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TMI Blog2021 (10) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... iling a civil writ before the Hon ble Rajasthan High Court where the Hon ble Court has directed to maintain a status quo and the case of the assessee before the Hon ble Court is that the subject transaction has been carried out under fraudulent circumstances and on the pretext of certain promises and agreement between the parties which have not been fulfilled by the buyer and the Hon ble Rajasthan High Court directed to maintain status-quo as regards the possession, alienation, construction and creation of third party interest in the suit lands, pending the writ petition. The Stay application stands disposed of. In light of aforesaid discussions and in the entirety of facts and circumstances of the case and in the fitness of things, we are of the considered view that the matter need to be set-aside and remanded to the file of the Assessing officer who is hereby directed to decide the same afresh after taking into consideration the decision of the Hon ble Rajasthan High Court in the aforesaid writ petition which has a direct bearing on the matter. Determining sale consideration u/s 50C - We believe that in light of differential approach and valuation adopted by the stamp dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings available on record, it is proved that actual consideration is only what is recorded in the sale deed and therefore, the same could not be substituted by deemed consideration u/s 50C. (iv) by not referring the determination of FMV of the property u/s 50C(2) of the Act. 2. Briefly stated facts of the case are that the Assessing officer based on information that the assessee has sold his share of land situated at village Hirapura issued notice u/s 148 of the Act and thereafter, a show-cause was issued as to why long term capital gains may not be taken at ₹ 81,58,722/- u/s 50C, being the value determined by the Stamp duty authority. In response, the assessee submitted that the transfer was carried out under fraudulent circumstances and no capital gains liability arises on such sham transaction and substance should prevail over form and infact, there was no transfer u/s 2(47) of the Act. It was submitted that the assessee and other aggrieved parties have also filed an FIR and a civil suit before the Hon ble Court. The AO however didn t accept the assessee s contentions for the reason that a sham transaction has no relevance in Income tax Act and referring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 for giving him 360 sq. yds. of developed land. However no written agreement was made with the assessee and Lalu Ram but assurance was given that after conversion, 784 sq. yard developed land would be given to them. 5. It was submitted that the Sub registrar for stamp duty purposes took the value of land for which the sale deed was executed by the assessee at actual consideration of ₹ 5,00,000/- considering it to be an agriculture land. However, Collector Stamps vide order dt. 23.03.2006 for the purpose of levy of stamp duty determined the value of land at ₹ 81,58,722/- by considering the same to be commercial land though in the revenue record, it is still a agriculture land. On the basis of this information, the AO initiated proceedings u/s 148. In course of assessment proceedings, the assessee explained that Smt. Krishna Devi got transferred the land under fraudulent circumstances. She misguided the assessee and put a condition that unless he and other family members execute a registered sale deed, the legal process at JDA cannot be completed. Accordingly, the assessee executed the sale deed for cash consideration of ₹ 5 lacs. However, Smt. Krishna Devi did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred its land to Smt. Krishna Devi during the year under consideration and is liable for capital gain tax. 8. In the above factual background, it was submitted by the ld AR that the buyers of the land fraudulently got the sale deed executed from the assessee in her favour without complying with the promises they made at the time of the transaction taking place. As per the promise, they will get the scheme approved from JDA and will get pattas of the residential land in favour of the assessee as agreed by them. As per the agreement, assessee got hold of the plot of lands, constructed boundary wall and the remaining land was used by him as per his convenience. But Smt. Krishna Devi with the intention of cheating want to sale the entire land breaching the terms of actual agreement, in view of the sale deed executed in her favour. Therefore, the assessee has filed a civil writ petition before the High Court of Rajasthan. The Hon ble High Court vide order dt. 31.01.2014 directed to maintain the status quo. The matter is still pending before Hon ble High Court. 9. It was submitted that from the above, it can be noted that though the assessee has executed the sale deed, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering it to be a residential land instead of the agricultural land. 11. Without prejudice to above, it was further submitted that the Ld. CIT(A) has failed to consider that when it is proved that actual consideration is only what is recorded in the sale deed, the same cannot be substituted by deemed consideration u/s 50C and that too without referring the determination of FMV of the property to DVO u/s 50C(2) of the Act, more particularly when assessee has not filed any appeal or revision or reference to any authority or court against the value assessed by the stamp valuation authorities. Further, the AO has not allowed any deduction of indexed cost of acquisition in computing the long term capital gain which is against the provisions of the Act. In view of above, it was submitted that the income on account of long term capital gain assessed by the AO be directed to be deleted. 12. Per contra, the ld. DR relied on the order of the lower authorities and our reference was drawn to the findings of the ld. CIT(A) which read as under:- 3.1.2 Determination: (i) The brief facts of the case are that during the year under consideration, the appellant along with his brot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ac in cash and nothing remained outstanding from the buyer Smt. Krishna Devi. It was further stated in the sale deed that the possession of the land was also handed over by the appellant to Smt. Krishna Devi. It is noted from the material placed on record that some dispute has arisen between the appellant, his brothers on the one hand and Smt. Krishna Devi on the other hand which is pending before the court of law. It is noted from the material placed on record that a suit for issue of temporary injunction was filed by appellant along with his brothers in relation to their dispute with Smt. Krishna Devi in the Court of Civil Judge (A B) and Metropolitan Magistrate (East), Jaipur and vide order dated 03.07.2013 in case No. Misc.(Temporary Injunction)/ 332/2012, the temporary injunction as prayed by the petitioners was denied by the Civil Judge, a part of the relevant extract of the above referred order of Civil Judge is reproduced as under: (v) Against the above referred order of Civil Judge, the appellant along with his brothers (the petitioners) filed a civil appeal before the Addl. District Judge No. 16, Jaipur and vide order dated 21.05.2013, in Civil Misc. App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material available on record. The case of the assessee is that the subject transaction has been carried out under fraudulent circumstances and on the pretext of certain promises and agreement between the parties which have not been fulfilled by the buyer. Given the non-fulfillment of such promises and agreement, the assessee has taken series of steps permissible under law against the buyer from time to time by way of filing an FIR, thereafter, suit for injunction in court of civil judge, thereafter civil appeal before the Add. Judge and lastly, by way of filing a civil writ before the Hon ble Rajasthan High Court where the Hon ble Court has directed to maintain a status quo pending disposal of the writ petition. It was submitted that where the whole transaction is under dispute, it cannot be presumed that merely by entering into a sale deed, the transfer has taken place so as to attract capital gains tax. Per contra, the case of the Revenue is that the assessee has executed a sale deed for sale of the land which has been duly registered and has not been cancelled till date and as per sale deed, the property has been transferred and possession has been handed over to the buyer and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale deeds registered at an under-estimated value. If it is held that the sale deed is final, in that case, the Income-tax authorities will be debarred from looking into as to how much sale consideration passed under the transaction, which is not the law. The factum of sale and the sale proceeds are the real questions to be determined by the Income-tax authorities. From what has been stated above, it is clear that the Tribunal fell into an error in refusing to examine the material put forth by the assessee to prove that the sale was a sham transaction. 15. We refer to the decision of the Hon ble Patna High Court in case of Smt. Raj Rani Devi Ramna vs CIT (1992) 201 ITR 1032 (Pat.) where the questions framed for consideration before the Hon ble High Court read as under: (1) Whether, on the facts and in the circumstances of the case, the learned Income-tax Officer was justified in including the sum of ₹ 42,000 pertaining to three deeds of sale in the gross receipts for the purposes of computation of capital gains? (2) Whether, on the facts and in the circumstances of the case, the learned Income-tax Officer was legally correct in coming to a finding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court as well as of other High Courts taking a similar view. The relevant provisions under the Act for the present purpose are sections 45 and 2(47). Section 45, inter alia, provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall, subject to certain exceptions, be chargeable to income-tax under the head Capital gains and shall be deemed to be the income of the previous year in which the transfer took place. The word transfer has been defined under section 2(47) of the Act which provides that, in relation to a capital asset, transfer includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law. In the present case, we are concerned with the transfer of an immovable property by way of sale. In the absence of any provision to the contrary, the concept of sale of an immovable property which is included in the expression capital asset as defined under section 2(14) of the Act, has to be gathered from section 54 of the Transfer of Property Act, 1882. In the present case, from the statement of case itself as drawn up an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Hon ble Rajasthan High Court where the Hon ble Court has directed to maintain a status quo and the case of the assessee before the Hon ble Court is that the subject transaction has been carried out under fraudulent circumstances and on the pretext of certain promises and agreement between the parties which have not been fulfilled by the buyer and the Hon ble Rajasthan High Court vide its order dated 31.01.2014 in S.B. Civil Misc. Stay Application No. 18755/2013 in S.B. Civil Writ Petition No. 21812/2013 has directed as under: Heard the learned counsel Mr. Vishwajeet Mantri for the petitioners and the learned counsel Mr. A.K. Dubey appearing for the respondent No. 3 on caveat. Having regard to the submissions made by the learned counsels for the parties, and to the impugned orders passed by the courts below, the parties are directed to maintain status-quo as regards the possession, alienation, construction and creation of third party interest in the suit lands, pending the writ petition. The Stay application stands disposed of. 17. We therefore, find that the outcome of these proceedings before the Hon ble High Court would have a direct bearing on the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w has also seriously erred in recording findings with regard to actual possession over the suit land. It has not at all properly considered rather has ignored the relevant documents which were submitted on record of the court below. Hence the impugned orders deserves to be quashed and set aside. (F) Because the learned court below has stated that the agreements produced on record are not registered documents whereas there is compulsion under section 17 and 49 of the Registration Act for registration of such documents. It is most humbly submitted that in the instant case the documents which are agreements are not at all for conveyance of the immovable property by the defendant respondent No. 3. The courts below have clearly erred in not at all appreciating the true nature of the transaction between the parties. (G) Because the case of the petitioners before the learned court below is for specific performance of the terms of agreements in question which are mere memorandum of agreements conveying no property. The agreement is to the effect that the respondent No. 3 will get a residential scheme sanction and will thereafter get lease deeds of residential plots executed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case clearly demonstrates the fraudulent intentions of the respondent No. 3 which has resulted in gross injustice to the poor agriculturist petitioners. The petitioners are entitled to prove all these aspects on trial of the suit which they have successfully demonstrated for prima facie establishment of their case. In such situation the rejection of the injunction prayed would clearly result in irreparable injury which cannot be compensated in terms of money. The courts below have considered this aspect of the matter in a very cursory manner. (M) Because in the facts and circumstances of the case the balance of convenience is also in favour of the petitioners. However the learned court below has considered this aspect of the matter also in a very cursory manner. (N) Because it is settled law of construction of documents that the true intent of parties can be gathered from the surrounding circumstances and if the evidence available suggests that what is expressed in the document is not the only thing which has taken place between the parties, the meaning to the document has to be given by considering the entire set of circumstances. The courts below have not taken int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically it was shown the area or the plots in which the plaintiffs are in possession and in which electricity connection were taken by them which is also evident from the document filed with the plaint. The learned Courts below not looked even the photographs of the concerned residential schemes in which the plaintiffs are in possession and decided the Temporary Injunction Application without applying the judicious mind. (S) Because the learned Courts below have only to see primafacie there is a case of plaintiffs or not. But the Courts below without appreciating the evidence came before the Court arrived out over a finding that the subsequent agreements between the plaintiffs and defendant are forged and that the plaintiffs had sold the entire land to the defendant which is a question of evidence and without going through the evidence with regard to the documents concerned arriving out to such conclusion cause gross injustice to the plaintiffs. (T) Because the learned Courts below erred in not considering the facts with regard to the irreparable loss to the plaintiffs and no finding was given with regard to the fact whether the plaintiffs having continue possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has been made the basis by AO for determining sale consideration U/s 50C of the Act and therefore, the said decision was rendered in peculiar facts and circumstances of the said case. At the same time, we note that during the course of assessment proceedings, in response to the showcause notice issued by the AO, the assessee had objected to adoption of such value of ₹ 81,58,722/- as against declared sale consideration of ₹ 5,00,000/- and in such circumstances, the AO should have taken steps by referring the matter to the DVO u/s 50C(2) of the Act and should have taken into consideration the report of the DVO before substituting the sale consideration as per Collector (Stamps) order as against the declared sale consideration. And we believe that in light of differential approach and valuation adopted by the stamp duty authorities in case of assessee and in case of brother of the assessee in respect of similar situated property as so claimed, the reference to DVO becomes imperative to take the same into consideration and determine the fair market value of the property. Given that the AO had go ahead in the matter without referring the matter to DVO, it gives rise to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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