Development agreement transfer triggers capital gains on received and accrued consideration where possession and control are handed over.

The ITAT upheld reassessment under section 148 where the return had been processed only under section 143(1) and information in the Revenue's possession supported belief of escapement of income. It further held that capital gains from the development arrangement were taxable in the hands of the individual member, since the society acted only as facilitator and the consideration was payable to the members. Applying sections 45, 48, 2(47)(v), 2(47)(vi) and section 53A of the Transfer of Property Act, the Tribunal held that handing over possession, conferring development rights and executing an irrevocable power of attorney amounted to transfer, and that taxable consideration included both amounts received and amounts accrued, including the flat component.

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Issues: (i) Whether reassessment initiated under section 148 was valid; (ii) whether capital gains arising from the development arrangement were taxable in the hands of the individual member and not the society; (iii) whether transfer of rights and possession under the development agreement attracted capital gains on the full consideration, including the value of the flat and accrued amounts.

Issue (i): Whether reassessment initiated under section 148 was valid.

Analysis: The return had been processed only under section 143(1), and the reopening was supported by information gathered in relation to the housing society arrangements. The Tribunal followed its earlier decision that the material available with the Revenue justified formation of belief that income had escaped assessment. The validity of reopening was also supported by the principle that processing under section 143(1) does not bar reassessment when the statutory conditions are met.

Conclusion: The reopening under section 148 was upheld, against the assessee.

Issue (ii): Whether capital gains arising from the development arrangement were taxable in the hands of the individual member and not the society.

Analysis: The Tribunal held that the society was only a facilitator and that the JDA, resolutions, payment structure, and conduct of the parties showed that the individual plot holders were the real persons entitled to consideration. The consideration under the arrangement was payable to the members, and cheques were issued in their names. The member's rights in the plot, not the society's, were the subject of transfer for capital gains purposes.

Conclusion: The capital gains were taxable in the hands of the assessee as an individual member, against the assessee.

Issue (iii): Whether transfer of rights and possession under the development agreement attracted capital gains on the full consideration, including the value of the flat and accrued amounts.

Analysis: The Tribunal applied sections 45 and 48 with section 2(47)(v) and 2(47)(vi), read with section 53A of the Transfer of Property Act, 1882. It held that the development agreement, coupled with handing over of possession, execution of irrevocable power of attorney, and conferral of control and development rights, amounted to transfer for capital gains purposes. It further held that consideration for capital gains includes not only amounts actually received but also consideration accrued or arising under the agreement. The flat component was part of the entire consideration, and the Assessing Officer's valuation was sustained.

Conclusion: The addition towards long-term capital gains, including the value of the flat and accrued consideration, was sustained, against the assessee.

Final Conclusion: The appeal was rejected in entirety and the reassessment and capital gains addition were sustained.

Ratio Decidendi: In a development agreement where possession and effective control over immovable property are handed over and an irrevocable power of attorney is executed, the transaction constitutes transfer for capital gains purposes, and the taxable consideration includes both amounts received and consideration accrued under the agreement.

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