Smt Allam Maisamma, Hyderabad vs Department Of Income Tax

These four appeals are preferred by the Revenue against four separate orders passed by the Ld. CIT(A)-VI, Hyderabad dated 15.06.2012 whereby she deleted the entire additions made by the A.O. to the total 2 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

income of the four assessees on account of long term capital gains.

2. All the four assessees in the present case are individuals. A search and seizure action under section 132 was conducted in the cases belonging to Janapriya Group. During the course of the said action, certain agreements were found showing that all the four assessees have sold lands belonging to them to M/s. Janapriya Engineers Syndicate, Himayatnagar, Hyderabad during the year under consideration. The details of lands sold by them and the consideration for such sale as declared in the relevant agreements were as under :

Sy.No. Advaiah Krishna Maisamma Agamaiah 662 Ac.3.22 -- Ac.3.22 Ac.6.22 663 Ac.4.20 -- Ac.4.20 --

668 - Ac.1.32 - -

671 Ac.3.20 Ac.2.20 - -

Consideration 47,70,000 17,20,000 32,20,000 26,20,000

3. Since none of the four assessees had filed the returns of income for the year under consideration declaring the long term capital gains arising from the sale of their lands, notices under section 148 were issued by the A.O. to them on 31.03.2011. In response to the said notices, all the assessees filed their returns of income on 12.05.2011 declaring total income at NIL. During the course of assessment proceedings, it was submitted on behalf of the assessees before the A.O. that the corresponding lands representing their ancestral property 3 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

in Yellareddy (v), Keesara (M), Kapra Revenue Division were actually agreed to be sold way back on 31.12.1994 to M/s. Janapriya Engineers Syndicate. It was also submitted that possession of the land in Survey Nos.662 and 663 was also handed over to M/s. Janapriya Engineers Syndicate, as per the Irrecoverable Power of Attorney -cum- Agreement for Sale dated 31.12.1994, while the possession of land in other two Survey Nos.668 and 671 was handed over as per the oral agreement entered into with the said purchaser. Keeping in view this submission made on behalf of the assessees and having regard to the fact that sale consideration declared by the assessee was not accepted by the registration authorities, the A.O. proceeded to compute the long term capital gain arising from sale of land chargeable to tax in the hands of the assessee by taking the fair market value as determined by the Sub-Registrar Office at Rs.400 per sq. yard during the year 1994 in respect of land in Survey No.662 and 663 and at Rs.600 as determined by the Sub- Registrar Office for the year under consideration in respect of land in Survey No.668 and 671. Accordingly, long term capital gain amounting to Rs.2,65,50,565, Rs.1,23,88,140, Rs.1,53,89,990 and Rs.1,25,22,290 was brought to tax in the hands of Mr. Allam Ayaliah, Mr. Allam Krishna, Smt. Allam Maisamma and Mr. Allam Agamaiah respectively by the A.O. vide assessments completed under section 143(3) read with section 147 of the Act by orders dated 30.12.2011.

4 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

4. Against the orders passed by the A.O. under section 143(3) read with section 147, appeals were preferred by all the four assessees before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), it was contended on behalf of the assessees that the possession of the lands in Survey Nos.662 and 663 having been already handed over to the purchaser at the time of execution of Irrevocable General Power of Attorney

-cum- Agreement of Sale entered into on 31.12.1994 as well as the possession of lands in Survey Nos.668 and 671 also been handed over as per the oral agreements simultaneously entered into, there was transfer of lands on 31.12.1994 itself as per clause (v) of section 2(47) read with section 53A of the Transfer of Property Act and therefore, the capital gain arising from such transfer was chargeable to tax in the hands of the assessees in A.Y. 1995-1996 and not in the year under consideration. This contention of the assessee was found acceptable by the Ld. CIT(A) and relying on the provisions of section 2(47)(v) of the Act read with Section 53A of the Transfer of Property Act, she held that the capital gain arising from the transfer of lands by the assessees was not chargeable to tax in the year under consideration. The reasons given by the Ld. CIT(A) to come to this conclusion as contained in paragraph Nos.6.3 and 6.4 of her impugned order are reproduced below :

"6.3. I have considered the facts on record and the submissions of the A.R. The agreement of sale dated 31.12.1994 and the confirmation letter of 5 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

the purchaser clearly establish that the possession had been handed over during the F.Y. 1994-95 itself. The A.O. has not brought any evidence on record to show that the assessee's claim as evidenced by these two documents is incorrect. In view of this, Section 2(47)(v) applies to the assessee's case and it is held that the capital gains on the sale of land was chargeable to tax in the A.Y. 1995-96 itself and not in the A.Y. 2004-05.

6.4. The subsequent payment of consideration to the assessee and the execution of sale deed are also of no consequence since the only issue relevant for application of section 2(47)(v) is the date of handing over of possession in terms of section 53A of the Transfer of Property Act. It is, therefore, held that the Assessing Officer's decision in bring to tax, capital gains on the sale of land in the A.Y. 2004-05 is not as per law and these grounds of appeal are allowed."

Aggrieved by the Order of the Ld. CIT(A), Revenue has preferred these appeals before the Tribunal.

5. We have heard arguments of both the sides and also perused the relevant material on record. The common issue that is involved in the present cases is, whether there was a transfer of lands by the assessee as on 31.12.1994 within the meaning of the definition of 'transfer' as given in clause (v) of sub-section (47) of Section-2. The said provisions along with the provisions of Section 53A of the Transfer of Property Act incorporated therein are extracted hereunder :

"2(47)(v) any transaction involving the allowing of the possession of any immovable property to be taken 6 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

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) ;"

"Section 53A. Part Performance. -

"Where any person contracts to transfer for consideration any immovable property by writing singed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,

and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract an has done some act in furtherance of the contract,

and the transferee has performed or is willing to perform his part of the contract,

then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract.

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof."

6. In the present case, the Irrevocable General Power of Attorneys -cum- Agreement of Sale were duly entered into by the assessees with M/s. Janapriya 7 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

Engineers Syndicate in respect of lands in Survey Nos.662 and 663 and the said transferee/purchaser having taken the possession of the land on 31.12.1994 itself in part performance of the said contract, we are of the view that the land in Survey No.662 and 663 was transferred by the assessees to the purchaser in the previous year relevant to A.Y. 1995-1996 itself within the meaning of clause (v) of sub-section(47) of section(2) read with section 53A of the Transfer of Property Act. This position is not even disputed even by the learned D.R. at the time of hearing before us.

7. The learned D.R. however has contended that in so far as the land in Survey No.668 and 671 is concerned, there was no agreement or contracts in writing entered into by the assessees with the purchaser in the previous year 1994-1995 and in the absence of such agreement/contracts to transfer the land, there was no transfer of the said land in the previous year 1994-1995 within the meaning of clause (v) of section 2(47) read with section 53A of the Transfer of Property Act even if it is agreed that the possession of the said land was taken by the transferee in that previous year. We find merit in this contention of the learned D.R. As per the provisions of section 53A of the Transfer of Property Act, which are incorporated in section 2(47)(v) of the Income Tax Act, the requirement is that the transferee has taken possession of the property or any part thereof in part performance of the contract and such contract to transfer for consideration 8 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

any immovable property has to be in writing signed by the transferee or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty.

7.1. In the present case, there was however no such contract in writing entered into in the previous year 1994-1995 in respect of land in Survey Nos.668 and 671 singed by the assessees from which the terms necessary to constitute the transfer could be ascertained with reasonable certainty and the oral agreements stated to be entered into by the assessees, in our opinion, cannot be said to have resulted in transfer of the land as envisaged in the provisions of section 2(47)(v) of the Income Tax Act read with section 53A of Transfer of Property Act even though it is accepted that the possession of the said land was taken by the transferee in that year. At the time of hearing before us, Ld. Counsel for the assessee has not been able to raise any material contention to dispute this position. He however has sought to raise altogether new issues by filing the following additional grounds with an application under Rule 27 of the Appellate Tribunal Rules, 1963 seeking admission thereof.

1. "The respondent prays that, on the facts and circumstances of the case, the Hon'ble Tribunal may be pleased to hold that the transfer of the impugned property has taken place in the previous year 1994-95 relevant to A.Y. 1995-96 within the meaning of Sec.2(47)(i), or Sec.2(47)(ii) or Sec.2(47)(vi) and as such the capital gains cannot be brought to tax in the A.Y. 2004-05.

9 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

2. The respondent prays that the Hon'ble Tribunal may be pleased to consider a broader view of the word "transfer" vis-à-vis the facts and circumstances of the respondents case and not restrict the "transfer" to Sec.2(47)(v)."

8. Learned D.R. has strongly opposed the application filed by the assessee for admission of the above additional grounds by contending that the assessee as a respondent cannot raise altogether new issues, which were not raised either before the A.O. or before the Ld. CIT(A). In this regard, it is observed that the following question was raised by the Revenue in the appeal filed in the case of DCIT vs. Turquoise Investment and finance Ltd., (2008) 299 ITR 143 (MP) before the Hon'ble Madhya Pradesh High Court as question No.3.

"3. Whether the Income Tax Appellate Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee either before the A.O. or before the CIT(A) but was raised for the first time before the Tribunal and that too in an appeal filed by the department.?"

8.1. The Hon'ble Madhya Pradesh High Court answered the above question along with the related question No.4 in favour of the assessee after recording the following observations :

"Coming to questions Nos. 3 and 4, whether the issue could be raised by the assessee before the Income-tax Appellate Tribunal for the first time and having dismissed the cross-objection, the Income-tax 10 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

Appellate Tribunal could proceed to give a finding on the same, learned counsel for the assessee has invited our attention to the decision of the CIT Appeal Ex./CIT(A) in I. T. A. No. 112 of 2003 in which reference has been made to the decision of the Hon'ble Madras High Court in CIT v. Vr. S. R. M. Firm (1994) 208 ITR 400, but he has erroneously stated that it was held in the said decision that the said dividend is taxable in India under sections 8 and 9 of the Income-tax Act, 1961, though the decision holds to the contrary. Learned counsel, therefore, contends that the fact that the said decision was cited bears testimony to the fact that contention was raised with regard to the non-taxability of the dividend earned in Malaysia in India under the agreement in question.

Learned Counsel has further submitted that in the appeals filed by the respondents, they have clearly raised the questions that the Tribunal was not justified in dismissing the cross-objection filed by the assessee on the ground of limitation specially when it took the view that the dividend income was not taxable in India. Attention has also been invited to rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963. The said rule reads as under :

"27. Respondent may support order on grounds decided against him. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds against him."

Reference has also been made to the decision of the apex Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 in which their Lordships have observed that the power of the Tribunal in dealing with appeals is expressed in widest possible terms. The purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the 11 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. From the above position, it is clear that if the material is on record on the basis whereof objection can be raised, the parties to the appeal cannot be precluded from raising such contention, especially the respondent, in view of rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, quoted above. We are, therefore, of the considered view that both questions Nos. 3 and 4 in the Department's appeal deserve to be answered against the Department. In view of the wide powers that the Tribunal is invested with, as clearly referred to and spelt out by their Lordships in their decision in National Thermal Power Co. Ltd. [1998] 229 ITR 383, the Tribunal cannot be precluded from considering the questions of law arising in an assessment proceeding not raised earlier, and restricted to issues arising out of appeal before the Commissioner.

9. The issue involved in the present case as to whether the assessee as a respondent can raise a new issue, which was not raised by him either before the A.O. or before the Ld. CIT(A), for the first time before the Tribunal as a respondent in the appeal filed by the department thus is squarely covered in favour of the assessee by the decision of the Hon'ble Madhya Pradesh High Court in the case of DCIT vs. vs. Turquoise Investment and finance Ltd., (supra) and there being no decision of any High Court that has been brought to our notice by the learned D.R. taking a contrary view, we respectfully follow the said decision of the Hon'ble Madhya Pradesh High Court and admit the additional grounds filed by the assessee.

12 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

10. As the issue involved in the additional grounds raised by the assessee has been raised for the first time before the Tribunal and neither the A.O. nor the Ld. CIT(A) has got an opportunity to examine the same, we consider it fair and proper and in the interest of justice, to restore this matter to the file of the A.O. with a direction to decide the same in the light of facts and materials already available on record after giving the assessee an opportunity of being heard.

11. In view of the above discussion, we uphold the impugned orders of the Ld. CIT(A) passed in the case of Smt. Allam Maisamma and Mr. Allam Ayalaiah (L.R. of late Allam Adavaiah) holding that their respective lands in survey Nos.662 and 663 having been transferred in the previous year relevant to A.Y. 1995-1996 within the meaning of section 2(47)(v) read with section 53A of the Transfer of Property Act, the addition made by the A.O. on account of capital gain in the year under consideration was not sustainable. The impugned order of the Ld. CIT(A) passed in the case of Mr. Allam Krishna holding that there was a similar transfer of the land belonging to him in survey No.668 and 671 in A.Y. 1995-1996 however is set aside in the absence of any contract for transfer in writing and the matter is restored to the file of the A.O. for the limited purpose of examining and deciding the new issue raised by the assessee for the first time before the Tribunal by way of additional grounds. In so far as the case of Mr. Alam Ayaliah L.R. of late Allam Adavaiah is 13 ITA.No.1336, 1337, 13381339/H/2012 Mr. Allam Ayaliah and others, Hyderabad.

concerned, the impugned order passed by the Ld. CIT(A) is upheld only to the extent whereby she held that there was a transfer of land belonging to him in survey No.662 and 663 within the meaning of section 2(47)(v) read with section 53A of the Transfer of Property Act in the previous year relevant to A.Y. 1995-1996 and therefore, the capital gain attributable to such transfer was not chargeable to tax in the year under consideration. The said order of the Ld. CIT(A) holding that there was similar transfer of land belonging to assessee in survey No.671 in A.Y. 1995-96, however, is set aside in the absence of any contract for transfer in writing and this matter is restored to the file of the A.O. for the limited purpose of examining and deciding the new issue raised by the assessee for the first time before the Tribunal.

12. In the result, ITA.No.1338 & 1339/Hyd/2012 of the Revenue are dismissed and ITA.No.1336 & 1337/Hyd/2012 of the Revenue are treated as partly allowed as indicated above.

Order pronounced in the open Court on 10.07.2015.

Sd/- Sd/- (SAKTIJIT DEY) (P.M. JAGTAP) JUDICIAL MEMBER ACOUNTANT MEMBER

Hyderabad, Dated 10th July, 2015

VBP/- 14 ITA.No.1336, 1337, 13381339/H/2012

Mr. Allam Ayaliah and others, Hyderabad.

Copy to :

1. The ACIT, Circle 11(1), 'D' Block, 5th Floor, I.T. Towers, A.C. Guards, Hyderabad.

2. Late Allam Adavaiah reptd. by L.R. Mr. Allam 2-123-2/3, Ayaliah, Yellareddyguda, Kapra,

3. Mr. Allam Krishna ECIL Road, Hyderabad.

4. Smt. Allam Maisamma

5. Late Allam Agamaiah reptd. by L.R. Mr. Allam Mallesh

6. CIT(A)-VI, 6A, I.T. Towers, A.C. Guards, Hyderabad.

7. CIT-V, Hyderabad

8. D.R. ITAT 'A' Bench, Hyderabad.

9. Guard File