Case Law Details
Brief of the Case
ITAT Jaipur held In the case of ITO vs. Alok Mukherjee that where both the parties not performed terms & conditions of the agreement to sale in prescirbed time and prescribed manner, it is breach of contract, so it will not be a transfer of property on the date of such agreement. In the given case. on the basis of agreement to sale and deed of registration, it is proved that agreement to sale are different. Even agreement to sell is presumed to be genuine as per the terms and conditions, the agreement to sell is not existed on the date of registry. Even area as well as remaining consideration are not matching in the agreement to sell and deed of registry of various dates.
Facts of the Case
ITA No. 887/JP/2012 and 862/JP/2012
In the given case, the assessee sold some properties. In all the cases, notice u/s 148 was issued and detailed questionnaires were also sent by the Assessing Officer. There was no compliance from all the assessees, therefore, order u/s 144 was passed by the Assessing Officer in all the cases. All the cases were scrutinized by the Assessing Officer. In all the cases, notices were issued to the assessees to furnish the details but no compliance was made by them. Therefore, the Assessing Officer decided the case u/s 144.
Ground of revenue’s appeal ITA No. 887/JP/2012
“Whether on the facts and in the circumstances of the case and in law the ld CIT(A) is justified in deleting the addition from sale of Rs. 36,12,659/- holding the assessability of LTCG in respect of four properties sold by the assessee in the hands of HUF.”
Ground of assessee’s appeal ITA No. 862/JP/2012
- That the ld. CIT(A) has erred by confirming the action of Assessing Officer of assessing ‘Capital Gains’ in A.Y. 2004-05 by ignoring the basic fact that ‘Transfer of Capital Asset’ had already completed, in terms of Section 2(47)(v), 2(47)(vi) and explanation 2 to the Section 2(47), in the relevant assessment years i.e. 1981-82 itself, when the agreement to sale was executed accompanied with handing over of physical possession of Capital Asset and purchaser had made construction over it and enjoying the property for business/residence.
- That the ld. CIT(A) has erred in upholding the action of A.O. byignoring the law that Section 50C came on the Statute w.e.f. 01/4/2003 and the transactions through ‘Agreement to sell’ or ‘Power of Attorney’ came in the enlarged scope of Section 50C(1) w.e.f. 01/10/2009 whereas the Capital Assets of the assessee were transferred by way of agreement from assessment year 1981-82 itself.
- Without prejudice to above grounds, the appellant submits thatthe ld CIT(A) has erred in upholding the action of A.O. who haswrongly initiated proceedings for assessment year 2004-05, as sale deed in question was not registered in the said assessment year. The relevant sale deed i.e. Mohan Joshi was executed,presented and registered before Registration Authority on 31/3/2003 i.e. assessment year 2003-04. Hence the whole proceedings for assessing capital gains is void ab- inito for the sale deed in favour of Mohan Joshi.
Contention of the Assessee
ITA No. 887/JP/2012 and 862/JP/2012
The ld counsel of the assessee submitted that Late Shri Avani Kumar Mukherjee, father of assessee (Alok Mukherjee) had sold 4 lands plots owned by minor son Alok Mukherjee in the A.Y. 1976-77 and one land and building owned by him in A.Y. 1981-82 by execution of sale agreements and handing over of possession in 1975 and1980.
He further submitted that original buyers appearing in agreements had further transferred these capital assets to new parties in some of the cases and the registration has been done in the name of final buyers. Buyers/their subsequent buyers/legal nominees of these capital assets, had already built houses/commercial establishments on the impugned land plots and were occupying the properties and using electricity, water, civic amenities etc. enjoying full ownership rights at the time of registration of sale deed in Sub Registrar office. Original buyer had completed the registration formalities before the Sub-Registrar of Jaipur in these properties. The assessee had filed income tax return U/s 139(4) for A.Y. 2004-05 on 21/3/2005. The AO computed the long term capital gain by taking stamp value as sale consideration and indexed cost of FMV as on 01/4/1981. Though the assessee had sold land plot only. But the value of subsequent construction by the buyers have also been wrongly considered by AO as part of sale consideration of assessee, for the purpose of working out capital gains.
He further argued that Section 50C is not applicable in the case of assessee as this section brought in the statute w.e.f. A.Y. 2003-04 is aimed to substitute the valuation assessed by the Sub-Registrar in the case the consideration received by assessee is lesser that such valuation and transfer on the basis of agreement to sell is covered w.e.f. 01/10/2009 by extending the words assessed or assessable. These agreement were made prior to insertion of section 50C in the statute, therefore, Section 50C is not applicable on these transactions made on agreement to sell.
He further argued that as per Section 47 of the Registration Act, a registered document shall operate from the time from which, it could have commenced to operate if no registration thereof had been required or made and not from the time of its registration. Therefore, the CIT (A) was not justified the assessability of year i.e. A.Y. 2004-05. Accordingly he prayed to delete the addition confirmed by the CIT (A).
Contention of the Revenue
ITA No. 887/JP/2012 and 862/JP/2012
The ld counsel of the revenue submitted that the assessee has not challenged the assessment in the hands of individual and no appeals have been filed by the assessee against the status decided HUF by the CIT (A). Therefore, the same is to be assessed under the status individual as the properties were sold by Shri Alok Mukherjee in individual capacity, which is evident from the registered documents and claimed by the assessee as own property. There is no reference of HUF in any document and assessee also had not claimed any where before any authority that these properties were belonged to HUF. Therefore, he argued that the status of this assessability of capital gain is to be taxed as individual not HUF.
Held by CIT (A)
ITA No. 887/JP/2012 and 862/JP/2012
The CIT (A) in case of Sh. Alok Mukherjee held valid reopening u/s 148 and she held that documents were registered on 2/4/2003; therefore, the transaction pertained to A.Y. 2004-05. The proceeding initiated by the Assessing Officer with respect to transfer of property in Kachhhi Basti, Hathi Babu Ka Aahata to Mohan Joshi as 1/3rd co-owner was upheld. Accordingly the said property sold to Mohan Joshi at Hathi Babu Ka Ahata, Kachchi Basti, Jaipur devolved upon Shri Alok Mukherjee in his individual capacity and one third, LTCG of Rs.21,26,580/- assessed in his hands on transfer of this property u/s 50C is upheld.
Regarding the LTCG with respect to the other four properties, it is held that they belong to the HUF of Shri Alok Mukherjee and the capital gains of Rs.36,12,659/- on the transfer is to be added to the income of the HUF of Shri Alok Mukherjee and is to be added therein. Therefore addition of Rs.36,12,659/- is deleted.
Held by ITAT
ITA No. 887/JP/2012 and 862/JP/2012
The assessee has challenged the jurisdiction of the Assessing Officer on the ground that the provisions of Section 2(47) (v) is applicable on this transfer, Section 50C is not applicable on this transaction and year of assessability is A.Y. 2003-04 and not for A.Y. 2004-05.
On the basis of agreement to sell and deed of registration, it is proved that alleged agreement to sell are different. Even agreementto sell is presumed to be genuine as per the terms and conditions, the alleged agreement to sell is not existed on the date of registry. As both the parties have not performed terms and conditions of the alleged agreement to sell in prescribed time and prescribed manner. Therefore, it is a breach of contract. Even area as well as remaining consideration are not matching in the alleged agreement to sell and deed of registry of various dates. Therefore, sale consideration considered by the ld Assessing Officer for the purposes of computation of capital gain as per Section 50C is rightly assessed. Section 50C inserted by the Finance Act, 2000 w.e.f. 01/4/2003, therefore, same is squarely applicable on the transfer made during the financial year 2003-04 relevant to A.Y. 2004-05. The assessee claimed that these properties were covered U/s 2(47)(v) of the Act does not stand to support the assessee’s case wherein number of discrepancies were noted above, as such alleged agreement to sale cannot be enforced by the court of law as time and manner prescribed in these alleged agreement to sell has much before and not followed by both the parties expired.
The ld Assessing Officer has taken the consideration on the basis of deed U/s 50C, therefore, whatever construction was made on these lands were treated by him as belonged to assessee at the time of transfer as no documentary evidences were submitted by the assessee at the time of assessment that these lands has been got transferred on the basis of alleged agreement to sell in different year to different persons and they constructed building thereon. If these facts were correct, the purchaser might have filing income tax return and also paying the municipal tax and might have installed telephone/electricity connection on it but no evidences were produced before the Assessing Officer. Further in the property No. 5 i.e. Hathi Babu Ka Ahata, Kachhi Basti, Jaipur was given by the assessee’s father on rent, which was continued upto registry of this property i.e. up to 31/3/2003. The assessee also challenged the assessability of this property No. 5, Hathi Babu Ka Ahata, Kachhi Basti, jaipur on the ground of assessability year but on verification of the record it was found that remaining stamp duty was paid by the assessee on 02/4/2003. In case of Raj Rani Devi Ramna Vs. CIT 201 ITR 1032 (Pat), it has been held that the parties had clearly intended that desired execution and registration of sale deed, transfer by way of the sale would become effective only on payment of entire sale consideration and in this background
of fact it had 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 gain tax U/s 45.
As per registered deed, the assessee got Rs. 50,000/- at the time of registry before Sub-Registrar, Jaipur who has signed the registry on 02/4/2003. Therefore, the assessee got consideration as per terms and agreement of the registered deed on 02/4/2003. Accordingly, the assessability of this capital gain on account of transfer of this property is liable to be assessed in A.Y. 2004-05.
The CIT(A) was wrong in deciding the assessment of four parties under the head HUF as argued by the ld DR, these properties were sold in the capacity of individual and the assessee had claimed status as individual. No where it has been claimed that these properties were belonged to HUF, therefore, the status of assessability of these four immovable properties referred by the ld CIT(A) is to be held assessable in the capacity of individual not HUF. Further only one witness has been signed on alleged agreement to sell dated 09/8/1975 of property at Hathi Babu Ka Bagh, Jaipur and transferer written in the agreement as Avani Kumar Mukherjee, son of Shri Satkori Mukherjee whereas singed by ‘Athak Kumar Mukherjee’. There is no witness on alleged agreement to sell dated 28/8/1975 to property but no address of the property and transferer written in the agreement as Avani Kumar Mukherjee, son of Shri Satkori Mukherjee whereas singed by ‘Athak Kumar Mukherjee’. In both the alleged agreements to sell singed by Athak Kumar Mukherjee. The assessees have not produced any evidence that these transactions have been disclosed by the assessees at the time of alleged agreement to sell in respective years in their respective income tax returns.
Accordingly appeal of the revenue allowed & appeal of the assessee dismissed.
