Seshasayee Steels P. Ltd. vs Assistant Commissioner of Income Tax, Company Circle VI(2), Chennai

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2019 Supreme(SC) 2339

SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, ANIRUDDHA BOSE, V. RAMASUBRAMANIAN, JJ.
M/s Seshasayee Steels P. Ltd. – Appellant
Versus
Assistant Commissioner of Income Tax, Company Circle VI(2), Chennai - Respondent(s)
Civil Appeal No. 9209 of 2019 (Arising out of SLP (C)No. 34815 of 2012)
Decided On : 04-12-2019

Advocates:
Advocate Appeared:
For the Appellant : Mr. R. V. Easwar, Sr. Adv. Mr. Rubal Bansal, Adv. Mr. V. Ramasubramanian, AOR Mr. P. Bala Senthil Kumar, Adv.
For the Respondent: Mr. K. Radhakrishnan, Sr. Adv. Ms. Seema Bengani, Adv. Ms. Purnima Bhat Kak, Adv. Mr. Prem Prakash, Adv. Mr. Anas Zaidi, Adv. Mrs. Anil Katiyar, AOR

Headnote:
Transfer of Property Act, 1882 – Section 53A – Income Tax Act, 1961 – Sections 144, 142, 148, 2 – Tax – Capital Gain – Appellant did not file any Return for Assessment Year 2004-2005. – Apparently, it was detected later by Assessing Officer, that agreement to Sell had been entered into and that, subsequently, a Memo of Compromise had also been entered into between parties –Notice issued under Section 148 of Income Tax Act, 1961 was served on appellant. – Even in response to this notice, no Income Tax Return was filed. – A notice was issued under Section 142(1) fixing case for hearing – Here again, the appellant did not turn-up, as a result of which, another notice was issued, but this time again assessee did not turn-up, so a third letter was issued fixing case for hearing – Since time bar was foremost in mind of Assessing Officer, limitation falling on this transaction a Best Judgment Assessment Order was then passed under Section 144 of I.T. Act – Vide this Order, entire sale consideration was treated as a capital gain and brought to tax – An appeal was preferred against this Order. – Commissioner of Income Tax (Appeals) examined three documents in question and ultimately dismissed appeal. – Income Tax Appellate Tribunal by Order agreed with CIT(A) and found that on or about date of agreement to sell, conditions mentioned in Section 2(47)(v) of I.T. Act could not be stated to have been complied with, in that, very fact that compromise deed was entered into on 19.07.2003 would show that obligations under agreement to sell were not carried out in their true letter and spirit. – As a result of this, Section 53A of Transfer of Property Act, 1882, could not possibly be said to be attracted. – What was then referred to was the Memo of Compromise under which various amounts had to be paid by Builder to owner so that a complete extinguishment of owner’s rights in the property would then take place – High Court, by the impugned judgment, adverted to concurrent findings of authorities, and stated that three questions of law that were set out were all answered in favour of Revenue and against assesse – Held, It is clear that expression “enabling the enjoyment of” must take colour from the earlier expression “transferring”, so that it can be stated on the facts of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owner’s rights stand extinguished. – It is clear that as on date of agreement to sell, owner’s rights were completely intact both as to ownership and to possession even de facto, so that this Section equally, cannot be said to be attracted. – What has to be seen is compromise deed and as to which pigeonhole such deed can possibly be said to fall under Section 2(47) of the Income Tax Act. A perusal of the compromise deed shows that the agreement to sell and the Power of Attorney are confirmed, and a sum of Rs.50 lakhs is reduced from the total consideration of Rs.6.10 crores. Clause 3 of the said compromise deed confirms that the party of the first part, this is the appellant, has received a sum of Rs.4,68,25,644/-out of the agreed sale consideration. – Clause 4 records that balance Rs.1.05 crores towards full and final settlement in respect of the Agreement entered into would then be paid by 7 post-dated cheques. – Clause 5 then states that last two cheques will be presented only upon due receipt of the discharge certificate from one M/s. Pioneer Homes. – It is important to advert to a finding of ITAT, which was that all cheques mentioned in the compromise deed have, in fact, been encashed – Pigeonhole, therefore, that would support the orders under appeal would be Section 2(47)(ii) and (vi) of the I.T. Act in facts of the present case – Appeal Dismissed

JUDGMENT :

R. F. NARIMAN, J.

1. The appellant-assessee entered into an agreement to sell, on 15.05.1998, with one Vijay Santhi Builders Limited for a total sale consideration of Rs.5.5 crores.

2. The important clauses of the sale agreement are set out hereinbelow:

2. It is agreed that the total extent of the property is 100 grounds approximately including the areas allotted for road and other amenities, plus the actual extent available for flats.

12. THE PARTY OF THE FIRST PART has already handed over to the PARTY OF THE SECOND PART Xerox copies of all land documents of the schedule mentioned property for their legal counsel’s scrutiny and opinion. THE PARTY OF THE SECOND PART have also satisfied themselves about the title deeds. The PARTY OF THE FIRST PART agree to show the original title deed which are kept with them to the nominees of the second part as and when required after fixing prior appointment.

14. Both the parties are entitled to specific performance of this agreement.

16. THE PARTY OF THE FIRST PART hereby gives permission to the PARTY OF THE SECOND PART to start advertising, selling, construction on the land herein mentioned. Advertisements, sales catalogues and leaflets shall be approved by the PARTY OF THE FIRST PART before publication or circulation.

SCHEDULE OF PROPERTY

Sl. No.	Patta No.	Village	Area in Acres
4	117	Perungudi	2.52
1	117	Perungudi	1.66
320/1	469	Perungudi	1.44
			5.62

3. Pursuant to this agreement to sell, a Power of Attorney was executed on 27.11.1998, by which, the assessee appointed one Chandan Kumar, Director of M/s. Vijay Santhi Builders Ltd. to execute and join in execution the necessary number of sale agreements and/or sale deeds in respect of the schedule mentioned property after developing the same into flats. The Power of Attorney also enabled the Builder to present before all the competent authorities such documents as were necessary to enable development on the property and sale thereof to persons.

4. The appellant did not file any Return for Assessment Year 2004-2005. Apparently, it was detected later by the Assessing Officer, that the agreement to Sell had been entered into and that, subsequently, a Memo of Compromise had also been entered into between the parties dated 19.07.2003. Based on the discovery of this fact, Notice dated 04.11.2008 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘I.T. Act’ for brevity) was served on the appellant. Even in response to this notice, no Income Tax Return was filed. A notice dated 08.09.2009 was issued under Section 142(1) fixing the case for hearing on 20.09.2009. Here again, the appellant did not turn-up, as a result of which, another notice was issued dated 23.10.2009, but this time again the assessee did not turn-up, so a third letter was issued on 11.12.2009 fixing the case for hearing on 22.12.2009. In response to the aforesaid letter, the assessee, by letter dated 29.12.2009 stated as follows:

“I refer to your letter dated 11.12.2009. I request you humbly and sincerely not to pass any order u/s 144 and to give me time for one month from today. shall positively submit all necessary statements and documents within 30 days of today to your satisfaction. I seek this time only because of my very serious illness after an abdominal surgery.”

5. Since time bar was foremost in the mi

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