TMI Blog2023 (6) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ilder/developer. possession of the land was also handed over to the builder/developer alongwith the development rights. Therefore, even though the Agreement for Sale was executed on 30/03/2010, the property was already transferred on 18/01/2008 at the time of execution of the Development Agreement, and thus, for all intent and purpose the land was transferred in the assessment year 2008-09. We are of the considered view that the aforesaid land was transferred by the assessee along with the other 17 co-owners to the builder/developer in the previous year relevant to the assessment year 2008-09 and therefore, capital gains, if any, thereon cannot be taxed in the year under consideration. As a result, ground no.3 raised in assessee s appeal is allowed. - ITA no. 817/Mum./2020 - - - Dated:- 31-5-2023 - Shri Prashant Maharishi, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Pranav Phadke For the Revenue : Shri Satyaprakash Singh ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 12/11/2019, passed under section 250 of the Income Tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the assessee during the year under consideration. At last, the assessee submitted his return of income on 29/11/2017, in response to the notice issued under section 148 of the Act. The assessee further submitted that the land was sold on 18/01/2008, and therefore no addition can be made in the year under consideration. The AO vide order dated 30/11/2017, passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that although the assessee entered into a Development Agreement on 18/01/2008, however, the actual sale deed was executed on 30/03/2010, that is during the relevant previous year. The AO, by applying the provisions of section 50C of the Act, adopted the amount of Rs.5,11,93,000, as the full value of the consideration received by 18 co-owners for the sale of immovable property vide registration agreement dated 30/03/2010. As a result, the AO made an addition of Rs.28,44,056 (i.e. 1/18th of Rs.5,11,93,000) as income under the head capital gains earned by the assessee during the relevant assessment year. 4. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee and held that tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation 1. For the purposes of sub-clauses (v) and (vi), immovable property shall have the same meaning as in clause (d) of section 269UA. Explanation 2. For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word transfer in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word transfer is as under: '2(47) transfer , in relation to a capital asset, includes,- (i)** ** ** (ii) the extinguishment of any rights therein; or. . . . . . . . . . . . .' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 18/01/2008, it is sufficiently evident that the assessee along with the other 17 co-owners transferred the possession of the land to the builder/developer for all intent and purposes at the time of execution of the Development Agreement. Thus, when the builder/developer was granted the right to sell the constructive area and also had the right to exclude deeds to be registered in the office of the Sub-Registrar, it cannot be said that the transfer of the immovable property did not take place in the assessment year 2008-09. 15. During the hearing, the learned DR submitted that all the payments as agreed vide Development Agreement were not made in the assessment year 2008-09 and the majority of the payment was made after the assessment year 2008-09. From the perusal of the Agreement for Sale, forming part of the paper book from pages 83-152, we find that the builder/developer indeed did not make the entire payment as per the payment terms agreed in the Development Agreement, however, made the entire payment subsequently in the next year. The learned DR also placed reliance upon clause 9 of the Development Agreement, which states that if the builder/developer fails to pay any one ..... X X X X Extracts X X X X X X X X Extracts X X X X
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