Rajasthan High Court - Jaipur
Pr. Commissioner Of Income Tax vs Naina Saraf on 9 May, 2022
Bench: Prakash Gupta, Sameer Jain
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Income Tax Appeal No. 16/2022
Pr. Commissioner Of Income Tax, Jaipur-II, Jaipur.
----Appellant
Versus
Naina Saraf, B-93, Surya Marg, Tilak Nagar, Jaipur.
----Respondent
For Appellant(s) : Mr. Nikhil Simlote, Adv.
HON'BLE MR. JUSTICE PRAKASH GUPTA HON'BLE MR. JUSTICE SAMEER JAIN Order 09/05/2022 Present appeal is filed under Section 260A of the Income Tax Act, 1961 against the order dated 14.09.2021 passed by the Division Bench of the Income Tax Appellate Tribunal (for short "ITAT"), Jaipur Bench, Jaipur in ITA No. 271/JP/2020 for assessment year 2015-16.
The appeal is preferred by the Revenue on the following substantial questions of law:-
"i) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in quashing the order passed by the PCIT u/s 263 of the IT Act, 1961 ignoring the fact that the assessment order was erroneous and prejudicial to the interest of Revenue as the Assessing Officer failed to enquire on the applicability of provisions of section 56(2)(vii)(b)
(ii) of the Act?
ii) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that there was no lack of enquiry by the Assessing Officer but the PCIT had considered the order erroneous and prejudicial to the interest of revenue without assigning any reasons."
The learned counsel for the Revenue has challenged the findings arrived at by the learned ITAT and submitted that the order passed under Section 263 of the Act was valid and justified.
(Downloaded on 24/12/2022 at 09:09:41 PM)(2 of 6) [ITA-16/2022] He submits that the order passed by the learned ITAT needs interference as the same was meeting out prerequisites of Section 263 of the Act which can be invoked when the assessment order is erroneous and prejudicial to the interest of Revenue.
We have considered the order impugned relied upon by Revenue counsel dated 14.09.2021 passed by learned ITAT, the relevant portion of the same are reproduced as under:-
"7. The undisputed facts are that the assessee applied for allotment of a Flat No. 201 at Somdatt`s Landmark, Jaipur having 50% share therein on 23.09.2006, pursuant to which, the flat was allotted vide allotment letter dated 06.03.2009 on certain terms and conditions as mentioned in the allotment letter, copy of which has been placed at Pg. 8-14 of the assessee's paper book. The assessee agreed to the allotment by signing the letter of allotment on 11.11.2009 as is apparent from the allotment letter signed by the assessee as a token of acceptance. It is also undisputed that prior to the registration of the transaction on 09.12.2014, the assessee had paid Rs. 45,26,233/- against the total agreed sale consideration of Rs. 65,57,500/-. A perusal of the allotment letter clearly shows that it contains all the substantive terms and conditions which create the respective rights and obligations of the parties i.e. the buyer (assessee) and the seller (the builder) and bind the respective parties. The allotment letter provided detailed specification of the property, its identification and terms of the payment, providing possession of the bjected property in the stipulated period and many more. Evidently the seller (builder) has agreed to sale and the allottee buyer (assessee) has agreed to purchase the flat for an agreed price mentioned in the allotment letter. What is important is to gather the intention of the parties and not to go by the nomenclature. Thus, there being offer and acceptance by the competent parties for a lawful purpose with their free consent, we find that all the attributes of a lawful agreement are available as per provisions of the Indian Contract Act, 1872. We also find that such agreement was acted upon by the parties and pursuant to the allotment letter, the assessee paid a substantial amount of consideration of Rs. 45,26,233/-, as early as in the year 2008 itself. We do not find merit in the contention of the ld. CIT that it was a mere provisional attachment which was subject to further changes because of the unexpected happening which may be instructed by the approving (Downloaded on 24/12/2022 at 09:09:41 PM) (3 of 6) [ITA-16/2022] authority, resulting into increase or decrease in the area and so on because it is a standard practice so as to save the seller (builder) from the unintended consequences. However, for all intent and practical purposes such an allotment letter constituted a complete agreement between the parties. We find that the judgement cited by the ld. AR in t the cases of Shikha Birla Vs. Ambience Developers Pvt. Ltd., MANU/DE/2524/2008 and Dilip M. Muni and Ors. Vs. Monarch & Qureshi Builders ANU/NULL/0062/2019, support the contention of the AR though based on S. 54. We draw strength from the decision in the case of Hansmukh N. Gala vs. ITO (2015) 173 TTJ 537, wherein it was held as under:
"Capital gains--Exemption under s. 54-- Purchase of new house vis-a-vis booking advance to builder--Assesse paid Rs. 1 crore as booking advance to a builder for purchase of new residential house after selling his old residential property--Though the legal title in the said property has not passed to the assesse within the specified period and the new property was still under construction, the allotment letter issued by the builder mentions the flat number and specific details of the property--There is no evidence that the advance has been returned-- Therefore, assesse can be said to have complied with the requirement of s. 54 and there is no reason to deny the claim of exemption under s. 54--CIT vs. Kuldeep Singh (2014) 270 CTR (Del) 561: (2014) 108 DTR (Del) 161 and Khemchand Fagwani vs. ITO (ITA No. 7876/Mum/2010, dt. 10th Sept., 2014) followed."
We also draw strength from the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kuldeep Singh (2014) 270 CTR 561 (Del), whereinthe Hon'ble Delhi High Court held that:
"Section 54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residential house (Purchase) - Whether where assessee having sold residential property, entered into an agreement with a builder within prescribed period of two years for purchase of flat payment of which was linked to stage of construction, assessee's claim for deduction under section 54 was to be allowed - Held, yes [In favour of assessee]"
In the lights of the above decision and on the appreciation of the facts and the evidences available on material, we are convinced that the parties had already entered into an agreement by way of the allotment letter in on 11.11.2009 falling in the A.Y. 2010-11.
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8. Now we come to the provisions of S. 56(2)(vii), which stood prior to the amendment.
"((b) any immovable property,--
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
The Finance Act, 2013 inserted clause (ii) in S. 56(2)
(vii)(b) reading as under:
"(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration".
The pre amended law evidently did not cover a situation where an immovable property was received by an individual or HUF for a consideration, whether adequate or inadequate, whether consideration was less than the stamp duty valuation by an amount exceeding Rs. 50,000/-. In other words, the pre amended law which was applicable up to A.Y. 2013-14 never contemplated such a situation and it was only in the amended law, specifically made applicable for and from A.Y. 2014 15 that any receipt of the immoveable property with inadequate consideration has been subjected to the provisions of S. 56(2)(vii)(b) but not before that. Hence, the applicability of the said provision in such cases, could not be insisted in the assessment years prior to a A.Y. 2014-15. Having said this, in this case, there was a valid and lawful agreement entered by the parties long back in A.Y. 2010-11 only, when the subject perty was transferred and substantial obligations were discharged. The law contained in S. 56(2)(vii)(b) as stood at that point of time, did not contemplate a situation of a receipt of property by the buyer with for inadequate construction. Hence, we are of the considered view that the ld. Pr.CIT erred in applying the said provision. Because of the mere fact that the flat was registered in the year 2014 falling in A.Y. 2015-16 on the fulfillment of the conditions, the amended provision of S. 56(2)(vii)(b)(ii) could not be applied. Our view finds support from the decision in the case of Bajranglal Naredi vs. ITO (2020) 203 TTJ 925 (Ranchi) (DPB 1-4) wherein it was held that:
"Income from other sources--Chargeability-- Applicability of s. 56(2)(vii)(b) vis-a-vis date of registration of property--Assessee got registered an immovable property on 17th June, 2013 against the actual purchase of property on 15th April, 2011--Purchase consideration was determined at Rs. 9,10,000 at the time of agreement for purchase--At the time of registration the stamp duty valuation stood at a higher figure at Rs. 22,60,000--Provision of s. 56(2)(vii)(b) was substituted by Finance Act, 2013 and made applicable to asst. yr. 2014-15 (Downloaded on 24/12/2022 at 09:09:41 PM) (5 of 6) [ITA-16/2022] onwards--As per the amended provisions, the scope of substituted provision was expanded to cover purchase of immovable property for inadequate consideration as well--Mere registration at later date would not cover a transaction already executed in the earlier years and substantial obligations have already been discharged--Hence, the AO is directed to delete the additions made under s. 56(2)(vii)(b)."
Hence, we are not in agreement with the view taken by the ld. Pr.CIT holding the applicability of S. 56(2)
(vii)(b)(ii) in the facts and circumstances of the case and therefore we hold that the assessment order, subjected to revision u/s 263, is not erroneous and prejudicial to the interest of the revenue. Therefore, considering the totality of facts and circumstances of the case, the impugned order passed u/s 263 of the Act by the ld. Pr.CIT, is therefore, quashed.
9. Once, we quash the order passed U/s 263 of the Act, then in that eventuality, the other grounds raised by the assessee become infructuous and needs no adjudication."
On consideration of the above, it is noted that, the view taken by the learned ITAT is based on logical findings. While rendering the judgment, the learned ITAT has relied upon various judgments of different High Courts and considered the provisions of 56(2)(vii) pre-amendment and post-amendment. Learned ITAT has held that law contained in Section 56(2)(vii)(b) as stood on the date of allotment letter (on 11.11.2009), falling in assessment year 2010-11, did not contemplate the situation of a receipt of property by the buyer with inadequate construction. The learned ITAT has held categorically that the amended provisions of Section 56(2)(vii)(b)(ii) could not be applied and they have relied upon the judgment of Bajranghlal Naredi Vs. ITO reported in (2020) 203 TTJ 925 (Ranchi) (DPB 1-4).
It is held time and again by the Apex Court qua the admission of appeal on substantial questions of law, more specifically in the case of Commissioner of Customs-I Vs. Aasu (Downloaded on 24/12/2022 at 09:09:41 PM) (6 of 6) [ITA-16/2022] Exim Pvt. Ltd.:(2018) 16 SCC 591 and Steel Authority of India Ltd. Vs. Designated Authority, Directorate General of Anit Dumping & Allied Duties and Ors.:2017 (349) E.L.T 193 (SC), wherein it is held as under:-
"(i) The question raised or arising must have a direct and/or proximate nexus to the question of determination of the applicable rate of duty or to the determination of the value of the goods for the purposes of assessment of duty. This is a sine qua non for the admission of the appeal before this Court under Section 130E(b) of the Act.
(ii) The question raised must involve a substantial question of law which has not been answered or, on which, there is a conflict of decisions necessitating a resolution.
(iii) If the Tribunal, on consideration of the material and relevant facts, had arrived at a conclusion which is a possible conclusion, the same must be allowed to rest even if this Court is inclined to take another view of the matter.
(iv) The Tribunal had acted in gross violation of the procedure or principles of natural justice occasioning a failure of justice."
On perusal of the ratio of the judgments rendered by the Apex Court, it is held that if the learned ITAT, on consideration of material and relevant facts, had arrived at the conclusion which is a possible conclusion, the same must be allowed to rest even, if this court is inclined to take another view of the matter.
In the case at hand, logical reasonings was given by the learned ITAT and there is no gross violation of the procedure or principles of natural justice occasioning a failure of justice.
Therefore, this court is of the view that no substantial question of law arises in the matter and therefore, the appeal filed by appellant is dismissed.
(SAMEER JAIN),J (PRAKASH GUPTA),J
Pooja/29
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