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Facts
The assessee, an individual, entered into a joint development agreement for a property. The Assessing Officer (AO) issued a notice under section 148 of the Income Tax Act, 1961, for the assessment year 2015-16, proposing to tax capital gains arising from this agreement. The assessee objected to the reasons provided for reopening.
Held
The Tribunal observed that the reasons recorded by the AO for reopening were vague and did not clearly indicate any specific evasion by the assessee. The AO's own uncertainty about the taxability of capital gains and the absence of a mention of non-disclosure by the assessee were noted. Consequently, the issuance of the notice under section 148 and the subsequent reopening of assessment were deemed invalid.
Key Issues
Whether the reopening of assessment based on the recorded reasons was valid and if the capital gains were chargeable to tax under Section 45(5A) of the Act.
Sections Cited
45(5A), 2(47)(v), 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: BEFORE S/SHRI GEORGE MATHANSHRI GEORGE MATHAN & RATNESH NANDAN SAHAY & RATNESH NANDAN SAHAY & RATNESH NANDAN SAHAY
This is an appeal filed by the assessee against the order of the ld CIT(A) This is an appeal filed by the assessee against the order of the ld CIT(A) This is an appeal filed by the assessee against the order of the ld CIT(A)- NFAC dated 31.1.2024 31.1.2024in Appeal No. NAFC/2014-15/10117930 15/10117930 for the assessment year 2015 2015-16
Shri Khubchand T Pandya, ld Sr DR Khubchand T Pandya, ld Sr DR appeared for the revenue and appeared for the revenue and ShriH.R.Patel/Shri Aditya Sahoo, H.R.Patel/Shri Aditya Sahoo,ld ARs appeared for the assessee. appeared for the assessee.
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It was submitted by ld AR that the assessee is an individual, who had entered into a joint venture agreement in regard to development of property. It was the submission that notice u/s.148 of the Act came to be issued on the assessee on 31.3.2021. The reasons recorded for reopening reads as follows:
“In the instant case the assessee has entered into, a land owner of R.S.Plot No.718, sub-plot No.718/17 KhataNo.156 measuring 7.17 kathas situated at Village Gar, Ward N.6, Thana No.194 P.S.Sadar District-Ranchi has entered into a joint development agreement with a developer M/s. Shanti Constructions, Ranchi, a proprietorship firm having PAN AARFS 4059 C on 21.5.2014 to develop a multi storied residential complex on the above mentioned said property. As per the joint development agreement, the owner was entitled t 46% (forty six) of the super build up area in the new building and for parking area also land owner’s share shall be 456(forty six)
This arises the issue of the capital gain on account of the joint development agreement in the hands of the landowner as per section45(5A) of the act. Hence, the question of taxability arises that whether the capital gains would be chargeable in the hands f the landowner in respect of the possession of flats, in lieu of the transfer of land t the builder., As per the definition of transfer u/s.2(47)(v) of the Act this arrangement befits into the definition of transfer”
The assessee had objected to the reasons recorded vide a letter dated Nil. The same was disposed off by the AO vide an order dated 24.3.2022. It was the submission that a perusal of the reasons recorded clearly shows that the reasons recorded and the reopening was only a fishing and roving enquiry. And there is no reference by the AO that the reasons recorded are leading to the reopening
P a g e 2 | 4 of the assessment by issuance of notice u/s.148 of the Act. It was the submission that just a note is prepared by the AO and these are not reasons recorded. It was the submission that on the basis of this note the assessment has been reopened without reference to satisfaction for reopening and or issuance of notice u/s.148 of the Act. It was the submission that the reopening was bad in law and should be quashed.
Ld Sr DR submitted that he has called for a report from the AO and same is still awaited. He vehemently supported the order of the AO and ld CIT(A).
We have considered the rival submissions. A perusal of the reasons recorded which have been extracted above, clearly shows that the AO himself is not sure as to there being any evasion. The AO himself is raising a question as to whether the capital gains would be chargeable in the hands of land owner itself. Further on perusal of the alleged reasons recorded clearly shows that there is no reference by the AO mentioning the non-disclosure by the assessee for which he is proposing to initiate notice u/s.148 of the Act. On account of all these failuresaid annexure cannot be treated as reasons recorded for reopening the assessment. As there is no recoding for the purpose of reopening of assessment, the issuance of notice u/s.148 of the Act and consequential reopening of assessment and consequential assessment itself become invalid and same is annulled.
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In the result, appeal of the assessee stands allowed.