Case Law Details
Seshasayee Steels P. Ltd. Vs ACIT (Supreme Court)
Conclusion: Capital gain was brought to be tax when on transfer of immovable property, rights were extinguished on the receipt of the last cheque.
Held: Assessee entered into an agreement to sell a property with Builders Limited for a total sale consideration of Rs.5.5 crores. Pursuant to this agreement to sell, a Power of Attorney was by which, assessee appointed one director of Builders Ltd. to execute and join in execution the necessary number of sale agreements and/or sale deeds in respect of the schedule mentioned property after developing the same into flats. Assessee did not file any Return for Assessment Year 2004-2005. Apparently, it was detected later by AO that the agreement to Sell had been entered into and that, subsequently, a Memo of Compromise had also been entered into between the parties. Based on the discovery of this fact, notice issued under Section 148 was served on the assessee. Even in response to this notice, no Income Tax Return was filed. A notice was issued under Section 142(1) fixing the case for hearing on 20.09.2009. Here again, assessee did not turn-up, as a result of which, another notice was issue, but this time again the assessee did not turn-up. Since time bar was foremost in the mind of AO, limitation falling on this transaction by 31.12.2009, a Best Judgment Assessment Order was then passed under Section 144 treating the entire sale consideration as a capital gain and brought to tax. It was held that assessee’s rights in the said immovable property were extinguished on the receipt of the last cheque, as also that the compromise deed could be stated to be a transaction which had the effect of transferring the immovable property in question. Therefore, the orders under appeal would be Section 2(47)(ii) and (vi) in the facts of the present case and capital gain was liable to be taxed when rights in the immovable property extinguished on the receipt of last cheque.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
The appellant-assessee entered into an agreement to sell, on 15.05.1998, with one Vijay Santhi Builders Limited for a total sale consideration of Rs.5.5 crores.
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