Reassessment and development agreement transfer rules upheld; capital gains arose on the agreement date, while valuation issues were remitted.

Reassessment under section 147 was valid where the return had only been processed under section 143(1) and survey material later revealed an undisclosed development agreement; it was not a mere change of opinion. A development agreement conferring possession and rights to enter the property amounted to transfer under section 2(47)(v) read with section 53 of the Transfer of Property Act, so capital gains arose in the year of the agreement and section 45(5A) did not apply. The issues of short-term or long-term character and the correct full value of consideration required fresh factual examination and were remitted for reconsideration.

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Issues: (i) Whether reassessment was validly initiated on the basis of information emerging from survey proceedings and whether it was barred as a mere change of opinion; (ii) Whether capital gains arose in the year of execution of the development agreement by reason of transfer within the meaning of section 2(47)(v) read with section 53 of the Transfer of Property Act; (iii) Whether the character of the asset as short-term or long-term and the full value of consideration required fresh examination.

Issue (i): Whether reassessment was validly initiated on the basis of information emerging from survey proceedings and whether it was barred as a mere change of opinion.

Analysis: The return had been processed only under section 143(1). The Assessing Officer received information about the development agreement from survey proceedings in the case of the developer, which constituted material subsequent to processing of the return. In that situation, reopening under section 147 could not be treated as a mere change of opinion, and the absence of disclosure of the development agreement in the return supported the reopening.

Conclusion: The reassessment was held to be valid and this issue was decided against the assessee.

Issue (ii): Whether capital gains arose in the year of execution of the development agreement by reason of transfer within the meaning of section 2(47)(v) read with section 53 of the Transfer of Property Act.

Analysis: The agreement enabled the developer to enter the property and undertake construction, and the Court treated the arrangement as involving part performance of the contract. On that basis, the ingredients of transfer under section 2(47)(v) were satisfied, and the amended provision in section 45(5A) was treated as inapplicable to the earlier agreement.

Conclusion: Capital gains were held taxable in the year of the development agreement and this issue was decided against the assessee.

Issue (iii): Whether the character of the asset as short-term or long-term and the full value of consideration required fresh examination.

Analysis: The computation accepted by the lower authorities was found incomplete because the period of holding had not been properly examined and the Assessing Officer had proceeded on the entire land instead of the assessee's transferred share. The proper date of acquisition, the effect of earlier payments and permissions, and the correct basis for valuation required factual verification.

Conclusion: These questions were restored to the Assessing Officer for fresh adjudication, with due opportunity to the assessees, and this aspect was partly in favour of the assessee.

Final Conclusion: The reopening and the year of taxability were upheld, but the computation issues relating to holding period and valuation were remitted for reconsideration, resulting in a partial allowance of the appeals for statistical purposes.

Ratio Decidendi: Reassessment is valid where tangible material from survey proceedings comes to light after processing under section 143(1), and a development agreement coupled with possession or part performance can amount to transfer attracting capital gains in the year of the agreement.

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