Loading judgment…

Nalpad Hotels and Convention… vs The Deputy Commissioner of… | s.45(2), 2(47)(iv) | ITAT Bangalore 2024 | BharatTax

NALPAD HOTELS AND CONVENTION CENTRE ,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOMER TAX, CENTRAL CIRCLE-2(3), BANGLAORE

ITA 1298/BANG/2024Status: DisposedITAT Bangalore16 August 2024AY 2017-181 pages

AI SummaryAllowed

Facts

The assessee, M/s. Nalapad Properties and M/s. Nalapad Hotels and Convention Centre, entered into a Joint Development Agreement (JDA) on January 17, 2008, with M/s. Brigade Enterprises Ltd. for the development of a property. The land was treated as stock-in-trade by the assessee. The AO assessed the income arising from the transaction in AY 2017-18, considering the occupancy certificate obtained by the developer in July 2016 as the trigger for transfer. The assessee argued that the transfer occurred in AY 2008-09 when the JDA was executed, and the income should be taxed as business income in the year of sale of the constructed area, not the year of the occupancy certificate.

Held

The Tribunal held that the conversion of capital asset into stock-in-trade occurred on January 17, 2008, when the JDA was executed. Therefore, any capital gains arising from this conversion should be taxed in the year of conversion. The subsequent sale of stock-in-trade (constructed area) would be treated as business income in the year of sale. The Tribunal also ruled that the assessment proceedings were initiated without a mandatory notice under Section 143(2) of the Income Tax Act, rendering the assessment order void ab initio. The AO's reliance on the occupancy certificate for taxation in AY 2017-18 was deemed incorrect.

Key Issues

1. Whether the income arising from the conversion of capital asset into stock-in-trade is taxable in the year of conversion or the year of sale. 2. Whether the assessment order passed without issuing a mandatory notice under Section 143(2) of the Income Tax Act is valid.

Sections Cited

Section 45(2), Section 2(47)(iv), Section 143(2), Section 153C, Section 153B

AI-generated summary — verify with the full judgment below

Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

Orient Trading Co. Ltd. v. CIT
224 ITR 371 · 1997 · SC
14 citing

Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE

Before: SHRI CHANDRA POOJARI & SHRI SOUNDARARAJAN K.

For Respondent: Shri Kiran D., D.R

Hearing: 30.07.2024Pronounced: 16.08.2024

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

1. These appeals filed by assessee are directed against different orders of CIT(A) for the assessment year 2017-18 both have common date 30.6.2024. The issue in both these appeals is common in nature. Hence, these are clubbed together, heard together and disposed of by this common order for the sake of convenience.

2. The assessees herein also filed SP Nos.33 & 34/Bang/2024 seeking stay of outstanding disputed demand of tax. 2.1 We reproduce the common grounds of appeals, except change in futures in AY 2017-18, which are as follows:

1. The impugned order u/s 250 of the Act dated 30.6.2024 passed by the ld. CIT(A) Bangalore 15 is opposed to law, facts and circumstances of the case.

2. The Ld. CIT(A) has erred in passing the impugned Appellate order confirming the additions of alleged Business income amounting to Rs.111,53,50,377/- for the A.Y.2017-18 on the ground of alleged exchange of asset which is being exploited without appreciating the SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 3 of 93 fact that the income so confirmed is not chargeable to tax for the impugned A.Y. 2017-18 as no asset as transferred except the stock in trade transferred in pursuance of the JDA dated 08-01-2008 entered with M/S. Bridge Enterprises Ltd.

3. The ld. ClT(A) has erred in rejecting the ground adduced relating to limitation of time reckonable from the date of original search in the case of M/s. Brigade Enterprises conducted on 02-11-2017 and alleged seizure of documents on 28-12-2017 from the said premises without appreciating the admitted fact that the AO was he same to the searched case of the Brigade enterprise and the appellant as a result of which he limitation applicable to the original searched case was also applicable to the case of the appellant and the limitation was expired on 31-12-2019.

19.

However, the A.O has held that the income is chargeable to tax in respect of the Stock-in-trade in the assessment year 2017-18 on the ground of alleged exchange of asset drawing the support from the occupancy certificate dated 21.07.2016 ignoring the fact that the SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 12 of 93 building was already completed in the financial year 2015- 16 as is evident from the clearance certificate dated 11.03.2016 issued by the Department of Fire Force. It is further submitted that as per the occupancy certificate dated 21.07.2016 the application for obtaining the occupancy certificate was made on 22.01.2016 only after completion of the building as is evident from reference(1) of the occupation certificate. Therefore it is evident from the occupation certificate that the building was completed much earlier to 22.01.2016 and in any case the construction of the building was completed during the financial year 2015-16 relevant to the assessment year 2016-17 and therefore without prejudice to the above submissions, the appellant submits that the chargeability of tax would not arise for the assessment year 2017-18 as has been held by the A.O in Para 37 of the assessment order based on the occupancy certificate 21.07.2016 which was not the date of either transfer or exchange of assets. The A.O has considered the chargeability of tax arising in the scheme of JDA for the assessment year 2017-18 on wrong premises presuming the exchange of asset in the financial year 2016-17 relevant to the assessment year 2017-18. The A.O’s view as to the assessability or exigibility of tax for the assessment year 2017-18 is opposed to law, Facts and Judicial Decisions and it is only to save the limitation of time which was expired in the assessment year 2008-09 itself. The A.O in the assessment order has canvassed his arguments based upon the judgment of the Hon’ble supreme Court in the case of M/s. Orient Trading Company v/s. CIT 224 ITR 371 and also in the case of CIT v/s Mrs. Grace Collis and others (2001) 248 ITR 323 (SC). The SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 13 of 93 appellant submits that the facts and circumstances of the above cases are not identical and not squarely applicable since the facts are completely distinguishable. The decision in the above cases were rendered in the context of exchange of capital assets, being the shares surrendered in the scheme of merging process of two companies. Whereas in the case of the appellant the Non Capital Asset being Stock- in-Trade was transferred as per JDA dated 17.01.2008 as a result of which any exigibility of tax either capital gains or business income would arise in the same assessment year in which the transfer took place and such a transfer has nothing to do with the receipt of consideration in the subsequent years, since the business income is assessable on accrual basis and not on the basis of receipt of consideration either by cash or in-kind.

5.3 The ld. A.R. submitted that the Ld. CIT(A) for the reasons stated in Para 32 to 36 has held the Year of Chargeability arose in the A.Y. 2017-18 based on the decision of the Honourable Supreme Court in the case of M/s. Orient Trading Co. Ltd., Vs. CIT - 224 ITR 371 (SC) without appreciating the fact that the said decision was distinguishable and not applicable to the facts and circumstances of the case of the Assessee. Further the Ld. CIT(A) in Para 36 has held that the asset transferred was Stock in Trade and in exchange received the Builtup area and the same was put to exploitation in SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 15 of 93 the F.Y. 2016-17 relevant to the A.Y.2017-18 as per the Occupation Certificate/Completion Certificate. 5.4 He submitted that the Ld. CIT(A) was not justified to hold that the income arising out of the deemed transfer of land was assessable for the A.Y. 2017-18 without appreciating the fact that the deemed transfer of land took place in pursuance of JDA dated 17-01-2008 relevant to the A.Y. 2008-09. The Ld. CIT(A) has not appreciated the citations relied upon by the assessee in the following cases: a) CIT vs. Dr. T.K. Dayalu - (202 taxman 531) (Karn.) Judgement of Jurisdictional High Court of Karnataka . b) CIT vs. Chaturbhuj Dwarkadas Kapadia - 260 ITR 491 (HC Bombay) c) Advance Ruling in the case of Jasbir Singh Sarkaria (294 ITR 196) (AAR) New Delhi. 5.5 He submitted that on Parity of reasoning mentioned in the above cases, the transfer of land arose in pursuance of JDA dated 17-01-2008 relevant to the A.Y. 2008-09 and not in the A.Y. 2017- 18. In this regard the Ld. CIT(A) was of the opinion that the above decisions were rendered u/s 45(1) of the Act and not u/s 45(2) of the Act. The reliance placed by the Ld. CIT(A) on Occupation Certificate/Completion certificate said to have been obtained in the F.Y. 2016-17 has no relevance to the facts and circumstances of the case since the phrases “Completion Certificate and Occupation Certificate” were envisaged under the newly amended provision of Section 45(A ) applicable for the A.Y. 2017-18 onwards in respect of the JDA executed on or after the F.Y. 2016-17 and more so the said provision is applicable only to the individuals and HUFs and not to the Firms. The assessee being a Firm provision of Section 45(A) in relation to Occupation Certificate/CC is not applicable and hence the findings of the Ld. CIT(A) are liable to be reversed. The SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 16 of 93 assessee submitted here with a copy of the JDA dated 17-01-2008 and the same placed as Annexure – A for our reference.

6.1 The ld. D.R. submitted that in Dheeraj Amin case (Supra), the appellant only received rights to sell the properties and not physical possession of the property. However, in the case on hand the appellant had exercised his rights over the impugned property when he received possession of the property during the impugned assessment year along with the occupancy certificate/CC and let the property out on rent in the same assessment year earning rental income. In this case what the appellant has got is not the right to sell his portion of the constructed area but rather full possession of the development plot in the form of commercial property and has also put it to use. 6.2 Further, he submitted that the ITAT in the very same order has also discussed the modality for calculating business profits and the same is reproduced here under for our reference: “The business transaction entered into assessee, in our humble understanding, is this. The assessee has contributed a trade asset SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 17 of 93 consisting of a piece of land, admeasuring 1 acre and 96.22 cents, on which a group housing project by the name of Alexandria was to be constructed, and what he got in consideration of this transfer is the Tight to sell 1,28,940.26 sq. ft. constructed area in this project. In his closing stock, even if he is to substitute the part ownership of the land transferred with the value of this right to sell 1,28,940.26 square feet constructed area, it would not make any difference to the profit figures because, as far as this assessee is concerned the cost of acquiring this right is the same as the cost of giving up the right in the hand, and, as is the settled legal position, the closing stock can only be valued at cost price or market price—whichever is less. Obviously, the cost price of this right to sell 1,28,940.26 sq.ft, which has been treated as a trading asset, is less than the market price of these rights, and, therefore, these rights can only be valued at cost in the accounts”

Date of execution of the JDA must be taken as the date of transfer 7.5 The Hon’ble Bombay High Court in Chaturbhuj Dwarakadas Kapadia of Bombay (2003) 260 ITR 491 dealt with an issue as to whether the transfer of an immovable property took place on the date of execution of the JDA or in the year in which substantial compliances were carried by the developer as per the JDA. In the present case, the assessee entered into a JDA with a developer on SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 21 of 93 18 August 1994 and executed a limited power of attorney in favour of the developer on the same day. The developer had made substantial payments and obtained two permissions for the construction in AY 1996-97. Subsequently, the assessee executed an irrevocable license in favour of the developer on 12 March 1999 to enter the property. The assessee contented before the lower authorities that the transfer took place only when he executed the irrevocable licence in favour of the developer to enter upon the property and, therefore, liability to pay capital gain only arose during the AY 1999-2000. However, the Tribunal held that since substantial payments and permissions were obtained in AY 1996- 97, the capital gains is taxable in AY 1996-97. The High Court observed that in the instant case, the agreement was a Development Agreement and the test to be applied to decide the year of chargeability was the year in which the transaction had been entered into. This view was taken for the reason that the Development Agreement does not transfer the interest in the property to the developer in general law and, therefore, by application of Section 2(47)(v), even entering into such a contract could amount to transfer from the date of the agreement itself. The Court further observed that substantial compliance would differ from officer to officer and therefore, it cannot be taken as reason to decide the year of taxability. The Court held that once under the agreement a limited power of attorney was intended to be given to the developer to deal with the property, the date of the contract/JDA viz., 18 August 1994 would be the relevant date to decide the date of transfer under Section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter did not arise.

SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 22 of 93 7.6 The Bangalore ITAT in a recent decision of Jaico Automobile Engineering Company Pvt. Ltd. v. ITO (192 ITD 147) also dealt with a similar issue. In the case of Jaico Automobile Engineering Company Pvt. Ltd the assessee had executed a JDA, General Power of Attorney (‘GPA’) and sale agreement with a developer on 30 March 2007. All the three documents were registered. As per the JDA, it was agreed between the parties that possession would be given to the developer in pursuance of the agreement on or before 30 November 2007. The reason for fixing the date was on the basis of payment of refundable deposit of INR 35 crores. The developer had paid INR 15 crores while the agreement was executed, and the balance was required to be paid on or before 30 November 2007. The question before the ITAT was to decide whether there was a valid transfer of property on the date of executing the JDA. The assessee contended that since it was specifically agreed between the parties that possession would be handed over only on 30 November 2007 or earlier if the balance of the refundable deposit was made, there was no transfer of possession contemplated on or before 30 March 2007. The assessee further contended that the developer had not carried out any construction activity during the said period and therefore, there was no performance of the contract by way of development of the property during the relevant year. Therefore, the assessee took a stand that there was no transfer of property to the developer in AY 2007-08 as the conditions stipulated under Section 53A of TOPA were not satisfied. On the other hand, the Department contended that by virtue of the JDA, the assessee granted the developer the right of development of the site and that such right was irrevocable. Since, the assessee had also executed an irrevocable GPA in favour of the developer to develop, alienate, sale, convey and lease the constructed area, there was a valid transfer as per Section 2(47)(v) of the IT Act in AY 2007-08. The ITAT observed SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 23 of 93 that from a perusal of the contents of the JDA and GPA dated 30 March 2007, it can be inferred that the assessee had provided to the developer all facilities to entry, development and even sale of the constructed built-up area. Therefore, such unhindered access provided to the developer is very much in the nature of possession even if the word as such has not been mentioned in the JDA. The ITAT further observed that the GPA also gives irrevocable powers of not only possession but, even to alienate and sell the constructed area. Therefore, the ITAT held that the transactions entered by way of JDA dated 30 March 2007 would constitute a ‘transfer’ in terms of Section 2(47) of the IT Act r.w. Section 53A of TOPA and therefore, the capital gains arising out of the said transfer is taxable in AY 2007-08.

SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 24 of 93 However, there was a contrary judgement wherein held that date of execution of the JDA cannot be taken as the date of transfer 7.8 The Hyderabad ITAT in S. Ranjith Reddy v. DCIT (144 ITD 461) (Hyd) dealt with an issue as to whether mere execution of a JDA without commencement of construction be held as transfer as per Section 2(47)(v) of the IT Act. The Assessee had entered into a JDA with a developer on 28 February 2006. During the relevant year, the developer had not started the construction of the project. The ITAT observed that usually in cases where an assessee enters into a contract which is a development agreement, in the garb of agreement of sale, it is the date of the development agreement which is material to decide the date of transfer. However, it was further observed that by no stretch of logic, this legal precedent can support the proposition that all development agreements, in all situations, satisfy the conditions of Section 53A which is a sine qua non for invoking Section 2(47)(v). The ITAT observed that a plain reading of the Section 53A shows that for a contract to fall under the ambit of Section 53A, it is necessary that transferee should have or is willing to perform his part of the contract. Therefore, it is clear that willingness to perform for the purposes of Section 53A is something more than a statement of intent and it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Thus, unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of Section 53A will come into play on the facts of that case. It was observed that it is only elementary that, unless provisions of Section 53A of TOPA are satisfied on the facts of a case, the transaction in question cannot fall within the scope of SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 25 of 93 deemed transfer under section 2(47)(v). In light of the abovementioned observations, it was held that once it is concluded that the developer did not perform the stipulations as required by the JDA during the period under consideration and within the meaning assigned to the expression in Section 53A, it cannot be said that there was a transfer under section 2(47)(v) so as to levy capital gain tax on the date of execution of the JDA.

Page No 117 Joint Development Agreement between to 160 Nalapad Hotels and Convention Centre and Brigade Enterprises Ltd. Dated 17.1.2008 Page No 169 General Power of Attorney dated to 173 17.01.2008 SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 30 of 93 Page No 174 Supplementary Agreement between to 179 Nalapad Hotels and Convention Centre and Brigade Enterprises Ltd. Dated 5.7.2012 Page No 180 General Power of Attorney dated 08.05.2006 7.21 Now we examine the provisions of section 53A of the Act. The starting words of section 53A are “where a person contracts”, which means just the existence of the contract. The assessee is a “person” who has entered into a contract with the developer viz., on 17-01-2008 This section says "to transfer" means the said contract is in respect of a transfer and not for any other purpose. The term "transfer" is to be read along with the s. 45 and s. 2(47)(v) of IT Act. It is pertinent to clarify that one must not mistake to identify the issue of capital gain with the term "transfer" as defined in s. 54 of Transfer of Property act. At the cost of elaboration, we may like to add that in the past there was a long line of pronouncements; while deciding income tax cases, that unless and until a sale deed is executed and that too it is registered, transfer cannot be said to have been effected. The consequence of said catena of decisions was that no capital gain tax was directed to be levied so long as "transfer" took place as per the generally accepted connotation of the term under Transfer of Property Act. The resultant position was that the levy of capital gain tax thus resulted in major amendments in the income-tax statute. The main objective of those amendments was to enact that for the purposes of capital gains, the transaction involving transfer of the nature referred are not required to be registered under Registration Act. Such arrangement does not include transfer of certain rights vesting to a purchaser; however, such "transfer" does confer certain privileges of constructive ownership with connected bundle SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 31 of 93 of rights. Indeed, it is a departure from the commonly understood meaning of the definition "transfer" while interpreting this term for tax purpose. On the facts of this case, the developer has got bundle of rights and thereupon entered into the property. Thereafter, we have to see what has happened and what steps the transferee has taken to discharge the obligation on his part. If transferee has taken any steps to construct the flats, undisputedly then, under the provision of Income Tax Act a "transfer" has definitely taken place.

7.28 It is abundantly clear therefore that, the rights of possession have been alienated to M/s. Brigade Enterprises Ltd. in letter and spirit. The contentions of the assessee in this regard are therefore to be accepted with regard to transfer of possession vide JDA dated 17-01-2008 by converting capital asset into stock in trade. Apart from disputing the year of taxability in respect of the impugned transaction, it is not the revenue’s case that the JDA dated 17.1.2008 with M/s. Brigade Enterprises Ltd. were not enforced or continued in the subsequent years. It is also not the case of the revenue that the above agreements were either cancelled. The AO in this regard has accepted in his order that the JDA dated 17.1.2008 remained in force and was not cancelled. Therefore, the transaction of sale / JDA with M/s. Brigade Enterprises Ltd. is remained intact and the income accrued from this impugned transaction to be taxed in the AY 2008-2009 only. In these facts & circumstances the agreement between the assessee and M/s. Brigade Enterprises Ltd. remaining effective, the transactions entered by way of the JDA dated 17.1.2008 would undisputably constitute a "transfer" in terms of the section 2(47) of the I.T. Act r.w.s. 53A of the T.P. Act, 1982 and the income accrued from this impugned transaction to be taxed in the AY 2008-09 only and not in AY 2017-18. In our opinion, had it been considered as a transfer of capital asset in terms of section 2(47)(v) of the Act, then there is a transfer of capital asset in AY 2008-09 and not in AY 2017-18 as held by lower authorities. However, in the present case, it is not a SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 49 of 93 case of transfer u/s 2(47)(v) of the Act since there was conversion of capital asset into stock in trade by assessee vide entering into JDA on 17.1.2008 and there is no dispute regarding these facts and both the parties are admitted that there was a conversion of capital asset into stock in trade vide JDA dated 17.1.2008. This also confirmed by Shri N.A. Haris, Managing Director of the firm in his statement recorded u/s 131 of the Act and he also confirmed that the purpose of floating the firm is for real estate and development business and as per balance sheet for financial year 2006-07, the land was revalued at Rs.1,45,44,590/-. Hence. there is no dispute between the assessee and department to the fact that the assessee has converted the capital asset into stock in trade vide entering into JDA dated 17.1.2008 with developers M/s. Brigade Enterprises Ltd. for development. It is also brought on record by ld. AO in his order that land has been shown by assessee as stock in trade subsequent to entering into JDA which is evident from the para 21 to 23 page nos.8 to 12 of the assessment order dated 12.7.2021 which is reproduced herein below:

7.36 In the present case, since there is no dispute that capital asset has been converted into stock in trade on the date of entering into JDA i.e. 7.1.2008 relevant to AY 2008-09, and capital gain accrued on such conversion of capital asset into stock in trade, to be computed with the fair market value as on date of conversion of the land being treated as full value of consideration. Thus, the deemed capital gain on said conversion of capital asset, to be taxed on the actual sale of said converted asset along with the assessee share of constructed area. However, the ld. AO assessed the entire value of constructed area after deducting the cost of the land as business income in assessment year 2017-18 on the ground that the developer has got the O.C./CC on 21.7.2016 which is not correct. At this point, we place reliance on the judgement coordinate bench of Madras in the case of M/s. Essrope Mills ltd. in dated 11.7.2013, wherein held that the gain on transfer of capital asset up to the date of conversion in to stock has to be assessed under the head capital gain and the gain in respect of property i.e. after the date of conversion into stock in trade has to be assessed as business income. As assessing officer computed the entire sale consideration under the head long term capital gain, he did not apply the provisions of section 45(2) of the Act. Therefore, the ld. AO should compute the business income in respect of stock in trade of the property i.e. the sale of stock in trade, taking into consideration section 45(2) of the Act in the year of sale of stock in trade and not in the assessment year 2017-18 since there was no sale of constructed area of assessee’s share. There was no provision in the Act which deals with the SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 57 of 93 determination of business income or capital gain on conversion of investment into stock in trade which is later on sold as business income of the assessee in whole without following the provisions of section 45(2) of the Act. In our opinion, the assessee income has to be computed u/s 45(2) of the Act when the stock in trade has been actually sold by the assessee and not in the assessment year when the developer has got the OC/CC from the BBMP. At this time it is appropriate to take support from the judgement of Kolkata High Court in the case of CIT Vs. Dhanuka & Sons 124 ITR 1, where it has been held that profit & gains arising from shares transferred from trading account to investment account at prevailing market rate is not a transaction at all because a person have a transaction with himself and in turn such profit cannot be taxed. If such shares can be disposed at a value other than the value at which it was transferred from the business stock the question of capital loss or capital gain would arise. Being so, in the present case, on applying the section 45(2) of the Act the income to be charged to tax in the year of sale of stock in trade as follows:

“10.Satisfaction Note: The A.O in Para 8 of the assessment order held that upon centralisation of the case in connection with the searched case of M/S. Brigade Enterprises Ltd, has stated to have drawn a satisfaction note and consequently a notice U/S 153C of the Act was issued on 24.03.2020 requiring the assessee to file the return of income within 30 days for impugned Assessment year 2017-18. In this regards the appellant submit that the date of drawing satisfaction note was not mentioned in the assessment order to by-pass the limitation prescribed u/s 153B of the Act. The A.O in Para 7 of the SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 59 of 93 assessment order has held that he was the A.O of M/S. Brigade Enterprises Ltd and in the course of Examination of the documents relating to the searched assessee M/S. Brigade Enterprises Ltd that he was satisfied as regards the determination of income in the assessment to be made u/s 153C of the Act in the case of the appellant. In this regards the appellant submit that the Jurisdictional A.O or the A.O to whom the case was notified (Central Circle 2(3)) have not mentioned the date of drawing of the satisfaction note in the context of the limitation of time as prescribed U/s 153B of the Act. The Impugned assessment order is barred by limitation of time as provided u/s 153B of the Act, according to which the A.O having jurisdiction over the case is required to complete the assessment u/s 153C within 12 Months from the end of the financial year in which the records and seized documents are handed over to him. The search U/s 132 of the Act was admittedly completed on 28.11.2017 in the case of M/S. Brigade Enterprises Ltd and the said case was notified to the A.O and Central Circle 2(3). The case of the appellant was also notified to the same A.O U/s 127 vide notification bearing F.No.29/Centralisation/PCIT-5/2018-19 dated 17.07.2018.The appellant submits that after the notification of the case, the A.O has initiated assessment proceeding by issue of a notice u/s. 143(2) of the Act dated 24.09.2018 followed by notice u/s. 142(1) of the Act dated 28.01.2019, 28.01.2019, 01.03.2019, 04.04.2019 and 06.05.2019. The appellant submits herewith the notices cited above and marked as Annexure A,B,C,D,E and F and the issue of above said notices is evident from the A.Os letter bearing F.No.AAEFN5563D/DCIT-CC-2(3)-2017-18 dated 04.06.2019. In this regards the appellant submits that the A.O has initiated assessment proceedings by issue of an initial notice u/s 143(2) of the Act dated 24.09.2018 only after taking over the seized documents between the date of notification i.e 17.07.2018 and 24.09.2018 being the date of issue of 143(2) notice. 11.The appellant further submits that it is evident from the notice u/s 142(1) dated 08.01.2019 and 28.01.2019 and 01.03.2019 that the assessment proceedings initiated in the case of the appellant were related to a search conducted u/s 132 of the Act in the case of M/S. Brigade Enterprises Ltd. The records were obviously were handed over to the A.O central Circle 2(3) on or before 24.09.2019 being the date on which a notice u/s 143(2) was issued followed by subsequent notices issued u/s 142(1) of the Act periodically. In view of the notice u/s 143(2) of the Act dated 24.09.2019 it is evident from the records that the case was transferred in the month of July 2018 as per notification dated 17.07.2018 and thereafter, the relevant records and the alleged documents found in the course of search conducted on 02.11.2017 and 28.12.2017 in the case of M/S. Brigade Enterprises Ltd were forwarded to the A.O and based upon such documents the A.O had issued a notice u/s 143(2) of the Act dated 24.02.2019 and SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 60 of 93 accordingly the limitation of time is reckonable from the end of the financial year 31.03.2019 and the assessment as per limitation of time prescribed u/s 153B of the Act ought to have been completed on or before 31.03.2020, whereas the impugned assessment was completed on 12.07.2021 after lapse of 1 year 3 Months. It is further submitted that the AO in para 8 of the Assessment Order has held that a Satisfaction Note was recorded and Notice u/s. 153C of the Act was issued on 24-03-2020. In this regard it can be seen from para 8 of the Assessment Order that the AO has not mentioned the date on which the alleged Satisfaction was recorded and therefore the impugned Notice u/s. 153C stated to have been issued on 24-03-2020 was invalid, improper and illegal since the assessment proceedings were already initiated by issue of Notice u/s. 143(2) of the Act dtd: 24-09- 2018 followed by five 142(1) Notices issued later. In this context it is submitted that the assessment proceedings consequent upon the search were already initiated as admitted in the 142(1) Notices dtd: 08-01-2019, 28-01-2019 and 01-03-2019 and therefore the contention of the AO that a Notice u/s. 153C was issued on 24-03-2020 after recording the alleged satisfaction Notice is factually incorrect. The AO’s contention that a Notice u/s. 153C issued on 24-03-2020 is a misleading factor. The AO is aware that the Assessment Proceedings were already initiated and relevant notices u/s. 143(2) and 142(1) were already issued and the assessment proceedings were in progress and therefore it is not justifiable for the AO to say that a Notice u/s. 153C dtd: 24-03-2020 was issued. The AO even though aware that the Assessment proceedings were in-progress he has made an attempt to get the benefit of time extended to a future date since the limitation of time was already barred as on 24-03-2020 and hence the AO’s contention as to the issue of 153C Notice on 24-03-2020 is opposed to the law and facts of the case as a result of which the assessment completed u/s 153C r.w.s 144 dated 12.07.2021 is ab-intio void and liable to be annulled/cancelled in view of limitation of time as envisaged u/s. 153B of the Act.

8.2 He submitted that the Ld. CIT(A) has not considered the above judicial decisions. However he has relied upon the decision of SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 62 of 93 the Honourable Madras High Court in the case of B. Kubendran vs. DCIT in WP No.3023 of 2020 dated 09-04-2021 in which the decision of the Honourable Delhi High Court in the case of Ashok Chaddha was relied wherein it held that the Notice u/s 143(2) of the Act was not mandatory in 153A cases. The Ld. CIT(A) in Para 17 on page 47 and 48 held that the ROI filed on 27-02-2021 was not E-verified till 27-06-2021 (within 120 days) and the assessment order was passed on 12-07-2021 which was beyond 120 days and therefore the contention of the assessee as to the non-issue of Defective Notice does not survive. In this regard he submitted that the ITAT Bangalore Bench in the case of Electronics and Controls Power vs. DCIT in dated 03-11-2017 has held that the Department was not permitted to treat the returned filed Electronically as invalid in the absence of E- verification and further the Honourable Supreme Court in the case of Mangalam Publications vs. CIT (SC) 461 ITR 159 (2024) wherein it was held that the ROI filed by assessee was accepted by AO and no Defective Notice was issued and therefore it cannot be said that the non E-verification of the ROI can be construed as a ground for holding the ROI as Defective without communicating to the assessee the nature of Defectiveness. In the case of the assessee it is an undisputed fact that the AO has not issued any Defective Notice and therefore the non-issue of Notice u/s 143(2) of the Act rendered the assessment ab-initio-void. The Ld. CIT(A) has arbitrarily held that issuance of Notice u/s 143(2) is not mandatory in 153A/C cases and there was no violation of Principles of Natural Justice. The findings of the Ld. CIT(A) are clearly opposed to the Judicial decisions cited above. 8.3 He further submitted that the Honourable High Court of Madras in the case of Sri. B. Kubendran (Supra) has held that Department had only 3 days’ time to complete the assessment from SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 63 of 93 the date of filing the ROI and therefore came to the conclusion that issue of Notice u/s 143(2) was not required. However in the case of the assessee ROI was filed on 26-03-2021 and the assessment was completed on 12-07-2021 and therefore the AO had sufficient time of more than four months and the decision of the Honourable Madras High Court contrary to the decision of the Honourable Supreme Court in the case of Hotel Blue Moon and Laxmandas Khandelwal (Supra), as a result of which the findings of the Ld. CIT(A) are to be reversed. Further the assessee submits that the ITAT Bangalore Bench in the case of Bangalore Narayan Das vs. ITO in and 121/Bang/2020 dated 17-03-2023 held that the issue of Notice u/s 143(2) of the Act was mandatory as per the decisions of the Honourable Supreme Court in the case of Hotel Blue Moon and Laxmandas Khandelwal (Supra). In view of the above judicial decisions he submitted that it is a trite Law that the AO was bound to issue a Notice u/s 143(2) of the Act before completion of the assessment. 8.4 Limitation of Time : The ld. A.R. submitted that the Ld. AO has not considered the Legal submissions of the assessee. It is an undisputed fact that a Search was conducted in the case of M/s. Brigade Enterprises on 02-11-2017 and finally concluded on 28- 12-2017 and the JDA, GPA, Supplementary Agreement were stated to have been impounded and held that the said documents were relevant for determination of income in the case of the assessee in view of Section 153C of the Act. The AO in Para 8 of the Assessment order has held that the case of the assessee was centralised and notified to him vide Notification bearing F No.29/Centralisation/PCIT-5/2018-19 dated 17-07-2018. However, the Ld. AO in Para 5 of the assessment order has held that the case was Notified on 18-11-2019 vide Notification bearing F No.29/Centralisation/PCIT-5/2019-20 which is nothing but a SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 64 of 93 Corrigendum to the earlier Notification dated 17-02-2018. Therefore, he submitted that the AO was not justified to say that the Notification was issued on 18-11-2019 even though the case was Notified as per Notification dated 17-02-2018. Thereafter the predecessors of AO already aware of the Search in the case of M/s. Brigade Enterprises Ltd and accordingly a Notice u/s 143(2) of the Act was issued 24-09-2018 on original return within Seven months from the date of original Notification dated 17-07-2018 and therefore the AO was not justified to say that the case was Notified on 18-11-2019. Later the predecessors of the AO has also issued series of Notices u/s 142(1) periodically commencing from the first Notice dated 08-01-2019 in which he has sought for the production of impounded documents such as JDA along with other relevant documents on the ground that it was a search related case. Thus it is evident from records that the information about the search was available in the year 2018-19 itself and therefore the Limitation of Time is reckonable from the date of knowledge i.e. from the date of search being 02-11-2017 concluded on 28-12-2017 followed by a specific Notification dated 17-02-2018. He submitted that the AO was not only aware of the Search and also the consequences u/s 153C of the Act in the case of the assessee on the date of Search being 02-11-2017 but more clearly it was within his knowledge in view of the Centralised Notification cited above. Therefore the Limitation of Time commences from the date of Search i.e. 02-11- 2017 and barred by Limitation on 31-12-2019 in the case of the Searched assessee and same Limitation of Time is also applicable in the case of the assessee and therefore the Notice issued u/s 153C of the Act dated 24-03-2020 was clearly barred by Limitation of Time. The AO in Para 7 and 8 of the assessment order has stated that he happened to be the same AO for the Searched case M/s. Brigade Enterprises Ltd., and the assessee and therefore he was SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 65 of 93 satisfied that the documents pertained to M/s. Nalapad Hotels and Convention Centre and information contained therein relates to and have a bearing and total income of the assessee and accordingly a Satisfaction Note was recorded in the case of the assessee and Notice u/s 153C of the Act was issued on 24-03-2020 directing the assessee to file the ROI within 30 days from the date of receipt of the said Notice. In this regard the ld. A.R. reproduced Para 7 and 8 of the Assessment order as under: “7. Hence, the assessing officer of M/s. Brigade Enterprises Ltd who happens to be the undersigned is satisfied that these documents pertain to M/s Nalpad Hotels & Convention Centre and information contains therein relate to the assessee firm and have a bearing on the total income of M/s Nalpad Hotels & Convention Centre. After examining the seized material, the undersigned who is also the assessing officer of M/s Nalpad Hotels & Convention Centre is satisfied that documents pertain to M/s Nalpad Hotels & Convention Centre and information contained therein relates to and have a bearing on the total income of M/s Nalpad Hotels & Convention Centre.

We agree with the observations of both the authorities that there is no 11. return of income filed pursuant to the notice issued under section 148 of the Act. In the case of Hotel Blue Moon(supra) the Hon'ble Apex Court held that section 143(2) of the Act itself becomes necessary when it becomes necessary to check the return. In the case of Oberoi Hotels (P.) Ltd (supra) the Hon'ble Calcutta High Court held that the dictum of the Hon'ble Supreme Court in the case of Hotel Blue Moon(supra) is that a notice issued under section 143(2) of the Act is mandatory if the return as filed, is not accepted and an assessment order is to be made at variance with the return filed by the assessee. It, therefore, goes without saying that non-issuance of notice under section 143(2) of the Act vitiates the proceedings if the assessee filed the return of income, such a return as filed was not acceptable to the AO and the assessment has to be made at variance with the return filed by the assessee. If no return of income is filed by the assessee, such allegation does not arise. We have gone through the various decisions relied upon by the assessee 12. and in all the cases invariably within the time stipulated in the notice issued under section 148 of the Act, either the assessee or the authorized representative either filed the return of income or submitted that the original return of income may be treated as the return of income filed pursuant to the notice under section 148 of the Act. Here in this case no return of income was filed within the time, and no return of income was filed till the commencement of hearing. It was only when the proceedings are going on, that too without obtaining the permission of the AO, the return was filed online and on the next day the AO was informed of such online filing. For these reasons, we brush aside the contention of the assessee that for 13. want of issuance of notice under section 143(2) of the Act, the assessment is bad under law. Next contention of the assessee is that assessment is bad for want of sanction of the learned PCIT before issuance of notice under section 148 of the Act.”

Hon’ble High Court while deciding the above questions of law has observed as under:- ''Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(2) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act." 10.10 Further, a reference can be made to the following decisions of Co-ordinate Benches of the Bangalore ITAT, wherein after following the mandate of Hon’ble Apex Court in the case of Hotel Blue Moon reported in 321 ITR 362(SC) the Bangalore Benches have held that issuance of notice under section 143(2) of SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 75 of 93 the Act, is a condition precedent for framing an assessment/ reassessment. i) Shri Banglore Narayan Das in &121/Bang/2022 order dated 17.03.2023 ii) Smt Arwa Harawala in order dated 20.12.2021 10.11 In all above decisions the courts have unanimously held that issuance and service of notice under section 143(2) of the Act after the filing of the ROI is sine qua-non for framing the assessment. Therefore, following the view of Hon’ble Patna High court, the Co-ordinate Benches of the Tribunal and of the Hon’ble Apex Court in the case of Hotel Blue Moon (Supra) we hold that the AO has erred in framing the assessments without issuing any notice under section 143(2) and hence the present orders are void- ab-initio.

10.12 Further, Co-ordinate Bench, Bangalore in the case of Electronics and Controls Power vs. DCIT in dated 03-11-2017 has held that the Department was not permitted to treat the returned filed Electronically as invalid in the absence of E-verification and further the Honourable Supreme Court in the case of Mangalam Publications vs. CIT (SC) 461 ITR 159 (2024) wherein it was held that the ROI filed by assessee was accepted by AO and no Defective Notice was issued and therefore it cannot be said that the non E-verification of the ROI can be construed as a ground for holding the ROI as Defective without communicating to the assessee the nature of Defectiveness. In the case of the assessee it is an undisputed fact that the AO has not issued any Defective Notice and therefore the non-issue of Notice u/s 143(2) of the Act rendered the assessment ab-initio-void. The Ld. CIT(A) has arbitrarily held that issuance of Notice u/s 143(2) is not mandatory in 153A/C cases and there was no violation of Principles of Natural Justice. The findings of SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 76 of 93 the Ld. CIT(A) are clearly opposed to the Judicial decisions cited above. 10.13 Madras high Court in the case of Sri. B. Kubendran (Supra) has held that Department had only 3 days time to complete the assessment from the date of filing the ROI and therefore came to the conclusion that issue of Notice u/s 143(2) was not required. However in the case of the assessee ROI was filed on 26-03-2021 and the assessment was completed on 12-07-2021 and therefore the AO had sufficient time of more than four months and the decision of the Honourable Madras High Court contrary to the decision of the Honourable Supreme Court in the case of Hotel Blue Moon and Laxmandas Khandelwal (Supra), as a result of which the findings of the Ld. CIT(A) are to be reversed. Further the assessee submits that the ITAT Bangalore Bench in the case of Bangalore Narayan Das vs. ITO in and 121/Bang/2020 dated 17-03-2023 held that the issue of Notice u/s 143(2) of the Act was mandatory as per the decisions of the Honourable Supreme Court in the case of Hotel Blue Moon and Laxmandas Khandelwal (Supra). In view of the above judicial decisions he submitted that it is a trite Law that the AO was bound to issue a Notice u/s 143(2) of the Act before completion of the assessment. 10.14 In view of the above position of facts and law, we are of the view that the reassessments (for both years in appeal before us) framed in the present case without issuance of notice under section 143(2) of the Act is bad in law and void ab-initio.

SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 77 of 93 11. We have heard the rival submissions and perused the materials available on record. In this case, satisfaction note has been recorded u/s 153C of the Act on 24.3.2020. It was also noted by the ld. AO that seized material pertain to assessee seized during the course of search of M/s. Brigade Enterprises Ltd. were handed over by the jurisdictional AO of M/s. Brigade Enterprises, which is unsigned to the ld. AO of the assessee vide satisfaction note dated 24.3.2020. Thereafter, he said to be issued a notice u/s 153C of the Act to the assessee on the same day. 11.1 Thereafter, the show cause notice was issued to the assessee on 6.10.2020 asking it to file the submissions as per the notice issued. The assessee filed letter for adjournment for 3 weeks stating Covid-19 as reason, the same was granted to the assessee by ld. AO. Again a letter was issued to the assessee to submit the details called for on 10.1.2020. But again the Managing Director of the assessee firm submitted letter stating that he has infected with the Covid-19 and he has hospitalized and also advised to be self- quarantined for 3 weeks. The same was granted by ld. AO. Again a letter dated 28.12.2020 was issued asking the assessee to submit the details called for. Thereafter, a show cause notice dated 19.1.22021 was issued to the assessee to file a return and to submit the details called for. Again the assessee failed to comply to the show cause notice. However, assessee filed the return of income in response to notice u/s 153C of the Act on 26.2.2021. However, it was observed by ld. AO that said return was not e- verified. In this regard, the ld. A.R. submitted that ld. AO initiated assessment proceedings by issue of an initial notice u/s 143(2) of the Act only after taking over the seized documents between date of notification u/s 127 of the Act bearing F.No.29/Centralisation/PCIT-5/2018-19 being the date of issue of notice u/s 143(2) of the Act. The copy is reproduced herein below:

12.

We have heard both the parties and perused the materials available on record. First of all, we will deal with whether assessment completed u/s 153C of the Act is valid without issuing notice u/s 143(2) of the Act after recording satisfaction u/s 153C of the Act, though the said notice u/s 143(2) of the Act was issued before recording satisfaction u/s 153C of the Act on 24.9.2018. 12.1 It is to be noted that originally, the assessee was assessed by ITO Ward 5(2)(4) Bangalore. It is only by way of notification dated 17.7.2018 r.w. notification dated 19.11.2019 u/s 127 of the Act that the powers were transferred from ITO Ward 5(2)(4) to ACIT Central Circle 2(3), Bangalore. Further, it is noted that the ld. ACIT Central Circle 2(3) has issued notice u/s 143(2) of the Act on 24.9.2018 for AY 2017-18 followed by notice u/s 142(1) of the Act dated 28.1.2019, 1.3.2019, 4.4.2019 and 6.5.2019. Subsequently, assessee was issued notice u/s 153C of the Act dated 24.3.2020 consequent to recording of satisfaction u/s 153C of the Act on the even date. Particulars Date 1. Notification issued u/s 127 17.7.2018 wherein centralization of assessee has been done 2. Notice issued u/s 143(2) of the Act 24.09.2018 3. Satisfaction recorded on 24.03.2020 4. Notice issued u/s 153C of the Act 24.03.2020 SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 82 of 93 12.2 From the above table, it is clear that notice u/s 143(2) of the Act has been issued by the ACIT, Central Circle-2(3), Bangalore after the case of assessee was centralized post search that took place in the place of M/s. Brigade Enterprises. The same is very clear from the satisfaction note recorded by the ld. AO, which is much after the date of issuance of notice u/s 143(2) of the Act. It is also noted that the assessment order was completed by the ld. AO u/s 153C r.w.s. 144 of the Act on 12.7.2021. It is implicit that the Central Circle who passed the assessment order u/s 153C of the Act assume jurisdiction only upon transfer of case from ITO Ward 5(2)(4) Bangalore vide order dated 17.7.2018. Thus, it was a necessity that before issuance of notice u/s 143(2) of the Act, ld. AO should have recorded the satisfaction for initiating proceedings u/s 153C of the Act. It is not happened in the present facts of the case. Hence, on this count also the assessment order is bad in law and to be quashed. Accordingly, we quash the impugned assessment orders.

Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or nine months from the end of the financial year in which books of account or documents or assets seized SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 83 of 93 or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided further that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2018,— (i)the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted; (ii)the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of eighteen months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided also that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on or after the 1st day of April, 2019,— (i)the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted; (ii)the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of twelve months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided also that in case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed and during the course of the proceedings for the assessment or reassessment of total income, a reference under sub-section (1) of section 92CA is made, the period available for making an order of assessment or reassessment shall be extended by twelve months: Provided also that in case where during the course of the proceedings for the assessment or reassessment of total income in case of other person referred to in section 153C, a reference under sub-section (1) of section 92CA is made, the period available for making an order of assessment or reassessment in case of such other person shall be extended by twelve months: The authorisation referred to in clause (a) and clause (b) of sub-section (1) shall be deemed to have been executed,— (a)in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; or SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 84 of 93 (b)in the case of requisition under section 132A, on the actual receipt of the books of account or other documents or assets by the Authorised Officer. (3)The provisions of this section, as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment or reassessment made before the 1st day of June, 2016: Explanation.—In computing the period of limitation under this section— (i)the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii)the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and— (a)ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section; or (b)where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or (iii)the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer; or (iv)the time taken in re-opening the whole or any part of the proceeding or in giving an opportunity to the assessee of being re-heard under the proviso to section 129; or (v)in a case where an application made before the Income-tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application is made before the Settlement Commission under section 245C and ending with the date on which the order under sub-section (1) of section 245D is received by the Principal Commissioner or Commissioner under sub-section (2) of that section; or (vi)the period commencing from the date on which an application is made before the Authority for Advance Rulings [or before the Board for Advance Rulings] under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Principal Commissioner or Commissioner under sub-section (3) of section 245R; or (vii)the period commencing from the date on which an application is made before the Authority for Advance Rulings [or before the Board for Advance Rulings] under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under sub-section (7) of section 245R; or (viii)the period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in sub-section (2) of section 153A, till the date of the receipt of the order setting aside the order of such annulment, by the Principal Commissioner or Commissioner; or SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 85 of 93 (ix)the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or (x)the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner or Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the Assessing Officer. Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this sub-section available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly: Provided further that where the period available to the Transfer Pricing Officer is extended to sixty days in accordance with the proviso to sub-section (3A) of section 92CA and the period of limitation available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly: Provided also that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the Assessing Officer for making an order of assessment or reassessment, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year” 12.4 As per first proviso to section 153B of the Act, the time limit available to the ld. AO is 9 months from the end of the financial year in which books of accounts or documents, assets seized or requisitioned are handed over u/s 153C of the Act to the ld. AO having jurisdiction over such other person or the period mentioned in clause (a) or (b) of section 153(1) of the Act, whichever is later. In the present case, the assessment order was passed vide assessment order dated 12.7.2021 as per first proviso to section 153B(1) of the Act. The time to be reckoned from the issue of notice u/s 143(2) of the Act i.e. on 24.9.2018. The said financial year will end on 31.3.2018 and the time limit to complete the assessment should be SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 86 of 93 reckoned from the end of the financial year 31.3.2019 and the assessment as per limitation as prescribed u/s 153B of the Act to be completed on or before 31.3.2020 in the present case. However, the assessment order has been passed on 12.7.2021. The ld. D.R. pleaded before us that this was the Covid period and the extended time available to the ld. AO to pass assessment order u/s 153C of the Act. As such, the assessment order has been passed within the extended time available due to Covid period. In our opinion, this issue not required to be answered at this stage as we have already held that assessment order is bad in law in both counts i.e. (i) non issue of notice u/s 143(2) after issuing notice u/s 153C on 24.3.2020. (ii) Issue of notice u/s 143(2) of the Act on 24.9.2018 before recording satisfaction u/s 153C of the Act. In view of these facts we kept it open the time limit u/s 153B of the Act to pass the assessment order u/s 153C of the Act at this stage and the assessee is at liberty to agitate this ground at appropriate stage, if situation warrants.

SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 87 of 93 On the contrary the assessee submits that said decision was distinguishable on Law and fact of that case and therefore the said decision is not squarely applicable to the facts and circumstances of the assessee. The Ld. CIT(A) was misdirected by misleading the above decision in confirming the action of the AO as per Para 7 of the Appellate Order. 13.1 In this regard he submitted that the exchange of old company shares to new company shares has taken place in the same previous year, whereas, in the case of the assessee such an exchange did not take place simultaneously in any of the years. It is evident from the JDA dated 17-01-2008 that a portion of the land was agreed to be transferred in favour of the developer in lieu of consideration of Built up area. The JDA took place in the F.Y. 2007-08 relevant to the A.Y. 2008-09 and the receipt of Built up area took place after a lapse of nearly eight years from the date of JDA. However, the Ld. AO considering the Occupancy Certificate dated 21-07-2016 has held that the exchange of assets took place in the F.Y. 2016-17 relevant to the A.Y. 2017-18 and accordingly the arbitrary income was subjected to Tax. For the sake of clarity the assessee submits that the issues relating to the completion Certificate and Occupancy Certificate were based upon the amended provision of Section 45(5A) of the Act applicable for the A.Y. 2017-18 onwards in respect of the JDAs executed on or after the F.Y. 2016-17. However in the case of the -assessee the JDA was executed on 17-01-2008 prior to the insertion of an amended provision Section 45(5A) of the Act and more so the said provision is applicable in respect of the individuals and HUFs only and not to other entity. It is an undisputed fact on record that the assessee is a partnership firm and therefore the amended provision of Section 45(A) is inapplicable in all respect. He submitted that in view of the above facts and circumstances the decision of the Honourable Supreme Court in the case of M/s. Orient Trading Co. Ltd, relied upon by the AO and concurred by the Ld. CIT(A) is opposed to the Law and facts of the case and hence the findings of the Ld. CIT(A) be reversed.

18. With regard to ground No.9 the ld. A.R. submitted that the Ld. CIT(A) has held that the delivery of possession of the Built up area in the F.Y. 2016-17 relevant to the A.Y. 2017-18 constituted transfer without appreciating the fact that the passing of consideration is of no criterion for chargeability of Capital Gain Tax. The Built up area agreed to be receivable without Time Limitation as per recitals of JDA cannot be construed as a ground for transfer based on alleged delivery of possession. In this regard the assessee begs to place reliance on the advance Ruling in the case of Jasbir Singh Sarkaria cited (supra) that passing of consideration was of no criterion for exigibility of Capital Gain Tax and the emphasis was laid down that the transfer/deemed transfer of the asset was the criterion for chargeability of Capital Gain Tax and not the passing of consideration. However the Ld. CIT(A) has held that the said Advance Ruling was applicable in the case of transfer of Capital asset chargeable to Tax u/s 45(1) of the Act and said to be not applicable in the case of Stock in Trade. He submitted the relevant portion of the Advance Ruling which was reproduced in Para 11 on page 37 and 38 of the impugned appellate order. However the CIT(A) has not appreciated the Advance Ruling which is squarely applicable to the facts and circumstance of the case of the SP 34/Bang/2024 Nalapad Hotels and Convention Centre, Bangalore Page 90 of 93 assessee and therefore the findings of the Ld. CIT(A) needs to be reversed, in view of the fact that as per the Advance Ruling the actual date of taking physical possession need not to probed into. In this view of this matter, he submitted that the Ld. AO and Ld. CIT(A) were not justified to probe the case of actual delivery of the Built up area based upon the Occupancy Certificate dated 21-07- 2016 without appreciating the fact that the transfer of the original asset being the Stock in Trade was transferred in the F.Y. 2007-08 as is evident from the JDA dated 17-01-2008 and therefore the question of chargeability of Capital Gain Tax for the A.Y. 2017-18 was based upon a misplaced view of the Authorities below.