DEPUTY COMMISSIONER OF INCOME TAX ,(INTERNATIONAL TAXATION )-2(I/C), HYDERABAD vs. MADHU KUMAR PATEL , HYDERABAD

There is a delay of 80 days in filing of the appeal by the Revenue and one day in filing of the C.O by the assessee. Both sides have already filed condonation applications explaining the reasons for such delay. After hearing both the sides, the delay in filing of the appeal by the Revenue and the C.O. by the assessee are condoned and the appeal as well as the C.O are admitted for adjudication.

Facts of the case, in brief, are that the assessee is a Non-Resident and a resident of the United Kingdom. He has not filed his return of income for the impugned A.Y. In this case, a letter was received from the DDIT (Inv.), Unit-II(3) Hyderabad saying that during a search & seizure operation in the case of M/s. SNR Nirman India Pvt Ltd on 3.2.2015, a joint development agreement signed by the assessee Shri Madhu Kumar Patel was traced. As per information, the assessee had entered into joint development agreement with M/s. SNR Nirman India Pvt Ltd on 13/1/2012 to construct residential flats on agreed sharing ratio of 65.35 (65% for the development share and 35% for the landowner’s share) on 9680 sq.yards of land in survey number 51/1, situated at Mansoorabad Village, Saroornagar Mandal, R.R. Distt. As per the JD agreement cum irrevocable general power of attorney dated 13.1.2012, the assessee had received 52 constructed flats as his share admeasuring 65,190 sq.feets (built up area). The total cost of the project was Rs.19,35,96,000/- out of which assessee’s share is Rs.6,77,58,600/- (35%). However, the assessee has not filed return of income for the A.Y 2012-13 declaring the same as taxable income. Hence, an income of Rs.6,77,58,600/- earned by the assessee during the financial year 2011-12 relevant to the A.Y 2012-13 was not offered to taxation.

On the basis of the above information, the Assessing Officer after recording reasons and after taking prior approval from the CIT (IT & TP) reopened the assessment and issued notice u/s 148 of the Act, dated 19.03.2019. Although this notice was duly served through the e-mail address of the assessee and a copy of the same was also served on 30.03.2019 however, there was no compliance to the said notice. Thereafter, the Assessing Officer issued another letter to the assessee to file the return of income for the A.Y 2012-13 but there was also no compliance. Subsequently, the Assessing Officer issued letter to the SRO, Saroornagar and SRO, Hayatnagar, for ascertaining the market value of land as on 1.4.1981. It was informed that the rate per sq. yard is Rs.1/-. The Assessing Officer accordingly calculated the cost of acquisition of the land at Rs.9,680/-. The Assessing Officer, thereafter, issued another letter to the assessee dated 10.12.2019 giving opportunity to file objections, if any, and show cause as to why the assessment in the case of the assessee should not be completed u/s 144. In response to the same, assessee replied as under: “During the financial year ending 31.3.2012, I have not given possession of my land to the developer, nor I have received any constructed flats from the developer…the development agreement entered into between himself and the builder was only for construction. The builder was more like a financier cum builder. As such there is no transfer within the meaning of section 2(47) r.w.s 53A of the Transfer of Property Act”.

However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He noted that a plain reading of the JDA dated 13.01.2012 makes it clear that the assessee had entered into an agreement for sale cum irrevocable general power of attorney. He noted that vide para 9 of the agreement, "the landowner (i.e., the assessee) agreed & allows the

Similarly, Para-23 of the JDA empowers and authorizes the developer to participate in all proceedings before the authorities on behalf of the landowner. He, therefore, held that the JDA falls within the ambit of section 53A of the Transfer of Property Act, since in this case the developer has in part performance of the contract, taken possession of the property and is willing to perform his part of the contract of developing the said property and also dealing with the same on behalf of the assessee. Relying on the provisions of section 2(47) of the I.T. Act, the Assessing Officer determined the Long-Term Capital Gain (LTCG) in the hands of the assessee at Rs.6,77,04,992/- by observing as under: “Since the irrevocable general power of attorney has been executed by the assessee in favour of the developer, the developer no longer retains the status of mere licensee. Capital gain tax liability would be attracted by the owner of the land entering into development agreement immediately when the irrevocable POA is executed in favour of the developer, as it constitutes the "transaction" by which the developer is allowed to take possession of the property in part performance of the contract for transfer, within the meaning of Section 2(47)(V).

In appeal, the learned CIT (A) upheld the re- assessment proceedings initiated by the Assessing Officer and also held that the provisions of section 2(47)v) and 2(47)(vi) are clearly attracted in this case and the capital gains are to be worked out in the impugned A.Y. He however, admitted the additional ground raised before him for the first-time claiming exemption u/s 54F and on the basis of the arguments advanced by the assessee and relying on various decisions, he held that the assessee is entitled to claim exemption u/s 54F of the Act in respect of 52 residential flats allotted to him by the builder.

Aggrieved with such order of the learned CIT (A), the Revenue is in appeal by raising the following grounds of appeal. 1. he Td. CIT(A) has erred in law in admitting the additional grounds of appeal raised Dy the assessee seeking exemption u/s. 54 F of the Act without appreciating the fact that such grounds do not fall under purely legal grounds inasmuch as the assessee is required to prove a bundle of conditions as stipulated u/s.54F of the Act, warranting gathering of fresh facts and appreciation of the same. 2. Without prejudice to the above, the Ld. CITA) has erred on facts and in law in holding that the assessee is entitled to claim exemption u/s.54 F of the Act. in respect of all the 52 residential flats ignoring the fact that they are independent flats located in 5 different blocks and each block consisting of 5 different floors without any common passage, kitchen, entrance, door no., etc. and, therefore, such 52 independent flats cannot be considered as "a residential house". Page 5 of 8

We have heard the rival arguments made by both the sides. Since the appeal filed by the Revenue has been restored to the file of the learned CIT (A) and since the grounds raised by the assessee in the cross objection are not adjudicated by the learned CIT (A), therefore, considering the totality of the facts of the case and in the interest of justice, we deem it fit and proper to restore the grounds raised by the assessee in the C.O to the file of the Page 7 of 8

In the result, appeal by the Revenue as well as the C.O filed by the assessee are allowed for statistical purposes.