YASHWANT SHRIKRISHNA KERHALKAR (HUF), Nagpur V. ITO-WARD-1(4), Nagpur

ITA 86/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3107 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Question of law; Cost of acquisition; Reason to believe
• Section: 143(3); 234B

Judgement Text

1 ITA NO. 86/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 86/NAG/2014 ASSESSMENT YEAR : 2009 - 10. YASHWANT SHRIKRISHNA KERHALKAR (HUF), THE INCOME - TAX OFFICER, NAGPUR. VS. WARD - 1(4), NAGPUR. PAN AAAHY2481B (APPELLANT) (RESPONDENT) APP ELLANT BY : SHRI K.P. DEWANI. RESPONDENT : SHRI NARENDRA KANE. DATE OF HEARING : 04 - 01 - 2016 DATE OF PRONOUNCEMENT : 26 TH FEBRUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 29 - 11 - 2013. THE GROUNDS RAISED ARE REPRODUCED BELOW: 1. THE ADDITION MADE BY A.O. AT RS.1,23,19,800/ - ON ACCOUNT OF SHORT TERM CAPITAL GAIN IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 2. THE LD. CIT(A) ERRED IN CONFIRMING ADDITION MADE BY A.O. AT RS.1,23,19,800/ - ON ACCOUNT OF SHORT TERM CAPITAL GAIN. 3. THE LD. AUTHORITIES ERRED IN HOLDING THAT ASSESSEE HAS GRANTED POSSESSION OF P ROPERTY DURING THE PREVIOUS YEAR RESULTING INTO TRANSFER OF CAPITAL ASSET HELD BY ASSESSE AND CONSEQUENTLY LIABILITY TO PAY CAPITAL GAIN TAX IN ASSESSMENT YEAR 2009 - 10. 4. THE ASSESSEE DENIES LIABILITY TO BE ASSESSED TO INTEREST UNDER SECTIONS 234A, 234B AND 234C OF INCOME TAX ACT, 1961. WITHOUT PREJUDICE, LEVY OF INTEREST UNDER SECTION 234A, 234B AND 234C IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 2 ITA NO. 86/NAG/2014 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) DATED 16 - 12 - 2011 WERE THA T THE ASSESSEE HUF HAS DISCLOSED IN THE BOOKS OF ACCOUNTS AN AMOUNT OF RS.1.49 CRORES TAKEN AS ADVANCE FROM M/S SWAPNASHILP DEVELOPERS. IT WAS RECORDED IN THE ASSESSMENT ORDER THAT IN RESPECT OF A LAND BEARING PLOT NO. 76 SITUATED AT M AUZA BESA, NAGPUR, TH E ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT DATED 07 - 08 - 2008 FOR A CONSIDERATION OF RS.1.50 CRORES. THE SAID DEVELOPMENT AGREEMENT WAS FOUND TO BE DULY REGISTERED WITH JOINT SUB REGISTRAR, NAGPUR. IT WAS ALSO NOTED BY THE AO THAT THE DEVELOPER HAD PAID THE STAMP DUTY AND REGISTRATION CHARGES AMOUNTING TO RS.3,30,00/ - . THE DEVELOPER M/S SWAPNASHILP DEVELOPERS HAD ISSUED TWO CHEQUES OF RS.75 LAKHS AND RS.74 LAKHS WHICH WERE RESPECTIVELY DEPOSITED BY THE ASSESSEE I N S.B.I. ON 09 - 08 - 2008. 3. THE AO HAS ALSO VERIFIED FROM THE RECORD OF M/S SWAPNASHILP DEVELOPERS THE FACT ABOUT THE ACQUISITION OF THE ABOVE PROPERTY WHICH WAS FOUND TO BE DULY REFLECTED IN THE BALANCE SHEET FOR A SUM OF RS.1,53,30,680/ - AS PER THE SCHEDULE 5 I.E. L IST OF A SSETS. THE OBSER VATION OF THE AO WAS THAT THE PURCHASER/DEVELOPER HAD CONSIDERED THE SAID PLOT AS ITS ASSET IN THE BOOKS OF ACCOUNTS AFTER PAYING ALMOST THE TOTAL AMOUNT OF CONSIDERATION AS PER THE TERMS OF THE AGREEMENT AND ALSO TAKEN POSSESSION OF THE SAID PLOT ON 07 - 08 - 2008. 3.1 THE AO HAS ALSO ENQUIRED ABOUT THE DATE ON WHICH THE ASSESSEE HAD ACQUIRED THE SAID LAND. THE LAND IN QUESTION WAS ACQUIRED ON 09 - 10 - 2006 FOR A SUM OF RS.26,80,200/ - . AS PER THE AO, SINCE THE ASSESSEE HAD NOT HELD THE PROPERTY FOR MORE THAN 36 M ONTHS PRIOR TO THE DATE OF TRANSFER, HENCE THE GAIN ON SALE OF PROPERTY WAS LIABLE TO BE CHARGED AS SHORT TERM CAPITAL GAINS. THE ASSESSEE HAS OBJECTED THE VIEW OF THE AO AND FILED A WRITTEN SUBMISSION, RELEVANT PORTION EXTRACTED FROM THE ASSESSMENT ORDE R IS AS UNDER : HENCE WH I LE ENTERING INTO AN AGREEMENT WITH THE ASSESSEE IT W A S SPEC I F I CA LL Y AGREED BETWEEN THE PARTY THAT TILL THE TRANSFER OF TITLE OF DEVELOPER I F L AND 3 ITA NO. 86/NAG/2014 O W NERSHIP COMES UNDER ANY DISPUTE IN THAT CASE ASSESSEE W I L L RETURNED A LL TH E A D V ANCE DEPOSIT MONEY TO THE SWAPNASHILP DEVELOPERS. BESIDE THIS AT TH A T M O M ENT THE PLOT DEVELOPMENT WORK OF THAT AREA ALSO COMES UNDER SCANNE R & D U E T O TH I S THE COLLECTORS ORDER TO STOP THE DEVELOPMENT WORK I N TH I S AREA . T H I S W AS V E RY C R I T I CAL SITUATION FOR BOTH THE ARTIES HENCE TO MAKE A WAY OUT OF THIS S I TUAT I ON IT WAS MUT UA LL Y AGREED BETWEEN THE PARTIES THROUGH THE AGREEMENT THAT TILL THE HANDING O V ER OF THE POSSESSION WHICH WAS SCHEDULE ON PAYMENT OF T OTAL CONS I DE R ATIO N A LL THE RI SK & RESPONSIBILITY REGARDING TO THE TITLE WILL BE ON ASSESSEE . AFTE R ENTERED INTO AN AGREEMENT BOTH ASSESSEE & THE SWAPNSHILPA DEVELOPE RS FA C ES THE VARIOUS DISTURBANCE FROM THE ORIGINAL OWNERS WHO MADE CLAIM ON T HE L AN D & SIMULTANEOUSLY THE PLOT DEVELOPMENT WORK I S ALSO HAMPERED DUE T O T H E CO LL ECTORS ORDER IN THIS REGARD WITH THIS AREA OF PLOT DEVELOPMENT . DUE TO T H IS PR EVAIL I NG FACT THE TERM OF AGREEMENT ALSO NEAR TO EXPIRE HENCE BY UNDERSTAND I NG T H E EACH OTHER POSITION BO TH THE PARTIES MUTUALLY MADE CORRECTION OF AGREEMEN T WHI CH WAS DULY NOTARIZED ON 29/03/2010 . AS PER THIS ADDENDUM DEED OF CORREC TI O N T O TH E AGREEMENT IT WAS FINALLY DECIDED THAT THE REMA I N I NG CONSIDERATION W I L L BE DUL Y PAID BY SWAPANSHILPA DEVELOPER WHICH WILL BE ACKNOWLEDGE BY THE ASSESSE E & I N THIS RESPONSE AFTER GETTING FULL CONSIDERATION ASSESSEE HANDOVER THE VACA NT P O S SES S ION OF LAND . - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - S I NCE THE CAPITAL GAIN IS ARISE ON THE LAST INSTALLMENT WHICH WAS RECEIVED BY THE ASSESSEE ON 05/05/2010 & ON THE SAME DAY THE POSSESSION OF LAND IS ALSO PASSES TO TH E M/S. SWAPANSHILPA DEVELOPERS, THE ABOVE MENTIONED FACTS & SUPPORTING DOCUMENT ARE CLEARLY SHOWS THAT THE ASSESSEE HAD LONG TERM CAPITAL GA I N I N THE FI NANCIAL YEAR 20 10 - 11 . TO EXTEND THE CLAIM IT IS HEREBY CONVEY THAT THE ASSESSEE ALREADY PAID CAPITAL GAIN T A X AS ADVANCE TAX FOR THE FINANCIAL YEAR 2010 - 11. TO SUPPORT THIS I HAVE ALSO A T TACHED HEREWITH THE COPIES OF CHALLAN WHICH CLEARLY SHOWS THAT THE ASSESSEE HAD CONSIDER THE CAPITAL GAIN TAX & PAID AS ADVANCE TAX FOR THAT PERIOD . PAI D AS ADVANCE FOR THAT PERIOD. ' 3.2 HOWEVER, THE AO WAS NOT CONVINCED AND IN HIS OPINION THE EVIDENCES PRODUCED BY THE ASSESSEE VIZ. ADDENDUM DEED DATED 29 - 03 - 2010, NEWSPAPER CUTTING OF HITAVADA DATED 7 TH MAY, 2010 WERE AN AFTER THOUGHT BUT NOT A CONCLUSIVE PROOF THAT THE POSSESSION OF THE LAND WAS NOT HANDED OVER ON 07 - 08 - 2008. ACCORDING TO THE AO THE ASSESSEE HAD RECEIVED THE TOTAL AMOUNT OF CONSIDERATION, BARRING A PALTRY SUM OF RS.1 LAKH. IN HIS OPINION THE PROPERTY WAS TRANSFERRED ON 07 - 08 - 2008 WHEN THE AGREEMENT TO DEVELOPMENT WAS EXECUTED. 4 ITA NO. 86/NAG/2014 THE AO HAS APPLIED THE PROVISIONS OF SECTION 5 3A OF I.T. ACT AND HELD THAT A SHORT TERM CAPITAL GAIN WAS TO BE TAXED IN THE HANDS OF THE ASSESSEE. THE CALCULATION WAS MADE AS UNDER : IN VIEW OF THE ABOVE I AM OF THE CONSIDERED OPINION THAT THE SAID TRANSACTION COMES WELL WITHIN THE MEANING OF SEC. 5 3A OF TRANSFER OF PROPERTY ACT, 1982. AS THE ASSESSEE HAS TRANSFERRED THE SAID LAND WITHIN 36 MONTHS OF ITS ACQUISITION, THE TRANSFER IS ATTRACTED WITH SHORT TERM CAPITAL GAIN AMOUNTING TO RS.1,23,19,800/ - WHICH IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE . THE SHORT TERM CAPITAL GAIN IS COMPUTED AS BELOW - COMPUTATION OF SHORT TERM CAPITAL GAIN. TOTAL SALE CONSIDERATE ON 1,50,00,000/ - (DATE OF TRANSFER 07/08/2008) LESS - COST OF ACQUISITION (ACQUIRED ON 09/10/2006) 26,80,200/ - TAXABLE SHORT TERM CAPITAL GAIN. 1,23,19,800 / - 4. BEING AGGRIEVED, THE ASSESSEE HA D CHALLENGED THE ORDER OF AO BEFORE THE LEARNED CIT(APPEALS). 5. IT WAS CONTENDED BEFORE THE LEARNED CIT(APPEALS) THAT THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE DEVELOPER ON 05 - 05 - 2010. IN SUPPORT OF THE SAID CONTENTION THE ASSESSEE HAS FILED A COPY OF THE CORRECTION /ADDENDUM DEED DATED 29 - 03 - 2010. IT WAS INFORMED THAT THE SAID CORRECTION DEED WAS EXECUTED ON A STAMP PAPER OF RS.100/ - WHICH WAS DULY NOTARIZED . T HE ASSESSEE HAS ALSO FURNISHED A LETTER OF POSSESSION DATED 05 - 0 5 - 2010 WRITTEN ON STAMP PAPER OF RS.100/ - WHICH WAS ALSO NOTARIZED. THE ASSESSEE HAD ALSO FURNISHED A CUTTING OF A NEWSPAPER WHICH WAS A PUBLIC NOTICE PUBLISHED ON 07 - 05 - 2010. LEARNED CIT(APP E A LS) HAS CALLED FOR A REMAND REPORT WHICH HAD ENDORSED THE VIEW TAKEN BY THE AO. FINALLY THE LEARNED CIT(APPEALS) HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE AS UNDER : 5 ITA NO. 86/NAG/2014 7 .6 ON CAREFUL EXAMINATION OF THE MATERIAL FACTS AVAILABLE ON RECORD, IT IS SEEN THAT THAT THE APPELLANT HAD RECEIVED RS.1.49 CRS., OUT OF TOTAL SALE CONSIDERATION OF RS.1.50 CRS., ON 07.0B.200B. THE DOCUMENT WAS DULY REGISTERED AND THE DEVELOPER HAD PAID STA MP DUTY AND R EGISTRATION EXPENSES FOR THE SAME. THEREFORE,. THE CONTENTION OF THE APPELLANT THAT POSSESSION WAS GIVEN BY HIM TO THE DEVELOPER ON 05.05.2010, DOES NOT CARRY MUCH SUBSTANCE, . FOR THE REASONS - FIRSTLY, THAT BY VIRTUE OF CLAUSE' 11 OF THE DEVEL OPMENT A GREEMENT, THE DEVALOPER IS E NTITLED TO TAKE THE POSSESSION OF THE PROPERTY ON 07.0 8 . 2 00 8 A ND ,ACCORDINGLY, AFTER PAYMENT; OF ALMOST FULL AMOUNT, ALL THE RIGHT, TITLE AND INTEREST OF THE PROPERTY GOT VESTED WITH THE DEVELOPER AS PER THE' TERMS OF THE SAID DEVELOPMENT AGREEMENT .. SECONDLY, THAT THE TRANSFER OF T HE PROPERTY WITHIN THE MEANING OF SECTION 2(47 . ) OF THE I. T. ACT, 1961, AND SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1982 ARE ' COMPLETED. THIRDLY, THAT THE PROPERTY IN QUESTION IS DULY F OUND REFLECTED IN THE BALANCE SHEET OF THE DEVELOPER IN THE RELEVANT ASSESSMENT YEAR. LASTLY, THAT THERE IS NO REASON TO BELIEVE THAT AFTER HAVING PAID THE FULL AND FINAL CONSIDERATION, THE DEVELOPER WOULD HAVE WAITED FOR PO SSESSION FOR THE NEXT TWO Y EARS, WHICH IS AGAINST THE B ASIC NORMS OF BUSINESS PRU DENCE. THE APPELLANT HAS BECOME THE OWNER OF THE PROPERTY ON 09.10.2006 WHICH WAS SOLD ON 07.08.2008. THEREFORE, THE HOLDING PERIOD BEING LESS THAN 36 MONTHS, THE TRANSACTION IS LIABLE TO BE TAXED AS SHORT TERM CAPITAL GAIN. THE ARGUMENTS TAKEN BY THE APPELLANT THAT HE HAD HANDED OVER THE POSSESSION OF LAND TO THE DEVELOPER ON 05.05.2010, TO MY CONSIDERED OPINION, DO NOT SURVIVE AND THE ACTUAL DATE OF POSSESSION IS 07.08.2008, AS PER THE TERMS (CLAUSE 11) OF THE DEVELOPMENT AGREEMENT. THEREFORE, DECLINE TO INTERFERE WITH THE ORDER OF THE A.O. HENCE, THE ADDITION MADE BY THE AO IS UPHELD. THESE GROUNDS ARE DISMISSED. 6. CHALLENGING THE ORDERS OF THE AUTHORITIES BELOW, LEARNED A.R. MR. K.P . 6 ITA NO. 86/NAG/2014 DEWANI APPEARED BEFORE US. A COMPILATION HAS BEEN FILED ALONG WITH FEW CASE LAWS. THE MOST IMPORTANT ARGUMENT OF LEARNED A.R. WAS THAT THE ASSESSEE HAD ALREADY SHOWN THE LONG TERM CAPITAL GAIN IN THE ASSESSMENT YEAR 2011 - 12 BY FILING INCOME TAX RETURN. F OR THAT YEAR THE ASSESSEE HAD ALSO PAID THE ADVANCE TAX. THE LONG TERM CAPITAL GAIN OF RS.1,13,41,519/ - WAS DISCLOSED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 AS PER THE FOLLOWING COMPUTATION : INCOME FROM CAPITAL GAIN 11,341,519.00 NET SALE CONSIDERATION: 15,000,000.00 LESS: 3,658,481.00 1) INDEXATION OF COST OF 2,964,281.00 ACQUISITION 2163800*711/519 2006 - 07 2) INDEXATION OF COST OF 214,7 20.00 IMPROVEMENT. 166400*711/551 LEARNED A.R. HAS ALSO INFORMED THAT A SUM OF RS.20 LAKHS WAS DEPOSITED AS ADVANCE TAX FOR ASSESSMENT YEAR 2011 - 12. LEARNED A.R. HAS FURTHER PLEADED THAT MERELY ON THE BASIS OF THE AGREEMENT OF DEVELOPMENT IT WAS WRONG ON THE PART OF THE AO TO PRESUME THAT THE PROPERTY HAD BEEN SOLD TO THE DEVELOPER. THE ASSESSEE WAS EXPECTED TO HAND OVER THE POSSESSION BUT DUE TO CERTAIN UNAVOIDABLE CIRCUMSTANCES THE POSSESSION OF THE PROPERTY COULD NOT BE HANDED OVER. LEARNED A.R. HAS PLEADED THAT THERE WAS SOME DISPUTE WITH THE PREVIOUS OWNER FROM WHOM THE ASSESSEE HAD PURCHASED THE PROPERTY IN QUESTION. DUE TO THE SAID DISPUTE THE POSSESSION OF THE PROPERTY COULD NOT BE DELIVERED. SINCE THE POSSESSION WAS NOT HANDED OVER AND THE PROPERTY WAS NOT MUTATED IN THE NAME OF M/S SWAPNASHILP DEVELOPERS , THEREFORE, VIDE CLAUSE 10 IT WAS CLARIFIED THAT ALTHOUGH THE DEVELOPER WILL PREPARE A PLAN FOR THE PROPOSED CONSTRUCTION OVER 7 ITA NO. 86/NAG/2014 THE PLOT BUT THE SANCTION COULD BE OBTAINED ONLY IN THE NAME OF THE ASSESSEE. LEARNED A.R. HAS ALSO PLACED RELIANCE ON THE DEED OF CORRECTION DATED 29 - 03 - 2010 WHEREIN IT WAS CLEARLY MENTIONED THAT DUE TO A DISPUTE THE POSSESSION OF THE PROPERTY COUL D NOT BE HANDED OVER.THE RELEVANT CLAUSE IS REPRODUCED BELOW : I) THAT DUE TO , THE EXPIRY OF THE PERIOD OF THE 18 MONTHS FROM T HE DATE OF THE REGISTERED AGREEMENT OF DEVELOPMENT DATED 7TH OF AU G UST 2008 ; BOTH THE PARTIES HAS DECIDED MUTUALLY TO EXTEND THE A GR E EMENT OF DEVELOPMENT FOR THE PERIOD OF THREE MONTHS FROM 07/02/2010 , TO 07/05/201 BY EXECUT I NG THIS ADDENDUM 1 CORRECTION TO THE A GREEMENT ON THIS 29TH DAY OF MARCH 2010. ' II) THAT THE PERIOD OF THIS AGREEMENT IS EXTENDED . DUE TO LACK OF P ERMISSION TO DEVELOP THE ABOVE SAID PROPERTY FROM THE TOWN PLANNING AUTHORITIES AND DUE TO THE IMPOSITION OF THE SANCTION BY THE DISTRICT COLLECTOR NAGPUR TO STOP THE ILLEGAL AND UNSANCTIONED CONSTRUCTION I N THE AREA WHERE PROPERTY IS SITUATED . III) THAT IT IS MUTUAL L Y DECIDED THAT THE DEVELOPER WILLMAKE THE PAYMENT OF RS . 1,00,0001 - (ONE LAKH) TO THE OWNER ON OR BEFORE 7 TH OF MAY 2010 WITH OR WITHOUT THE PERMISSION OF CONSTRUCTION ON THE A BOVE SAID P L OT AND AFTER RECEIPT OF THE CONSIDERATION AMOUNT THE OWN E R WILL H AND O V ER THE VACANT AND PEACEFUL POSSESSION OF THE ABO V E SA I D PROPERTY A L ONG WITH THE POSSESSION LETTER ON OR BEFORE 7TH OF M AY 2 010 TO THE DEVELOPER AS PER THIS ADDENDUM 1 CORRECTION TO THE AGREE M ENT DATED 2 9 TH MARCH, 2010. 6.1 OUR ATTENTION HAS ALSO BEEN DRAWN ON THE PUBLIC NOTICE APPEARING IN NEWSPAPER HITVADA DATED 07 - 05 - 2010 . AS PER THE LEARNED A.R., THE NAGPUR IMPROVEMENT TRUST HAS ACKNOWLEDGED THE OWNERSHIP OF THE ASSESSEE DURING THE SAID PERIOD. LEARNED A.R. HAS ALSO INFORMED THAT 7/12 EXTR ACT FOR THE SAID PERIOD WAS ISSUED IN THE NAME OF THE ASSESSEE. IN SUPPORT OF THE ABOVE CLAIM AN AFFIDAVIT OF ONE OF THE PARTNER OF M/S SWAPNASHILP DEVELOPERS HAS ALSO BEEN PLACED ON RECORD. IN SHORT, THE ARGUMENT OF LEARNED A.R. WAS THAT THE POSSESSION WA S NOT HANDED OVER AND THE PART OF THE CONSIDERATION I.E. RS.1 LAKH REMAINED TO BE PAID BY THE SAID PURCHASER, THEREFORE, THERE WAS NO OCCASION TO ASSESS THE AMOUNT RECEIVED BY THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAIN. THE CASE LAWS RELIED WER E AS UNDER : 1. CIT VS. GEETADEVI PASARI 17 DTR 280 (BOM.). 2. HONBLE BOMBAY HIGH COURT DECISION IN TAX APPEALS NO. 11&12 8 ITA NO. 86/NAG/2014 OF 2013 IN THE CASE OF SHRI SADIA SHAIKH VIDE ORDER DT. 02/12/2013. 3. DELIP ANAND VIZIRANI VS. ITO 41 CCH 321 (MUM. )(TRIB.). 4. BINJUSARIA PROPERTIES PVT.LTD. 40 ITR (TRIB.) 230 (HYD.). 5. ITO VS. FINIAN ESTATES DEVELOPERS (P) LTD. 63 DTR 314 6. ACIT VS. R. SRINIVASA RAO. 40 ITR 266 (HYD.). 7. ITO VS. HARINATH CHOUDARY 40 CCH 31 (HYD.) (TRIB.). 8. ACIT VS. N. SARO JINI 43 CCH 175 (HYD.) (TRIB). 7. FROM THE SIDE OF THE RESPONDENT, LEARNED D.R. MR. NARENDRA KANE APPEARED AND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HIS MAIN PLANK OF ARGUMENT WAS THAT IN A SITUATION WHEN A SUBSTANTIAL AMOUNT WAS PAID BY A PURCHAS ER THEN THE POSSESSION HAS ALSO BEEN TAKEN OVER, THEREFORE, THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 2(47) OF THE I.T. ACT. THE CORRECTION DEED AND NEWSPAPER CUTTING WERE NOTHING BUT AN AFTER THOUGHT TO COVER UP THE FINDINGS OF THE AO. 8. WE HA VE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE RECORDS. IN THE LIGHT OF THE FACTS NARRATED IN THE FOREGOING PARAGRAPHS, WE HAVE FOUND THAT THIS ISSUE HAD REVOLVED AROUND THE PROVISIONS OF SECTION 2(47) OF THE I.T. ACT. THIS SECTION HAS DEFINED THE TERM TRANSFER IN RELATION TO A CAPITAL ASSET. ACCORDING TO THIS SECTION, A TRANSFER INCLUDES THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSETS. THE TRANSFER ALSO INCLUDES THE EXTINGUISHMENT OF ANY RIGHTS. THE TRANSFER OF THE CAPITAL ASSET ALSO INCLUDES ANY TRANSACTION INVOLVING THE ALLOWING OF POSSESSION OF ANY IMMOVABLE PROPERTY IN PART PERFORMANCE OF A CONTRACT REFERRED TO IN SECTION 53A OF I.T. ACT. 8.1 AS FAR AS THE PAYMENT OF RS.1.49 CRORES RECEIVED BY THE ASSESSEE IS CONCERNED THERE WAS NO DISPUTE THAT THE SAME WAS RECEIVED BY THE ASSESSEE THROUGH TWO CHEQUES OF RS.75 LAKHS AND RS.74 LAKHS WHICH WERE DULY CREDITED IN SBI ACCOUNT ON 09 - 08 - 2008. ALSO TH ERE IS NO DISPUTE THAT THE SAID PAYMENT 9 ITA NO. 86/NAG/2014 WAS MADE AFTER THE EXECUTION OF THE DEVELOPMENT AGREEMENT DATED 07 - 08 - 2008. HENCE THE PASSING OVER OF THE CONSIDERATION FROM THE DEVELOPER TO THE ASSESSEE WAS AN ACCEPTED POSITION OF FACT. BARRING A SMALL AMOUNT OF R S. 1 LAKH REST OF THE AMOUNT WAS ADMITTEDLY HANDED OVER TO THE ASSESSEE. SINCE THE AGREEMENT WAS EXECUTED ON 07 - 08 - 2008 FOR A TOTAL CONSIDERATION OF RS.1.50 CRORES AND ALMOST THE TOTAL AMOUNT WAS RECEIVED BY THE ASSESSEE, THEREFORE, THE AO HAD PROCEEDED TO TAX THE SAME FOR THE ASSESSMENT YEAR 2009 - 10. 8.2 THE DISPUTE IS ABOUT THE HANDING OVER OF THE POSSESSION. ON ONE HAND THE REVENUE DEPARTMENT HAS HELD THAT THE POSSESSION WAS HANDED OVER WHEN THE DEVELOPMENT AGREEMENT WAS EXECUTED, THEREFORE, THE PROVIS IONS OF SECTION 2(47) WERE APPLIED FOR ASSESSMENT YEAR 2009 - 10. AS AGAINST THAT THE ASSESSEES VEHEMENT CONTENTION WAS THAT THERE WERE NUMBER OF EVIDENCES THROUGH WHICH IT COULD BE ESTABLISHED THAT THE POSSESSION WAS NOT HANDED OVER ON 07 - 08 - 2008 BUT IT WA S HANDED OVER SUBSEQUENTLY WHEN A DULY NOTARIZED DEED OF CORRECTION OR THE ADDENDUM WAS EXECUTED ON 29 - 03 - 2010. AT THIS JUNCTURE IT IS WORTH TO MENTION THAT THE ASSESSEE HAS OFFERED THE LONG TERM CAPITAL GAIN FOR ASSESSMENT YEAR 2011 - 12 BY HOLDING THA T THE TRANSFER TOOK PLACE IN THE YEAR 2011 - 12 WHEN THE POSSESSION WAS HANDED OVER. 8.3 CERTAIN FACTS ABOUT THE DIFFICULTY IN HANDING OVER OF THE POSSESSION WERE DEMONSTRATED, SUCH AS, THE DISPUTE RAKED UP WITH THE TOWN PLANNING AUTHORITIES AS WELL AS THE COLLECTOR. THE COLLECTOR HAD DIRECTED TO STOP THE CONSTRUCTION IN THAT LOCALITY. KEEPING THIS PROBLEM IN MIND THAT THERE WAS A DISPUTE IN COMMENCEMENT OF THE DEVELOPMENT, HENCE , A CLAUSE NO. 21 WAS INSERTED IN THE DEVELOPMENT AGREEMENT DATED 07 - 08 - 2008 S PECIFYING THAT IN CASE OF LITIGATION THE AMOUNT SHALL BE REFUNDED. ONE MORE ARGUMENT HAS BEEN RAISED THAT THERE WAS NOT A SINGLE CLAUSE IN THE DEVELOPMENT AGREEMENT WHEREIN IT WAS SPECIFICALLY MENTIONED THAT THE POSSESSION OF THE PLOT IN QUESTION WAS HANDE D OVER TO THE DEVELOPER. THE ARGUMENT OF LEARNED A.R. IS THAT THE TONE & T ENOR OF 10 ITA NO. 86/NAG/2014 THE LANGUAGE OF THE DEVELOPMENT AGREEMENT CLEARLY INDICATE THAT THE PROPERTY IN FUTURE SHALL BE DEVELOPED BY THE DEVELOPER AFTER COMPLETION OF ALL THE FORMALITIES AND REMOVA L OF THE HURDLES. SO THE ARGUMENT IS THAT THE EXECUTION OF THE DEVELOPMENT WAS TO BE PERFORMED ON A FUTURE DATE AND WITH EFFECT FROM THE DATE OF SIGNING OF THE AGREEMENT . IN SUPPORT OF THIS CONTENTION, OUR ATTENTION HAS ALSO BEEN DRAWN ON CERTAIN CLAUSES O F THE DEED OF CORRECTION DATED 29 TH MARCH, 2010 WHEREIN IT WAS PROVIDED THAT DUE TO THE EXPIRY OF THE PERIOD OF 18 MONTHS FROM THE DATE OF THE DEVELOPMENT AGREEMENT THE PARTIES HAVE MUTUALLY DECIDED TO EXTEND THE SAID AGREEMENT FOR A FURTHER PERIOD, HENC E EXECUTED THE ADDENDUM ON 29 TH MARCH, 2010. ONE OF THE CLAUSE HAS SPECIFIED THAT NO DEVELOPMENT WORK WAS CARRIED OUT DUE TO LACK OF PERMISSION FROM THE ADMINISTRATIVE AUTHORITIES TO DEVELOP THE SAID PROPERTY. TOWN PLANNING AUTHORITIES HAVE NOT GRANTED THE REQUISITE PERMISSION. IN ONE OF THE CLAUSE IT HAS BEEN MENTIONED THAT THE DISTRICT COLLECTOR, NAGPUR HAD IMPOSED A SANCTION AND STOPPED THE CONSTRUCTION ACTIVITY O N THAT ENTIRE AREA. ONE OF THE CLAUSE OF THE ADDENDUM HAD, THEREFORE, SPECIFIED THAT ON R ECEIPT OF THE BALANCE AMOUNT OF RS. 1 LAKH THE POSSESSION WAS TO BE HANDED OVER TO THE DEVELOPER. THERE ARE CERTAIN OT HER EVIDENCES ON RECORD , SUCH AS, AN AFFIDAVIT OF ONE OF THE PARTNER O F M/S SWAPNASHILP DEVELOPERS AFFIRMING ON OATH THE DATE OF POSSESSIO N AND ALSO AFFIRMING THAT NO DEVELOPMENT ACTIVITY WHATSOEVER WAS CARRIED OUT TILL 9 TH DEC., 2011. THERE IS ALSO AN ANOTHER EVIDENCE THAT THE NAGPUR IMPROVEMENT TRUST VIDE NOTICE DATED 29 - 03 - 2012 HAS NOT RECOGNIZED THE DEVELOPER BUT ISSUED THE NOTICE IN THE NAME OF THE ASSESSEE DUE TO THE UNCERTAINTY OF THE OWNERSHIP OVER THE PROPERTY IN QUESTION. WE HAVE ALSO BEEN INFORMED THAT FOR ASSESSMENT YEAR 2011 - 12 AN ASSESSMENT WAS MADE U/S 143(3) VIDE ORDER DATED 21 - 10 - 2013 WHEREIN THE LONG TERM CAPITAL GAIN WAS AS SESSED ON PROTECTIVE BASIS. 8.4 ON THE QUESTION OF GENERAL MARKET PRACTICE THAT WHEN THE SUBSTANTIAL PRICE WAS PAID, THEN WHY THE POSSESSION WAS NOT HANDED OVER, THE APPELLANT HAS 11 ITA NO. 86/NAG/2014 PLACED BEFORE US THAT IDENTICALLY WHEN THE ASSESSEE HAD PURCHASED PURCHASED THIS LAND FROM ONE SHRI BABAN & OTHERS THE SALE DEED WAS EXECUTED ON ,09 - 10 - 20 06 , HOWEVER, AS AGREEMENT WAS MADE DATED 28 - 10 - 2003 AND OUT OF THE TOTAL CONSIDERATION OF RS.21,00,000 , T HE ASSESSEE HAD PAID THE SUBSTANTIAL AMOUNT OF RS.19,00,000/ - UPTO THE YE AR 2004. THEREFORE, THE SUBSTANTIAL AMOUNT WAS PAID TWO YEARS PRIOR TO THE HANDING OVER OF THE POSSESSION. THUS RELYING UPON THE GENERAL MARKET PRACTICE IT IS ARGUED THAT APPLYING THE PRINCIPLES OF PREPONDERANCE OF PROBABILITIES; THE SEQUENCE OF TRANSACTIO NS IN THE CASE OF THE ASSESSEE DESERVES ACCEPTANCE. WE, THEREFORE, HOLD THAT SCALE OF JUSTICE IN ALL FAIRNESS GETS TIL TED IN FAVOUR OF THE ASSESSEE. IN THE LIGHT OF THE OVER ALL CIRCUMSTANCES AND THE EVIDENCES AS DISCUSSED HEREIN ABOVE, WE HAVE PERU S ED THE FEW CASE LAWS AS UNDER: 8.5 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GITADEVI PASARI 17 DTR 280 HAS EXAMINED THE AGREEMENT AND THEREUPON DRAWN A CONCLUSION THAT CONSIDERING THE DATE OF POSSESSION THE CAPITAL GAIN IS CHARGEABLE ACCORDING TO THE DATE OF POSSESSION AND NOT AS PER THE DATE OF AGREEMENT. THE ISSUE BEFORE THE HONBLE COURT WAS AKIN TO THE ISSUE NOW BEFORE US I.E. DATE OF POSSESSION VIS - A - VIS AGREEMENT OF SALE. IT WAS OPINED THAT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN THE ASSESSMENT YEAR SHALL BE IN WHICH THE PURCHASER HAD ACTUALLY PUT INTO PHYSICAL POSSESSION, EVEN THOUGH THE AGREEMENT COULD HAVE BEEN EXECUTED EARLIER. 8.6 IN A N ANOTHER UNREPORTED DECISION OF HONBLE HIGH COURT AT GOA IN TAX APPEAL NO. 11 AND 12 OF 2013 IN THE CASE OF SHRI SADIA SHAIKH VIDE ORDER DATED 2 ND DEC., 2013 IT WAS HELD AS UNDER : 6. THE COMMISSIONER OF INCOME TAX (APPEALS) SO ALSO THE LEARNED TRIBUNAL UPON PERUSAL OF THE AGREEMENT IN QUESTION FOUND THAT THE POSSESSION AS CONTEMPLATED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS IN FACT NOT HANDED OVER BY THE ASSESSEE TO THE DEVELOPER. IT HAS FURTHER BEEN FOUND THAT THE AGREEMENT ONLY PERMITTED THE DEVELOPMENT TO 12 ITA NO. 86/NAG/2014 BE CARRIED OUT BY THE SAID DEVELOPER. IT HAS BEEN FOUND THAT THE ENTIRE CONTRO L OVER THE PROPERTY WAS IN FACT WITH THE ASSESSEE INASMUCH AS THE LICENCE TO CONSTRUCT THE PROPERTY WAS ALSO IN THE NAME OF THE ASSESSEE AND THE OCCUPANCY CERTIFICATE WAS ALSO GIVEN TO THE ASSESSEE. IT WAS THEREFORE FOUND THAT THE EXECUTION OF THE AGREEME NT COULD NOT AMOUNT TO TRANSFER AS CONTEMPLATED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IT WAS FURTHER FOUND THAT THE AGREEMENT DATED 5 TH OCTOBER, 2002 WAS SPECIFICALLY MODIFIED BY SUB - CLAUSE 2 OF THE AGREEMENT DATED 19 TH JULY, 2004 AND 5 TH MARC H, 2008. IT WAS FURTHER FOUND THAT THE ASSESSEE WAS LIABLE TO PAY THE CAPITAL GAIN AS PER THE LAST AGREEMENT I.E. FOR ASSESSMENT YEAR 2008 - 09. 7. IT CAN BE SEEN THAT COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE LEARNED TRIBUNAL UPON BASIS OF THE FAC TUAL MATERIAL PLACED BEFORE IT AND UPON INTERPRETATION OF THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE DEVELOPER HAS FOUND THAT THE ASSESSEE WAS LIABLE TO PAY CAPITAL GAIN IN THE EYAR 2008 - 09, INASMUCH AS THERE WAS NO POSSESSION HANDED OVER TO THE DE VELOPER UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT IN THE ASSESSMENT YEAR 2003 - 04. IT CAN THUS BE SEEN THAT FINDING RECORDED ARE UPON APPRECIATION OF MATERIAL LED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL AND UPON CONSIDERATIO N OF THE DOCUMENTS PLACED FOR ITS CONSIDERATION. THE SAID QUESTION THEREFORE CANNOT BE SAID TO BE A QUESTION OF LAW, LEAVE ASIDE, THE SUBSTANTIAL QUESTION OF LAW. THE APPEALS ARE THEREFORE FOUND TO BE WITHOUT MERIT AND AS SUCH STANDS DISMISSED. 8.7 IN AN ANOTHER DECISION THE ITAT, MUMBAI IN THE CASE OF DELIP ANAND VIZIRANI VS. ITO 41 CCH 321 IN ITA NO. 3096/MUM/2012 ORDER DATED 14 TH NOV., 2014 HAS EXPRESSED THAT CAPITAL GAIN CANNOT BE COMPUTED AS TRANSFER OF PROPERTY DOES NOT TAKE PLACE ON THE DATE OF EXECUTION OF DEVELOPMENT AGREEMENT. 9. IT IS WORTH TO MENTION AT THIS JUNCTURE THAT IN ALL SUCH CASES AN EARLIER DECISION OF CHATURBH UJDAS KAPARIA OF BOMBAY HIGH COURT 260 ITR 491 HAS BEEN DISCUSSED AND CONSIDERED. 10. THERE ARE FEW OTHER DECISIONS BUT KEEPING BREVITY IN MIND NEED NOT TO BE DISCUSSED ANY MORE IN DETAIL. , WE HEREBY CONCLUDE THAT CONSIDERING THE SURROUNDING CIRCUMSTANCES DUE TO WHICH THE DEVELOPMENT WORK COULD NOT BE 13 ITA NO. 86/NAG/2014 STARTED AND THE POSSESSION OF THE PROPERTY WAS STATED TO BE UNDER SOME LITIGATION AND THAT THE POSSESSION WAS HANDED OVER DURING THE FINANCIAL YEAR RELEVANT FOR THE ASSESSMENT YEAR 2011 - 12, IN WHICH YEAR THE L ONG TERM CAPITAL GAIN HAS BEEN OFFERED AND TAXED, INTER ALIA WE HEREBY HOLD THAT THE SHORT TERM CAPITAL GAIN WAS NOT ASSESSABLE FOR THE ASSESSMENT YEAR 2009 - 10. AS A RESULT, THE FINDINGS OF THE REVENUE AUTHORITIES ARE HEREBY REVERSED AND THE GROUNDS RAISE D BY THE ASSESSEE ARE ALLOWED. 11. THE GROUND IN RESPECT OF CHARGING OF INTEREST U/S 234A, 234B AND 234C IS CONSEQUENTIAL IN NATURE. THEREFORE, NO ADJUDICATION IS REQUIRED PRESENTLY IN THIS ORDER. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 26 TH FEBRUARY, 2016. 14 ITA NO. 86/NAG/2014 COPY FORWARDED TO : 1. SHRI YASHWANT SHRIKRISHNA KERHALKAR (HUF), 278, BAJAJ NAGAR, NAGPUR. 2. I.T.O., WARD - 1 (4), NAGPUR. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR .