Joint development capital gains arise on transfer of possession, and reassessment fails if based only on later construction readiness.

In a joint development arrangement, capital gains arise when effective possession is transferred to the developer, not when the builder later states that constructed area is ready for handover. Here, vacant possession became available only after tenants were vacated in an earlier year, so the taxable transfer event, if any, could not be attributed to the reassessment year. Because the reassessment rested on the incorrect assumption that the developer's readiness to hand over the constructed portion created a fresh transfer, the reopening lacked a valid basis and was unsustainable. The reassessment was therefore held invalid, and the capital gains were not taxable in the year under appeal.

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Issues: Whether capital gains arising from a joint development agreement were chargeable in the assessment year adopted by the Assessing Officer, and whether the reassessment made on the basis of the builder's readiness to hand over constructed area was valid.

Analysis: The assessee had entered into a joint development arrangement in 2000, but actual vacant possession for development was available only in 2003 after the tenants were vacated. The later letter of the developer stating that the construction was ready for occupation did not establish a fresh transfer by the assessee in the relevant year. For purposes of capital gains, the decisive event was the transfer of possession to the developer, not the subsequent readiness of the constructed portion for handover. On that basis, the taxable event, if any, had arisen in an earlier year and not in the year reopened by the Assessing Officer. Since the reopening rested on an incorrect premise, the reassessment could not be sustained.

Conclusion: The reassessment was held to be invalid, and the capital gains could not be brought to tax in the year under appeal.

Ratio Decidendi: In a joint development transaction, capital gains arise when effective possession is transferred to the developer, and a reassessment based merely on the builder's later readiness to hand over constructed area is unsustainable where that premise does not reflect the actual transfer event.

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