AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 867
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.... 2. The Ld.CIT (A) failed to appreciate that the Ld.AO under section 153C r.w.s 144C(3) of the Act is without jurisdiction and invalid as the transfer of the case was made without complying with the provisions of section 127 of the Act. Therefore, erred in confirming the assumption of jurisdiction by the Assistant Director of Income Tax (International Taxation) -1, Hyderabad ('the Ld.AO') u/s section 153C r.w.s 144C(3) of the Act. 3. The assessment framed by the Ld.AO is without complying with the procedures prescribed u/s 153C of the Act. Therefore, the assessment is bad in law and deserves to be quashed. B. FACTUAL GROUNDS 4. Without prejudice to the above legal grounds, the Ld.CIT (A) and the Ld.AO failed to appreciate that there was no "Transfer" within the meaning of section 2(47)(v) of the Act since the possession of the land on the date of the development agreement still vests with the Assessee. Therefore, they erred in taxing the capital gain on the development agreement in the subject AY. 5. Without prejudice to ground no. 4, that there is no transfer within the meaning of section 2(47)(v) of the Act during the subject AY, th....
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....xable under the residual charge at Delhi, having a PAN number. The ld.AR further submitted that the AO had not objected to the ground raised by the assessee regarding the transfer of jurisdiction from Delhi to Hyderabad. For this, the ld.AR has drawn our attention to Paragraph 6 on page 3, which states that there was no transfer of jurisdiction under Section 127 of the Income Tax Act, 1961 to the AO at Hyderabad and the said paragraph 6 reads as under : "6. Further, with regard to your objection about the requirement of passing of order under section 127 of Income Tax Act, 1961, it is requested to kindly note that the source of income lies in the territory on which jurisdiction of the undersigned extended hence order u/s 127 of the Income Tax Act, 1961 is not required. Further, you are requested to note that your PAN got migrated from Circle 1(1)(1) (IT), New Delhi which is default circle for all PANs pertaining to the Non Residents and PAN got transferred under section 120 of the Income Tax Act from default circle to respective jurisdiction of the assessee. 4.1. Therefore, the AO at Hyderabad does not have jurisdiction, and the assessment order passed by the AO at Hyde....
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....ire any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.] Explanation.-In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year." 4.2. The second argument of the ld.AR before us is that the JDA, based on which the addi....
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....d reading of Clause 3.1 and 13 shows that parties have specifically agreed that assessee shall continue to own entire JD property until conveyance deed took place. Clause 13 is in consonance with clause 3.1. There is no material on record to show that any conveyance had taken place in A.Y. 2014-15. Unless, there is material to establish that there was any conveyance, the view taken by the Assessing Officer, is perverse and the said view has rightly been reversed by both CIT(A) and ITAT. 5. The ld.AR in support of his contentions filed written submissions, which is to the following effect : 1. The above Appeal was heard on 24.10.2024 before the I.T.A.T "A" Bench, Hyderabad. (a) Please refer to the written submissions filed before CIT(A)-1. [Pages 1 to 25 Yellow Colour Paper Book filed on 18.07.2024]. 2. The Appellant is a non-resident and does not have a residential house in India except for an inherited dilapidated building which does not satisfying the criteria of a residential house. [Please see the Judgement of the Orrisa High Court in C.W.T vs. K.B. Pradhan [130 ITR 393]. 3. The address given by the Non-Resident was 1194, Valley Quail Circ....
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....ession for entry and exit for the limited purpose of development. 8.1. Reliance is placed on the following Decisions:- S.No: Name of the Case Citation Court Page No's: 1. Pr.C.I.T vs. Sri Sai Lakshmi Industries (P) Ltd 458 ITR 373 Karnataka High Court Please See pages 1 to 4 of Precedents presently enclosed 2. Daeshana Anand Damle vs. Dy.C.I.T 459 ITR 60 Bombay High Court Please See Pages 9 to 12 of Precedents-P.B-III 3. Pr.C.I.T vs. Emporis Properties (P) Ltd 458 ITR 68 Calcutta High Court Please See Pages 13 to 16 of Precedents-P.B-III 4. Mrs. Margrit Goverdhan vs. I.T.O 458 ITR 91 Karnataka High Court Please See Pages 17 to 25 of Precedents-P.B-III 8.2. As no possession was given the capital gains arising on of the Development Agreement was disclosed voluntarily by the Appellant in the assessment year 2019-2020 as the Developer gave possession of two flats during the financial year 2018-2019 relating to A.Y. 2019-2020 which were sold and entire capital gains for other flats was also shown in the A.Y.2019-2020. 8.3. Thus the capital gains was disclosed in the Assessment Year 2019....
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....d Assessing Officer adopted the S.R.O value which is the guideline value and not market value at Rs. 5000/- per sq.yrd as against Rs. 8000 per Sq.Yrd as per the valuation of Registered valuer which has been ignored on the ground that no comparable cases was cited by the Registered valuer. The Appellant adopted the value at Rs. 7000 per sq.yrd as a via media. At any rate the Assessing Officer ought to have adopted the value of land as on 01.04.2001 at Rs. 8000 per sq.yrd as adopted by the Regd. Valuer whose report has been ignored without any reasons." 6. On the other hand, ld.DR for the Revenue has relied upon the orders of lower authorities. 6.1 Regarding the first ground, the ld.DR relied on Point No.6 in the show cause notice issued by the Assessing Officer placed at page 3 of the assessment order, wherein the AO addressed the transfer of jurisdiction. It was also submitted by the ld.DR that the jurisdiction of the departmental ITO in the case of non-residents is residual and applies only if the PAN was issued in the name of the assessee, having no dwelling unit in India. Furthermore, it was submitted that, according to the assessee, the JDA mentions that the assessee is t....
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.... and the remaining 47% developed area will be allotted to the plot OWNER / PRINCIPLE / FIRST PARTY. Both parties deem it expedient to reduce the terms and conditions governing the development of the schedule property into writing hence, this Development Agreement cum General Power of Attorney." 6.4. The ld.DR further submitted that the sum and substance of the clauses reproduced by the ld.CIT(A) in the development agreement clearly show that there was a transfer of possession by the assessee to the developer. It was further submitted that it is not possible for the developer to construct the building unless possession of the property was transferred to him. The ld.DR referred to the law discussed and decided by the Hon'ble Supreme Court in the case of CIT Vs. Balbir Singh Maini reported in (2018) 12 SCC 354, wherein the Hon'ble Supreme Court held as follows : "20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which ....
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....s not attracted on the facts of this case, we need not go into any other factual question. 21. However, the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as contemplated. We are afraid that we cannot agree with the High Court on this score. Under Section 2(47)(vi), any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The High Court has not adverted to the expression "or in any other manner whatsoever" in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership of a cooperative society. We have, therefore, to see whether the impugned transaction can fall within this provision. 22. The object of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression "enabling the enjoyment of" takes color from the earlier expression "transferring", so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof. 1 The idea is to bring ....
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....64 referred to various judgments on the expression "accrues", and then held: "14. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148) "... Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." 15. The above passage was cited with approval in ....
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....mstances, there was no debt owed to the assessee's by the developers and therefore, the assessee's have not acquired any right to receive income under the JDA. This being so, no profits or gains "arose" from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act. 29. We are, therefore, of the view that the High Court was correct in its conclusion, but for the reasons stated by us hereinabove. The appeals are dismissed with no order as to costs." 6.5. It was submitted that the decision of the Hon'ble Karnataka High Court on this issue is not applicable to the facts of the case. On the valuation of the property, the ld.DR submitted that, as per law, the valuation report of the assessee does not inspire confidence, and the valuation report relied upon by the assessee is insufficient and do not support the argument of the assessee. For this purpose, attention was drawn to page 86 of the paper book. Furthermore, the ld.DR submitted that in the case of the JDA, the valuation of the transfer of land should be determined based on the cost of construction as reflected in the JDA agreement and its annexure. The ld.DR has drawn our attention ....
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....elling house / property which is the subject matter of JDA falling within the territorial jurisdiction of the Assessing Officer. In the present case, the documents were found during the course of search belonging to the assessee and notice u/s 153C was issued by the Assessing Officer having the territorial jurisdiction where the property is situated. The contention of the assessee that the notice should have been issued by the Assessing Officer at Delhi will lead to lot of complications as there is no record available at the Assessing Officer of Delhi nor the documents were available at the Assessing Officer of the Delhi. The law is fairly settled that the forum in whose jurisdiction the situs is situated and where the necessary documents / information is available should be the appropriate forum for adjudication. 7.1. Furthermore, Section 127 of the Act will only come into play when there is some transfer of jurisdiction from one authority / office to the other. In the present case, the assessee has not filed the return of income and has not assessed at the Delhi ITO / Assessing Officer and therefore, there is no question of transfer of jurisdiction of the Assessing Officer fro....
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....s to how the assessee will receive the possession of built-up flats when the assessee has not allegedly transfer the possession. In fact, the ld.CIT(A) in para 6.3.1. at page 33 of the order has categorically mentioned that no document has been produced by the assessee to separate transfer of possession to the developer. We do not find any error in the decision of ld.CIT(A) on this aspect as the fact speaks for itself. The Developer was under obligation to construct the property after receiving due sanctions from various authorities as per the specification and cost of construction agreed between it and the assessee. For all purposes, there is a transfer of land / capital asset within the meaning of law and for the above said purposes, we may rely upon the decision of Hon'ble Supreme Court in the case of Balbir Singh Maini (supra). In the light of the above, this ground of the assessee is dismissed. 9. Now coming to the argument of the assessee that the assessee has disclosed his capital gains in the assessment year 2019-20 and therefore, it should not have been assessed in A.Y. 2016-17. In our view, the law is settled that the tax has to be levied in the year when it is due....