AI Drafter 
TaxTMI 
TaxTMI 
2014 (6) TMI 494
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....ec 143(3) r.w.s. 153A of the IT Act 1961 by determining the total income at Rs.22,62,230/- against the income returned at Rs 1,54,000/- by making certain additions. The only issue in appeal by the Assessee is against the order of the CIT(A) confirming the addition of Rs 18,51,300/- towards long term capital gains. 3. There was a search and seizure operation u/s 132 of the IT Act 1961 conducted in the case of assessee on 6.1.2009 wherein certain documents were found and seized. Consequent to the search operation the assessee's case is notified with DCIT Central Circle 4 Hyderabad. The assessee also happened to be a Director of M/s Crown Beer International Limited for the previous year relevant to the assessment year under consideration. The assessment was completed assessing officer based on the material available on record. 4. The assessee had entered into an agreement with M/s Bhavya Constructions Pvt. Ltd on 7.3.2003. The sanction for the building plan was obtained from the municipality only on 31.3.2003. The assessee had received only security deposit of Rs 25,000 in the year. Under the agreement the assessee is to transfer 590 sq.yds of land to M/s Bhavya Constructions Pv....
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....or the assessment year under consideration. It is also seen that the assessee has not made any disclosure of long term capital gains for the assessment year 2004-05. Therefore it is justified on the part of the assessing officer to assess the capital gains for the assessment year under consideration. The assessee also has raised the objection that the assessment officer has valued the property as per the Sub Registrar's valuation. However it is seen from the observation of the Assessing Officer that he had adopted the consideration received by the assessee as per the capital account of the assessee wherein the value of the sales appears to have been shown at Rs 24,68,400 therefore the objection raised by the assessee cannot be accepted. In view of the discussion made as above, the addition made by the assessing officer is confirmed. Therefore this ground of appeal is treated as dismissed." 8. Aggrieved the Assessee is on appeal. Firstly we find that the Assessee had contended that they have offered the capital gains on the transaction for the AY 2004-05. In the Assessment order for AY 2004-05 in the case of the Assessee (submitted as part of the appeal for that year in 152....
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.... on the ruling of Authority for Advance Rulings in Jasbir Singh Sarkaria In Re (294 ITR 196(AAR), to the following effect - In order to be 'transfer' within the meaning of cl. (v) ofs.2(47), there must be a transaction under which the possession of immovable property is allowed to be taken or allowed to be retained. Secondly, such taking or retention of possession as is well known is a facet of the equitable doctrine of part performance of contract falling within the scope of S.53A of the Transfer of Property Act. The legislature advisedly referred to "any transaction" with a view to emphasize that it is not the factum of entering into agreement or formation of contract that maters, but it is the distinct transaction that gives rise to the event of allowing the contractee to enter into possession that maters. That transaction is identifiable by the terms of the agreement itself and it takes place within the framework of the agreement. We may also refer in this behalf to the decision of the Hon'ble Karnataka High Court in the case of CIT V/s. Dr.T.K.Dayalu (202 Taxman 531), wherein it has been held that it is well settled position by now that the date on which possession was h....
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....and P. Shanthi are not routed through their bank accounts. The assessing officer also has observed that the financial transactions pertaining to minor children are not reflected in the capital accounts of the assessee enclosed along with the return of income and no financial transactions pertaining to assessee's minor children are appearing in the assessee's return of income. 15. It is also the observation of assessing officer that the money received by the assessee's minor children as gifts from blood relation of minor children are invested in purchase of lands is only an afterthought. Therefore the assessing officer has disbelieved the explanation offered by the assessee with regard to the alleged gifts said to have been received by assessee's minor children. 16. It is the contention of the authorized representative that the assessee's children have received gifts from Sri. Y. Venkateswar Rao who is a software engineer and who is well settled in USA. It is also contended that Sri. Y. venkateswarar Rao had sent 57,151.23 US$ which was more than Rs 26 lakhs, therefore the assessing officer should have accepted assessee's investment in purchase of lands in the name of his mino....
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....Venkateswar Rao, NRI is seen to have been maintaining account with ICICI Bank and he has remitted US $ of 64347.53 equivalent of Rs 29,15,172. and it is the claim of the assessee that the said amount had been withdrawn and given as gifts to P. Nishanth and P. Shanthi children of Sri Potla Nageswara Rao. Further the CIT(A) held that out of the said amounts only Rs 26,00,000 is actually withdrawn even though it is claimed that Rs. 29,10,000 was withdrawn and given to the assessee's children. The Ld. CIT(A) also pointed out that nowhere it is established by the assessing officer that the donor had no capacity to give gifts and very remittance of the money is a bogus claim. The Ld. CIT(A) also observed, that the only link missing attributed is that the said money is not routed through the bank accounts of the donees or the parents of the donees and it appears the money is claimed to have been withdrawn from the accounts of Sri. Y. Venkateswara Rao and given to the assessee, which amount is stated to have been invested in purchase of lands in the name of minor children of the assessee. 20. The Ld. CIT(A) concluded that considering the facts and circumstances of the case it appears th....
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....most it can be believed that there was a receipt of gifts only to the extent of Rs 26,00,000 only because there are withdrawals only to the extent of Rs 26,00,000 from the accounts of Sri. Y. Venkateswar Rao. Since donor has confirmed having given gifts and donees also claim to have received gifts and there are certain circumstantial facts, which are not in dispute like receipt of money and withdrawals in the account of donor, the CIT(A) accepted that the donees have received gifts of Rs 26,00,000 only and accordingly confirmed the view taken by the assessing officer with regard to balance amount of Rs 3,10,000, for which no corroborative evidence was found. In the absence of any material brought on record by the assessee to substantiate the claim with regard to the balance addition on account of gifts of Rs.3,10,000, we find no infirmity in the action of the CIT(A) on this issue. We accordingly confirm the order of the CIT(A) and reject the grounds of the assessee on this aspect. 26. As regards the balance amount of Rs. 5,80,000/- said to have been received from Smt. Y. Vimala by P, Nishanth and P. Shanthi we concur with the CIT(A) that the explanation offered is not satisfacto....
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....ship firm, represented by its managing partner Sri P Nageswara Rao, Khammam, to develop a project in the name and style of PNR Colony in survey No.480, 491, 491/A, 491/AA in Khammam. 34. As per the development agreement, in the individual capacity, Sri P Nageswara Rao, Sri P. Nishant and Kum. P. Shanthi, will be each having 10% share of the constructed area. The combined share of 30% constructed area works out to 57,000 sq. Feet approximately and the developer having the balance 70% share, which works out to 1,33,000 sq. Feet approximately. 35. Total value of the said proposed PNR colony, taken as per market value adopted by sub register while registering the said document, amounted to Rs.8,62,58,075/-. The above said landowners combined share of 30% worked out to Rs.2,58,77,422/- and each one's share is worked out to Rs.86,25,807/-. However, it is seen that the assessee has not offered any capital gain in the return of income filed arising out of this transaction. 36. The assessee was asked to explain the same. In response to the same, the assessee, in his reply has stated that the agreement with M/s Aditya constructions has conditions of time frame to complete the projec....
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....at the property was transferred and thereby share of the assessee is liable for capital gains purpose. 40. The CIT(A) has given partial relief to the Assessee by observing as under: Looking into the facts and circumstances of the case, i find that the agreement entered into by the assessee with M/s Aditya Constructions is not complete and by cancellation of agreement, the development work is abandoned. Hence, i find that there is a part transfer of property to attract capital gains for the assessment year under consideration. Therefore, after perusing the facts of the case, i find that there is a part performance of the agreement as per section 2 (47) (v) of the IT Act r.w.s. 53A of Transfer of Property Act, 1882, hence the Assessing Officer is justified to levy capital gains tax. It is also seen that the Assessing Officer has not computed the capital gains correctly. The proposed construction value is Rs.7.79 crores and the site value is at Rs.83,58,075/- The assessee and the other two owners are having the stake in the above site. For transferring 70% of value of site, the assessee and the other two owners get 30% of the constructed value and the assessee is entitled for 1/....
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....up area. 46. We heard the parties. In this case, the agreement for development with M/s Adithya Constructions envisaged the Assessee and other co-owners to transfer 70% interest in the land for 30% of constructed area. According to the learned counsel, the agreement was not fully given effect to and it was subsequently cancelled. However, we find that at the same time, some land was utilised by the developer who had constructed 13 houses on the land. Therefore the Assessee is liable for tax on capital gains as if the entire development agreement was given effect to, in view of the judgment of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra). The learned counsel for the assessee relied on the following decisions, which, however, do not support the case of the assessee. 1. K Radhika Vs. DCIT in ITA No.208/Hyd/2011 2. ACIT Vs. Hotel Harbour View (2 ITR (AT) 178) 3. General Gas Company Vs. DCIT (108 TTJ Mum) 854) 4. R. Vijayalakshmi Vs. Appu Hotels P Ltd. (257 ITR 4) Similar issue we have decided while dealing with the corresponding grounds of the assessee in its appeal for assessment year 2003-04. For the detailed reasons discussed in para 9 ....
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....'s election expenditure more than what is admitted by him. Therefore, without bringing proper evidences, the Assessing Officer could not have attributed the assessee to have spent more than what is admitted in respect of election. 52. The CIT(A) held that having verified the fact and circumstances of the case, that the Assessing Officer had no material to guess election expenditure of the assessee, therefore, the addition made by the Assessing Officer, observing that addition made on estimation and presumption basis cannot be sustained. Therefore, this ground of appeal was allowed by the CIT(A). 53. Aggrieved the revenue is on appeal. 54. We heard the parties. As observed by the CIT(A) there is no basis for the estimation made by the AO. The Assessee has stood for election as MLC and certain expenses have to be necessarily incurred for canvassing purposes. In the circumstances we give the benefit of doubt to the Assessee and uphold the order of the CIT(A) deleting the addition of Rs. 1,00,000/- made on estimate basis towards unexplained expenditure. 55. In the result the revenue's appeal in ITA No 1567/H/11 is partly allowed for statistical purposes. CO No 79/H/11 in....
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....l available on record. 62. AO held that since for a part of the land assessee has already entered into development agreement for residential use, she cannot claim agricultural status for the adjacent chunk of land. Hence AO did not accept the assessee's argument and subjected the transaction to capital gains tax. AO held that on a complete analysis of all the facts of the case and conduct of the assessee from the time of purchase of land to its sale, in the light of the economic scenario of the Hyderabad City during the period it is clear that the assessee had not purchased the land with an intention to do agriculture on it. Instead the land was purchased with the ony intention of selling it at profit in the booming economy of Hyderabad. The AO took the sale proceeds at Rs 1.62 Crores and reduced the cost of acquisition of Rs 4.80 lakhs and balance amount of Rs 1,57,20,000 treated as STCG for the relevant assessment year. 63. Aggrieved the Assessee filed an appeal before the CIT(A). 64. The Assessee submitted before the CIT(A) that the Assessee's father Sri Potla Nageswara Rao had purchased 21.27 acres of land at Bowrampet, Dundigal village of Qutbullahpur Municipality dur....
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....Co. Ltd (1982) 138 ITR 783 (Cal) it has been held that for the purpose of land being agricultural land actual agricultural operations or cultivation or tilling thereon is not necessary if the land is otherwise capable of agricultural operations being carried on thereat. 68. It was pointed out that nowhere the AO has concluded that the subject land is not Agricultural land. All along the AO has taken stand that the investment was made keeping in mind the future bone of Hyderabad which are irrelevant and out of context since presumptions and assumptions cannot be basis for taxing the gain on sale of Agricultural land. Further the proposed ring road was decided upon by the Govt. authorities long after purchase of land and hence the idea of future growth cannot be imputed to the assessee. An identical view was expressed in the case of CIT vs E. Udayakumar (2006) 284 ITR 0511 Hon'ble High Court of Madras. 69. It was submitted that there was no previous sale of any portion of the land for non agricultural use. The lands surrounding the land in question were agricultural lands. In such a situation it has been held in Addl. CIT vs Tarachand Jain 91980) 123 ITR 567 (patna) that the pr....
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....ashildar which was relied upon by the revenue to show that the distance of the land of the assessee from the municipal limits was less than 8 kms there was no other material on record contractdict to the report. Thus a pure finding of fact had been recorded by the Commissioner (A) and the Tribunal on the issue of distance after considering the evidence available on record. The finding could not be said to be perverse illegal or contrary to the evidence available on record. The amount was not assessable as capital gains. 72. The assessee also has furnished the certificate from Deputy Collector of Tahsildar of Quthbullapur Mandal who had certified that the Dundigal village situated in Quthbullapur Mandal, Ranga Reddy District and nearest municipality is Quthbullapur. The distance from Dundigal village to Quthbullpur municipality limits is 13 kms. Therefore in the light of above certificate furnished it was submitted before the CIT(A) that the assessee's lands are situated at Dundigal which is away from 13 kms of Quthbullapur municipal limits and the sale of said land is only sale of agricultural land hence no capital gains are attracted under Income Tax Act 1961. 73. The CIT(A)....
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.... deed dated 8th February 2005, and your assessee herewith enclosed land Pass Book No.444079 under Patta No.1973 and Pass Book No.44063, Patta No.1132 issued by the Deputy Collection RR District dated 10.5.2005 In support of the above the copy of sale deed and land pass books enclosed by the assessee in Annexure 1 i) The assessee enclosed herewith copy of land revenue records in form No.3 wherein the nature of the land i.e. metta land and the assessee name both under the khatadaar and anubhodar columns which shows that the land is agriculture land and cultivated by the assessee. Copy of the documents enclosed in Annexure 2 The assessee also enclosed the certificate issued by the village revenue office for having carried on agriculture activity after duly enquiry conduct by the officer and details of the crops raised during the year 2006-07. Copy of certificate was enclosed by the assessee in Annexure-3: The assessee also enclosed a certificate that the land is situated beyond 8 kms. From the nearest municipality limits (13 kms.) in Annexure 4 4. There is no transfer involved as contemplated by the Assessing Officer on page 4 of the assessment order since: i) it is onl....
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....e intention of the assessee was to develop the land for commercial purposes as the outer ring road was passing near to the land. It is also pertinent to point out that a part of the same land was given for development for construction of houses and the other part of land which has been entered into agreement with M/.s Amsri Developers P Ltd. has to be proved beyond doubt to be agriculture in nature. 82. The Co-ordinate Bench of the Tribunal in the case of Smt. Gousia Begum and others, has held, vide its order dated 16.1.2012 in ITA No. 1024/Hyd/201 and others, as follows: "11. We heard both sides. The contention of the authorised representative of the assessee is that the agricultural operations were carried out in the ay under consideration. During the course of proceedings before the assessing officer, the assessee requested the assessing officer to inspect the lands at that stage. The assessee also filed pahani patrika for the financial year 2006-07, the slab pass-book issued by the Electricity Board before the lower authorities. It was also submitted that there was an open well in the land and water was supplied to the crop through electric motor pumping. Even after the r....
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....hen the persons who gave the affidavits were not cross-examined, it was not open to the revenue to challenge the correctness of the statement made in the affidavits. In view of this, we are inclined to hold that the agricultural income declared by the assessee is to be accepted as agricultural income only. ....... 12. The next effective grievance of the assessee in this appeal relates to computation of capital gains, treating the land sold by the assessee as non-agricultural land. ............. 15. We have considered the rival submissions. We do not find merit in the contention of the assessee. The land in question giving rise to capital gain was, in fact, urban land though agricultural operations have been carried out on them. The assessee placed before the lower authorities pahani patrika, VRO's Certificate and details of electricity Bill/slab pass Book etc. We have held on that basis in earlier paras that the assessee derived agricultural income. But, the question still remains whether the impugned land come within the meaning of "capital asset". The land is situated at Narsing Village of Rajendra Nagar Mandal, R.R. District which is within the municipal limits of Ra....
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....relief under S.54B. There is some merit in this reasoning of the assessing officer. However, in terms of S.54B of the Act, assessee has to purchase the agricultural land within a period of two years. Hence, though mere payment of advance does not entitle the assessee for relief under S.54B of the Act, if ultimately whole transaction of purchase of land was completed within a period of two years as contemplated under S.54B of the Act, assessee is entitled for relief under S.54B of the Act. In this view of the matter, we set aside the orders of the lower authorities, and restore this issue to the file of the assessing officer for verifying whether the assessee has purchased the agricultural lands within a period of two years, so as to qualify for relief under S.54B of the Act, and accordingly redecide this issue in accordance with law and after giving reasonable opportunity of hearing to the assessee. Grounds of the assessee on this issue are allowed for statistical purpose. " 83. In these circumstances, we deem it fit to restore the issue to the file of the AO for re-examination of the entire issue afresh, in the light of the findings given in the case of Smt. Ghousia Begum cited....
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....s to the assessability of capital gains. The facts involved in the Appeal of the Assessee are identical with those in the appeal of her father Sri. Potla Nageswara Rao in ITA No 1521/H/11. We have dealt with the corresponding grounds of the assessee's father in that case in para 9 of this order here inabove For the detailed reasons discussed in para 9 of this order while dealing the appeal of the assessee's father for that year, we do not find merit in the grounds of the assessee on the issue of assessability of capital gains in the year under appeal. However, on the aspect of assessee's claim for allowability of exemption under S.54F of the Act, we set aside the orders of the lower authorities and restore the matter to the file of the assessing officer, with a direction to re-examine the same afresh in accordance with law and after giving reasonable opportunity of hearing to the assessee. The assessing officer may allow the claim of the assessee for relief under S.54F of the Act, if the requisite conditions for the same have been complied with by the assessee. For this limited purpose, assessee's appeal is allowed for statistical purposes. 92. In the result the Assessee's appea....
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....tatistical purposes. CO No 80/H/2011 in ITA 1568/H/11 for AY 2007-08 98. This cross objection filed by the Assessee, Shri Potla Nishanth, is merely in support of the CIT(A) order deciding the issue in his favour. As we have set aside the appeal by the revenue, in 1568/H/11 for this year, to the file of the assessing officer for fresh consideration, this CO filed by the Assessee has become infructuous and dismissed accordingly. 99. In the result CO No 80/H/2011 filed by the Assessee in the revenue's appeal ITA No 1568/H/11 is dismissed. ITA No 1531/H/11: Sri. Potal Nishanth- Departmental appeal for AY 2008-09: 100. The first ground in revenue's appeal is against the recomputation of capital gains arising from the development agreement between the Assessee and M/s Aditya Construction. As we have set aside this issue to the files of the AO in the Assessee's appeal in ITA No 1522/H/11 supra, the revenue' s appeal on this issue is also set aside to the files with the same directions as in the Assessee's appeal. 101. The second ground of appeal by the revenue is against the deletion of capital gains in respect land sold to M/s Amsri Developers (wrongly mentioned as M/s ....