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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI LALIT KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE
BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI LALIT KUMAR, JUDICIAL MEMBER
Assessment Appeal No. Appellant Respondent Year Dr. Arvind Goverdhan, ITA No. No. 97, Kasturba Road, 2010-11 1353/Bang/2015 Bangalore – 560 001. PAN: AGUPG9327J Mrs. Monica Goverdhan, ITA No. No. 97, Kasturba Road, 1354/Bang/2015 Bangalore – 560 001. The Income Tax Officer, PAN: AFNPK1319J Ward 1 (2) (1), Mrs. Margrit Goverdhan, Bangalore. ITA No. No. 97, Kasturba Road, 2009-10 1355/Bang/2015 Bangalore – 560 001. PAN:AEAPG5028A Mrs. Anitha Goverdhan, ITA No. No. 97, Kasturba Road, 1356/Bang/2015 Bangalore – 560 001. PAN: ABUPL4623P C.O. No. Dr. Arvind Goverdhan, 93/Bang/2017 No. 97, Kasturba Road, 2010-11 (in ITA No. Bangalore – 560 001. 1353/Bang/2015 PAN: AGUPG9327J C.O. No. Mrs. Monica Goverdhan, 94/Bang/2017 No. 97, Kasturba Road, (in ITA No. Bangalore – 560 001. 1354/Bang/2015 PAN: AFNPK1319J The Income Tax Officer, C.O. No. Mrs. Margrit Goverdhan, Ward 1 (1) (2), 95/Bang/2017 No. 97, Kasturba Road, Bangalore. (in ITA No. 2009-10 Bangalore – 560 001. 1355/Bang/2015 PAN:AEAPG5028A Mrs. Anitha Goverdhan C.O. No. Loebbert, 96/Bang/2017 No. 97, Kasturba Road, (in ITA No. Bangalore – 560 001. 1356/Bang/2015 PAN: ABUPL4623P
Assessees by : Shri Chandrashekar, Advocate Revenue by : Shri B.R. Ramesh, JCIT (DR)
Date of hearing : 12.12.2017 Date of Pronouncement : 13.12.2017
O R D E R PER BENCH: All these four appeals are filed by the revenue assessee’s and these four COs are filed by the assessee and these are directed against a combined order of
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 2 of 21 ld. CIT(A) – 1, Bangalore dated 24.08.2015 for Assessment Year 2009-10 in respect of four different but connected assessees. All these appeals and COs were heard together and are being disposed of by way of this common order for the sake of convenience. 2. The grounds raised by the revenue in these appeals are as under. ITA No. 1353/Bang/2015:- “1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The CIT(A) erred in holding that the assessees have not parted with possession of the property as contemplated in Section 53A of the Transfer of Property Act without appreciating the fact that the clause X(c) and Para 6.1 of the agreement clearly indicate that constructive possession has been handed over to the builder. 3. The CIT(A) erred in holding that the assessees have not parted with possession of the property by placing reliance on the decision of ITAT, Bangalore in the cases of Sri Nagaraj and Smt. Satyaprema in ITA No.136 & 137/Bang/2012 without appreciating the fact that said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 4. The CIT(A) has failed to appreciate that the assessee had executed General Power of Attorney in the name of the developer on 27.11.2008 to sell the built-up area of the said property and as per agreement dated 02.02.2009, the refundable deposit was converted into non-refundable deposit which corroborate the fact that the possession was in fact handed over to the developer in pursuance of JDA. 5. The CIT (A) erred in holding that the act of bringing non- refundable deposit to tax in the impugned asst. year is premature, by placing reliance on the decision of ITAT, Bangalore in the case of M/s. Chaitanya Properties Pvt. ltd., in ITA NO.125/Bang/2013, without appreciating the fact that the said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 6. The CIT (A) has erred in holding that the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. T.K. Dayalu is not applicable to the facts of the assessee's case. 7. The CIT(A) has erred in holding that the sources for mutual fund investments and time deposits stand explained without
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 3 of 21 appreciating the fact that no evidence was filed before the AO in this regard and allowed the assessee's claim on the basis of additional evidence, without giving an opportunity to the AO to verify the additional evidence as required under Rule 46A. 8. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 9. The appellate craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.” ITA No. 1354/Bang/2015:- “1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The CIT(A) erred in holding that the assessees have not parted with possession of the property as contemplated in Section 53A of the Transfer of Property Act without appreciating the fact that the clause X(c) and Para 6.1 of the agreement clearly indicate that constructive possession has been handed over to the builder. 3. The CIT(A) erred in holding that the assessees have not parted with possession of the property by placing reliance on the decision of ITAT, Bangalore in the cases of Sri Nagaraj and Smt. Satyaprema in ITA No.136 & 137/Bang/2012 without appreciating the fact that said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 4. The CIT(A) has failed to appreciate that the assessee had executed General Power of Attorney in the name of the developer on 27.11.2008 to sell the built-up area of the said property and as per agreement dated 02.02.2009, the refundable deposit was converted into non-refundable deposit which corroborate the fact that the possession was in fact handed over to the developer in pursuance of JDA. 5. The CIT (A) erred in holding that the act of bringing non- refundable deposit to tax in the impugned asst. year is premature, by placing reliance on the decision of ITAT, Bangalore in the case of M/s. Chaitanya Properties Pvt. ltd., in ITA NO.125/Bang/2013, without appreciating the fact that the said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 6. The CIT (A) has erred in holding that the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. T.K. Dayalu is not
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 4 of 21 applicable to the facts of the assessee's case. 7. The CIT(A) has erred in holding that the sources for mutual fund investments and time deposits stand explained without appreciating the fact that no evidence was filed before the AO in this regard and allowed the assessee's claim on the basis of additional evidence, without giving an opportunity to the AO to verify the additional evidence as required under Rule 46A. 8. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 9. The appellate craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.” ITA No. 1355/Bang/2015:- “1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The CIT(A) erred in holding that the assessees have not parted with possession of the property as contemplated in Section 53A of the Transfer of Property Act without appreciating the fact that the clause X(c) and Para 6.1 of the agreement clearly indicate that constructive possession has been handed over to the builder. 3. The CIT (A) erred in holding that the assessees have not parted with possession of the property by placing reliance on the decision of ITAT, Bangalore in the cases of Sri Nagaraj and Smt. Satyaprema in ITA No.136 &137/Bang/2012 without appreciating the fact that said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 4. The CIT(A) has failed to appreciate that the assessee had executed General Power of Attorney in the name of the developer on 27.11.2008 to sell the built-up area of the said property and as per agreement dated 02.02.2009, the refundable deposit was converted into non-refundable deposit which corroborate the fact that the possession was in fact handed over to the developer in pursuance of JDA. 5. The CIT (A) erred in holding that the act of bringing non- refundable deposit to tax in the impugned asst. year is premature, by placing reliance on the decision of ITAT, Bangalore in the case of M/s. Chaitanya Properties Pvt. ltd., in ITA NO.125/Bang/2013, without appreciating the fact that the said decision has not been
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 5 of 21 accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 6. The CIT (A) has erred in holding that the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. T.K. Dayalu is not applicable to the facts of the assessee's case. 7. The CIT(A) has erred in holding that the sources for mutual fund investments and time deposits stand explained without appreciating the fact that no evidence was filed before the AO in this regard and allowed the assessee's claim on the basis of additional evidence, without giving an opportunity to the AO to verify the additional evidence as required under Rule 46A. 8. The CIT(A) erred in deleting the addition made on account of interest income from J & K Bank on the ground that the said income was accrued to the assessee after 31.03.2009 without appreciating the fact that the Form 26AS available on record, clearly indicate that the said income was paid / credited to the assessee on 31.12.2008 and 02.03.2009 of Rs.76,712/- and Rs.1,22,740/- respectively. 9. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 10. The appellate craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.” ITA No. 1356/Bang/2015:- “1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The CIT(A) erred in holding that the assessees have not parted with possession of the property as contemplated in Section 53A of the Transfer of Property Act without appreciating the fact that the clause X(c) and Para 6.1 of the agreement clearly indicate that constructive possession has been handed over to the builder. 3. The CIT(A) erred in holding that the assessees have not parted with possession of the property by placing reliance on the decision of ITAT, Bangalore in the cases of Sri Nagaraj and Smt. Satyaprema in ITA No.136 & 137/Bang/2012 without appreciating the fact that said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka.
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 6 of 21 4. The CIT(A) has failed to appreciate that the assessee had executed General Power of Attorney in the name of the developer on 27.11.2008 to sell the built-up area of the said property and as per agreement dated 02.02.2009, the refundable deposit was converted into non-refundable deposit which corroborate the fact that the possession was in fact handed over to the developer in pursuance of JDA. 5. The CIT (A) erred in holding that the act of bringing non- refundable deposit to tax in the impugned asst. year is premature, by placing reliance on the decision of ITAT, Bangalore in the case of M/s. Chaitanya Properties Pvt. ltd., in ITA NO.125/Bang/2013, without appreciating the fact that the said decision has not been accepted by the Department and an appeal u/s.260A has been admitted by the Hon'ble High Court of Karnataka. 6. The CIT (A) has erred in holding that the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. T.K. Dayalu is not applicable to the facts of the assessee's case. 7. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 8. The appellate craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.”
The grounds raised by the assessee in its COs are as under. C.O. No. 93/Bang/2017:- “1. The order of the learned Commissioner of Income-tax [Appeals] in so far it is against the Respondent / Cross Objector is opposed to law, facts, equity, and weight of evidence and circumstances of the case. 2. The Respondent/ Cross objector denies himself liable to be assessed over and above the total income reported by the Respondent/ Cross objector of Rs. 62,50,000/- as on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) is not justified in law in not holding that the order of re-assessment passed by the learned assessing officer under section 143 [3] r.w.s. 147 of the Act is bad in law, since the mandatory conditions for assuming jurisdiction for issuance of a notice under section 148 of the Act did not exist or having not been complied with and consequently, the reassessment requires to be cancelled on the facts and circumstances of the case.
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 7 of 21 4. The learned Commissioner of Income-tax [Appeals] is further not justified in not holding that the order of reassessment is further bad in law and void-ab-initio as the learned Assessing officer had no reasons to believe that the income of the Appellant has escaped assessment under the facts and circumstances of the case. 5. Without prejudice, the learned Commissioner of Income-tax [Appeals] ought to have granted benefit of exemption under section 54F of the Act on the facts and circumstances of the case. 6. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the learned assessing officer has erred in the calculation of cost of acquisition of the property on the facts and circumstances of the case. 7. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the values adopted by the learned assessing officer in the entire computation of capital gains are wrong and the capital gains require to be recomputed on the facts and circumstances of the case. 8. Without Prejudice, the learned Assessing Officer is not justified in law in charging the interest under section 234 A and 234 B of the Act and further the calculation of interest under section 234 A and 234 B of the Act is not in accordance with law since the rate, method of calculation, quantum is not discernable from the Order of assessment on the facts and circumstances of the case. 9. The Respondent / Cross Objector craves leave to add, alter, delete, substitute or modify any of the grounds urged above. 10. For the above and other grounds that may be urged at the time of the hearing of the appeal, the Respondent / Cross Objector prays that the appeal may be allowed in the interest of equity and justice.”
C.O. No. 94/Bang/2017:- “1. The order of the learned Commissioner of Income-tax [Appeals] in so far it is against the Respondent / Cross Objector is opposed to law, facts, equity, and weight of evidence and circumstances of the case. 2. The Respondent/ Cross objector denies herself liable to be assessed over and above the total income reported by the Respondent/ Cross objector of Rs. 62,82,900/- as on the facts and circumstances of the case.
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 8 of 21
The learned Commissioner of Income-tax (Appeals) is not justified in law in not holding that the order of re-assessment passed by the learned assessing officer under section 143 [3] r.w.s. 147 of the Act is bad in law, since the mandatory conditions for assuming jurisdiction for issuance of a notice under section 148 of the Act did not exist or having not been complied with and consequently, the reassessment requires to be cancelled on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals] is further not justified in not holding that the order of reassessment is further bad in law and void-ab-initio as the learned Assessing officer had no reasons to believe that the income of the Appellant has escaped assessment under the facts and circumstances of the case. 5. Without prejudice, the learned Commissioner of Income-tax [Appeals] ought to have granted benefit of exemption under section 54F of the Act on the facts and circumstances of the case. 6. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the learned assessing officer has erred in the calculation of cost of acquisition of the property on the facts and circumstances of the case. 7. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the values adopted by the learned assessing officer in the entire computation of capital gains are wrong and the capital gains require to be recomputed on the facts and circumstances of the case. 8. Without Prejudice, the learned Assessing Officer is not justified in law in charging the interest under section 234 A and 234 B of the Act and further the calculation of interest under section 234 A and 234 B of the Act is not in accordance with law since the rate, method of calculation, quantum is not discernable from the Order of assessment on the facts and circumstances of the case. 9. The Respondent / Cross Objector craves leave to add, alter, delete, substitute or modify any of the grounds urged above. 10. For the above and other grounds that may be urged at the time of the hearing of the appeal, the Respondent / Cross Objector prays that the appeal may be allowed in the interest of equity and justice.”
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 9 of 21
C.O. No. 95/Bang/2017:- “1. The order of the learned Commissioner of Income-tax [Appeals] in so far it is against the Respondent / Cross Objector is opposed to law, facts, equity, and weight of evidence and circumstances of the case. 2. The Respondent/ Cross objector denies herself liable to be assessed over and above the total income reported by the Respondent/ Cross objector of Rs. 74,33,640/- as on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) is not justified in law in not holding that the order of re-assessment passed by the learned assessing officer under section 143 [3] r.w.s. 147 of the Act is bad in law, since the mandatory conditions for assuming jurisdiction for issuance of a notice under section 148 of the Act did not exist or having not been complied with and consequently, the reassessment requires to be cancelled on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals] is further not justified in not holding that the order of reassessment is further bad in law and void-ab-initio as the learned Assessing officer had no reasons to believe that the income of the Appellant has escaped assessment under the facts and circumstances of the case. 5. Without prejudice, the learned Commissioner of Income-tax [Appeals] ought to have granted benefit of exemption under section 54F of the Act on the facts and circumstances of the case. 6. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the learned assessing officer has erred in the calculation of cost of acquisition of the property on the facts and circumstances of the case. 7. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the values adopted by the learned assessing officer in the entire computation of capital gains are wrong and the capital gains require to be recomputed on the facts and circumstances of the case. 8. Without Prejudice, the learned Assessing Officer is not justified in law in charging the interest under section 234 A and
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 10 of 21 234 B of the Act and further the calculation of interest under section 234 A and 234 B of the Act is not in accordance with law since the rate, method of calculation, quantum is not discernable from the Order of assessment on the facts and circumstances of the case. 9. The Respondent / Cross Objector craves leave to add, alter, delete, substitute or modify any of the grounds urged above. 10. For the above and other grounds that may be urged at the time of the hearing of the appeal, the Respondent / Cross Objector prays that the appeal may be allowed in the interest of equity and justice.” C.O. No. 96/Bang/2017:- “1. The order of the learned Commissioner of Income-tax [Appeals] in so far it is against the Respondent / Cross Objector is opposed to law, facts, equity, and weight of evidence and circumstances of the case. 2. The Respondent/ Cross objector denies herself liable to be assessed over and above the total income reported by the Respondent/ Cross objector of Rs. 62,53,220/- as on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) is not justified in law in not holding that the order of re-assessment passed by the learned assessing officer under section 143 [3] r.w.s. 147 of the Act is bad in law, since the mandatory conditions for assuming jurisdiction for issuance of a notice under section 148 of the Act did not exist or having not been complied with and consequently, the reassessment requires to be cancelled on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals] is further not justified in not holding that the order of reassessment is further bad in law and void-ab-initio as the learned Assessing officer had no reasons to believe that the income of the Appellant has escaped assessment under the facts and circumstances of the case. 5. Without prejudice, the learned Commissioner of Income-tax [Appeals] ought to have granted benefit of exemption under section 54F of the Act on the facts and circumstances of the case. 6. Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the learned assessing officer has erred in the calculation of cost of acquisition of the property on the facts and circumstances of the case.
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 11 of 21
Without prejudice, the learned Commissioner of Income-tax [Appeals] failed to appreciate that the values adopted by the learned assessing officer in the entire computation of capital gains are wrong and the capital gains require to be recomputed on the facts and circumstances of the case. 8. Without Prejudice, the learned Assessing Officer is not justified in law in charging the interest under section 234 A and 234 B of the Act and further the calculation of interest under section 234 A and 234 B of the Act is not in accordance with law since the rate, method of calculation, quantum is not discernable from the Order of assessment on the facts and circumstances of the case. 9. The Respondent / Cross Objector craves leave to add, alter, delete, substitute or modify any of the grounds urged above. 10. For the above and other grounds that may be urged at the time of the hearing of the appeal, the Respondent / Cross Objector prays that the appeal may be allowed in the interest of equity and justice.”
The ld. DR of revenue supported the assessment order. He also submitted that this issue is covered in favour of the revenue and against the assessee by the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Dr. T.K. Dayalu as reported in 202 Taxman 531. He also drawn our attention to Para no. 9.5 of the assessment order and pointed out that it is noted by the AO in this Para of the assessment order that as per Rider-2 dated 02.02.2009, all the four parties to the JDA namely Mrs. Margrit Goverdhan, Dr. Arvind Goverdhan, Dr. Anita Goverdhan and Mrs. Monica Goverdhan had re negotiated clause 13 of the JDAs dated 27.11.2008 executed with M/s. Ashed Properties and Investment Pvt. Ltd. and as per the recitals of the said rider which is reproduced by the AO on page no. 8 of the assessment order, owners have received a sum of Rs. 2.5 Crores as non-refundable deposit. He further pointed out that as against receipt of non-refundable deposit of Rs. 2.50 Crores, the AO has determined the sale consideration for transfer of 40% of land i.e. 3711 sq.ft. at Rs. 6,500/- per sq.ft. being guidance value as on 31.03.2009 as per SRO and the same has been determined at Rs. 2,41,21,500/- which is less than the amount of non-refundable deposit received by these four assessees.
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 12 of 21
As against this, ld. AR of assessee supported the order of CIT(A). Regarding the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Dr. T.K. Dayalu (Supra), it is submitted that this judgment is not applicable in the facts of the present case because in that case, the possession was given in the year itself in which the JDA was executed as per an affidavit of the assessee in that case but in the present case, actual possession was given much after and in the present year, possession was given only for the purpose of development without any right in the land. In support of his contention, he submitted that the copy of JDA is available on pages 13 to 43 of paper book and in particular, our attention was drawn to Para no. 1.2 of JDA and it was pointed out that as per this Para, the owners of the land had irrevocably permitted and authorized the developers to enter upon the SCHEDULE B PROPERTY and to develop it along with the remainder portion / share of the SCHECDULE A PROPERTY by constructing a building thereon as per sanctioned plan, subject to the terms of this Agreement and it is made clear that nothing contained in this JDA shall be construed as delivery of possession in part performance of any Agreement of Sale under Section 53-A of the Transfer of property Act, 1908 or Section 2(47)(V) of the Income Tax Act, 1961. He also drawn our attention to Para no. 6.2 of JDA and pointed out that as per this Para of JDA, it was made clear that this handing over possession is not a delivery of possession as part performance of any Agreement of Sale under Section 53-A of the Transfer of property Act, 1908 or Section 2(47) (V) of the Income Tax Act, 1961 and the possession was given only to develop the property. Thereafter, he drawn our attention to Para no. 15 of the JDA and pointed out that the land owners had handed over all the original document of title to M/s. AKS Law Associates, Advocate who shall hold the same in ESCROW on behalf of the owners till the completion of the entire project and on formation of an Association of owners of all the apartments in the building to be constructed on the SCHEDULE A PROPERTY, the ESCROW Agent shall hand over the original documents of title to such Association / Organisation of owners as the case may be. Thereafter he drawn our attention to Para no. 19 of the JDA and pointed out that as per this Para of JDA, the owners have to pay
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 13 of 21
all the taxes, levies and cess in respect of the SCHEDULE PROPERTY up to the date of the completion of the developed area and up to the date when the proportionate undivided interest in land in the SCHEDULE PROPERTY is handed over to the developer. He pointed out that this Para of the JDA shows that ownership right was with the owners of the land only and not with the developer. Then he drawn our attention to page nos. 44 to 66 of paper book and submitted that sale deed was executed on 05.04.2013 and the owners have executed the said sale deed in 2013 in favour of the nominee of the developer Mr. Dev Roy and Ms. Nilanjana Roy being the actual purchasers of the property and the developer is also one of the parties of the sale deed. Thereafter he drawn our attention to page no. 67 of paper book containing letter dated 16.04.2013 issued by Regency Property & Management Services addressed the present assessees asking the assessee to pay the apartment maintenance from 01.04.2013 to 31.03.2014. Reliance was placed by him on two tribunal orders rendered in the case of M/s. Chaitanya Properties Pvt. Ltd. Vs. JCIT(OSD) in ITA No. 52/Bang/2013 dated 27.03.2015 and on the Tribunal order rendered in the case of Shri K.M. Nagaraj and Smt. Sathya Prema Vs. CIT in ITA Nos. 136 & 137/Bang/2012 dated 14.08.2014 available on pages 68 to 98 and 99 to 126 of paper book.
Regarding ground no. 7 in ITA Nos. 1353, 1354 & 1355/Bang/2015, Learned DR of the revenue submitted that the assessment orders were passed by the AO u/s 144 in some cases but in no case, these documents were made available before the AO and these were made available for the first time before the CIT(A) and he decided the issue on the basis of these documents without obtaining remand report from the AO and therefore, this is in violation of Rule 46A of IT Rules, 1962 and hence, this issue should go back to the file of CIT(A) for fresh decision after obtaining remand report from the AO. Learned AR of the assessee supported the order of CIT (A).
Learned DR of the revenue further submitted that one more issue is raised as per ground no. 8 in ITA No. 1355/Bang/2015 and on this issue, the order of CIT(A) should be reversed and that of AO should be restored in view of this fact
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that as per Form 26AS available on record, it is clearly indicated that the said income was paid / credited to the assessee in the present year and therefore, the same is taxable in the present year. The ld. AR of assessee supported the order of CIT(A).
Regarding the COs filed by the assessees, the ld. AR of assessee submitted that the ground in respect of validity of reassessment proceedings is not pressed in all these four Cross Objections and therefore, the relevant ground in this regard is rejected as not pressed. He further submitted that there is only one issue remaining in the COs of the assessee that the assessee is eligible for deduction u/s. 54F of the IT Act. He submitted that this issue was not decided by the CIT(A) on this basis that he has held that capital gain is not taxable in the present year because no transfer is taking place in the present year. He submitted that if the order of CIT(A) is confirmed on that aspect, then this ground of assessee in CO will become infructuous but if the order of CIT(A) is reversed on that aspect regarding taxability of capital gain in the present year then this issue regarding allowability of deduction u/s. 54F is to be decided. He submitted copy of Tribunal order rendered in the case of Shri K.G. Adaveeshaiah Vs. ITO in ITA No. 2043/Bang/2016 dated 23.03.2017 and drawn our attention to Para nos. 7&8 of this Tribunal order and pointed out that in that case, the same issue regarding allowability of deduction u/s. 54 / 54F was restored back to the file of AO and therefore, in the present case also, this issue may be restored back to the file of AO. The ld. DR of revenue submitted that the same may be restored back to the file of CIT(A).
We have considered the rival submissions. First we decide the appeals of the revenue and the main issue in all these four appeals of the revenue is regarding taxability of capital gain in the present year because the JDA was executed in the present year and as per the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Dr. T.K. Dayalu (supra), capital gain is liable to be taxed in the year in which the JDA was executed and possession is handed over along with part payment
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First we examine the applicability of this judgment of Hon'ble Karnataka High Court rendered in the case of CIT vs. Dr. T.K. Dayalu (supra). In that case, the question of law was raised before the Hon'ble Karnataka High Court was this as to whether on the facts and circumstances of the case, the capital gains in respect of the property in question was liable under the Act for the assessment year 1996-97. In that case, as per the facts noted by Hon'ble Karnataka High Court in Para no. 7 of the judgment, it was noted that the possession of the schedule property was handed over on 30.05.1996 as per the material on record. Under these facts, it was held by Hon'ble Karnataka High Court that capital gains has to be taxed in the year 1997-98 not in the year 2003-04 as contended by the assessee. Hence it is seen that this is the judgment of Hon'ble Karnataka High Court that the year in which possession of the property has been handed over to the developer as per JDA, capital gain is liable to tax in that year and not in the year in which the project has been completed.
Now we examine the facts of the present case. In the present case, the JDA has been executed on 27.11.2008 and as per Para no. 6 of JDA, the owners of the land had handed over the free and vacant possession of land to the developer for the purpose of developing the same along with the remainder portion of schedule A property. As per letter dated 16.04.2013 available on page 63 of the paper book intimating to these assessees about payment of maintenance charges by these assessees w.e.f. 01.04.2013, it is also intimated that the maintenance charges shall be paid on or before handing over possession of the apartment. This goes to show that possession of the constructed area will be given by the builder to the land owners after payment of maintenance charges. No body can give something to anybody what he does not have. Since the builder will give possession to the land owner after payment of maintenance charges, it is implied that the builder was in the possession of the constructed area i.e. flats to be received by the land owners i.e. the present assessees. It also means that valid possession was given by these assessees to the builder in the present year because in the present year, the JDA talks about handing over of possession and there is no other document shown as per which, the possession was handed over to the developer in any subsequent
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 16 of 21 year. This is also noted by the AO on page no. 7 of the assessment order in Para no. 9.5 that as per Rider -2 dated 02.02.2009, the parties to the JDA being these four assessees before us had renegotiated clause 13 of the JDAs dated 27.11.2008 and had received a sum of Rs. 2.5 Crores as non-refundable deposit. Since in the present case, not only JDA was executed, but possession was also handed over to the developer and non-refundable deposit was received by the assessee to the extent of Rs. 2.50 Crores, in our considered opinion, this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Dr. T.K. Dayalu 9Supra) is squarely applicable.
Now we examine the applicability of two Tribunal orders on which reliance has been placed by ld. AR of assessee. The first Tribunal order cited by him is the Tribunal order rendered in the case of M/s. Chaitanya Properties Pvt. Ltd. Vs. JCIT(OSD) (supra). In Para nos. 8.11 to 8.13 of this Tribunal order, it is noted by the Tribunal that the land which was subjected to Joint Development is Stock In Trade of the assessee and the tribunal also noted that the application of section 45 is limited to sub section (2) of section 45 in as much as the impugned lands are held as Stock in Trade. The Tribunal also held that the provisions of section 53A of the Transfer of Property Act applies to an asset held as a Capital asset / investment & not to Stock In Trade. For the purpose of ready reference, these three paras from this Tribunal order being 8.11 to 8.13 are reproduced as under from page no. 91 of the paper book. “8.11 From the above facts of the case & the relevant clauses of the JDA which determine the actual point in time as to when the ownership of the land gets transferred from the Assessee it is clear that no part of it is transferred for and up to the A.Y. 2011-12 much less on 05/02/2005 itself. 8.12 The fact that the land which is subjected to Joint Development is Stock In Trade of the Assessee is a very important fact to take note off in order to decide the exact point in time as to when the ownership in these lands held as stock in trade gets actually transferred from the Assessee. 8.13 The application of section 45 is limited to sub section (2) of section 45 in as much as the impugned lands are held as Stock in Trade. The provisions of section 53A of the Transfer of Property Act apply to an asset held as a Capital asset
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 17 of 21 /investment & not to Stock In Trade.” 13. In the present case, the asset in question is capital asset and not stock in trade and therefore, in our considered opinion, this Tribunal order is not applicable in the present case.
The second Tribunal order cited by ld. AR of assessee is the Tribunal order rendered in the case of Shri K.M. Nagaraj and Smt. Sathya Prema Vs. CIT (supra). In that case, the facts are noted by the Tribunal in Para no. 2 of the Tribunal order as per which the assessees were joint owners of the property and the assessees entered into JDA with M/s. Glory Estate P. Ltd., (now known as Mantri Developers P. Ltd.) on 26.10.1994 and as per the said agreement, the developers agreed to construct apartments on the property and retain 70% of the undivided share of land of the property and 70% of the super structure as and towards developer’s share and the remaining 30% of the built-up area and proportionate undivided share of land of the property was to be given to the share of the assessees. The Tribunal also noted that the developers did not comply with the JDA till the year 2000 and in the year 2000, the developers intended to start construction as per the JDA. The Tribunal also noted that at that point of time, the assessees agreed to sell their 30% of the share of the built-up area and proportionate undivided share of land of 30% of the property to M/s. Glory Estate P. Ltd., for a sum of Rs. 8.35 Crores and the agreement dated 11.11.2000 was accordingly entered into between the parties and the developers agreed to pay the sale consideration in 35 instalments over a period of 36 months, from the date of agreement of sale as per the installment schedule annexed to the agreement of sale. For Assessment Year 2001-02, the notices u/s. 148 was issued on 28.03.2008 to the assessees and in response to the same, the assessees filed a letter before the AO requesting the AO to treat the original return filed as a return filed in response to the notice u/s. 148 of the IT Act.
The Tribunal further noted in Para no. 4 of the order that in the course of the assessment proceedings, the question as to whether there would be any capital
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gain arising out of the sale agreement dated 11.11.2000 was considered by the AO and query was raised and the assessees in response to a query by the AO in this regard filed a common letter dated 29.12.2008 before the AO in which they took a stand that no capital gain accrues by virtue of agreement dated 11.11.2000 in Assessment Year 2001-02. The AO completed the assessment u/s. 143(3) r.w.s. 147 of the IT Act and admittedly, there is no discussion in the assessment order regarding the assessee’s claim made in the letter dated 29.12.2008 regarding capital gain not having accrued during the previous year relevant to Assessment Year 2001-02 as claimed by the assessee but the fact remains that the assessee filed the letter and the same was taken cognizance of by the AO before completing the assessment. Thereafter the CIT in exercise of his powers u/s. 263 of the Act was of the view that the orders of assessment passed by the AO on 31.12.2008 was erroneous and prejudicial to the interests of Revenue. According to the CIT, the AO ought to have held that there was a transfer of a capital asset by the assessee by virtue of agreement dated 11.11.2000 and capital gain had accrued during the previous year relevant to Assessment Year 2001-02 and the AO ought to have brought to tax the capital gain. Against this order of CIT u/s. 263, the assessee carried the matter before the Tribunal and in Para no. 21 of this Tribunal order, it is noted by Tribunal that by virtue of the agreement for sale dated 11.11.2000, the assessee’s right to get 30% built up area of flats got extinguished and therefore, there was a transfer by way of extinguishment of rights over the property and therefore, there was a transfer as per the claim of the department. The claim of the assessee before the Tribunal was this that by the agreement dated 11.11.2000, the consideration for transfer of the property was substituted in terms of money in lieu of getting built up area of flats originally agreed under the JDA dated 26.10.1994 and therefore, the conclusions of the CIT are contrary to facts. Hence it is seen that in that case, the JDA was entered in the year 1994 and in that year the possession was given and in Assessment Year 2001-02, the built up area was converted into money. On this aspect also, query was made by the AO and reply was given by the assessee before the AO and the AO took a view that no capital gain has arisen in the present year. This is settled law that the CIT cannot substitute his view in place of AO while exercising revisionary
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powers u/s. 263. In our considered opinion, this Tribunal order is also not applicable in the facts of the present case.
As per the above discussion, we find that this issue is squarely covered in favour of the revenue and against the assessee by the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Dr. T.K. Dayalu (supra) and the two tribunal orders cited by ld. AR of assessee are not applicable in the present case. Hence by respectfully following this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Dr. T.K. Dayalu (supra), we reverse the order of CIT(A) on this issue and restore that of the AO.
Before parting, we also take note of this fact that the JDAs in question are duly registered and stamp duty is paid under Karnataka Stamp Act, 1957. As per a recent judgment dated 04.10.2017 of Hon’ble apex court rendered in the case of CIT vs. Balbir Singh Maini, this was held that if the JDA is not registered, it cannot be said that any transfer has taken place as per JDA. Since, in the present case, JDAs in question are duly registered, this judgment also does not render any help to the assessee and since, our decision is without taking any help from this judgment and this judgment only fortifies our decision and therefore, it was not considered necessary to confront the assessee with this judgment. Accordingly ground nos. 1 to 6 of revenue’s appeal are allowed.
Regarding ground no. 7 in three appeals i.e. ITA Nos. 1353 to 1355/Bang/2015, we find that the issue regarding sources for mutual fund investment was decided by CIT(A) on the basis of evidence made available before him for the first time without obtaining remand report from the AO and hence, in our considered opinion, there is violation of Rule 46A of IT Rules, 1962 and therefore, we set aside the order of CIT(A) on this issue and restore this matter back to the file of CIT(A) for fresh decision after obtaining remand report from the AO. Ground no. 7 of these three appeals is allowed for statistical purposes.
Now, only one issue left in appeals of revenue is. ground no. 8 in ITA No. 1355/Bang/2015. In this regard, we find that as per Para no. 4.3 of the order of
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CIT(A), the decision of CIT(A) is on this basis that the assessee is consistently following Cash system of accounting but in the assessment order, the AO has stated that the method of accounting followed by the assessee is mercantile. We do not know from where the CIT(A) has found this that the assessee is consistently following Cash system of accounting particularly when the AO has clearly stated in the assessment order that the assessee is following mercantile system of accounting and there is no ground raised by the assessee before the CIT(A) on this aspect. Hence we reverse the order of CIT (A) on this issue and restore that of the AO. Ground no. 8 of revenue’s appeal in ITA No. 1355/Bang/2015 is allowed.
In the result, all the four appeals of the revenue are allowed in the terms indicated above.
Now we take up the COs filed by the assessee. As per these COs, two issues are raised by the assessee. The first issue is regarding validity of reassessment proceedings and in course of hearing before us, it was submitted by ld. AR of assessee that this issue is not pressed and accordingly, the grounds pertaining to this issue is rejected as not pressed.
The second issue raised is regarding assessees’ claim for deduction u/s. 54F of IT Act. We find that this issue was not decided by CIT(A) because he has decided the issue in favour of the assessee on the main issue that capital gain is not liable to tax in the present year. Once it is held that the capital gain is not liable to tax in the present year then there is no question of allowability of deduction u/s. 54F and therefore, this aspect was not decided by CIT(A). Now we have reversed the order of CIT(A) on that aspect and we have held that capital gain is liable to tax in the present year and therefore, now this issue regarding allowability of deduction u/s. 54F has to be decided. Hence we restore this issue to the file of CIT (A) for decision.
Regarding the contention of the learned AR of the assessee that as per the Tribunal order rendered in the case of Shri K.G. Adaveeshaiah Vs. ITO (Supra), the issue regarding allowability of deduction u/s. 54 / 54F should be restored
ITA Nos. 1353 to 1356/Bang/2015 & C.O. Nos. 93 to 96/Bang/2017 Page 21 of 21 back to the file of AO, we find that in Para 8 of this tribunal order, it is stated by the tribunal that generally, such issue should be restored to CIT (A) but since, in that appeal, the main issue about the quantum of capital gain was restored to AO, it was considered appropriate that this issue about deduction u/s 54/54F shall also be restored to AO and after these observations, the matter was restored to AO. In the present case, no other issue is being restored to AO and therefore, in the present case, we feel it proper to restore this issue to CIT (A) with the direction that he should decide this issue as per law after providing adequate opportunity of being heard to both sides. Ground no. 5 of all these COs is allowed for statistical purpose.
In the result, all the four COs are partly allowed for statistical purposes.
In the combined result, all the four appeals filed by the revenue are allowed in the terms indicated above and all the four COs filed by the assessees are partly allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (LALIT KUMAR) (ARUN KUMAR GARODIA) Judicial Member Accountant Member Bangalore, Dated, the 13th December, 2017. /MS/ Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order
Senior Private Secretary, Income Tax Appellate Tribunal, Bangalore.