INCOME TAX OFFICER-41(2)(4), MUMBAI, KAUTILYA BHAVAN, BKC, MUMBAI vs. RBI EMPLOYEES BHAGVATI CO-OP HOUSING SOCIETY LTD., MULUND EAST, MUMBAI

6. The Ld. CIT(A) erred in allowing the appeal despite the fact that the assessee had not filed any return of income voluntarily under section 139 and only filed a return in response to notice under section 148, which indicated prima facie Concealment of taxable income and warranted addition based on available the materials with the Assessing Officer.”

4. Aggrieved by the above addition made by the Assessing Officer, the Assessee filed appeal before the Ld. CIT(A). Since the Assessee was non-responsive to the notices issued during the appeal proceedings and the Ld. CIT(A) passed ex-parte order under Section 250 of the Act on 27/12/2021 dismissing the appeal of the Assessee. However, in appeal preferred by the Assessee, vide Order dated 27/06/2022, the Tribunal set aside the order passed by the Ld. CIT(A) and restored appeal back to the file of the Ld. CIT(A) to pass fresh order as per law.

5. As per the directions of the Tribunal, after taking into consideration the written submissions on 15/04/2024, 30/04/2024 & 11/03/2025 filed by the Assessee, the Ld. CIT(A) disposed off the appeal preferred by the Assessee vide order dated 15/04/2025 impugned by way of present appeal. The Ld. CIT(A) accepted the contention of the Assessee that the consideration received in terms of the Development Agreement was not liable to tax in the hands of the Assessee and the same was taxable in the hands of the members of the cooperative society. Therefore, the addition of INR.4,97,60,657/- made by the Assessing Officer in the hands of the Assessee was deleted. C.O. No.243/Mum/2025 Assessment Year 2011-2012

8. During the course of hearing the learned Departmental Representative placed reliance upon the Assessment Order and submitted that the Ld. CIT(A) had failed to appreciate that the Assessee had entered into a Development Agreement with the builder and therefore, the consideration was liable to be taxed in the hands of the Assessee only. Referring to the financial statements of the Assessee-Society, the learned Departmental Representative submitted that the society had shown the land and building under the head fixed assets and therefore, the Assessee should be regarded as its owner.

“7.1. The written submissions of the appellant are carefully perused. The appellant has raised 3 propositions on the issue of taxability of Short Term capital Gains as under without prejudice to each other: Proposition I - Income accruing to the members of the Appellant society in cash/kind is not taxable in the hands of Appellant: Proposition II – in the absence of „cost of acquisition‟, computation mechanism u/s. 48 of the Act fails and therefore no capital gains attracted to transfer of development right: Proposition III - Taxable event not in the current year. 7.2 Vide proposition 1, the appellant has stated that in the present case, the individual members are the owners of their respective flats and that the society is merely entering the re- development agreement on behalf its members, the consideration so received is taxable in the hands of members and not the Appellant society. Further, the appellant placing reliance on the Board Circular No. 9 in F.No. 8/2/69-IT(A-I)], dated 25-03-1969 has stated that circular clearly states that the legal ownership in the flats can be said to vest in the individual members themselves and not in the co-operative society. The appellant also placed reliance on the judgements of the Hon‟ble Supreme Court in the case of CIT v. Poddar Cement Pvt. Ltd. (SC) AIR 1997, Mysore Minerals Ltd. v. CIT 239 ITR 775 (SC) and Hon‟ble Jurisdictional Tribunal in Raj Ratan Co. Op. Hsg. Society Ltd. v. DCIT (12 taxmann.com 172)(Trib. Mumbai). 7.3. In the present case the individual members of the society purchased the respective flats from builder and thereafter they constituted a cooperative housing society. All the flats in the building and land appurtenant thereto belong to the members of the appellant and do not belong to the Appellant itself. The Members are the real owners of old flats which were transferred to developer for exchange of new flats with more space. Though the appellant society made a redevelopment C.O. No.243/Mum/2025 Assessment Year 2011-2012 agreement with the builder, the real owners of the property are the individual members who enjoy the full rights of the property. As held by the AO, the appellant had received Rs.10,00,000/- from the builder. However, this amount is a security provided by the developer to complete the project and would be refunded on receiving occupation certificate. The decision of Hon‟ble ITAT, Mumbai in Raj Ratan Co. Op. Hsg. Society Ltd. v. DCIT (12 taxmann.com 172)(Trib. Mumbai), relied by the appellant squarely covers the present case. In the said case, the Hon‟ble ITAT has held that incidence of taxation will be in the hands of the individual members and not in the hands of the society and mere grant of consent would not amount to transfer of land/or any rights therein. In view of the facts & circumstances of the case, the claim of the appellant in proposition I that the consideration so received is taxable in the hands of members and not the Appellant society is found to be acceptable. Therefore, the AO is directed to delete the addition of Rs.4,97,63,657/- in the hands of the appellant. Further, as the Proposition I is decided positively, remaining propositions II & III become academic in nature. Accordingly, ground no 1 & 3 raised by the appellant are treated as allowed.

12. On perusal above, we the find that the Ld. CIT(A) as returned a finding that the Assessee had only received a refundable deposit of INR.10,00,000/-. We have perused a copy of the Development Agreement placed on record by the Assessee. On perusal of the same, we find that as per the agreed terms, the consideration was to flow to the individual members of the Assessee and the Assessee had only received refundable deposit of INR.10,00,000/-. Thus, we concur with the finding returned by the Ld. CIT(A) that the C.O. No.243/Mum/2025 Assessment Year 2011-2012 individual members were the owners of respective flats and that Assessee had entered into Development Agreement in the capacity of the representative of the flat owners/members. Schedule to the development agreement clearly provided down the list of members who were to receive consideration in terms of the Development Agreement. Following Clauses of the Development Agreement support the conclusion drawn by Ld. CIT(A) is as under :

“7. The Builders/Developers shall provide to each of the present members of the said Society occupying the flats in the said Old Building as per the details setout in the Second Schedule hereunder written, the Member Premise free of any cost and on ownership basis. Such Members premises shall have an additional carpet are of 20% over and above the carpet areas of the old premises in the present occupation of the said Existing Members of the Society hereunder written. The Members Premises as aforesaid to be allotted to the said Existing Members shall be between 2nd to 13th floors of the said Building. The Builders/Developers shall provide in the said Members Premises the amenities and specifications as stated in the Third Schedule hereunder written and quality of the amenities to be provided shall be strictly as per the Offer Letter dated 07-10-2008 issued by the Developers to the Society.

8 to 11. xx xx

14. If any said Existing Members of the Society intends to buy additional area from salcable components over and above agreed area by the Developers then such flat Purchasers shall pay to the Developers for additional area as follows:-

(i) for additional area upto 50 sq.ft. Carpet Rs.7,000/- per sq. ft.

(ii) for additional area from 51 sq. ft. to 100 sq. ft. Carpet Rs.8,400/- per sq. ft.

(iii) for additional area above 100 sq. ft. Carpet Rs.9,100/- per sq. ft. It is specifically agreed that the Stamp Duty in respect of the aforesaid additional premises shall be borne and paid by the respective members of the Society.

(ii) The post-dated cheque for the subsequent period of 23 (twenty three) months at the time of vacating the flat by respective members. The Developers shall hand over the aforesaid post dated cheque to each of the said Existing Members with a express undertaking that Developers shall make all necessary arrangements for encashment of the said cheque as and when presented by each and or by any of the Existing Members. It is specifically agreed that in the event any of the aforesaid cheque that may be handed over by the Developers to the Existing Members if returned dishonored for any reason whatsoever the Developers shall pay Rs.5000/- per month as and by way of penal interest to Such Existing Member till the default continues over and above the amount of such cheque.

(iii) The Developers shall pay refundable security deposit to Existing Members of the society of Rs.50,000/- for 1 Room kitchen Rs.1,00,000/- for 1 BHK & Rs.1,20,000/- for 2 BHK. It is specifically agreed by the society that before accepting the possession of new flats from the Developers, each of the said Existing Members shall refund the security deposit to the Developers.”

13. In view of the above, we do not find any infirmity in the conclusion drawn by Ld. CIT(A). Accordingly, Ground No. 1 to 6 raised by the revenue are dismissed.

Cross Objection No.243/Mum/2025 [Assessment Year 2011- 2012]

15. Now we would take up Cross Objection preferred by the Assessee for the Assessment Year 2011-2012

“1. On the facts and in the circumstances of the case and in law, the Commissioner of Income tax (Appeals) (“Ld. CIT(A)) erred in confirming the action of the Ld. Assessing Officer (“Ld. A.O”) in issuing notice u/s.148 of the Act and consequently passing an order u/s.143(3) r.w.s. 147 of the Act without appreciating that the jurisdictional requirements under sections 147 to 151 of the Act are not satisfied.

Without prejudice to the above, challenge on the merits of the addition: 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not holding that even otherwise, no addition could be sustained under section 50C of the Act amounting to Rs.4,97,63,657.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not treating the transfer of immovable property as a long term capital asset and substituting the cost of acquisition of the immovable property with Fair Market Value as on April 1, 1981 as provided under section 48 read with section 55 of the Act granting indexed cost of acquisition thereon.

6. The Cross Objector prays that the Ld. AO be directed to treat the transfer of immovable property as long term capital asset and the Fair Market Value of the immovable property as on April 1, 1981 as the Cost of acquisition of immovable property and allow indexed cost of acquisition on the same.”

2.2. The Revenue has raised following grounds of appeal in [Assessment Year 2011-2012] :

“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty of Rs.1,53,76,971/- levied u/s.271(1)(c) without appreciating that the assessee failed to offer any satisfactory explanation during penalty proceedings and that the quantum addition of Rs.4,97,63,657/- was still under challenge before the Hon‟ble ITAT and had not attained finality?

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in annulling the penalty merely on the basis of deletion of quantum addition, ignoring the well-settled principle that penalty proceedings are independent and must be adjudicated on merits irrespective of quantum appeal pendency?