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Smt. Mithra Ram Versus Income Tax Officer Non Corporate Ward -3 (4) Chennai

[2017] 57 ITR (Trib) 555 - Reopening of assessment - denying the claim of exemption u/s. 54F by assessing the capital gains in respect of the sale of property - assessment re-opened by an erroneous reason - Held that:- Once the applicability of provisions of section 53A of the Transfer of Property Act fails, there cannot be no transfer of capital asset within the provisions of section 2(47)(v) of the Act and accordingly no capital gains could arise for the assessee in assessment year 2007-08. Ad .....

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07-08 and had claimed exemption u/s 54F in respect of reinvestment in property at Kodaikanal and had filed a return in response to notice u/s 148 of the Act, this very action alone would not strengthen the reasons recorded by the ld AO and confer him power to frame the reassessment. - Though the assessee based on mistaken understanding of provision of Income Tax Act had filed the return in response to notice u/s. 148 of the Act disclosing capital gains and claiming exemption us 54F of the A .....

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of the matter and does not involve any investigation of facts in the light of the decision of National Thermal Power Corporation Ltd. (1996 (12)7 - SUPREME Court ). - The re-assessment framed by the Ld. AO for the assessment year 2007-08 is not sustainable in law. - Decided in favour of assessee. - I.T.A. No. 3160/Mds/2016 - Dated:- 17-2-2017 - SHRI M. BALAGANESH, ACCOUNTANT MEMBER, AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER For The Appellant : Shri Philp George, Advocate, Shri M.P. Senthil .....

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on u/s. 147 : 2.1.1. The Assessing Officer has no jurisdiction xx] s. 147 to reopen the assessment. 2.1.2. The reason for reopening the assessment provided by the Assessing Officer that the Appellant had sold property at Sri Kapaleeswarar Nagar to M/s. K2 Engineers Pvt. Ltd. for ₹ 1,60,00,000/- during the assessment year under consideration is not correct. 2.1.3. The Commissioner of Income Tax (Appeals) ought to have appreciated that the Assessing Officer had no reason to believe that inco .....

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.6. The Commissioner of Income Tax (Appeals) ought to have held that Assessing Officer has no jurisdiction to reopen the assessment u/s. 147 to assess the Capital Gains arising out of transfer of property held by the Appellant." In order to admit the additional ground the basic facts that are required to be presented would have to be gone into. The basic facts are as follows: The assessee did not file her original return of income for the assessment year 2007-08. Based on an information obt .....

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sing the capital gains in respect of the sale of property. The primary facts in the instant case are that the assessee purchased the property measuring about 2 grounds and 1412 sq.ft. at Sri Kapaleswar Nagar, No. 145, Shrotium Neelankarai Village, Tambaram Taluk, Kancheepuram District bearing Survey No. 92/2A vide sale deed dated 31.08.1994 registered as document No. 3655/1994. The assessee executed Power Of Attorney (POA) in favour of M/s. K2 Engineers Pvt. Ltd., on 15.12.2006. The copy of the .....

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the assessee represented by her POA holder M/s. K2 Engineers Pvt. Ltd., sold the property to four different persons as below:- Date Doc. No. Area Purchased by onsideration 31.10.2007 5532/2007 1389 Sq.Ft. Saswati Misra 2083500 31.10.2007 5538/2007 1930 Sq.Ft. Anshuman Mishra 2895000 30.05.2008 2230/2008 1348 Sq.Ft. Rameshram Mishra 2422356 30.05.2008 2231/2008 1545 Sq.Ft. Rajalakshmi Mishra 2776365 2. The Ld. AR before us argued that the Ld. AO could not have formed a belief that income has esc .....

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had made transfer by way of part performance of the contract, thereby inviting him with the levy of capital gains. It was only in the assessment year 2008-09 and in 2009-10, the assessee through her POA agent had executed sale deeds and the capital gains, if any, would arose only in those two years and definitely not in assessment year 2007-08. He also referred to the reasons recorded by the Ld. AO wherein it has been stated that assessee has sold the subject mentioned property for ₹ 1,60 .....

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on of the Hon'ble Supreme Court in the case of Suraj Lamp and Industries Pvt. Ltd., Vs. State of Harayana entered in SLP (C) No. 13917/2009 dated 11.10.2011, reported in (2012) 340 ITR 1 (SC), wherein after analysing the relevant provisions viz. section 5 and section 53A, 54 and 55 of Transfer of Property Act, together with section 17 of Registration Act, 1908 had held as follows: " It is thus clear that a transfer of immoveable property by way of sale can only be by a deed of conveyanc .....

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According to TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of TP Act enacts that sale of immoveable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject matter. Scope of Power of Attorney 13. A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. The power of attorney is creation of an agenc .....

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of the power granted under the power of attorney and convey title on behalf of the grantor. 15. Therefore, a SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property. The observations by the Delhi High Court, in Asha M. Jain v. Canara Bank - 94 (2001) DLT 841, that the "concept of power of attorney sales have been recognized as a mode of transaction" when dealing with transactions by way of SA/GPA/WILL are unwarranted and not justified, uninten .....

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Transactions of the nature of 'GP A sales' or 'SA/GP A/WILL transfers' do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act. Suc .....

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P A/WILL transfers are not legally valid modes of transfer is likely to create hardship to a large number of persons who have entered into such transactions and they should be given sufficient time to regularize the transactions by obtaining deeds of conveyance. It is also submitted that this decision should be made applicable prospectively to avoid hardship. 18. We have merely drawn attention to and reiterated the wellsettled legal position that SA/GPA/WILL transactions are not 'transfers&# .....

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n of allotments/leases by Development Authorities. We make it clear that if the documents relating to 'SA/GPA/WILL transactions' has been accepted acted upon by DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision." 3. The Ld. AR also drew the attention of the bench that the possession was actually handed over by the assessee to the aforesaid buyers of the property on 31.1 .....

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se the assessee has erroneously offered sum receipt/income in the returns, that alone would not enable the Ld. AO to take advantage of the ignorance of the assessee with regard to the provisions of law. He further argued that there is no estoppel against the statute. In support of this, he placed reliance on the decision of Hon'ble Calcutta High Court in the case of Maynak Poddar (HUF) Vs. Wealth Tax Officer reported in (2003) 262 ITR 633 (Cal). He further argued that it is the earnest duty .....

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response to this, the Ld. DR argued that admittedly the re-opening in this case had happened pursuant to the information received by the ld. AO from the Registration Department. In the instant case, both POA as well as the sale deeds were duly registered with the Registration Department though on different dates filed in two different assessment years and accordingly he argued that income in the hands of the assessee had escaped assessment. He argued that it is already well settled with suffici .....

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in pursuant to notice issued u/s. 148 offering capital gain on sale of the subject mentioned property and claiming exemption u/s. 54F of the Act, in respect of the re-investment of entire property of Kodaikanal. We find that on 15.12.2016, the assessee had merely executed the POA in favour of M/s. K2 Engineers Private Ltd. Admittedly, the possession of the property was not handed over by the assessee to the POA holder based on the POA. Though, the various clauses in the POA confers various power .....

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ontract by way of a valid agreement in writing. Since, in the instant case, there is no agreement in writing executed by the assessee in favour of POA holder, the provisions of implicating part performance of the contract within the provisions of section 53A of Transfer of Property Act cannot be invoked on the assessee. We find that the Hon'ble Supreme Court in Suraj Lamp (Supra) has elaborately discussed this issue as to at what point of time the Transfer of Property happens. The same are n .....

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of the property by the assessee. In these facts and circumstances, the capital gains, if any, could arose only in assessment years 2008-09 and 2009-10 as the case may be and not in the year under appeal i.e., assessment year 2007-08. 5.1. Now let us go into the reasons recorded by the Ld. AO which are enclosed in page 133 of the paper book of the assessee. The reasons recorded by the Ld. AO for re-opening the assessment for the assessment year 2007-08 are as under:- "The assessee Mrs. Mith .....

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. DR that re-opening admittedly in this case had happened based on AIR information obtained by the Assessing Officer from the Registration Department. It would be pertinent to look as to what information could have been provided by the Registration Department in the instant case. The Registration Department could have at best provided only the POA executed by the assessee on 15.12.2006 registered as Doc. No. 2537/2006 at book -IV in the office of Sub-Registrar, Neelangarai and copies of register .....

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fferent documents and recorded the reasons for re-opening the assessment by stating that assessee had sold the property for ₹ 1,60,00,000/- on 15.12.2006 itself, whereas, the documents executed on 15.12.2006 was only registered POA are admittedly did not contain any consideration figure. In these facts and circumstances and in view of the decision of the Hon'ble Supreme Court (Supra) we hold that the Ld. AO has led himself to record the erroneous reasons for reopening the assessment fo .....

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ons were issued by the Ministry of Industry (Department of Industrial Policy and Promotion) from time to time increasing the limit of investment in plant and machinery for treating the undertaking as a small scale industrial unit. The Commissioner (Appeals) has recorded a finding to the effect that the investment made by the assessee at all times was within the limit for plant and machinery for the assessment years under consideration. A perusal of the table showing the calculation of plant and .....

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sideration even the exempted assets and come to the conclusion that the assessee had crossed the limit. Moreover, the Assessing Officer has failed to take into consideration that as per notification No.857(E) the limit for investment in plant and machinery for SSI units manufacturing drugs and pharmaceutical products was ₹ 3.00 crore and as per notification No.655(E) with effect from 5th June, 2003 such limit has been increased to ₹ 5.00 crore. Therefore, the assessee remained an SSI .....

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eet with the requirements of an SSI unit and consequently could not have formed the requisite belief that income chargeable to tax has escaped assessment. In the absence of having any reason to believe that income chargeable to tax has escaped assessment for the assessment years under consideration, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act by issuing notice under section 148 of the Act is clearly without any authority of law. Dr. Ajit Gupta .....

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d in the present case. 24. Accordingly the impugned notices under section 148 of the Act dated 25th March, 2013 (for AY 2006-07), 28th March, 2013 (for AY 2008-09), 5th March 2014 (for AY 2007-08) and 7th March, 2014 (for AY 2009-10) and the corresponding orders dated 13th December, 2013 and 11th March, 2015 rejecting the objections of the Assessee to the said notices, are hereby quashed. 25. The writ petitions are allowed but in the circumstances with no order as to costs. The pending applicati .....

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