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TMI Blog2009 (10) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... land out of 2,99,345 sq.ft. of land available for sale of 127 flats for a sale consideration of Rs.1,90,62,000. The land in question admeasuring 6.86 acres (2,99,345 sq. ft.) was purchased in instalments during the years 1950 to 1980. The assessee admitted long-term capital gains in the subsequent assessment years upto the assessment year 2004-05 in respect of the remaining area. The Assessing Officer found that there was a survey under section 133A in the business premises of M/s. Ceedeeyes Housing and Finance Ltd., Chennai600 020 and it was found that the assessee had entered into a sale agreement on May 25, 2001 for sale of its entire land of 6.86 acres to the above company for a consideration of Rs. 14 crores and possession of the property was given on the same date to the purchaser who had started construction activities from June 4, 2001 onwards. As per paragraphs 6 and 8 of the sale agreement, the entire sale consideration of Rs. 14 crores was to be paid to the assessee before the end of the financial year relevant to this assessment year as below : (i) Rs. 12 lakhs already paid by pay order dated March 10, 2001 ; (ii) Rs. 2 crores paid on the date of agreement on May 25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Ltd. to enter into the land and construct compound wall with a view to secure the land from the encroachers and total possession of the entire land was not given. It was further submitted that the assessee allowed the builder to enter and do their part of work and business and simultaneously the assessee was also in possession and occupation of the property which was evident and clear from the fact that the property was used as a storage house for magazine until March 31, 2002 as per explosive licence granted to them. It was contended that the assessee reserved with themselves every right of ownership and possession and executed the sale deeds and therefore, the provisions of section 53A of the Transfer of Property Act were not applicable. The Assessing Officer did not accept the reply of the assessee and held that as per paragraph 10 of the sale agreement, M/s. Ceedeeyes Housing and Finance Ltd. was given possession of the land immediately after the date of execution of the sale agreement and this fact was confirmed by their letter dated March 5, 2005. He also held that the assessee did not produce any evidence to show that the magazine was actually used for business purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Ceedeeyes Housing and Finance Ltd., the Assessing Officer did not provide an opportunity to cross-examine the executive director, Shri C. Devadoss Sundaram. He submitted that the Assessing Officer did not examine the stock register to find out whether the magazines were actually used for the purpose of business even though the stock registers were forming part of the books of account maintained by the assessee. The learned Commissioner of Income-tax (Appeals) while considering the submissions of the learned authorised representative for the assessee and going through the relevant documents, the case was remanded back to the Assessing Officer for verification after allowing the opportunity of cross-examination of Shri C. Devadoss Sundaram. He was also directed to examine the stock register of the assessee-company to find out whether the magazines were actually used for storehouse purposes till the end of the financial year. The Assessing Officer submitted his remand report dated October 6, 2006 and the learned Commissioner of Income-tax (Appeals), while considering such remand report, other material and details on record and discussing the case in detail, has concluded to dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2(47)(v) or (vi) of the Income-tax Act. The Assessing Officer shall accept the computation of the long-term capital gains as admitted in the return of income filed by the appellant." Aggrieved by this order of the learned Commissioner of Income-tax (Appeals), the Department has come up on appeal. It is strongly pleaded that possession of land in terms of the agreement was handed over in the month of May, 2001 and the entire payment had also be made within the financial year relevant to the assessment year under consideration as per the agreement to sell. Therefore, in terms of the provisions as contained in section 2(47)(v) there is a complete transfer. Therefore, the Assessing Officer has correctly proceeded to tax the entire capital gain transaction in the year under consideration. Hence, the learned Commissioner of Income-tax (Appeals) is neither legally nor factually correct to accept the plea of the assessee to direct the Assessing Officer to accept the returned long-term capital gain only. It was thus urged to set aside the impugned order and restore the order of the Assessing Officer. Learned counsel for the assessee while relying on the reasoning and basis as given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plosive licence relating to licence Nos. Ma/6424/E and Ma/645/E valid from April 7, 2001 to March 31, 2002. Mere renewal of explosive licence need not be construed that the magazines in question were really put to use during this assessment year. The fact remains that these licences have been renewed with effect from April 7, 2001, i.e., prior to the date of sale agreement. If they were renewed from April 7, 2001, naturally the application for such renewal ought to have been filed prior to that date. The assessee has not produced any evidence to show that the magazines were actually used for business purpose. Moreover, the third magazine bearing licence No. E25(12)259/Ma 1625/E was surrendered with a request to cancel the licence as per the assessee's letter dated June 20, 2001 addressed to the Chief Controller of Explosives, Nagpur (copy of letter available in file). The exact narration of the said letter is reproduced as under : `We are not storing any fireworks for the past six months in the above storehouse since the safety distances are not upto the required limit. Now since we have decided to surrender the licence, we request you to kindly cancel the licence. The original li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution of the sale deeds by the power of attorney holders did not militate against the operation of section 53A of the Transfer of Property Act, 1882.' In the case of Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491 (Bom) the court has held as under : `Even arrangements confirming privileges of ownership without transfer of title could fall under section 2(47)(v), where the agreement is a development agreement, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. If on a bare reading of a contract in its entirety, an Assessing Officer comes to the conclusion that in the guise of the agreement for sale, a development agreement is contemplated under which the developer applies for permissions from various authorities, either under power of attorney or otherwise and in the name of the assessee, then the Assessing Officer is entitled to take the date of the contract as the date of transfer in view of section 2(47)(v). There is no merit in the argument of the assessee that the courts should go only by the date of actual possession. If the contract, read as a whole, indicates passing of or transferring of complete cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XX-C and otherwise violation of a provision cannot be a valid defence for the violator in other proceedings would not be of any help to the assessee to hold that the sale agreement is not valid and possession is not handed over when on the basis of the said agreement only construction was started on June 4, 2001 by taking over possession on May 25, 2001 so it has wrongly been held by the learned Commissioner of Income-tax (Appeals) that the transfer did not take place in the year under consideration. Therefore, in view of the facts and circumstances and material on record, we hold that the transfer took place within the accounting period relevant to the assessment year under consideration as contemplated under section 2(47)(v). Therefore, capital gain is attracted in this year only and the Assessing Officer has rightly taxed the same in this year and the learned Commissioner of Income-tax (Appeals) is neither factually nor legally correct to hold that the entire capital gain is not taxable within the year under consideration. As such, while accepting the plea of the Department, we set aside the impugned order and restore that of the Assessing Officer. So far as the plea of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court, we uphold the order of the learned Commissioner of Income-tax (Appeals) in this regard, as the same is in conformity with the precedent noted above and dismiss this ground appeal of the Revenue. As a result, the appeal of the Revenue is partly allowed. T. R. Sood (Accountant Member).-I have carefully gone through the order of the learned Judicial Member and have discussed the matter with him. Though I am in agreement with him in respect of the second issue, as far as the first issue is concerned, taxing the capital gain in the year before us, I am in agreement but I have failed to persuade myself with the order of the learned Judicial Member while dealing with the alternative argument of learned counsel for the assessee that if capital gain tax was held to be leviable in this year then since the assessee has already paid taxes on the transfer of the asset from the assessment years 2002-03 to 2005-06 on the basis of actual sale deeds executed, the taxes already paid in the assessment years 2003-04 to 2005-06 should have been credited in this year only. The learned Judicial Member has rejected this submission of the assessee on the basis of the decision of the hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the Department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions. It is important to remember that the proviso does not confer any fresh power upon the Income-tax Officer to make assessments in respect of escaped incomes without any time-limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the Tribunals under the relevant section. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing Tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-section (3) of section 34, which deals with completion of an assessment, but would have been added to sub-section (1) thereof." From the above, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same could be rejected by applying analogy as laid down in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 or direction could be issued to adjust the taxes paid by the assessee in the subsequent assessment years on capital gain in the year under appeal." Order of Third Member Pradeep Parikh (Vice-President).-There being a difference between the two Members who originally heard this appeal, the hon'ble President was pleased to nominate the Zonal Vice-President as Third Member as intimated by U. O. No. F. 18-Jd(ATD-CS)/2009, dated July 30, 2009. Accordingly, the matter was heard and the same is now disposed of. The question referred to the Third Member is as follows : "Whether, while dealing with the Department's appeal, the alternative plea of the respondent-assessee raised during hearing, in the absence of any appeal or cross-objection by the assessee, in view of the decision in State of Kerala v. Vijaya Stores [1979] 116 ITR 15 (SC), to give direction to the Assessing Officer to exclude capital gain offered by the assessee in the subsequent assessment years than the year under appeal, the same could be rejected by applying analogy as laid down in ITO v. Murlidhar Bhagwan Das ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Departmental representative strongly supported the order proposed by the learned Judicial Member. Learned counsel while supporting the order proposed by the learned Accountant Member, relied on two judgments of the Madras High Court. They are in the case of CIT v. Smt. S. Vijayalakshmi [2000] 242 ITR 46 (Mad) and that in the case of CIT v. Ramnath Goenka (Decd.) [2001] 252 ITR 653 (Mad). It was also submitted that the judgment of the Supreme Court in State of Kerala v. Vijaya Stores [1979] 116 ITR 15 is not applicable to the facts of the case and the judgment of the Supreme Court in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 has been considered by the learned Accountant Member. I have duly considered the rival contentions and the material on record. I have also carefully perused the orders proposed by the two Members. At the outset, I would like to consider the judgment in the case of State of Kerala v. Vijaya Stores [1979] 116 ITR 15 (SC). In this case, which is a case under the Kerala General Sales Tax Act, 1963, transactions to the tune of Rs. 80,218 recorded in the rough notebook were not recorded in the regular books of account. The Sales Tax Officer (STO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there was no taxable receipt in the hands of the assessee under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. The Department preferred an appeal before the Tribunal. The assessee was not in appeal. However, the assessee raised an additional point before the Tribunal. He contended that the notice issued to him under section 34(1)(a) of the 1922 Act was invalid and therefore the appeal of the Department should be dismissed. The Tribunal did not permit the assessee to raise such a ground. It felt that if the plea was allowed to be raised and it was accepted, the entire order of the Appellate Assistant Commissioner would stand vitiated. However, the High Court observed that the assessee wanted to raise a new point as a ground of defence in the appeal and it was specifically stated that he wanted to rely upon it only for the purpose of having the appeal by the Department for enhancement in income-tax dismissed. In other words, the High Court held that the part of the order which was against the assessee would not be disturbed or set aside. The ground was being taken only as a measure of defence against the enhancement of income. The fact that the notice was invalid was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression `direction' in section 153(3)(ii) of the Act, it is now wellsettled that it must be an express direction necessary for the disposal of the case before the authority or court. It must be also a direction which the authority or court is empowered to give while deciding the case before it. The expressions "finding" and "direction" in section 153(3)(ii) of the Act must be accordingly confined. Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. It is a provision which merely raises the bar of limitation for making an assessment order under section 143 or section 144 or section 147 : ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) and N. KT. Sivalingam Chettiar v. CIT [1967] 66 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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