Case Law Details
ITO Vs Laxmi Realty and Advisory Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai held that as ownership of property lies with the developer on the day of ‘agreement of sale’, sale consideration is taxable under capital gains in the hand of developer and not in the hands of assessee.
Facts- The case of the assessee was selected for scrutiny under CASS, in which the reasons involved low capital gains in respect to sale consideration and that the sale consideration reported in the ITR was lower than the figure reported in the AIR statement. AO is accordingly noted to have called for the details of the property sold during the year under consideration along with complete details of sale, capital gain on it etc. On perusal of the submitted agreements, the AO noted that these agreements involved sale of flats by developer, M/s Coredelia Realty Pvt Ltd (CRPL) and purchaser, M/s Religare Finvest Ltd (RFL). AO further noted that the assessee along with another person, Mr. Manish Vyas were only the confirming parties to the sale transaction.
AO sought information from CRPL and noted that initially they had entered into an allotment agreement for 24 flats but only 17 flats were sold to RFL during the year, with the assessee as one of the confirming parties. Thus, AO inferred that the consideration value of Rs.11,27,75,000/- as mentioned in the sale agreement between CRPL and RFL had accrued to the assessee and after allowing the benefit of indexed cost of acquisition as per the allotment agreement, AO worked out capital gain.
CIT(A) held that the ownership of property in question was with CRPL and not the assessee hence no capital gain was assessable in the hands of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the gains from the same had already been offered to tax by CRPL in its return of income. Nothing was brought on record to show that the assessee had transferred any property to RFL or was in receipt of consideration from RFL. As far as, the reliance placed by the Revenue on the letter dated 21.12.2017 filed by the A/R of the assessee admitting to capital gains, which was later on withdrawn, is concerned; we agree with the assessee that if a levy of tax is not permitted under the Act, then tax cannot be levied applying the Doctrine of Estoppel. For this, we may refer to Article 265 of the Constitution of India, which provides that, no tax shall be levied or collected except by authority of law.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal preferred by the Revenue is arising out of the order of Ld. CIT(A)/NFAC, Delhi [in short ‘Ld. CIT(A)’] dated 26.09.2022, against the assessment order dated 31.12.2017 passed u/s 143(3) of the Income-tax Act, 1961 [in short ‘the Act’] by the ITO, Ward 12(3)(3), Mumbai [ in short ‘the AO’] for the AY. 2015-16.
2. The grounds of appeal raised by the Revenue are as under: –
1. On the facts and in the circumstances of the case and in law the Ld. National Faceless Appeal Centre (NFAC) Delhi erred in deleting the addition of Rs.8,57,50,000/- as Long Term Capital Gains even though the assessee company has transferred capital asset in nature of 17 flats to M/s. Religar Finvest Ltd. During the year consideration the assessee company has not offered the capital gain arising out of such transaction to tax.
2. The assessee prays that the order of the Ld. NFAC, Delhi on the ground be set aside and that of the Assessing Officer be restored.”
3. Briefly stated, the facts of the case as noted by the AO were that, the assessee, a private limited company, had filed its return of income on 31.03.2017 for AY. 2015-16, declaring loss of Rs.(-) 68,405/-. The case of the assessee was selected for scrutiny under CASS, in which the reasons involved low capital gains in respect to sale consideration and that the sale consideration reported in the ITR was lower than the figure reported in the AIR statement. The AO is accordingly noted to have called for the details of the property sold during the year under consideration along with complete details of sale, capital gain on it etc. The assessee vide letter dated 05.12.2017 had furnished the details of seventeen (17) immovable properties sold along with copy of agreements and other details. The assessee however had not offered any capital gains in relation thereto. On perusal of the agreements, the AO noted that these agreements involved sale of flats by developer, M/s Coredelia Realty Pvt Ltd [in short ‘CRPL’] and purchaser, M/s Religare Finvest Ltd [in short ‘RFL’]. The AO further noted that the assessee along with another person, Mr. Manish Vyas were only the confirming parties to the sale transaction. The AO is noted to have issued notice u/s 133(6) of the Act to CRPL calling for the details of property sold by them, which was complied with by the developer. Based on the information provided by CRPL, the AO noted that developer, CRPL had effected the sale agreements with RFL as complete sale and the consideration accrued therein, had been offered to tax by CRPL as its income in the return of income filed for AY 2015-16. Based on the information so gathered, the AO is noted to have issued another notice u/s 133(6) of the Act calling for further information from CRPL. In the subsequent reply, CRPL is noted to have informed that initially they had entered into an allotment agreement for twenty four (24) flats in question with the assessee vide agreement dated 04.10.2010 and pursuant to which part consideration was also received from the assessee. Later on however, the said allotment agreement was not acted upon and rescinded. Accordingly, CRPL sold seventeen (17) out of the twenty-four (24) flats to RFL during the relevant year, with the assessee as one of the confirming parties. The remaining seven (7) flats were unsold.
4. According to AO however, the assessee had acquired rights in the seventeen (17) flats vide agreement date 04.10.2010 and therefore it was the rights in these seventeen (17) flats which had been sold by the assessee to M/s RFL in the relevant year. The AO inferred that the consideration value of Rs.11,27,75,000/- as mentioned in the sale agreement between CRPL and RFL had accrued to the assessee and after allowing the benefit of indexed cost of acquisition as per the allotment agreement dated 04.10.2010, the AO worked out capital gain of Rs.8,04,66,632/-, which according to him, had accrued to the assessee. The AO thus show caused the assessee to explain as to why the aforesaid capital gains should not be assessed to tax in its hands. In response, the A/R of the assessee is noted to have explained vide letter filed on 21.12.2017 that, the sale agreements were executed between CRPL and RFL and that the sale consideration was received by CRPL and not the assessee and for this reason the assessee had not offered any capital gain to tax. The A/R of the assessee further submitted a statement giving computation of capital gains on the rights transferred by the assessee along with an explanation for the basis of arriving at such figures. The AO however did not agree with this computation and rejected the same for the reasons set out in Para 11 of the assessment order. Later on, it is noted that the A/R of the assessee who had filed the letter dated 21.12.2017, had withdrawn himself as the Authorized Representative and also the submissions made by him on 21.12.2017.
5. In the meantime, the assessee submitted another letter dated 22.12.2017 in which it had claimed that there was no ‘transfer’ of any ‘property’ by them u/s 2(47) of the Act in the relevant year and therefore no capital gains was liable to tax in its hands. The assessee is noted to have explained the background facts leading to the impugned transaction viz., the assessee had originally entered into an allotment agreement dated 04.10.2010 with CRPL for purchase of twenty four (24) flats. Thereafter, one Mr. Manish Vyas, a friend of the promoter of CRPL, Mr.Vinod Rathod, had incurred substantial losses in F&O trades conducted through RFL and was under tremendous pressure to make good the same. Faced with this crisis, Mr. Vyas’s family had approached Mr. Rathod who agreed to help him out of friendship and on humanitarian grounds. Accordingly, the flats allotted to the appellant were cancelled. Correspondingly, seventeen (17) flats were offered to RFL by way of settlement of dues payable by Mr. Vyas, to which RFL agreed. Accordingly, sale agreement for seventeen (17) flats was entered into between developer, CRPL and purchaser, RFL in which both the appellant (the original allottee) and Mr. Vyas (whose dues were being settled) were confirming parties. According to the assessee therefore, the outstanding debts of Manish Vyas payable to RFL were settled against the sale consideration payable by RFL to the Developer. These facts are noted to have been confirmed by both, M/s CRPL and M/s RFL in their replies u/s 133(6) of the Act. The assessee thus claimed that this transaction did not result in any ‘transfer’ by it but was in substance in the nature of ‘security/ mortgage’ offered to RFL towards due of Mr. Manish Vyas.
6. The AO however, after considering the above facts and explanations put forth by the assessee, did not agree that no capital gains arose to the assessee. The AO is noted to have laid much emphasis on the letter filed on 21.12.2017 by the A/R of the assessee in which he had accepted that the assessee had transferred rights in the property. The AO observed that merely because the A/R had subsequently withdrawn the submissions so made, will not render it as withdrawn. Relying on the said submissions, the AO is noted to have held that there was indeed a ‘transfer’ of rights by the assessee in favour of RFL during the year and therefore there is an incidence of capital gains in the hands of the assessee. The AO further noted that both CRPL and RFL in their replies u/s 133(6) had confirmed that the flats were sold by CRPL to RFL and therefore the contention of the assessee that there was no ‘transfer’ involved and that the properties were handed over by way of ‘security / mortgage’ was not tenable. The AO further held that, since the appellant had already purchased the rights in the seventeen (17) flats in question from CRPL in the year 2010, hence, it was the assessee, which had transferred the rights in the property, by being a party to the sale agreements between RFL and CRPL. According to AO, the assessee was a Confirming Party in the sale agreements in order to transfer his rights in the seventeen (17) flats to RFL. The AO thus held that the rights in 24 flats held vide agreement dated 24.01.2010 was long-term assets, out of which the A/R of the assessee in their letter dated 21.12.2017 had confirmed that it was the assessee which had transferred rights in 17 flats to RFL. The AO accordingly re-worked the capital gains at Rs.8,57,50,000/- in relation to transfer of rights in property and assessed the same to tax. Being aggrieved by this action of the AO, the assessee preferred appeal before the Ld. CIT(A).
7. The Ld. CIT(A) is noted to have examined the facts of the case to ascertain the ownership of the asset, seller of the asset and thereby the taxability of LTCG. The Ld. CIT(A) observed that, the assessee had defaulted in the terms of payment of consideration as agreed in the allotment agreement dated 04.10.2010 and therefore the developer had the liberty to cancel the same. According to Ld. CIT(A) therefore, the assessee cannot be said to have rights over the property as it had not honored the terms of allotment agreement. The Ld. CIT(A) further observed that, even the recitals to the sale agreement with RFL, clearly stated that it was the Developer who was the absolute owner of the property being sold and nowhere did the agreement recognize any rights of the assessee in the said property. The Ld. CIT(A) accordingly held that the ownership of the property in question was with M/s CRPL and not the assessee.
8. The Ld. CIT(A) further held that the developer was the seller of the property and that the assessee was only the confirming party. The Ld. CIT(A) noted that the advances paid by the assessee to the developer pursuant to allotment agreement had been recognized as sum recoverable from the developer and that the same was outstanding in the balance sheet as on 31.03.2016. The Ld. CIT(A) further noted that, the developer, CRPL had also offered the gains arising from the sale of flats to RFL as its income for relevant AY 2015-16 and this fact had been specifically taken note of by the AO in the assessment order. The Ld. CIT(A) noted that the AO was not able to show that any portion of the consideration of Rs.11,27,75,000/- had accrued or was payable to the assessee. Instead, the entire consideration was confirmed to have been paid by RFL at the instance of CRPL and CRPL had offered the same to tax. Overall therefore, the Ld. CIT(A) held that no capital gains was assessable in hands of the assessee. Aggrieved by the aforesaid action of the Ld. CIT(A)/NFAC, the Revenue is now before us.
9. Assailing the action of Ld. CIT(A), the Ld. DR for the Revenue laid much emphasis on the fact that the A/R of the assessee had originally admitted that the assessee had transferred the rights in the seventeen flats to RFL. He therefore contended that, the subsequent stand taken by the assessee regarding non-taxability of capital gains in its hands ought to be rejected as an after-thought. The Ld. DR further took us through the allotment agreement dated 04.10.2010 to show that the assessee had entered into agreement for sale of twenty-four (24) flats in project in ‘Alberts Ville Universe’ situated at Alibaug for an amount of Rs.3 crores and paid an advance of Rs.2.94 crores. According to him therefore, the assessee held valuable rights in the same. The Ld. DR submitted that, only because the remaining consideration of Rs. 6 lacs remained unpaid could not have empowered the Developer to cancel the allotment. The Ld. DR contended that, out of twenty-four (24) flats, CRPL had transferred seventeen (17) flats to M/s. Religare at the behest of the assessee in lieu of settlement of the debt of Rs.11 crores owed by Shri Manish Vyas. The Ld. DR thus submitted that, it was the assessee which had transferred his rights in the property to RFL and not CRPL. The Ld. DR thus contended that there was an incidence of capital gains arising upon transfer of such rights by the assessee and the same was rightly taxed by the AO. He thus urged that the order of Ld. CIT(A) be reversed and the order of AO be restored.
10. Per contra, the Ld. AR supported the order of the Ld. CIT(A). The Ld. AR submitted that there is no estoppel as regards liability to pay tax. Only because the A/R of the assessee in the course of assessment had made an incorrect admission regarding capital gains cannot make the assessee liable to pay tax on income which is otherwise legally not taxable in its hands and correspondingly it also does not authorize the revenue authorities to collect tax on the same. The Ld. AR accordingly contended that the main emphasis of the AO as well as the Ld. DR on the initial admission regarding capital gains by the A/R of the assessee in his letter dated 21.12.2017 to justify the assessment of capital gains in the hands of the assessee was misplaced and unjustified. The Ld. AR further drew our attention specifically to Clause (8) of the allotment agreement dated 04.10.2010. The said clause stated that, if the assessee did not make full payment of the agreed consideration of Rs. 3 crores, then the developer shall be at liberty to self-transfer and dispose off the said property to any other buyer, for such consideration, and on such terms and conditions as the developer deems fit. The Ld. AR thus pointed out that since the assessee had not made full payment of the agreed consideration, the developer was at the liberty to cancel the allotment agreement. The Developer had accordingly claimed itself as the rightful owner of the flats and transferred seventeen (17) flats to RFL pursuant to sale agreements dated 26.03.2015. The Ld. AR explained that, it is for the aforesaid reason that, the Developer being the seller/transferor of the property in question, had offered the sale consideration to tax as its income in the return of income filed for AY 2015-16.
11. The Ld. AR also took us through the terms of consideration to show that the assessee did not receive any payment from the purchaser. The Ld. AR also invited our attention to the reply furnished by RFL u/s 133(6) of the Act in which RFL had set out the payment details made pursuant to the sale agreement and none of the payments were made either to the assessee or at its behest. Instead, the payments were made either to CRPL or to the bank of CRPL from which the latter had obtained loans. The Ld. AR also pointed out that the flats in question had been mortgaged by CRPL with State Bank of India prior to the sale to RFL. According to her, unless the Bank would have been satisfied regarding the title and ownership of developer in the said flats, and that there was no encumbrance or third party right created thereon, it would not have sanctioned the loan to CRPL. This contemporaneous fact, according to her, lent credence to the finding of the Ld. CIT(A) that it was CRPL which was the absolute owner and therefore the seller of the property in the present case and not the assessee. The Ld. AR thus submitted that the order of the Ld. CIT(A) deleting the impugned addition be upheld.
12. We have heard both the parties and perused the material placed before us. The facts in brief are that, the assessee had entered into an allotment agreement dated 04.10.2010 with Developer/CRPL for purchase of twenty-four (24) flats in the project ‘Alberts Ville Universe’. Pursuant thereto, the assessee had made part payment of the agreed consideration. In the relevant year, CRPL is noted to have sold seventeen (17) out of the twenty-four (24) flats to RFL and the assessee along with one Mr. Manish Vyas are confirming parties to the said sale agreement. From the replies of RFL and CRPL, it is noted that Mr. Manish Vyas, who was a friend of Mr. Vimal Rathod, Director of assessee company, had incurred losses in F&O trades conducted through RFL and therefore had outstanding debt payable to RFL. In terms of the settlement agreement executed with RFL, CRPL agreed to sell seventeen (17) flats in the project ‘Alberts Ville Universe’ to RFL for a consideration of Rs.11,27,75,000/-. Out of the said consideration, portion of the sum was settled against the outstanding dues of Mr. Vyas and the balance sum to the extent of Rs.1.66 crores was paid by RFL to State Bank of India, the lender of CRPL, in order to obtain NOC for the sale agreement and also towards stamp duty, registration fees, advocate fees etc. It is thus not in dispute that both CRPL and RFL recognized this as a sale and purchase transaction of seventeen (17) flats between them. It is also an admitted fact that CRPL had offered the sale consideration derived from this transaction as its income in the return of income filed for AY 2015-16. The relevant finding of fact, as noted by the AO, read as follows:
“…. On enquiries made from M/s Coredelia Realty Pvt. Ltd. (Developer), it is found that the developer has effected the sale agreement as complete sale and the sale consideration in respect of these flats has already been offered for tax in its Retum of Income for A.Y. 2015-16 by the developer.”
13. The dispute in the present case however arose as the AO noted that the assessee was a confirming party to the sale agreement between CRPL and RFL. It is the AO’s case that, the assessee had acquired rights in the seventeen (17) flats in question by virtue of the allotment agreement dated 04.10.2010, and therefore it was the assessee, which had actually transferred and sold these flats to RFL and not CRPL. The AO accordingly inferred that the sale consideration mentioned in the sale agreement dated 26.03.2015 actually accrued to the assessee and was taxable in his hands. The question therefore to be answered by us is that, in the facts and circumstance of the case, whether the assessee had at all transferred the rights in the seventeen (17) flats in question and therefore whether the consideration mentioned in the sale agreement dated 26.03.2015 accrued to it, thereby giving rise to capital gains.
14. Having perused the allotment agreement dated 04.10.2010, we note that the assessee had agreed to purchase twenty-four (24) flats from CRPL for a consideration of Rs.3 crores, out of which the assessee had paid Rs.2.94 crores. Neither the full consideration was paid, nor was the assessee in possession of the flats. As rightly pointed out by the Ld. AR of the assessee, clause (8) of the said agreement stipulated that, if the purchaser failed to pay the stipulated consideration, then the developer shall be at liberty to sell, transfer, dispose of the said property at its free will. The relevant clause (8) reads as under:
“ The Purchaser/s agrees that for any reason if the Purchaser/s fail and/or neglect to make the payment of the demanded instalment within the stipulated period of 16 days as above, in that event the Developer shall be entitled to issue a notice of termination of those presents to the Purchaser, calling upon the Purchaser/s to pay the defaulted amount of installment along with the interest thereof @ 24% p.a. prorate, within a period of one week from the receipt of written notice by the Developer to the Purchaser/s. The Purchaser/s further agree that despite receiving the said notice, if the Purchaser/s will fail and neglect to pay the defaulted amount of necessary installments, along with the said interest within a period of one week from the written notice, in that event these properties shall stand automatically cancelled and/or terminated and thereupon the Developer shall be at liberty to sell, transfer and dispose of the Said Property to any other prospective buyers thereof for such consideration and upon such terms and conditions as the Developer may deem fit, proper and necessary.”
15. The Ld. CIT(A) is noted to have taken cognizance of the same and the fact that the assessee had not paid the full consideration as agreed in the allotment agreement. According to us therefore, the Ld. CIT(A) had rightly held that the assessee did not enjoy rights pursuant to this agreement and that the Developer was indeed at liberty to sell the flats in question on its own accord and on such terms and conditions as it deemed fit. The relevant findings recorded by the Ld. CIT(A), which are countenanced, are noted to be as under :-
“1. Ownership of asset:
- The appellant in its submission reiterated in verbatim above, has argued that appellant company has not got ownership, rights and title of the property from developer i.e. M/s Coredelia Realty Pvt. Ltd., since there was default in payment of full consideration for sale.
- It has further argued that it was developer i.e. M/s Coredelia Realty Pvt. Ltd. who entered into another agreement of sale with M/s Religare Finvest Ltd. for sale of 17 flats out of 24 flats, vide various agreements for consideration of Rs.11,27,75,000/- wherein the appellant company is the confirming party.
- The appellant company has relied on decision of the Hon’ble Supreme Court Hon’ble Supreme Court in case of Suraj Lamp & Industries (P) vs State of Haryana (supra) where the Apex Court held that an agreement for sale does not constitute transfer by itself
Here, the ‘Agreement for sale’ dated 26.03.2015 in which sale of one of the 17 flats has been registered M/s Coredelia Realty Pvt. Ltd. (developer) and M/s Religare Finvest Ltd. (the Purchaser) along with appellant company and Mr. Manish Vyas as a confirming party. The Assessing Officer observed that since the said Agreements for Sale were registered with the Sub Registrar, Murud Janjira, it amounts to passing on the title or right in the property.
The various clauses of ‘Agreement for sale’ for one such flat is reiterated here:
“…. (a) The Developer is the absolute owner of the lands in Gut Nos.20(1) and 21(1) situate, lying and being at Village Vihoor, Talukamurud, District Raigad, Maharashtra admeasuring about 3.50 acres equivalent to 14,164 sq. mtrs. or thereabouts and more particularly described in the Schedule hereunder written and delineated on the plan being Annexure “I” hereto annexed and thereon shown surrounded by red colour boundary line hereinafter referred to as the “Said Lands”.
NOW THESE PRESENTS WITHNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:
1.The Developer shall sell and transfer and the purchaser/s shall purchase the residential Suite No.004 in Building Pisces situated in the development, admeasuring 756 sq. ft. building area and about 677 sq. ft. Carpet area at a total consideration of Rs.65,65,000/- (Rupees Sixty Five Lacs Sixty Five Thousand only) which consideration has been agreed to be paid/ adjusted by the Purchaser/s to the Developer and Confirming Parties in the following manner:
1. A sum of Rs.65,15,000/- (Rupees Sixty Five Lacs Fifteen Thousand only) shall be construed to be paid to the developer by the Confirming Party One and Confirming Party Two under partial discharge of their obligations in the credit facility availed by them from purchaser.
1. The balance sum of Rs.50,000/- (Rupees Fifty Thousand only) Shall be paid to the Developer as a one-time transfer fee.
1. Prior to execution of these presents, the Developer has represented to the purchaser/s as follows:
1. That the Developer has a clear and marketable title to the said property described in the Schedule hereunder written; 2. That the developer has obtained the permission for non agricultural use of the said property from the Collector, Raigad;
3. Prior to the execution of these presents the Developer had also mortgaged the said property for availing a project/construction loan from SBI, Mumbai to ensure successful project completion. There is no encumbrance on this specific property due to the project loan and therefore no NOC would be required from the bank.
4. That Purchaser/s has/have been presented the Project Layout as well as the Development plans that have been approved by the Town Planning office of Alibaug and all such other authorities as may be necessary for getting the said development plan sanctioned and obtained necessary permission to commence, continue and complete the proposed development of the said property described in the Schedule hereunder written by the Developer.
The perusal of above clauses clearly show that developer i.e. M/s Coredelia Realty Pvt. Ltd. is the absolute owner of the property and has right to sell and transfer such property. Developer had even mortgaged the said property for availing a project/construction loan from SBI, Mumbai to ensure successful project completion. Hence, the ownership of property clearly lies with developer on the day of ‘Agreement for sale’ dated 26.03.2015. This is true for all the 17 flats for which ‘Agreement for sale’ has been entered between 08.10.2014 to 26.03.2015.”
16. Moreover, we also note that the sale agreement recorded that the sale consideration as agreed, was paid to the developer/CRPL. Even RFL, in their reply u/s 133(6), had recognized CRPL as the seller of the property in question and that the consideration was paid at the instance of CRPL. Further, as already noted above, CRPL had also offered the entire sale consideration to tax in their hands. These facts and conduct of the parties, has been noted by the Ld. CIT(A), which showed that it was the developer who was the seller of the property and for that reason the gain from such transaction had been offered to tax by it in its return of income. This view of Ld CIT(A) cannot be termed as perverse, which in the facts and circumstance of the case is a plausible view. Therefore, we are in agreement with the following findings of the Ld. CIT(A) as well:
“2. Seller of the asset:
As per the ‘Agreement for sale’, the seller is developer i.e. M/s Coredelia Realty Pvt. Ltd. The appellant company is the confirming party. In agreement for sale dated 04.10.2010, the payment of Rs.2,94,00,000/- was paid for purchase of 24 flats and Rs.6 lacs was to be paid to the developer upon handover of the possession of the said property. The appellant company had shown amount of Rs.2,86,50,000 as capital advance in return of income for A.Y. 201617. Even after the year under consideration, the amount remained outstanding as is clear from audited financial statement as on 31.03.2016 submitted by the appellant in his reply.
3. Taxability of LTCG:
The assessment order has been perused. In para 14 on page No. 16 of the assessment order, the AO has mentioned that on enquires, it has been found that the developer i.e. i.e. M/s Coredelia Realty Pvt. Ltd. has paid taxes in its return of income for A.Y. 2015-16 for the complete sale consideration in respect of these flats. The relevant extract of para 14 of assessment order is reiterated as follows:
“…. On enquiries made from M/s Coredelia Realty Pvt. Ltd. (Developer), it is found that the developer has effected the sale agreement as complete sale and the sale consideration in respect of these flats has already been offered for tax in its Retum of Income for A.Y. 2015-16 by the developer.”
The AO has not proved that sale amount of 17 flats amounting to Rs.11,27,75,000/- has been received by appellant company, on the contrary, the AO has given the above finding that complete sale consideration has been offered by developer for taxation in its return of income.
In view of above discussion, the ground no.1 of the appellant is allowed and addition of Rs. 8,57,50,000/- as Long Term Capital Gains is deleted.”
17.Before us, the Ld. DR was unable to dislodge the above findings of the Ld. CIT(A) holding CRPL to be owner and seller of the property in question and that the gains from the same had already been offered to tax by CRPL in its return of income. Nothing was brought on record to show that the assessee had transferred any property to RFL or was in receipt of consideration from RFL. As far as, the reliance placed by the Revenue on the letter dated 21.12.2017 filed by the A/R of the assessee admitting to capital gains, which was later on withdrawn, is concerned; we agree with the assessee that if a levy of tax is not permitted under the Act, then tax cannot be levied applying the Doctrine of Estoppel. For this, we may refer to Article 265 of the Constitution of India, which provides that, no tax shall be levied or collected except by authority of law. Our aforesaid view is also fortified by the judgment of Hon’ble Supreme Court in the case of CIT Vs Shelly Products (261 ITR 367) wherein the Court observed that, if any assessee on account of inadvertent mistake or ignorance included in his income any amount which is exempt from income-tax or is not income within the contemplation of the law, the assessee may bring this to the notice of the income-tax authorities, which if satisfied may grant relief and refund the excess taxes paid. Useful reference may also be made to Circular No.14 dated 11.04.1955 issued by the CBDT, which read as follows:
“Officers of the department must not take advantage of ignorance of an assessee as to his rights. Although the responsibility for claiming refunds and reliefs rests with the assessee; on whom it is imposed by law; officers should –
a) draw their attention to any refunds or reliefs to which they appear to be clearly untitled but which they have omitted to claim for some reasons or other;
b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refund and reliefs.”
18. In light of the above decision as well as the CBDT Circular (supra), we hold that merely because the assessee had initially admitted to capital gains in relation to the impugned transaction on an incorrect understanding of law, cannot operate as an estoppel to the assessee to claim that no capital gains can be inferred in its hands. Hence, we are unable countenance this particular contention of the Revenue.
19. In the light of the peculiar facts and circumstance of the case as discussed, and for the reasons set out above, we do not see any reason to interfere with the findings of the Ld. CIT(A), which cannot be termed perverse, and is held to be a plausible view, and accordingly the order of the Ld. CIT(A) is upheld. Hence, the grounds raised by the Revenue stand dismissed.
20. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on this 11/12/2023.
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