V.RAMMOHAN,CHENNAI vs. ACIT, CHENNAI

This is an appeal filed by the assessee against the Order of the Commissioner of Income Tax (Appeals)-5, Chennai, in ITA No.76/C.I.T(A)- 5/14-15 dated 19.01.2016 for assessment year 2005-06.

Mr.G.Seetharaman represented on behalf of the assessee, and Mr.Arunraj represented on behalf of the Revenue.

It was submitted by the ld.AR that the assessee an individual, entered into a Joint Development Agreement (JDA) with Doshi Housing Private Limited on 29.05.2004. The assessee had received a refundable deposit of Rs.25 lakhs at the time of entering into JDA. It was submitted that a notice u/s.148 of the Act had been issued and the assessment reopened. It was submitted that though the assessee has challenged the reopening, the assessee is not pressing the same. The ld.AR has also signed and given an endorsement to this effect in the grounds of appeal.

In regard to other grounds, it was submitted by the ld.AR that the assessee had offered capital gains in respect of JDA entered into by the assessee for the assessment year 2007-08. The ld.AR placed before us a copy of the assessment order, a copy of the order of ld.CIT(A) and the order giving effect to the order of the ld. CIT(A) for assessment year 2007-08. It was submitted that the said amount of Rs.25 lakhs being a refundable deposit has also been returned by the assessee as per the accounts of the assessee on 25.12.2006. It was a further submission that the amount of Rs.25 lakhs being a refundable deposit, the same was not liable to be assessed during the assessment year 2005-06. It was further submitted that the Assessing Officer did not accept the contention of the assessee and brought to tax Rs.25 lakhs to the income of assessee. It was submitted that the addition made by the Assessing Officer and confirmed by the ld.CIT(A) was liable to be deleted.

In reply, the ld.DR submitted the amount of Rs.25 lakhs was not considered when computing the capital gains for the assessment year 2007-08. It was further submitted that computation of long term capital gains and short term capital gains as determined by the Assessing Officer for the assessment year 2007-08, clearly showed that what has been brought to tax as liable for capital gains, was only short term capital gains of Rs.18,19,225/- and sale consideration of Rs.1,20,00,000/-, which was liable for long term capital gains, has not been assessed. It was a submission that the Revenue had no objection, if the issue of computation of capital gains is restored to the file of the AO for re-adjudication.

We have heard the rival contentions and perused the material available on record. A perusal of the assessment order for assessment year 2005-06 clearly shows that the Assessing Officer has categorically held that long term capital gains is taxable during the financial year 2004- 05 relevant to the assessment year 2005-06 in respect of transfer of land owned by the assessee as per the development agreement dated 29.05.2004 and the Power of Attorney dated 03.06.2004. However, it is noticed that the Assessing Officer has only made an addition of Rs.25 lakhs. The assessee claims that the assessee has offered both the long term capital gains and short term capital gains in respect of the transaction of the JDA during the assessment year 2007-08. It has also been one of the arguments of the assessee that if at all the issues are restored to the file of Assessing Officer, then disallowance, if any, should not exceed Rs.25 lakhs.

A perusal of the order giving effect to the order of the ld.CIT(A) as provided by the assessee for the assessment year 2007-08, shows that the addition in the order giving effect to the order of the ld. CIT(A) is only on account of short term capital gains of Rs.18,19,225/-. The liability on account long term capital gains arising on account of sale consideration of five grounds of land being Rs.1,20,00,000/- has not been brought to tax in the said order giving effect to the order of the ld. CIT(A) for assessment year 2007-08. It must also mention here that the said order of the ld.CIT(A) has also been confirmed by the income Tax Appellate Tribunal for the assessment year 2007-08. There is no variation as is evidenced from the order giving effect to the order of the Tribunal as produced by the Revenue. This being so, in the interest of justice, the issues in this appeal is restored to the file of Assessing Officer for verifying as to whether the amount of Rs.25 lakhs has been considered in computation of the capital gains if any, assessed for the assessment year 2007-08. If the same has not been considered for the computation of capital gains for the assessment year 2007-08, then obviously the same would have to be considered in the computation of capital gains as has been mentioned by the Assessing Officer for the assessment year 2005-06.

In the result, the appeal of assessee is partly allowed for statistical purposes.