MR ABDUL WAHAB V. THE COMMISSIONER OF INCOME TAX

RP/72/2021

AI Insights

The case involves Mr. Abdul Wahab, the petitioner, who contested a capital gains tax imposed by the Income Tax Department on a property transaction. Mr. Wahab had purchased land that was already acquired by the Karnataka Industrial Areas Development Board (KIADB) and allotted to M/s. Bulgarian Foods. Subsequently, he entered into an agreement with M/s. Trishul Developers, which the Assessing Officer interpreted as a 'transfer' under Section 2(47) of the Income Tax Act, 1961, leading to the imposition of capital gains tax. The ITAT initially allowed Mr. Wahab's appeal, but the High Court reversed this decision, leading to the current review petition. The main legal contention revolves around whether the transactions were substantive or merely paper transactions, given the prior acquisition of the land by KIADB.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 752385 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 08-09-2023
• Assessment Year: misc
• Laws Referred To: Code of Civil Procedure, 1908, Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: A SHANKAR
• Keywords: Assessment Year 2006-07; Capital gains tax; Power of attorney; Review petition; Transfer of property
• Section: 260A; 114; 47; 2(47)

Judgement Text

" - 1 - NC: 2023:KHC:32550-DB RP No. 72 of 2021 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF SEPTEMBER, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE R. NATARAJ REVIEW PETITION NO. 72 OF 2021 BETWEEN: MR. ABDUL WAHAB AGE : 65 YEARS NO.292, 2ND CROSS, RAHAMATHNAGAR, BANGALORE. …PETITIONER (BY SRI. A. SHANKAR, SENIOR COUNSEL FOR SRI. BALACHANDRAN B.S., ADVOCATE) AND: 1. THE COMMISSIONER OF INCOME TAX, No.1, C.R. BUILDING, QUEEN'S ROAD, BANGALORE-560 001. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 (3), NO.1, QUEEN'S ROAD, C.R BUILDING, BANGALORE-560 001. …RESPONDENTS (BY SRI. E.I. SANMATHI, ADVOCATE) THIS REVIEW PETITION IS FILED UNDER SECTION 114 READ WITH ORDER 47 RULE 1 OF THE CODE OF CIVIL PROCEDURE, 1908, READ WITH SECTION 260A OF THE INCOME TAX ACT, 1961 PRAYING THIS HONBLE COURT TO REVIEW THE ORDER DATED 19.01.2021 PASSED BY THIS HON'BLE COURT IN ITA NO.249/2015 (ANNEXURE- A) AND ETC. THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, P.S.DINESH KUMAR J., MADE THE FOLLOWING: Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2023:KHC:32550-DB RP No. 72 of 2021 ORDER This review petition by the assessee is directed against ITA No.249/2015 decided on 19.01.2021. 2. Heard Shri A. Shankar, learned Senior Advocate for the Assessee and Shri E.I. Sanmathi, learned Advocate for the Revenue. 3. Shri Shankar, learned Senior Advocate for the assessee submitted that assessee had purchased 1,47,898.98 Sq. ft. land in Sy. Nos.48 and 48/1 of Veerasandra village under a sale deed dated 29.06.2004. By then, it was already acquired by the KIADB1 and allotted to one M/s.Bulgarian Foods. The possession of the land remains with M/s.Bulgarian Foods. Without knowing the said development, the assessee had entered into an agreement with M/s.Trishul Developers on 21.12.2005 to develop the property and gave a power of attorney of even date to the builder. The Assessing Officer came to the conclusion that there was 'transfer' under Section 2(47) of 1 The Karnataka Industrial Areas Development Board - 3 - NC: 2023:KHC:32550-DB RP No. 72 of 2021 the Income Tax Act, 1961 and imposed capital gains tax. The CIT(A)2 dismissed assessee’s appeal. On further appeal, the ITAT3 has allowed the assessee’s appeal. 4. Feeling aggrieved, the Revenue has approached this Court in ITA No.249/2015 and the said appeal has been allowed. 5. Shri Shankar submitted that the ITAT has recorded a finding in para No.12 of its order that the possession of the property was never handed over to M/s.Trishul Developers and it was agreed that the possession would be handed over at the time of registration of the sale deed and registration of the sale deed never took place. 6. In substance, assessee's case is, the property which the assessee had purchased was already acquired by the KIADB and allotted to a firm called M/s.Bulgarian Foods. Therefore, all transactions are only paper transactions. That being the situation, the order passed 2 Commissioner of Income Tax (Appeals) 3 Income Tax Appellate Tribunal - 4 - NC: 2023:KHC:32550-DB RP No. 72 of 2021 by the ITAT is just and appropriate and its reversal by this Court is unsustainable in law. 7. Shri Sanmathi, learned Advocate for the Revenue submitted that the impugned order is based on the recitals contained in the power of attorney. Replying to Shri Shankar's contention with regard to the facts recorded in para No.12 of the ITAT's order, Shri Sanmathi submitted that the ITAT may be directed to examine both the agreement and the power of attorney and record a clear finding. 8. Shri Shankar also submitted that there are pending litigations in the Civil Court and High Court with regard to the title and possession of the property. Shri Sanmathi countered the said submission, contending that the litigation referred by Shri Shankar is at a later point of time and does not have any bearing so far as the order passed by the Assessing Officer for the AY 2006-07. 9. We have carefully considered the rival contentions and perused the record. - 5 - NC: 2023:KHC:32550-DB RP No. 72 of 2021 10. Admittedly, ITAT has referred to the agreement dated 21.12.2005 and recorded its findings and this Court has referred to the power of attorney. As rightly pointed out by Shri Sanmathi, we feel that the matter requires fresh consideration in the hands of ITAT which is the last fact finding authority. 11. Learned Advocates for both sides submitted that the matter may be remitted to the ITAT. In view of the fact that this Bench does not have the roster of ITAs pertaining to 2015, we deem it appropriate to allow this review petition and restore ITA No.249/2015 to board. Ordered accordingly. No costs. Sd/- JUDGE Sd/- JUDGE sma "