TMI Blog2021 (12) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... d 20/12/2012, the assessee has not received the possession of the property and the delivery of the possession of property will be given to the assessee only on payment of balance consideration of 3.5 crores out of 4.5 croers. As per the sec.2(47)(i), transfer in relation to capital asset includes sale and exchange are realized on the asset so as to relinquish the asset. The assessee shall be in a possession of impugned property but in the present case, the property which was said to be existed or relinquished was not in the possession of the assessee and both purchase and sale agreement were unregistered agreement and it cannot be said that the assessee was in a physical possession of the property so as to relinquish the same in favour of the assessee. Being so, we are of the opinion that sec.2(47)(i) cannot be complied. Accordingly, we allow the appeal of the assessee. Chargeability of penalty u/s 271AAB - As decided in the case of Shri Suresh H. Kerudi [ 2019 (10) TMI 1175 - ITAT BANGALORE] we are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncelled. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your assessee humbly prays that the appeal may be allowed and Justice rendered and the assessee may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 3. First of we will take up ground No.3 of assessee s appeal. Ground No.3. Without prejudice to the above, the learned CIT[A] is not justified in upholding the short term capital gains of ₹ 8,74,38,017/- assessed by the LD.AO holding that there was a transfer of property on execution of the sale execution of the sale agreement dated 21/02/2012 during the year in terms of sec. 2[47][ii] of the Act, under the facts and in the circumstances of the assessee's case. 4. Facts of the case are that the assessment passed u/s.153C r.w.s 143[3] of the Act dated 29/01/2016 for the above assessment year 2012-13 assessing the assessee on a total income of ₹ 9,10,70,095/-. 5. The assessee is an individual deriving salary income as a Managing Director from M/s. Rasasri Developers Pvt. Ltd., and income from other sources. For the year under consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to validate/assume jurisdiction u/s. 153C of the Act. 10. Secondly, the ld.AR further submitted that the proceedings which have been initiated are stated to be as a result of the search conducted in the residence of the assessee and not in the premises of M/s. Rasasri Developers, the person searched. It is natural that there will be documents belonging to the assessee in his residence and in the absence of any seizure of the documents initially as belonging to the person searched, which, later transpired as relating to the assessee herein, the proceedings initiated u/s. 153C of the Act are bad in law. This is because the provisions of sec. 153C of the Act are enacted to enable the assessment of a third person, who has not been searched, but in respect of whom certain assets seized or books and documents seized are found to pertain or in respect of whose some information discovered in course of search of the person searched. In other words, such assets, books of accounts or documents must be seized from the person searched and not from the premises of the assessee himself to invoke the provisions of sec. 153C of the Act. Thereafter, a satisfaction has to be reached that the docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns of income filed for the year under consideration. 14. In course of assessment proceedings, the ld.AO took the view that there was a transfer within the meaning of section 2[47] of the Act for the year under consideration and, therefore, same was brought to tax as short term capital gains. In this manner, the ld.AO concluded the assessment proceedings by passing the impugned order u/s. 143[3] rws 153C of the Act dated 29/01/2016 making a lone addition of ₹ 8,74,38,017/- as Short Term Capital Gain. 15. It is submitted that the assessee has made detailed submissions before the learned ld.AO bringing out the fact that there was no transfer within the meaning of sec. 2[47] of the Act during the year under appeal. The ld.AO has not appreciated the submissions made by the assessee in correct perspective and has made the impugned addition. 16. The assessee has challenged the addition of ₹ 8,74,38,017/- made as short term capital gains. The assessee submitted that - [a] There was a Memorandum of Understanding [MOU] entered into by the assessee with M/s.Rasasri Developers Pvt. Ltd., on 20/02/2012 for purchase of land admeasuring 12 Acres and 4 guntas in various su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed and signed by the assessee only and not the agreement holder as the assessee continued to remain as the owner of the said property. In other words, even under the agreement to sell dated 21/02/2016, there was no power given by the assessee to enable M/s. Confident Projects India Pvt. Ltd., to execute registered sale deeds on behalf of the assessee and alienate the aforesaid property. Based on the specific power of attorney executed after the end of the year under appeal, the assessee stated that he continued to remain as the owner of the said property and there was no transfer of the property merely on entering into of the agreement to sell dated 21/02/2012. 19. It was also pointed out that the said property originally belonged to M/s.Rasasri Developers Pvt. Ltd., and the assessee had agreed to acquire the same from the said company in terms of the MOU dated 20/02/2012. No possession of the said property was given by M/s.Rasasri Developers Pvt. Ltd., to the assessee during the year under appeal and in the absence of the assessee securing possession from M/s.Rasasri Developers Pvt. Ltd., the assessee could not have given possession of the property to M/s. Confident Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7] of the Act have a definite meaning. The term relinquishment implies that the person ceases to own the asset concerned by virtue of some act on his part, the property continues to exist but the interest therein of the owner is either given up or abandoned. Similarly, the word extinguishment of any rights therein postulates the termination of any of the rights of the owner of the property by any act intended to bring to an end the rights of the owner qua the property. By virtue of these two terms relinquishment and extinguishment of any rights therein , the ld.AO has sought to hold that the assessee has relinquished his right in the asset or that there is an extinguishment of his rights therein by virtue of entering into the agreement of Sale dated 21/02/2012. However, this finding of the ld.AO is erroneous because, the ld.AO ought to have appreciated that the assessee had retained the rights in the said property and there was no relinquishment of any asset or extinguishment of any rights in the aforesaid property in terms of the said agreement by virtue of the following clause [page [6] of the Agreement. 23. As can be seen from the above clause, if the purchaser fails t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty it is very difficult to consider that there was any relinquishment of the asset or extinguishment of any rights therein in the hands of the assessee, who is the intending transferor. The Hon'ble Supreme Court in the case of SURAJ LAMP AND INDUSTRIES V. STATE OF HARAYANA reported in 340 ITR 1 [SC] [copy of the judgement placed at pages 80 to 86 of the paper book] has elaborately considered the scope of an agreement of sale in the context of the provisions of section 54 of the Transfer of Property Act in the context of the transfer being effected through the Power of attorney routes. The relevant observation of the Hon'ble Supreme Court are as follows. 26. According to ld.AR the section 54 of TP Act makes it clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. This Court in (1977) 3 5CC 247, observed that - A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Act. See Rambaran Prosad v. Ram Mohit Hazra [1967 ]i SCR 293; AIR 1967 SC 744. The fiduciary character of the personal obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to bring to tax the short term capital gains on the agreement to sell dated 21/02/2012 entered into by the assessee holding that there was either a case of relinquishment of the asset or extinguishment of any rights therein. Accordingly, it is prayed that the short term capital gains assessed by the ld.A.0. for the year under appeal may kindly be deleted. 29. On the other hand, the ld.DR submitted that the ld.AO has taken the date of the Agreement entered into by the assessee on 21.02.2011 as the date of transfer of the property by relying on the decision of the Hon'ble Supreme Court in the case of Sanjiv Lal in 365 ITR 389 [SC]. On the other hand, the assessee has also relied upon the judgment of the Hon'ble Supreme Court in Suraj Lamp and Industries in 340 ITR 1 [SC] to contend that there is no transfer on the mere execution of an agreement to sell as it does not create any interest-in the property. The assessee has argued that he has not given possession of the property to M/s. Confident Projects (India) Private Ltd., during the year as the appellant himself secured the possession over the property only in the next financial year. The assessee may be right since it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untas for a consideration of ₹ 4.5 crores and paid advance of ₹ 1 crore on 29/2/2012. Balance amount shall be paid on delivery of possession of the property. Later, the assessee entered into sale agreement on 21/2/2012 with M/s Confident Project India Pvt. Ltd., for the sale of same property measuring about 10 acres 4 guntas for consideration of ₹ 12.5 crores and received advance of ₹ 1 crore vide cheque No.17901 dated 24/2/2012 drawn on City Union Bank, Koramangala Branch, Bengaluru and also received post dated cheques for ₹ 11 crores payable from 3/9/2012 to 7/12/2012. According to the AO, on entering into sale agreement by the assessee with M/s Confident Project India Pvt. Ltd., the assessee was extinguished all the rights in the property and hence it amounts to transfer within the meaning of sec.2(47)(ii) of the Income-tax Act. Since extinguishment of right in the immovable property in the impugned property, the AO brought on the difference between purchase and sale price as short terms capital gain in the assessment year under consideration. The contention of the ld.DR is that the assessee having acquired the right in a property under an agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantive addition reaches a finality, the protective assessments made the penalties levied by the Assessing Officer ought to have been upheld? 32. These are protective assessment in all two asst. years. In earlier part of their order, we held that there is no chargeability of short term capital gain on the transaction discussed earlier in assessment year 2012- 13, being so, the same is to be taxed in the subsequent assessment years 2013-14 and 2014-15 on substantive basis and the grounds by the revenue are allowed. 33. In the result, the appeal raised by the Revenue in ITA Nos.46/Bang/2016 and 47/bang/2018 are allowed. 34. Now Coming to the ITA No.45/Bang/2018, this appeal is with regard to chargeability of penalty u/s 271AAB . 35. The brief facts of the case are that assessee being the Managing Director of M/s. Rasasri Developers Private Ltd., on 01.10.2013, search was conducted in the office premises as well as at his residence. But the case of the assessee was not covered u/s. 132. In course of search u/s. 132 at the residential premises of the assessee, certain incriminating documents having a bearing upon the income of the assessee was seized. Accordingly, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2012-13, the A.O. has also passed the assessment order u/s. 153C rws 143(3) of the Act, dated 29.1.2016 for the assessment year 2013-14 accepting the capital gains returned protectively. Similar assessment order u/s. 143(3) rws 153D dated 29.1.20 16 was passed for assessment year 2014-15 accepting capital gains reported by the assessee. 38. The CIT(A), deleting the penalty observed that since he has confirmed the levy of charging of tax us 2(47)(i) for asst. year 2012-13, as such there is no question of levy of penalty in asst. years 2013-14 and 2014-15. Against this Revenue is in appeal before us in ITA Nos.45 46/Bang/2018. 39. We heard both the parties and perused the materials on record. We find that identical issue was considered by the Coordinate Bench of this Tribunal in the case of Shri Suresh H. Kerudi in ITA Nos.2950 to 2955/Bang/2018 vide order dated 25/10/20-19 for the assessment year 2007-08 to 2012-13, wherein it was held as under:- 10. We have considered the rival submissions. We find that an identical plea was put forth by the assessee in the case of Shreeji Corporation (supra) and the Ahmedabad Bench of the Tribunal in its order accepted the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee firm. The revenue has not been able to point out as to how this finding of the learned CIT(A) is erroneous. This being so the finding of the learned CIT(A) on this issue stands confirmed. 12. In view of the aforesaid decision of coordinate Benches, we are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the provisions of section 271 AAB could not be invoked in his case. 13. In view of the above conclusion, we are not dealing with the other aspects of imposing penalty raised by the assessee in the grounds of appeal. 14. In the result, all the appeals of the assessee are allowed. 40. In view of the aforesaid decision of coordinate Benches, we are of the view that the penalty in the case of assessee cannot be sustained as the assessee was not a person who was subjected to search u/s. 132 of the Act and consequently the provisions of section 271AAB could not be invoked in his case. 41. Since the issue in dispute before us is similar to that considered by the Tribunal in an earlier occasion, taking a consistent view, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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