UDAYACHAL GOREGAON CO-OPERATIVE HOUSING SOCIETY LTD.,MUMBAI vs. ITO WARD 41(4)(4), MUMBAI

Brief facts are that the assessee is a co-operative housing society which had not filed its return of income for the year under consideration. The case was flagged under the Risk Management Strategy of the CBDT on the basis of information purportedly indicating that the assessee had undertaken a transaction involving sale of immovable property for a consideration of ₹71,29,000. Since no return of income had been filed, proceedings under section 147 were initiated and notice under section 148 was issued on 21.03.2023. No return was filed in response thereto. The Assessing Officer has recorded that several statutory notices were thereafter issued to the assessee, but the same remained uncomplied with. Based upon the information so available, he proceeded on the premise that the assessee had sold an immovable property for ₹71,29,000 and had not offered the resultant capital gain to tax.

It is, however, pertinent that the Assessing Officer himself issued a notice under section 133(6), dated 21.02.2024, to the

During the appellate proceedings, the assessee categorically denied having sold any immovable property during the Financial Year 2015–16 and furnished additional evidence in support of its contention. The learned CIT(A) called for a remand report from the Assessing Officer with a specific direction to verify whether any sale deed, agreement for sale, transfer document or other registered instrument concerning the assessee existed for the relevant financial year and, further, whether the reported transaction of ₹71,29,000

In the remand proceedings, a fresh notice under section 133(6) was issued to the Joint Sub-Registrar, Borivali–3, pursuant to which a registered agreement was furnished. The Assessing Officer, however, described it in the remand report as a redevelopment agreement between the assessee-society and M/s Jaycee Homes Ltd. and proceeded to state that the assessee had failed to comply with the statutory notices during both the assessment and remand proceedings and had not furnished complete and verifiable evidence. The learned CIT(A), substantially relying upon the remand report and the alleged continued non-compliance of the assessee, confirmed the addition of ₹71,29,000 without examining the true nature of the instrument received from the Sub-Registrar or identifying the person to whom the transaction and consideration embodied therein actually belonged.

Before us, the learned counsel submitted that the instrument dated 26.08.2015 is an Agreement for Providing

The learned Departmental Representative relied upon the observations contained in the orders of the authorities below and submitted that the assessee had failed to comply with the

We have heard the rival submissions and perused the relevant material placed on record, including the remand report, the registered Agreement for Providing Permanent Alternate Accommodation dated 26.08.2015 and the affidavit of the concerned members. At the outset, the very foundation of the impugned addition is found to be factually misconceived. The assessment order proceeded on the assumption that the assessee had sold an immovable property during the year for ₹71,29,000. Yet, at the time of making the assessment, the Assessing Officer did not possess the instrument underlying the reported transaction. Indeed, paragraph 6.1 of the assessment order expressly records that the information sought from the Joint Sub-Registrar under section 133(6) had not been received until the date of the order. Consequently, the Assessing Officer was unaware of the precise nature of the transaction, the property or right allegedly transferred, the parties who held such right and the consideration, if any, which had accrued to the assessee. The entire reported value was nevertheless treated as short-term capital gain without first establishing a transfer by the assessee and without undertaking even the elementary computation contemplated under section 48.

Clause (k) of the agreement puts the matter beyond any pale of ambiguity. It records that the members were otherwise entitled to a new flat admeasuring 1,033 sq. ft. of carpet area, but, at their request, the developer agreed to allot them a

The valuation report forming part of the registered instrument also does not advance the case of the Revenue. It records the market value at ₹71,29,000 and the agreement value at ₹29,07,000. The former figure is plainly a valuation adopted for stamp-duty purposes in relation to the registered instrument; it is not evidence that ₹71,29,000 was paid to or received by the assessee-society. Even the stated agreement consideration of ₹29,07,000 was payable to the individual members for surrendering 323 sq. ft. of their redevelopment entitlement. Thus, neither figure represents consideration accruing to the assessee. The authorities below have conflated the presence of the society as a confirming party in the registered instrument with ownership of the underlying right

A charge to capital gains necessarily requires a transfer of a capital asset belonging to the assessee and the accrual or receipt of consideration in consequence of such transfer. The mere appearance of an assessee’s name in a registered instrument cannot, by itself, establish either ingredient. The legal character of the transaction must be gathered from the instrument read as a whole and, in particular, from the operative clauses creating or extinguishing the relevant rights. Here, no specific capital asset belonging to the society has been shown to have been transferred under the agreement dated 26.08.2015; no consideration has been shown to have accrued to or been received by the society; and no material has been brought on record to establish that ₹71,29,000, or even ₹29,07,000, entered the coffers of the assessee. The remand report also does not identify any bank entry, receipt, ledger account or independent evidence indicating accrual or receipt of the impugned sum by the assessee. Once the registered agreement itself reveals that the transaction was between the members and the developer, the addition cannot be sustained merely because the assessee had earlier failed to respond to the statutory notices. Non-

We also find that the learned CIT(A), despite having called for a remand report precisely to ascertain the identity and nature of the transaction, did not examine the document ultimately received from the Sub-Registrar. The description of the instrument in the remand report as merely a redevelopment agreement between the society and the developer overlooks the individual members as substantive parties and, more importantly, the express terms governing the surrender of the balance entitlement. Confirmation of the addition solely on account of the assessee’s earlier non- compliance, without appreciating the primary document obtained through an independent statutory source, has resulted in taxing the stamp-duty value of a transaction which neither belonged to the assessee nor yielded any income to it.

Accordingly, we hold that the addition of ₹71,29,000 as short-term capital gain in the hands of the assessee-society lacks both factual and legal foundation. The same is directed to be deleted. Since the assessee has succeeded on the merits and the entire addition stands deleted, the grounds

In the result, the appeal of the assessee is allowed.