PURAV MAHENDRA MEHTA,MUMBAI V. CIRCLE 24(1), MUMBAI

ITA 5539/MUM/2025

AI Insights

The case involves an appeal by Purav Mahendra Mehta against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, which confirmed the assessment order bringing to tax capital gains of Rs. 80,76,511/- for three properties sold during the financial year relevant to the Assessment Year 2015-16. The primary contention was whether the transfer of property and receipt of full consideration occurred in the financial year 2014-15. The assessee argued that only partial payments were received and possession was not transferred during that year, citing specific clauses in the sale agreements and supporting documents from the buyers. The Tribunal examined the agreements and the sequence of transactions, ultimately agreeing with the assessee's position that the transfer and full consideration were not completed in the financial year 2014-15, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788033 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 04-09-2025
• Other Referred Cases: CIT vs. Dr.Arvind S. Phake, Ashok M. Seth vs. DCIT, Chaturbhuj Dwarkadas Kapadia v/s. Commissioner of Income Tax, Raj Rani Devi Ramna vs. CIT, Nital Chandra Gavaskar vs. Smt. Champakiata Debi, Panchoo Sahu vs. Janku Mandar, Shiva Narayan Sat vs. Baidya Nath Prasad Tiwary
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA MAHAJAN
• Assessee Lawyers: RAJESH S. SHAH
• Keywords: Capital asset; Cost of acquisition; Capital Gains
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “C” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITA No. 5539/Mum/2025 Assessment Year : 2015-16 Purav Mahendra Mehta, 501/502, Samrath Prasad Lokhandwala Circle, Andheri (W), Mumbai-400053. PAN : AALPM3127B vs. Circle-24(1), Piramal Chamber, Mumbai-400012. (Appellant) (Respondent) For Assessee : Shri Rajesh S. Shah For Revenue : Shri Virabhadra Mahajan, Sr.DR Date of Hearing : 18-11-2025 Date of Pronouncement : 27-11-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 08-09-2024, pertaining to Assessment Year (AY) 2015-16. 2. Briefly stated, facts of the case are that the assessment in this case was completed u/s. 143(3) of the Income Tax Act, 1961 („the Act‟), vide order dt. 21-12-2017, wherein the AO has brought to tax capital gains amounting to Rs. 80,76,511/- in respect of three properties alleged to have Printed from counselvise.com 2 ITA No. 5539/Mum/2025 been sold by the assessee during the financial year relevant to the impugned assessment year. The assessee carried the matter in appeal before the Ld.CIT(A). The Ld.CIT(A) has confirmed the findings of the AO and against the said order, the assessee is in appeal before us. 3. During the course of hearing, the Ld. AR submitted that during the financial year relevant to the impugned assessment year, the assessee has entered into an agreement to sell three properties and the respective agreements were also registered before the Sub- Registrar, Mumbai. It was submitted that as against the agreed sale consideration mentioned in the respective agreements, the assessee has received only partial consideration ranging between 5% to 13% during the financial year relevant to the impugned assessment year and the possession of the property was also not handed over to the respective buyers. In this regard, our reference was drawn to the following chart, disclosing the amount of consideration which has been received upto 31-03-2015 and the remaining consideration which has been received during the FY. 2017-18 relevant to the AY. 2018-19: S.No. Chheda Arcade Unit No. Date of Agreement for sale Agreement Value in Rupees Amount received up to 31.03.2015 Balance Amount received – 01.04.2017 to 31.03.2018 1 305 07.12.2014 55,00,000 5,00,000 50,00,000 2 309 07.12.2014 18,33,333 being 1/3rd Share 2,50,000 15,83,333 3 311 07.12.2014 63,00,000 5,00,000 58,00,000 4. It was submitted that for the sale of property to be completed, what is essential is the execution of the registered sale agreement, full payment of agreed consideration and thirdly, handing over the possession of the property. It was submitted that except for the execution of the registered Printed from counselvise.com 3 ITA No. 5539/Mum/2025 agreement, the remaining two conditions were not fulfilled during the financial year relevant to the impugned assessment year. In this regard, our reference was drawn to Clause No.7 of the agreement which provides that the purchaser shall be entitled to get the said office to his name at any time after the payment of full consideration and Clause No.8 of the agreement provides that the vendor shall hand over to the purchaser all the other documents/papers relating to the said office in their possession after the payment of the full consideration. It was submitted that during the course of assessment proceedings, the assessee has also submitted the letters issued by the purchasers, wherein they have confirmed that the amount was outstanding and they have not taken over the possession over the property. It was accordingly submitted that the AO has erred in holding that the transfer of property has happened during the financial year relevant to the impugned assessment year and whole of the sale consideration has been brought to tax. 5. Further reliance was placed on the decision of the Hon‟ble Bombay High Court in the case of CIT vs. Dr.Arvind S. Phake, dt. 20-11-2017, wherein the relevant findings reads as under: “6. We have carefully considered the submissions. What binds this Court is that the judgment of the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia v/s. Commissioner of Income Tax (supra). The Division Bench held that the date of contract is relevant provided the terms of the contract indicate passing off or transferring of complete control over the property in favour of the developer. The Division Bench laid down the rest for determining the date which should be taken into account for determining the relevant accounting year in which the liability accrues. In the present case, the Appellate Tribunal has taken into consideration various clauses in the development agreement. Sub-clause (d) of clause (3) of the agreement provides that after full payment of consideration, the construction shall be undertaken by the developer. Admittedly, on the date of execution of the development agreement, the entire consideration was not received by the respondent-assessee. The physical possession of the property subject matter of development agreement was parted with by the respondent-assessee on 1st March, 2008. It was held that on that day, complete control over the property was passed on to the Printed from counselvise.com 4 ITA No. 5539/Mum/2025 developer. After having perused the various clauses in the agreement and the aforesaid factual aspects, the Tribunal has taken 1st March, 2008 as the date of transfer. This finding is fully consistent with the law laid down by the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia (supra). Therefore, no fault can be found with the impugned judgment of the Tribunal when it was held that the investment made in the sum of Rs.50,00,000/- by the respondent-assessee on 22nd August. 2008 was within the period specified under Section 54EC of the said Act.” 6. Further reliance was also placed on the decision of the Co-ordinate Bench of the Mumbai Tribunal in the case of Ashok M. Seth vs. DCIT, in ITA Nos. 187 & 188/Mum/2015 (AY. 2010-11), dt. 15-02-2017, wherein the relevant findings contained from pars No. 8 to 11 and the contents thereof reads as under: “8. We have gone through the documents shown to us by the learned counsel. Undoubtedly, the assessee had received during the year advance which constituted substantial part of total sale consideration. It is also true that the assessee had executed the sale agreement during the year on 3rd July, 2009 and the same was registered also. However, this fact is also on record and not disputed by the Revenue that the possession of the flat was not yet handed over and few other legal formalities for transferring the flat in the names of the assessee (sic-buyers) were still pending for execution. As per details available out of total consideration of Rs. 85 lacs, a sum of Rs. 80 lacs was received by assessee and his wife (being co-owner) on 28th May. 2009. However, the balance amount of Rs. 5 lacs was received on 16th June, 2011, (1.e. in asst yr. 2012-13). The assessee has also drawn our attention upon the receipts issued by the Earth Castle Residency Co-operative Housing Society Ltd. dt. 1st Aug. 2011 confirming that maintenance charges of the flat for the period October, 2010 to June, 2011. amounting to Rs. 77,344 was paid by the assessee. Our attention was drawn on the bank statement of the assessee Indicating payment of aforesaid maintenance charges of Rs. 77,344 by the assessee. Further, our attention was drawn on the possession letter wherein Shah family (i.e.. Buyers) confirmed that possession was obtained by them from the assessee on 26th day of June, 2011. Further, our attention was also drawn on the letter written by Shah family to the society for transferring the said Flat in their names and also clarifying in the said letter that from this date onwards, i.e., June, 2011, maintenance charges shall be borne by the Shah family and not by the assessee. 9. Thus, the documents on record duly establish that during this period. i.e., between the date of registration of sale agreement on 3rd July. 2009. and till the date of handing over of possession on 26th June, 2011 the Flat was in the exclusive possession, enjoyment and custody of assessee only. Though sale Printed from counselvise.com 5 ITA No. 5539/Mum/2025 agreement was executed and registered, but neither complete consideration was received by the assessee nor did all the legal formalities were complete. Further, the obligation about the maintenance of the property was also retained by the assessee till the Flat was transferred by the society in the name of the purchasers. 10. Thus, overall facts of the case indicate that sale could not have been said to be completed in absolute terms in the year 2009. For completion of sale in absolute terms fulfilment of all the three conditions mentioned above are must i.e., execution and registration of conveyance deed, handing over of possession and payment of full consideration. In the case before us, only first condition was completed and the remaining two conditions were still pending to be executed and were not completed in the impugned year. In addition to that, all the legal formalities for effecting the transfer of the property in the name of purchaser were also not complied with and the same were completed only after payment of maintenance charges by the assessee to the said society. The said flat came into full and exclusive control of the new purchasers only after when the possession of the same was handed over to them by the assessee on 26th June, 2011. Thus, the said flat was available for enjoyment by the purchaser only after the said date. Thus, taking into account all the facts and circumstances of the case, the sale of the flat cannot be said to be completed in the year before us. In this regard our view finds support from the judgment relied upon by learned counsel of the assessee of Hon'ble Patna High Court in the case of Raj Rani Devi Ramna (supra) wherein their Lordships opined as under: \"The properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. Registration Is prima facie proof of an intention to transfer, but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed. Thus, the seller may retain the deed pending payment of price and, in that case, there is no transfer until the price is paid and the deed is delivered. In the present case. from the statement of case itself as drawn up by the Tribunal, it is apparent that the parties had clearly intended that despite the execution and registration of sale deeds transfer by way of sale will become effective only on payment of the entire consideration amount and in this background of facts. It has to be held that there was no transfer of land covered by the three sale deeds in question during the period under consideration making the assessee liable for capital gains tax under s. 45- Nital Chandra Gavaskar vs. Smt. Champakiata Debi (1919) 29 CL-7 250, Panchoo Sahu vs. Janku Mandar AIR 1952 Pat 263 and Shiva Narayan Sat vs. Baidya Nath Prasad Tiwary AIR 1973 Pat 386 relied on.\" 11. Thus, if we analyse all the documents and facts of this case and based upon the same gather the intention of the parties, we find that the substance of the transaction shows that sale was not intended to be completed in the year before us. Therefore, the resultant gain arising on the sale of the flat concluded in the subsequent year could not have been brought to tax in the impugned year. Further. In any case, the taxable amount of capital gain has already been offered to tax by the assessee in the asst. yr. 2012-13 and has Printed from counselvise.com 6 ITA No. 5539/Mum/2025 been accepted as such by the Revenue as per the information provided to us. Under these circumstances, it would not be justified to adopt a hyper-technical approach and tax the same in this year also which will lead to double taxation and avoidable hardship to the assessee, Therefore, keeping in view the peculiar facts and circumstances of this case and in the interest of justice and all fairness we direct the AO to delete the addition. As a result, ground 1 is allowed.” 7. It was further submitted that in the FY. 2017-18 relevant to AY. 2018- 19, the assessee has received the balance sale consideration and possession was also handed over to the buyers. It was submitted that in the return of income filed for the AY. 2018-19, the assessee has duly offered the Long Term Capital Gain on sale of three properties amounting to Rs. 1,06,43,565/-. It was submitted that the said return of income has since been processed and accepted by the Revenue in terms of order passed u/s. 143(1) of the Act, dt. 16-04-2019. It was stated at the Bar that though the figure of long term capital gains of Rs. 1,06,43,565/- has been determined taking into consideration cost of acquisition without indexation (though the assessee is eligible for indexation) and is at a higher figure than the figure of Rs 80,76,511/- determined by the AO for the impugned assessment year 2015-16, the assessee has not and will not challenge the same and has thus accepted the same as so determined in terms of intimation u/s 143(1) of the Act. It was accordingly submitted that where the capital gains have already been offered and accepted in the subsequent assessment year and that too at a higher figure, there remains no basis for bringing the said capital gains to tax for the impugned assessment year leading to double addition. 8. Per contra, the Ld.DR is heard, who has relied on the order passed by the AO as well as that of the Ld.CIT(A). It was submitted that in respect of three properties, the agreement of sale was registered during the financial year relevant to the impugned assessment year and therefore, the transfer Printed from counselvise.com 7 ITA No. 5539/Mum/2025 of capital asset has happened during the financial year relevant to the impugned assessment year and the AO has rightly brought the sale consideration to tax under the head „capital gains‟ which has been confirmed by the ld CIT(A). Regarding the claim of the Ld.AR that the capital gains have already offered in the subsequent financial year, it was submitted that the same needs necessary verification and where the Bench so direct, the matter may be remitted to the file of the AO for necessary verification. 9. We have heard the rival contentions and pursued the material available on record. We find merit in the contention advanced by the Ld. AR that for the purposes of determining the transfer of capital asset, it is essential to examine the conditions as agreed to between the parties subject to which they have agreed to transfer the capital asset and in particular, the conditions in terms of discharge of full consideration and handing over the possession of the property. Unless and until these conditions are fulfilled, the transfer of property cannot be said to have been effected merely basis registration of the agreement to sell and not of the instrument of transfer of immoveable property through a conveyance deed. Infact, there is nothing on record when the conveyance deed has been executed and registered in respect of properties under consideration. In the instant case, it is evidently clear that in respect of all three properties and the underlying agreements to sell (which are similarly worded), Clause No.7 of the agreement provides that the purchaser shall be entitled to get the said office to his name at any time after the payment of full consideration and Clause No.8 of the agreement provides that the vendor shall hand over to the purchaser all the other documents/papers relating to the said office in their possession after the payment of the full consideration. During the financial year relevant to impugned assessment Printed from counselvise.com 8 ITA No. 5539/Mum/2025 year, admittedly, the assessee has only received part consideration in the range of 5% to 13% of total agreed consideration and thus, the condition so specified has not been fulfilled. A fact which has been confirmed by the respective buyers in their separate communication, wherein they have confirmed that they have not paid full consideration and they have not taken over the possession over the property. In light of the same, we are of the considered view that the transfer of capital asset has not happened in respect of properties under consideration during the financial year relevant to impugned assessment year 2015-16 and chargeability to tax therefore doesn‟t arise for consideration. 10. We further find merit in the alternate contention of the Ld.AR that where the full sale consideration has been finally received in subsequent financial year 2017-18 and capital gains arising on transfer of the property have been duly offered to tax in AY. 2018-19 and which has been accepted by the Revenue in terms of intimation u/s 143(1), the capital gains on the same transactions cannot be brought to tax again for the impugned assessment year 2015-16 which will lead to double taxation of the same set of transactions. In this regard, our reference was drawn to the return of income filed for the assessment year 2018-19 wherein in respect of three properties namely, flat No. 305, 309, & 311, the assessee has offered long term capital gains of Rs. 1,06,43,565/- (as against Rs. 80,76,511/- brought to tax by AO for the impugned assessment year) and the said return of income has since been processed and accepted by the Revenue in terms of intimation passed u/s. 143(1) of the Act, dt. 16-04-2019. We also note that the assessee has accepted the position as so determined even though the long terms capital gains have been determined at a higher figure without indexation benefit and the matter relating to assessment Printed from counselvise.com 9 ITA No. 5539/Mum/2025 year 2018-19 has attained finality as so stated by the Ld.AR on behalf of the assessee. 11. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the addition of Rs 80,76,511/- is hereby directed to be deleted. 12. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 27-11-2025 Sd/- Sd/- [RAJ KUMAR CHAUHAN] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 27-11-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai Printed from counselvise.com "