Income Tax Appellate Tribunal - Hyderabad
Syed Sikandera Ali, Hyd, Hyderabad vs Ito, Ward-6(3), Hyd, Hyderabad on 2 September, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
(THROUGH VIDEO CONFERENCE)
BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
I.T.A. No. 781/HYD/2015
Assessment Year: 2010-11
Syed Sikander Ali, Income Tax Officer,
HYDERABAD Vs Ward-6(3),
[PAN: ACVPA4441Q] HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri P.Dinakar, AR
For Revenue : Shri Sunil Kumar Pandey, DR
Date of Hearing : 20-04-2021
Date of Pronouncement : 02-09-2021
ORDER
PER S.S.GODARA, J.M. :
This assessee's appeal for AY.2010-11 arises from the CIT(A)-4, Hyderabad's order dated 27-02-2015 passed in case No.0514 / 2014-15 / ITO,Wd.6(3) / CIT(A)-4 / Hyd / 2014-15, in proceedings u/s.143(3) r.w.s.147of the Income Tax Act, 1961 [in short, 'the Act'].
Heard both the parties. Case file perused.
2. The assessee's sole substantive grievance as per his nine main substantive grounds challenges correctness of both the lower authorities' action making long term capital gain addition of Rs.2,81,88,700/- in the course of assessment :- 2 -:
ITA No. 781/Hyd/2015framed on 22-01-2014 as upheld in the CIT(A)'s lower appellate order reading as follows:
"3. The appellant during the course of appellate proceedings vide its letter dated 19/02/2015 had filed the following written submissions which are reproduced as under:
Mr. Sikander AH - Assessee vendor - badly in need of money/funds. Mr. Sikander Ali Was in dire need of monies to pay off his debts and also to marry off his daughters and so for the purpose at one time he wanted to dispose off his house Property at D.No.8.2-413/1/A, Road No.4 Banjara Hills, Hyderabad, at same reasonable bargain. The assessee vendor in the first instance, entered into a registered agreement sale cum GPA No.3966/2007 dt 30.11.2007 with K. Vijaya Bhaskara Reddy to sell his property bearing D.No.8-2- 413/1/A, situated at Road No.4, Banjara Hills, Hyderabad for a Consideration of Rs.1,60,00,000/-. In this connection, he was in receipt of Rs.10,00,000/- in Cheque form and Rs.40.00 lakhs in cash as token advance paid by the prospective vendee. As he could not pay he rest amount in time and for other reasons, the proposed sale transaction with Mr. Vijaya Bhaskara Reddy could not get Off and So Was, to be cancelled, It Was cancelled by doc. No.1140/2009 on 20.04.2009 by another registered cancellation deed.
Mr. Suresh Babu - Pro. Uma Enterprises -a broker or loan facilitation came into the picture. The assessee vendor later changed his mind of selling his lone inherited house property for the time being now and instead try for other ways to "encash" on the same. He Was also under pressure from Vijaya Bhasker Reddy to payoff his monies at the earliest within no time.
Mr.Suresh Babu Prop.M/s.Uma Enterprises was engaged as a loan facilitator to try for any possible loan against the assessee vendor's house property. In the course of obtention of loan against the said house property, the broker, after many trials informed the assessee vendor that the maximum loan that he could get by "mortgage of property" with any Bank would be in the range of Rs. 75.00 lakhs to 100.00 lakhs.
The assessee's loan requirements however were otherwise and he wanted something more than Rs. 100.00 lakhs as he was to pay Rs. 90.00 lakhs or so to Mr. Vijaya Bhaskara Reddy alone, amount taken against GPA from him along with interest thereon. Taking advantage of the assessee's delicate predicament situation, the broker Mr. Suresh babu leveraged for a cleverful bargain with the assessee saying that he could get more amount of loan, provided he was, in effect willing, at least on paper, to make for a "real registered :- 3 -:
ITA No. 781/Hyd/2015sale deed" of his property in some name instead of a "property mortgage loan" because a housing loan from a Bank. against house property could get at a lower interest rate as against the (high) interest rate on mortgage loan.
In that process he, viz. the broker too pitched himself in the deal as one more party along with the assessee and the purchaser of property to share in the amount of loan; so obtained against the pledge of registered sale deed property with any bank/finance company in the name of a I "housing loan".
The assessee vendor was thus made' to enter a make believe "sale deed" with one Mrs. Manju Devi Taparia W/o. Shiv Shankar Taparia which was duly registered on 20.04.2009 in the usual manner as per laws of land, with SRO, Hyderabad(South).incurring relevant expenditure of stamp duty in the process under Stamp Duty Act. The sale consideration therein was quoted at Rs.3,00,67,000/- as having been received by the assessee vendor.
During the course of assessment proceeds, the asses has emphatically asserted before the Ld. AO that he has not handed over the physical possession of his property to Mrs. Manju Devi and that he is still "in virtual physical occupation" of the said property even till date of this appeal before the Hon'ble.
In spite of assessee vendor's strong assertions that he is still in physical possession of his property the Ld AO took a different stand, to say in hi; own words that the "law is well settled that the sub Registrar will register a sale deed, when possession and title fully without any encumbrance on the property was handed over, and the vendor agrees that he/she has received sale consideration fully". He further went to say, that Supreme Court ill the case of "Suraj Lamp Inds, Vs State of Haryalla & Ors clearly ruled that a registered sale deed is onlu the valid document in terms of. transf.er and such deed is legally, and lawfully valid", No Possession given no transfer involved:-
The assessee vendor argues that he is still in virtual physical possession of his property as against What is so stated in the registered sale deed. The vendee of the property however, has not complained till date with any of the authorities or for that matter issued any" legal notice" against him nor petitioned the appropriate Courrt in the matter of his "continued illegal, physical occupation of the said property." Surprisingly she, by taking a curious turn around stand with no other possible alternatives available under the law and so only before the Ld AO, in her sworn statement came out openly with an ulterior intent/motive to put him in a corner/discredit his image in the society. She knows fully well that under any civil laws/criminal laws she could not succeed against the assessee :- 4 -:ITA No. 781/Hyd/2015
vendor as any such hasty/faulty step would boomerang on her in view of her being privy to other agreements entered with him. The assessee vendor, argues, that in the absence of his clear bona fide intentions/actions expressly made otherwise while entering such sale deed contract especially viz. when Such sale deed is accompanied. With (1) MOU Dt 16.04.2009 and (2) Agreement of reconveyance _ Dt. 18.05.2009. And to prove that, "sale deed is false", he has openly asserted "before the AO that he is still in "physical occupation" of the said of his own property unchallenged and unassailed of his rightful "titleship rights" - lawfully by the vendee of property - Mrs. Manju Devi Taparia. Suprisingly the LdAO has failed to take cognizance of the same and even evaded mention of the same viz., vendee's "physical possession" of the said property in his assessment order.
Case laws Cited - on sale deed registered - possession not given: As held in the case of Smt. Raj Rani Devi Ramna V CIT (1993) 201 ITR 1032 (Pat), the sale deed of the property was registered but possession was not given nor the payment was received. It was held by the Patna High Court that the transaction involved "no transfer. In the absence of any provision to the contrary, the concept of sale of an immovable property which is included in the term capital asset as defined u/s 2(14) has to be gathered from section 54 of Transfer of Property Act, 1882 (TP - Act).
In the present case, the parties viz. assessee vendor, and Mrs. Manju Devi had clearly intended that despite the execution and registration of sale deed under Registration Act 1908, the said deed accompanied with other "riders" (conditionalities) duly written and signed as between them in' clear terms is nothing but a piece of paper given required legality for the sole aim of obtaining loan from the Bank. And hence there is no "transfer of property" or sale' of property that took place with "possession of property" not being transferred from the assessee vendor and hence no capital gains would arise in the assessee hands.
Case law cited on Registration of document "necessary but not conclusive of transfer" :-
In: Hiralal Ramdayal V CIT (1980) 122 ITR 461 (Patt) the assessee had executed a sale deed in respect of certain immovable property and got it registered as well. But when the AO proposed to tax the capital gains arising there from, the assessee contended the sale deed was a "sham document" and no sale had in fact taken place. This contention was repeated right up to the Tribunal. But, the High Court observed that, no doubt, evidentiary value has to be attached to a registered document, but the document by itself cannot be final word in the matter. It has to be borne in mind that capital gains :- 5 -:ITA No. 781/Hyd/2015
accrue only if there is a sale or any other transfer of capital asset and if the assessee is able to prove that in fact no sale took place, in that case, no capital gain accrued which could be assessed to income
- tax. Even in the face of registered sale deed, if the assessee is able to prove by "cogent evidence" and satisfy the Tribunal that no sale as such took place, the conclusion that there was no capital gain. 'Whereas the vacant possession was not handed over by the assessee to prospecting transferee company, the transaction entered with that company by the assessee for immoveable property could not be termed as "transfer" within the meaning of section 2(47)(V) r.w.section 53A of TP Act B.K.Jhala & Associates Vs. Asst. CIT (2000) 14 DTC 201. (Pune-Trib.).
Transfer where "Possession" not transferred to the transferee. - "AO given ample documentary evidences".
As discussed in preceding paragraphs, the At) was given during the course of proceedings the following documents.
1) Copies of MoU Dt. 16.04.2009 (not registered)
2) Agreement of reconveyance Dt. 18/05/2009 (not registered) entered into as between the assessee vendor and Mrs. Manju Devi Taparia, The above agreements relate to the "property" that is purported to have been so "sold" to Mrs. Manju Devi.
a) The MoU agreement Dt. 16.04.2009 inter alia provides/says that:-
(extract of relevant clauses) . .
Clause No. (1) & (2) reads:-
The 01st party( the assessee vendor) and 02nd party (Mrs. Manju Devi Taparia) mutually agreed and accepted to execute registered sale deed in aspect of scheduled property with any financial institution and the said sale deed is executed without any sale consideration purely for the purpose of obtaining loan to an execute Rs.2,81,50,260/-. The 01st party & 02nd party mutually agreed and accepted that the 01st party will share loan amount. Clause No 5 reads:-
The 02nd party hereby admits' and declares that sale deed would be executed only a document for the purpose of obtaining loan from any .financial, as the 02nd party has good reputation in repayment of loans and so the 02nd party (Mrs. Manju Devi Taparia) is not the bona fide purchaser in respect of scheduled property. Clause No.9 reads:-
The 02nd party admits and declare that sale deed which would be executed by the 01st party in favour of the 02nd party through the :- 6 -:ITA No. 781/Hyd/2015
said registered sale deed the 02nd party will not have any right, title, interest in respect of scheduled properly.
Clause No.10 reads:-
That the 02nd party has admitted and accepted to execute Agreement of Reconveyance or cancellation of registered sale deed on the same day where the registered sale deed will be done in favour of it.
Clause No. 11 reads:-
That the 02nd party hereby undertakes 'and declare that by using the registered sale deed would be executed in favor of it by the O1st party will not be misused and the 02nd party undertakes that it will not execute any deed of conveyance in favour of any third party.
b) The Agreement of Reconveyance Dt. 18.05.2009 inter alia by clause No (1) reads as under.
The 1st Party - Mrs. Manju Devi, and the 2nd party Mr. Sikander Ali - the assessee vendor mutuallu agreed and accepted that. to execute:
the registered sale deed in favour of the first party with a condition to reconvey the scheduled property on payment of sale consideration as mutually agreed in MOU Dt. 16.04.2009.
Clause No (2) of the same agreement says - the 1st party Mrs: Manju Devi hereby undertakes that NOT TO REGISTER SALE DEED or ANY DEEDS in favour any .third party(ies) within a period of 05 years from the date of execution of this Agreement of Reconveyance. MOU & Agreement of Reconveyance - Unregistered documents as observed by Ld AO. The Ld. AO's argument that the said 02 agreements viz. MOU for the loan obtained .on "execution of sale deed" with Mrs. Manju Devi and also Agreement of reconveyance as entered into as between them by the parties thereto, having a bearing on the very subject. matter of property sold, since they being unregistered, and hence should not to be considered, does not have a force in it and so speaks of his perfunctory mind on the subject. Agreements - validity and their enforceability Agreements as between two/more individuals/persons if made as per Law of Land viz. Indian Contract Act are valid contracts enforceable in a court of law.
The AO should have realized that all agreements need not be registered so as to be enforceable in law. As per Sec 2(h) of Indian Contract 1872, any agreement enforceable by law is a contract. III other words, all such agreements if entered on valid and appropriate stamp value under Indian stamp Act are very much "enforceable in a Court of law" provided' they are fulfilling the basic :- 7 -:ITA No. 781/Hyd/2015
requirements (1) An offer, (2) An acceptance, (3) 'Competence of the parties to contract, (4) Lawful subject matters, (5) Mutuality of Obligations & (6) Consideration.
Thus the above 02 agreements, viz. MOU and Agreement of Reconveyance, as entered into as between the two persons are very much "enforceable in law". Unfortunately he has not said anything about their "enforceability in law" in his assessment order other than merely saying they are nonregistered and hence he has not considered them.
Registerability of agreement documents:-
As has been said earlier all agreements/contracts need not get registered tender Registration Act unless they are so prescribed specifically as such, Suffice it, should they are properly stamped of appropriate value under Indian Stamp Act, to make them duly enforceable in a court of law, in case of any dispute arising there, from by either of parties 'to such agreements. At the worst, in the eventuality should such, agreements suffer any "deficiencu" of non - registration, depending on the nature, significance, intent of parties involved and specific law - whether national/international under which they are so entered/made unless the context subject matter is inimical to any law of land or State/society at large, Courts at times, in general, give a fair opportunity for rectification of such deficiency by the parties to make them legally enforceable for justice renderability, Thus in cases of enforceable agreements/contracts, courts are the ultimate jurisdiction to role over such matters. MOU Agreement & Agreement of Reconveyance - why they remained unregistered.
Registration of any document under Registration Act 1908 has its own unique advantage of being in "public domain" and protected from fraud end forgery of documents of transfer. Further registration provides information to people who may deal with a property, as to the nature and extent of the 'rights' which persons may have, affecting the property. In other words, it enables people to find out whether any particular property with which they are concerned, has been subjected to any legal obligation or liability and who is (are) the person(s) presently having right, title, and interest in that property. It gives solemnity of form and perpetuate documents which are of legal importance or relevance by recording them, where people may see the record and enquire unique and ascertain what the particulars are 'and as far as land/immoveable property is concerned what obligation exist with regard to them.
:- 8 -:ITA No. 781/Hyd/2015
Thus, as aforesaid, the above 02 agreement documents viz. MOU & Agreement of Reconveyance, if they too had been registered in addition to "sale deed" document registration the assessee vendor and vendee (parties to the documents) would "disentitle" themselves from getting any "possible loan" against the said property from any Bank/Financial Institutions or even from a private financer as lenders suspect that no clear valid sale/title of property as per Law of Land has taken place/exists or that the sale of property in question would be subject to legal wrangling/litigations for years together with no clarity position.
In the present case the AO, has neither shown his modicum of patience/willingness to understand the entire issue in its-whole gamut nor has he sought requisite expert legal advice on the same before he came to his prejudiced conclusion of saying that such agreements are not fit for consideration. at all to the present context.. The AO thus, should have realized that the "intent of parties" is the fulcrum, on which, the other aspects come to stand one over the other. First let us take "sale deed" which is executed and registered under the Indian Registration Act 1908. If it is read on stand alone basis anyone would, naturally, come to a firm conclusion that the "sale of property" has in effect taken place in all respects and aspects and so the vendor of the property is fit and eligible for levy of capital gain tax under the Income Tax Act. Thus there is no room for any doubt on the matter and point of taxation which is straight forward for easy consumption.
Anyone would then say that the sale of property effected is "a complete sale" with all ingredients of sale contract characteristics having been fulfilled as per Laws of Land viz. Transfer of Property Act, Sale of Goods Act, Indian Contracts Act and lastly Indian Income Tax Act to be eligible for levy of charge of Capital gains Tax. In other words, the seller/vendor and purchaser of property, one would assume that they are with "clear intentions of their mind and actions: with no ambiguities attached there to in performance of contract of sale.
It is only when the vendor attempts to produce some more agreements/contracts copies/documents relevant to "such completed sale" of property, which make the things a bit entwined/complicated vitiating the topic of "completed sale of property". In other words, the lateral agreements/contracts viz. MOU agreement saying in the instant case the "sale of property" is subject to availing of "loan" requirements by the assessee vendor and purchaser of property agreeing to "certain conditionalities". Agreement of Reconveyance - says that "sold property" should get reconveyed to the assessee vendor with provision of certain time :- 9 -:ITA No. 781/Hyd/2015
period limits - as are entered into by the same parties in full knowledge of their legal consequences.
Thus purchaser of property is fully made aware of her "limits" which put a bar on her rightful enjoyment of property as otherwise that would have been available to her had it not been a "conditional sale". More over the purchaser is fully aware that, till date she-is nor-given "vacant possession of the property" by the assessee vendor to her though the "executed sale deed" so said which but remained only on paper". This is because that she, in· full knowledge and to her own conscience executed 02 more separate agreements in addition to usual sale deed of property - viz. MOU & Agreement of Reconveyance "with the assessee vendor, which "handcuffed up her hands" to initiate any 'legal steps" worth the name under the law of land against him. In other words she is specifically estopped from proceeding so under the law by an express agreement with the assessee vendor in connection with said property. Thus both the assessee vendor and purchaser of property, did not have "clear set of minds" on the alleged sale Deed of property "from the very beginning". In other words it is nothing but a "conditional sale of property" as between the parties with other objective/purpose in their minds and hence the alleged sale transaction of property does not qualify itself to be called "as transfer/sale of property" in view of possession of property has not passed on to "purchaser" in realistic terms but remaining "on paper" under the Transfer of Property Act and also "Sale of Goods Act".
Conditional Sale " not a "Complete sale of Property "Sale" as defined under sub clause (i) of clause (47) of Sec.2 of Income Tax Act, 1961.
Section of 54 of Transfer of Properties Act 1882, defines sale as under:-
"a transfer of ownership in exchange for a price paid or promised or part paid or part promised".
Sec 4(3) of the Sale of Goods Act 1930, the definition of sale is as under -
"where under a contract of sale of the property in the goods is transferred, the contract is called a "sale".
Thus the Income Tax Act, takes the definition of term, "sale" as defined under relevant provisions of Transfer of properties Act and the Sale of Goods of Act.
The term "sale" as used in those relevant provisions of the said two Acts connote the meaning of a "completed sale" and not a "conditional Sale" viz. a "type of sale" where certain "conditions" are attached by :- 10 -:ITA No. 781/Hyd/2015
the parties involved in the transaction. The conditionality attached/rooted to a "sale transaction" may be of different kinds varying to situational circumstances" the said parties have come together for a common cause/objective" exclusive to them. Parties always intended to obtain loan from a Bank - their sole objective & aim.
In the present case, the parties to "alleged sale transaction of property" have roundly intended to obtain loan from a Bank against the "security of property" in the name of purchaser of property viz. Mrs. Manju Devi, which amount would be shared as per some agreed arrangement. For the purpose, as per broker's (Mr. CH. Suresh Babu), facilitation and his advice on the matter, the assessee vendor has agreed to "make sale of his property" in the name of Mrs. Manju Devi, through a make-believe deed only for the sale aim of obtaining a loan against security of the said house property.
To that end, the assessee vendor and Mrs. Manju Devi, purchaser of property have entered into 02 more written agreements viz. (1) MOU (2) and an Agreement of Reconveyance which intend to specifically put impose "restrictions" on the rights/claims accruing from the execution and registration of sale deed of property for a certain period of time 05 years from the date of "sale deed" - until which time, the purchaser of property" as per "sale deed" shall not venture to sell or deal with the "purchased property" or enforce her "lawful rights" as the "Lawful property owner of the said property. To that end, the assessee vendor has "intentionally" NOT handed over possession of the property both as per legal advice and in "tacit concurrence "with purchaser of property Mrs. Manju Devi Taparia.
The assessee vendor, thus in the sworn statement before the Id AO, to question No 8, has strongly stated that - "he has not handed over or transferred his property possession to Mrs. Manju Devi". This is because, armed with the 02 said agreements - MOU Agreement and Agreement of reconveyance I\possession of property" not vet parted with, by him, he could stop her of any possible enforcement/encroachment of any legal claim/right by the purchaser of property in a court of law, and therefore, neither in terms of Sec 2(47) (V) of Income Tax Act, nor in terms of Sec 53A of TP Act the impugned "sale deed" transaction could be classified as "transfer: of capital asset or could be so considered as a "completed sale"
transaction in view of it being a conditional sale".
Assessee vendor in submission of relevant documents to the Ld AO:-
The assessee vendor in the present case, as stated earlier is well, in submission of all relevant evidences of documents of agreements viz. MOU and Agreement of Reconveyance in his sworn statement before the ld AO in support of his contention that the sale deed of his :- 11 -:ITA No. 781/Hyd/2015
property with Mrs. Manju Devi makes it a "conditional sale" not a completed sale" and hence do not come under the definition of "transfer" U/S 2(47) of Income Tax Act. It is unfortunate that the Ld AO, it appeared wantonly disregarded the above 02 agreements documents by citing a flimsy excuse that they are "not registered" in law for consideration.
Case law quotes - as come to be mentioned in the order of assessment by LdAO. Suraj Lamp Industries (P) Ltd, vs State of Haryana & Anr 13917 of 2009 Dt. 01.10.2011.
Hon'ble Supreme Court Ruling on other modes of transfer of properties other than by Registration.
At first, the above case, law, as come to be quoted by the AO is not a case law pertaining to the Income Tax matter. It is a case law delivered by Hon'ble Supreme Court in a matter pertaining to immoveable properties transferred/conveyed by other modes of transfer not getting registered under the Indian Registration Act - like, sale agreements/Agreement to sell/General power of attorney/will which are known as Indirect sales.
It has come to the notice of Hon'ble Apex court, that there is growing a parallel economy running in to hundreds of crores of rupees within the country's economy through land/real estate business mafia openly by passing/violating established relevant laws of land and so indulging in generation of "black money" with devious methods of so called "indirect sales of immovable property" getting officially registered under the Indian Registration Act. Thus the Hon'ble Court has observed that high rates of stamp duties in respect of dealings of purchase/ sale of immovable properties, existing in certain states are one of the prime causes/factors encouraging such indirect sales causing much revenue loss to the country's exchequer in the form of stamp duty, Income tax & Wealth Tax evasion. This is because a majority of dealings pertaining to immovable properties~ are being made through General Power Attorney, Agreements to sell and will whi.ch need not be "registered" as such under the Indian Registration Act. Only confirmed dealings or direct sales in immovable properties are getting registered under the- Indian Registration Act and the rest, as detailed above are not so getting registered on account of gaping hole prevailing in the present law.
And hence, to curb such rampant misuse of Registration Act, the Apex Court directed the sates of Delhi, Haryana, Punjab & Uttar Pradesh, to make suitable changes in Registration Act of respective states, making compulsory registration of documents containing contract to transfer for consideration like agreement to sell etc. :- 12 -:ITA No. 781/Hyd/2015
Vague/unfounded charges/comments made against the assessee:- The AO has remarked, in Para 34 of his. order that" by entering into unregistered MOU just before sale deed registration before the sub registrar and entering into an unregistered Agreement of Reconveyance is nothing but putting a colourable device to avoid capital gain tax but nothing else".
The AO also said in Para 31 of the order quote "entering into an MOU and giving a statement that the registered sale deed has no legal sanction, but a merely a colourable device or avoidance a tax as held in Mc Dowell & Co. Ltd. Vs TO (1985) 154 ITR 148(SC). That the Ld.AO by attempting to apply case laws, as above stated, Suraj Lamp Inds. & (P) Ltd. Vs State of Haryana and MC Dowell & Co. Ltd.
- to the present case of the assessee- just because of (1) sale deed came to be executed and registered and (2) MOU & Agreement. of Reconveyance relating to the said property not so registered and so imputing the "said agreements" as nothing but a colourable devices only to evade capital gains tax by him is a serious baseless insinuation and unfounded charge on an honest citizen of tax payer without any basis of corroborative material /concrete proof on record from his end brought against him.
Similar case raw cited - Maharana Bhagwat Singh Ji Vs CIT (Raj) A similar case to the present one could be worth citing here: Moharana Bhagtoat Singhji (Deed) vs. CIT (10.05.2002)" Equal citations: (2003) 183 CTR Raj 137,2003,259 ITR 381 Raj. In the above cited case, the assessee had sold certain immovable properties during the P.Y.1972 - 73 (A.Y.1973 - 74) but he declared no capital gain on the sale of the properties.
It was mentioned in the sale deed that the total consideration had already been received by the transferor and the procession of transferee Lake Palace Hotels & Motels (P) Ltd. It was submitted on behalf of the assessee HUF that by a subsequent MOU dt. 12.01.1973, the parties agreed and accepted that only lower portion of Shiva Nivas Place was transferred to the transferee. It was also submitted that a cancellation deed dt. 09.10.84 was also executed between the parties. The AO, however, rejected all the contentions and assessed the value of the property at Rs. 2,00,000/-. The assessee, aggrieved by the. order, preferred an appeal which was rejected by CIT (Appeals). The assessee went on in further appeal before the ITAT reiterating the contention raised before the AO.
The Tribunal, too, rejected his appeal! citing MOU dt.12.01.1973 the lease deed dt. 14.12.1978, the cancellation deed dt.09.10.1984 and the certificate dt.15.03.1989 could not change the legal position that :- 13 -:ITA No. 781/Hyd/2015
the property in question had stood transferred to Lake Palace Hotels & Motels (P) Ltd. Further, in the opinion of the Tribunal, the documents referred to are self serving documents and as such they cannot be acted upon being in violation of the provisions of the Transfer of Property Act, Indian Registration Act and the Stamp Duty Act. Accordingly, the Tribunal rejected the appeal. Subsequently, the assessee HUF, filed an application U/S 256(1) of I- Tax Act seeking certain questions to be referred to Rajasthan High Court for opinion.
The Hon'ble Rajasthan High Court ruled that the Tribunal committed an error in refusing to refer the "question of law" as formulated by the assessee HUF in his application for "opinion of this Court" allowing the reference application filed by the assessee. Mr. Suresh Babu - a broker in the loan facilitation deal _ his role conspicuously ignored:-
It is also surprising that Ld AO has conveniently ignored to interrogate/probe Mr.Suresh Babu Prop. M/s. Uma Enterprises a broker in loan facilitation in the entire deal, arranged by him/using his good offices to arrange loan sum for the 02 parties viz. the assessee vendor and Mr.Manju Devi Tapa ria. Further, this gentlemen also signed on some agreements viz. MOU, on behalf of Mr. Manju Devi Taparia as her representative.
The assessee vendor in his sworn statement before the AO in Q.No.6 of the assessment order has unmistakably highlighted the said broker's vital role, which came to be played by him. At his insistence, he had given Rs.2,00,000/- by cheque 166198/- and Rs. 81,00,000/- by another cheque No.166197 which got transferred to M/s. 'Uma Enterprises' by the broker Ch.Suresh Babu. Why the AO has deliberately failed to further investigate/probe into the affairs is a moot point in this entire episode inspite of the said broker's role being brought to his notice.
Tenancy agreement by the assessee/vendor with Mr. Abdul Haleem Baig Mq. Director M/s.Dream India Builders - a proof that he is still in physical occupation of his "so called sold property". The assessee vendor has entered into a tenancy agreement with Mr. Abdul Haleem Baig Mg. Director M/s. Dream- India Builders on 30.04.2012 for letting out ground floor and the 1 sf floor portion to him/company on a monthly rent of Rs. 40,000/- at his premises H. No. 8-2-413/1 A, situated at Banjara Hills, Hyderabad.
It may be worth mentioning here that Dream India Builders has also a Sister Concern by name Pride India, Mansions (P) Ltd. which is also owned by the same individual Mr. Abdhul Haleem Baig.
:- 14 -:
ITA No. 781/Hyd/2015The owner Mr.Syed Sikander Ali, assessee/vendor, who is in physical occupation of "alleged sold property" till date, has been receiving monthly rental amounts from the said tenant deposited in his own/personal bank account.
In other words, this is one of the proofs over and above his stated assertions, that he is still in "physical occupation" of the alleged sold property to Mr. Manju Devi Taparia.
Receipt of notices from GHMC - Municipal corporation:-
The 'assessee vendor also states that he is in receipt of municipal / property tax notices in his name as "owner" of the said property the latest of such notices - dt. 17.12.2014 & 09.01.2015 which go to prove his Base of argument that he is in physical occupation of the property in the records of GHMS authority.
Receipt of rental income duly shown in the 1- Tax returns that come to be filed by him.
Receipt and accounting of rental incomes received from Dream India Builders / Pride India Mansion (P) Ltd. are unfailingly shown in the Income Tax returns filed by the assessee vendor for AY. 2013-14 & 2014-15. Thus he has shown Rs.4,62,500/- for the AY.2013-14 and Rs.7,20,500/- for the AY.2014-15.
Such rental income receipt declaration, as per Income Tax Act provisions would come to be shown only by the veritable "Owners" of immovable property a "term" specifically "defined" under said Act. Further the TDS form 26 AS statement downloaded from TRACES site against his PAN - ACVPA 4441Q shows receipt of rental incomes from Pride India Mansions (P). Ltd. for the AY 201-15. All the above documents / information go to prove that he is de-facto "owner" of his property who is still in "physical occupation" of the said property beyond doubt.
In the light of above foregoing, submissions / explanations, before the Hon'ble, it is earnestly prayed by the assessee vendor, in equity and fair justice of law, to kindly consider cancelling the assessment order as bad and void in law.
4. Though the assessee has taken 21 grounds in appeal they all relate 'to one issue i.e. assessment of capital gains on account of transfer of property situated at Road No.4, Banjara Hills, Hyderabad vide document dated 29/04/2009. The basic contention of the assessee is that the registration document cannot be taken as conclusive proof to hold that there is a transfer resulting in capital gains. The contention of the' assessee is that the preceding and subsequent events also should be taken into account to arrive at the true character of the transaction. With the help. of certain documents :- 15 -:ITA No. 781/Hyd/2015
the assessee 'contended that the transaction in question is only a document to accommodate taking loan mortgaging the property. For this purpose the assessee is relying on the following:
i. There was an. earlier transaction in the form of agreement of 'sale cum GPA with Mr. Vijaya Bhaskara Reddy on 30/11/2007, against which the assessee has received substantiative amounts. As the above deal get cancelled, the assessee has to repay the amount along with interest. The assessee claims that the transaction 'in question was entered into particularly to repay the amount to Mr. K. Vijaya Bhaskar Reddy.
ii. The assessee approached some brokers for arranging loan against mortgage of property to repay. the amount to Mr. K. Vijaya Bhaskar Reddy, during the negotiations, the broker suggested that the loan could be arranged if a "registration sale deed" is executed. iii. To safe guard the interest of the revenue an MOU dated 16/04/2009 was entered into showing the real intention. After the sale deed also an agreement of reconveyance dated 18/05/2009 was also executed between the same parties as per MOU. iv. The assessee claims that he is in a possession of property and receiving the rent from the tenant. The rent received is shown as his income in his, individual capacity as income from house property which is being accepted by the Department. The assessee filed copies of the returns and a computation of income for the AYs 2013-14 & 2014-15 for this purpose.
5. 'The assessment order, the submissions of the assessee during the assessment proceedings and the appellate proceedings and the documents placed on record are considered. It is seen that there is no ambiguity as to whether there is transfer within the meaning to Section 2(47) on account of execution of the document dated 29/04/2009. The document clearly records that the consideration has been received and the possession has been handed over to the purchaser. The assesse's reliance on earlier transaction and application of part of consideration for repayment of money to Sri K Vijaya Bhaskar Reddy with whom an earlier agreement of sale / GPA was entered into is of no .relevance to decide the nature of the transaction. The distribution of money between the broker, assessee and the purchaser of the property from the loan raised against the property is a subsequent act wl1lkh would not change character of the transaction already entered into by the assessee with lite purchaser of the property. The fact that ultimate purchaser Smt Manju Devi Teparia has admitted on oath that the consideration as recorded in the document was passed on and the transaction duly recorded in her accounts and shown in the return of income filed by her for the AY 2010-11. The above documentation duly confirmed by :- 16 -:ITA No. 781/Hyd/2015
the ultimate purchaser is of utmost importance to arrive at the true nature of the transaction. As regards of the MOU dated 29/04/2009, it is seen that there is no reference of any such agreement in the registration deed entry into on 29/04/2009. Similarly the agreement of free conveyance allegedly entered into on 18th May, 2009, is un- registered and cannot completely relied upon. Further, the possession of the property and receiving the rent from the tenant would depend on later understanding This cannot be a consideration to decide whether the assessee property was passed on through a regal document conferring enforceable rights to the purchaser. In view of the discussion as above, I hold that there was a 'transfer' within the meaning of Section 2(47) of the Income tax Act, 1961 giving rise to capital gains as evidenced by the document dated 29/04/2009 between the assessee and Smt. K. Manju Devi Taparia. Accordingly, the action of AO in assessing the capital gains is confirmed and the assessee's appeal on this ground is dismissed".
3. This assessee has preferred his twin petitions dt.30-05-
2018 and 05-03-2019 along with the corresponding additional evidence as well. All the said pleadings and additional evidence further seek to substantiate his case that the transfer of the relevant capital asset by way of sale deed dt.20-04-2009 in issue was indeed a sham one in light of the alleged Memorandum of Understanding (MoU) dt.20-04-2009 and re- conveyance deed dt.18-05-2009; respectively. Learned counsel invited our attention to assessee's paper book(s) further containing the rental agreement between the assessee and one Shri Abdul Haleem Baig dt.30-04-2012, ICICI bank statement, confirmation coming from M/s.Pride India (M) Pvt. Ltd. etc regarding paying of rent to him for the period from April, 2014 to March, 2015 after deducting TDS, written submissions and initiation of civil/criminal proceedings before the learned Chief Metropolitan Magistrate, Nampally Criminal Courts at Hyderabad by his son Shri Syed Md.Mustafa Ali Vs. RBL Bank and others as well as a civil suit in the learned civil court at :- 17 -:
ITA No. 781/Hyd/2015Hyderabad qua the very asset etc. Learned counsel therefore pleads in tune with the assessee's stand through out as well as in light of these legal intervening development Assessing Officer as well as the CIT(A) have erred in law and on facts in treating the sale deed herein dt.20-04-2009 as a valid transfer u/s.2(47)(v) of the Act giving rise to the impugned long term capital gain addition. We legally made a very strong endeavour to get the impugned issue remanded back to the Assessing Officer to examine afresh in light of the findings by the foregoing judicial forums (supra).
4. We have given our thoughtful consideration to rival pleadings against and in support of the impugned addition we find no reason to express our concurrence with this taxpayer's stand. This is for the reason that he has already executed the impugned registered sale deed; treated as a valid transfer u/s.2(47)(v) of the Act which is deemed to have superseded all the oral as well as un-registered documents between the vendor and the vendee; as the case may be. And also that whatever are the documents sought to be filed by way of additional evidence, the same only contain pleadings before the respective civil and criminal courts (supra) which are yet to attain finality. We are unable to treat the assessee or his family members' pleadings or evidence therein as forming the sole basis so afar as assessment of his impugned capital gains is concerned. We wish to refer to hon'ble apex court's decision in CIT Vs. Balbir Singh Maini (2017) [86 taxmann.com 94](SC) rejecting the department's pela seeking to invoke a transfer in absence of registered document, thereby squarely covering the :- 18 -:ITA No. 781/Hyd/2015
issue so far as the facts herein are involved as this assessee had not only appeared before the registration authority claiming therein that he had indeed transferred peaceful and vacant possession of the relevant capital asset but also received the entire corresponding sale consideration. Any prior or subsequent document therein to, oral as well as an unregistered one ought to be taken as superseded by the foregoing registered transfer document in issue. We therefore quote hon'ble apex court's yet another decision CIT Vs. K.Y.Pilliah (1967) [63 ITR 411] (SC) to express our concurrence with the CIT(A)'s detailed discussion under challenge. The assessee's strong endeavour to rely on the foregoing litigation (supra) as well as evidence deserves to be declined in light of his registered sale deed dt.20-04-2009. We accordingly uphold the impugned long term capital gain addition in assessee's hands. All the assessee's applications/petitions seeking to admit additional grounds and evidence shall be deemed to have been disposed-of in light of our foregoing detailed discussion.
5. We lastly acknowledge that although the instant lis is being decided after a period of 90 days from the date of hearing as per Rule 34(5) of the IT(AT) Rules 1963, the same however, does not apply in the covid lockdown situation as per hon'ble apex court's recent directions dated 27-04-2021 in M.A.No.665/2021 in SM(W)C No.3/2020 'In Re Cognizance for extension of limitation' making it clear that in such cases where the limitation period (including that prescribed for institution :- 19 -:
ITA No. 781/Hyd/2015as well as termination) shall stand excluded from 14th of March, 2021 till further orders in above terms.
6. This assessee's appeal is dismissed in above terms.
Order pronounced in the open court on 2 nd September, 2021 Sd/- Sd/-
(LAXMI PRASAD SAHU) (S.S.GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad,
Dated: 02-09-2021
TNMM
:- 20 -:
ITA No. 781/Hyd/2015
Copy to :
1.Syed Sikander Ali, C/o. Sri S.Rama Rao, Advocate, Flat No.102, Shriya's Elegance, 3-6-643, Street No.9, Himayat Nagar, Hyderabad.
2. Income Tax Officer, Ward-6(3), Hyderabad.
3.CIT(Appeals)-4, Hyderabad.
4.CIT,Hyderabad.
5.D.R. ITAT, Hyderabad.
6.Guard File.