NAGA PADMAJA VANGARA ,HYDERABAD vs. INCOME TAX OFFICER, WARD-11(3) , HYDERABAD

Facts of the case, in brief, are that the assessee is an individual and derives income from partnership and income from other sources. She filed her return of income on 24.03.2017 declaring total income at Rs.3,61,600/-. The case was selected for limited scrutiny under CASS with the reasons (i) Large Cash Deposits in savings bank a/c and (ii) large investment in property.

During the course of assessment proceedings, from various details furnished by the assessee, the Assessing Officer noted that the assessee has entered into Development Agreement cum-GPA with M/s Dhanush Builders & Developers for development of 791 sq.yards bearing Plot No.27 & 28, R.S. No.189/4A, Narayanapuram, Rajahmundry, A.P vide doc No.2038/2016 dated 24.02.2016. As per the document she got 8 Flats of 1100 sq.ft. each and the total constructed area of 8800 square feet. The total market value of the project as per the document (SRO) is Rs.2,70,50,000/- (land value Rs.79,10,000/- and market value of constructed area is Rs. 1,91,40,000/-. Assessee has not disclosed the land transfer transaction in her return for the A.Y.2016-17. 3.1 As per the Development Agreement cum GPA, Builder share is 60% and the assessee being landowner share is 40%. He, therefore, calculated the assessee’s share in the project at Rs.1,08,20,000/- i.e.,(27050000 X 40%)”. The Assessing Officer noted that the assessee has not furnished the details of cost of acquisition of the land transferred. As per the document. she got this land through Will vide doc.No.124/1975 dated 03.11.1974 from her mother. Her mother acquired the property in the year 1965 vide doc.no.3576/1965 dated 27.09.1965. Hence, he allowed indexed cost of acquisition as per the fair market value as on 01.04.1981. Since the assessee got this property without any consideration and she has not produced any evidence for cost of acquisition of the property, the Assessing Officer obtained information from SRO, Rajuhmundry according to which the fair market value of the land as on 01.04.1981 was Rs.10,000/- per acre. He noted that in this case the transfer of property was in square yards. In the absence of information, he computed the fair market value of the transferred property i.e. 791 square yards proportionately at Rs.1,648/- (10000/4800 X Page 2 of 11

Before the learned CIT (A), the assessee challenged the addition of Rs.1,08,08,283/-on account of Long Term Capital Gain. The assessee also submitted that the capital gain cannot be added in the impugned A.Y since she didn’t get the possession of the flats during the impugned A.Y. It was submitted that the capital gain would be admitted in the A.Y relevant to the previous year in which the possession of the flat is handed over.

Further, referring to the decision of the Hyderabad Bench of the Tribunal in the case of Smt. K. Vijaya Lakshmi v. ACIT (TS- 5722-ITAT-2018 (Hyderabad)-O) wherein it has been held that section 45(5A) cannot be applied retrospectively as they are substantive provisions, he rejected the argument of the learned Counsel for the assessee that the capital gain should have been

Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal and one additional ground of appeal: Grounds of Appeal: “The order of the learned CIT(A) in dismissing the appeal is not only erroneous both on facts and in law but is perverse. 2. The learned CIT(A) erred in upholding the year of assessability of Capital gains as the year in which development agreement is entered into in spite of bringing to his notice the revenue's stand both before the jurisdictional high court and at New Delhi that it is only when possession is handed over. 3. The learned CIT(A) erred in upholding the computation of Capital gains by considering the Composite value adopted by the SRO of Rs.1,08,20,000 for registering the development agreement though it is demonstrated that it contains value of land and structure and what is to be deemed to have been consideration 1s only the value of super structure or the land and not both. The learned CIT(A) erred in upholding adoption of cost of acquisition as on 1-4- 1981 as per SRO which is per acres when it should have been for sq.yards observing that the assessee has not adduced any evidence instead of directing the AO to ascertain the value from the SRO which is the prayer of the assessee. 4. The learned CIT(A) erred in relying on the decision of the High Court in the case of Potla Nageswara Rao though it is brought to his notice the decision of the Supreme Court in the case of Jai Hind Cycles to the effect that it does not lay down any law as no question was framed and thereby erred in holding that the year of assessability is the year in which development agreement is entered into. 5. (Tax effect - Rs.33,39,760). For these and other grounds that may be urged, it is prayed that the Hon'ble Tribunal may be pleased to allow the appeal.

Referring to the decision of the Hon'ble Supreme Court in the case of NTPC Vs. CIT reported as (1998) 229 ITR 383, the learned Counsel for the assessee submitted that the additional ground being a legal ground and do not require fresh investigation of facts should be admitted for adjudication.

The learned DR, on the other hand, opposed the admission of the additional ground stating that it is not a legal one and requires verification of fact. He drew the attention of the Bench to the report of the Assessing Officer on admission of the additional ground which reads as under: “Office Of the Income Tax Officer, Ward 11(1) Room No 507, Signature Towers 5th Floor Opp Botanical Garden, Kothaguda.HYD F No. ITO-11 1)JAFVPV8238F/2021-22 Date: 11.01 2022 To The Sr Authorized Representative 1. ITAT. A Bench Hyderabad (Through Addl CIT. Range -2. Hyderabad) Sir Sub: Proceedings before Hon'ble Vangara, ITAT In the case of Smt Naga Padmaja Hyderabad PAN: AFVPV8238F for the AY 2016-17 Report on additional grounds filed by assessee before the Hon'ble ITAT Regarding Ref: 1. Your office dated 30.12.2021 letter in F.No. SR.AR/ITATIA Bench/34H2020/2021-22 2. Assesee's petition filed in ITA No. 34/Hyd/2020 dated 11 12 2021 Please refer to the above. 2 The asssessee filed Rule petition under rule 11 of the Income Tax Appellate Tribunal 1963 for admission of Additional grounds which is reproduced as under: “ On the facts and circumstances of the case, the authorities below has erred in not considering the deduction claimed u/s 54F of the Act which was claimed in the return of income" Further in para 1 of petition, the appellant assessee submitted that she has been advised to raise specific ground with respect to the deduction u/s 54F of the IT Act 1961 though the same was claimed in the return of income. The appellant has been advised to take a legal ground which was not taken before the authorities below and which ground goes to the root of the matter in not considering the claim of the appellant u/s 54 F of the Act by the authorities below

We have heard the rival arguments made by both sides regarding the admissibility of the additional ground. We find the additional ground raised by the assessee is not a legal ground, but it requires verification of facts especially when the assessee during the course of assessment proceedings had categorically stated before the Assessing Officer that the assessee has not made any investment in movable or immovable asset during the financial year 2015-16. Therefore, the additional ground raised by the assessee, being not a legal one, but requires verification of facts, the additional ground raised by the assessee is liable to be dismissed. Accordingly, we dismiss the additional ground raised by the assessee.

The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in confirming the action of the Assessing Officer. He submitted that the first question that has to be adjudicated in the instant case is that for the purpose of computation of capital gain whether the date of development agreement or the date of delivery of the flats are to be considered

Soi far as the computation of capital gain is concerned, he submitted that the Assessing Officer has considered the sale consideration by taking 40% of the value adopted by the SRO in the development agreement for land and building and arrived at Rs.1,08,20,000/-. He submitted that the development agreement itself is for transfer of 60% of land, and the assessee received 40% constructed area. What is sale consideration is value of the 40% super structure only since value of 40% of land cannot be treated as sale consideration as it is owned by the assessee. He submitted that the Assessing Officer in the instant case adopted the composite value as sale consideration. Referring to page 9 of the development agreement, he submitted that it is clear from the market value statement that value of land per sq. yard is 10,000/- and the value of super structure is Rs.870/- per s.ft. Therefore, the Assessing Officer should have considered the value of land of 60% taking it at Rs.10,000 per sq. yard which would come to Rs.47,46,000/-. He submitted that there was no clarity with regard to the basis for adopting sale consideration as several methods are adopted in several cases. In some cases it is cost of construction, in some cases it is land value and in some cases super structure value as per SRO. In such circumstances, it would be correct to look into section 45(5A) though introduced from 1.4.2017 as it is from the I.T. Act only and as per this provision it is the SRO value

The learned DR, on the other hand, drew the attention of the Bench to the detailed order passed by the learned CIT (A) on the issue of computation and or taxability of capital gain and submitted that the learned CIT (A) in his detailed order has rejected the claim of the assessee. His decision is based on the decision of the ITAT Hyderabad Bench in the case of Smt. K. Vijaya Lakshmi (Supra) where it has been held that provision of section 45(5A) cannot be applied retrospectively.

Further, the Hon'ble A.P High Court in the case of Potla Nageswara Rao (Supra) has held that transfer is complete on the execution of the JDA and thus was liable to be taxed in the impugned A.Y. He accordingly submitted that the order of the learned CIT (A) being based on the basis of the decision of the jurisdictional High Court and jurisdictional Tribunal, the grounds raised by the assessee should be dismissed.

We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the Page 9 of 11

So far as the argument of the learned Counsel for the assessee that the development agreement is for 60% of the land and the assessee has received 40% constructed area and therefore, the value comes to Rs.47,46,000/- is concerned, the same in our opinion, is without any basis and cannot be accepted.

In the result, the appeal filed by the assessee is dismissed. Order pronounced in the Open Court on 29th July, 2022. Sd/- Sd/- (LALIET KUMAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER