According to Section 2(47), an agreement is executed when possession of an asset is transferred
Fact and issue of the case
The assessee is in appeal before us against the order of ld.Commissioner Income-Tax (Appeals)-XVI, Ahmedabad dated 29.7.2013 passed for the Asstt.Year 2010-11.
The grounds of appeal taken by the assessee are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 – they are descriptive and argumentative in nature. In brief, her grievance is that the ld. CIT(A) has erred in confirming the addition of Rs.6,83,09,792/- which was added by the AO on the ground that the assessee has sold land i.e. “capital asset” in this year and failed to offer gain for taxation on actual sale consideration in her return of income for this assessment year.
Brief facts of the case are that the assessee is an individual. She has filed her return of income on 30.6.2011 declaring total income at Rs.17,95,620/-. This return was duly processed under section 143(1) of the Income Tax Act. The case of the assessee was selected for scrutiny assessment on 8.9.2012 and notice under section 143(2) was issued which was duly served upon the assessee on 14.9.2012. In the return of income, the assessee has shown income from short term capital gain (STCG) and interest income. According to the AO, the Annual Information Report Wing has given an information that immovable property valued at Rs.7,41,64,205/- and of Rs.5,87,360/- have been transacted by the assessee, but in the return of income, she has shown STCG at Rs.17,92,042/- on sale consideration of Rs.66,32,100/-. The AO has called for information from Sub-registrar, Sanand on 9.11.2012 along with copy of sale deed. The AO, thereafter, confronted the assessee to disclose complete details of transfer of capital asset by her during the year. It emerges out from the record that the ld.AO has made a detailed analysis of the survey numbers, which were purchased by the assessee and alleged to have been sold in this year. The AO has made addition of Rs.6,83,09,792/- which comprises of two amounts viz. Rs.6,64,88,792/- and Rs.18,21,000/- pertaining to the transaction undertaken by the assessee in respect of two different chunks of agriculture land which were purchased by her and sold. In brief, the assessee has purchased a piece of land measuring 123731 sq. mters having different survey numbers from Shri Bhikhubhai N. Padshala and Shri Sandipbhai B. Padshala for total sum of Rs.67,96,432/- vide purchase deeds dated 18.12.2007, 28.02.2008 and 4.3.2008. The assessee, thereafter, entered into an agreement to sell (Banakhat) with Shri Sanjeev D. Shah, proprietor of Capital Consultancy (hereinafter referred as “SDS”) and agreed to sell the said agriculture land for a consideration of Rs.76,75,413/-. According to the AO, possession of the impugned land was not transferred by the assessee to the prospective buyers at this stage. She had received a sum of Rs.3,00,000/- as advance against the proposed agreed consideration of Rs.76,75,413/-. Subsequently, by another agreement to sell/banakhat dated 2.3.2009, the said land was agreed to be sold to one Gatil Properties P. Ltd. (hereinafter referred to as “GPPL”) for a sum of Rs.10,64,08,660/-. In this agreement, the assessee was the selling party, GPPL was the purchasing party and SDS was a confirming party. By this agreement, the assessee was paid Rs.10,00,000/- and SDS was paid Rs.25,00,000/-. The agreement further stated that the possession of the land would be given upon full payment being made to the assessee and total Rs.50,00,000/- to the SDS. On the same date i.e. 2.3.2009 another agreement/kabja karar agreement was signed between the assessee, GPPL and the SDS by which Rs.63,75,413/- was paid to the assessee and Rs.25,00,000/- to the SDS and the possession of the land was transferred from the assessee to the prospective buyer i.e. GPPL. Thereafter, a registered sale deed was executed on 27.1.2010 wherein M/s.GPPL was shown as vendee. The assessee was shown as vendor and SDS as confirming party. Vide this sale deed, the land measuring 85,995 sq.meters out of the total land of 1,23,731 sq.meters agreed in the banakhat was transferred. The consideration in the sale deed was shown at Rs.7,41,64,205/- for the area admeasuring 85,995 sq.meters. It also emerges out that second sale deed was executed on 6.9.2010 between the same parties and land admeasuring 8498 sq.meters was sold. Thereafter, various other sale deeds were registered and the total land agreed to be sold has been sold. For the purpose of controversy involved in this year, we are concerned with regard to the sale of land measuring 85,995 sq.meters which was alleged to have been sold at Rs.7,41,64,205/-. The ld.AO on detailed analysis of the evidence produced by the assessee arrived at a conclusion that the first two agreements i.e. 4.4.2008 and 2.3.2009 are to be ignored. The assessee has sold land only by way of registered sale deed executed on 27.1.2010 and therefore, the capital gain resulted on transfer of land is to be assessed in the hands of the assessee in the Asstt.Year 2010-2011. The ld.AO has made an addition of Rs.6,64,88,792/- [Rs.7,41,64,205/- (being the value shown in the sale deed) minus Rs.76,75,413/- (being the value offered for taxation by the assessee)]. The ld.AO has reproduced all these agreements in the assessment order i.e. agreement dated 4.4.2008 and agreement dated 2.3.2009.
Observation of the court
Next reasoning assigned by the AO is that funds have been provided by Ganesh plantation to SDS. Husband and father-in-law of the assessee were holding voting power of more than 20% in the Ganesh Plantation Ltd. Therefore, the transactions are arranged in the family itself. The assessee has pointed out that Capital Consultancy is a proprietary concern of SDS. This concern has taken unsecured loan from the company in F.Y.2006-07 relevant to the Asstt. Year 2007-08. In F.Y.2006-07, the interest of Rs.1,77,534/- was charged from SDS by Ganesh Plantation. In F.Y.2007-08 an interest of Rs.61,74,961/- was charged. Thus, according to the assessee, the funds were provided on interest in the ordinary course of business. Similarly, the AO has raised a point that the funds to the assessee were provided by Tarang Reality Pvt. Ltd. which is also family concern. The assessee has contended that she has taken loan from Tarang Reality Pvt. Ltd. of Rs.66,55,000/- and on receipt of sale consideration of Rs.73,75,413/-, she had repaid the loan to Tarang Reality Pvt. Ltd. In the case of the assessee, no phenomenal rise in the value of the land has arisen. She has purchased at Rs.67,96,342/- for the period starting from 18.12.2007 upto 4.3.2008. She had agreed to sell this property on 4.4.2008, just in a span of 3-4 months. She has earned small amount of capital gain which has been offered for taxation. An analysis of all the facts and circumstances, discussed by the ld.Revenue authorities, we are of the view that setting of surrounding facts and circumstances, even as a whole, does not suggest that agreement dated 4.4.2008 or 2.3.2009 are sham or bogus. Their enforceability in the law cannot be ignored. The alleged gains on sale of property calculated in the hands of the assessee are not sustainable. We allow the appeal of the assessee and delete the addition of Rs.6,83,09,792/- from the hands of the assessee.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 13th January, 2016 at Ahmedabad.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from hereSapnaben-Dipakbhai-Patel-Vs-ITO-ITAT-Ahmedabad-2