a) Assessee entered into an agreement for purchase of property in year 1992. Sale deed could not be executed only because appropriate authority refused to grant NOC and ordered deemed purchase of the same by the Central Government.

b) The petitioner challenged such order before the High Court by filing Writ Petition. Interim orders were passed in favour of the petitioner and order passed by the Appropriate Authority was quashed.

c) Pursuant to the judgment of the High Court, the sale deed was executed in favour of the petitioner. Thereafter, the said property was sold and petitioner offered capital gain by treating the date of acquisition as 30-10-1992, i.e, the date of agreement to sale.

d) Later a notice was issued for reopening of assessment. According to the department, as per the reasons recorded, the assessee had wrongly taken the date of acquisition of the property as 30-10-1992. Aggrieved-assessee filed the writ petition before the HC.

The High Court held in favour of assessee as under:

1) The assessee had entered into an agreement for purchase of the property in the year 1992. The sale deed could not be executed only because the Appropriate Authority refused to grant no objection certificate and instead, ordered compulsory acquisition thereof.

2) This order was declared as illegal and void ab initio by the High Court. The sale deed was ordered to be executed in favour of the petitioner. There was no reason not to accept the petitioner’s contention that the execution of the sale deed by virtue of the judgment of the High Court would relate back to the original agreement to sale.

3) The petitioner was entitled to claim the benefit of cost indexation from the said date. The entire basis of the department of disputing the petitioner’s computation of the capital gain was invalid.

  – [2019] 101 taxmann.com 221 (Bombay)