SMT. LOKAMMA,BANGALORE vs. DY.C.I.T., BANGALORE

Per Shri Vijay Pal Rao, J.M. : These are three appeals by the related assessees who are brother and two sisters arising from the respective orders of the Commissioner of Income Tax (Appeals) for the Assessment Year 2008-09. arising from common facts. The common grounds are raised in these appeals which are as under :

The assessee further entered into an Agreement dt.22.8.2007 for the development of their land together measuring about 12.8 guntas in S.No.175 & 174/3, K.R. Puram Hobli, Bangalore East Taluk. The assessee received non-refundable deposit of Rs.10 lakhs and were entitled to receive 43% of total built up area and car parking area (1/3 rd share of each). The Assessing Officer was of the view that in view of the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs. T.K.Dayalu 202 Taxman 531 the transfer of property took place on the date of JDA and the Long Term Capital Gain (LTCG) is taxable for the Assessment Year 2008-09. Accordingly, the Assessing Officer reopened the assessment of all three assesses. The assessees have challenged the reopening on the ground that the reasons recorded by the Assessing Officer do not reveal that there is a transfer as per the JDA and other relevant record. The ld. AR of the assesses has submitted that the land in question was an 16.11.2009. Therefore prior to the conversion from agriculture to non- agriculture, it cannot be treated as transfer. He has further submitted that the project plan was sanctioned by the local authority in the year 2010 and therefore prior to the conversion and sanction of plan it was not certain whether the JDA would be fructified or not. Thus the ld. AR as asserted that it does not constitute a transfer as per Section 2(47) of the Act prior to the agriculture land was converted into non-agriculture land and further till the plans were sanctioned by the local authority.

Hence the reopening is without any material to form the belief that the income assessable to tax has escaped assessment. The ld. AR has further contended that the land was ancestral property and as a result of partition of old HUF, 3 new HUF were came into existence. Therefore the assessment if any should have been in the name of HUF and not in the name of individuals. Thus the reopening and reassessment in the name of individuals is bad in law. He has relied upon the following decisions :

6 to 565/Bang/2015 i. CIT Vs. K. Adinarayana Murthy 65 ITR 607 (SC) ii. P N Sashi Kumar Vs. CIT 170 ITR 80 (Ker) iii. M R Pattabhiram (HUF) Vs. ACIT in ITA No.262/Bang/2013 dt.21.11.2014. 4. On the other hand, the ld. DR has submitted that apart from JDA the assesses have also executed General Power of Attorney (GPA) in favour of the developer and therefore the assessee has transferred all the rights as well as possession of the land in favour of the developer. He has further contended that as per JDA and GPA executed by the assessees the developer is entitled to 57% of the super built up area in the building to be constructed along with the undivided share in the land. The developer was also entitled to hold or sell, lease or otherwise dispose of its share of constructed area with 57% share in the scheduled property. Thus the ld. DR has submitted that the conditions prescribed under Section 2(47) of I.T. Act r.w.s. 53A of the Transfer of Property Act are satisfied to constitute the transaction as transfer. In furtherance of JDA, the assessee and developer also signed a Memorandum dt.14.11.2007 under which the developer paid an advance of Rs.10 lakhs to the assessee. Thus the contents of JDA, Memorandum of Agreement by the assessee and possession was given to the developer at the time of agreement. He has relied upon the decision of Hon'ble jurisdictional High Court in the case of CIT and others Vs. Dinesh D. Ranka (2016) 380 ITR 440 (Kar) and submitted that Hon'ble High Court has again reiterated that transfer includes extinguishment of rights in the capital asset on the date of JDA and consequently the capital gain is assessable in the assessment year relevant to the financial year in which the JDA has been executed.

Thus the ld. DR has submitted that reopening is valid in view of the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. T.K.Dayalu (supra) and further the assessee did not disclose the JDA in the return of income filed.

A consideration may be a promise, it may be in cash or any in kind.

Therefore receiving 47% of the constructed area in the project itself is a consideration against the transfer of land in question. As regards the objection of the ld. counsel for the assessee that the assessment is bad in law as framed on the individual instead of HUF, we find that the JDA, GPA as well as Memo of Agreement were executed by the assesses in their individual capacity. Further in response to the notice under Section 148, the assesses filed their return of income and declared capital gains only on non-refundable deposit of Rs.10 lakhs. The said returns of assessee did not object to the initiation of proceedings under Section 148 against their individual capacity. Since all the documents were executed by the assessees in their individual capacity and further return of income was also filed in the individual capacity therefore we do not find any substance in the contention of the ld. counsel of the assessee that the assessment should have been framed in the name of HUF instead of the individual.

As it is clear from the reasons recorded that the Assessing Officer has reopened the assessment on the basis of JDA dt.27.7.2007 without applying its mind on the fact that as on the date of JDA the property in question was an agriculture land and without conversion of the same to non-agriculture use the JDA itself would not be given effect. The decision of Hon'ble High Court in the case of CIT Vs. Dr. T.K. Dayalu (supra) is based on the fact that the part performance under the JDA was not void and unforceable under law. In case of CIT Vs. Dinesh D Ranka (supra), it was an undisputed fact that the JDA was executed on 19.10.1995 whereas the assessment of capital gains was brought to tax for the Assessment Year 1999-2000. The entire land was converted from agriculture to housing purpose in the year 1992 itself.

Subsequently the plan was approved and renewed on 19.2.1998. Thus in the cases before Hon'ble High Court there was no dispute regarding the conversion of the land to non-agriculture use as on the date of JDA whereas in the case on hand it is undisputed fact that the land in question was an agriculture land on the date of JDA and it was converted into non-agriculture use on 6.11.2008 and therefore the transfer of capital asset in question cannot be completed prior to the conversion of the land. Even if on examination of record, the intention of the parties is established that the parties to the documents had intention to treat the transaction as concluded it is a debatable issue and therefore the reopening without application of mind on the crucial fact of conversion of agriculture land to non-agriculture land on subsequent date not to form a belief that the income assessable to tax for the year under consideration has escaped assessment. Accordingly, we hold that the reopening is not valid and consequential reassessment is quashed.

Order pronounced in the open court on the 9th day of Nov.,2016.