSIDERATION WHICH WAS CAPPED AT RS.20 CRORES, WHICH HAD TO BE P AID IN TERMS OF FORMULA PRESCRIBED IN THE AGREEMENT DATED 25TH JANUARY, 200 6. THE WORKING OUT OF THE FORMULA COULD LEAD AND IN FACT HAD LED TO A SITUATI ON WHERE NO AMOUNT ON ACCOUNT OF DEFERRED CONSIDERATION FOR THE SALE OF S HARES WAS RECEIVABLE BY THE ASSESSEE IN THE IMMEDIATE SUCCEEDING ASSESSMENT YEA R I.E. ASSESSMENT YEAR 2007-08. ON THE ANALYSIS OF AGREEMENT, THE COMMISSI ONER OF INCOME-TAX (APPEALS) CONCLUDED THAT THE AMOUNT OF RS.20 CRORES IS THE MAXIMUM AMOUNT THAT COULD BE RECEIVED BY ALL CO-OWNERS UNDER THE A GREEMENT FROM THE PURCHASES OF SHARES M/S. RKHS. HOWEVER, ON WORKING OF THE FORMULA THERE WAS NO GUARANTEE THAT THIS AMOUNT OR FOR THAT MATTE R ANY AMOUNT WOULD BE RECEIVED. THE TRIBUNAL FURTHER HELD THAT WHAT AMOUN T HAS TO BE BROUGHT TO TAX IS THE AMOUNT WHICH HAS BEEN RECEIVED AND/OR ACCRUE D TO THE ASSESSEE AND NOT ANY NOTIONAL OR HYPOTHETICAL INCOME AS THE REVENUE IS SEEKING TO TAX THE 24 ITA NO.826/PN/2014 ASSESSEE IN THE SUBJECT ASSESSMENT YEAR 2006-07. LE ARNED COUNSEL FOR THE REVENUE URGED THAT IN TERMS OF SECTION 45(1) OF THE ACT THAT TRANSFER OF CAPITAL ASSET WOULD ATTRACT THE CAPITAL GAINS TAX. IT IS FU RTHER SUBMITTED THAT THE AMOUNT TO BE TAXED UNDER SECTION 45(1) IS NOT DEPENDENT UP ON THE RECEIPT OF THE CONSIDERATION. IN SUPPORT OF THE ABOVE THE LD. COUN SEL FOR THE REVENUE INVITED THE ATTENTION OF THE HONBLE COURT TO SECTION 45(1) (A) AND SECTION 45(5) OF THE ACT ON WHICH HONBLE COURT OBSERVED THAT THESE PROV ISIONS IN CONTRAST BRINGS TO TAX CAPITAL GAINS ON AMOUNT RECEIVED. IT WAS OBS ERVED BY THE HONBLE COURT THAT IN THE SUBJECT ASSESSMENT YEAR NO RIGHT TO CLA IM ANY PARTICULAR AMOUNT GETS VESTED IN THE HANDS OF THE ASSESSEE. THEREFORE, ENT IRE AMOUNT OF RS.20 CRORES WHICH IS SOUGHT TO BE TAXED BY THE ASSESSING OFFICE R IS NOT THE AMOUNT WHICH HAS ACCRUED TO THE ASSESSEE. THE TEST OF ACCRUAL IS WHETHER THERE IS A RIGHT TO RECEIVE THE AMOUNT THOUGH LATER AND SUCH RIGHT IS L EGALLY ENFORCEABLE. IT WAS HELD THAT CONTENTION OF THE REVENUE THAT THE IMPUGN ED ORDER IS SEEKING TO TAX THE AMOUNT ON RECEIPT BASIS BY NOT HAVING BROUGHT I T TO TAX IN THE SUBJECT ASSESSMENT YEAR, IS NOT CORRECT. THIS FOR THE REASO N, THAT THE AMOUNTS TO BE RECEIVED AS DEFERRED CONSIDERATION UNDER THE AGREEM ENT COULD NOT BE SUBJECTED TO TAX IN THE ASSESSMENT YEAR 2006-07 AS THE SAME H AS NOT ACCRUED DURING THE YEAR. THE RELEVANT SUBSTANTIAL QUESTION OF LAW AND OBSERVATIONS OF THE COURT ARE REPRODUCED HEREUNDER FOR READY REFERENCE: 8. IN THE PRESENT CASE, FROM THE READING OF THE AB OVE CLAUSES OF THE AGREEMENT THE DEFERRED CONSIDERA TION IS PAYABLE OVER A PERIOD OF FOUR YEARS I.E. 2006-07 , 2007-08, 2008-09 AND 2009-10. FURTHER THE FORMULA PRESCRIBED IN THE AGREEMENT ITSELF MAKES IT CLEAR T HAT THE DEFERRED CONSIDERATION TO BE RECEIVED BY TH E RESPONDENT-ASSESSEE IN THE FOUR YEARS WOULD BE DEPE NDENT UPON THE PROFITS MADE BY M/S. UNISOL IN EACH OF THE YEARS. THUS IN CASE M/S. UNISOL DOES NOT MAKE NET P ROFIT IN TERMS OF THE FORMULA FOR THE YEAR UNDER CONSIDERATION FOR PAYMENT OF DEFERRED CONSIDERATION THEN NO AMOUNT WOULD BE PAYABLE TO THE RESPONDENT- ASSESSEE AS DEFERRED CONSIDERATION. THE CONSIDERATI ON OF RS.20 CRORES IS NOT AN ASSURED CONSIDERATION TO BE RECEIVED BY THE SHETE FAMILY. IT IS ONLY THE MAXIMU M THAT COULD BE RECEIVED. THEREFORE IT IS NOT A CAS E WHERE ANY CONSIDERATION OUT OF RS.20 CRORES OR PART THERE OF (AFTER REDUCING RS.2.70 CRORES) HAS BEEN RECEIVE D OR HAS ACCRUED TO THE RESPONDENT ASSESSEE. AS OBSERVED BY THE APEX COURT IN MORVI INDUSTRIES LTD. VS. CIT (19 71) 82 ITR 835. THE INCOME CAN BE SAID TO ACCRUE WHEN IT BECOMES DUE.... THE MOMENT THE INCOME ACCRUES, THE ASSESSEE GETS VESTED RIGHT TO CLAIM THAT AMOUNT, EV EN THOUGH NOT IMMEDIATELY. IN FACT THE APPLICATION OF FORMULA IN THE AGREEMENT DATED 25TH JANUARY, 2006 I TSELF MAKES THE AMOUNT WHICH IS RECEIVABLE AS DEFER RED CONSIDERATION CONTINGENT UPON THE PROFITS OF M/S.UN ISOL AND NOT AN ASCERTAINED AMOUNT. THUS IN THE SUB JECT ASSESSMENT YEAR NO RIGHT TO CLAIM ANY PARTICULAR AM OUNT GETS VESTED IN THE HANDS OF THE RESPONDENT-ASS ESSEE. THEREFORE, ENTIRE AMOUNT OF RS.20 CRORES WHICH IS S OUGHT TO BE TAXED BY THE ASSESSING OFFICER IS NOT T HE AMOUNT WHICH HAS ACCRUED TO THE RESPONDENT-ASSESSEE . THE TEST OF ACCRUAL IS WHETHER THERE IS A RIGHT T O RECEIVE THE AMOUNT THOUGH LATER AND SUCH RIGHT IS LEGALLY E NFORCEABLE. IN FACT AS OBSERVED BY THE SUPREME COUR T IN E.D. SASSOON & CO. LTD. VS. BOMBAY HIGH COURT ITXA2348.1 3 CIT (1954) 26 ITR 27 IT IS CLEAR THEREFORE THAT INCOME MAY ACCRUE TO AN ASSESSEE WITHOUT THE ACTUAL RECEIPT OF THE SAME. IF THE ASSESSEE ACQUIRES A RI GHT TO RECEIVE THE INCOME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO HIM THOUGH IT MAY BE RECEIVED LATER ON I TS BEING ASCERTAINED. THE BASIC CONCEPTION IS THAT HE MUST H AVE ACQUIRED A RIGHT TO RECEIVE THE INCOME. THERE M UST BE A DEBT OWED TO HIM BY SOMEBODY. THERE MUST BE AS IS O THERWISE EXPRESSED DEBITUM IN PRESENTI, SOLVENDUM I N FUTURO . . .. IN THIS CASE ALL THE CO-OWNERS OF THE SHARES OF M/S.UNISOL HAVE NO RIGHT IN THE SUBJ ECT ASSESSMENT YEAR TO RECEIVE RS.20 CRORES BUT THAT IS THE MAXIMUM WHICH COULD BE RECEIVED BY THEM. THIS AMOUNT WHICH COULD BE RECEIVED AS DEFERRED CONSIDER ATION IS DEPENDENT/CONTINGENT UPON CERTAIN UNCERTAI N 25 ITA NO.826/PN/2014 EVENTS, THEREFORE, IT CANNOT BE SAID TO HAVE ACCRUE D TO THE RESPONDENT-ASSESSEE. THE TRIBUNAL IN THE I MPUGNED ORDER HAS CORRECTLY HELD THAT WHAT HAS TO BE TAXED IS THE AMOUNT RECEIVED OR ACCRUED AND NOT ANY NOTIO NAL OR HYPOTHETICAL INCOME. AS OBSERVED BY THE APEX COURT IN COMMISSIONER OF INCOME-TAX VS. M/S. SHOORJI VALLABDAS AND CO. (1962) 46 ITR 144 INCOME-TAX IS A LEVY ON INCOME. NO DOUBT, THE INCOME-TAX ACT TAKE S INTO ACCOUNT TWO POINTS OF TIME AT WHICH LIABILITY TO TAX IS ATTRACTED, VIZ., THE ACCRUAL OF ITS INCOM E OR ITS RECEIPT; BUT THE SUBSTANCE OF THE MATTER IS INCOME, IF INCOM E DOES NOT RESULT, THERE CANNOT BE A TAX, EVEN THOU GH IN BOOK-KEEPING AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MATERIALIZE. IN THIS CASE R S.20 CRORES CAP IN THE AGREEMENT IS NOT INCOME IN THE SU BJECT ASSESSMENT YEAR. IT HAS BEEN OBSERVED BY THE APEX COURT IN THE CASE OF K.P. VARGHESE VS. INCOME-TAX O FFICER, ERNAKULAM & ANR. 181 ITR PAGE 597 THAT ONE HAS TO READ CAPITAL GAIN PROVISION ALONG WITH COMPUTATI ON PROVISION AND THE STARTING POINT OF THE COMPUTAT ION IS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR AC CRUING. IN THIS CASE THE AMOUNT OF RS.20 CRORES IS NEITHER RECEIVED NOR IT HAS ACCRUED TO THE RESPONDENT-ASSES SEE DURING THE SUBJECT ASSESSMENT YEAR. WE ARE INFO RMED THAT FOR THE SUBSEQUENT ASSESSMENT YEAR (SAVE ASSES SMENT YEAR 2007-08 FOR WHICH THERE IS NO DEFERRED CONSIDERATION ON APPLICATION OF FORMULA), THE ASSES SEE HAS OFFERED TO TAX THE AMOUNTS WHICH HAVE BEEN RECEIVED ON THE APPLICATION OF FORMULA PROVIDED IN THE AGREEMENT DATED 25TH JANUARY, 2006 PERTAINING T O THE TRANSFER OF SHARES. 9. THE CONTENTION OF THE REVENUE THAT THE IMPUGNED ORDER IS SEEKING TO TAX THE AMOUNT ON RECEIPT BASIS BY NOT HAVING BROUGHT IT TO TAX IN THE SUBJECT ASSESSMENT YEAR, IS NOT CORRECT. THIS FOR THE REASON, THAT THE AMOUNTS TO BE RECEIVED AS DEFERRED CONSIDERATION UNDER THE AGR EEMENT COULD NOT BE SUBJECTED TO TAX IN THE ASSESSM ENT YEAR 2006-07 AS THE SAME HAS NOT ACCRUED DURING THE YEAR . AS POINTED OUT ABOVE, ACCRUAL WOULD BE A RIGHT TO RECEIVE THE AMOUNT AND THE RESPONDENT-ASSESSEE ALONGWITH IT S CO-OWNERS HAVE NOT UNDER THE AGREEMENT DATED 25TH JANUARY, 2006 OBTAINED A RIGHT TO RECEIVE BOMBAY HI GH COURT ITXA2348.13 RS.20 CRORES OR ANY SPECIFIED PART THEREOF IN THE SUBJECT ASSESSMENT YEAR. 10. IN THE ABOVE VIEW THERE COULD BE NO OCCASION TO BRING THE MAXIMUM AMOUNT OF RS. 20 CRORES, WHICH C OULD BE RECEIVED AS DEFERRED CONSIDERATION TO TAX IN THE SUBJECT ASSESSMENT YEAR AS IT HAD NOT ACCRUED TO T HE RESPONDENT-ASSESSEE. 11. WE FIND THAT BOTH THE COMMISSIONER OF INCOME-TA X (APPEALS) AND THE TRIBUNAL HAVE IN VIEW OF THE CL EAR CLAUSES OF AGREEMENT DATED 25TH JANUARY, 2006 HAVE IN THE FACTS OF THE PRESENT CASE CORRECTLY HELD THA T THE RESPONDENT-ASSESSEE AND THE CO-OWNERS OF THE SHARES DID NOT HAVE A RIGHT TO RECEIVE RS.20 CRORES IN TH E SUBJECT ASSESSMENT YEAR. 12. IN THE ABOVE VIEW, IN THE PRESENT FACTS THE QUE STION OF LAW AS FRAMED DOES NOT GIVE RISE TO ANY SU BSTANTIAL QUESTION OF LAW. ACCORDINGLY, APPEAL IS DISMISSED. NO ORDER AS TO COSTS. 15. LEGAL POSITION THAT CAN BE CULLED OUT FROM A R EADING OF THESE DECISIONS NOTED ABOVE IS THAT IN ORDER TO BRING AN AMOUNT WIT HIN THE AMBIT OF CAPITAL GAINS, LEGAL RIGHT TO RECEIVE THE AMOUNT ON TRANSFE R OF CAPITAL ASSET MUST VEST IN FAVOUR OF THE ASSESSEE. 16. WE FIND THAT THE PREMISE FOR CHARGEABILITY OF C APITAL GAINS IN THE IMPUGNED ASSESSMENT YEAR IS THE FINDINGS GIVEN CIVI L COURT ORDER DATED 03/01/2007. IN THE CONTEXT, IT WILL BE RELEVANT TO REFER TO THE DECISION OF HONBLE HIGH COURT IN THE CASE OF KESHAVLAL PUNJARA , & OTHERS 141 ITR 466 (GUJ.) CITED ON BEHALF OF ASSESSEE WHEREIN THE HON BLE COURT HELD THAT FINDINGS IN CIVIL SUITS ARE NOT CONCLUSIVE AND THE AO IS NOT PRECLUDED TO FORM HIS OWN OPINION. IN OTHER WORDS, SCOPE OF INCOME TA X ASSESSMENTS ARE NOT AFFECTED BY CIVIL SUITS. THE ORDER OF THE CIVIL COU RT IS STATED TO BE IN DISPUTE BEFORE THE JURISDICTIONAL HIGH COURT AND THUS NOT C ONCLUSIVE EVEN IN CIVIL PROCEEDINGS. 26 ITA NO.826/PN/2014 17. IN THESE FACTS, IN THE LIGHT OF DECISIONS OF TH E SUPREME COURT AND JURISDICTIONAL HIGH COURT NOTED IN PRECEEDING PARAS , THERE IS NO ROOM FOR DOUBT THAT CAPITAL GAIN CAN BE TAXED ONLY IN THE RELEVANT YEARS IN WHICH THE LEGAL RIGHT TO RECEIVE HAS ACTUALLY VESTED IN ASSESSEE. VIEWED FROM THIS PERSPECTIVE, WE SUBSCRIBE TO THE PLEA OF THE ASSESSEE THAT THE CONS IDERATION FROM PURPORTED BUYERS HAVE NEITHER BEEN DETERMINED NOR CRYSTALLIZE D IN THE YEAR UNDER CONSIDERATION AND IS WHOLLY CONTINGENT UPON THE OUT COME OF DISPUTE. THUS, IN OUR VIEW, IN THE GIVEN FACTUAL MATRIX, THE CAPITAL GAIN IS NOT SUSCEPTIBLE TO TAX DURING THE YEAR UNDER CONSIDERATION. HOWEVER, AS A COROLLARY, IT WILL BE OPEN TO THE REVENUE TO TAX THE CAPITAL GAIN ACCRUING OR ARI SING ON TRANSFER IN THE APPROPRIATE YEAR IN WHICH THE LEGAL RIGHT TO RECEIV E THE CONSIDERATION ON TRANSFER STANDS CRYSTALLIZED WITHOUT ANY FETTERS OF LIMITATION PRESCRIBED UNDER STATUTE. WE DIRECT ACCORDINGLY. 18. IT WOULD BE PERTINENT TO NOTICE HERE THAT QUANT UM OF CAPITAL GAINS DETERMINED FOR TAXATION CONTINUED TO OSCILLATE FROM ONE ROUND OF PROCEEDINGS TO ANOTHER. THIS DOES NOT INSPIRE CONFIDENCE EITHER AND REFLECTS UNCERTAINTY. THE ITAT IN ITS EARLIER ORDER HAD SET ASIDE THE MATTER WITH CATEGORICAL DIRECTIONS TO THE ASSESSING OFFICER TO PROVIDE CROSS EXAMINATION OF THE PURPORTED FLAT BUYERS AS DEMANDED BY THE ASSESSEE. WITH DISMAY, WE NOTE T HAT THE DIRECTIONS WERE NOT MET. ON THE CONTRARY, CERTAIN REMARKS WERE MADE BY THE AO SUCH AS EXAMINATION OF FLAT PURCHASERS WOULD BE AN EXERCIS E OF FUTILITY; QUESTIONING THE WISDOM OF THE BINDING DIRECTIONS OF THE ITAT TO COMPLETE THE PROCEEDINGS IN A TIME BOUND MANNER IN 4 MONTHS ETC. THE RESISTA NCE SHOWN IN THE ORDER SMACKS OF DISREGARD OF THE TRIBUNAL AND GROSSLY OPP OSED TO JUDICIAL DISCIPLINE TO SAY THE LEAST. THE AO WHILE MAKING SUCH UNWARRAN TED OBSERVATIONS HAS FAILED TO UNDERSTAND THE TRUE PURPORT AND OBJECTIVE OF SUCH DIRECTIONS. THE AO HAS OBSERVED THAT IMPUGNED 225 BUYERS ARE NOT A PAR TY TO THE AGREEMENT DATED 20/06/1996 AND AGREEMENTS FOR SALE OF FSI WERE FOUN D VALID BY THE ITAT IN THE FIRST ROUND OF PROCEEDINGS. THIS OBSERVATION OF ASSESSING OFFICER IS FOUNDED UPON GROSS MISUNDERSTANDING OF THE FACTUAL MATRIX. ON THE FIRST OCCASION, SALE AGREEMENTS WITH ULTIMATE BUYERS WERE NOT IN FOCUS AT ALL. THE AGREEMENT DATED 20/06/1996 WAS BETWEEN THE ASSESSEE AND DEVELOPER WHO IN 27 ITA NO.826/PN/2014 TURN WERE TO EXECUTE SALE OF UNDIVIDED FSI AND COLL ECT MONEY FROM THE BUYERS AT SPECIFIED RATE TO GIVE EFFECT TO THE DEVELOPMENT AGREEMENT. THUS, ASSERTIONS MADE BY THE AO ARE TOTALLY MISLEADING AND CONTRARY TO WHAT IS BORNE OUT FROM RECORDS. WHILE THE CROSS EXAMINATION OF THE ULTIMAT E BUYERS OF UNDIVIDED FSI WERE NOT MADE AVAILABLE, THE CROSS EXAMINATION OF P ARTNER OF THE DEVELOPER RAJESH PATIL WAS ALSO FOUND TO BE PERFUNCTORY. FOR MOST OF THE QUESTIONS POSED BY THE ASSESSEE, THE WITNESS HAS FAILED TO PROVIDE ANY SPECIFIC ANSWER AT THE TIME OF CROSS-EXAMINATION. THE WITNESS WAS NOT COM PELLED BY AO TO FURNISH INDEPENDENT AND DEMONSTRABLE EVIDENCES, IF ANY TO S UPPORT ITS STAND. THUS, THERE IS A CLEAR REMISSNESS ON THE PART OF AO IN ME ETING THE DIRECTIONS BOTH IN LETTER AND IN SPIRIT. HENCE, IMPUGNED ASSESSMENT OR DER FRAMED IN CONSEQUENCE OF DIRECTIONS OF ITAT CLEARLY SUFFERS FROM THE VICE OF DISOBEDIENCE. THE AO IS ADVISED TO BE CAREFUL IN FUTURE AND NOT TO INDULGE IN SUCH AVOIDABLE CIRCUMSTANCES. WE RESTRAIN OURSELVES AND DO NOT DW ELL UPON THE ISSUE ANY FURTHER. 19. WE OBSERVE THAT AMOUNT RECEIVED ON EXECUTION OF AGREEMENT AND ANOTHER AMOUNT RECEIVED TOWARDS ADJUSTIABLE DEPOSIT WILL ALSO ACQUIRE THE CHARACTER OF INCOME ON FULFILLMENT OF TERMS OF AS P ER AGREEMENT WHICH ITSELF IS IN DISPUTE. THUS, THE TAXABILITY OF SUCH RECEIPTS I F ANY, WILL ALSO DEPEND ON THE EVENTS THAT MAY UNFOLD AS PER THE ORDER OF THE COUR T. IN THE SAME VAIN, WE ALSO OBSERVE THAT CONSIDERATION IN THE FORM OF COST OF C ONSTRUCTION OF AMENITIES WILL DEPEND ON THE OUTCOME OF THE DISPUTED CIVIL PROCEED INGS AND THUS CANNOT BE TAXED IN IMPUGNED ASSESSMENT YEAR IN THE ABSENCE OF ITS ACCRUAL. 20. IN THE LIGHT OF ABOVE, WE FIND MERIT IN THE SUB MISSIONS OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT CHARGEABILITY TO CAPITAL GAIN WILL ARISE IN THE YEAR IN WHICH LEGAL RIGHT TO RECEIVE THE CONSIDERATION, IF ANY, ACCRUES OR ARISES TO THE ASSESSEE. THE ASSESSING OFFICER WILL BE ENTITLED TO ASSESS THE INCOME REALISTICALLY EMANATING FROM SUCH TRANSACTION IN TH E APPROPRIATE ASSESSMENT YEAR ON RESOLUTION OF DISPUTE IN ACCORDANCE WITH PR OVISION OF LAW. WHILE DOING SO, THE AO SHALL ALSO MEET THE OBJECTIONS OF THE AS SESSEE ON THE VALUATION OF 28 ITA NO.826/PN/2014 COST OF ACQUISITION OF SUBJECT LAND AS ON 01/04/198 1, IF ANY, BY GIVING PROPER OPPORTUNITY OF BEING HEARD. 21. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 16 TH DAY OF MAY, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 16 TH MAY, 2016. & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE