TMI Blog2018 (9) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... zed that the escapement of income is in the hands of M/s Aeren R Enterprises but not the assessee, and in all fairness the Ld. AO should have taken steps under section 147/148 of the Act against M/s Aeren R Enterprises. We are at a loss to understand as to how the assessee could be made responsible for the escapement of income in the hands of M/s Aeren Enterprises and to make the assessee answerable for the same. We understand that the things would have been different should M/s Smart Estates or for that matter M/s Aeren R Enterprises denied the execution or existence of the agreements of sale or M/s Smart Estate’s receiving the amount. nothing prevented the Ld. AO from making further enquiry by calling for the post merger financials of M/s Aeren R Enterprises or to consider the possibility of taking appropriate steps against M/s Aeren R Enterprises. The process adopted by the Ld. AO in this fact-finding exercise is not satisfactory. AO proposing to increase the value as per section 50C of the Act for the purpose of computation of capital gains, the assessee disputed the same by saying that is not at all correct and highly unjustified to increase the sale consideration to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the relevant land was purchased in the financial year 2006-07 at ₹ 6,28,95,310/- and the cost inflation index for such year was 519, whereas it was 785 for the financial year 2011-12, as such on application of cost inflation index, the indexed cost came to ₹ 9,51,30,671/-. 4. Further according to the assessee, on 24/09/2010 the assessee company sold 90,000 square meters of land in SEZ, Jaipur to M/s. Smart Estates Private Limited ( SEPL or Smart Estates ) @ ₹ 2300/-per square meter and received an advance sum of ₹ 2 crores by way of cheques and cash namely, ₹ 1,48,94,900/- vide cheque No. 000065 dated 20th September 2010, ₹ 51,00,000/- vide cheque No. 000062 dated 10th September 2010 drawn on Citibank NA, New Delhi and ₹ 5,100/- in cash. Subsequently by way of supplementary Agreement dated 20/09/2011 the area of land was reduced from 90,000 square meters to 78,043.125 square meters and the sale price was increased from ₹ 2300/- to ₹ 2400/-. 5. According to the assessee as per the agreements the purchaser may get the sale deeds in respect of the plots comprising of the said land registered either in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . After hearing the assessee Ld. AO issued a show cause notice as to why not the entire transaction with M/s. Smart Estates Private Limited be treated as ingenuine and the sale transaction shall not be taken as between the assessee company and the individual buyers, and also why not sale consideration being increased to the value as per section 50C for the purpose of computation of capital gains. Assessee disputed the proposal made by the Ld. AO basing on the documents submitted by them and also submitted that it is not at all correct and highly unjustified to increase the sale consideration to the value as per section 50C for the purpose of computation of capital gains. Ld. AO, however, recorded a finding that the whole arrangement that was pleaded by the assessee was only to reduce the sale consideration received by the assessee and thereby lowering its tax liability under they had capital gains. On this premise the Ld. AO made an addition of ₹ 8,93,27,615/- to the income of the assessee. 9. In appeal, Ld. CIT(A) dealt with the question as to whether the sale consideration and consequently the capital gain on sale of its land purportedly to assess Smart Estates Private L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d acted on behalf of M/s Smart Estates. According to Ld. AR the Agreement and the supplementary Agreement in this matter are evidencing the commercial transaction prevalent in the real estate business and consequently the chargeability of the capital gain wholly in the hands of the assessee with reference to the sale price specified in the sale dates executed by the representatives of M/s Smart Estates Private Limited in favour of the end purchasers and not with reference to the amount recoverable under the agreements is also not tenable . 12. Ld. AR further argued that the Ld. CIT(A) failed to appreciate the substance of the commercial transaction as entered with M/s Smart Estates Private Limited vide Agreement to sell dated 24/09/2010 and supplementary Agreement dated 28/09/2011 in respect of sale of land, with the final sale proceeds deposited in the Punjab National Bank, operated by the authorized persons of M/s. Smart Estates Private Limited were from the amount over and above the sale price as agreed between the assessee and M/s Smart Estates Private Limited has been appropriated by M/s. Smart Estates Private Limited and consequently the chargeability of the capital gain w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the rights owned and enjoyed by the parties in the property, as such the authorities below ought not to have charged the capital gains wholly in the hands of the assessee. He further submitted that the taxability of capital gain in terms of section 50C of the Act on the basis of valuation made by the stamp authorities is meant for execution of sale deeds and the actual value in terms of subsection (2) of section 50 C of the Act has to be determined. Further these reasons Ld. AR prayed to allow the appeal and to delete the impugned addition. 16. Per contra, it is the submission of Ld. DR that the Agreements to sell the property are unstamped and unregistered. They are not valid agreements especially after the amendment to Stamp Act, 1999 and requirement of section 53 A of the Transfer of Property Act are not complied with. Ld. DR placed reliance on the decision reported in Suraj Lamp Industries Private Limited vs. State of Haryana (SC) 2009 (7) SCC 363 and CIT vs. Balbir Singh Maini (SC) 2017-SC-TS-444 for the principle that the immovable property can be legally and lawfully transferred or conveyed only by registered deed of conveyance and not through any GPA sales. 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laxmi Devi to 96 ITR 363 (MP). 20. Further, by placing reliance on the edition reported in CIT vs. Motor And General Stores Private Limited 66 ITR 692 (SC) and CIT vs. BM Khanna 72 ITR 603, Ld. AR submitted that when the transactions are embodied in a document, the liability to tax depends upon the meaning and context used in accordance with the ordinary rules of construction and the taxing statute has to be applied in accordance with the legal rights of the parties to the transactions and not on substance of the matter unless the transaction is prohibited by law. 21. On this aspect, it is the observation of the Ld. AO that on two occasions the representative of the M/s Smart Estates appeared before him and filed letters admitting the transaction evidenced by the agreements of sale, along with the copies of the Balance Sheet and P L Account. Whether or not any rights passed under the agreements of sale in question for want of stamp duty and Registration does not fall for consideration before the Ld. AO, inasmuch as the proceedings before the Ld. AO are not relating to the enforcement of any rights emanating from the agreements. Compliance with the Stamp and Registration l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empowers the Ld. AO to take coercive steps in that event of escapement of income arising out of non filing of return by M/s Smart Estates. Instead of catching a soft target the Ld. AO should have proceeded to take steps against M/s. the Smart Estates or for that that the matter M/s Aeren R Enterprises private limited with whom M/s Smart Estates was measured pursuant to the orders of the Hon ble High Court. Ld. AO, however, penalized the assessee for not producing the director of M/s Smart Estates for examination, by bringing to tax such amount as has been admitted to have been received and appropriated by M/s Smart Estates, in the hands of the assessee. Further we are in agreement with the Ld. AR that the verification of the details of the account with Punjab national bank should have thrown some light on the aspect of the genuineness of the transaction pleaded by the assessee. 24. It is an admitted fact that all the details relating to measures Smart Estates or M/s Aeren R Enterprises Private Limited including the pan card No are available before the Ld. AO. Record does not reveal that at any point of time the Ld. AO had issued any notice to M/s Aeren R Enterprises Private Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion authority under subsection (1) thereof exceeds the fair market value of the property as on the date of transfer, Ld. AO may refer the valuation of the capital asset to valuation officer. 27. In the instant case the sale consideration as per the sale dates as noted by the Ld. AO is ₹ 21,74,05,935/-, and the stamp valuation authority valued the same at ₹ 25,27,31,575/-. In the letter dated 25/03/2015 submitted before the Ld. AO proposing to increase the value as per section 50C of the Act for the purpose of computation of capital gains, the assessee disputed the same by saying that is not at all correct and highly unjustified to increase the sale consideration to the value as per section 50C for the purpose of computation of capital gain. The Ld. AO did not record any reasons as to why the matter need not or shall not be referred to the DVO. When it is pleaded that the actual amount received is a far less than the circle rates of the registration authority or that the value adopted or assessed by the stamp valuation authority under subsection (1) thereof exceeds the fair market value of the property as on the date of transfer, the Ld. AO does not seem to have taken ..... X X X X Extracts X X X X X X X X Extracts X X X X
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