TMI Blog2019 (10) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... e of aforesaid agricultural land within the provisions of Section 10(37) read with Section 2(14)(iii) we are of the considered view that this issue requires re-consideration by AO who shall adjudicate this issue afresh after making proper enquiries and verifications with local authorities and of the area where the said property was situated and such enquiries/verifications as the AO may consider necessary so as to arrive at conclusion whether said land is capital asset as defined u/s 2(14) exigible to tax or is entitled for exemption from tax u/s 10(37) We remit this issue back to the file of the AO for fresh determination after making necessary enquiries and verifications so as to determine whether or not the said land is eligible for exemption from capital gains under the provisions of the 1961 Act or is exigible to capital gains tax. The assessee is directed to produce all relevant evidences /material in support of its contention that capital gains earned from sale of said land are exempt from income-tax within four corners of provisions of the 1961 Act, which evidences/material shall be admitted by the AO in the interest of justice and thereafter adjudicated on merits in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned C.I.T. (A) erred in not accepting the appellant's submission that the land was sold for ₹ 1,91,50,575/- as per the agreement dated 7.1.2008 and that the sale proceeds together with consideration of ₹ 17,99,425/- for standing crops were deposited into the bank account as and when the installments of payments were received from the buyers. (Part payment of ₹ 82,00,000/- in the accounting period relevant for Asst. Yr 2008-09 and balance of ₹ 1,27,50,000/- in accounting period relevant for Asst. Yr 2009- 10). 5. The learned C.I.T (A) erred in concurring with the view of the Assessing Officer that the agreement had no evidentiary value as it had not been registered. 6. The CIT (A) erred in not recognizing the well known fact that Guideline Values are different from Market Values and at times they varied widely. In particular he failed to recognize that in this case the registration had been got done for the guideline value which was much lower than its market value. 7. The CIT(A) failed to see that it was illogical on the part of the Assessing Officer to have brought to assessment the capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds that may be urged with leave of the Honourable Tribunal it is submitted that the appellate order may be cancelled as not rendering any justice. 2.2 The assessee has also raised additional grounds of appeals for ay: 2009-10 , which reads as under: 1. The learned CIT(A) erred in not observing that the Assessing Officer had admittedly issued the 148 notice merely on the basis of information received from the Investigation Directorate and not on the basis of any recorded satisfaction of his own indicating that income had escaped assessment and in such circumstances the 148 notice was not legally valid. 2. The learned CIT erred in not examining with reference to the records whether the Principal C.I.T. had in fact given his approval for the issue of 148 notice and if approval given whether such approval was given after recording his own satisfaction about any escapement of income to tax. 3.These are two appeals filed by the assessee for ay s: 2008-09 2009- 10 respectively. First we shall take up assessee s appeal for ay: 2008-09. The AO received information from Investigation Directorat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement to sell dated 07.01.2008, wherein he agreed to sell his land admeasuring acre 25.36 and half cents of land , for a total consideration of ₹ 1,91,50,575/-. The assessee claimed that it received ₹ 50 lacs in cash as advance at the time of entering into an agreement to sell of his land from the purchasers on 07.01.2008. The assessee claimed that out of aforesaid advance of ₹ 50 lacs received as cash on 07.01.2008, the assessee deposited ₹ 45 lakhs in cash with IOB, Girivalam Road, Tiruvannamalai on 08.01.2008 while balance amount of ₹ 5 lakhs of cash was retained by the assessee which was deposited subsequently with the same Bank. The assessee also claimed that following amounts in cash aggregating to ₹ 1,59,00,000/- were also deposited with the same bank account with IOB on various dates as mentioned below: Date of receipt Amount (Rs.) 04.03.2008 25,00,000 15.03.2008 7,00,000 24.07.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) r.w.s. 10(37) of the 1961 Act and no income-tax is exigible on the said sum received by the assessee. The assessee also contended that since the assessee had identified nature of receipt, source of funds and persons who had given the said sum of amount to the assessee, provisions of Section 69 of the 1961 Act has no applicability in the instant case. 3.4 The said Shri. S.D.Settu during the course of survey conducted u/s 133A of the 1961 Act on 22.09.2015 , in his statement recorded during survey operations submitted as under: Q.No.19: Do you know Shri Anthiah Pancras and what is the business relationship between you? Reply of Shri S.D.Settu: I do not know him directly. My business associate Shri Palani of Arani introduced Shri Anthiah Pancras through a broker by name Shri Rasheed Bhai who indicated that there is prospective seller in Anthiah Pancras who is the owner of some lands. Through Rasheed Bhai myself and Shri Palani purchased 23.36 acres of lands in Velapadi Village, Arni Tk on 11-09-2008 through seven separate sale agreements for a consideration of ₹ 23,34,900/-. This did not include any registration charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of ₹ 2 crores for being paid to Shri Anthiah Pancras. We do not have sufficient financial resources. In fact we had given him only ₹ 23.34 lakhs. In the land so acquired there were no agricultural produce nor agricultural activity was carried on. It is incorrect to suggest that the lands were agricultural in nature. Out of the 23.34 acres purchased we incurred an additional expenditure of ₹ 40 lakhs for converting the same into 250 saleable plots. So far, 50 plots have been sold and the balance 200 plots remains unsold. From the same site we had made a lay-out of additional 450 plots and we are proposing to sell the same through lottery dip. 3.5 During the course of survey conducted by Revenue u/s 133A of the 1961 Act on 22.09.2015, Shri Palani concurred with the statement of Shri S.D.Settu that one Shri Rasheed Bhai introduced the assessee to them and that he purchased 23.36 acres lands in 2008 by availing ₹ 8 lacs as loan from Axis Bank . He further stated that total investment is around ₹ 24 lacs was made for purchase of aforesaid land along with Shri S.D.Settu and Shri Palani. 3.6 The said Shri S.D.Settu a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signing of agreement till completion of absolute sale. Initially we have given ₹ 25 lakhs in cash and another 25 lakhs in cheque. Subsequently, we did not satisfy with the ambiance of the lands located we approached Shri Anthia Pancras and sought for refund of the amount As per my reply at the time of survey I reiterate that he returned the cheque. Q.No.3 by the assessee: Can you substantiate your claim that Shri Anthiah Pancras returned the cheque of ₹ 25 lakhs by documentary evidence Reply of Shri S.D. Settu: I do not have any evidence to substantiate that the cheque was given and cheque was returned. However, it is a fact that I had given a cheque and same was returned to me and the relevant bank account cheque leaves were not available with me. Q.No.4 by the assessee: Do you want to say that the agreement dated 07-01-2008 stood cancelled in the light of deposition dated 22-09-2015. Reply of Shri S.D. Settu: Since the agreement to sell dated 07-01-2008 was not subjected to registration I had not chosen to cancel the agreement. In real estate trade practice normally we used to enter into number of agreements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i S.D. Settu: We categorically deny having paid any amount on the date of absolute sale deed i.e. 11-09-2008 to you. Apart from payment of ₹ 25 lakhs at the time of agreement we did not pay any amount. Q.No.7 by the assessee; As per the agreement dated 07-01-2008 and also seven sale deeds dated 11-09-20O8 the assets transferred were agricultural in nature. Similarly, VAO, Velapadi Village, Arani, in his statement before ITO on 12-02-2016 has confirmed that on the date of agreement there were agricultural lands were in existence. However, it is observed from the statement u/s 133A on 22-09-2015 you have deposed that the assets sold were not agricultural in nature. In the statement in reply to Question no.22 you denied having paid any amount towards compensation for standing crops to the extent of ₹ 13,09,425/- which was claimed to be receipt by me from you. I say that your statement is incorrect and false. Please explain. Reply by Shri S.D. Settu: I deny the existence of agricultural activity thereon. We did not pay any compensation as claimed by you. When we visited the site we did not notice any agricultural produce or activity. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d price. It was also submitted by learned VAO that later the buyers converted the said land into saleable plots for the real estate activity. The assessee was given copies of the sworn statements recorded of Shri S.D.Settu , Palani and the VAO. 3.9The assessee had claimed that he sold rural agricultural lands which are beyond the purview of capital gains taxation , keeping in view provisions of Section 2(14)(iii) read with Section 10(37) of the 1961 Act and the assessee claimed that even provisions of Section 68 of the 1961 Act cannot be invoked for cash deposits in the bank account. The assessee filed certificate from Panchayat office to support its contention. The assessee contended that he received ₹ 1,91,50,575/- from buyers for sale of acre 25.36 and half cents of land at Velapadi Village which is evidenced by unregistered agreement of sale dated 07.01.2008 executed by buyers Shri S.D.Settu Shri Palani. He also confirmed that cash received were deposited in his bank account maintained with IOB and it is only for the purposes of registration with the registration authorities, the said buyers along with Shri R.Purushothaman, Vellore, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t due to passing of high tension lines and power cables along the lands, the value of ₹ 8 lacs per acre is exaggerated. Further, it was observed by the AO that this agreement of sale dated 07.01.2008 is an unregistered document and the stand of the party to the said agreement are contrasting. The AO observed that the said agreement is not enforceable and does not have binding nature between the parties to the agreement . The AO observed that unregistered agreements can be given due weightage only if both the parties confirm the dealing on enquiry or clinching evidences relating to payments are brought on record. The AO observed that evidences on record and enquiries revealed that assessee could not have received huge consideration as mentioned in the agreement. As per AO , since parties are giving conflicting version, this unregistered agreement to sale dated 07.01.2008 loses evidentiary value. The AO also observed that there is no evidence on record to prove that assessee received cash which was deposited in bank from the buyers of the said land. The AO also observed that this unregistered sale agreement does not contain any endorsement relating to the payment of cash made/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed about the assessee's land which can fetch ₹ 3 lakhs per acre. VAO has also stated that the land could not have been sold for higher price at ₹ 8 lakhs per acre. Accordingly, in absence of any documentary evidence relating to payment, the assumption cannot be drawn that assessee would have sold land measuring 23.5 acres at ₹ 8 lakhs per acre. Therefore, the cash deposits in assessee's IOB account in no. 177901000001600 cannot be considered as sourced from sale of land. Hence remains unexplained. The cash deposits are unexplained investment u/s 69 of the Act. Accordingly, the action of the AO considering the deposits dated 07.01.2008 for ₹ 50,00,000/- 04.03.2008 for ₹ 25,00,000/-, 15.03.2008 for ₹ 7,00,000/-. Thus, total of ₹ 82,00,000/-, the AO has considered ₹ 23,34,900/- as full value consideration liable to LTCG as discussed above. The balance amount of ₹ 58,65,100/- is treated as unexplained investment u/s 69 of the Act for FY 2007-08. The action of the AO is accordingly confirmed on this issue and the appellant's ground is dismissed. 5.Aggrieved by appellate order dated 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted by learned counsel for the assessee that AO applied amended provisions while making additions in the case of the assessee relevant to the ay: 2008-09 2009-10 and held the said land to be capital assets. The learned counsel for the assessee claimed that for relevant period , the assessee rightly claimed exemption u/s.10(37) of the Act. It was submitted that nearest Municipality is 52 kms away . It was submitted that said agricultural land was not a notified land nor it falls within notified municipality. It was submitted by learned counsel for the assessee that the said land was registered for guideline value of ₹ 23.34 lakhs while actual sale proceeds of the said land were ₹ 1,91,50,575/-. It was submitted by learned counsel for the assessee that entire sale proceeds were deposited in bank account of the assessee maintained with IOB, which was used for constructing school. It was submitted that at the time of agreement of sale dated 07.01.2008 , part consideration of ₹ 50 lakhs was paid by buyers to the assessee in cash. It was submitted that registered document for sale of the said property were not entered in ay: 2008-09 , while same was executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue for the impugned ay: 2008-09. The AO received information from Investigation Directorate , Chennai to examine sources of cash deposits appearing in assessee s saving bank account number 177901000001600 maintained with Indian Overseas Bank, Grivalam Road, Tiruvannamalai for the period October, 2007 to February 2015. The case of the assessee was reopened by Revenue for framing assessment u/s 147 read with Section 143(3) of the 1961 Act, wherein notice dated 27.03.2015 u/s 148 of the 1961 Act was issued by AO to the assessee for ay: 2008-09. The said notice was admittedly issued after four years from the end of assessment year but within six years from the end of the assessment year but the fact remains that the assessee had not originally filed any return of income for ay: 2008-09 u/s 139(1) or u/s 139(4) of the 1961 Act. The assessee furnished its return of income for the first time pursuant to notice issued by the AO u/s 148 of the 1961 Act admitting nil income , on 31.03.2015 . The fact remains that the assessee did not filed its return of income originally u/s 139(1) of the 1961 Act or even did not filed it belatedly within time prescribed u/s 139(4) of the 1961 Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained with IOB. The details of further deposit of ₹ 1,59,00,000/- of cash by assessee in his bank account with IOB as stated by assessee as supported by bank statement of assessee is as under:- Date of receipt Amount (Rs.) 04.03.2008 25,00,000 15.03.2008 7,00,000 24.07.2008 50,00,000 02.08.2008 20,00,000 05.09.2008 15,00,000 11.09.2008 10,00,000 11.09.2008 22,00,000 27.09.2008 10,00,000 Total 1,59,00,000 The said unregistered agreement of sale dated 07.01.2008 along wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sile power towers and cable going through the land , lake was around the land and there were Srilankan Refugee Camps near to the said land which in the opinion of the buyers were negative factors adversely influencing the market value of the land and which made these buyers to renegotiate price to ₹ 23.34 lacs with the assessee as against the agreed consideration of ₹ 1.10 crores as contended by the buyers. It is claimed by the buyers that they initially agreed for price of ₹ 1.10 crores for purchase of these lands without even seeing the land relying on the statement of the broker and advanced ₹ 50 lacs, out of which ₹ 25 lacs in cash and ₹ 25 lacs by cheque without seeing the land and later renegotiated the price with the assessee for ₹ 23.34 lacs after coming to know of these adverse features present in the said land which in our considered view on touchstone of preponderance of probabilities is highly unlikely and the buyers are not coming out with the truth for obvious reasons to save them from various adverse actions which may follow against them under the provisions of the 1961 Act and the applicable stamp duty laws. The entering of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot fetch this much higher price. The buyers have denied to have paid ₹ 50 lacs in cash at the time of signing of the agreement to sale dated 07.01.2008 but stated that cash of ₹ 25 lacs and cheque of ₹ 25 lacs was paid to the assessee at the time of signing of the agreement dated 07.01.2008. It was stated by the buyers that cheque of ₹ 25 lacs was returned by the sellers to the buyers on renegotiation of the price of the said land owing to defects as cited above . On being asked by the authorities , the said buyers expressed inability to give details of said returned cheque of ₹ 25 lacs ,while the assessee on its part is consistently denied having received any cheque of ₹ 25 lacs at the time of entering of agreement to sale dated 07.01.2008 rather the assessee is consistently maintaining the stand that cash of ₹ 50 lacs was given by the buyers on 07.01.2008 when agreement to sale was entered into. The assessee claimed to have deposited ₹ 45 lacs in cash with IOB on 08.01.2008 while ₹ 5 lacs was retained by the assessee which also was claimed to be deposited by assessee later with its IOB bank account. The assessee has deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will renegotiate the said land for paltry amount of ₹ 23.34 lacs as against original agreed consideration of ₹ 1.10 crores which was itself admitted by buyers to have initally agreed upon. If we go with the version of the buyer that only cash of ₹ 25 lacs was paid in advance while ₹ 25 lacs was paid vide cheque which was returned by the assessee on renegotiation, it is highly unlikely that any seller who has taken advance of ₹ 25 lacs against the agreed consideration of ₹ 1.10 crores ( buyer version of initial agreed consideration) will suddenly agree for consideration of ₹ 23.34 lacs on being pointed out with some adverse features in land rather in such scenario , the seller will either refund the said advance or if it is utilized then in that situation the seller will ask buyers to wait till new buyers are located. Thus, in our considered view the assessee is coming out with true facts that he did received consideration of ₹ 1.91 crores towards sale of his property which is evidenced by an unregistered agreement dated 07.01.2008 executed on stamp papers. The buyers admitted to this agreement dated 07.01.2008 as well to their signatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also stated that this land however could not fetch ₹ 8 lacs per acre at that point of time. The learned VAO has given such statement based on enquiries with the villagers and not based on any government records and has also prayed that this statement of his should not be used against him. However, in the instant case , we have an agreement to sale dated 07.01.2008 reflecting sale consideration to be ₹ 1,91,50,575/-, which agreement is not denied by the buyers rather only sale consideration reflected in said agreement is denied by the buyers . The stamp paper were bought by one of the buyers and genuinity of the witnesses were also confirmed by the buyers and infact one of the witness happens to be the brother of one of the buyer . The only dispute raised by buyers is to the quantum of value of sale consideration for acquiring said land for which reasons are obvious so as to protect them from rigors under the provisions of the 1961 Act and the applicable stamp duty laws. The assessee is also party to such a collusive and clandestine act of indulging in on-money transaction in the sale of aforesaid property whereby instead of receiving money through ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le rest of the consideration was received in previous year relevant to ay: 2009-10. Thus, we hold that capital gains arising on transfer of said land shall be brought to tax only in ay: 2009-10 when the registered sales deed stood executed. The decision of Hon ble Supreme Court in the case of CIT v. Balbir Singh Maini dated 04.10.2017 in Civil Appeal No. 15619 of 2017 arising out of SLP(Civil) no. 35248 of 2015 Ors. is relevant , wherein Hon ble Supreme Court held as under: 17. The relevant sections that are necessary for us to decide the present matter are as under: Transfer of Property Act 53A. Part performance. - Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 18. Section 53A, as is well known, was inserted by the Transfer of Property Amendment Act, 1929 to import into India the equitable doctrine of part performance. This Court has in Shrimant Shamrao Suryavanshiv. Pralhad Bhairoba Suryavanshi [2002] 3 SCC 676 stated as follows: 16. But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53-A of the Act. The necessary conditions are: (1) there must be a contract to transfer for consideration of any immovable property; (2) the contract must be in writing, signed by the transferor, or by someone on his behalf; (3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained; (4) the transferee must in part-performance of the contract take possession of the property, or of any part thereof; (5) the transferee must have done some act in furtherance of the contract; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 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, 1887 (1 of 1877) or as evidence of any collateral transaction not required to be effected by registered instrument. 20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a transfer of a capital asset under Section 2(47)(v) of the Act, there must be a contract which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment records produced by assessee that agricultural operations were carried on in that land when the transfer/sales took place. The VAO also confirmed based on government records that there was standing crops of sugarcane, ground nut and paddy and ₹ 500/- was collected as land Revenue. The ld. VAO stated that there were three submersible pump sets for irrigating the lands. This contention of the assessee also stood accepted on the touchstone of preponderance of probabilities that the consideration received over and above the sale consideration of ₹ 1.91 crores mentioned in agreement to sale dated 07.01.2008 was towards standing crops . However, so far as whether the assessee is entitled for exemption on sale of aforesaid agricultural land within the provisions of Section 10(37) read with Section 2(14)(iii) of the 1961 Act is concerned, we are of the considered view that this issue requires re-consideration by learned Assessing Officer who shall adjudicate this issue afresh after making proper enquiries and verifications with local authorities and of the area where the said property was situated and such enquiries/verifications as the AO may consider necessary so as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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