TMI Blog2022 (11) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... Agricultural Lands Act 1948 along with relevant provision of contract Act and Transfer of Property Act. In view of the above action of AO in applying sec 43CA On the given facts of case was unlawful. AO and Ld. CIT(A) committed a mistake by ignoring the facts of the case and provisions of other civil laws applicable in the present case. In our considered opinion assessee being party of cancellation deed, do not tantamount to entering the transaction of sale /transfer. In absence of element of transfer sec 43CA can t be applied. We therefore direct the AO to delete the addition to be deleted with consequential reliefs. Appeal filed by the assessee is allowed. - ITA No. 7073/Mum/2019 - - - Dated:- 3-10-2022 - Shri Vikas Awasthy, Judicial Member And Shri Gagan Goyal, Accountant Member For the Appellant : Sh. Vasudev Ginde Kumar Kale For the Respondent : Sh. Manoj Sinha ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-2, Thane [hereinafter referred to as [ CIT(A) ] dated 30.09.2019passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as [ the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) 24.12.2013 56,23,100 6,00,000 50,23,100 (v) 31.12.2013 40,75,200 3,87,000 36,88,200 (vi) 24.12.2013 33,70,000 4,80,000 28,90,000 (vii) 31.12.2013 73,16,300 7,00,000 66,16,300 (viii) 24.12.2013 36,64,500 3,50,000 33,14,500 (ix) 31.12.2013 34,62,300 4,50,000 30,12,300 (x) 10.10.2013 54,53,700 7,00,000 47,53,700 (xi) 11.04.2013 46,06,500 46,06,500 0 Total Difference 4,52,40,600 4. Through a show cause assessee was asked as to why the amount of difference amounting to Rs 4,52,40,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A)-2 (Thane). Version of order Ld. CIT(A)is reproduced as under: 6. I have carefully considered facts of the case, findings of the AO in the assessment order, submission of the AR, decisions of various courts relied upon by the AR and material placed on record. In this case the AO after considering the factual and legal position held that the difference in market value and agreement value has to be added to the income of the seller and there is no case of exemption from the same. Accordingly the AO added difference of Rs 4,52,40,600/- to the income of the assessee. 6.1 During appellate proceedings the AR contended that the appellant was under mistaken belief that since its Memorandum of Association, inter alia, contained a clause enabling the appellant company to acquire agricultural land and that its directors are agriculturists, it was permitted to acquire agricultural land, without any permission from the competent authority. It is further contended that later on when it became clear to the appellant that under the law agricultural land can be acquired only by an agriculturist, and no one else, it realised that it would not be possible for the appellant to either deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as per the law. 6.4 Now, let us see the facts as per the documents placed on record. The Appellant has translated one Sale Deed for one parcel of land as an example and I shall analyze that Sale Deed and Cancellation of Sale Deed. The exemplary Sale Deed has been executed on 21.10.2010 between Shri Vijay Sudam Kadav and M/s Seema Promoters and Builders Pvt. Ltd (appellant), through its director Mrs Seema Yogesh Joshi. The first line of this Sale Deed states this Sale Deed is executed between Vendors and Purchasers, both farmers in respect of permanent sale-purchase of immovable property which is agricultural property . This Sale Deed is duly registered before Sub-Registrar of Karjat and the Special Executive Magistrate and the same has been notarized by a Notary registered with the Government of Maharashtra. The Sale Deed has been duly witnessed, etc and the Sale Deed has been executed for Rs. 7,00,000/- only. Hence, the veracity of the Sale Deed cannot be doubted. 6.5 In the cancellation of instrument of Sale Deed or the cancellation of Deed of the same land, it is seen that the parties to the transaction are the same. The Sale Deed has been cancelled by stating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961 are attracted in case of the appellant, the addition is therefore, confirmed. 6. We have gone through the order of the AO, order of the Ld. CIT(A) and submissions of the assessee along with the paper-book. We observed that assessee company had entered into an agreement with Mrs. Seema Yogesh Joshi one of the directors for purchase of some agricultural plots. It was further observed with reference to these agricultural plots that there was no development in the area and assessee couldn t develop the said plots. Details of plot purchased with date of cancellation, name of the party, purchase consideration/consideration return on cancellation, description of the property are placed on pg-1 of the paper -book. It is further observed that the land purchased by the assessee company was of the nature of agricultural land and as per law in force in the state of Maharashtra agricultural land can be purchased only by an agriculturalist. Assessee was of a wrong belief that a company having agriculturalist as share holder and director of the company can buy an agricultural land for further development in housing and commercial arena. 7. Not only this, the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 43CA of the Act to be attracted. In the present case, what the appellant received is not any 'consideration' for any transfer, but it is the return of the very same consideration that was paid by it to the sellers, as a result of cancellation of earlier transaction that was not per law. Hence, it is submitted that the vital ingredients are missing in the appellant's case, and consequently, provisions of section 43CA of the Act do not apply. 4.5 In this context, reference is made to Section 63(1) of the Maharashtra Tenancy and Agricultural Lands Act, 1948 ( MTALA ), the relevant part of which is reproduced below for ready reference: Section 63 (1) Save as provided in this Act- (a) no sale (including sales in execution of a decree of a Civil Court or for recovery of arrears of land revenue or for sums recoverable as arrears of land revenue), gift, exchange or lease of any land or interest therein, or (b) no mortgage of any land or interest therein, in which the possession of the mortgaged property is delivered to the mortgagee, shall be valid in favour of a person who is not an agriculturist or who being an agriculturist will after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) for an unlawful object or consideration within the meaning of section 23 of the Indian Contract Act, 1872 (9 of 1872), or (3) to a person legally disqualified to be transferee. [Emphasis supplied] Section 6 of TPA provides that property of any kind except as otherwise provided by -TPA or by any other law for the time being in force, can be transferred. It is, therefore, essential to test whether the subject matter of transfer falls outside the ambit of the exceptions carved out by that Section in order that there is a valid transfer in law. Sub-cl. (2) of Clause (h) of Section 6 of TPA, among others, provides that if the object of the transfer is unlawful as per Section 23 of the Contract Act, then such transfer is not permissible. A plain reading of 23 of the Contract Act shows that if the object is forbidden by law or is of such nature that, if permitted, it would defeat the provisions of any law, then that object would be unlawful. As stated above, Section 63(1) of MTALA prohibits any transfer of agricultural land to a non agriculturist. Therefore, where a person transfers any such land to a non agriculturist, it is clearly not permitted by MTALA; it is prohibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context, the appellant refers to the judgment in CIT vs. Sirehmal Nawalakha [2001] 118 Taxman 316 (SC), wherein the Hon'ble Supreme Court held that a gift of immovable property made without a registered document is not a valid gift in general law, and therefore, it cannot be subjected to gift-tax. Referring to the judgment in CGT v. R. Valsala Amma [1971] 82 ITR 828 (SC), the Court held that the Gift-tax Act, did not change the general law relating to the rights of property. The general law would take in its ambit not only the provisions of the Transfer of Property Act but would also require application of the provisions of the Registration Act. Therefore, it is submitted that while construing provisions of Section 43CA of the Act as well, it is necessary to construe the term 'transfer' as known to the general law, having regard to the provisions of the Transfer of Property Act, 1882. Where the appellant did not have a legally valid title to the property as explained above, there can be no question of the appellant transferring it to another. 4.7 Reference is also made to a decision of the Hon'ble Tribunal, Chandigarh Bench in DCIT vs. Winsome Yarns Ltd. [2014] 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction itself was void at the very inception, creating no legal right, title or interest in the land, necessitating cancellation of the same. The only right that remained with the appellant was to receive back the purchase consideration upon cancellation of the transaction, and that is the right in equity. Therefore, it is submitted that in the appellant's case too, there cannot be any transfer of the property. 5. In light of above, the appellant submits that the addition of Rs.4,52,40,600/- made u/s.43CA of the Act is not justified and is unsustainable in law. Your appellant, therefore, prays that the said addition be deleted. 10. In view of the above action of AO in applying sec 43CA On the given facts of case was unlawful. AO and Ld. CIT(A) committed a mistake by ignoring the facts of the case and provisions of other civil laws applicable in the present case. In our considered opinion assessee being party of cancellation deed, do not tantamount to entering the transaction of sale /transfer. In absence of element of transfer sec 43CA can t be applied. We therefore direct the AO to delete the addition amounting to Rs 4,52,40,600/- to be deleted with consequential r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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