TMI Blog2017 (5) TMI 1562X X X X Extracts X X X X X X X X Extracts X X X X ..... ANT MEMBER This appeal for assessment year 2009-10 is directed against the order of Commissioner of Income Tax -I dated 05.03.2014 passed u/s. 263 of Income Tax Act. The assessee has challenged the validity of the order passed u/s. 263 of the Act learned Commissioner of Income Tax by raising following grounds:- 1. The Ld. CIT has erred in law and on facts in passing the order u/s. 263 of the Act by holding that the assessment order passed u/s. 143(3) dated 28-12-2011 was erroneous and prejudicial to the interest of revenue. Hence the said assessment for A.Y. 2009-10 dated 28-12-2011 is cancelled and the AO is directed to make fresh assessment of the total income of the assessee for the said assessment year, after allowing opportunity to the assessee as per law. 2. The Ld. CIT has erred in law and on facts in making an observation that in view of the above facts and applicable provisions of law, it is amply clear that STCG on sale of land was required to be considered at ₹ 4,09,82,337/- and not ₹ 5,04,668/- as shown in the return of income. Under the circumstances, it is evident that the AO has erred in accepting the figure of STCG of ₹ 5,04,668/- shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain at ₹ 4,09,82,337/- instead of ₹ 5,04,668/- disclosed in the return of income. Learned Commissioner of Income Tax (Appeals) accordingly issued show cause notice u/s. 263 of the Act dated 04.12.2013 which reads as follows:- The assessee had purchased agricultural land at Godhavi village admeasuring 49,169 Sq Mis. during FY 2007-08. The cost of acquisition including conversion charges of ₹ 2,21,338/- was ₹ 33,69,763/-. The Banakhat/Agreement for sale of this (and with Melody Complex Pvt Ltd. is dtd. 15.09.2008 for ₹ 38,74,431/-. In the said agreement it is mentioned on page-4 that the seller would continue to posses the land till execution of Sale deed. Possession has been handed over vide Kabja karar dated 23.03.2009 by the assessee to Gatil Properties Ltd. for a consideration of ₹ 4,43,52,100/-. Hence as per the provisions of section 2(47)(v) of the IT Act 1961 and 53A of Transfer of property Act the transfer of asset took place on 25.03.2009. The assessee had claimed that the said land was sold to Melody complex Pvt Ltd. vide initial agreement dated 15.09.2008 for ₹ 38,74,431/-. It is evident that the actual transfer took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dated 15-9- 2008 and the confirming party i.e. Melody Complex Pvt. Ltd. received its share of sale consideration of ₹ 4,04,77,669/- from the ultimate purchaser (total sale consideration of ₹ 4,43,52,100/-). The assessee has stated that Melody Complex Pvt. Ltd., has acquired the rights of the property vide agreement of sale dated 15- 9-2008 as per the provisions of section 2(14). The said right is an enforceable right which has been transferred within the meaning of section 2(47)(ii) of the Act while executing the agreement dated 25-3-2009 as a confirming party. The assessee has placed reliance on ITAT Madras Bench decision in the case of K.R. Srinath whereby it is held that when there is relinquishment of right it amounts to transfer u/s 2(47). The assessee has also relied on other judgments on similar lines. 5.1 The AR has further contended that the Banakhat/Agreement to sale dated 25-3-2009 has not been taken into consideration in the notice u/s 263 and that is why the entire consideration of ₹ 4,43,52,100/- is considered in the hands of the assessee which is a factually incorrect observation. 5.2 It is further contended that during the course of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. Reference is made to the decision of Delhi High Court in the case of GEE VEE Enterprises v. Addl CIT (99 ITR 375), wherein after considering the decision of Supreme Court in the cases of Ram Pyari Devi Saraogi v CIT (67 ITR 84) and Smt. Tara Devi Agarwal v CIT (88 ITR 323), it was held that the position and function of the Income-tax Officer is very different from that of a Civil Court. The statements made in a pleading proved by minimum amount of evidence may be accepted by a civil court in absence of any rebuttal. The Civil Court is neutral. It is simply given decision on the basis of the pleadings and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparent in the order but call for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word erroneous in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure allowed as against the provisions of law. (iii) The Gauhati High Court n the case of Tarajan Tea Co. Pvt. Ltd. (1994) 205 ITR 45, 61 (Gau.) wherein it was held that a decision taken without considering the relevant aspect of a particular point would certainly be erroneous and such a decision in favour of the assessee without such consideration would be prejudicial to the interest of revenue so as to empower the Commissioner to exercise his revisional powers u/s 263 of the Act. Simply because the facts have been disclosed by the assessee in the course of assessment proceedings, it does not give him the immunity from the revisional jurisdiction which the Commissioner can exercise u/s 263 of the Act. (iv) In the case of Mannulal Matadeen Vs CIT reported at (2005) 277 ITR 346 (All), the Allahabad High Court had held that the order of revision was valid as the AO had not made necessary enquiries before allowing deduction of interest. 7. Coming to the arguments on merit, the assessee's assumption that there is an inadvertent mistake in the notice u/s 263 as the Banakhat/Agreement to sale dated 25-3-2009 has not been taken into consideration is misplaced. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also mentioned that the confirming party has already paid ₹ 1,00,000/- to the assessee on 15-9-2008. Vide this possession document, the assessee has handed over the possession of the said land to Gatil Properties Ltd. 8. From the above facts, it is evident that the land was in possession of the assessee upto 25-03-2009 and the actual sale of land has thus taken place on 25- 3-2009 between the assessee and Gatil Properties Ltd. In other words, the assessee is the seller of land at Godhavi Village admeasuring 49,169 sq. mtrs. and Gatil Properties Ltd., is the purchaser of the land who has made payment of ₹ 4,43,52,100/- in lieu of the transfer of land in its favour by the assessee. The assessee could not have possessed the land if the Agreement dated 15-09-2008 was final. As per the provisions of section 2(47)(v), any transaction involving the allowing of the possession of any immovable property to be taken or retained in any part performance of a contract of the nature referred to in section 53 A of the Transfer of Property Act, 1882 shall be considered as a transfer of a capital asset. In this case, the possession of the land has been handed over by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that impugned transaction of short term capital gain earned from sale of agricultural land was adequately dealt by the learned Assessing Officer in light of details documents and evidence supplied during the course of assessment proceedings which inter alia included copies of purchase deed in respect of land sold, copy of agreement to sale dated 15.09.2008 entered with Melody Complex Pvt. Ltd., copy of agreement to sale dated 25.03.2009 with the Gatil properties Ltd. wherein Melody Complex Pvt. Ltd. is shown as confirming party and the copy of possession letter dated 25.03.2009. He further submitted that out of the total sale consideration of ₹ 4,43,52,100/- assessee has received her share of ₹ 38,74,431/- which has been duly offered to tax and the remaining sum of ₹ 4,04,77,669/- has been received by the confirming party i.e. Melody Complex Pvt. Ltd. through account payee cheques and is a part of revenue/income of Melody Complex Pvt. Ltd. Therefore the total sale consideration of ₹ 4,43,52,100/- has been duly acknowledged as revenue by both the parties i.e. the assessee and Melody Complex Pvt. Ltd. as per the agreement to sale dated 15.09.2008 and 25.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.03.2009 to Gatil Properties Limited. 12. Assessee in her return of income has shown the transaction of sale of agricultural land at consideration of ₹ 38,74,431/- and after taking cost of acquisition of ₹ 33,69,763/-, offered the remaining amount of ₹ 5,04,668/- to tax as short term capital gain. Learned Assessing Officer after examining the details of the impugned transaction of sale of agricultural land accepted the declared income as assessed income. Thereafter learned Commissioner of Income Tax (Appeals) assuming its power u/s. 263 of the Act called for the assessment records which has all the details including the agreement to sale dated 15.09.2008 and 25.03.2009. After going through all these documents learned Commissioner of Income Tax (Appeals) took a view that learned Assessing Officer has not examined the transaction properly as the assessee was liable to pay tax on the short term capital gain after taking the sale consideration at ₹ 4,43,52,100/- as against ₹ 38,74,431/- shown by the assessee and he accordingly worked out that the short term capital gain at ₹ 4,09,82,337/- instead of ₹ 5,04,668/- disclosed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Every loss of revenue as a consequence or an order of the assessing officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of Revenue unless the view taken by the Income-tax Officer is unsustainable in law. 14. We further observe that Hon ble jurisdictional High Court in the case of Arvind jewelers (supra) has laid another independent ratio by holding that, if there is material on record and the said material is considered by the Assessing Officer while framing assessment in a particular view is taken merely because different view can be taken that should not be based on action u/s. 263 of the Act. 15. We further observe that the Hon ble jurisdictional High Court in the case of Commissioner of Income-tax-l vs. Amit Corpn. [2012] 21 taxmann.com 64 (Guj.) has held that jurisdiction under section 263 does not permit latitude to the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is shown in statement of total income. 4. Your honour has asked to furnish details of Interest income along with TDS certificates thereof. In this regard, I have inform your honour that I have only saving bank interest income of ₹ 2256/-. So the question of TDS does not arise. 5. Your honour has asked to furnish details regarding source of cash deposit, if any, in saving bank account exceeding ₹ 10000/-. In this regard, I have inform your honour that I have cash deposit exceeding ₹ 10000/- on 24/03/2009 at the said cash shown in my book of account. 6. Your honour has asked to furnish details of unsecured loans In this regard, I have inform your honour that copy of ledger account is enclosed herewith as per Exhibit-Ill. Further, your honour has also asked the confirmation of loan account from the parties. In this regard, I have inform your honour I have accepted loan from only one party during the year under consideration. Confirmation for the same will be provided in next hearing. Remaining loans accounts are carried forward from A.Y. OS-09. The case for A.Y. 08-09 was also covered under scrutiny assessement. Copy of the Order for the A.Y. 08-09 is encl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding given by learned Assessing Officer in the order u/s. 143(3) of the Act, we observe that the impugned transaction with all relevant facts and figures were filed before the learned Assessing Officer in the computation of income. Necessary details were called for u/s. 143(2) and 142(1) of the Act. Specific reply supported with evidence were filed by the assessee in the assessment proceedings. Learned Assessing Officer has examined all the available records and has accepted the transaction to be bonafide and genuine. Assessment order of learned Assessing Officer cannot be termed erroneous because it has adjudicated the correct facts which is not disputed at any stage by the revenue. 20. Another principle laid down by the Hon ble Apex Court as referred above in the case of Malabar Industrial Co. Ltd. is to examine as to whether the order of learned Assessing Officer is prejudicial to the interest of revenue. It was further held that every loss of revenue cannot be treated as prejudicial if the Assessing Officer had adopted one of the courses permissible in law which may have resulted in loss of revenue. Also it was held that where two views are possible and the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e putting reliance upon the order of the ld.CIT(A) also brought to our notice copy of the Govt. of Gujarat Extraordinary Gazette Notification published on Saturday, February, 2002 whereby amendment of the Indian Registration Act in section 17 of the Registration Act has been published. The ld.CIT(A), while construing the impact of sections 17 and 49 of Indian Registration Act along with section 53A of TPA within the meaning of section 2(47) of the Income Tax Act has concluded that the transfer within the section 2(47) of the Income Tax Act can only be completed, if in part performance of the contract, possession has been handed over as per section 53A of the TPA. Once the agreement was not registered then it will lose its evidentiary value within the meaning of Section 53A of the TPA. In other words, the rights flowing from an agreement can only be recognized if it was duly registered. If the agreement was not registered, then the rights would not accrue to the parties to the agreement. If no rights would accrue, then it will be construed that the possession was not delivered by the assessee vide agreement dated 4.4.2008 and 2.3.2009, meaning thereby, no transfer has taken place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived as evidence of any transaction affecting such property or conferring such power, unless it has been registered : Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (1 of 1877), or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882 (4 of 1882) or as evidence of any collateral transaction not required to be effected by registered instrument. 25. Section 53A of the T.P. Act provide a shield to defend the possession taken by virtue of the agreement. The vendee can claim protection of the possession even against the owner i.e. vendor, during the period sale deed was not registered. The person who has acquired the possession on execution of agreement as referred to in section 53A may not be able to protect his possession on account of non-registration of the agreement, but for all other collateral purposes, i.e. for tendering the agreement into evidence for suit for specific perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act, 1908, put paid to any argument to the contrary. 14. We, therefore, hold that : (a) a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part per- formance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement; (b) the proviso to section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract. 26. Thus, if the assessee refused to honour her agreement dated 4.4.2008, SDS has a right to get this agreement enforced by way of suit for specific performance and the assessee could be persuaded to execute the sale deed in favour of SDS by virtue of this agreement. The validity of this agreement under general law viz. Specific Relief Act as well as Indian Registration Act has not been effected. This aspect has not been appreciated by the ld.CIT(A) while holding that since the agreements are unregi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture Land Act, 1948 which prohibits non-agriculturists to purchase the agriculture land. As per ld. CIT(A), since SDS was not proved to be an agriculturist, therefore, he was not competent to purchase the agriculture land. Once he was prohibited by the provisions of Tenancy Act, then he cannot purchase agriculture land, meaning thereby, he will be disqualified even to enter into an agreement for purchase of the land. On consideration of all these reasons, we are of the view that the assessee and the SDS are duly eligible to enter into any contract as per the Indian Contract Act. The effect of the contract may not be given by virtue of Gujarat/Bombay Tenancy and Agriculture Land Act, as per clause (c) of Section 63 referred by the ld.CIT(A). But the ld.CIT(A) failed to note proviso appended to his section. The proviso authorizes the Controling Officer to grant permission for such sales. The sale could be executed after the agreement and after getting approval. As far as this section is concerned, it does not create any disqualification for entering into contract, it creates disqualification for enforcing that contract. The contractee can enforce contract in favour of a person who is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development, would vests upto 40% in the development authorities for utilisation of roads, park, schools, drainage etc. Thus, once the land is being converted into non-agriculture land, the whole nature of the land would change. As far as observation of the ld.CIT(A) is concerned, that nothing prevented the assessee to retract from the agreement is concerned, we fail to understand the basis of making such observation. She entered into a lawful contract, which is of binding nature, and how can she retract ? The moment she retracts, then other party can file suit for specific performance. Even if the court does not grant specific performance of the contract, then, would compensate the contractee for damage ? The damages again would be quantified considering the market value of the land. It is also pertinent to note that the assessee has purchased the land from 18.12.2007 to 4.3.2008. She had purchased the agriculture land from nonassociate vendors. The purchase cost shown by the assessee was at ₹ 67,96,432/-. No circumstances have changed, and therefore, she has sold the land on 4.4.2008 at a price of ₹ 76,75,413/-. There is no substantial change or appreciation of the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Gujarat High Court in Banyan and Berry v. Commissioner of Income-Tax where referring to McDowell , the Court observed: .....The court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell case (1985) 154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legal steps taken by an assessee, the intended legal result has not been achieved, the Court might be justified in overlooking the intermediate steps, but it would not be permissible for the Court to treat the intervening legal steps as non-est based upon some hypothetical assessment of the 'real motive' of the assessee. In our view, the court must deal with what is tangible in an objective manner and cannot afford to chase a will-o'- the-wisp. 32. Next reasoning assigned by the AO is that funds have been provided by Ganesh plantation to SDS. Husband and father-in-law of the assessee were holding voting power of more than 20% in the Ganesh Plantation Ltd. Therefore, the transactions are arranged in the family itself. The assessee has pointed out that Capital Consultancy is a proprietary concern of SDS. This concern has taken unsecured loan from the company in F.Y.2006-07 relevant to the Asstt.Year 2007-08. In F.Y.2006-07, the interest of ₹ 1,77,534/- was charged from SDS by Ganesh Plantation. In F.Y.2007-08 an interest of ₹ 61,74,961/- was charged. Thus, according to the assessee, the funds were provided on interest in the ordinary course of business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that the decision of the Income Tax Officer cannot be held to be erroneous simply because in his order, he had not made any elaborate discussion in that record. Relevant finding of the Hon ble Court is as under :- (ii) COMMISSIONER OF INCOME-TAX v. GABRIEL INDIA LTD. 203 ITR 108 (HC BOMBAY). In this case, it has been held as under : The power of suo motu revision under sub-s. (1) of s. 263 of the Income-tax Act, 1961, is in the nature of supervisory jurisdiction and can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice must has been caused to the interests of the Revenue. An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. This decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner- himself, even after initiating proceedings for revision and hearing the assessee, could not 'say thai the allowance of the claim of the assessee was erroneous and that the A expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under section 263. 23. In light of ratios laid down by Hon ble Apex Court, Jurisdictional High Court, other High Courts, coordinate bench decision and detailed discussions and the given facts and circumstances of the case, we are of the considered opinion that the impugned transaction of sale of agricultural land forming the basis of the order of learned Commissioner of Income Tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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