TMI Blog2013 (4) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has committed a grave error in issuing impugned notice as petitioner had first entered into MOU to form a consortium of different entities to bid for a large piece of land which would require sizable investment & thereupon, entered into an agreement to sale with the society. Ultimately, as per the terms of the agreement and the understanding between the petitioner and other signatories to the MOU at the instance of the petitioner, the society entered into a separate sale deeds in favour of various parties. Thus failure to see how the revenue can contend that under such circumstances, there was escapement of income under the head of short term capital gain. Merely because the petitioner entered into an agreement with the said society which agreement contained a clause that the final sale deed would be executed in favour of such other persons as the petitioner may indicate, by itself cannot give rise to a presumption that the land in question stood transferred in favour of the petitioner on the date of such agreement as contended by the revenue. The society had not, by virtue of agreement dated 08.04.2004, transferred the property in favour of the petitioner. The society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 3. Petitioner raised objections under communication dated 16.07.2012 against reopening of the assessment. Such objections, however, were rejected by the respondent by an order dated 15.01.2013. The petitioner has, thereupon, filed this petition. 4. Counsel for the petitioner pointed out that the petitioner had entered into an MOU with four other entities on 22.01.2004, under which, the agreeing party had decided to commonly bid for a large piece of land belonging to one Purushottam Farmers Co-operative Cotton Ginning and Pressing Society Ltd. (hereinafter to be referred to as the said society ). Such MOU was necessary since considerable investment was required to purchase large piece of land and neither the petitioner nor other agreeing parties to the said MOU individually had sufficient funds to do so. 5. Ultimately, the petitioner, on behalf of other agreeing parties, entered into an agreement to sale with the said society on 18.04.2004 for purchase of 33870 sq.meters of land situated in the city of Surat. Such agreement was, as a result of the petitioner s successful biding at a public auction. In the said agreement it was recorded that, the petitioner had paid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of his contentions, counsel placed heavy reliance on the decision of Division Bench of this Court in case of Bakulbhai Ramanlal Patel Vs. Income Tax Officer dated 04.03.2011 rendered in Special Civil Application No. 12852 of 2010. 9. Counsel further submitted that liability to pay capital gains did not arise, particularly, during the year under consideration. He submitted that the petitioner had not transferred any capital asset so as to invite any capital gain. The Assessing Officer, therefore, gravely erred in basing his reasons for issuance of notice for reopening. 10. On the other hand, learned counsel, Mr. Manav Mehta for the department submitted that, return filed by the petitioner was not taken in scrutiny. The same having been accepted under Section 143(1) of the Act, it was open for the Assessing Officer to re-open the assessment by issuing notice and recording reasons thereof. He submitted that when the petitioner entered into the agreement dated 08.04.2004 with the society, transfer of the land in question stood completed. He relied on provisions contained in Sections 19 and 5 of the Transfer of Property Act to contend that under the said agreement dated 08.04.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be issued. It is equally well settled that such notice is mandatory and in absence of notice under section 143(2) of the Act within the time permitted, scrutiny assessment under section 143(3) cannot be framed. However, merely because no such notice was issued, to contend that the assessment cannot be reopened, is not backed by any statutory provisions. Counsel for the petitioner did not even stretch his contention to that extent. The case of the petitioner as we understand is that in guise of reopening of an assessment, the Assessing Officer cannot try to scrutinize the return. This aspect substantially overlaps with the later contention of the petitioner that the reasons recorded by the Assessing Officer were not germane and were not sufficient to permit reopening. 16. It would, thus, emerge that even in case of reopening an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. However, as held by the Apex Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the revenue can contend that the petitioner had transferred any capital asset that too during the previous year relevant to assessment year under consideration. Merely because the petitioner entered into an agreement with the said society which agreement contained a clause that the final sale deed would be executed in favour of such other persons as the petitioner may indicate, by itself cannot give rise to a presumption that the land in question stood transferred in favour of the petitioner on the date of such agreement as contended by the revenue. The said agreement dated 08.04.2004 is a simple agreement to sale immovable property. The petitioner had paid part sale price at the time of execution of such agreement. Substantial portion of the sale price was yet to be paid. The petitioner was given installments for doing so. The possession of the property was retained by the seller and was to be handed over only upon full payment of sale consideration. Merely because in addition to such terms the agreement also envisaged that the ultimate sale deeds may be executed in favour of the persons that the petitioner may indicate, by no way would convert such agreement to sale into one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for th time being in force relating to transfer of property to or by companies, associations or bodies of individuals.] 17. Section 5 thus provides that transfer of property means an act by which living person conveys property, in present or in future, to one or more other living persons or to himself and one or more other living persons. In the present case, the society had not, by virtue of agreement dated 08.04.2004, transferred the property in favour of the petitioner. The society had only agreed to do so on certain terms and conditions. Most important condition being that of the purchaser paying remaining purchase price without which the sale could never be completed. In the meantime the possession of the land was retained by the society. An agreement to sale without there being anything more, obviously cannot be equated with transfer of property. Section 5 of the Transfer of Property Act also enforces this view. 18. In the result, we are of the opinion that the reasons which founded the basis for issuing impugned notice for reassessment lack validity. The notice dated 28.03.2012 is, therefore, quashed. Petition is disposed of. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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