Deemed transfer under section 2(47)(v) requires section 53A compliance; absent readiness and possession, capital gains cannot arise.

A joint development agreement attracts deemed transfer under section 2(47)(v) only if it satisfies section 53A of the Transfer of Property Act, including the transferee's readiness and willingness to perform. On the facts, the agreement was treated as permissive, possession in the required sense was not shown, and no transfer was proved for assessment year 2006-07, so capital gains could not be taxed in that year. The reopening under sections 147 and 148 was upheld on recorded reasons. Later-year assessments and related cost of improvement, loss set-off and interest issues were remitted for fresh verification, and the penalty under section 271(1)(c) failed once the quantum addition did not survive.

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Issues: (i) whether reopening of the assessments under sections 147 and 148 was valid; (ii) whether the joint development agreement dated 23.11.2005 resulted in a transfer under section 2(47)(v) so as to tax capital gains in assessment year 2006-07; (iii) whether the protective assessments, remand on cost of improvement and related consequential matters for later years were sustainable; and (iv) whether the penalty levied under section 271(1)(c) could survive.

Issue (i): whether reopening of the assessments under sections 147 and 148 was valid.

Analysis: Reopening was based on recorded reasons relating to the taxability of the transaction under the joint development arrangement. For reassessment, the statutory requirement is only a bona fide reason to believe that income has escaped assessment, and not final proof of escapement at the notice stage.

Conclusion: The reopening was upheld.

Issue (ii): whether the joint development agreement dated 23.11.2005 resulted in a transfer under section 2(47)(v) so as to tax capital gains in assessment year 2006-07.

Analysis: Section 2(47)(v) applies only where the arrangement answers the description of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. The decisive requirement is that the transferee must have performed or be willing to perform its obligations. On the facts, the agreement was only permissive in nature, possession was not shown to have been handed over in the manner required, the developer had not demonstrated readiness to perform, and no development activity or accrual of sale consideration was established in the relevant year. The sworn statements and surrounding circumstances were not sufficient to displace the documentary position.

Conclusion: No transfer under section 2(47)(v) was proved for assessment year 2006-07, and capital gains could not be taxed in that year.

Issue (iii): whether the protective assessments, remand on cost of improvement and related consequential matters for later years were sustainable.

Analysis: Once assessment year 2006-07 was held not to be the year of transfer, the later-year assessments could not stand on the same premise and had to be worked out afresh on the correct factual and legal basis. The claim of cost of improvement required fresh verification on evidence, and related computation issues, including set-off of business loss and interest, were left to be reconsidered by the Assessing Officer.

Conclusion: The later-year quantum matters were remitted for fresh consideration and the protective basis was displaced.

Issue (iv): whether the penalty levied under section 271(1)(c) could survive.

Analysis: The penalty for assessment year 2006-07 could not survive once the corresponding quantum addition failed. For the later years, the quantum issues were remanded, and penalty could not be sustained at that stage.

Conclusion: The penalty was deleted or set aside as unsustainable.

Final Conclusion: The assessee succeeded on the core transfer issue for assessment year 2006-07, the corresponding penalty failed, and the remaining year-wise quantum issues were sent back for fresh computation and verification.

Ratio Decidendi: A joint development agreement attracts deemed transfer under section 2(47)(v) only if the arrangement satisfies section 53A of the Transfer of Property Act, including the transferee's readiness and willingness to perform; absent that, capital gains cannot be taxed on the basis of deemed transfer in the relevant year.

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