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TMI Blog2018 (12) TMI 1506X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has received more than what is offered for the purposes of determination of capital gains, it is difficult to draw inference against the assessee on the basis of suspicion howsoever strong. We may however hasten to add that the CIT(A) ought to have weighed the jantri value vis-à-vis the sale price agreed by the assessee with Melody Complex while granting relief to assessee. Thus, the order of the CIT(A) suffers from inadequacy or infirmity to this extent. No plausible reason to depart from the view taken by the first appeallate authority, until it is found that jantri value of parcels of land in question is higher than the sale price agreed by the assessee with Melody Complex. Thus remit the matter back to the file of AO to ascertain the jantri value/circle rate existing at the time of agreement with Melody Complex on 15.09.2008 and substitute the same with sale consideration agreed by the assessee with Melody Complex in case it is found higher than the actual sale consideration of ₹ 19.10 Lakhs. - issue is required to be restored back to the file of AO for its consideration. - Appeal of the Revenue is allowed for statistical purposes. - I.T.A. No. 1215/Ahd/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement to sale. In this regard, the assessee presented before the AO that during the preceding FY 2008 09 (AY 2009-10), the assessee entered into an agreement to sale dated 15.09.2008 with the prospective purchaser namely Melody Complex in respect of various survey numbers of land allocated at Moje Gam, Godhavi, Taluka Sanand, Ahmedabad and the total sale consideration was determined/fixed for an amount of ₹ 19,01,177/-. In terms of the said agreement to sale, the proposed buyer (Melody Complex) paid a sum of ₹ 1 Lakh as earnest money to the assessee. Thereafter, at the behest of the proposed buyer, the assessee entered into another agreement to sale with the ultimate buyer M/s. Gatil Properties Pvt. Ltd. (Gatil Properties) on 25.03.2009 wherein Melody Complex was made a confirming party for relinquishment of its right accrued in the land. The consideration payable by the ultimate buyer (Gatil Properties) was fixed at ₹ 3,40,84,800/-. It was further agreed that Gatil Properties shall pay the sale consideration to the assessee as per the amount fixed by Melody Complex vide agreement to sale dated 15.09.2008 entered into between assessee and Melody Complex and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) of the Act were satisfied namely (i) there is an agreement in writing between the purchaser and seller, (ii) purchaser has paid consideration (iii) purchaser has taken the possession of the property. It was also pointed out that all the relevant documents namely Banakhat dated 15.09.2008 entered into with Melody Complex and subsequent tripartite Banakhat dated 25.03.2009 was produced before the AO to establish the alienation of rights in the land by the assessee in favour of Melody Complex. The copy of balance sheet and ledger account of the confirming party (Melody Complex) was also submitted. It was pointed out that the physical possession of the land has been handed over to the purchaser vide possession agreement (Kabja Karar) dated 25.03.2009 which fact has also been mentioned in the final sale deed. It was thus contended that the rights acquired by the Melody Complex in an enforceable right in law and thus a capital asset within the meaning of Section 2(14) of the Act. The said right has been transferred/extinguished by it within the meaning of Section 2(47)(ii) of the Act while executing the subsequent Banakhat dated 25.03.2009 as a confirming party. It was contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2009. On the same date i.e. 25.3.2009, a possession agreement was also executed with assessee as vendor, Gatil Properties Pvt. Ltd. as purchaser and Melody Complex Pvt. Ltd. as confirming party. The AO has made the addition of ₹ 3,18,55,034/- on account of long term capital gain. The AO has ignored the first two agreement to sale on the ground that these agreement to sale are not registered. Therefore, transaction is not completed by these agreements. The AO is of the opinion that land was sold by way of registered sale deed only which was executed on 21.01.2010. Therefore, the capital gain resulted on transfer of land is assessed in the hands of the assessee in the A.Y. 2010-11. 3.6. During the appellate proceedings the appellant has contended that Melody Complex Pvt. Ltd. has acquired enforceable rights by virtue of the agreement to sale executed on 15.09.2008. It is further contended that Melody Complex Pvt. Ltd. could file suit for specific performance of contract under specific relief Act. The appellant has also contended that right with the assessee extinguished with agreement to sale executed on 15.09.2008. The appellant has also contended that the said agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plex is also assessed to tax. The appellant has relied upon various decisions/judgments which are cited in the written submissions reproduced above. 3.7. The facts of the case and the submissions are considered. The appellant has mainly contended that the Melody Complex Pvt .Ltd. has acquired enforceable rights on execution of agreement to sale dtd. 15.09.2008 and he could file suit for a specific performance of contract under Specific Relief Act and the right with the assessee stands extinguished on the day when he had entered into an agreement to sale of a property. The AO has ignored the existence of this agreement by referring to surrounding circumstances and held that agreements dtd. 15.09.2008 and 25.3.2009 are sham and deserved to be ignored. The decisions cited by the appellant are carefully considered. Considering all these legal pronouncements, it seems that the rights acquired by the Melody Complex Pvt. Ltd. under the agreement dtd. 15.09.2008 are of capital nature and this agreement was enforceable in law under the Specific Relief Act. Further the appellant has contended that by virtue of agreement to sale dtd. 25.03.2009, the transfer is completed u/s.2(47) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naben B. Patel in ITA No.24114/Ahd/2013 dtd. 13.01.2016 for A.Y. 2010-11 wherein the Hon'ble ITAT has deleted the addition on account of alleged income from capital gain on similar sets of facts. I have gone through the order of the Hon'ble ITAT and it is found that the order of the Hon'ble ITAT is on similar set of facts. 3.10. Considering all these facts, the addition made by the AO is deleted. Thus this ground of appeal is allowed. The CIT(A) according reversed the action of the AO for taxability of capital gain on the basis of sale consideration agreed with the ultimate buyer Gatil Properties and restored the stand of the assessee. 8. Aggrieved by the relief given by the CIT(A), the Revenue has knocked the door of the Tribunal. 9. The learned DR for the Revenue mainly relied upon the order of the AO and submitted that the assessee is susceptible to capital gain tax as per sale consideration determined in the sale deed registered on 21.01.2010 by virtue of which the owner has conveyed his rights totally, absolutely and completely to the purchaser i.e. Gatil Properties. It was alleged that the assessee has not worked out any capital gain for AY 2010-11 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming party and therefore, the assessee could not have sold the land directly to the ultimate seller in exclusion to the intermediary without inviting civil and criminal consequences. The learned AR thereafter referred to another tripartite Banakhat with the ultimate buyer dated 25th March, 2009 (paper book page nos. 66 to 88) and submitted that the reference to the existence of confirming party is made explicit to enable the sale of land. The learned AR thereafter referred to a tripartite final sale deed 21.01.2010 and submitted that the assessee has received only the consideration at which it agreed to sale the land to the confirming party and the remaining amount has been given by the seller to the confirming party as can be seen from page no.108 of the paper book. The learned AR thereafter submitted that except for registration which eventually took place in the subsequent FY 2009-10, the assessee had received the consideration agreed upon and had also parted with the possession and enjoyment of land in sale. In the circumstances, the transfer took place in favour of the confirming party in FY 2008-09 concerning AY 2009-10 at the agreed sale consideration of ₹ 19,10,177/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires to be upheld as per the cross objection filed by assessee and no interference with the order of the CIT(A) is called for. 13. We have carefully considered the rival submissions. The essential controversy in the present appeal relates to quantification of capital gains arising on transfer of immovable property being land. The incidental question that arises for consideration is whether in the given set of facts, the rights acquired by Melody Complex under the agreement to sale is a capital asset or not and whether such right stands transferred/extinguished within the meaning of Section 2(47) of the Act while executing the agreement to sale dated 25.03.2009 as a confirming party having regard to provisions of Section 2(14) and Section 2(47) of the Act. 14. It is the case of the assessee that he entered into an agreement to sale dated 15.09.2008 with Melody Complex against which he has received earnest money. The sale consideration as per the aforesaid agreement to sale stands at ₹ 19,10,177/-. It is the case of the assessee that the proposed buyer (Melody Complex) has acquired enforceable right to obtain the conveyance of the immovable property and therefore, is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g fiction of Section 50C of the Act. Apart from this Section, we do not visualize anything provided in the Act which might have authorized an AO to replace the actual sale consideration disclosed by the assessee. In these circumstances, unless the AO is in possession of cogent material that consideration actually received by the assessee is in excess of the amount disclosed, no adverse inference is permissible to be drawn against the assessee. It is an undisputed fact that the assessee has received only the amount of ₹ 19,10,177/- which has been agreed as per the agreement to sale with the intermediary/confirming party Melody Complex. The consideration agreed by the ultimate purchaser over and above the consideration freezed by the assessee with Melody Complex was directly given by ultimate buyer (Gatil Properties) to the intermediary/confirming party (Melody Complex). There is no material available on record to hold that the assessee herein is the beneficiary of the excess consideration. Noticeably, the provisions of Section 50C of the Act have not been invoked at all. Therefore, where the deeming provisions of Section 50C has not been invoked and there is nothing to demonst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade the basis of suit for specific performance. Therefore, a decisive right was available to Melody Complex in view of agreement to sale albeit unregistered. As noted earlier, in the absence of invocation of Section 50C of the Act or in the absence of any finding for receipt of excess consideration by the assessee, there is no palpable reason to fasten the tax liability of assessee for excess sale consideration at this stage. The payment of tax by intermediary/confirming party or otherwise is an irrelevant consideration for the purposes of determination of tax liability in the hands of the assessee. 17. We find that the CIT(A) has also taken cognizance of the decision of the co-ordinate bench in Sapnaben B. Patel (supra) while adjudicating the issue in favour of the assessee in similarly placed facts. We also take affirmative note of the significant plea on behalf of the assessee that if the unregistered agreement to sale with intermediary is discarded as an arrangement, the final contractual relationship as per the final sale deed will also crumble where intermediary is acknowledged as a confirming party to enable the transaction to sail through. 18. Thus, looking from any a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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