TaxTMI 
TaxTMI 
2026 (7) TMI 1143
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.... of the Act based on search proceeding at the third party is invalid and void ab initio. 3.1 At the time of hearing, the learned counsel for the assessee before us submitted that he has been instructed by the assessee not to press the impugned legal ground of appeal. Accordingly, we dismiss the same as not pressed. 4. The interconnected issue raised by the assessee through Ground Nos. 3, 4 and 5 of the appeal is that the learned CIT(A) erred in confirming the addition on the transaction of agreement to sale of immovable property. 5. During the course of assessment proceedings, the AO examined various documents seized and furnished by the assessee. It was noticed that the assessee, along with his mother and brothers, was a joint owner of certain immovable properties situated at Bileshivale Village, Bidarahalli Hobli, Bangalore East Taluk. The properties were inherited by them and were held jointly in defined shares. 5.1 The AO observed that on 03.12.2012, the assessee and the other co-owners entered into Articles of Agreement with M/s Total Environment Constructions Pvt. Ltd. (TECS) in respect of 14.5 guntas of land in Survey No. 69/2. Under this agreement, TECS agreed t....
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....possession of the property was not handed over to TECS in the legal sense. According to him, unless possession is transferred and title is conveyed by a registered document, there is no transfer under the Transfer of Property Act. 5.7 The assessee further submitted that the amounts received were only advances and that the total consideration was to be received over a period of several years depending upon development and sale of project. It was argued that the GPA was executed only for limited purposes such as obtaining approvals and facilitating development which do not amount to transfer of ownership rights. 5.8 It was also contended that since the transaction was subject to various conditions and future events, capital gains could not be said to have accrued in the year under consideration. Therefore, the assessee claimed that there was no liability to offer capital gains in AY 2013-14. 5.9 However, after examining the reply and documents, the AO rejected the explanation of the assessee. The AO held that the issue is not whether a registered sale deed was executed, but whether there was a "transfer" within the meaning of section 2(47) of the Act. The AO opined that unde....
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....dated 18th May 2023 set aside the issue to file of the learned CIT(A) for fresh adjudication. 8. In the set aside proceedings, the assessee, before the learned CIT(A) submitted that the land in question was ancestral property which had come down through three generations. The assessment order itself records that the property was inherited by the assessee's father from his father and so on. Therefore, the property constituted joint family property of a Hindu Undivided Family (HUF). This fact was also recognised by the II Additional Senior Civil Judge, Bangalore (Rural) in the partition decree, wherein it was specifically observed that the assessee and his family constituted a HUF. In view of this, it was submitted that the property did not belong to the assessee in his individual capacity and any capital gains, if arising, could not be assessed in his individual hands. 8.1 The assessee further explained that section 4 of the Income-tax Act charges income-tax on the total income of a "person". The term "person" as defined under section 2(31) includes an individual as well as a HUF. Therefore, before assessing any income, it must be established who is the correct taxable entity.....
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....deration in his individual capacity. Subsequent to the execution of the development agreement, a civil suit for partition was filed before the II Additional Senior Civil Judge, Bangalore (Rural). As per the final decree dated 13.07.2019, the properties which were subject matter of the Joint Development Agreement were allotted to other family members and not to the assessee, except for a very small portion. Therefore, the assessee was not the owner or ultimate beneficiary of the transferred property and did not receive the benefits arising from the development agreement. 8.5 The assessee contended that once it is established that he was not the real owner of the property and did not receive the consideration, no capital gains can be taxed in his hands. Tax liability under the Act arises only in the hands of the person who earns or receives the income in the capacity of an owner. In the present case, the assessee neither held the property in his individual capacity nor received the consideration arising from the development agreement. 8.6 In view of the above submissions, it was prayed before the learned CIT(A) that the addition made by the Assessing Officer towards long-term c....
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....r who received Rs. 8,33,750/- and balance was to be paid in installments as mentioned in the agreement. 5.9 On the same day as the Agreement, i.e. 3/12/2012, the appellant and the other co-owners of Schedule B property entered into an agency agreement with Nanjungud Projects Pvt Ltd appointing them as Agents to arrange for sale of Schedule C property. This entity was to co-ordinate with M/s TECS to ensure that every month, out of the total sales in the project, a minimum 20% sales are of Schedule B property. The Owners also executed an Irrevocable power of attorney in favour of Nanjungud Projects Ltd on 3/12/2012. Incidentally this company is also a group concern of M/s TECS. This company was given the power/authority to authorise, execute and perform any act which the owners could do on their own. 5.10 I have perused the agreement: Agency Agreement and the GPA was perused. The appellant's contentions that there was no transfer of possession has to read not as per the words of the Agreement, but the intention of the parties to the Agreement. On perusal of the Articles of Agreement, Agency Agreement and the Irrevocable GPA issued, it is clear that the appellant has....
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....ransfer of property for the purposes of capital gains. The true test is whether, in substance, the rights in the property were effectively and irrevocably parted with and whether the transaction had attained finality so as to result in accrual of income. 12.2 From the material placed before us, it is evident that subsequent to the execution of the JDA dated 18 September 2012, serious disputes arose within the family. A partition suit was filed and ultimately a decree of partition was passed by the competent Civil Court in the year 2018 which is available on pages 43 to 64 of the paper book. As per the decree, substantial portions of the property which were subject matter of the earlier development agreement were allotted to other family members. This development is crucial to decide the issue on. Once the Civil Court determined and re-allotted the respective shares of the family members, the very foundation on which the earlier JDA rested became unsettled. The fact that a fresh Joint Development Agreement was entered into only on 4 August 2023 between the developer and the assessee's brother in which assessee is not the party further strengthens the inference that the original J....
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....12 and the GPA. The learned CIT(A) has not properly appreciated the impact of the partition decree and the subsequent agreement, which go to the root of the matter. The so-called transfer relied upon by the Revenue did not attain finality and did not result in accrual of real income in the hands of the assessee during the relevant previous year. 12.7 Accordingly, we hold that the computation of long-term capital gains in the hands of the assessee for the year under consideration is not sustainable in law or on facts. The addition made by the Assessing Officer and confirmed by the learned CIT(A) is directed to be deleted. The grounds raised by the assessee on this issue are allowed. 13. The next issue raised by the assessee through Ground No. 6 of the appeal is that the learned CIT(A) erred in confirming the disallowances of agricultural income of Rs. 7,75,000/-. 14. During the assessment, on verification of the computation of income, the AO noticed that the assessee had declared agricultural income of Rs. 7,75,000/-. The assessee was asked to substantiate the said claim. The AO specifically called upon the assessee to furnish details of expenditure incurred on seeds, ferti....
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....e records maintained at the Panchayat office were in physical form and not digitally available, causing genuine difficulty in retrieving old records. 16.1 The assessee submitted that he was in possession of RTCs for subsequent years from 2014-15 onwards, which clearly showed that the agricultural land stood in the name of his deceased father and was being utilized for agricultural activities. The agricultural properties were originally acquired in the name of his father, who expired on 12.03.1996, and thereafter devolved upon the legal heirs. Therefore, it was evident that the assessee was holding agricultural land and had derived income from agricultural operations during the year under assessment. 16.2 It was further argued that the agricultural income declared by the assessee had been accepted by the department in earlier assessment years 2008-09 and 2009-10. In the absence of any incriminating material found during the search to suggest otherwise, the AO ought to have maintained consistency and accepted the agricultural income declared for the year under consideration as well. 16.3 In support of the principle of consistency, reliance was placed on the decision of the H....
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....d as agricultural income is actually derived from agricultural operations lies squarely upon the assessee. Since no documentary evidence such as RTC copies, sale bills, vouchers, or proof of expenditure was produced for the relevant year, the AO was justified in treating the same as income from other sources. 21. We have heard the rival submissions of both the parties and carefully perused the materials available on record. The only issue for our consideration under this ground is whether the agricultural income of Rs. 7,75,000/- declared by the assessee is liable to be treated as income from other sources. 21.1 It is not in dispute that the assessee had declared agricultural income in his return of income. The Assessing Officer rejected the claim mainly on the ground that the assessee did not produce RTC copies and other supporting evidence such as bills, vouchers and sale receipts during the course of assessment proceedings. The learned CIT(A) confirmed the addition solely for the reason that no documentary evidence was produced for the relevant year. 21.2 In our considered view, the approach adopted by the lower authorities is too technical and does not take into accoun....
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....r sources is not sustainable. The AO has not brought any material on record to demonstrate that the income was not agricultural in nature. The addition is therefore directed to be deleted. Accordingly, Ground No. 6 raised by the assessee is allowed. 22. In the result, the appeal of the assessee is hereby partly allowed. Coming to ITA No. 2193/Bang/2025 of the assessee for A.Y. 2014-15 23. The assessee in the memo of appeal has raised 3 Grounds which are interconnected and effectively the issue raised is that the learned CIT(A) erred in confirming the addition made merely based on statement of third person. 24. The relevant facts are that during the course of search, the statement of Shri B.M. Sundaresh, Director of the company namely M/s L.G. Builders & Developers P Ltd in which the assessee was also a director, was recorded under section 132(4) of the Act. In his statement, he voluntarily admitted a sum of Rs. 5 crores as income undisclosed to tax in the hands of the company and its two directors (Shri BM Sundaresh & the assessee). Subsequently, in a letter addressed to the DDIT (Inv.), the assessee Shri B.M. Sundaresh furnished a provisional bifurcation of the undiscl....
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....eme Court in the case of CIT v. S. Khader Khan & Sons reported in 25 taxmann.com 413, wherein it was held that a statement, though an important piece of evidence, is not conclusive and cannot by itself form the sole basis of addition unless supported by material evidence. It was further submitted that the CBDT, through its instructions F. No. 286/98/2013-IT (Inv.II) dated 18th of December 2014, has clearly directed officers not to obtain confessions during search and not to make additions merely on the basis of statements without credible evidence. In the present case, the AO failed to follow these guidelines. 26.2 The assessee also submitted that the burden of proof lies on the Department to show that any undisclosed income was actually earned and received by the assessee. The addition cannot be made on assumptions or on the basis of an admission by another person, without proving that such income actually accrued to the assessee. It was argued that taxing an amount in the hands of the assessee merely because of a general disclosure made during search is not legally sustainable. 26.3 Further, it was contended that even if any undisclosed income was to be assessed, it should ....
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....e surrendered/admitted during search. The appellant was granted as many as eight opportunities to explain its case and despite this its ground but no one appeared. 6.3 In view of the same, it is assumed that the appellant is not interested in pursuing its grounds of appeal. As no submissions on merits of the additions are forthcoming, the addition made by the AO for the A.Y. 2014-15 is confirmed. Ground Nos 2,3,4,5 are dismissed. 27. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 28. The learned Authorised Representative (AR) reiterated that the addition of Rs.94,85,250/- was made solely on the basis of a statement recorded under section 132(4) of the Act from Shri B.M. Sundaresh during the course of search. He submitted that no incriminating material was found during search to establish that the assessee had earned undisclosed income of Rs.1 crore or any part thereof. It was further argued that the apportionment made by the Assessing Officer (AO) was purely ad hoc and without any evidentiary basis. 29. On the other hand, the learned Departmental Representative (DR) relied upon the orders of the AO and the learned CIT(A). ....