Ita/125/2014 Of Sri. N.a.baby v. Deputy Commissioner Of Income Tax, Central Circle, Thrissur

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE MR. JUSTICE SHAJI P.CHALY FRIDAY, THE 31ST DAY OF JULY 2015/9TH SRAVANA, 1937 ITA.No. 125 of 2014 () ----------------------- AGAINST THE ORDER IN ITA 265/2012 of INCOME TAX APPELLATETRIBUNAL,COCHIN BENCH, COCHIN DATED 27-12-2013 APPELLANT/APPELLANT: -------------------------------------------- SRI. N.A.BABY NEREPARAMBIL HOUSE, MANNAMPETTA P O, VARAKARA THRISSUR BY ADVS.SRI.ANIL D. NAIR SRI.SREEJITH R. NAIR SMT.C.S.SULEKHA BEEVI SMT.ROSIE ATHULYA JOSEPH RESPONDENT/RESPONDENT: ---------------------------------------------- DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THRISSUR – 680 001 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON21-07-2015, ALONG WITH ITA NO.127/2014, THE COURT ON 31.07.2015DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S ANNEXURES: ANNEXURE – A: TRUE COPY OF THE ORDER OF ASSESSMENT FOR THE YEAR 2008-09 ISSUED TO THE APPELLANT. THE YEAR 2008-09 ISSUED TO THE APPELLANT. ANNEXURE – B: TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) OF INCOME TAX (APPEALS) ANNEXURE – C: TRUE COPY OF THE AGREEMENT DATED 19.10.2006. ANNEXURE – D: TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 27.12.2013. APPELLATE TRIBUNAL, COCHIN BENCH DATED 27.12.2013. RESPONDENT'S ANNEXURES: NIL //TRUE COPY// P.A. TO JUDGE smv ANTONY DOMINIC & SHAJI P. CHALY, JJ. ----------------------------------------------- I.T.A. Nos.125 & 127 of 2014 -----------------------------------------------Dated this the 31[st] day of July, 2015 JUDGMENT Shaji P. Chaly, J. These appeals are preferred by the assessees against theorder passed by the Income Tax Appellate Tribunal, CochinBench in I.T.A. No.265/2012 dated 27.12.2013 for theassessment year 2008-2009 and ITA No.266/2012 dated27.12.2013 for the assessment year 2009-2010. Even though thelearned Appellate Tribunal has disposed of the appeals videseparate orders, since the issues raised in these appeals andmaterials relied on by the Assessing Authority are common,these appeals are disposed of by this common judgment. 2. As per the orders referred above, the Appellate Tribunalhas confirmed the order of the First Appellate Authority and heldthat the additions made by the Assessing Authority in the orderof assessment are justified. 3. Brief facts leading to the case are as follows: 4. The assessee in ITA No.125 of 2014 has purchased an extent of 944.43 cents of rubber plantation in Amballur Village,Thrissur District on 9.5.2007 and 7.7.2007 along with theappellant in ITA No.127 of 2014. The said property was latersold to E.P. Antony and A.A. Davis and others. A person namedSri.P.T. Pavunni was the middle man or broker in the deal. Asearch was conducted at the residence of Sri.P.T.Pavunni andduring the search a sale agreement relating to the above saidtransaction of sale was seized. From the said seized agreement,it was noticed by the Assessing Authority that the selling price ofthe land was Rs.25,000/- per cent which was found to be higherthan the value shown in the sale deeds. The buyer, A.A. Davisand the appellant in ITA No.125 of 2014 confirmed that thetransaction was effected at the rate of Rs.25,000/- per cent.Accordingly, the Assessing Officer determined the saleconsideration of the land by adopting Rs.25,000/- per cent. 5. The Assessing Authority has arrived at such a findingafter overruling the objections raised by the appellants that theproperty sold was an agricultural land and hence the profitarising on its sale is exempted from payment of tax. TheAssessing Authority found that the appellants did not carry outany agricultural operations and further that the land was soldwithin a short period of its purchase. Apart from the same, the appellant in ITA No.125 of 2014 had confirmed that he did notcarry on any agricultural activity on the said land. Added to this,the Assessing Authority has found that the nature of the propertyat the time of registration was converted into a barren land byremoval of earth upto the rock bottom. Accordingly theAssessing Authority took the view that the transactions can onlybe considered as an adventure in the nature of trade andaccordingly after providing sufficient opportunity to theappellants and complying with the procedures, finalised theassessment, taking into account the actual sale value shown inthe seized agreement during the search operations. 6. Even though the appellants have taken up the matter inappeal, the First Appellate Authority confirmed the order of theAssessing Authority and it is aggrieved by the said order, theappellants preferred 2[nd] appeal before the Income Tax AppellateTribunal, which affirmed the order of the Commissioner ofIncome Tax Appeals. It is thus aggrieved, these appeals are filed. Questions of law raised in ITA No.125 of 2014: (i) In the facts and circumstances of the case, ought notthe Tribunal have held that the appellant wasentitled for exemption from the capital gains.the Tribunal have held that the appellant wasentitled for exemption from the capital gains. (ii) In the facts and circumstances of the case, oughtnot the Tribunal have held that what was transferredto buyer was a rubber plantation and thattransaction would come under Sub Clause 5 of Subnot the Tribunal have held that what was transferredto buyer was a rubber plantation and thattransaction would come under Sub Clause 5 of Sub Sec.47 under Sec.2 of the Act. (iii) In the facts and circumstances of the case, oughtnot the Tribunal have held that the purchase valuefor the purpose of computation of capital gains hasto be reckoned as per Annexure C Agreement and onthe basis of Statement recorded under Sec.132(4) ofthe Act.not the Tribunal have held that the purchase valuefor the purpose of computation of capital gains hasto be reckoned as per Annexure C Agreement and onthe basis of Statement recorded under Sec.132(4) ofthe Act. (iv) In the facts and circumstances of the case, oughtnot the Tribunal have held that the transactions doesnot partake the characteristic of adventure in thenature of trade.”not the Tribunal have held that the transactions doesnot partake the characteristic of adventure in thenature of trade.” 8. Question of law raised in ITA No.127 of 2014: (i) In the facts and circumstances of the case, oughtnot the Tribunal have held that the purchase valuefor the purpose of computation of capital gains hasto be reckoned as per Annexure C Agreement andon the basis of Statement recorded under Sec.132(4) of the Act.not the Tribunal have held that the purchase valuefor the purpose of computation of capital gains hasto be reckoned as per Annexure C Agreement andon the basis of Statement recorded under Sec.132(4) of the Act. 9. Heard the learned counsel for the appellants and thelearned Senior Counsel for the Revenue. 10. The learned counsel for the appellants contended thatthe appellants have actually purchased the property forRs.10,250/- and Rs.10,500/- respectively per cent while thedocumented value was only Rs.1,000/- and therefore, they wereentitled to set off the entire purchase value for the purpose ofcomputation of tax while computing the tax against them inaccordance with the agreement unearthed during the search 9. Heard the learned counsel for the appellants and thelearned Senior Counsel for the Revenue. 10. The learned counsel for the appellants contended thatthe appellants have actually purchased the property forRs.10,250/- and Rs.10,500/- respectively per cent while thedocumented value was only Rs.1,000/- and therefore, they wereentitled to set off the entire purchase value for the purpose ofcomputation of tax while computing the tax against them inaccordance with the agreement unearthed during the search operation. So also the learned counsel contended that theproperty sold by the appellants was agricultural property havingrubber plantation and on executing the agreements for sale ofthe said property, the prospective purchasers were put inpossession and they were permitted to cut and remove therubber trees and to remove soil from the said property.Therefore, in the facts and circumstances of the case, theassesses are entitled to get the benefit of tax exemption providedunder the provisions of the Act, treating it as agriculturalproperty. 11. Learned counsel for the appellants also contended thatin view of Section 53A of the Transfer of Property Act and theagreement executed by the appellants with the prospectivepurchasers who were put in possession of the property and wereallowed to carry out slaughter taping, cutting and removal ofrubber trees and to remove soil from the property, there issubstantial proof to show that the property transferred by theappellant was an agricultural property and that therefore he isnot liable to pay any tax under the Act. 12. As stated earlier, appeals are relating to the assessmentyears 2008-2009 and 2009-2010. To answer the abovecontention of the appellants, we think it only appropriate to refer to sub-section 1A of Section 17 of the Registration Act, which isextracted hereunder: “(1A) The documents containing contracts totransfer for consideration, any immovable propertyfor the purpose of Section 53A of the Transfer ofProperty Act, 1882 ( 4 of 1882), shall be registeredif they have been executed on or after thecommencement of the Registration and otherrelated laws (Amendment) Act, 2001, and if suchdocuments are not registered on or after suchcommencement, then, they shall have no effect forthe purposes of the said Section 53A.” 13. Sub-section 1A was introduced as per the AmendmentAct 2001 and therefore, any agreement for transfer of propertyafter introduction of sub-section 1A require mandatoryregistration in order to have effect for the purpose of Section53A of the Transfer of Property Act. Admittedly the appellantshave not registered the agreements for sale and therefore, asprovided under sub-section 1A of Section 17 of the RegistrationAct, the same can only be deemed as an ineffective document forconsidering the question of part performance of the contract ascontended by the appellants. In that circumstances, theappellants shall be deemed to have possessed the property tillthe sale deed was executed. Therefore the appellants are notentitled to get any advantage out of Section 53A of the Transferof Property Act, and cannot contend that they had transferred possession of an agricultural property entitling them to getexemption from payment of tax. possession of an agricultural property entitling them to getexemption from payment of tax. 14. On the other hand, the learned Senior Counsel for theRevenue has taken us through the orders of the AssessingAuthority and contended that the Assessing Authority hascategorically found that when the property in question was sold,the same was barren land and there was no evidence to establishthat the appellants have sold agricultural property to the buyersat the time of execution of sale deeds. It was the furthercontention of the learned Senior Counsel that at the time ofexecution of the sale deed, in accordance with the investigationand verification conducted by the Assessing Authority, theproperty in question was barren land and not agriculturalproperty. Further more it was contended that on an enquiry bythe Assessing Authority, it was found that no agriculturaloperations were carried on in the property after the land waspurchased by the appellants. Apart from this, it was contendedthat since the sale carried out by the appellants was within ashort period of its purchase, it was clear that the appellantscarried out adventure in the nature of trade and therefore, theprofit derived from such sale is liable to be assessed under theAct. 15. The learned Senior Counsel for the Revenue alsocontended that the Assessing Authority could unearth the actualsale price from the agreement seized on search from aforesaidPavunni and thereby the assessing authority could ascertain thetax evaded by the appellants truly and correctly. LearnedSenior Counsel also argued that there is no proof to establishthat the appellants have paid the purchase price of Rs.10,250/-and Rs.10,500/- respectively per cent for the property againstthe documented value of Rs.1,000/- per cent and therefore, theAssessing Authority was right in holding so in the order ofassessment which was confirmed by the authorities below. 16. Taking into account the rival contentions of the learnedcounsels, we are of the considered opinion that the AppellateTribunal has discussed the entire issues put forth by theappellants and has arrived at a reasonable conclusion that thebasis for adoption of sales price of Rs.25,000/- per cent was thesale agreement seized during search and also confirmation of thesame by the appellant in ITA No.125 of 2014 and the purchaserof property, Sri.A.A. Davis in their sworn statements. It istherefore clear that the sale price of Rs.25,000/- per cent wasarrived at basically relying on the sale agreement and not thesworn statement alone. Further the Tribunal has found that the claim that the appellants have purchased the property forRs.10,250/- and Rs.10,500/-respectively per cent made in thesworn statement of the appellant in ITA No.125 of 2014, was notcorroborated by any proof or materials and therefore theAssessing Authority was left with no other alternative than todecline the claims so raised by the appellants. Further theTribunal has found that the responsibility to substantiate thepurchase consideration was on the appellants and appellantshave not adduced any evidence or put forth any material tosubstantiate the case advanced by them and therefore, the claimof the appellants that they were entitled to seek reckoning of theamount allegedly paid by them when they effected purchase ofthe property cannot be considered to be real at all. TheAppellate Tribunal has thereupon declined to interfere with theorders passed by the First Appellate Authority. 17. We have perused the entire materials on record.According to us, the circumstances which led to the addition ofamounts in the assessment order was based fully upon the factsunearthed during the search operations at the residence of onePavunni. Further the authorities below have found that therewas no evidence at all to prove that while the property wasconveyed by executing sale deed, the same was an agricultural 17. We have perused the entire materials on record.According to us, the circumstances which led to the addition ofamounts in the assessment order was based fully upon the factsunearthed during the search operations at the residence of onePavunni. Further the authorities below have found that therewas no evidence at all to prove that while the property wasconveyed by executing sale deed, the same was an agricultural land. But on the other hand, the assessing officer has clearlyfound that the property in question was barren land and furtherit was revealed that after purchase of the property, noagricultural operations were carried on by the appellants andfurther that the property was sold within a short period whichdiscloses nothing but an adventure in the nature of trade liableto be taxed under the Act. These are all circumstances based onfacts and the authorities below have appreciated the contentionsput forth by the appellants and arrived at a fair and reasonableconclusion that the agreement relating to the sale deed was acrucial document showing the exact price of the property, whichwas also not denied by the appellants. We do not think that inview of the factual situations referred above there are anysubstantial questions of law for us to consider the same invokingthe powers conferred under Section 260A of the Act. In the circumstances appeals fail and accordingly they aredismissed. Sd/- ANTONY DOMINIC JUDGE smv Sd/-JUDGE SHAJI P. CHALY