Development agreement possession and unexplained jewellery additions failed where transfer conditions and contemporaneous explanation were not established.

Handing over land for development under a development agreement-cum-general power of attorney did not amount to a transfer under section 2(47)(v) because the arrangement was only for land pooling and construction, the developer's payment was a refundable performance security, and the agreement excluded delivery of possession in part performance; the capital gains addition was therefore unsustainable. An addition for unexplained gold jewellery also failed because the assessee gave a contemporaneous explanation in the section 132(4) statement, supported by an affidavit and confirmation, and no adverse material rebutted that explanation; the jewellery addition was deleted.

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Issues: (i) whether handing over possession of land under a development agreement cum general power of attorney, accompanied by a refundable performance security and no completed transfer for consideration, constituted a transfer giving rise to capital gains under section 2(47)(v); and (ii) whether the addition made towards gold jewellery found during search could survive when the assessee's explanation was supported by a contemporaneous statement and affidavit and remained uncontroverted by any adverse material.

Issue (i): whether handing over possession of land under a development agreement cum general power of attorney, accompanied by a refundable performance security and no completed transfer for consideration, constituted a transfer giving rise to capital gains under section 2(47)(v).

Analysis: The agreement showed that the land was pooled only for development, that the developer was permitted to enter the property for carrying out construction, and that the landowners were to receive a defined share in the developed project. The amount deposited by the developer was only a refundable performance security and not consideration for transfer. The agreement also stated that possession was not to be treated as delivery of possession in part performance of a contract of sale. Applying the requirements of section 53A of the Transfer of Property Act, 1882 and the definition of transfer in section 2(47)(v) of the Income-tax Act, 1961, the conditions for a taxable transfer were not satisfied.

Conclusion: The development arrangement did not amount to a transfer and the capital gains addition was not sustainable, in favour of the assessee.

Issue (ii): whether the addition made towards gold jewellery found during search could survive when the assessee's explanation was supported by a contemporaneous statement and affidavit and remained uncontroverted by any adverse material.

Analysis: The assessee disclosed at the earliest stage, in the statement recorded under section 132(4) of the Income-tax Act, 1961, that a substantial part of the jewellery belonged to a close relative and was kept in safe custody. That explanation was supported by an affidavit and confirmation filed contemporaneously. No contrary material or effective rebuttal was brought on record to disprove the explanation, and the mere absence of purchase bills was insufficient, in the facts, to negate the explanation for the entire quantity found.

Conclusion: The addition towards unexplained jewellery was deleted, in favour of the assessee.

Final Conclusion: The Tribunal accepted the assessee's challenge on both the capital gains issue arising from the development agreement and the jewellery addition, and the assessment additions did not survive.

Ratio Decidendi: Possession handed over only for development under a land-pooling arrangement does not constitute transfer under section 2(47)(v) unless the conditions of section 53A are met and the arrangement involves consideration for part performance; where a search explanation for jewellery is contemporaneous, supported by affidavit, and unrebutted by contrary material, the addition cannot be sustained.

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