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TMI Blog2023 (6) TMI 1416X X X X Extracts X X X X X X X X Extracts X X X X ..... lso made in the earlier years and, therefore, effective transfer had taken place in the earlier years, hence the provisions of section 56(2)(x) of the Act are not applicable to the assessee under consideration. We also observe that provisions of section 56(2)(x) of the Act are applicable with effect from 01.04.2017, which are not applicable to the assessee under consideration as the payments by cheques were made by assessee in F.Y. 2003-04 and the possession was also taken in Financial Year (FY) 2003-04 and the documents were also registered in Financial Year (FY) 2003-04, later on, to correct the defect in the title of the property, the assessee has deposited additional stamp duty. Just to correct the defect in the title of the property does not mean that assessee has purchased new property in the year under consideration. Thus, we note that order passed by the assessing officer should not be erroneous. Transfer of property as per the provisions of section 2 (47) of the Act (Purchase of property) had already taken place in the A.Y. 2004-05 by way of full payments by cheques as well as possession thereof. Since the property was already transferred in earlier year, the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 27.03.2023, passed by the Learned Principal Commissioner of Income Tax (in short Ld. PCIT ), Surat-1, under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The grounds of appeal raised by the assessee are as follows: 1) The learned PCIT grossly erred in passing order u/s. 263 of the Act and directed to verify the application of section 56 (2) of the Act in respect of two documents executed during the year though the said document is in the nature of correction of defects of the title as the property was already purchased in the earlier years (1/2 share in F.Y.2003-04 and the rest 1/2 in F. Y. 2010-11) and the payments were also made by account payee cheques in the relevant years. 2) The learned PCIT ought to have held that the possession of the property was taken in the earlier years and the entire payments were also made and, therefore, effective transfer had taken place in the earlier year hence, provisions of section 56 (2) are not applicable. 3) The appellant reserve right to odd, alter and withdraw any grounds of appeal. 3. Succinctly, the factual panorama of the case is that assessee before us is an Individual and had filed his return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased the property below the stamp duty value and the provisions of section 56(2)(x) of I.T. Act are clearly applicable in the case of Assessee. During the course of assessment proceedings difference of Rs.2,11,60,560/- (Rs.2,14,10,560 Rs.2,50,000) between the Fair market value and actual purchase value of the immovable property was required to be added to the total income of the Assessee u/s 56(2)(x) of I.T. Act, which the AO has failed to do so. Therefore, ld PCIT issued a show cause notice to the assessee, dated 22.03.2023 which was duly served upon the assessee. 7. In response to the notice issued by the Ld. PCIT, the assessee submitted the written submission before the Ld. PCIT, which is reproduced below: It is submitted that I had purchased the above said plot catted Plot No. 270 at Village Dumas in F. Y, 2003-04 by making full payment by account payee cheques for Rs.2.50/- lacs and possession was also taken F, Y. 2003-04, The said plot was purchased jointly with Ankin S. Zaveri and accordingly I had 1/2 share in the said property. The document was executed on 13.03.2008. The details of payments are as under: 16.04.2002 Surat People's Bank 55824 50,000 24.04.2003 Sura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the title and there is no payment during the year to the seller. Since the entire payment was made by- account payee cheque in F.Y. 2003-04 and therefore the ownership was obtained by way of the possession as per section 2(47) of the Act. Thus the plot was actually purchased in F.Y.2003- 04 Even it is considered as acquired by registered deed was acquired in FY.2007-08 and when the original document was executed, there was no purchase of properly viz 270 of village Dumas and therefore question of application of section 56(2)(x) does not arise. It is further submitted that one needs to look into the proviso of section 56(2)(x) which is reproduced for ready reference: Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of the clause. The above said proviso is applicable only when the payment was made by account payee cheques on or before the date of agreement for transfer of such immovable properly) In the present case, the original document was executed in F.Y.2007-08 and the payment was made by acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt payee cheques in F.Y.2010-11 and the possession was also taken ana, therefore, the ownership was obtained by way of possession as per section 2(47) of the Act. Thus, the plot was actually purchased in FY.2010-11. In short, there was no purchase of property viz. Plot No. 270 (1/2 share) at Village Dumas and therefore, question of application of section 56(2)(x) does not arise. It is further submitted that, one needs to look into the proviso of section 56(2)(x) which is reproduced for ready reference. Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of this clause. The abovesaid proviso is applicable only when the payment was made by account payee cheques on or before the date of agreement for transfer of such immovable property, in the present case, the original document was executed in F.Y. 2010-11 and the payment was made by account payee cheques in F.Y.2010-11. As per the original document, no additional stamp duty was leviable on the base of payment in F.Y.2010-11. In view of the above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the appellant) Sr.No 2(the balance 1/2 share of the plot) 11. With help of the above chart, the ld Counsel explained the Bench that the original document was executed in F.Y.2007-08 and the payment was made by account payee cheques in F.Y. 2003-04 and, therefore, the stamp duty value of F.Y.2003-04 ought to be taken. As per the original document, no additional stamp duty was liable on the basis of payment in F.Y.2003-04 when the document was registered in FY.2007-08. Therefore the value of Rs.2,50,000/- ought to be considered as the value for stamp duty purpose . The ld Counsel stated that payment of stamp duty was made by account payee cheques and since the possession was already taken on full payment by account payee cheques in F.Y.2003-04, hence the property was deemed to be transferred by virtues of section 2(47) of the Act in F.Y.2003-04. Later on there was correction in the purchase deed, therefore correction in purchase deed and payment of additional duty on the occasion of correction does not attract the capital gain as the transaction was materialized in F.Y.2003-04. 12. The ld Counsel also argued that provisions of section 56(2)(x) of the Act are applicable from 01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the assessee under consideration as the payments by cheques were made by assessee in F.Y. 2003-04 and the possession was also taken in Financial Year (FY) 2003-04 and the documents were also registered in Financial Year (FY) 2003-04, later on, to correct the defect in the title of the property, the assessee has deposited additional stamp duty. Just to correct the defect in the title of the property does not mean that assessee has purchased new property in the year under consideration. Thus, we note that order passed by the assessing officer should not be erroneous. 15. We note that the transfer of property as per the provisions of section 2 (47) of the Act (Purchase of property) had already taken place in the A.Y. 2004-05 by way of full payments by cheques as well as possession thereof. Since the property was already transferred in earlier year, the provisions of section 56(2)(x) of the Act were not invoked by assessing officer while passing order u/s 143(3) of the Act. We also note that assessing officer conducted sufficient enquiry during the assessment proceedings about the issue raised by ld PCIT, by way of issuing notices to the assessee. The assessing officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one hand the sale proceeds are sought to be taxed in A.Y. 2006-07 implying thereby that the transfer took place in this year and not on 16.03.2005 but on the other hand, for the limited purpose of disallowing the claim of exemption under section 54EC of the Act, the AO as well as the CIT(A) proceeded on the presumption that 16.03.2005 is the date of transfer and reckoned from that date the investment is to be made within six months and hence the investment made in December, 2005 cannot be considered for the purpose of seeking benefit under section 54EC of the Act. It is equally important to notice that the AO seeks to tax the income on sale of the property in the year under consideration on protective basis by observing that consequently the substantive addition may be made in A.Y. 2005-06 as per the law . The expression may be made in itself indicates that the AO is not sure as to whether the transfer took place in A.Y. 2005-06 or not and in fact his subsequent action/inaction of not initiating any proceeding in respect of A.Y. 2005-06 speaks volumes about the conduct of the AO. In fact it is a matter of serious concern. 12. Article 265 of the Constitution of India postulates tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out by the learned counsel for the assessee, the Hon'ble Bombay High Court in the case of Chatrubhuj Dwarkadas Kapadia (supra) has decided the issue by reading the terms of the contract as a whole and by specially taking note of the fact that in the guise of agreement of sale a development agreement was contemplated whereby the developer was held to have taken possession on account of the irrevocable licence granted to him to enter upon the property whereas in the instant case no such finding was given by the tax authorities. In fact the learned CIT(A) opined that the date of handing over of possession in the instant case was 20.09.2005, and based on this factual premise it has to be held that the transfer had taken place in the previous year relevant to A.Y. 2006-07. Reckoned from the date of possession, i.e., 20.09.2005, the assessee having invested the money within six months in long term specified asset, the benefit of exemption under section 54EC deserves to be extended to the assessee in the instant case. In substance, we hold that the assessee is entitled to exemption under section 54EC of the Act in the year under consideration and we direct the AO accordingly. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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