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TMI Blog2012 (4) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... n Khasra No.374 and land measuring 17 biswas comprised in Khasra No.375, in the revenue estate of Village Sikandarpur, Ghosi, Tehsil and District Gurgaon, situated at Main Mehrauli Gurgaon Road. A Memorandum of Understanding dated 22.03.2000, was executed between Prem Shanker Khandelwal (HUF), through its karta Sh. Premchand Shanker Khandelwal and Fashion Flare International Private Ltd. through its Managing Director Sh. Choudhary Ajay Latyan, with respect to the aforesaid land measuring 5300 sq. yards. Under the Memorandum of Understanding, Fashion Flare International Private Ltd. was to purchase the aforesaid land for the total consideration of Rs.6 crores 35 lacs. The seller was required to obtain approval/sanction/license to use the aforesaid land for construction of a commercial building, from concerned authorities of Haryana Government and the license as well as external development charges payable to the Authorities, for grant of permit /license to construct a commercial building on the aforesaid land, were to be deposited by Fashion Flare International Pvt. Ltd., which could deduct the same from the said price agreed between the parties. All other charges and levies imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges, Rs.27,34,375/- on account of additional conversion charges, Rs.64,47,656/- on account of external charges and Rs.11,76,875/- on account of internal development charges. This Collaboration Aagreement dated 15.07.2002 was terminated mutually vide letter dated 13.08.2002 from Span International Pvt. Ltd. to Sh. Ajay Chaudhary and Smt. Savita Chaudhary. 4. A Collaboration Agreement dated 28.08.2002 was then executed between Span Properties Pvt. Ltd. and JMD Promoters Private Limited, through its Managing Director Shri Sunil Bedi. Under this MoU, JMD Promoters Private Limited agreed to construct a building having approximately 54,000 square feet of FAR on the land belonging to Span Properties Private Limited. The building which JMD Promoters Private Limited had to construct on the land of Span Properties Private Limited was to be a centrally air conditioned multi-storey commercial building. A sum of Rs 2.50 crores was paid by JMD Promoters Private Limited to Span Properties Private Limited as a non-refundable security for due purpose of its obligations under the agreement and as part consideration. On completion of the project, 25% of the entire built up area of the building (135 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Both the appeals were allowed by CIT (Appeals). The orders passed by CIT (Appeals) were challenged by revenue before the Tribunal. The appeals filed by the revenue were, however, dismissed. 7. In these appeals, the following substantial question of law arises for our consideration:- "Whether in the facts and circumstances of the case the ITAT was correct in law in holding that the Assessing Officer was not justified in making the addition of Rs 75 lakhs being the difference between the apparent consideration and the real value of the assets of M/s Span Properties (P) Ltd.?" 8. It is an admitted position that vide MoU dated 22.03.2000, Fashion Flair International Private Limited had agreed to purchase land in question from Prem Shanker Khandelwal (HUF). The same consideration was maintained in the MoU dated 19.12.2000, the only difference being that under the first MoU, it was the land which was to be transferred to Fashion Flair International Private Limited, whereas under the second MoU, the entire share holding of Span Properties Private Limited was to be transferred by Shri Prem Shanker Khandelwal, Niraj Khandelwal and their heirs to Fashion Flair International Private Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the said plot and payment of development and other charges and compliance of the other conditions of the CLU/licence. 10. The value of land in question, after change of land use so as to enable construction of a commercial building and payment of conversion charges, development charges, etc., was agreed by Kandelwals/Span Properties Private Limited and Fashion Flair International Private Limited at Rs 6.35 crore, vide MoUs dated 22.03.2000 and 19.12.2000. It can therefore be safely taken that the value was not less than Rs 6.35 crore on 15.07.2002 when the Collaboration Agreement was executed been Span Properties Private Limited and JMD Promoters Private Limited and on 30.11.2002, when the agreement for sale of share holding was executed between Khandelwal and Sunil Bedi, unless it is shown that on account of reasons such as slump in the market or the permissible coverage/FAR being reduced or the land use having been changed from commercial to some other purpose, or some other reason, there was erosion in the market value of the land between 22.03.2000/19.12.2000 and 28.08.2002/30.11.2002. We find that this was not the case of the assessee either before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Span Properties Private Limited was not engaged in any other business activity at the relevant time and had no other asset. This is also evident from the balance sheet of the company which is available on record. Since the entire share holding of Khandelwas in Span Properties Private Limited was transferred to Shri Sunil Bedi, he, on account of his ownership of the entire share holding of Span Properties Private Limited, also acquired ownership of the land in question. Hence, it would be difficult for us to accept that the value of the entire share holdings of Khandelwas in Span Properties Private Limited could have been less than Rs 6.35 crore minus the liabilities of the company. In fact, the MoU dated 19.12.2000 envisaged transfer of the entire share holding of Span Properties Private Limited to Fashion Flair International Private Limited, after grant of requisite permission to Span Properties Private Limited for construction of a commercial building on land in question. The relevant clauses of the MoU dated 19.12.2000 read as under:- AND WHEREAS, the FIRST PARTY had undertaken to obtain approval/sanction/permit/ licence to use the abovementioned land for construction of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer disputes the valuation discussed by the assessee, the onus is on the revenue to prove that the ostensible consideration disclosed by the assessee was not the true consideration and, therefore, there would be a presumption of correctness of the consideration disclosed in the agreement dated 30.11.2002 between Khandelwas and Shri Sunil Bedi. But, if the revenue is able to show from the material available to the Assessing Officer that actual consideration was more than the ostensible consideration disclosed by the assessee, the presumption stands duly displaced and the Assessing Officer would be justified in taking a view that the difference between the ostensible consideration and the real consideration reflected the amount which was paid by the purchaser to the seller, but was not reflected in the account books of the parties 13. During the course of arguments before us the learned counsel for the Assessee referred to the decisions of the Supreme Court in K.P. Varghese v. Income Tax Officer, Ernakulam And Anr. (1981) 4 SCC 173 and Commissioner of Income Tax, Salem v. P.V. Kalyanasundaram (2007) 10 SCC 487 and the decisions of this Court in Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the date of the agreement-the market price shoots up with the result that the market price prevailing on the date of the sale exceeds the agreed price at which the property is sold by more than 15% of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bonafide and, in fact, in fulfilment of a contractual obligation, the assessee who has sold the property should be liable to pay tax on capital gains which have not accrued or arisen to him. It would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation under-taken by him. It is difficult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision in Sub-section (1) to other cases of understatement of consideration. Thus it is not enough to attract the applicability of Sub-section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15% of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is under-stated or in other words, shown at a lesser figure than that actually received by the assessee. Sub-section (2) has no application in case of an honest and bonafide transaction where the consideration in respect of the transfer has been correctly declared or disclosed by the assessee, even if the condition of 15% difference between the fair market value of the capital asset as on the date of the transfer and the full value of the consideration declared by the assessee is satisfied. If therefore the Revenue seeks to bring a case within Sub-section (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only where the consideration for the transfer has been understated by the assessee or in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such under-statement or concealment is on the Revenue. This burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration." (emphasis supplied) Section 52 of the Act, which came up for consideration before the Supreme Court in the aforesaid case has since been omitted w.e.f. 1.04.1988. More importantly, in the case before us, the burden which was placed on the revenue stands duly discharged from the consideration disclosed in the admitted documents viz. the Memorand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the total investment in the property was Rs.13 crores it cannot be said that there was sufficient material to come to the conclusion that the said figure represented the actual investment. This Court was of the view that there has to be something more that considering the legal proposition, that burden was on the revenue to prove that the real investment exceeded the investment shown in the books of accounts of the assessee. In taking this view, this Court relied upon the decision of the Supreme Court in K.P. Varghese (supra). In Puneet Sabharwal (supra), the Assessing Officer suspected that the cost of acquisition of three properties purchased by the assessee was more than the consideration disclosed by him. He, therefore, referred the matter to the Valuation Cell for determining the cost of this property on the date of acquisition. The District Valuation Officer reported a valuation higher by Rs.12.54 lakh. That amount was added by the Assessment Officer to the income of the assessee. The appeal filed by the assessee was allowed by the CIT (Appeals) and his order was maintained by the Tribunal. Rejecting the appeal filed by the Revenue, this Court, inter alia, held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The appeal filed by the assessee was however allowed by the CIT (Appeals). Noticing that the floor price fixed by the Authorities was much lower, the order of CIT (Appeal) was maintained holding that the fact as to the actual sale price of the property, the implication of the contradictory statements made by the vendor or whether reliance could be placed on the loose sheets recovered in the search were questions of fact. The appeal filed by the Revenue was dismissed. The learned Counsel for Mr. Sunil Bedi has also relied upon CIT v. Ved Prakash Choudhary [2008] 305 ITR 245 (Del), CIT v. Prem Nath Nagpal 214 CTR 51 (Del) CIT v. Shakuntala Devi [2009] 316 ITR 46 (Del) CIT v. Naveen Gera [2010] 328 ITR 516 (Del) CIT v. Kishan Kumar and Others [2009] 315 ITR 204 (Raj.) and CIT v. Dr. S.Bharti [2002] 254 ITR 261 (Del). In Ved Prakash (supra) during the course of search at the residence of respondent two MoUs were recovered. The assessee admitted signatures on those MoUs but denied having received the amount mentioned in the documents. The Assessing Officer held that denial by the Assessee was only with a view to escape the payment of tax liabilities and accordingly made an ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstatement of the purchase consideration or the cost of improvement, this Court found no basis for addition to be made to the income of the assessee. In Shakuntala Devi (supra) the assessee had sold two plots of land. During the course of a search, certain documents related to sale and purchase of the property were found with him. The Assessing Officer made an addition on account of different between the valuation declared by the assessee and the valuation carried out at his behest. Another addition was made on account of unexplained deposits in the bank account of the assessee. With respect to addition pertaining to valuation of the properties, this Court noted that the Tribunal had discussed the valuation and accepted the valuation given by the assessee. It had also noted that the departments had failed to collect any information or material to show that any consideration over and above the stated sale consideration had changed hands. Taking note of the legal proposition that the onus to prove that the assessee had received more consideration than what was stated in the documents of transfer rested on the Revenue and that burden had not been discharged. The appeal filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration flowing to the assessee from the transfer of share is only Rs.250 lakh. There is no material to hold that over and above the sated consideration, the assessee has received something more. Thus, irrespective of the value of the property owned by M/s Span Properties P. Ltd. no sum over and above the state consideration was received by the assessee. The capital gain is computed as per provisions of Section 48 of the Act. Under Section 48, the income chargeable is to be computed by deducting from the full value of consideration received or accruing as a result of transfer of the capital assets, the cost of acquisition of the assets transferred, the cost of any improvement thereto and the expenditure incurred in connection with such transfer. There is no provision in Section 48 to replace the "full value of consideration received or accruing with "the fair market value of such capital assets". We accordingly hold that since the assessee has not received anything over and above the stated consideration, the fair market value cannot be replaced for computing capital gain. Accordingly, the order of learned CIT (A) needs no interference. In the case of Sunil Bedi, the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a commercial building on the land in question, and that there was no material produced by the assessee to indicate that the market value of the land had gone down between December, 2000 and November, 2002. The Tribunal failed to take note of the fact that the burden which was placed upon the Revenue to show that there was an understatement of the sale consideration stood discharged from the admitted facts and circumstances of the case including the terms and conditions of the MoUs dated 22.03.2000 and 19.12.2000. In these circumstances, the finding of the Tribunal that no sum over and above the stated consideration was received by Shri Sunil Bedi is clearly perverse since on considering the facts and circumstances above, no reasonable person could have returned such a finding. 18. We note from the order passed by the Assessing Officer that he has added the liability of 1,71,50,937/- as shown in the books on account of M/s Span Properties Private Limited to the apparent consideration of Rs.2.5 crore which Mr. Sunil Bedi claims to have paid to Khandelwals. The assessees do not claim that the liabilities of the company were higher than this amount. The Assessing Officer has furth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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