Development agreement and search-based reassessment: no capital gains transfer arose, and section 153C was the proper jurisdictional route.

Capital gains were held not taxable in assessment year 2009-10 on the basis of the development agreement because the requirements of section 53A of the Transfer of Property Act and section 2(47)(v) were not satisfied: mere possession or municipal approval was insufficient, and the record showed no real performance, continuing uncertainty and no meaningful development activity. Reassessment of the co-owners under sections 147 and 148 was also held invalid because the additions arose from search material relating to another person, for which section 153C was the proper jurisdictional route. The Tribunal therefore treated the reassessments as lacking valid search-linked jurisdiction.

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Issues: (i) Whether capital gains could be brought to tax in assessment year 2009-10 on the basis of the development agreement, having regard to section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961. (ii) Whether reassessment of the co-owners under sections 147 and 148 of the Income-tax Act, 1961 was valid when the materials had arisen from a search and the proper course was section 153C of the Income-tax Act, 1961.

Issue (i): Whether capital gains could be brought to tax in assessment year 2009-10 on the basis of the development agreement, having regard to section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The development arrangement did not mature into a taxable transfer in assessment year 2009-10 because the developer had not carried out the contemplated development to the extent showing real performance of the contract. The crucial requirement for invoking section 53A is not merely possession or municipal approval, but possession coupled with acts in furtherance of the contract and willingness to perform the contractual obligations. The record showed continuing uncertainty, repeated supplementary arrangements, change of developer, and absence of meaningful development activity in the relevant year. On those facts, the ingredients of section 53A were not satisfied so as to trigger section 2(47)(v).

Conclusion: No transfer within the meaning of section 2(47)(v) arose in assessment year 2009-10, and capital gains could not be taxed in that year.

Issue (ii): Whether reassessment of the co-owners under sections 147 and 148 of the Income-tax Act, 1961 was valid when the materials had arisen from a search and the proper course was section 153C of the Income-tax Act, 1961.

Analysis: The additions against the co-owners flowed from incriminating material found in the search proceedings relating to the development agreement. In such a situation, the special machinery under section 153C governs the assumption of jurisdiction over the other person, and the revenue cannot bypass that mechanism by resorting to sections 147 and 148. The absence of the mandatory search-linked procedure rendered the reassessment jurisdiction defective. The challenge based on want of satisfaction and improper invocation of section 147 was therefore accepted.

Conclusion: The reassessments of the co-owners under sections 147 and 148 were invalid, and the appeals of the revenue failed.

Final Conclusion: The Tribunal held that capital gains were not taxable in assessment year 2009-10 on the facts of the development agreement, and that the co-owners' reassessments were without proper jurisdiction because the search material required action under section 153C.

Ratio Decidendi: For a development agreement to constitute a transfer under section 2(47)(v), the transferee must have possession in part performance together with a demonstrated willingness and substantive performance under the contract; where the trigger is search material relating to another person, section 153C is the exclusive jurisdictional route and cannot be replaced by sections 147 and 148.

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