2012 (7) TMI 15 - AT - Income Tax

Amount received for relinquishing the disputed rights over the land - capital gains - assessee pleaded for admission of additional ground contesting taxability in view of fact that same does not fall under definition of capital asset and cost of acquisition of the disputed rights in hands of the appellant is nil - Held that - There is a reasonable cause for raising additional ground by the assessee before us for the first time. Considering the arguments of the assessee that relinquishment of disputed right cannot taxed since the said rights have no cost of acquisition, it is appropriate to admit the additional ground. However, the lower authorities have no occasion to go into the merit of the additional ground raised by the assessee before us. Accordingly, additional ground remitted back to the file of the AO for due consideration in the light of judgement of Supreme Court in the case of B.C. Srinivasa Setty (1981 (2) TMI 1 (SC)) and also the other judgements.

Summary

Issues Involved:
1. Determination of total sale consideration.
2. Alleged suppression of receipts.
3. Treatment of payments to mediators.
4. Apportionment of additional consideration among co-owners.
5. Eligibility for exemption under Section 54B.
6. Eligibility for exemption under Section 54F.
7. Classification of the asset as a capital asset.
8. Taxability of amounts received for relinquishment of disputed rights.
9. Admission of additional grounds by the assessee.
10. Deletion of advance amounts received from various parties.

Detailed Analysis:

1. Determination of Total Sale Consideration
The First Appellate Authority determined the total sale consideration in the hands of the appellants group at Rs. 16.25 crores, against Rs. 9.95 crores actually received and offered to tax by the appellant and his family members. The appellants argued that this determination was not justified.

2. Alleged Suppression of Receipts
The First Appellate Authority confirmed the addition of Rs. 2,37,09,111 as alleged suppression of receipts. The appellants contended that this addition ignored the averments made by the vendees in the registered sale document and the actual payments acknowledged by the vendees in a letter filed before the Assessing Officer.

3. Treatment of Payments to Mediators
The appellants argued that the Assessing Officer treated the amount of Rs. 4.80 crores paid by the vendee to the mediators as brokerage. They contended that the sum of Rs. 2 crores should not be treated as sale consideration, as it was payable on settlement of certain disputes. They also argued that if payments to mediators were treated as outflow, the net consideration received should be taxed.

4. Apportionment of Additional Consideration Among Co-owners
The appellants contended that the First Appellate Authority unjustly apportioned the alleged additional consideration among the appellant and his two brothers, ignoring the shares and ownerships of their three sisters.

5. Eligibility for Exemption Under Section 54B
The First Appellate Authority rejected the claim of exemption under Section 54B to the extent of Rs. 53,57,386, ignoring the receipts issued by the vendors of the land. The appellants argued that they had ownership and active possession of the land for several years, making them eligible for the exemption.

6. Eligibility for Exemption Under Section 54F
The First Appellate Authority restricted the claim of exemption under Section 54F to Rs. 35,97,815 against Rs. 59,89,760 claimed, ignoring the receipts issued by the vendors. The appellants also contested the denial of exemption for Rs. 50,00,000 incurred as cost of improvements.

7. Classification of the Asset as a Capital Asset
The appellants argued that the asset in question does not come within the purview of a capital asset as defined in Section 2(14), based on the ratio laid down by the ITAT, Hyderabad in the case of Srinivas Pandit vs. ITO-7(2), Hyderabad.

8. Taxability of Amounts Received for Relinquishment of Disputed Rights
The appellants raised an additional ground, arguing that the amounts received for relinquishing disputed rights over the land should not be taxable under any provisions of the Income-tax Act, as the cost of acquisition of the disputed rights in their hands was nil. They relied on various judicial precedents, including CIT vs. B.C. Srinivasa Setty and CIT vs. Smt. M. Agama.

9. Admission of Additional Grounds by the Assessee
The appellants filed a petition for admitting the additional ground, stating that it was purely legal in nature and required no further verification of facts. The Tribunal found reasonable cause for raising the additional ground and admitted it. The issue was remitted back to the Assessing Officer to examine in light of the arguments and judicial precedents cited.

10. Deletion of Advance Amounts Received from Various Parties
The Revenue raised grounds against the deletion of advance amounts received from M/s. Radha Realty Corporation and Sri D.S. Karunakar Reddy. The CIT(A) had directed the deletion of these amounts, but the Revenue argued that these advances should be treated as revenue during the year of receipt and that the assessee forfeited the advances during the relevant assessment year.

Conclusion
The Tribunal admitted the additional ground raised by the appellants and remitted the issue to the Assessing Officer for due consideration. Other grounds raised by both the appellants and the Revenue were not adjudicated at this stage. All appeals were allowed for statistical purposes.