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TMI Blog2023 (11) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer had sufficient tangible material to form belief that income has escaped assessment for the Assessment Year 2009-10. Further, in our view, the provisions contained in Clause (b) of Explanation 2 to Section 147 of the Act would also get attracted in the case of the Appellant and income would be deemed to have escaped assessment. Thus, we hold that the order passed by CIT(A) on this issue does not suffer from any infirmity. Addition of capital gains - As per AO Appellant had not offered to tax capital gains income arising from transfer of the Property - whether the transactions undertaken between the Appellant and Purchaser resulted in transfer of the Property from the Appellant to Purchaser in terms of Section 2(47)? - HELD THAT:- On perusal of Clause 4(b) of the Agreement, it can be seen that the Appellant continued to in the physical possession of the Property till the Consent Terms were recorded and granted only license and right of entry to the Purchasers by way of the aforesaid Consent Terms. Further, on perusal of Clause 11 of the Consent Terms it emerges that it also dealt with handing over of only the constructive possession of limited area occupied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en brought to tax as 'Income from Other Sources' by way of an amendment to Section 56(2)(ix) of the Act made vide Finance (No. 2) Act, 2014 (effective from 01/04/2015). Further, the definition of income under section 2(24) of the Act was also amended by the said Finance (No. 2) Act, 2014 (w.e.f. 01/04/2015) to include any sum of money referred to in Clause 56(2)(ix) of the Act. Therefore, prior to 01/04/2015, the amount of INR 51,00,000/- received by the Appellant for transfer of capital asset and retained by the Appellant could not have been brought to tax as income. However, as per Section 51 of the Act, the aforesaid amount would have to be reduced from the cost for which the Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted. Advance in relation to the sale of the Varsova Property - Assessee argued that relevant agreement was not duly signed by all the parties and the full amount of consideration was not received. Therefore, the transaction could not be completed and amount represented refundable advance and therefore, was not liable to tax as income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in as much as, all the primary and material facts for framing the assessment under Section 143(3) of the Act were before the CIT(A) and therefore there was no escapement of income as contemplated under the provisions of Section 147 of the Act. Further, the fact that the sale of property at Peddar road had not taken place. was before the Learned CIT(A). The re-opening of assessment is therefore bad in law and needs to be set aside. (C) The CIT(A) erred in upholding the order of the AO, in as much as, it is settled law that re-opening proceedings cannot be initiated to verify the same details and facts as produced discussed and decided upon at the time of the original assessment. There has to be tangible evidence to do the same and in the facts of the present case. There is a complete absence of tangible evidence to initiate re- assessment proceedings. (D) The CIT(A) erred in upholding the order of the AO. in as much as, the AO failed to appreciate that mere change in opinion does not constitute reason to believe . It is well settled that a mere change in opinion does not constitute reason to believe that income has escaped assessment. It has been repeatedly laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on in respect thereof. The amount is liable to be refunded pending the decision of the Court. The same could not be therefore taxed in the hands of the Appellant. (J) The Learned C.I.T.(A), erred in confirming the order of the AO on addition of the advances received of Rs. 19,60,000 without appreciating the facts of the case that the agreement is entered into but the same is not yet duly signed by all the parties to the agreement. (K) The Learned C.I.T.(A), erred in confirming the order of the AO in not reducing the cost of Rs. 10.29,700/-, appearing on the stock of Inventory in Annexure III while treating the advance of Rs. 19,60,000/- received towards Versova property. (L) The CIT(A) erred in not adjudicating the additional grounds raised before him by the Appellant on the ground that the same did not arise out of the order passed before AO, without appreciating that the powers of the CIT(A) are co-terminus with that of the AO and therefore additional grounds could be raised before him and the same needed to be adjudicated upon. The impugned order has been passed on a mis-appreciation of the facts and law and is therefore liable to be set aside. (M) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of INR 49,50,11,429/-, and addition of INR 70,60,000/- in connection with the advance of INR 51,00,000/- and INR 19,60,000/- received and retained by the Appellant as non-refundable advance relating to sale of properties. 4. Being aggrieved, the Appellant preferred appeal against the Assessment Order, dated 30.03.2014, before the CIT(A) which was dismissed, and therefore, the Appellant has preferred the present appeal on the grounds/additional ground reproduced in paragraph 2 to 2.1 above which are taken up hereinafter in seriatim. Ground No. (A) to (D) along with Additional Ground No. 1 5. By way of Ground No. (A) to (D) the Appellant has challenged the jurisdiction of the Assessing Officer to frame assessment under Section 143(3) read with Section 147 of the Act. 5.1. We have considered the rival submissions and perused the material on record. On going through the reasons recorded in writing for reopening the assessment under Section 147 of the Act (placed at page 11 of the paper-book) we find that the Assessing Officer had received information that the Appellant had entered into Agreement for Sale, dated 01.04.2008, with M/s Raja Ramdev Enterprises, a partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 17. The scope and effect of section 147 as substituted with effect from 1-4-1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be considered is whether the Assessing Officer had the relevant material on which a reasonable person could have formed requisite belief that income has escaped assessment. Whether the materials would conclusively prove the escapement of income and/or whether the material is sufficient or not does not require consideration at that stage. In our view, in the facts and circumstances of the present case, the Assessing Officer had sufficient tangible material to form belief that income has escaped assessment for the Assessment Year 2009-10. Further, in our view, the provisions contained in Clause (b) of Explanation 2 to Section 147 of the Act would also get attracted in the case of the Appellant and income would be deemed to have escaped assessment. Thus, we hold that the order passed by CIT(A) on this issue does not suffer from any infirmity. Ground No. (A) to (D) as well as additional ground No. 1 raised by the Appellant are, therefore, dismissed. Ground No. (E) to (H) 6. Ground No. (E) to (H) are directed against the addition of INR 49,50,11,429/- made by the Assessing Officer by holding the same to be capital gains. 6.1. Reassessment proceedings were initiated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with an amount of INR 36 Crores was shown under the head 'Loans and Advances'. After 2009, as the Purchaser was unable to repay the balance amount of INR 45 Crores, and the 5 Cheques of INR 9 Crores were returned, only an amount of INR 5.51 Crores was reflected as advance towards sale of Property. She submitted that since the balance consideration of INR 45 Crores was never actually received by the Appellant from the Purchaser, the Assessing Officer erred in taking the entire consideration of INR 50 Crores while computing the capital gains income in respect of the alleged transfer of the Property. 6.3.1. She further submitted that the Purchaser failed to make the payment of balance consideration and comply with the Consent Terms, and therefore, an Agreement for Cancellation of Sale, dated 20.09.2008 (hereinafter referred to as the Cancellation Agreement ) was executed by the Appellant and the Purchaser. The Cancellation Agreement was placed before the Assessing Officer and the CIT(A), however, both declined to rely upon the same. 6.3.2. Relying upon the definition of the term transfer contained in Section 2(47)(v) of the Act, she submitted that to constitute ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wife and pendency of court cases in disputes with the tenants. The Ld. Departmental Representative submitted that the Appellant had changed his stand during the assessment proceedings to avoid tax liability and produced the alleged Cancellation Agreement as a matter of afterthought as till 27.03.2014 the Appellant had not even mentioned about Cancellation Agreement. Referring to the Agreement for Sale, she submitted that the Agreement for Sale did not provide any details of pending disputes with the tenants even though the Appellant had contended that he was tied up in disputes with the tenants. She also pointed out that the Appellant had expressed inability to produce the partner of the Purchaser-firm before the Assessing Officer. Referring to the observations of the Assessing Officer in paragraph 5.12 of the Assessment order, she submitted that the Assessing Officer had rightly rejected the Cancellation Agreement as the signature of Mr. Sanjay M Punamiya on the Agreement to Sale (at page 89 of the Paper-book) matched with the Consent Terms (at page 108 of the paper-book). However, the aforesaid signatures did not match with the signature available on the alleged Cancellation Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantiate that the ownership of the property is still lying with the Appellant. She submitted that the Appellant had failed to provide cogent reasons for not furnishing the aforesaid Property Card before Assessing Officer or the CIT(A). According to her, the non-submission becomes more glaring when considered in light of the fact that the Appellant was made aware of the reasons for reopening by the Assessing Officer vide letter dated 03.07.2012. Hence, she submitted the same may not be admitted at such a later stage. 6.4.4. In view of the above, she submitted that there was clearly transfer of Property in terms of Section 2(47)(i) of the Act. However, without prejudice to the above, she submitted that the provisions of Section 2(47)(v) of the Act were also attracted since the same did not require transfer of the Property. She submitted that the transaction between the Appellant and the Purchaser clearly fell under the definition of 'transaction' as contemplated in Section 2(47)(v) of the Act. In this regard, she placed reliance on the following decisions/judgments - CIT Vs. Harbour View : [2019) 102 taxmann.com 185(Kerala) and Jasbir Singh Sarkaria : 294 ITR 196 (AAR-New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no transfer as contemplated under Section 2(47) of the Act read with Section 53A of the TPA and hence, the computation of Long Term Capital Gains of INR 49,50,11,429/- and the addition thereof to the total income of the Appellant was erroneous and liable to be set aside. 6.6. We have considered the rival submission and taken into consideration the material on record including written submission filed by both the sides. The Assessing Officer rejected the aforesaid contention of the Appellant. 6.7. The pivotal issue that arises for consideration is whether the transactions undertaken between the Appellant and Purchaser resulted in transfer of the Property from the Appellant to Purchaser in terms of Section 2(47) of the Act. In this regard, the Revenue has relied upon provisions of Section 2(47)(v) of the Act which read as under: 2(47) Transfer in relation to a capital asset includes xx xx (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 6.8. Thus, in order to determine whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enants/occupants referred to in the Agreement for Sale who would attorn to the Purchaser. The Appellant also confirmed that the Purchaser was given vacant possession of the Ground Floor premises admeasuring 120 Sq.ft. in building No. 11 of RCC structure and part of the basement area admeasuring about 750 Sq.ft. of which the Appellant had obtained possession from their respective tenants/occupants. Further, Clause 17 of the Consent Terms, provided for conveyance/transfer of the Property by way of sale to the Purchasers subject to fulfillment of conditions specified therein. The aforesaid Consent Terms were placed before the Hon ble Bombay High Court and vide judgment, dated 29.05.2008, the suit for specific performance was disposed of in terms of the Consent Terms. As per Clause 18 of the Consent Terms, the parties agreed to accept the decree drawn up in terms of Consent Terms as a conveyance of the Property in favour of the Purchaser. As per Clause 20 of the Consent Terms the Purchaser agreed to lodge the decree drawn up for registration with the Sub-Registrar of Assurances, Mumbai, while as per Clause 21 of the Consent Terms, the Appellant undertook to attend the office of Sub-Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r shall be entitled to administer requisition on the said ground nor the Purchasers shall be entitled to revoke modify cancel terminate or dispute the present Agreement or ask for reduction in consideration. Any such demand of Purchasers shall amount to breach of the terms of this Agreement. The Purchasers have entered into present Agreement fully knowing the rights of said occupants and tenants. The Vendor shall help and assist the Purchasers to obtain consent/NOC from said occupants/tenants 6.12. On perusal of Clause 4(b) of the Agreement, it can be seen that the Appellant continued to in the physical possession of the Property till the Consent Terms were recorded and granted only license and right of entry to the Purchasers by way of the aforesaid Consent Terms. Further, on perusal of Clause 11 of the Consent Terms it emerges that it also dealt with handing over of only the constructive possession of limited area occupied by the tenants/occupants and a small portion of the area of the building. In our view, Clause 11 of the Consent Terms when read with Clause 4(b) of the Agreement for Sale, supports the contention of the Appellant that the Purchaser was not put in possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Purchaser to exercise control/management over the entire Property. The Assessing Officer had proceeded on incorrect understanding that the Purchaser was put in possession of the Property. In our view, decision was rendered in facts and circumstances different from those in the present case, and therefore, does advance the case of the Revenue in the facts and circumstances of the present case. 6.14. We note that the Ld. Authorised Representative for the Appellant had also relied upon the judgment in the case of CIT Vs. Balbir Singh Maini : [2017] 398 ITR 531 (SC) to contend that since Agreement for Sale is not registered the provisions of Section 53A of the TPA would not be attracted. The relevant extract of the aforesaid judgment of the Hon ble Supreme Court read as under: 19. It is also well-settled by this Court that the protection provided under Section 53A is only a shield, and can only be resorted to as a right of defence. Rambhau Namdeo Gajre v. Narayan Bapuji Dhgotra [2004] 8 SCC 614 , para 10. An agreement of sale which fulfilled the ingredients of Section 53A was not required to be executed through a registered instrument. This position was changed by the Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a transfer of a capital asset under Section 2(47)(v) of the Act, there must be a contract which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A . The ITAT was not correct in referring to the expression of the nature referred to in Section 53A in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting capital gains the Assessing Officer had taken into consideration the amount of INR 5 Crores paid by the Purchaser to the Appellant which has, admittedly, being retained by the Appellant. The Agreement to Sale has not resulted in transfer of the capital assets. During the course of hearing, it was contended on behalf of the Appellant the that amount of INR 5 Crores received by the Appellant was not liable to tax in the hands of the Appellant for the reason that (a) the amount was received prior to 01/04/2015 when the provisions of Section 56(2)(ix) of the Act came into effect, and (b) the Appellant had reinvested the amount in purchase of another immovable property situated at Plot No. 172 (Old No. 69), Ramrkishna Mission Road Khar, Mumbai 400052 having CTS No. E/562 under Scheme No. IV of Santacruz Town Planning Scheme admeasuring about 668.9 Sq.mts. at INR 5,87,14,000/-. 6.19. Section 56(2)(ix) of the Act reads as follows:- 56(2) in particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income tax under the head Income from other sources , namely: xx xx (ix) any sum of mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such sum shall not be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition. 6.23. Accordingly, the amount of INR 5 Crores would have to be reduced from the cost for which the Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted. 6.24. In view of paragraph 6.6. to 6.23 above, the occasion to deal with rest of the contentions/pleas raised by the Appellant/Revenue does not arise. The application for additional evidence filed by the Appellant is rejected as being infructuous. However, before parting we would like to observe that according to the Assessing Officer there was a consent decree passed by the Hon ble Bombay High Court which continued to bind the parties and that the Cancellation Agreement, which was introduced by the Appellant just four days before the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Tarunkumar Dhumavat. The Appellant had also entered into a subsequent transaction with the Purchaser for the Property which did not result in transfer. The Appellant claims to be the owner of the Property as on date. Clearly the amount of INR 51,00,000/- has been retained by the Appellant. Nothing prevented the Appellant from refunding the aforesaid amount. Further, in the Balance Sheets also the Appellant does not admit that amount of INR 51,00,000/- is payable/refundable to Mr. Tarunkumar Dhumavat as the aforesaid amount has been reflected against the name of the Property (i.e. Peddar Road ) and not against name of Mr. Tarunkumar Dhumavat (so as to amount to admission of debt). 7.4. We have held that there is no transfer of the Property during the relevant previous year and therefore, the amount of INR 51,00,000/- cannot be brought to tax as income during the relevant previous year. The receipt of such an advance received and retained in relation to transaction of sale of Property has been brought to tax as 'Income from Other Sources' by way of an amendment to Section 56(2)(ix) of the Act made vide Finance (No. 2) Act, 2014 (effective from 01/04/2015). Further, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Varsova ). Nothing prevented the Appellant to refund the amount over these years. Therefore, we concur with the authorities below that the amount of INR 19,60,000/- has been received and retained by the Appellant. Though the aforesaid amount is not liable to tax in income in the hands of the Appellant during the relevant previous year, however, the aforesaid amount of INR 19,60,000/- would have to be reduced from the cost for which the Varsova Property was acquired while computing the cost of acquisition of the Property during the previous year in which provisions of Section 51 of the Act are attracted. Ground No. (L) (M) 9. Ground No. (L) is directed against the order of CIT(A) declining to adjudicate additional ground raised by the Appellant. Whereas Ground No. (M) is directed against the order of CIT(A) rejecting the contention of the Appellant that the properties were held as the investment by the Appellant. Both the aforesaid grounds are disposed off as being infructuous in view of adjudication of grounds (E) to (K) above. Ground No.( N) 10. Ground No. (N) is disposed of as being general in nature. In the result, the present appeal by the Assessee is part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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