Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. Naina Saraf, B

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 JAINOrder 09/05/2022 Present appeal is filed under Section 260A of the Income TaxAct, 1961 against the order dated 14.09.2021 passed by theDivision Bench of the Income Tax Appellate Tribunal (for short“ITAT”), Jaipur Bench, Jaipur in ITA No. 271/JP/2020 forassessment 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 ofthe case and in law the Tribunal was justified inquashing the order passed by the PCIT u/s 263 of theIT Act, 1961 ignoring the fact that the assessmentorder was erroneous and prejudicial to the interest ofRevenue as the Assessing Officer failed to enquire onthe applicability of provisions of section 56(2)(vii)(b) (ii) of the Act? ii) Whether on the facts and in the circumstances ofthe case and in law the Tribunal was justified inholding that there was no lack of enquiry by theAssessing Officer but the PCIT had considered theorder erroneous and prejudicial to the interest ofrevenue without assigning any reasons.” The learned counsel for the Revenue has challenged the findings arrived at by the learned ITAT and submitted that theorder passed under Section 263 of the Act was valid and justified. He submits that the order passed by the learned ITAT needsinterference as the same was meeting out prerequisites of Section263 of the Act which can be invoked when the assessment order iserroneous and prejudicial to the interest of Revenue. We have considered the order impugned relied upon byRevenue counsel dated 14.09.2021 passed by learned ITAT, the relevant portion of the same are reproduced as under:- The learned counsel for the Revenue has challenged the findings arrived at by the learned ITAT and submitted that theorder passed under Section 263 of the Act was valid and justified. He submits that the order passed by the learned ITAT needsinterference as the same was meeting out prerequisites of Section263 of the Act which can be invoked when the assessment order iserroneous and prejudicial to the interest of Revenue. We have considered the order impugned relied upon byRevenue 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 appliedfor allotment of a Flat No. 201 at Somdatt`sLandmark, Jaipur having 50% share therein on23.09.2006, pursuant to which, the flat was allottedvide allotment letter dated 06.03.2009 on certainterms and conditions as mentioned in the allotmentletter, copy of which has been placed at Pg. 8-14 ofthe assessee’s paper book. The assessee agreed tothe allotment by signing the letter of allotment on11.11.2009 as is apparent from the allotment lettersigned by the assessee as a token of acceptance. It isalso undisputed that prior to the registration of thetransaction on 09.12.2014, the assessee had paid Rs.45,26,233/- against the total agreed saleconsideration of Rs. 65,57,500/-. A perusal of theallotment letter clearly shows that it contains all thesubstantive terms and conditions which create therespective rights and obligations of the parties i.e. thebuyer (assessee) and the seller (the builder) and bindthe respective parties. The allotment letter provideddetailed specification of the property, its identificationand terms of the payment, providing possession ofthe bjected property in the stipulated period andmany more. Evidently the seller (builder) has agreedto sale and the allottee buyer (assessee) has agreedto purchase the flat for an agreed price mentioned inthe allotment letter. What is important is to gather theintention of the parties and not to go by thenomenclature. Thus, there being offer and acceptanceby the competent parties for a lawful purpose withtheir free consent, we find that all the attributes of alawful agreement are available as per provisions ofthe Indian Contract Act, 1872. We also find that suchagreement was acted upon by the parties andpursuant to the allotment letter, the assessee paid asubstantial amount of consideration of Rs.45,26,233/-, as early as in the year 2008 itself. We donot find merit in the contention of the ld. CIT that itwas a mere provisional attachment which was subjectto further changes because of the unexpectedhappening which may be instructed by the approving authority, resulting into increase or decrease in thearea and so on because it is a standard practice so asto save the seller (builder) from the unintendedconsequences. However, for all intent and practicalpurposes such an allotment letter constituted acomplete agreement between the parties. We findthat the judgement cited by the ld. AR in t the casesof Shikha Birla Vs. Ambience Developers Pvt.Ltd., MANU/DE/2524/2008 and Dilip M. Muniand Ors. Vs. Monarch & Qureshi BuildersANU/NULL/0062/2019, support the contention ofthe AR though based on S. 54. We draw strength fromthe decision in the case of Hansmukh N. Gala vs.ITO (2015) 173 TTJ 537, wherein it was held asunder: authority, resulting into increase or decrease in thearea and so on because it is a standard practice so asto save the seller (builder) from the unintendedconsequences. However, for all intent and practicalpurposes such an allotment letter constituted acomplete agreement between the parties. We findthat the judgement cited by the ld. AR in t the casesof Shikha Birla Vs. Ambience Developers Pvt.Ltd., MANU/DE/2524/2008 and Dilip M. Muniand Ors. Vs. Monarch & Qureshi BuildersANU/NULL/0062/2019, support the contention ofthe AR though based on S. 54. We draw strength fromthe decision in the case of Hansmukh N. Gala vs.ITO (2015) 173 TTJ 537, wherein it was held asunder: “Capital gains—Exemption under s. 54—Purchase of new house vis-a-vis bookingadvance to builder—Assesse paid Rs. 1 crore asbooking advance to a builder for purchase ofnew residential house after selling his oldresidential property—Though the legal title in thesaid property has not passed to the assessewithin the specified period and the new propertywas still under construction, the allotment letterissued by the builder mentions the flat numberand specific details of the property—There is noevidence that the advance has been returned—Therefore, assesse can be said to have compliedwith the requirement of s. 54 and there is noreason to deny the claim of exemption under s.54—CIT vs. Kuldeep Singh (2014) 270 CTR (Del)561: (2014) 108 DTR (Del) 161 and KhemchandFagwani vs. ITO (ITA No. 7876/Mum/2010, dt.10th Sept., 2014) followed.” We also draw strength from the decision of theHon’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 forresidential house (Purchase) - Whether whereassessee having sold residential property,entered into an agreement with a builder withinprescribed period of two years for purchase offlat payment of which was linked to stage ofconstruction, assessee's claim for deductionunder section 54 was to be allowed - Held, yes[In favour of assessee]”In the lights of the above decision and on theappreciation of the facts and the evidences availableon material, we are convinced that the parties hadalready entered into an agreement by way of theallotment letter in on 11.11.2009 falling in the A.Y.2010-11. 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 ofwhich exceeds fifty thousand rupees, the stamp dutyvalue 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 stampduty value of the property by an amount exceedingfifty thousand rupees, the stamp duty value of suchproperty as exceeds such consideration”. 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 ofwhich exceeds fifty thousand rupees, the stamp dutyvalue 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 stampduty value of the property by an amount exceedingfifty thousand rupees, the stamp duty value of suchproperty as exceeds such consideration”. The pre amended law evidently did not cover asituation where an immovable property was receivedby an individual or HUF for a consideration, whetheradequate or inadequate, whether consideration wasless than the stamp duty valuation by an amountexceeding Rs. 50,000/-. In other words, the preamended law which was applicable up to A.Y. 2013-14never contemplated such a situation and it was only inthe amended law, specifically made applicable for andfrom A.Y. 2014 15 that any receipt of the immoveableproperty with inadequate consideration has beensubjected to the provisions of S. 56(2)(vii)(b) but notbefore that. Hence, the applicability of the saidprovision in such cases, could not be insisted in theassessment years prior to a A.Y. 2014-15. Having saidthis, in this case, there was a valid and lawfulagreement entered by the parties long back in A.Y.2010-11 only, when the subject perty was transferredand substantial obligations were discharged. The lawcontained in S. 56(2)(vii)(b) as stood at that point oftime, did not contemplate a situation of a receipt ofproperty by the buyer with for inadequateconstruction. Hence, we are of the considered viewthat the ld. Pr.CIT erred in applying the said provision.Because of the mere fact that the flat was registeredin the year 2014 falling in A.Y. 2015-16 on thefulfillment of the conditions, the amended provision ofS. 56(2)(vii)(b)(ii) could not be applied. Our viewfinds support from the decision in the case ofBajranglal 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 ofregistration of property—Assessee got registeredan immovable property on 17th June, 2013against the actual purchase of property on 15thApril, 2011—Purchase consideration wasdetermined at Rs. 9,10,000 at the time ofagreement for purchase—At the time ofregistration the stamp duty valuation stood at ahigher 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 onwards—As per the amended provisions, thescope of substituted provision was expanded tocover purchase of immovable property forinadequateconsiderationaswell—Mereregistration at later date would not cover atransaction already executed in the earlier yearsand substantial obligations have already beendischarged—Hence, the AO is directed to deletethe additions made under s. 56(2)(vii)(b).” Hence, we are not in agreement with the view takenby the ld. Pr.CIT holding the applicability of S. 56(2)(vii)(b)(ii) in the facts and circumstances of the caseand therefore we hold that the assessment order,subjected to revision u/s 263, is not erroneous andprejudicial to the interest of the revenue. Therefore,considering the totality of facts and circumstances ofthe case, the impugned order passed u/s 263 of theAct by the ld. Pr.CIT, is therefore, quashed. 9. Once, we quash the order passed U/s 263 of theAct, then in that eventuality, the other grounds raisedby the assessee become infructuous and needs noadjudication.” On consideration of the above, it is noted that, the view 9. Once, we quash the order passed U/s 263 of theAct, then in that eventuality, the other grounds raisedby the assessee become infructuous and needs noadjudication.” On consideration of the above, it is noted that, the view taken by the learned ITAT is based on logical findings. Whilerendering the judgment, the learned ITAT has relied upon variousjudgments of different High Courts and considered the provisionsof 56(2)(vii) pre-amendment and post-amendment. Learned ITAThas held that law contained in Section 56(2)(vii)(b) as stood onthe date of allotment letter (on 11.11.2009), falling in assessmentyear 2010-11, did not contemplate the situation of a receipt ofproperty by the buyer with inadequate construction. The learnedITAT has held categorically that the amended provisions of Section56(2)(vii)(b)(ii) could not be applied and they have relied uponthe 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 theadmission of appeal on substantial questions of law, morespecifically in the case of Commissioner of Customs-I Vs. Aasu Exim Pvt. Ltd.:(2018) 16 SCC 591 and Steel Authority ofIndia Ltd. Vs. Designated Authority, Directorate General ofAnit 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 directand/or proximate nexus to the question ofdetermination of the applicable rate of duty or to thedetermination of the value of the goods for thepurposes of assessment of duty. This is a sine quanon for the admission of the appeal before this Courtunder Section 130E(b) of the Act.and/or proximate nexus to the question ofdetermination of the applicable rate of duty or to thedetermination of the value of the goods for thepurposes of assessment of duty. This is a sine quanon for the admission of the appeal before this Courtunder Section 130E(b) of the Act. (ii) The question raised must involve a substantialquestion of law which has not been answered or, onwhich, there is a conflict of decisions necessitating aresolution.question of law which has not been answered or, onwhich, there is a conflict of decisions necessitating aresolution. (iii) If the Tribunal, on consideration of the materialand relevant facts, had arrived at a conclusion whichis a possible conclusion, the same must be allowed torest even if this Court is inclined to take another viewof the matter.and relevant facts, had arrived at a conclusion whichis a possible conclusion, the same must be allowed torest even if this Court is inclined to take another viewof the matter. (iv) The Tribunal had acted in gross violation of theprocedure or principles of natural justice occasioning afailure of justice.”procedure or principles of natural justice occasioning afailure of justice.” On perusal of the ratio of the judgments rendered by theApex Court, it is held that if the learned ITAT, on consideration ofmaterial and relevant facts, had arrived at the conclusion which isa possible conclusion, the same must be allowed to rest even, ifthis court is inclined to take another view of the matter. In the case at hand, logical reasonings was given by thelearned ITAT and there is no gross violation of the procedure orprinciples of natural justice occasioning a failure of justice. Therefore, this court is of the view that no substantialquestion of law arises in the matter and therefore, the appeal filedby appellant is dismissed. (SAMEER JAIN),JPooja/29 (PRAKASH GUPTA),J