IT: Where sale deed was executed in 2001, and sales consideration and possession of property also took place in year 2001, transfer took place in year 2001 and therefore capital gain was required to be assessed in assessment year 2002-03 and not in assessment year 2004-05
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[2013] 35 taxmann.com 472 (Ahmedabad - Trib.)
IN THE ITAT AHMEDABAD BENCH 'C'
Smt. Sandhyaben A. Purohit
v.
Income-tax Officer*
MUKUL KR. SHRAWAT, JUDICIAL MEMBER
AND ANIL CHATURVEDI, ACCOUNTANT MEMBER
AND ANIL CHATURVEDI, ACCOUNTANT MEMBER
IT APPEAL NO. 1536 (AHD.) OF 2011
[ASSESSMENT YEAR 2004-05]
[ASSESSMENT YEAR 2004-05]
FEBRUARY 8, 2013
Section 2(47), read with section 45, of the Income-tax Act, 1961 - Capital gains - Transfer [Land] - Assessment year 2004-05 - Assessee transferred land in question to a party for consideration - Sale deed was executed on 9-6-2001, possession was handed over to purchaser on 9-6-2001 and consideration was received on two dates, 30-4-2001 and 23-5-2001 - Sale deed was registered 30-7-2003 - Assessing Officer taking into account date of registration of sale deed held that capital gain was taxable in assessment year 2004-05 - Whether since sales consideration and possession of property took place in year 2001, transfer took place in year 2001 and, therefore, capital gain was required to be assessed in assessment year 2002-03 and not in assessment year 2004-05 - Held, yes [Para 8] [In favour of assessee]
CASE REVIEW
Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491/129 Taxman 497 (Bom) (para 8) followed. Suraj Lamp & Industries (P.) Ltd. v.State of Haryana [2011] 14 taxmann.com 103/202 Taxman 607 (SC) (para 8) distinguished.
CASES REFERRED TO
Arundhati Bal krishna v. CIT [1982] 138 ITR 245 (Guj.) (para 4), CIT v. Vishnu Trading & Investment Co. [2003] 259 ITR 724/128 Taxman 777 (Raj.) (para 4), CIT v. Rajasthan Mirror Mfg. Co. [2003] 260 ITR 503/[2002] 125 Taxman 1 (Raj.) (para 4), Suraj Lamp & Industries (P.) Ltd. v.State of Haryana [2011] 14 taxmann.com 103/202 Taxman 607 (SC) (para 5), Kalyan Ala Barot v. M.H. Rathod [2010] 328 ITR 521/[2011] 9 taxmann.com 246 (Guj.) (para 6) and Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491/129 Taxman 497 (Bom.) (para 8).
M.K. Patel for the Appellant. D.K. Singh for the Respondent.
ORDER
Mukul Kr. Shrawat, Judicial Member - This is an appeal filed by the assessee arising from the order of learned CIT(A)-VI, Ahmedabad dt. 25th March, 2011 passed for asst. yr. 2004-05 and the grounds raised are as follows :
| "(1) | That on facts and in law, the learned CIT(A) has grievously erred in holding that taxable capital gain has arisen in asst. yr. 2004-05, whereas in fact the transfer and transaction was completed in asst. yr. 2002-03. | |
| (2) | That on facts and in law, it ought to have been held that reopening of assessment under s. 148 for asst. yr. 2004-05 is bad in law, as there is no escapement of tax in the year under consideration. | |
| (3) | That on facts and in law, the learned CIT(A) has grievously erred in holding that AO was justified in applying the provisions of s. 50C of the Act to asst. yr. 2004-05 and thereby confirming the addition of Rs. 22:22,000." |
2. Facts in brief as emerged from the corresponding assessment order passed under s. 144 r/w s. 147 of the IT Act, dt. 28th Dec., 2007 were that the assessee in individual capacity has furnished the return declaring income from selling property. It was noted that one of the taxpayers, namely M/s Siddhi Corporation had purchased a land from the assessee. That information was received by the AO. From the information received, it was noted that the date of transfer deed was 30th July, 2003. From the office record, the AO has further noted that the assessee had not filed the return for asst. yr. 2004-05. In consequence thereof, a notice under s. 148 was issued and the reasons for reopening were stated to be as follows :
"Smt. Sandhyaben Amrishbhai Purohit, is my assessee and has filed her return of income for asst. yr. 2003-04 vide acknowledgement No. 0721012513 dt. 30th Oct., 2003. Thereafter, the assessee has not filed return of income. The undersigned has got information that M/s Siddhi Corporation has purchased one immovable property from Smt. Sandhyaben A. Purohit as per sale deed dt. 30th July, 2003 for Rs. 12,00,000 but the valuation authority has adopted the value of the said property at Rs. 22,22,000 instead of Rs. 12,00,000. Since the assessee has not filed return of income for asst. yr. 2004-05 relevant to financial year 2003-04, the undersigned has reason to believe that there is under assessment in respect of above-mentioned transactions. I, therefore, reopen the assessment for asst. yr. 2004-05."
2.1 The AO has thereafter collected the information from the office of the Sub-Registrar. The said office has supplied a copy of the transfer deed with a noting that M/s Siddhi Corporation had paid an amount of Rs. 1.43,500 as a registration fees on the valuation taken at Rs. 22,22,000. The AO has applied the provisions of s. 50C of IT Act and completed the assessment under s. 144 by adopting the market value at Rs. 22,22,000 and completed the assessment accordingly. Being aggrieved, the matter was carried before the first appellate authority.
3. Before learned CIT(A), the reopening was challenged, however it was held that the appellant had undisputedly sold the property and the capital gain on the sale of property was not even disclosed for asst. yr 2002-03. Learned CIT(A) has held that since the property was registered with the Registrar on 30th July, 2003 relevant for asst. yr. 2004-05, therefore, transfer of the property took place in asst. yr. 2004-05 which was correctly taxed by the AO. Since the action of the AO was confirmed, therefore now the assessee is further in appeal.
4. Before us, learned Authorised Representative M.K. Patel has explained that the plot in question was in fact sold on 21st May, 2001. In this regard, relevant dates and his explanation in writing were as under :
| "Date | Event | |
| 26-4-2001 | Advance of Rs. 31,000 for sale of plot received-Cheque cleared on 30-4-2001 (total sale amount agreed was Rs. 12,00,000) | |
| 19-05-2001 | Remaining full value of the consideration of Rs. 11,69,000 received-Cheque cleared on 23-5-2001 | |
| 21-5-2001 | Possession of the plot given and sale deed executed'' |
His main argument is that the consideration was received on 21st May, 2001, sale deed was executed on 21st May. 2001 and the possession has also been handed over on 21st May, 2001, therefore, the transfer was completed on that date as per the provisions of s. 2(47)(v) of IT Act. The AO has therefore, wrongly held that the transfer took place in the asst. yr. 2004-05 merely on the basis of the date of registration. In this connection, case law cited is Arundhati Balkrishna v. CIT [1982] 138 ITR 245 (Guj.) for the legal proposition that transfer is effective from the date of execution of document and not from the date of registration. Further, case laws cited are CIT v. Vishnu Trading & Investment Co. [2003] 259 ITR 724/128 Taxman 777 (Raj.) and CIT v. Rajasthan Mirror Mfg. Co. [2003] 260 ITR 503/[2002] 125 Taxman 1 (Raj.). He has concluded that the capital gain was wrongly taxed in asst. yr. 2004-05.
5. From the side of the Revenue, learned senior Departmental Representative Mr. D.K. Singh has placed on record a copy of the impugned document registered with the Sub-Registrar in support of the contention that the transfer of an immovable property is enforceable only from the date of registration of the document. For this legal proposition, learned Departmental Representative has placed on record a decision of Hon'ble Supreme Court pronounced in the case of Suraj Lamp & Industries (P.) Ltd. v. State of Haryana [2011] 14 taxmann.com 103/202 Taxman 607 (SC).
6. We have also been addressed by both the sides in respect of the possibility of making the assessment for asst. yr. 2002-03. In this connection, a decision of Hon'ble Gujarat High Court in the case of Kalyan Ala Barot v. M.H. Rathod [2010] 328 ITR 521/[2011] 9 taxmann.com 246 (Guj.) has been cited. The contention of the learned Authorised Representative is that the provisions of s. 150 can only be attracted in respect of an order which is a subject-matter of appeal and since in this case the order which is subject-matter of appeal is the order of CIT(A)-VI, Ahmedabad which was dt. 25th March, 2011, hence the period of six years is to be computed considering the date of pronouncement of the order of CIT(A). In his opinion, the provisions of s. 150(2) are to be applied in respect of the order of CIT(A) which was the subject-matter of appeal. On the other hand, Revenue's contention is that the assessment order in question is the subject-matter of appeal which was dt. 28th Dec., 2007. Hence, the direction can be given after considering the said date of assessment order.
7. We have heard both the sides. As far as the issue of reopening of assessment under s. 148 is concerned, as raised in the grounds of appeal vide ground No. 2, we are of the considered opinion that on receiving of an information the AO had proceeded under s. 148 of the Act by issuing a notice dt. 6th Dec. 2006 relevant for asst. yr. 2004-05. The time-limit prescribed for issuance of notice under s. 149 is four years from the end of the relevant assessment year and if four years have elapsed, then not more than six years from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to Rs. 1 lac or more. Since the notice was within the prescribed limit, hence very much valid, therefore, the aforesaid ground deserves to be dismissed.
8. Next is the question of the correct year of assessment of the capital gain. On the basis of the documents available on record, it is evident that a sale deed was executed on 9th July, 2001, a copy of which is placed by the Revenue Department on record, by Smt. Sandhyaben Amrishbhai Purohit as a vendor in favour of Smt. Meenaben Markandbhai Parikh, proprietor of M/s Siddhi Corporation, as a purchaser, for a sale consideration of Rs. 12 lacs. As per cl. 5 of the deed, it is evident that on the date of execution of the said deed the possession has also been handed over to the purchaser. As far as the passing of consideration from one hand to another hand, our attention has been drawn on the bank statement of the assessee to demonstrate that the amount of consideration was deposited on two dates, i.e. Rs. 31,000 on 30th April, 2001 and Rs. 11,69,000 on 23rd May, 2001. It has also been informed that on the said date, i.e. on 21st May, 2001, adhesive stamps of Rs. 1,24,800 have also been purchased and duly affixed on the said deed. However, that deed could not be presented before the Sub-Registrar and later on the said deed was registered on 30th July, 2003. On this issue, we have examined the provisions of s. 2(47)(v) of IT Act which says that "transfer" in relation to a capital asset includes any transaction involving the allowing of the possession and establishment of any rights therein. In this regard, a well-known decision of Hon'ble Bombay High Court pronounced in the case ofChaturbhuj Dwarkadas Kapadia v. CIT [2003] 260 ITR 491/129 Taxman 497 (Bom) is worth mentioning. In the said decision, it was explicitly held that in a situation where consideration has been paid and the possession has been handed over, then in view of the provisions of s. 2(47)(v) transfer took place and that date of transfer is thus required to be taken for the purpose of computation of capital gain. We therefore hold that the capital gain was required to be assessed in asst. yr. 2002-03 and not in asst. yr. 2004-05. Although, from the side of the Revenue the decision of Suraj Lamp & Industries (P.) Ltd. (supra) has been cited but that decision is not in respect of the provisions of the IT Act, but the said decision was pronounced in respect of the provisions of the Transfer of Property Act, 1882. In that context, while dealing with s. 54 of TP Act, 1882, the Hon'ble Court has pronounced that an immovable property can be legally and lawfully transferred or conveyed only by a registered deed of conveyance. Since this decision of the Hon'ble Court has been decided in different context and the income-tax provisions were not adjudicated upon, therefore, we hereby hold that the reliance placed by the Revenue on the said precedent was misplaced.
9. Now we have to deal with the situation where admittedly the capital gain was to be computed for asst. yr. 2002-03 but no action was taken by the Revenue Department. We have raised a question to both the sides and in response we have been informed that almost in identical situation, the Hon'ble Gujarat High Court in the case of Kalyan Ala Barot (supra), wherein it was held as under :
"Sub-s. (1) of s. 150 and sub-s. (3) of s. 153 of the IT Act, 1961, provide that in cases falling under cl. (ii) of sub-s. (3) of s. 153 r/w Expln. 2 thereunder, the provisions of sub-s. (1) of s. 150 would be applicable and the bar of limitation under s. 149 would not be applicable. While s. 150(1) and s. 153(3) contemplate issuance of notice under s. 148 and completion of assessment, reassessment and recomputation respectively, in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision, Expln. 2 to s. 153(3) contains a deeming provision which provides that where by an order referred to in cl. (ii) of sub-s. (3) any income is excluded from the total income of an assessee for an assessment year, then an assessment of such income for another assessment year shall for the purposes of ss. 150 and 153 be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.....
Held, dismissing the petition, that in consequence of and with a view to give effect to the finding contained in the order made by the CIT(A) in appeal for asst. yr. 1984-85, the AO had issued notice under s. 148 for assessing the income which was excluded from the total income of the petitioner by the asst. yr. 1984-85, to assess such income for the asst. yr. 1983-84. Thus, the case fell within the ambit of the provisions of s. 150 as well as s. 153(3)(ii) r/w Expln. 2 to s. 153 of the Act and as such there was no infirmity in the action of the AO in initiating reassessment proceedings, the same being in consonance with the provisions of law and within the prescribed time limit."
10. Respectfully following the view taken by the Hon'ble jurisdictional High Court, we hereby direct the AO to compute the capital gain in asst. yr. 2002-03 as per law after issuing a notice of hearing prescribed under the provisions of the Act. In support of this direction, it is worth to reproduce the relevant s. 150 hereinbelow :
"Sec. 150. Provision for cases where assessment is in pursuance of an order on appeal etc.-(1) Notwithstanding anything contained in s. 149, the notice under s. 148 may be issued at any time for the purpose of making, an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.
(2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken."
10.1 On careful reading of this section, to our humble understanding in the light of the case law cited, that a notice under s. 148 may be issued at any time for the purpose of making a reassessment in consequence of or to give effect to any finding or direction contained in an order. Further, in sub-s. (2) of s. 150 a limitation is prescribed that the clause of reopening in sub-s. (1) of s. 150 shall not apply where any such reassessment relates to an assessment year in respect of which an assessment could not have been made at the time of order, which was the subject-matter of appeal, or as the case may be, was made by reason of any other provision of limiting the time within which any action for reassessment may be taken. As we have noted above the date of assessment order now under appeal for asst. yr. 2004-05 is 28th Dec, 2007. Thus, we hereby hold that the said assessment order is the order which is the subject-matter of appeal. At that time, when the reopening of asst. yr. 2004-05 was made, the AO could have also simultaneously taken the action for asst. yr. 2002-03 and that action of the reopening was not barred by limitation at that point of time. In other words, for asst. yr. 2002-03, the AO could have initiated the proceedings under s. 148 upto six years from the end of relevant year i.e. upto 31st March, 2007. We hereby further clarify that a conjoint reading with s. 153(3), a reassessment may be completed at any time where the reassessment is made in consequence of or to give effect to any finding/direction of an order passed under s. 254(1) of the Act i.e. an order of the Tribunal.
10.2 In this manner, we have adjudicated ground No. 1 of the assessee which can be held as allowed as far as the assessment year under consideration is concerned but subject to the directions contained hereinabove.
11. Now, we are left with only ground No. 3, and in this regard we want to clarify that while computing the capital gain for asst. yr. 2002-03, the AO is hereby directed to take into account the sale consideration as noted in the impugned sale deed, i.e. Rs. 12 lacs only. The AO is not expected to take the shelter of the provisions of s. 50C of IT Act for asst. yr. 2002-03. Otherwise also, the provisions of s. 50C have come w.e.f. 1st April, 2003 (Finance Act, 2002). With these directions, ground No. 3 is hereby allowed but for statistical purposes only being restored back to the file of the AO with certain directions.
12. In the result, assessee's appeal is partly allowed.
USPRegards
Prarthana Jalan
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