Jyotish G. Sevak v. The ACIT- Circle - XIII
[Citation -2005-LL-0629-12]

Citation 2005-LL-0629-12
Appellant Name Jyotish G. Sevak
Respondent Name The ACIT- Circle - XIII
Court ITAT
Relevant Act Income-tax
Date of Order 29/06/2005
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags mistake apparent from record • irrevocable bank guarantee • specified securities • transfer of property • sale consideration • immovable property • mistake of law • capital asset • earnest money • capital gain • future date • sale price • sale deed
Bot Summary: In support of his argument that the question whether in the case of a conditional sale the title would pass with the registration of the sale deed was debatable, the learned representative for the assessee drew our attention to a judgment of the Patna High Court in Shiv Narayan Shah and Others Vs. Baidya Nath Prasad Tiwary and Others. The controversy in the present case is whether there was a complete sale on 21- 1-1999 as contended by the department or whether the sale was complete only when the balance of sale consideration of Rs.30 lakhs was paid on 22-3- 1999, as contended by the assessee. The contention of the assessee is that on a proper consideration of the terms of the sale deed, it would be clear that the intention of the parties was that the sale should be taken as complete only when the balance consideration of Rs.30 lakhs was paid. These averments prima-facie seem to support the assessee s contention that the sale was not complete on the execution of the sale deed but would taken as complete only when the final consideration of Rs.30 lakhs was paid by the purchaser. The contention of the department is that since the assessee took bank guarantee for the balance consideration of Rs.30 laksh, that is as good as payment of the consideration and therefore the sale was complete on the execution of the sale deed. The judgment of Patna High Court cited on behalf of the assessee has taken the view that in a case where the sale deed stipulates that the balance of consideration has to be paid on the future date and where the sale deed does not postpone the passing of the title till discharge of the consideration, and where the bulk of the consideration i.e. more than 3/4th has also been paid, even then the title to the property will not pass under Section 54 of the Transfer of Property Act, 1882 with the registration of sale deed and will pass only when the balance of the sale consideration is paid. The main ground on which rectification proceedings were taken by the AO is that the sale was complete on 21-1-1999 itself, which is the date of sale deed, because the name of the purchaser had been entered in the revenue records as owner of the property from 27-1- 1999 and the assessee has taken a bank guarantee which was quite unnecessary, if the sale was not complete on the execution of the sale deed.


IN INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND A.N. PAHUJA, ACCOUNTANT MEMBER) ITA.No.3718/Ahd/2004 [Asstt.Year : 1999-2000] Smt.Ramaben Parmar 1072/1(19) Bhoomika City Centre, M.G.Road, Shahid Chowk, Silvassa. PAN : ADQPP 0833 K Vs. ITO, Vapi Ward-3 Vapi. Assessee by : Shri Milin Mehta Revenue by : Smt.Neeta Shah ORDER PER R.V.EASWAR, VICE-PRESIDENT: This appeal by assessee relates to assessment year 1999-2000 and arises out of proceedings taken by AO under Section 154 of Income- tax Act in following circumstances. 1. assessee is individual. She owned lands in Daman which she sold during year ended 31-3-1999. There was capital gain of Rs.76,57,794/- which was claimed to be not chargeable under Section 45 of Income-tax Act on ground that assessee merely had occupational rights over lands which did not have any cost of acquisition. basis of claim seems to be judgment of Supreme Court in CIT(A) Vs. B.C.Srinivas Shetty, 128 ITR 294. It was not accepted by AO and matter ultimately reached Tribunal and it appears that assessee s claim was not accepted by Tribunal. Be that as it may, while rejecting assessee s contention and in calculating chargeable capital gains, AO, in his order dated 22-3-2002 passed under Section 143(3) read with Section 147 allowed assessee s claim for exemption of investment of Rs.15.00 lakhs in prescribed assets under Section 54EA of Act. 2. On 10-2-2004 AO issued notice under Section 154 of Act inviting objections from assessee to rectification of assessment order passed on 22-3-2002 allowing exemption under Section 54EA. He observed that assessee had executed sale deed in respect of land on 21-1-1999 and therefore investment in prescribed securities ought to have been made within six months from said date in accordance with sub- section-1 thereof which means that investment ought to have been on or before 20-7-1999 and since assessee had made investment in prescribed securities only on 17-9-1999, which was beyond period of six months, allowance of exemption was mistake apparent from record and ought to be rectified. assessee objected to rectification proceedings by letter dated 25-2-2004 and submitted that investment had been made within period of six months as prescribed by section. It was pointed out that sale deed executed on 21-1-1999 was conditional sale deed under which it was stipulated that if purchaser fails to make final payment of Rs.30.00 lakhs on or before 22-3-1999 sale would not be complete and would be treated as void-ab-initio and all rights, title and interests in land would continue to remain with assessee. It was also pointed out that purchaser made final payment of Rs.30 lakhs on 22-3- 1999 by cheque which was also deposited in bank on same day and therefore sale was complete only on that date, with result that investment made in specified securities on 17-9-1999 was well within six months period stipulated in section 54EA (1). 3. above contention did not found favour with AO who noted that purchaser had proposed to give absolute and irrevocable bank guarantee for amount of Rs.30.00 lakhs and it was on this basis that sale deed was executed. He further noted from document embodying bank guarantee that bank was to pay amount on written demand from assessee and then guarantee could be enforced notwithstanding any dispute or suit pending between assessee and purchaser and that guarantee would be unconditional, absolute and irrevocable. From these stipulations in bank guarantee and also from revenue records showing purchaser M/s.Everest Garden to be absolute owner of lands from 27-1-1999, AO concluded that lands were transferred by assessee on date on which sale deed was executed viz. 21-1-1999 and accordingly investment in specified securities made on 17-9-1999 was beyond period of six months mentioned in Section 54EA(1). On ground that allowance of exemption under this section in assessment order was mistake apparent from record, he withdrew exemption of Rs.50 lakhs by order passed on 31-3-2004 under Section 154 of Act and recomputed capital gains at higher figure and raised demand. 4. assessee filed appeal to CIT(A) against order under Section 154 and contended that action of AO amounts to revision of earlier order of assessment and not rectification. It was also submitted that sale being conditional on final payment of Rs.30.00 lakhs being made on or before 22-3-1999, it was complete only when said amount was paid by purchaser and therefore investment in prescribed securities made on 17-9-1999 was within period of six months from date of sale. These contentions did not find favour with CIT(A). According to him, conditional clause in sale deed is nothing but accommodation on part of assessee to purchaser by giving him some time to make payment. He also observed that agreement itself was not deferred by two months and if it was so, then there was no need for assessee to take bank guarantee. CIT(A) therefore held that sale was complete on 21-1-1999 and since investment in prescribed securities was made after 20-7-1999, assessee was not entitled to exemption under Section 54EA. According to CIT(A) since assessee failed to follow statutory provision there was clear mistake apparent from record in respect of application of law which was rightly rectified under Section 154. He accordingly dismissed appeal. 5. assessee is in further appeal before us. learned representative for assessee argued that this is debatable question requiring long-drawn arguments to establish one point of view or other and accordingly AO was not justified in initiating proceedings for rectification of assessment under section 154 of Act. He drew our attention to judgment of Supreme Court in CIT Vs. Hero Cycles Pvt. Ltd. and Others, 228 ITR 463 and submitted that having regard to principles laid down in this judgment rectification proceedings were without jurisdiction. In support of his argument that question whether in case of conditional sale title would pass with registration of sale deed was debatable, learned representative for assessee drew our attention to judgment of Patna High Court in Shiv Narayan Shah and Others Vs. Baidya Nath Prasad Tiwary and Others (AIR 1973 Pat 386). It was submitted that in judgment it has been held that when sale price was only part paid but sale deed was executed and registered it does not pass title unless balance of sale consideration was paid by purchaser. It was contended that according to terms of sale deed in present case, title to property was to pass only when balance sale consideration of Rs.30.00 lakhs was paid for which time was given till 22- 3-1999 and it was also stipulated that if payment is not made as above deed of sale shall be automatically rendered void entitling assessee to rescind agreement of sale dated 17-10-1998 as also to forfeit earnest money of Rs.25 lakhs paid earlier. Our attention was also drawn to recital in preamble to effect till balance of Rs.30.00 lakhs is paid by purchaser to assessee, property under sale deed shall remain in charge for Rs.30.00 lakhs in favour of assessee and that bank guarantee shall be collateral security. According to learned representative for assessee entire terms and conditions subject to which sale deed was executed pointed to conclusion that sale would be considered to be complete only when purchaser paid balance of Rs.30.00 lakhs on or before 22-3-1999. Strong reliance was also placed on recital in sale deed that conveyance is contingent conveyance subject to timely payment of sum of Rs.30 lakhs and on further stipulation that if payment is not so made, sale shall be void-ab-initio and right, title and interest in property shall stand reverted and vested in favour of vendor absolutely and forever without any encumbrances whatsoever. case of department presented before us by learned Sr.DR was that assessee had taken bank guarantee for due payment of balance of Rs.30.00 lakhs and this was reflected in sale deed itself and this would not have been case if sale had not been completed on that date itself. Besides relying strongly on orders of tax authorities, learned SR.DR relied on finding recorded by CIT(A) that possession of property was given by assessee to purchaser on date of sale deed . Based on this finding, it was contended that when possession had been handed over and Rs.47 lakhs out of sale consideration of Rs.77 lakhs had also been received by 21-1-1999 (date of sale deed), it is not possible to say that sale was not complete on that date. She also drew our attention to remark made by AO towards end of para-2 of order under Section 154 that in revenue records name of purchaser, M/s.Everest Garden has been shown as owner of property with effect from 27-1-1999. On basis of these findings, it was strongly contended by her that order passed under Section 154 withdrawing relief granted under Section 54EA requires to be upheld. 6. In reply, learned representative for assessee disputed finding of CIT(A) that possession was handed over to purchaser on 21-1- 1999, date of sale deed. He contended that this is not established fact and in order under Section 154 there is no finding to this effect. According to him this is new fact brought in by CIT(A) without any basis and at any rate disputed facts or facts which have not been established on record cannot form basis of rectification proceedings under Section 154. He vehemently submitted that appeal should be decided without giving any credence to observation of CIT(A) that possession of property was given by assessee to purchaser on 21-1-1999. 7. On careful consideration of facts and rival contentions, we are of view that contentions of assessee should prevail. It is now well settled that rectification proceedings under Section 154 can be successfully taken only if mistake is apparent from record and disputed questions of fact or law cannot be examined in such proceedings and cannot form basis of proceedings. learned representative for assessee, in our humble opinion, is right in his contention that question whether assessee invested sum of Rs.15 lakhs in prescribed securities, within period of six months, from date of transfer, is debatable question of law, which cannot be decided under Section 154. Under Section 54EA(2), assessee, in order to claim exemption, is required to invest sale consideration in prescribed securities in any of specified securities within period of six months after date of such transfer. Under Section 2(47)(i) of Act transfer includes sale of capital assets. sale is transfer of property for price. controversy in present case is whether there was complete sale on 21- 1-1999 as contended by department or whether sale was complete only when balance of sale consideration of Rs.30 lakhs was paid on 22-3- 1999, as contended by assessee. To decide this question one has to interpret terms and conditions of sale deed executed on 21-1-1999 and registered on same date. contention of assessee is that on proper consideration of terms of sale deed, it would be clear that intention of parties was that sale should be taken as complete only when balance consideration of Rs.30 lakhs was paid. In support of this contention reliance has been placed on averments in sale deed to effect that it is contingent conveyance subject to condition that if purchaser defaults in making payment of Rs.30 lakhs on or before 22-3-1999, deed of sale shall be void-ab initio and right, title and interest in property under conveyance shall stand reverted and vested in favour of assessee absolutely and for ever, without any encumbrance. These averments prima-facie seem to support assessee s contention that sale was not complete on execution of sale deed but would taken as complete only when final consideration of Rs.30 lakhs was paid by purchaser. contention of department is that since assessee took bank guarantee for balance consideration of Rs.30 laksh, that is as good as payment of consideration and therefore sale was complete on execution of sale deed. department has also relied on fact that purchaser s name had been entered in revenue record as owner from 27-1-1999. Having regard to rival stands, it is clear that question as to when sale was complete is debatable and arguable point of law. judgment of Patna High Court (supra) cited on behalf of assessee has taken view that in case where sale deed stipulates that balance of consideration has to be paid on future date and where sale deed does not postpone passing of title till discharge of consideration, and where bulk of consideration i.e. more than 3/4th has also been paid, even then title to property will not pass under Section 54 of Transfer of Property Act, 1882 with registration of sale deed and will pass only when balance of sale consideration is paid. From para-6 of judgment, it is seen that this judgment was rendered by Patna High Court following three of its earlier judgments. It is thus clear that rectification proceedings touched upon debatable or arguable question of law which requires long drawn process of argument to establish one point of view or other. Therefore, rectification proceedings cannot be taken under Section 154 of Act. It is no doubt true that glaring and obvious mistake of law can also be rectified under Section 154 but that is not case here, for there is no statutory provision or judgment of Supreme Court or jurisdictional High Court to which our attention was drawn to show that on similar facts title to property passed on execution of sale. 8. We have already noticed that argument on behalf of department was that bulk of consideration i.e. Rs.47 lakhs was received before execution of sale deed and that purchaser was also put in possession of property and therefore there was completed transfer on date of sale deed. Though no statutory provision was specifically pointed out in support of contention, we have no doubt that learned SR.DR was having in mind clause (v) of Section 2(47) of I.T.Act which says that transfer in relation to capital asset includes any transactions involving allowing of possession of any immovable property to be taken or retained in part performance of contract of nature referred to in Section 53A of Transfer of Property Act. We specifically put this statutory provision to learned AR who in his reply, which we have already noted, vehemently objected to finding recorded by CIT(A) that possession of property was handed over to purchaser on date of execution of sale deed, as being without any basis. We are inclined to uphold objection because rectification proceedings initiated by AO do not appear to us to be based on fact that assessee had handed over possession on date of sale deed and bulk of consideration having been received by that date, provisions of Section 2(47)(v) of Act would apply. We are of view that it is not established or undisputed fact that assessee handed over possession to purchaser on date of execution of sale deed. This fact does not emerge from sale deed as fact. In our humble opinion, rectification proceedings cannot be upheld on basis of fact which has not been established as such and is not part of record. Whether purchaser was actually put in possession of land is thus disputed or any rate not established fact and may require investigation into facts which are not already on record. If fact is not already part of record, proceedings for rectification under Section 154 stand excluded. In other words, proceedings for rectification cannot be taken to investigate into facts which are not already on record. In present case, it seems to us, with respect, that observation of CIT(A) that assessee granted possession of property to purchaser on date of sale deed is without any basis. As already noted that was not one of reasons for which AO initiated rectification proceedings. main ground on which rectification proceedings were taken by AO is that sale was complete on 21-1-1999 itself, which is date of sale deed, because (a) name of purchaser had been entered in revenue records as owner of property from 27-1- 1999 and (b) assessee has taken bank guarantee which was quite unnecessary, if sale was not complete on execution of sale deed. It was not case of AO that purchaser was put in possession of property on date of execution of sale deed. 9. For reasons stated above, we are of view that question whether sale was complete on 21-1-1999 is debatable. debatable question of law cannot form subject matter of rectification proceedings under Section 154. Therefore, we hold that rectification proceedings were without jurisdiction. There was no mistake apparent from record. We hold accordingly and allow appeal of assessee with no order as to costs. Order pronounced in Open Court on 13th August, 2009. Sd/- Sd/- (R.V.EASWAR) (A.N.PAHUJA) ACCOUNTANT MEMBER VICE-PRESIDENT Place : Ahmedabad Date : 13-08-2009 Copy of order forwarded to: 1. : Assessee 2. : Respondent 3. : CIT(A) 4. : CIT concerned 5. : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD Jyotish G. Sevak v. ACIT- Circle - XIII
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