Indian Kanoon - Search engine for Indian Law

7. The Assessing Officer distinguished the case law relied upon by the assessee and concluded that the entire sale consideration of Rs. 5.50 Crore is taxable in assessment year under appeal i.e. 2007-08 and accordingly, computed the long term capital gain.

8. The assessee challenged the findings of the Assessing Officer before ld. CIT(Appeals). It was submitted before ld. CIT(Appeals) that assessee executed Sale Deed dated 20.03.2007 in favour of M/s Link Infrastructure and Developer Pvt. Ltd., Delhi. The total contracted consideration was Rs. 5.50 Crore. The sale consideration was received as advance of Rs. 41,50,000/- vide cheque on 15.03.2007, cash of Rs. 8,50,000/- at the time of registration of the Deed on 20.03.2007 and balance Rs. 5 Crores through undated cheque which was later on encashed on 16.06.2008. As per terms of the Sale Deed, it was stipulated that in case the cheque of balance amount gets dishonoured, the Sale Deed shall stand automatically cancelled. The assessee referred to the terms of Sale Deed for cancellation of the Sale Deed on dishonour of undated cheque. Regarding possession, assessee has relied upon affidavit given by the buyer at the time of registration. The assessee submitted that assessee received sum of Rs. 50 lacs only as proceeds of the land and due tax/treatment was meted out to the aforesaid receipt.

6.1 It is further noted that the appellant has sold agricultural land for a consideration of Rs.5,50,00,000/- through a sale deed registered on 20.03.2007. As per the deed, the sale consideration comprised of Rs.8,50,000/- in cash, Rs.41,50,000/- through cheque dated 15.03.2007 and Rs.5,00,00,000/- through undated cheque. The first two payments were received during the year under consideration on which the appellant through letter offered capital gain on pro rata basis. The appellant has not offered the capital gain on the entire sale proceed as the balance amount of Rs.5,00,00,000/- was received by the appellant through undated cheque in subsequent year relevant to A.Y. 2009-10. The appellant has taken this view on the basis of clause in sale deed which says if the above cheque bounced then the sale deed itself is annulled. Thus, the appellant has taken the view that the complete transfer did not take place on the date of registration i.e. 20.03.2007 but in two parts, one during the year and second on the date of realization of entire sale consideration through undated cheque.

16(ii) Hon'ble High Court, considering the serious allegations against the builders/buyers for cheating hundreds of farmers in District Yamuna Nagar directed the senior officers of the Crime Branch to look into the allegations of conniving with the builders alongwith Collector Yamuna Nagar to take immediate remedial action. Addl. DGP, Crime Branch was also directed to constitute Special Investigation Team to conduct fair investigations. These facts would also support the claim of the assessee that the buyer companies have no intention to pay any amount to the agriculturists who have executed sale deed in favour of the developers and the developers have not paid the substantial sale consideration to the agriculturists including the assessee. It is only when the investigation carried out by the State Police and Civil Authorities, as per directions of the Hon'ble Punjab & Haryana High Court, the substantial amount of sale consideration through undated cheque was cleared in favour of the assessee after several months. The provision of Negotiable Instrument Act provides that the negotiable instruments ( including cheque) would be valid for a period of six months but in the case of the assessee, with the intervention of Civil and Police authorities, as per directions of the Hon'ble Punjab & Haryana High Court, undated cheque of the assessee was cleared after about 15 months from the date of the sale deed because undated cheque is cleared on 16.06.2008 while sale deed was executed on 20.03.2007. The intention of the buyer company is, therefore, very clear from the beginning itself that the buyer company/builders never intended to pay substantial sale consideration to the assessee. The intention of the buyer company is also clear from the fact mentioned in the sale deed, affidavit and the attending circumstances. Though the sale deed is executed in the matter but the facts and circumstances above will clearly explain that the sale deed in-fact was a contract of sale of property only and it would not create any interest or charge in the property. The sale transaction shall take place on terms settled between the parties i.e. the contents of the sale deed and the affidavit executed by the buyer.

16(iii) The facts of the case also clearly reveal that full payment on account of sale consideration was essence of the contract not satisfied by the buyer company at the time of execution of the sale deed. There is no transfer of capital asset in assessment year 2007-08. Thus, no income/amount accrued or received by the assessee on account of transfer of capital asset or on account of any capital gains till 16.06.2008. Therefore, no capital gain arise in assessment year 2007-08.

17. The sale deed cannot be a final word in the matter. Our view is supported by the decisions referred to above. Capital gain accrues only if there is a sale or transfer of capital asset. The assessee is able to prove on face of sale deed, affidavit executed by the buyer and the cogent evidence on record that no sale took place on 20.03.2007 i.e. the day when sale deed was registered. The documents/material produced on record proved no sale transactions completed on 20.03.2007. The material and evidence brought on record, thus, cannot be ignored. The contents of sale deed, affidavit and undated cheque of Rs. 5 Crores and orders of Hon'ble Punjab & Haryana High Court clearly proved that the buyer company manipulated the sale deed to dupe the assessee and other agriculturists. Undated cheque of Rs. 5 crores shows no intention of the buyer to pay any sale consideration in future to complete the transaction. The undated cheque itself shows that buyer company was not definite of the payment within the time-bound period. The intention of the parties shall have to be considered on the facts and circumstances of the case. The registration is prima-facie proof of an intention to transfer but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed or possession. The properties do not necessarily pass as soon as the instrument is registered, the true test is the intention of the parties. In the instant case, the sale of property depends upon full payment and the buyer company obtaining land use change permission and development permission etc. The authorities below only considered the sale deed was final but ignored the other material evidence on record. Accrual would be right to receive the amount but no right accrued as assessee was intentionally duped by the buyer. Since one of the assessee Shri Tejinder Kumar & others have made allegation against the developers/buyers conniving with the Revenue Authorities and directions have been issued to take action into the matter by forming a Special Investigation Team also, therefore, the mutation done by the Revenue authorities in favour of buyers as per registered Sale Deed would not be significant to declare any capital gain accrued or arise in the assessment year under appeal. The decisions relied upon by the assessee clearly apply to the facts and circumstances of the case. The decision in the case of Sanjeev Lal Vs CIT (supra) relied upon by ld. DR is distinguishable on facts of the case and would not support case of the revenue.