Karnataka High Court
The Commissioner Of Income Tax vs Mr.Abdul Wahab on 19 January, 2021
Bench: Alok Aradhe, Nataraj Rangaswamy
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF JANUARY 2021
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY
I.T.A. NO.249 OF 2015
BETWEEN:
1. THE COMMISSIONER OF INCOME TAX
BANGALORE.
2. DY. COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE 1(3)
BANGALORE.
.... APPELLANTS
(BY MR. E.I. SANMATHI, ADVOCATE)
AND:
MR. ABDUL WAHAB
NO.292, 2ND CROSS
RAHAMATHNAGAR
BANGALORE
PAN: AAKPW2099P.
... RESPONDENT
(BY MR. B.S. BALACHANDRAN, ADVOCATE)
---
THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX
ACT 1961, ARISING OUT OF ORDER DATED 19.12.2014 PASSED
IN ITA NO.527/BANG/2013 FOR THE ASSESSMENT YEAR 2006-07,
PRAYING TO:
(i) DECIDE THE FOREGOING QUESTION OF LAW AND/OR
SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY
THE HON'BLE COURT AS DEEMED FIT.
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(ii) SET ASIDE THE APPELLATE ORDER DATED 19.12.2014
PASSED BY THE ITAT, 'A' BENCH, BANGALORE, AS SOUGHT FOR,
IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL
PROCEEDINGS IN ITA NO.527/BANG/2013 FOR A.Y.2006-07.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY,
ALOK ARADHE J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for short) has been filed by the revenue. The subject matter of the appeal pertains to the Assessment Year 2006-07. The appeal was admitted by a Bench of this Court vide order dated 24.08.2016 on the following substantial questions of law:
"Whether on facts and circumstances, the Tribunal was right in holding that there was no transfer of the property by the assessee and as such no capital gains arise even when the ingredients of Section 2(47) of the Income Tax Act, 1961, are clearly satisfied in the case of assessee?"
2. Facts leading to filing of this appeal briefly stated are that a search was conducted under Section 132 of the Act in the premises of one Prakash Shetty, partner of M/s. Gold Finch Hotels Group and others at Bengaluru. During the 3 course of search, certain incriminating material were found and it was also found that the assessee had sold certain properties and had not paid capital gains. Thereupon, proceedings under Section 153C of the Act read with Section 143(3) were initiated in the case of the assessee who is an individual. The order of assessment was passed by the Assessing Authority on 28.10.2011. The Assessing Authority inter alia held that as per the seized material, the assessee had entered into an agreement for sale as well as executed irrevocable General Power of Attorney on 21.12.2005 in favour of M/s. Trishul Developers for sale of land measuring 1.47,898.98 square feet situated in Veerasandra Village of Sy.No.48 and 48/1 and has received total sale consideration of Rs.7,90,68,395/- out of which, a sum of Rs.5,01,37,720/- was paid by way of Cheque and Rs.2,97,27,675/- was paid by way of cash to the assessee. It was further held that the aforesaid fact was confirmed by Prakash Shetty namely partner of M/s. Trishul Developers in the course of search. As the assessee did not offer the sale consideration to tax, therefore, the Assessing Authority made an addition of Rs.7,57,65,395/-.
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3. Thereupon, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 13.02.2013 dismissed the appeal preferred by the assessee. The assessee thereupon filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The Tribunal, by an order dated 19.12.2014, inter alia, held that the permissive possession given by the assessee to the holder of the agreement cannot be considered as transfer and therefore, provisions of Section 2(47) of the Act cannot be invoked to the fact situation of the case. In the aforesaid factual background, the revenue has filed this appeal.
4. Learned counsel for the revenue submits that as per Section 2(47) of the Act, the expression 'transfer' includes extinguishmet of the rights. It is also submitted that Section 2(47)(ii) of the Act stipulates "any transaction involving allowing of the possession of any immovable property to be taken or retained in part performance of the contract of the nature referred to Section 53A of the Transfer of Property Act and further Section 2(47)(v) read with explanation (2) 5 stipulates transfer which includes part performance. It is further submitted that in the instant case, the Assessing Authority as well as the Commissioner of Income Tax (Appeals) had satisfied themselves that all the conditions pertaining to transfer were satisfied. Our attention was also invited to Clauses 5, 7, 10 and 11 of the agreement and it was also pointed out that on the same day, irrevocable General Power of Attorney was executed by the assessee in favour of the purchaser and as per clauses (k), (l), (m), (o),
(p), (q), (s), (u), (v) of the General Power of Attorney, the assessee had transferred entire rights in the property. It is also pointed out that in sum and substance, the assessee had delivered the possession and had received the entire sale consideration. It is also submitted that the Tribunal did not take into account the incriminating material which was found against the assessee during the course of search. It is submitted that the finding recorded by the Tribunal that the transaction in question does not amount to transfer within the meaning of Section 2(47) of the Act, is perverse. In support of aforesaid submission, reliance has been placed on the decision in 'M/s. SESHASAYEE STEELS P. LTD. Vs. 6 ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(2), CHENNAI' 421 ITR 0046 SC.
5. On the other hand, learned counsel for the assessee submitted that the Tribunal has rightly held that there was no transfer of property by the assessee and therefore, the capital gains did not arise. It is further submitted that transfer of possession of the property is one of the essential ingredients of transfer under Section 2(47) of the Act. It is further submitted that the assessee has neither received the balance consideration of Rs.5,01,37,720/- nor has handed over the possession of the property. Therefore, the transaction in question has rightly been treated to be not a transfer under Section 2(47) of the Act. It is also urged that the property is still recorded in the name of the assessee in the revenue records and a litigation is pending between the assessee and the prospective purchaser in an appeal namely RFA No.1758/2016 c/w RFA No.1610/2016 in which an interim order has been passed restraining the parties not to alter the nature of the property. It is submitted that the Assessing Officer has merely relied on the declaration made 7 by the aforesaid Prakash Shetty and has not brought on record any tangible material to demonstrate that the assessee has received the cash. It is further submitted that the order passed by the Tribunal does not call for any interference.
6. We have considered the submissions made on both sides and have perused the record. Before proceeding further, it is apposite to take note of the relevant statutory provisions. The relevant extract of Section 2(47) reads as under:
"Section 2(47) 'transfer', in relation to a capital asset, includes:
xxxxx
(ii) the extinguishment of any rights therein; or xxxx
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or xxxx."
Thus, from perusal of Section 2(47) of the Act, it is evident that for the purposes of the Act, the definition of 8 transfer is wide enough and it includes the sale, exchange or relinquishment of the asset or extinguishment of any rights therein. In the instant case, admittedly the assessee had entered into an agreement for sale in respect of the land in question and had executed an irrevocable General Power of Attorney on 21.12.2005.
7. The relevant clauses of the irrevocable General Power of Attorney executed by the assessee are reproduced below for the purpose of reference:
"(k) to submit applications, affidavits, statements, returns to the Government of Karnataka and/or the Authorities under any state or central stature, to obtain necessary clearance, exemption, sanctions and permissions required under the Act.
(l) to enter into agreements for sale with
regard to the Schedule property or any
portions/shares thereof or enter into any kind of agreement/s on such terms as my Attorney deems fit and to get the Agreement/s registered as well to cancel the said registration;
(m) to transfer and convey by way of sale, the Schedule property or any portions. Shares 9 thereof and execute necessary deeds of sale/conveyance in favour of the Attorney himself and any intending purchases/transferees and do everything necessary for completing the sale/conveyance/transfer of the same including execution of sale deed/s, presentation of the sale deed/s and admitting execution thereof as well as to sign and execute all forms, affidavits,applications/statements/declarations/for ms/returns
(n) to execute any deeds of ratification and rectifications with regards to any documents already executed pursuant to this Power of Attorney and to present such deeds of ratification and rectification and to admit execution thereof and to sign such forms, applications, statements, ratification and rectification etc., with regards thereto;
(o) to execute any release deeds, exchanges, gift deeds or such transfer documents as my attorney may deem fit with regards to the Schedule property including presentation of such deeds and admit execution of such deeds and to sign all such affidavits, applications., forms etc., required for the registration thereof and to complete all formalities of such documents.
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(p) to receive my Attorney's name or his
nominee's name the consideration for
sale/transfer/conveyance, as also advances,
earnest money/deposits, part payments and
balance payments in regard to the
sale/conveyance/transfer of the Schedule property or portions/shares therein and issue receipts and acknowledgements therefore;
(q) to apply for and obtain clearances required for the registration of the Schedule property or any portions/shares thereof for and on my behalf and to pay such dues on my behalf as may be necessary for the purposes of obtaining such clearance certificate/s from the concerned authority.
(r) to apply for and obtain permission/no objection certificate under any of the provisions of the income Tax Act, 1961 and to appear before, file objection statements etc., to the Competent Authority or Appropriate Authority as the case may be under the provisions for obtaining the permission for the transfer of the Schedule property or any portion or portions thereof.
(s) to apply for and obtain transfer and registration of Katha in regard to the Schedule Property or any portion/s thereof to the names of 11 the Purchasers of the Schedule property or portions thereof.
(t) to apply for and obtain bifurcation of the katha after the building is constructed on the Schedule Property for assignment of individual Municipal Numbers to the Units.
(u) to take loans and financial facilities of any kind for putting up construction in the schedule property against the security of the Schedule property and the building to be constructed on the Schedule property at the entire risk and cost of my Attorney and without I being personally liable of the repayment of the amounts or any interest or charges thereof;
(v) to grant and terminate leases, tenancies, licenses, with regard to the Schedule property with or without constructed area with or without car parking space or any part thereof on such terms as my Attorney may deem fit, and do everything necessary for completing the leases/tenancies/licenses of the same including execution of deeds and documents pertaining to leases/tenancies/licenses and admitting execution thereof as well as to sign and execute all forms, affidavits applications/statements/declarations /forms/returns;12
(w) to execute, sign such agreements, deeds necessary for the purpose of letting out, licensing or leasing the Schedule property or any part thereof with or without the constructed area and to receive deposits and rents in own name without I being responsible to repay the same or the lessee/tenant/license in this behalf......"
Also, in the General power of Attorney documents, the appellant has stated that:-
"I here by authorize and empower my said Attorney to delegate all or any of the aforementioned powers granted to any other person and to cancel/revoke such delegated powers to others person."
8. Thus, from perusal of relevant clauses of the Power of Attorney which was executed on the same day, it is evident that all rights in the property including the possession constructively infact has been handed over by the assessee to the purchaser. Therefore, we have no hesitation in holding that the aforesaid transaction is the same within the meaning of Section 2(47) of the Act and the Assessing Officer as well as the Commissioner of Income Tax (Appeals) has rightly treated the same to be a transaction of sale. 13 However, the Tribunal, without taking into account the incriminating material on record, merely on the basis of the fact that the possession of the property under the agreement was not delivered, has held the same to be not sale.
9. In view of preceding analysis, the substantial question of law is answered in the negative and in favour of the assessee. In the result, the impugned order dated 19.12.2014 passed by the Tribunal is quashed.
Accordingly, the appeal is allowed.
Sd/-
JUDGE Sd/-
JUDGE RV