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TMI Blog2015 (12) TMI 1616X X X X Extracts X X X X X X X X Extracts X X X X ..... of ‘capital gain’ and taxing the same under the income tax law. It is further noted by us that it is settled law that an assessee can resile from its return if it is found at any later stage that the income offered therein was not taxable in accordance with law. Immediate reference can be made on the judgment of in the case of Bharat General Reinsurance(1970 (12) TMI 5 - DELHI High Court), which was subsequently approved in the case of Rampur Distillery and Chemical Co Ltd vs CIT (1990 (11) TMI 3 - SUPREME Court ) - Decided in favour of assessee Claim of long term loss in respect of investment in shares disallowed - Held that:- We agree with the view taken by the lower authorities that a loss or gain can arise u/s 45 of the Income Tax Act 1961 only from “transfer” of a capital asset, effected in the previous year. Since, no transfer of the aforesaid shares was effected during the previous year, therefore, no claim of loss could have been allowed to the assessee, as per law. The contention of the Ld. Counsel that provision for decline in value of investment has been made because of mandatory requirement of Accounting Standard-13, is also not sustainable for the reason that accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refunded the entire amount, and thus, no income of capital gain was actually earned by the assessee, and therefore, in these circumstances assessee filed revised computation sheet wherein the income from capital gain was shown as nil , which was not accepted by the AO on the ground that once transaction had taken place, then the amount of capital gain earned becomes taxable in the year of transfer itself. He has drawn our attention on various pages of the paper book showing cancellation deed which was registered with the concerned authorities and also showing that entire amount was refunded by the assessee to concerned parties. It was further submitted by him that the transfer was void ab initio as per law. Since the transfer was illegal since inception. In fact, no transfer had actually taken place, and therefore no capital gain income was earned by the assessee. He drew our attention to section 63 of the Gujarat Tenancy Agricultural Land Act, 1948 wherein it has been provided that the transfer of agricultural land to non-agriculturists was barred under the law. He relied, in support of his view, upon the judgment of Hon ble Gujarat High Court in the case of CIT vs. Vit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was not included, stating that the transfer made during the year was void as the assessee had no right to sell the property, and, therefore, the sale agreement was cancelled and the land was repurchased and thus, no capital gain arose. 4.5. But the AO did not accept the assessee s claim that no capital gain arose during the year, and ignored the revised computation filed by the assessee, holding that during the impugned year, an effective transfer had taken place, giving rise to accrual of taxable amount of capital gains . Accordingly, the AO brought to tax the long term capital gains on sale of land. 4.6. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) wherein the assessee submitted that the original sale deed was in fact void, as he had no right to sell the property. The property has been mortgaged to lender bank and while making the sale deed, no confirmation from the bankers had been obtained. Accordingly, a cancellation deed dated 27.11.2011 was drawn subsequently and the consideration received was also paid back. Therefore, in law and equity, no sale could be deemed to have taken place. The assessee also stated that both, the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said sale deed which is situated at District Surat Sub District City Surat Village Singapor, Block/R.S. No.139 T.P.S. no. is 26, original Plot No. 69F. Plot No.105/1 and the area of the final plot is 8950 sq. mtrs. and the said land and inside and outside all rights, titles and interest is purchased by the party of the second part from the party of the first part vide registered sale deed dated 01.01.2010 bearing sale deed no.84 for an amount of ₹ 4,57,00,000/-. And the said sale deed was registered with the office of the Hon ble Sub Registrar Surat 4 Kataragam on 01.01.2010 at Sr. No. 84 in book no.1 and in this way from the state of the said sale deed the said lands is agricultural land and I the party of the second part is not a farmer and hence I cannot hold the said land. And at present under section 63 of the Calculation Act the permission is also not received from the Gujarat State. And it is also impossible to obtain permission under section 65 of the Revenue Act in respect of the said property due to some reason. Hence due to the above mentioned reason I don t want to keep the said land with me which is mentioned and described in the following Annexure and I want to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turists will not be valid under the law, and ownership of any such land purchased by the non-agriculturists may have to vest in the State Government subject to, provisions of section 84C of the said Act. We further refer to the judgment of Hon ble Gujarat High Court in the case of CIT vs. Vithalbhai P. Patel (supra), wherein it was held that if the sale was null and void under the law, then there was no sale transaction in the eyes of law, and therefore, there would be no capital gain arising out of a null and void transfer of such land. It was accordingly held by the Hon ble High Court that no capital gain had accrued to the assessee. 4.12. Thus, in the given facts of this case and position of law as discussed above it can be said that no legal rights had accrued to the parties on execution of sale deed, as the same was void ab initio in the eyes of law. 4.13. It is further noted by us that similar view has been taken by Hon ble Bombay High Court in the case of CIT vs. Lok Housing Constructions Ltd. 232 Taxmann 159/58 taxmann.com 179 (Bombay). In this case the facts were that agreement to sale entered into by this assessee was cancelled. Subsequently, the said compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings is to determine amount of income taxable as per law in the hands of assessee and tax payable thereon. The objective is not at all to nail down an assessee in one way or the other, and to recover the maximum tax by using force of law. The revenue authorities should never forget that as per clear mandate of Article 265 of Constitution of India, no tax can be collected without the authority of law. Therefore, under the given facts, we should keep in mind the concept of Real Income theory. According to this theory, an assessee can be made to pay tax only and to the extent of income actually earned by him, and not beyond that. In the facts before us, the accepted factual and legal position is that no valid transfer (of the impugned land) had taken place as per law, and therefore, no question can arise of earning of capital gain and taxing the same under the income tax law. It is further noted by us that it is settled law that an assessee can resile from its return if it is found at any later stage that the income offered therein was not taxable in accordance with law. Immediate reference can be made on the judgment of Hon ble Delhi High Court in the case of Bharat General Rein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d company. During the course of assessment proceedings, the assessee was not in a position to give any details with regard to sale or transfer of these shares, and accordingly it was added by the AO. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A), wherein it was submitted that the assesee was having an investment for the aforesaid amount in share capital of the aforesaid company. The said company suffered losses and its capital got sunk and the lender bank took possession of the land of the company along with property and debts. The debts value more than the value of property, and therefore, nothing was left and that is how the assessee claimed long term capital loss. It was also submitted that it should be treated as a case of deemed transfer. But the Ld. CIT(A) did not accept the claim of the assessee on the ground that in fact, no transfer of shares took place during the year, and therefore, there was no question of incurring of any loss or gain on the said shares and therefore, it was rightly rejected by the AO. 5.5 We have examined all the these facts very carefully and agree with the view taken by the lower authorities that a loss or gain can arise u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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