TaxTMI 
TaxTMI 
2026 (5) TMI 739
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....sessment Year 2020-21, were decided in favour of the Assessee. In arriving at this decision, the Ld. CIT(A) relied on the ITAT order in ITA No. 465/Bang/2025 for Assessment Year 2020-21, dated 04.09.2025, concerning Smt. Shantha Alias Shanthamma v/s. DCIT (wife of the Assessee). The ITAT held that no incriminating material was found during the search, rendering the additions made by the Ld. Assessing Officer in the concluded Assessment Orders invalid. Furthermore, it held that even on merits, the additions could not be sustained. 2. Smt. Shanthamma is the spouse of the Assessee. The Learned Assessing Officer has raised a single ground of appeal for Assessment Years 2017-18 to 2019-20, questioning whether, given the facts and circumstances of the case, the Learned CIT(A) was justified in deleting the additions by stating that no incriminating material was found during the search-relying on the decision in PCIT vs. Abhisar Build well Pvt. Ltd.-even when various forms of evidence, such as the seized occupation certificate, the Assessee's sworn statement recorded during the search, and newly uncovered details regarding the built-up area and capital gain events, arguably constitute g....
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....ed at Rs. 62,02,96,489/- by Assessment Order dated 30 September 2021. 6. Parties claimed that the facts for other assessment years are also identical. 7. The Assessee challenged the assessment before the Learned CIT(A), who was presented with identical Assessment Orders for the years 2018-19, 2019-20, and 2020-21. Accordingly, a consolidated Appellate Order was issued. Grounds 4 to 7 addressed the legality of the search conducted under section 132 of the Act, alleging it was improperly completed without providing the satisfaction note or copies of the seized material to the Assessee. In paragraph 7 of the order, the Learned CIT(A) dismissed these grounds, stating there were no procedural deficiencies in the actions of the Assessing Officer regarding completion of the assessment under section 153A of the Act. 8. Additional grounds were subsequently raised, specifically grounds 1 and 2 for Assessment Years 2017-18 to 2019-20, where the Assessee contended that no incriminating material was discovered or seized during the search on which the income additions were based. In paragraph 8, the Learned CIT(A) addressed this issue by referencing the Supreme Court's decision in P....
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....n by the AO namely the JDAs and Occupancy Certificates were already disclosed by the Smt. Shanthamma's husband, i.e. appellant in the present case Shri. Lakkanna Durgappa in the sworn statement given by him u/s. 131 of the Act dated 23.05.2019. The Hon'ble ITAT also has given a finding that no other fresh material was found during the search and hence held that the Supreme Court decision in the case of Abhisar Build well Pvt. Ltd. (2023) 149 taxmann.com 399 will apply in this case and notices under section153C lacks jurisdiction and is void ab initio The Hon'ble ITAT, thus set aside the assessment order of the appellant's wife and allowed the appeal. In the present case also where Smt. Shanthamma's husband Shri. Lakkanna Durgappa is the appellant, the Assessing Officer has relied upon similar documents such as JDAs and Occupancy Certificates of the SJR Primeand Assetz East Point projects for making addition for the relevant assessment years. Similar to the above-mentioned decision of the Hon'ble ITAT in his wife's case, in this case also the appellant himself has given all the information pertaining to the status of the projects and disclosed the ab....
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....rder pertaining to Smt. Shanthamma (wife of the Assessee), determined that taxing income in the hands of the Assessee is not appropriate. It was further observed that Smt. Shanthaamma held a 72.2% share, while the Assessee's share was only 27.8% in the same project. Consequently, the Learned CIT(A) also deleted the addition for Assessment Year 2020-21. 13. The Learned Assessing Officer has filed an appeal challenging the Appellate Order for Assessment Years 2017-18, 2018-19, and 2019-20, based on the presence of incriminating material. 14. For Assessment Year 2020-21, the Ld. Assessing Officer has raised the following grounds of appeal: - a. Whether on the facts and in law, the Id. CIT(A) erred in deleting the addition of Rs. 42.85,12,536/- made on account of capital gains arising from the Joint Development Agreement dated 17.12.2012, despite the admitted fact that the assessee has not offered such capital gains to tax in any assessment year, resulting in complete escapement of income. b. Whether on the facts and in law, the Id. CIT(A) erred in holding that capital gains could not be taxed in AY 2020-21 merely because Section 45(5A) is prospective in nat....
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....m Ahmed and Shri Keshav Dubey). Notably, one member of this quorum in the Coordinate Bench's determination, which, in paragraph 34.2, expressly held as follows: - 34.2 At the outset, we find force in the contention of the assessee that the jurisdiction assumed under section 153C of the Act is invalid in the absence of incriminating material pertaining to the assessee. It is settled law, as held by the Hon'ble Supreme Court in Abhisar Buildwell Pvt. Ltd. (2023) 149 taxmann.com 399, that for invoking section 153C of the Act, the Revenue must possess incriminating materials belonging to or relating to the assessee which is unearthed during the search. In the present case, the documents relied upon by the AO, such as JDAs and occupancy certificates, were already disclosed in a sworn statement given by the assessee's husband under section 131 of the Act on 13.05.2019, i.e., much before the date of search. There is no indication that any fresh material was found during the search that had not alreadybeen disclosed. Therefore, in our considered opinion the issuance of notice under section 153C lacks jurisdiction and is void ab initio. 18. The decision rendered by the other....
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....T-DR vehemently stated all the above arguments and submitted that the deletion of addition made by the Ld. CIT(A) is not in order. 23. The learned Authorized Representative respectfully submitted that the order issued by the learned CIT(A) is grounded in the findings of the ITAT. Specifically, the Coordinate Bench, in paragraph 34.10, definitively stated that all income derived from the referenced development agreements was duly disclosed by the Assessee in the relevant Assessment Year's return of income. Further, reliance was placed on the judgment of the Hon'ble Bombay High Court, which was also cited by the Coordinate Bench in Chaturbhuj Dwarkadas Kapadia v. CIT (2003) 129 taxmann.com 497 (Bombay), establishing that capital gains arising from Joint Development Agreements are taxable in the year the agreement is executed and possession is transferred. Additionally, reference was made to the decision of the Hon'ble Karnataka High Court in CIT v. Dr. T. K. Dayalu (202 taxmann.com 531), confirming that capital gains accrue in the year of possession transfer under a development agreement. The Coordinate Bench, in paragraph 34.14, explicitly held that the deeming provision unde....
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....04.2018 and hence is not applicable to JDAs executed prior to that date. Since the assessee's JDAs were executed in 2009 and 2012 respectively, the income from capital gains has to be taxed in accordance with the law prevailing prior to the introduction of section 45(5A) of the Act. 34.12 To support this, the learned AR relied on judicial precedents. In the case of Chaturbhuj Dwarkadas Kapadia v. CIT [(2003) 129 Taxman 497 (Bom HC)], it was held that capital gains in case of JDAs are taxable in the year in which the agreement is executed and possession is handed over, and not in the year of construction. Similarly, in CIT v. Dr. T.K. Dayalu [(2011) 202 Taxman 531 (Kar HC)], it was held that once possession is transferred under a development agreement, capital gains accrue in the year of such transfer. 34.13 Accordingly, the AR contended that the assessee has complied with the provisions of law as applicable to her case and offered the capital gains in the correct assessment years. Therefore, no adverse inference should be drawn, and the addition made may kindly be deleted. 34.14 Considering the facts in totality, we find that the assessee had entered into....
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....gains in accordance with the prevailing legal framework. 34.18 Therefore, in our considered view, the additions made by the Assessing Officer on account of estimated capital gains based on the cost of construction of flats rather than actual sale are unjustified. The AO failed to appreciate that the assessee had already offered the income in the year of actual sale and paid tax accordingly. Estimating capital gain based on construction cost and taxing it in A.Y. 2020-21, without any corresponding realization by the assessee in that year, results in double taxation and goes against the principles of real income. Accordingly, on merits also, we hold that the addition of Rs.111.29 crore (in respect of SJR Project) and Rs.37.56 crore (in respect of Mantri Project) towards capital gains is not sustainable. 34.19 Moving ahead, we note that the AO has added sales proceeds of Rs. 7,53,77,252/- Rs. 8,52,88,148/- from the sale of flats in "SJR Plaza City Project" and "Mantri Premero Project" by assigning the reason that advance tax was not paid. In this regard, we find that the assessee has already offered tax on sale 15 flats in the "SJR Plaza City Project" and 14 flats in....
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....ion made by the AO in the hands of the appellant also needs to be deleted following the above decision of Hon'ble ITAT (mentioned supra) on account of the same JDA/Project. 12.4 To reiterate, the AO has made an addition on account of capital gains income for the same JDA of SJR Plaza City project in the hands of the appellant (for his share of land 27.8%) in this relevant AY 2020-21. The decision of the Hon'ble ITAT (mentioned supra) in the appellant's wife case is squarely applicable to the appellant's case, since the JDA/project entered by both of them is exactly the same. Hence, respectfully following the decision of the Hon'ble ITAT (mentioned supra), the addition made by the AO cannot be sustained and is directed to be deleted for the relevant AY 2020-21. Accordingly, the additional grounds of appeal filed by the appellant for AY 2020-21 are allowed." 26. As the JDA was executed and possession was handed over in FY 2012-13, the "transfer" within the meaning of section 2(47)(v) occurred in that year, and the resulting capital gains were chargeable to tax in AY 2013-14 under the law then in force. Section 45(5A), inserted with effect from 01.04.20....
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....h, on appeal by assessee confirmed by the Honourable Orissa High court in [2025] 176 taxmann.com 738 (Orissa)[29-08-2024] and SLP dismissed by the Honourable Supreme court in Kanak Bhanj Deo vs. Income-tax Officer [2025] 176 taxmann.com 963 (SC)[18-07-2025]. We find that decision off the coordinate bench has neither referred to the decision of Honourable Bombay high court in Chaturbhuj Dwarkadas Kapadia of Bombay vs. Commissioner of Income-tax [2003] 129 Taxman 497 (Bombay)/[2003] 260 ITR 491 (Bombay)/[2003] 180 CTR 107 (Bombay)[13-02-2003]nor of The Jurisdictional Karnataka high court in Commissioner of Income-tax, Bangalore vs. DR. T.K. Dayalu [2011] 14 taxmann.com 120 (Karnataka)/[2011] 202 Taxman 531 (Karnataka)[20-06-2011] 31. Further, as the Coordinate Bench has decided the issue based on the decision of the Hon'ble Karnataka High Court in case of Shri T. K. Dayalu as well as of the Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia, the decision relied upon by the Ld. Department Representative of Hon'ble Orissa High Court is not required to be considered as the relevant ITAT decision in 21 CTK 2024 has not considered these decisions of other high courts. Th....
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....r considering the year of taxation. Thus, we pause at conclude at holding that there is no application of section 45(5A) in case of assessee for this year at least as JDA is not entered into this year as well as the possession is also granted on the date of entering JDA. We have also not been shown whether the handing over of possession in FY 2012-13 was absolute possession within the meaning of section 53A or merely a limited license for construction. No specific terms of JDA were pointed out by the revenue, nor was it contested in the case of wife of the assessee, whose ITAT decision is relied upon. 34. We find that Honourable Telangana High court in income tax tribunal appeal no: 527 0f 2006Smt. Shantha Vidyasagar Annam Hon'ble the Chief Justice[ as then lordship was] Alok Aradhe held that The developer has been handed over the possession for the limited purpose of carrying out the development work' Therefore, in pursuance of the development agreement, the possession of the immovable property has not been handed over to the developer as contemplated under Section 53A of the Transfer of the Property Act, 1882. Therefore, the same does not fall within the definition of '....