2018 (3) TMI 436 - HC - Income Tax

Reopening of assessment - non disclosure of sale of land - whether Letter of Allotment does not confer the possession of land on the buyers and possession of land is given only on execution of sale deed - Held that - Admittedly, in the present case, plot of land which have been sold are the trading assets of the Assessee. Thus, the above Section would have no application. So far as the reliance upon the statement of Mr. Deshmukh is concerned, it was pointed out that sale deed and consequent possession of the plot was given to Mr. Deshmukh only on 11th March, 2004 and not at the time of issuing an allotment letter in 2002. Thus, the sole reliance upon the statement of Mr. Deshmukh, is not justified in the context of the documentary evidence to the contrary. Therefore, on the basis of the allotment letter, it is clear that no possession of the plot was given to the prospective buyers till the execution of the sale deed. In the above circumstances, the view taken by the Tribunal, on facts, is a possible view. Therefore, the proposed question does not give rise to any substantial question of law. Also it is an undisputed position that Assessee has offered the income on sale of plot to tax, on execution of sale deed. The Revenue has also accepted the tax on it. Therefore, in the absence of Revenue pointing out any change in law in the subsequent year which works to its prejudice, subjecting the sale of plot to tax in the subject Assessment Years, is only an academic exercise.

Summary

Issues:
Challenge to common order by Income Tax Appellate Tribunal regarding possession of land based on letter of allotment.

Analysis:
The case involved six appeals challenging a common order by the Income Tax Appellate Tribunal regarding the possession of land based on the letter of allotment. The main question raised was whether possession of land was conferred on buyers upon issuance of the letter of allotment or only upon execution of the sale deed. The Respondent-Assessee was engaged in developing and dealing in agricultural plots. The Assessing Officer treated the sale of plots as occurring on the date of the letter of allotment, leading to tax implications. The Respondent filed appeals to the Commissioner of Income Tax, which were rejected. However, the Tribunal allowed the appeals, emphasizing that possession was granted only upon execution of the sale deed, as evidenced by letters from buyers.

The Revenue contended that the Tribunal's order ignored the definition of transfer under Section 2(47) of the Income Tax Act, arguing that allotment letters constituted part performance and, thus, transfer. Additionally, a statement by a key individual suggested discrepancies in the transaction process compared to the allotment letter. However, the Tribunal's findings on the allotment letters were undisputed, and the Revenue's reliance on Section 2(47) was deemed inappropriate since the sold land was trading assets, not capital assets. The reliance on the individual's statement was refuted based on documentary evidence showing possession was granted only upon sale deed execution.

The Court noted that the Tribunal's view on possession being granted upon sale deed execution was reasonable, and the proposed question did not raise any substantial legal issue. Moreover, the Respondent had consistently offered income on plot sales upon sale deed execution, which was accepted by the Revenue. The Court highlighted that subjecting plot sales to tax in the relevant years had no impact due to absence of law changes affecting taxability. It criticized the Revenue for engaging in unnecessary litigation over the timing of income taxability without material changes affecting revenue collection. Consequently, the appeals were dismissed, with no costs imposed.