Reassessment and capital gains on joint development agreements turn on fresh material and absence of possession in part performance.
Fresh material coming to the Assessing Officer's notice after the return, including an omitted joint development agreement, was sufficient to justify reopening because it supported a belief that income had escaped assessment. On the capital gains issue, the agreement granted only a permissive licence to enter and develop the property and expressly negatived possession in part performance. As section 53A requires such possession, the precondition for transfer under section 2(47)(v) was absent. The reassessment survived, but capital gains could not be brought to tax on execution of the agreement.
Issues: (i) Whether the reassessment was validly reopened on the basis of material that came to the Assessing Officer's notice subsequently. (ii) Whether capital gains could be assessed on the execution of the joint development agreement, having regard to section 2(47)(v) of the Income-tax Act, 1961 and section 53A of the Transfer of Property Act, 1882.
Issue (i): Whether the reassessment was validly reopened on the basis of material that came to the Assessing Officer's notice subsequently.
Analysis: The joint development agreement was not furnished with the return and came to the Assessing Officer's notice later. That agreement constituted fresh material. The entries in the books of account were not for income-tax purposes, and the Assessing Officer had sufficient reason to form the belief that income had escaped assessment.
Conclusion: The reopening of assessment was valid.
Issue (ii): Whether capital gains could be assessed on the execution of the joint development agreement, having regard to section 2(47)(v) of the Income-tax Act, 1961 and section 53A of the Transfer of Property Act, 1882.
Analysis: The agreement granted only irrevocable permission and licence to enter the property for development and expressly stated that such licence was not to be construed as possession delivered in part performance. Section 53A requires possession in part performance of a contract, and the transaction did not satisfy that requirement. Since the precondition for section 2(47)(v) was absent, the transaction did not amount to a transfer for capital gains purposes.
Conclusion: Capital gains could not be assessed under section 2(47)(v) on these facts.
Final Conclusion: The reassessment survived, but the addition of short-term capital gains was deleted, leaving the assessee successful on the substantive tax issue.
Ratio Decidendi: A mere licence or permissive entry for development, expressly negating possession in part performance, does not constitute a transfer under section 2(47)(v) read with section 53A.
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AI Drafter ✕
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