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2026 (4) TMI 48
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....losed income under the head Long Term Capital Gains' on entering into development agreement. 3. The Id. CIT(A) erred in denying the deduction u/s. 54F of Act on the alleged ground that the appellant has not claimed any deduction in the return of income filed in response to notice issued u/s. 148 of the Act and further has not filed any evidence in support of investment of sale consideration in the residential unit within the time frame as prescribed by the Act for claiming exemption u/s. 54F of the Act. 4. The authorities below failed to appreciate that the requirement of section 54F of the Act is investment within three years in respect of construction, and in so far as the appellant is concerned, there is a deemed investment as per the entire entitlement by virtue of development agreement. The authorities below ought to have appreciated that the rights granted under development agreement is only on the condition that the appellant will be given developed area. 5. Without prejudice to the above grounds, the Id. CIT(A) erred in sustaining the action of the AO in computing capital gains on the entire value of development agreement. The authorities belo....
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.... matter in appeal before the CIT(A) but without success. 7. The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us. 8. We have heard the Ld. Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them to drive home their respective contentions. 9. Shr. A V Raghuram, Advocate, the Ld. AR, at the threshold of hearing of the appeal, submitted that the CIT(A) had erred in not appreciating that the sale consideration to be received by the assessee on the transfer of the subject land to the developer as per the terms of the "Joint Development Agreement" (JDA), i.e., the share in the bungalows to be constructed on the said land (agreed to be allotted to him) would fall within the meaning of "investment in construction of the new residential house" as provided in section 54F of the Act, therefore, no income was liable to be brought to tax in his hands under the head "Capital gains". Apart from that, the Ld. AR submitted that though the claim of deduction u/s 54F of the Act was not raised by the as....
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....to levy tax on the entire income that had escaped assessment during the previous year. What is set aside is, thus, only the previous under-assessment and not the original assessment proceedings. An order made in relation to the escaped turnover does not effect the operative force of the original assessment, particularly if it has acquired finality, and the original order retains both its character and identity. It is only in cases of 'under-assessment' based on clauses (a) to (d) of Explanation (I) to section 147, that the assessment of tax due has to be recomputed on the entire taxable income. The judgment in V. Jaganmohan Roa's case (supra), therefore, cannot be read to imply as laying down that in the reassessment proceedings validly initiated the assessee can seek reopening of the whole assessment and claimed credit in respect of items finally concluded in the original assessment. The assessee cannot claim recomputation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings it is ope....
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....orkable. Since the proceedings under section 147 are for the benefit of the revenue and not an assessee and are aimed at garnering the 'escaped income' of an assessee, the same cannot be allowed to be converted as 'revisional' or 'review' proceedings at the instance of the assessee, thereby making the machinery unworkable. 39. As a result of the aforesaid discussion we find that in proceedings under section 147 the ITO may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the ITO's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment incons....
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....ssed. 40. It would be seen that whereas in the case of Anglo French Textile Co. Ltd. (supra) the question as to the rights of an assessee to claim 'redoing', 'revising' or 'recomputing' entire income during the reassessment proceedings was left open, that question did not come up for consideration in the case of H.R. Shri Ramulu ( supra) or H.M. Esufali H.M. Abdulahi (supra) or even in V. Jaganmohan Rao's case (supra). Some of the High Courts, therefore, fell in error in reading those judgments, divorced from the context in which the precise questions came up for consideration in those cases, and to hold that the assessee could 'reagitate' the concluded issues and claim relief in respect of items, finally concluded in the original assessment proceedings, during the reassessment proceedings, unconnected with the escapement of income. We cannot, therefore, approve in broad propositions laid in that regard in Indian Refrigeration Industries (P.) Ltd.'s case (supra), Ramsevak Paul's case (supra ), Assam Oil Co. Ltd.'s case (supra), Standard Motor Products of India Ltd.'s case (supra), Rangnath Bangur's case (supra), State....
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....see, the assessee in the present case before us though could not seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, but in the backdrop of the fact that his case was reopened for bringing to tax the "Long Term Capital Gain" on the transfer of the subject property, thus remained well within his right to raise his claim for deduction u/s 54F of the Act, as the same was relatable to his 'escaped income'. We, thus, in terms of our aforesaid observations, are unable to persuade ourselves to concur with the Ld. DR that the assessee had wrongly raised the claim for deduction u/s 54F of the Act in the course of proceedings initiated in his case u/s 147 of the Act. 12. Coming to the issue involved in the present appeal, we find that the controversy therein involved lies in a narrow compass, i.e., as to whether or not the sale consideration to be received by the assessee (land owner) in lieu of transfer of his land to the developer as per the terms of the "Joint Development Agreement" (JDA), i.e., share in the bungalows to be constructed on the said land (agreed to be allotted to him) can be brou....
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....e judgment of the Hon'ble High Court of Madras in the case of CIT vs. Abhinitha Foundation (P.) Ltd (2017) 396 ITR 251 (Mad). 16. Coming back to the core issue involved in the present case, i.e., as to whether or not the sale consideration to be received by the assessee (land owner), in lieu of the transfer of his land to the developer as per the terms of "Joint Development Agreement", i.e., share in the individual bungalows to be constructed on the said land (which is agreed to be allotted to him), can be brought within the meaning of "investment in construction of the new residential house" as provided in section 54F of the Act, is covered by the judgments of the Hon'ble High Court of Karnataka in the case of CIT Vs. K.G. Rukminiamma (2011) 331 ITR 211 (Karnataka) and in CIT vs. Sambandam Udaykumar (2012) 345 389 (Karnataka). Also, we find that the ITAT, "A" Bench, Hyderabad in the case of Gyana Kumari Rojanala vs. ITO, ITA No.1054/Hyd/2025, dated 15/10/2025, had after relying upon the aforesaid judicial pronouncements, concluded that the residential apartments/duplexes, which as per "Joint Development Agreement" (JDA) were agreed to be allotted to the assessee (land owner) wo....
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.... be constructed by "Honest Infra‟ under the said registered development agreement dated 31.12.2012, these flats were allotted specifically by the developer in favour of the assessee under development agreement which entitled assessee to sell, dispose of or even create charge on these flats. Thus, effectively it could be said that the share of consideration in lieu of property for development given by the assessee to the developer, to the extent of these four residential flats is retained by the builder which will be invested by the developer by utilising its own funds for constructing these flats on behalf of the assessee. This effectively means that consideration under the development agreement dated 31.12.2012 which other wise assessee was entitled to receive is now withheld by the developer which will be invested for constructing these flats on behalf of the assessee which will satisfy the requirement of making investment in construction of new residential flat as is provided u/s 54F of the 1961 Act. Section 2(14) is very widely defined to mean property of any kind held by an tax-payer, whether or not connected with his business or profession. The exceptions are also provi....