Case Law Details
In this case, appellant had sold a bungalow located at Survey bno.1298, T.P.Scheme 15, Final Plot No. 173. It was having land area of 1130.50 sq.meters and constructed area of 894.90 sq.meters. The appellant sold property for Rs. 3,70,00,000/-. The sale deed was registered vide entry no. 1229. The appellant was having 1/5th share in the property. Appellant shown sale consideration for Rs. 74,00,000/- (3,70,00,000 * 20%).
During the assessment proceedings under section 143(3), the AO issued a notice to the assessee that another sale deed was also registered for this property for Rs. 1.37 crores vide entry no.1231. It was mentioned in this second deed that it was executed for construction only. Appellant was never aware of this sale deed before this notice. He had neither executed such deed nor received any sale consideration for this deed. Therefore, on coming to know about this deed, he made an affidavit confirming that second sale deed was fake. He also filed civil suit and criminal suits against purchaser of the property, Umang H. Thakkar and Kanaklata Thakkar for committing fraud. Appellants submitted that he has not executed the second sale deed.
Further, in the first sale deed itself it was mentioned that deed was for land and building thereon. There cannot be another sale deed for the same building. In Civil Suit No.18 16 of 2011, which was decided on 4.1.2013, a compromise was entered into by both the parties and it was agreed by both the parties that they are not the executors of documents for Rs. 1,37,00,000/- registered vide serial no.1231 and the said document be declared as invalid, non est, illegal and not binding to the plaintiff.
In our considered view that in view of civil suit judgment by the Civil Court, there cannot be any addition for share in sale consideration of Rs. 1,37,00,000/-. Therefore, we are of the considered opinion that order under section 263 passed by the ld.CIT needs to be quashed. Accordingly we allow the appeal of the assessee.
Full Text of the ITAT Order is as follows:-
Both appeals are preferred by the assessee against order of the ld.CIT-I, Ahmedabad.2. In both the appeals, facts and circumstances are similar. Therefore, for the sake of convenience we would like to dispose of matters with this consolidated order.
3. In ITA No. 1285/Ahd/2013 the assessee has taken following grounds:
“1.1 That the order passed by Honorable Commissioner of Income Tax is untenable in law. Honorable Commissioner has wrongly invoked Sec. 263 of the Act.
1.2 The Assessing Officer had already called for and examined various details about capital gain on sale of bungalow. Appellant had made detailed submissions to the Assessing Officer. Appellant had submitted various details including affidavit by him confirming the sale price. Further, all the evidences in connection with sale deed of Rs. 1,37,00,000/- which was not executed at all have been filed with the Assessing Officer. The Assessing Officer has passed the order after evaluating all these evidences and cam to conclusion that the sale deed of Rs. 1,37,00,000/- has no effect as the same was not executed at all. The appellant therefore submits no action now can be taken U/s. 263 of the Act.
2.1 Without prejudice to the above, the appellant respectfully submits that he had executed sale deed for Rs. 3,70,00,000/- only on which long term capital gain is computed. There cannot be two registered deeds for the same property to be executed on the same day. The purchasers have confirmed by affidavit that no deed of Rs. 1,37,00,000/- is in fact executed nor any sale consideration in excess of Rs. 3,70,00,000/- is paid to sellers. In view of categorical undertaking of the purchasers, it is respectfully submitted that the capital gain should be computed only with reference to sale deed of Rs. 3,70,00,000/-.
2.2 The appellant refers and relies various submissions made before Honorable CIT and request that the same may be specifically treated as agitated here also.
2.3 The appellant therefore respectfully submits that the order passed by Honorable CIT u/s. 263 of the Act be quashed.
3.1 The appellant craves leave to add, to alter or to amend any of the grounds of appeal before final hearing of appeal.”
4. Facts of the case are that return of income declaring total income of 2,31,950/-was filed on 30.03.2009. The same was processed u/s 143(1) of the I.T. Act, 1961. The case was selected for Scrutiny and a notice u/s. 143(2) issued on 15.09.2009 fixing hearing on 30.09.2009 and duly served by RPAD. Due to change of incumbent a fresh notice u/s 142(1) was issued on 06.07.20 10 duly served to the assessee. The assessee is dealing in cloths. During the course of assessment proceedings various details in relation to the income derived by the assessee have been called for. The details called for have been duly submitted by the assessee which have been verified. Based on the verification of details and submissions furnished by the assessee, the assessment proceeding was completed, subject to the following observations/findings. After discussion and material available on record, total income of the assessee is computed as under:
Total income as per return of income Rs. 2,3 1,950/-
Total assessed income Rs. 2,31,950/-
5. Thereafter, the ld.CIT has called for and examined record of assessment proceedings for the Asst. Year 2008-09. In this case, the ld.CIT was of the opinion that the assessment order passed under section 143(3) of the Act on 31.12.2010 by ITO, Ward-2(1), Ahmedabad determining the total income at Rs. 2,31,950/- was erroneous in so far as it was prejudicial to the interest of Revenue, on the following grounds:
“The assessee had only accounted for the sale of land valued at Rs 3.70 crores and not accounted for the capital gains arising from the Sale deed of superstructure valued at Rs. 1.37 crore. The assessee had taken a plea that Sale deed of Rs. 1.37 crores executed on 31.01.2008 was ultimately cancelled as per the cancellation deed dated 31.12.2010 and hence, the assessee did not receive any amount resulting in capital gains.
However, what is noticeable is that the sale deeds of Rs.3. 70 crores for land and Rs. 1.37 crores for super structure were executed on 31.01.2008 (AY 2008-09), whereas the deed cancelling the sale deed of superstructure (Rs.1.37 crores) was executed on 31.12.2010. The order u/s 143(3) was also passed on 31.12.2010. Hence it is evident that the cancellation deed has been executed after almost three years from the year in which the original deed was executed (31.01.2008) as an afterthought by the assessee during assessment proceedings. The assessee is likely to be well aware while executing the two deeds and there is no scope of believing that the deed of Rs.1.37 crores was executed by mistake. Therefore the actual intention of the assessee and the taxability of profits in AY 2008-09 on accrual basis due to execution of sale deed of Rs.1.37 crores on 31.08.2008 need to be ascertained with requisite evidences.”
6. Thereafter, the ld.CIT issued a notice to the assessee. In response to notice under section 263, the assessee replied before the ld.CIT as follows:
“3. The brief facts are that the return of income was filed for A. Y.2008- 09 declaring income of Rs. 2,31,950/-. The assessment u/s 143(3) was made on 31-12-2010 accepting the returned income. In an office note appended to the order, it was recorded by the A. O. that information was received to the effect that in respect of the same property viz (Survey No. 1298, T.P. Scheme No.15, Final Plot No. 173 for land and 2 bungalows known as “Dwarkesh” having land area of 1130.50 sq. meter and constructed area of twin bun glows of 894.90 sq. meters) two sale deeds had been executed on the same day separately for sale of land (Rs.3.70 crores) and for sale of super-structure (Rs.1.37 crores). These two registrations at Sr. No. 1229/08 and 1231/08 were confirmed by the Sub-Registrar on inquiry made by the A. O. A show cause notice was thereafter served to the assessee calling upon him to show cause why the sale at Rs.1.37 crore should not be considered as capital gain since the same had not been disclosed in the return. The assessee’s explanation was that the latter registration at document No. 1231/08 for Rs.1.37 crores was erroneously executed. Affidavits were filed by the purchasers to the effect that no consideration had passed except Rs.3. 70 crores. Based on the affidavit of the purchaser, the bank statement of the assessee and the averment of the assessee that the second registration was erroneous, the A. O. accepted the contention of the assessee and did not include the receipt from the second sale in the taxable income for the year. In the revisionary proceedings, it was submitted by the Id. AR that the assessee came to know about the second sale document for the first time on receipt of notice from the A.O. The fact of the second sale was denied and the same arguments were put forth, namely that (i) the assessee had no knowledge of the second deal and (ii) the purchasers of the property Kanekleta Umengbhai Thakker and Umangbhai HiralalThakker had filed affidavits stating that they paid only Rs.3.70 crores and that the sale deed of Rs. 1.37 crores was executed by mistake. Hence, no income in respect of the second sale accrued to the assessee.”
7. But the ld.CIT was no agreed with contentions of the assessee and directed the AO to make fresh assessment of total income of the assessee for the said assessment year. Thereafter, the ld.AO cancelled capital gains and total income was assessed at Rs. 36,56,950/- pursuant to the order of the CIT. Against the said order, assessee preferred appeal, but with no fruitful results.
8. We have gone through the record and relevant orders. In this case, appellant had sold a bungalow located at Survey bno.1298, T.P.Scheme 15, Final Plot No. 173. It was having land area of 1130.50 sq.meters and constructed area of 894.90 sq.meters. The appellant sold property for Rs. 3,70,00,000/-. The sale deed was registered vide entry no. 1229. The appellant was having 1/5th share in the property. Appellant shown sale consideration for Rs. 74,00,000/- (3,70,00,000 * 20%). During the assessment proceedings under section 143(3), the AO issued a notice to the assessee that another sale deed was also registered for this property for Rs. 1.37 crores vide entry no.1231. It was mentioned in this second deed that it was executed for construction only. Appellant was never aware of this sale deed before this notice. He had neither executed such deed nor received any sale consideration for this deed. Therefore, on coming to know about this deed, he made an affidavit confirming that second sale deed was fake. He also filed civil suit and criminal suits against purchaser of the property, Umang H. Thakkar and Kanaklata Thakkar for committing fraud. Appellants submitted that he has not executed the second sale deed. Further, in the first sale deed itself it was mentioned that deed was for land and building thereon. There cannot be another sale deed for the same building. In Civil Suit No.18 16 of 2011, which was decided on 4.1.2013, a compromise was entered into by both the parties and it was agreed by both the parties that they are not the executors of documents for Rs. 1,37,00,000/- registered vide serial no.1231 and the said document be declared as invalid, non est, illegal and not binding to the plaintiff. In our considered view that in view of civil suit judgment by the Civil Court, there cannot be any addition for share in sale consideration of Rs. 1,37,00,000/-. Therefore, we are of the considered opinion that order under section 263 passed by the ld.CIT needs to be quashed. Accordingly we allow the appeal of the assessee.
9. So far as ITA No. 433/Ahd/2016 is concerned, the grounds are common and since we have decided the matter in favour of the assessee, this appeal is also allowed.
10. In the result both appeals of the assessee are allowed.
Order pronounced in the Court on 16th November, 2017 at Ahmedabad.
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