Decided on February 25,1994



T.V.K. Natarajachandran, Accountant Member - (1.) THESE appeals were heard together as they involve common facts and disposed of together for the sake of convenience.
(2.) Appeal ITA 530 relates to assessment of Late Sri M.M. Aga through his legal heir R.M. Aga while appeal ITA 5328 relates to assessment of Sri R.M. Aga in his individual capacity. The long-term capital gains arising on the sale of property known as "Bakhtawar Ice Factory" belonging to late Sri M.M. Aga was assessed taking the total consideration of Rs. 1,05,25,000 consisting of amount realised on public auction Rs. 61,25,000, amount received from purchasers of the property as per Consent Term dated 26-9-1988 Rs. 39 lakhs and earnest money Rs. 5,00,000 in the hands of Sri R.M. Aga, legal representative. At the same time, the amount of Rs. 39 lakhs received as per Consent terms dated 26-9-1984 was also assessed in the hands of Sri R.M, Aga, individual, on protective basis as income from "Profits & Gains of business or profession". The facts of the case have been elaborated which are common to both the appeals. The brief facts are that during his lifetime, Sri M.M. Aga had entered into an agreement of sale of Bakhtawar Ice Factory on 31 -3-1981 with Sri P. C. Bafna, for a total consideration of Rs. one crore and received Rs. five lakhs as earnest money. The deal did not materialise. Sri P.C. Bafna alleged a supplementary agreement wherein the consideration was reduced to Rs. 80 lakhs and he has also filed a Suit No. 845 of 1981 in April 1982 for specific performance. An interim order dated 12-8-1983 has been passed by the Bombay High Court injecting and restraining the legal heirs from parting with or disposing of the property or creating any tenancy thereof. The said property was sold by public auction held on 23-4-1984 by Tax Recovery Officer, G-III Ward, Bombay, for a total consideration of Rs. 61,25,000 to M/s. Veena (P.) Ltd., Narpat Raj Mehta, Parasmal Jain, H.D. Jogani and P.C. Bafna. At this juncture it is to be pointed out that the original agreement dated 31-3-1981 was entered into by Sri P.C. Bafna only. Sri R.M. Aga received notice from the purchasers on 12-6-1984 to vacate the property and after coming to know the sale of the property by auction filed a Writ in the Bombay High Court on 15-6-1984 numbered as '1259 of 1984'. This was dismissed in limine by a Single Judge on 18-6-1984. On appeal, this judgment was dismissed but Court Receiver was appointed to take possession of the property. Sri R.M. Aga filed a Special Leave Petition dated 25-7-1984 before the Supreme Court to appeal against the order of the Division Bench, challenging the auction sale, as collusive one as the auction sale price of Rs. 61,25,000 was much below the price of Rs. one crore agreed upon earlier by Sri P.C. Bafna. R.M. Aga arrived at a settlement of all disputes as per Consent Terms dated 26-9-1984 in respect of S.L.P. Nos. 8609 & 9293 of 1984, according to which the sale by public auction on 23-4-1984 of Rs. 61,25,000 was confirmed and clear title passed and that amount is to be retained by the Department towards taxes and vacant possession should be handed over to the purchasers. As Sri P. C. Bafna is entitled to withdraw Rs. 5 lakhs paid as earnest money and interest accrued thereon. The Supreme Court passed an order on 28-9-1984 as per the Consent Terms confirming the sale of the property by public auction and clear title to the said property was passed on to the purchasers.
(3.) IN the light of the aforesaid facts and circumstances, the Assessing Officer held that the total consideration paid for the sale of the property was Rs. 1,05,25,000 and worked out the long-term capital gains with reference to that amount. On appeal, the CIT(A) came to the conclusion that it is only the amount of Rs. 61,25,000 which is the auction sale price of the property and which has been confirmed by the Supreme Court that should be taken into consideration as sale price for purposes of completion of capital gains. The observation of the CIT(A) is as follows: Once a court of law has decreed that a certain property has been sold for a certain amount and the certificate of sale of immovable property given in Form No. I.T.C.P. 20 also confirms the sale of 23-4-1984 made in auction, the ITO cannot intervene and say that the sale amount was anything more than Rs. 61,25,000." (vide para 4 of the impugned appellate order) Having concluded the sale price, the CIT(A) further held that the sum of Rs. 39,00,000 received by Sri R.M. Aga for settlement of all disputes with the purchasers to the exclusion of all other legal heirs was for giving up his right to enjoyment of the said property and therefore such right is a capital asset. The value of such right could be ascertained. IN this view of the matter, therefore, he held that the entire sum of Rs. 39 lakhs received by R.M. Aga to the exclusion of other legal heirs is to be taxed in his hands and compute the capital gains arising out of that amount. Accordingly, he directed the ITO to compute capital gains in the case of the assessee with reference to the sale price of Rs. 61,25,000 and further directed the Assessing Officer to take assessment proceedings in the case of Sri R.M. Aga to tax the benefit arising out of Rs. 39 lakhs.;

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