TaxTMI 
TaxTMI 
2019 (3) TMI 461
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....17 by the assessee and the revenue 2. The factual details and background of the case are that the assessee, is an individual, and there was search and seizure operation u/s 132 of IT Act 1961 in the residential premises of the assessee on 07.07.2008. He filed return of income for A.Y.2009-10 on 30.07.2009 admitting income of Rs. 58,28,850/-. The scrutiny assessment u/s 143(3) was completed on 19.11.2010 assessing the income at Rs. 58,86,933/-. 2.1 During the course of search proceedings certain documents identified as A/GR/RES/01 were seized. These were the copies of development agreement and the supplementary agreement entered by the assessee with M/s Legend Estates Pvt. Ltd. 2.2 Vide development agreement dated 3.2.2007 the assessee Sri Kosetti Gopal Raj and his sons Sri K. Nagaraju and Sri K. Kishore Kumar entered into an agreement with M/s. Legend Estates Pvt Ltd for development of land of 6 Acres and 39 Guntas located at Survey No.102 at Serilingampally Mandai, Rangareddy District. On this day, an amount of Rs. 1,25,000/- was paid through cheque by the developer to the assessee as returnable earnest money deposit. The agreed sharing ratio of constructed portion was 50:50. T....
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....ht the capital gain to tax in A.Y.2008-09 taking the date of transfer as 17.11.2007.It is pertinent to mention that an unsigned and un registered agreement dated 17.11.2007 was found during search. The capital gains assessed in this order was Rs. 61,50,25,350/-. 2.8 On first appeal, the CIT(A) vide his order dated 28/11/2011 directed the AO to bring the capital gains to tax for the AY 2009-10 as the possession of land was handed over after obtaining the municipal permission on 05/08/2008. 2.9 On further appeal both by Department and the assessee, the coordinate bench of this Tribunal vide ITA No.140/Hyd/2012 dated 30.08.2013 upheld the order of CIT(A) and directed the Assessing Officer to examine the taxability of capital gain for A.Y.2009-10 subject to Sec.149, 150 and 153 of the IT Act. The relevant para of Hon'ble Tribunal is repeated as under: "As can be seen from the registered development agreement dated 03/02/2007 with Legend Estates Pvt Ltd., developer was entrusted to develop the property belonging to the assessee along with other co-owner. As per Clause 5 of the development agreement irrecoverable right was given to the developer for developing the property. As pe....
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.... of the ratio laid down by the Hon'ble Bombay High Court in case of Chaturbhuj Dwarakadas Vs ACIT, 260 ITR 491 (Bom.) and K. Radhika Vs DCIT, ITAT, Hyderabad, 47 SOT 180. We, therefore, do not find any infirmity in the order of the CIT(A) in directing the Assessing Officer to examine the issue of taxability of capital gain in the assessment year 2009-10 when his powers under the statute are co-terminus with that of the Assessing Officer. In our view the statute has neither put any fetters not the CIT(A) is powerless in directing the Assessing Officer to examine the taxability of a particular income in an approximate assessment year even if he finds it not taxable in the assessment year under dispute. The assessee certainly cannot have any grievance in assessability of an income in a particular assessment year if otherwise it is taxable in that assessment year in accordance with law. In the facts of the present case the CIT(A) has directed the Assessing Officer to examine the taxability of capital gain in assessment year 2009-10. However, such direction of the CIT(A) is subjected to the provision contained in Sections 149, 150 and 153 of the act. It is open for the assessee to p....
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....capital gains in the year of completion of project taking sale consideration at stamp duty value or actual consideration received, whichever is higher. 5. Aggrieved by the order of CIT(A), the assessee as well as revenue are in appeal before us raising the following grounds of appeal: 5.1 Grounds raised by the assessee: "1. The learned CIT(A)-3, Hyderabad (CIT(A) having held that no capital gains was assessable for asst. year 2009-10 ought to have clearly held that in the absence of the basis for quantification of long term capital gains at Rs. 54,94,81,659 not having been clearly spelt ought to have annulled the computed figure of Rs..54,94,81,659. 2. The learned (CIT(A) ought to have clearly held that the entire re-assessment proceedings u/s.147 rws 148 are illegal without jurisdiction and bad in law as the learned DClT has reopened the assessment on the basis of the order of the CIT(A)-I, Hyderabad in his order dated 28/11/2011 passed for the AY 2008-09 without forming an opinion of his own that income of the assessee has escaped assessment. 3. The reasons recorded if any has no nexus with the income escaping assessment and therefore the entire re-assessment proceedings ....
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....s recorded and the income escaping assessment and therefore the reopening proceedings are bad in law, invalid without jurisdiction and therefore must be quashed. 9. The learned CIT(A) failed to note that the provisions of section2(47)(v) of the I.T. Act, 1961 governed sales transactions where possession was given without registration and therefore ought to have clearly held that the transactions relating to the development agreement were outside the scope of the aforesaid section and thus ought to have clearly held that no income accrued to the assessee in the AY. 2009-10. 10. The learned (CIT(A) ought to have clearly held that the DClT erred in coming to a suo motto conclusion without accosting the assessee with the website information of M/s. Legend Estates Pvt. Ltd. to come to a conclusion that the developer was willing to perform his terms of the development agreement while the projects have been executed by RBD Legend Infrastructure Pvt. Ltd. 11. The learned ClT(A) failed to note that M/s. Legend Estates Pvt. Ltd. who was the first developer under the agreement of 03.02.2007 was unwilling to perform his terms of the contract and the second developer also having done only....
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.... CIT(A) for the AY 2008-09. He argued that CIT(A) has given direction for the other AYs. In this regard, he relied on the following case laws: 1. Rajinder Nath Vs. CIT, [1979] 120 ITR 14 (SC) 2. ITO Vs. Murlidhar Bhagwan Das (SC) [1964] 52 ITR 335 3. Computer Science Corporation of India (P) Ltd. Vs. Addl. CIT, [2014] 268 CTR 110 (MP) 4. Munjal Showa Ltd. Vs. DCIT, [2016] 382 ITR 555 (Del.) Further, he submitted that there is no link with the tangible material for the reopened assessment for AY 2009-10. For this proposition, he relied on the judgment in the case of CIT Vs. Kelvinator India Ltd. 320 ITR 561 (SC). 6.1 With regard to merits of the case, ld. AR submitted that assessee has entered into a development agreement dated 03/02/2007 along with his two sons, namely K. Nagaraju and K. Kishore Kumar with M/s Legend Estaes Pvt. Ltd. for development of land i.e. 6 acres and 39 guntas. As per the development agreement, on receipt of approval from HUDA for construction of the building, assessee handed over the land to the developer, but, the developer has not commenced the construction. He submitted that in the earlier year, ld. CIT(A) has adjudicated that developer has obt....
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....ly decided the issue in favour of the revenue in AY 2008-09. 7.1 With regard to deduction u/s 54F, ld. DR submitted that the flats are at unfinished condition and the same are not in position of habitation and, therefore, it has not fulfilled the conditions laid down in section 54F. Further, he submitted that as per section 54F, assessee is eligible to claim deduction only on one flat. 7.2 With regard to Department's appeal being ITA No. 765/Hyd/2017, he submitted that ld. CIT(A) has taken cognizance of the amendment to section 45(5A) in the Finance Act, 2017. He submitted that since the amendment is prospective in nature, CIT(A) should not have relied on such amendment to adjudicate the matter. He relied on the following cases: 1 K. Vijaya Lakshmi and others, ITA No. 1561/Hyd/16 and others, order dated 28/02/2018. 2. Smt. G. Sailaja, ITA No. 51 & 579/Hyd/2016 and others, order dated 30/11/2017. 3. CIT Vs. Balbir Singh Maini, [2017] 398 ITR 531 (SC). 8. Considered the rival submissions and perused the material on record. We notice that assessee has entered into Joint Development Agreement (JDA) with M/s Legend Estates Pvt. Ltd. for development of land belonging to assessee....
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.... passing this order, the construction is at different stages, in some of the blocks construction is in progress, some of the blocks have not even started construction. In any case, no flat is fully completed except a model flat which is constructed for showing it to customers, which is being used for office purpose by developer. Though developer entered sale agreements with purchasers and collected the amounts, it did not complete construction of any flat, did not handover any flat to the purchasers. It is reliably learnt that the purchasers have filed suit against the developer. The owner did not enter any agreement with anybody as the construction of the project is abnormally delayed and also with the fear of not coping up with the pressure from the purchasers in case the sale agreements were entered into with the prospective buyers. Though the time limit of 36 months was written in the agreements, the project is not completed even after 10 years. Again with the down trend in real estate business on account of demonetisation, there is no certainty as to when this project will be completed." 8.2 We have considered the submissions of both the parties and let us first deal with rev....
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....and is not a capital asset as defined uls 2(14) of the Act. This finding of "e learned CIT(A) remains unchallenged and uncontroverted by the Department. For this reason also, short term capital gain computed by the AO cannot be sustained. In view of the aforesaid, we do not find any reason to interfere with the order of the CIT(A). 14. So far as the ground raised by the department challenging the view of CIT(A) to the effect that there cannot be any capital gain in absence of value of consideration received or accrued, we are at the view, the same is not required to be adjudicated as it is of mere academic interest in view of our finding that there is no transfer of capital asset by the assessee in the impugned assessment year. Accordingly, we uphold the order of the CIT(A) by dismissing the grounds raised." 8.5 Since the issue is agitated before us, we would like to restrict ourselves to adjudicate whether the incidence of capital gains arises in the AY 2009-10 or not. We notice that AO applied section 53A of TP Act to bring this transaction as transfer u/s 2(47)(v) of the Act. For the sake of clarity, we reproduce the provisions of section 53A: "Part performance.-Where any p....
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....efore, the developer gets authorisation from the municipal authorities and the owner of the property to commence development activities, in that process, the land is handed over to the developer as the defacto owner and the real ownership is not passed. This permission to hold the land for development does not give rightful ownership to the developer. This right accrues to the developer with a condition that the development will be done on the project on the wholesome basis. To invoke section 53A, there has to be reasonable certainty on the commitment from the developer. In the given case, the developer should have completed the project by 05/08/2011 but, assessee renegotiated the terms of the contract on 11/02/2011 and brought in another developer to complete the project. Further, ld. CIT(A) has verified the current status of the project and finds that it is still in incomplete stage and has uncertainties prevailing on completion of the project. It clearly shows that there is no reasonable certainty in the project completion. Further, we notice that AO by considering the first JDA, intends to tax on the capital gains in the ratio of 50:50, when the same was renegotiated to 38.5:6....
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....he basis of receipt of seized document. 4. The learned CIT(A) ought to have appreciated that the provisions of section 153C are not attracted in the present case, since the AO who was having the jurisdiction over the searched person did not form 'satisfaction' required as per the said provisions to transfer the related material as he was of the opinion that the entire capital gains had arisen in the hands of the assessee on whom he was having jurisdiction and assessed accordingly. Therefore, transfer of any document did not arise and consequently provisions of section 153C are not attracted. 5. Any other grounds that may be urged at the time of hearing." 10. The brief facts as taken from the case of Shri Kosetty Kishore (ITA No. 342/Hyd/2015) are, return of income was filed by the assessee on 31.07.2009 admitting a total income of Rs. 3,99,170/-. A search and seizure operation u/s 132 was conducted in the case of Sri K.Gopal Raj, father of the assessee, on 07.07.2008 in the course of which a development agreement dated 03.02.2007 between Sri K. Gopal Raj and his two sons, S/Sri K. Kishore Kumar and K. Nagaraju on the one hand and M/s. Legend Estates Pvt Ltd on the othe....
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....o which the assessee was also a signatory, was a document that belonged as much to the assessee as to Sri K. Gopal Raj. Under the circumstances, the relevant provision of the Act enabling the Assessing Officer to assume jurisdiction was Sec. 153C and not sec. 147. Under the circumstances, the assessment is held to be void ab initio. The second ground of appeal is allowed." 13. Aggrieved by the order of CIT(A), the revenue is in appeal before us. 14. Considered the rival submissions and perused the material on record. We noticed that a search and seizure operation conducted on 07/07/2008 in the case of Shri K. Gopal Raj and found incriminating material that Shri K. Gopal Raj along with the assessee and his brother entered into JDA with M/s Legend Estates Pvt. Ltd. The AO initiated 153A proceedings in the case of Shri K. Gopal Raj and brings to tax whole income. Later, ld. CIT(A) directed the AO to initiate proceedings in all the cases i.e. Shri K. Gopa Raj, assessee and his brother. After search proceedings, the AO has not recorded the required satisfaction nor transferred the information to the AO of the assessee in order to initiate proceedings u/s 153C. The AO informs the 'juri....