ORDER
B.M. Kothari, Accountant Member
1. All these appeals involve consideration of a common point. Hence they are being disposed of by this common order.
2. The appellant-firm came into existence on 18-11-1974. The firm constructed one multistoreyed building named “Raman Chambers” at Surat. Construction of the whole building was completed in the financial year 1976-77. The possession of the various flats/shops was also handed over to the buyers after receiving the sale consideration from them. However, the sale deeds had not been executed and got registered in favour of those buyers. During the course of assessment proceedings for assessment year 1982-83, the ITO elaborately examined the issue as to whether the appellant-firm is liable to tax on Annual Letting Value of the property under Section 22 of the Act, regardless of the fact that the various shops/flats had been sold to the various buyers and possession was also handed over to them after receiving the sale consideration, in view of the fact that the sale deeds were not executed and registered in their favour. After examining the relevant provisions of IT Act, Transfer of Property Act, Indian Registration Act, Contract Act etc. and after taking into consideration the judgments of various courts he came to the conclusion that the appellant is liable to tax on the ALV of the flats/shops in respect of which sale deeds had not been executed and registered. On the basis of the findings given in assessment year 1982-83, it appears that the completed assessments for assessment years 1976-77 to 1979-80 were re-opened by issue of notice under Section 148 which was served on 30-1-1985. The assessments for assessment years 1980-81 and 1981-82 appears to have been made afresh after the earlier assessments were set aside by the CIT by an order passed under Section 263 as per para 4 of the assessment orders for these two years. However, on the first page of these two assessment years the section and sub section under which the assessments are made has been mentioned as 143(3) r.w.s. 147(a) of the Act. Assessment for assessment year 1983-84 has been made under Section 143(3) following the assessment order for assessment year 1982-83. In all these assessments/reassessments the ITO included the notional income from property in respect of shops/flats which were allotted to the respective buyers and to whom the possession was given after receiving the sale consideration but sale deeds were not executed and registered in their favour.
3. In revenue’s appeal for assessment years 1977-78 to 1979-80, the first ground taken is that the CIT (Appeals) has erred in holding that action taken under Section 147(a) was invalid. The next ground, which is common for all the appeals, is that the CIT (Appeals) has erred in holding that income from properties which were contracted for sale but no documents were executed or registered was not assessable in the hands of the assessee under Section 22 of the Act in view of the fact that legal ownership of the said property continued with the assessee and for which the assessee was assessable under Section 22 of the Act.
4. We will first deal with the ground relating to validity of the proceedings initiated under Section 147(a) for assessment years 1977-78 to 1979-80. The learned D.R. relied on the reasons recorded in the assessment order and submitted that the CIT (Appeals) ought to have held that the proceedings under Section 147(a) had been validly initiated by the ITO. The income was not fully and truly disclosed by the assessee during the course of original assessment proceedings. None was present on behalf of the assessee.
5. We have carefully gone through the orders of the departmental authorities. The CIT (Appeals) has observed in the order passed by him that the assessee in the present case had not only disclosed the primary facts but it had disclosed all the relevant facts necessary for the assessment during the course of original assessment proceedings. After considering the entire relevant facts and circumstances the ITO came to the conclusion that the income derived by the assessee from the sale of flats/shops were to be assessed as income from business. The stock of unsold portion was declared as “stock-in-trade”. After examining the entire relevant facts, the CIT (Appeals) came to the conclusion that the ITO was not justified in reopening the completed assessments under Section 147(a) for assessment years 1977-78to 1981-82. In view of the detailed discussions and reasons given in the order of the CIT (Appeals) we do not find any justification in interfering with the said finding.
6. Now we will consider the next ground which is common in all the appeals. The learned Sr. D.R. submitted that sale of flats and shops not supported by execution and registration of the respective sale deeds would not result in a valid and complete transfer in favour of the buyers. The assessee continued to be the legal owner of such flats and shops. The provisions of Section 22 provides for levy of tax on notional ALV in respect of properties owned by the assessee regardless of the fact whether the income in fact is received by the assessee or whether the assessee in fact possesses those properties. It is also well settled law that the legal ownership vests with the assessee till a sale deed is duly executed and registered in favour of the buyers, which have admittedly not been executed and registered in the present case. The ITO has given elaborate reasons and has also cited several decisions which clearly support the conclusions derived by him. The CIT (Appeals) ought to have confirmed the order of the ITO. He also relied on the various decisions in Ramkumar Mills (P.) Ltd. v. CIT [1989] 180 ITR 464 (Kar.), CIT v. Hans Raj Gupta [1982] 137 ITR 195 (Delhi), CWT v. S.C. Kothari [1971] 82 ITR 794 (SC), CIT v. Trustees of H.E.H. The Nizam’s Miscellaneous Trust [1986] 160 ITR 253 (AP), Nawab Mir Barkath Ali Khan v. CIT [1988] 171 ITR 541 (AP), D.C. Anand and Sons v. CIT [1981] 131 ITR 77 (Delhi), Sunil Ansal v. CIT [1986] 160 ITR 308 (Delhi) and CIT v. Sultan Bros. (P.) Ltd. [1983] 142 ITR 249 (Bom.). He urged that the order of the CIT (Appeals) should be set aside and that of the ITO restored.
7. We have carefully considered the submissions made by the learned D.R and have also gone through the orders of the departmental authorities. We have also gone through the various judgments referred to in the order of the ITO as well as in the order of the CIT (Appeals). In our view the meaning of the term “owner” or the expression “belonging to” may have a variety of meanings depending on the context in which these words are used. Section 22 brings to tax the income from property and not the interest of a person in the property. A property cannot be owned by two persons, each one having independent and exclusive right over it. Therefore, the owner, for the purpose of Section 22, must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. In the present case, the firm is carrying on the business as builders. In the course of such business it constructed a multi-storeyed building and sold the flats and shops to various buyers. It is an admitted fact that on payment of sale consideration, possession of the shops/flats was transferred to the buyers. The buyers thereafter enjoyed exclusive right of possession, enjoyment and disposal of the flats/shops. He had the right to control, handle and dispose of the same. This right may not be perfect in the sense that there had been no change of ownership from the builder to the buyer by a registered deed of conveyance, but his right as owner was in no way encumbered. The shop/flat was not charged with any right towards a third person. The term “ownership” used in Section 22 of the Act is not merely a word of technical, legal meaning but it has to be interpreted in a broad and reasonable manner. Ownership consists of a bundle of rights. In the context of Section 22 of the Act, “ownership” would rest in that person who has dominion over the property which is the subject matter of consideration. In the present case it is an admitted fact that the shops/flats were occupied and used by the respective buyers and the assessee-firm in fact did not derive any income from the said portions. We are, therefore, of the considered opinion that the CIT (Appeals) has rightly arrived at the conclusion that the notional ALV in respect of such shops/flats cannot be added in the hands of the assessee-firm. Such a view is clearly fortified by the judgment of Hon’ble Supreme Court in the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 and judgments in Madgul Udyog v. CIT [1990] 184 ITR 484 (Cal.), Addl. CIT v. Sahay Properties and Investment Co. (P.) Ltd. [1983] 144 ITR 357 (Patna), Smt. Kala Rani v. CIT [1981] 130 ITR 321 (Punj. and Har.) and Smt. Savita Mohan Nagpal v. CIT [1985] 154 ITR 449 (Raj.). It is true that there is a divergence of judicial opinion on this point and various other courts have taken a contrary view. However, we will prefer to follow the view taken by the CIT (Appeals) as such a view is in consonance with the well settled principles relating to taxation that the tax should be levied only on real income and in the hands of the person who is really entitled to enjoy that income. Some of the buyers of the flats have let out these portions and are deriving rental income in respect of which they must have been subjected to tax. Some buyers occupying the respective shop/flat have their own business/residence. There is no justification in levying tax in the hands of the appellant-firm. Such a controversy has also been resolved by the Finance Act, 1987 w.e.f. 1-4-1988 by suitably substituting clauses (iii), (iiia) and (iiib) in Section 27 which now expressly provides that ownership of the house property will be broadly determined on an enjoyment basis and not on actual legal ownership basis. The view taken by the CIT (Appeals) is, therefore, confirmed in relation to this ground also.
8. In the result, all the appeals are dismissed.