Merely on Form 26AS Sale Consideration cannot be Determined

This appeal by the assessee is directed against order of the CIT(A) dated 28.2.2018. The assessee  has  raised following  grounds of appeal:

• “The impugned Appellate order dated 28-02-2018 passed by the Learned CIT(A), Bangalore, is  opposed to law, facts and circumstances of the case in so far as it is prejudicial to the interest of Assessee.

• The Ld. CIT(A) has erred in adjudicating the Appeal in the Status of -Individual” as against the Status of “HUF” without appreciating the facts that the Appellant has sold the land being Ancestral Property along with other Co-parceners of the family, each one of them had 1/4th
• Undivided Share in the property inherited.

• The Ld. CIT(A) has erred in holding that the Sale consideration to be adopted at Rs. 4,88,75,000/- in the hands of the Appellant as against the actual sale consideration of Rs. 2,70.00.000/- as per the Registered Sale Deed dtd: 11-07-2013 which collectively belonged to Four Co-owners who were the vendors of the HUF Property and each one of them had  undivided  114th Share of Rs. 67,50,000/- out of the Total Consideration of Rs. 2,70,00,000/-.

• The Ld. CIT(A) ought to have appreciated the fact that the Appellant was entitled for deduction admissible u/s. 54F of the Act, in respect of the Sale Consideration of Rs. 39,86,280/-inclusive of Stamp Duty and Registration Fee in acquiring a New residential flat bearing No. G-2. Creative Environs, 2nd Sector HSR Layout, Bangalore.

• Without Prejudice to the above grounds the Appellant submits that the Ld. CIT(A) ought to have appreciated the fact  that the  Appellant  in his Status  of “HUF” was  liable to Capital Gains Tax in respect of his 1/4th Share of Sale Consideration out of the Total Sale Consideration of Rs. 2,70,00,000/- as  against  the  assumed  sale  consideration of Rs. 4,88,75,000/-.

• The Ld. CIT(A) has erred in holding the Sale Consideration at Rs. 4,88,75,000/- without any basis and merely considering the details furnished by the Appellant in respect of Fair Market Value Deductable as on 01-04-1981.

• The Appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing.

For these and other grounds that may be urged at the time of hearing, the Appellant prays that your Hon’ble Authority  be pleased to cancel the Assessment Order made in the Status of “Individual” as against Status  of  “HUF”  and  also  to  set-aside the Appellate Order of the Ld. CIT(A) for the same reasons and further be pleased to pass such other orders granting such other relief as your Hon’ble Authority may deem fit, in the interest of Justice and Equity.”

The assessee has raised additional grounds on 5.4.2021 as follows:

 “1. The Appellant begs to submit the following additional grounds of Appeal for adjudication on the same set of facts and circumstances as prevailed upon as on 31-03-2014 relevant to the A.Y 2014-15. 2.

 Additional Grounds:-

1. The Ld. CIT(A) has erred in computing the consideration at Rs. 4,88,75,000/- in the Appellate Order without appreciating the fact that the MOU dtd: 01-05-2013 followed by supplementary MOU dated 27-06-2013 and Second Supplementary Agreement dtd: 12-08-2013 relating to the development of the Land was not materialized in favor of the deductor of TDS M/s. Nambiar Builder Pvt Ltd and hence no transfer.

 2. The Ld. CIT(A) has erred in computing the deemed consideration at Rs. 4,88,75,000/- on the basis of TDS deducted by the Company M/s. Nambiar Builders Pvt Ltd without appreciating the fact that the TDS was paid in anticipation of the land transaction which was not materialized in favour of the Deductor of TDS M/s. Nambiar Builder Pvt Ltd.”

3. The Appellant submits that the additional grounds urged are not emerged out of the New Set of facts and circumstances of the case. but it relate to the same facts and circumstances of the case prevailed as on 31-03-2014 relevant to the A.Y 2014-15.

4. The Appellant submits that the admission of additional grounds do not cause any prejudice to the revenue, since the matter would be ultimately disposed off on the basis of the merits of the case. On the other hand if the additional grounds are not admitted, the Appellant would be put to hardship and denial of justice, otherwise admissible in accordance with law.

5. In view of the above submissions, the Appellant respectfully prays that the Hon’ble bench be pleased to admit the additional grounds for adjudication for the cause of substantial justice.”

Further, assessee filed petition under Rule 11 of the Tribunal Rules to admit the additional ground stating that there was no necessity of investigation of any facts on  the  grounds urged before the Tribunal and it relates to the same facts and circumstances of the case prevailed on assessment records and admission of additional grounds do not  cause  any  prejudice  to the revenue, since the  matter would  be  ultimately  disposing  of on the basis of the merits of the case. On the other hand, if the additional grounds are  not  admitted, the  assessee  would be put to hardship and denial of justice, otherwise admissible in accordance with law. Further, he placed reliance on judgement of Hon’ble Supreme Court in the case of NTPC Ltd. Vs. CIT and prayed to admit the additional grounds.

Court has heard the rival submissions, perused the materials available on record and gone through the orders of the authorities. As seen  from the additional  grounds  of appeal, which  go to the root of the mater  and it is very necessary to adjudicate this ground so as to render substantial justice. Accordingly, we admit the additional grounds in the interest of justice. Facts of the  case are  that  the assessee  is an individual and deriving the income from contracts. The  assessee  has declared nil  income  in  his  return. However,  assessee  shown long term capital gain at Rs.6,73,75,000/- in his return and claiming exemption u/s 54B  of  the  Income-tax  Act,1961  [‘the Act’ for short]. The A.O. observed that the assessee has sold a property toone Shri Ratish Nambier residing at RF(A) 164, Purava Rivera, Marathahalli, Bengaluru. It is seen that the said land is at Narayanghatta village, Bengaluru and   is   within   the city limit and a capital asset. The assessee did not produce any details/documents  to  the  contrary. In  view  of  this  gain  on  the sale of land is considered as long-term capital gain and a proposal  was  sent  to   the  assessee  for  addition.    However,  there is no reply from the assessee. In the absence of  reply,  the  A.O. treated Rs.6,73,75,000/-   as   long-term   capital   gain   taxed   at 30%. In addition to this, the A.O. considered   the   contract receipts at Rs.4,88,75,000/- shown in Form 26AS as gross sales receipt from contract  and  estimated  the  income  at  8%  applying the provision of section 44AD of the Act. The  assessee  went  in appeal before the CIT(A) and the Ld. CIT(A) on the issue of capital gain observed that the total receipts reflected in  Form No.26AS of Rs.4,88,75,000/-  is  nothing  but  transaction  relating to sale of immovable property and he directed the A.O. to consider this amount of  Rs.4,88,75,000/-   as  sale  consideration and deduct the indexed cost of  acquisition  out  of  it  and  compute the long term capital gain and to be taxed at 20% with Surcharge, Educational cess, interest,  etc.,  if  any. Again  on  this issue, the assessee is in appeal before us by way of above main grounds and additional grounds. The Ld. A.Rs’ submission regarding main grounds is as follows:

• The Appellant begs to submit the following Written Submissions in support of the Appeal filed against the Appellate Order dtd: 28-02-2018 passed by the Ld. CIT(A)-9, Bangalore in ITA No. 10070/BANG/2017-18.

• The Appellant submits that he is a Kartha of the HUF consisting of the following Co- owners.

• The  Appellant
• Smt.  Vijaya  w/o  the  Appellant
• Sri.  Thejas  Reddy  s/o  the  Appellant
• Smt.  Vathsala  daughter  in  law  of  the  Appellant

• The Appellant being Kartha of the HUF had inherited 7 Acres 30 Guntas  from his ancestors

The given land were originally owned by One Nanjundappa  s/o  Byanna  as  his  ancestral  property. On expiry of the aforesaid Nanjunadappa,  the  lands were devolved upon Smt. Kondamma w/o Late. Nanjundappa. The   aforesaid  lands   were  transferred in favour of N. Ramareddy her grandson and the katha was also transferred in the name of N. Ramareddy.

On expiry of N. Ramareddy, the   aforesaid  lands were succeeded by the Appellant as per mutual understanding between himself and his two  sisters Smt. Renuka and Smt. Girija   who   have   released their rights in favour of the Appellant. Thus the Appellant had succeeded to the aforesaid lands and hence the properties were acquired by means of inheritance and therefore, the aforesaid lands collectively  belonged to all the four co-owners named above.

The Appellant and the other three co-owners have not entered into any partition but collectively decided to dispose off the lands measuring 6 Acre

30 Guntas and retained 1 Acre  in their possession. Therefore all the family members being co- owners have executed a registered sale deed dated 11-07-2013 in favour of One Sri. Ratheesh Nambiar for a Sale Consideration of Rs. 2,70,00,000/-.

The Appellant’s 1/4th Share  of the sale consideration amounts to Rs. 67,50,000/- and the remaining sale consideration of Rs. 2,02,50,000/- belonged to the other 3  Co-owners. A  copy of  the Sale Deed is submitted as per the Paper Book.

The Appellant out of the Sale Consideration of Rs. 67,50,000/-being his 1/4th Share had invested a sum of Rs. 39,94,280/-(Sale Consideration Rs. 37,50,000/- + Stamp Duty Rs. 2,06,250/- and Registration Fee Rs. 38,030/- =  Rs.  39,94,280/-) in purchasing a Residential apartment  bearing No.    G-02, BBMP Katha No. 621/140/137/105/1/55/9/2 in the apartment known as Creative Environs” situated in Sy. No. 55/9, Arlukunte Village. Begur Hobli, Bangalore South Taluk. A Copy of the Sale Deed dtd: 15-10- 2013 is submitted along with the Paper Book.

The Ld. AO in the Assessment Order on  para  2  and Page  2  of  the  Assessment  Order  has  held  a  sum  of Rs. 6,73,75,000/- as sale consideration of the property sold by the Appellant and his family members  mainly  on  the  ground  that  the  Appellant has not furnished any reply  to  the  proposal  sent  by the  AO.  The  Appellant  having  been  aggrieved  with the amount of  Sale   Consideration  adopted  by  the AO  at  Rs.  6,73,75,000/-  filed  an  Appeal  before  the Ld. CIT(A)-9. Bangalore, who in turn has passed an Appellate Order dtd: 2802-2018 directing the AO to adopt the  Sale  Consideration  of  Rs.  4.88,75,000/- for the purpose of Capital Gains as reduced by the indexed cost of acquisition,  as against   the   actual sale consideration of Rs., 2,70,00,000/- as per the Registered Sale Deed dtd: 11-072013. Therefore the Appellant submits that the Ld. CIT(A) was not justified to direct the AO adopt the Sale Consideration of Rs. 4,88,75,000/-,  as  against  the sale consideration of Rs. 2,70,00,000/- out of which the Appellant’s 114th  share amounts to Rs. 67,50,000/-. Hence the Appellant submits that his 114th share amounts to  Rs.  67,50,000/-  out  of  the total sale consideration  of   Rs.   2,70,00,000/-  and the balance sale consideration of Rs. 2.02,50,000/- belongs to the other 3 co-owners of the Property. Accordingly  the Appellant  prays that   his   114th Share of Sale Consideration of Rs. 67,50,000/- requires to be considered for the purpose of Capital Gains as against the amount of Rs. 4.88,75,000/- directed by the Ld. CIT(A) to be adopted for the purpose of levy of Capital Gains Tax based on  TDS Details in 26AS Format relating to a sum of Rs. 1,85,00,000/-, Rs. 1,43,75,000/- and Rs. 1,60,00,000/- found recorded in the 26AS Format which is not correct.

The Appellant further submits that out of the Sale Consideration of Rs. 67,50,000/- a sum of Rs. 39,94,280/-inclusive of Stamp Duty and Registration Fee, was invested in purchasing a New Residential House situated at Ground Floor bearing No. G-02, BBMP Katha No. 621/140/137/105/1/55/9/2 in the apartment known as “Creative Environs” situated in Sy. No. 55/9, Arlukunte Village, Begur Hobli, Bangalore South Taluk and accordingly the Appellant is entitled for the deduction u/s. 54F of the  Act  and the same was neither considered by the AO nor by the Ld. CIT(A). Therefore the Appellant prays that this Hon’ble Bench be pleased to pass orders directing the Authorities below to allow the deduction of Rs. 39,94,280/-  admissible  u/s.  54F of the Act in the interest of justice and equity.

Regarding additional grounds, the Ld. A.R’s submissions are as follows:

The Appellant begs to submit the following additional submissions in support of the Additional Grounds. The Appellant’s family had inherited the Agricultural Land with Total Extent of Land  7 Acres 30 Guntas. The Appellant  and  his  Son  Sri.  Tejus  Reddy  had  entered  into a MOU dtd: 01-05-2013 with a developer Company M/s. Nambiar Builder Pvt Ltd for the development of the aforesaid lands. The aforesaid lands  were  mentioned  in  Schedule  1  to  5 of MOU dtd: 01-05-2013

The Appellant  and  his  Son  have  entered  into  another  MOU dtd: 27-062013 in continuation with an MOU dtd: 01-05- 2013, with the developer Company  M/s.  Nambiar  Builder  Pvt Ltd and excluded  Schedule  Property  mentioned  in  item  No.  5 in MOU dtd: 01-05-2013. In the aforesaid Supplementary MOU dtd: 27-06-2013 the Appellant and his   Son   were entitled to 12 Villa Sites against 14 accepted in MOU dtd: 01-05-2013. The Appellant and his Son have entered into Second Supplementary MOU dtd: 12-08-2013 wherein it was mentioned  that  a  Sale  Deed  has  been  executed  in  favour  of the Ratheesh Nambiar in respect of item No. 1 to 4  of  the Schedule property with the consent of the Second Party  being M/s. Nambiar Builders Pvt Ltd and Buy Back option was provided to purchase the  villas  agreed to  be  allotted  in  favour of the Appellant.

The Appellant submits that the aforesaid MOUs dtd: 01- 05-2013, 27-06-2013 and 12-08-2013 did not materialize owing to certain constraints that the developer  Company M/s. Nambiar Builders Pvt Ltd .vas not entitled to  own-up in view of the restrictions of the Land Reforms Act according to which the agricultural lands in Karnataka are to be sold only to an agriculturist. Further a part of the aforesaid lands was a buffer zone. Therefore the Nambiar Builders Pvt Ltd., have backed   out   from   the   agreed conditions mentioned  in  the  aforesaid  MOUs  and alternatively  the  aforesaid  lands mentioned  in   SI.  No.  1  to   4 of the  Schedule   annexed  to  aforesaid   MOUs  were  later   sold in favour of  an  Individual Sri.  Ratheesh  Nambiar  vide Sale Deed dtd: 11-07-2013.  In  view  of  the  Appellant  submits  that the land transaction agreed vide aforesaid MOUs was not materialized  and  the  land was   not  transferred  in   favour  of the Developer Company M/s. Nambiar Builders Pvt Ltd and therefore  there  was  no  transfer  of  the  Asset  and  hence  there is no liability to the Capital Gain Tax. However the Developer Company has deducted the  TDS  in  respect  of  the  payments made to  the  Appellant  and  his  Sister  Smt.  Girija  with  whom the developer Company M/s. Nambiar Builders Pvt Ltd had entered  into   a  separate  MOU  dtd:  27-06-2013.  According  to the MOUs  the  Developer  Company  has  deducted  the  TDS  on the deemed consideration payable to the Appellant and to his Sister Smt. Girija.

The Ld. CIT( A) has confirmed the  addition  on  the basis of the consideration mentioned above amounting to Rs. 4, 88 ,75 ,000 /-. The Appellant  submits that the sale transaction agreed upon in the aforesaid MOUs was not materialized and the land was not transferred n favour of the Developer Company M/ s. Nambiar Builders Pvt Ltd. Therefore the Appellant was not liable for Capital Gain tax on  the  deemed consideration of Rs. 4,88,75,000/- which was confirmed by  :ne  CIT(A)  on the basis of  the  26AS  statement  without  appreciating  the fact that the lands agreed  upon  as  per  the  aforesaid  MOUs for development by  the  Developer  Company  was  ultimately sold by the Appellant and  his  family  members  in  favour  of an Individual Sri. Ratheesh Nambiar vide Sale Deed dtd: 11- 07-2013 for a sale consideration  of  Rs.  2,70,00,000/-.  The Sale Deed dtd: 11-07-2013 was  executed  by  the  Appellant and his family members since the lands sold were inherited from the ancestors.   Therefore   the   Appellant   submits   that the lands sold for a consideration of Rs.   2,70,00,000/- belongs to the HUF members collectively.

Under these facts  and  circumstances  the  Appellant  prays that the consideration of Rs. 4,88.75.000/- confirmed by the CIT(A) on the  case  of  the  TDS  is  not  justifiable  in  law  since the property agree to be developed by the Developer M/s. Nambiar  Builders  Pvt  Ltd  who  have  deducted  the  TDS  was not materialized and the  land  was  not  transferred  in  favour of the said Company and therefore  the  Appellant  is  not  liable for Capital Gain Tax in the absence of transfer of property. Therefore the addition confirmed  by  the Ld.  CIT(A)  is liable to be deleted in the interest of equity and justice.

The Appellant submits herewith a Geniological Tree in support of the contention that the lands sold in favour of the individual Sri Ratheesh Nambiar vide  Sale  deed  dtd:  11-07- 2013 were ancestral property  and  the  lands  sold  were  the same lands which were agreed for development with the Developer Company M/s. Nambiar  Builders  Pvt.  Ltd.  as  per MOU dtd: 01-05-2013, Supplementary Agreement dtd: 27- 06-02013 and Second Supplementary Agreement dtd; 12-08- 2013.”

The Ld. D.R. submitted that the  CIT(A)  properly  considered the sale transactions   and   quantified   it   at   Rs.4,88,75,000/-   and it is supported by form  No.26 AS reproduced by the Ld. CIT(A)  in para 9  page  4  of  the  CIT(A)  order. According  to  the  Ld.  D.R., there is no error in the order of the CIT(A) and the same to be confirmed. Regarding status the Ld. D.R. submitted that the assessee itself offered the return of income in the capacity of individual. Being so, the  A.O.  and  CIT(A)  included  the  capital gain in the hands of present assessee as  an  individual  only without prejudice to the above arguments. Regarding additional ground, it was submitted that the issue may be remitted to theA.O. to consider the exact sale consideration on the  basis  of  sale deed.

Observation of the court.

Court has heard the rival submissions,   perused   the materials available on record and gone through the orders of the authorities below.   Admittedly  in this case, the CIT(A)  determined the sale consideration on the  basis  of  Form  26AS  without  seeing the actual sale deed entered by the assessee with concerned parties. In our opinion, sale consideration  cannot  be  determined only on the basis of Form 26AS. The provisions of s.2(47)(v) can be applied only if there is a written contract coupled  with  the transfer of possession in terms of s.53A of the Transfer of Property  Act.   In  English  law,  the  contract  to  which  the  doctrine of part-performance applies may be oral. However, s. 53A of the Transfer of Property Act expressly requires that the   contract must be in writing by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty. Thus s. 53A does not  recognize  an  oral contract. The writing is an essential sine qua non for the applicability of the doctrine of part-performance. The lower authorities must have considered the relevant sale deed so as to compute the correct value  of  sale  consideration  and  during  the year of assessment. Being so,  the   assessment  framed   on  the basis  of  Form  26AS  is  set  aside.   However,  we  make it  clear  that if the revenue finds that there  is  material  evidence  in  support  of the transfer of land by  assessee  to  M/s.  Nambiars  Pvt.  Ltd.  who had deducted TDS in anticipation of transfer of land  in  this  A.Y. under consideration that to be brought to tax. In other  words, if the revenue finds that there was a transferable land by the assessee in  favour  of  the  deductor  of  TDS  i.e.  Nambiars  Pvt.  Ltd. in the  A.Y.  by  executing  a  proper  sale  deed  towards  transfer  of the impugned property, the same may be   examined   in accordance with law. At this stage, we refrain from committing anything  on  status of  the  assessee   in  whose   name   capital  gain to be taxed as we have set aside the assessment. It is kept open.

Conclusion

In the result, the court partly allowed appeal filed by the assesse.

Jaya-Prakash-Vs-ITO-ITAT-Bangalore1

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