SMT. VIMAL BABURAO JADHAV,,NASHIK vs. INCOME-TAX OFFICER,,

At the very outset, the Ld. Counsel for the assessee submitted that there is a delay of 121 days in filing the appeal for which he has filed an affidavit along with condonation petition for delay. The contentions of the assessee is that the delay was caused because of factors which were not attributable to any direct conduct or mala-fide motive of the assessee. Rather, they were all circumstantial and unavoidable in nature. The assessee is an old lady of 62 years having no knowledge of income tax proceedings. She is illiterate and the income tax matters were looked after by her husband. That before the schedule date of filing appeal before the Tribunal, husband of the assessee died due to heart attack for which relevant certificate has also been annexed. The Ld. DR did not raise any objection regarding condonation of delay and hence, delay of 121 days is condoned and the case is proceeded to be heard on merits.

The assessee has filed grounds of appeal as well as additional grounds of appeal. The assessee has also filed an application praying for admission of additional ground based on the decision of the Hon‟ble Supreme Court of India in the case of NTPC Vs. CIT reported in 229 ITR 383 (SC) where the

The Ld. DR did not raise any objection with regard to admission of additional ground for adjudication.

Having heard the submissions of both the parties herein, we find the additional grounds raised by the assessee are legal in nature, hence, the same is admitted in line with the decision of Hon'ble Supreme court of India in the case of NTPC Ltd. Vs. CIT (supra.).

That starting his arguments with regard to the first additional ground, the Ld. Counsel for the assessee submitted that in this case, the assessment has been completed u/s.144 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) on the basis of incriminating materials unearthed at the time of search action in the premises of a third party. That it is settled position of

Now referring to the submissions made by the Ld. Counsel for the assessee, the Ld. DR submitted that there is letter from ADIT, Nashik to Assessing Officer of the assessee that certain incriminating transactions, information in relation to the assessee were found out in course of search action held at the premises of one Shri Bhupendra Shah, Proprietor of M/s. Bhavik Developers, Nashik. It was submitted by the Ld. DR that ADIT, Nashik is not the Assessing Officer of the searched party. We find that in order to apply Section 153C of the Act in the facts of the present case, the requirement of the said provisions has to be fulfilled first in order to trigger the said provisions of section 153C of the Act. The requirement of Section 153C is absolutely clear that it has to be the Assessing Officer of the searched party who will hand over the incriminating materials/documents etc. found during the search action in the premises of the third party to the Assessing Officer having jurisdiction over such person in relation to whom those information/documents were found. In this case, it is the assessee. However, such is not the position since in the instant case before us, ADIT, Nashik had reported these informations to the Assessing Officer of the assessee and he is

On the other hand, when no return was filed by the assessee section 144(1)(a) of the Act was already triggered and therefore, the Assessing Officer has correctly resorted to complete assessment u/s.144 of the Act. We also find that in the non obstante clause in Section 153A of the Act, Section 144 is not mentioned. Thus, Additional ground No.1 raised in appeal by the assessee is dismissed.

Additional Ground No.2 is with regard to the contention of the assessee that the provisions of Section 50C of the Act, were applicable only in respect of transfer of land or building and the same were not attracted in respect of transfer of development rights in land and thus, the Assessing Officer had wrongly made addition in the instant case by invoking the provisions of Section 50C of the Act in respect of development agreement entered into by the assessee.

Briefly once again the facts of the present case are that the assessee is an individual and basically a housewife from agriculturist family. The assessee had not filed any return of income for the year under appeal and that she had entered into a development agreement with Shri Abhijit D. Nagpure on 18.04.2006 for development of her immovable property at Survey No.14/1A/3, Anandwalli for Rs.36 Lacs. There was search action u/s.132 of the Act against one Shri Bhupendra Shah, Proprietor of M/s. Bhavik Developers, Nashik on 08.02.2008. From such seized documents, the aforesaid transactions of the assessee entering into development agreement with Shri Nagpure was evident. That Shri Nagpure is an employee of M/s. Bhavik Developers, Proprietor of Shri Bhupendra S. Shah. The Assessing

The Assessing Officer completed ex-parte assessment u/s.144 of the Act by invoking provisions of Section 50C of the Act by adopting the value of the property at Rs.70 Lacs i.e. the value adopted for payment of the stamp duty at the time of registration of the development agreement. The Assessing Officer determined the long term capital gain of Rs.62,21,500/- after giving the benefit of cost of acquisition.

That before the Ld. CIT(Appeal), the assessee had filed detailed written submissions and crux of such submissions was that the assessee had not received most of the consideration agreed at Rs.36 lacs and hence, there was dispute in the court in respect of the said development agreement. The cheques given by Shri Nagpure has been bounced. After prolonged litigation the consideration was received by the assessee in financial year 2009-10 relevant to assessment year 2010-11. Thereafter, the possession of the land was in fact given to Shri Nagpure in financial year 2009-10 after receiving the consideration.

At the time of hearing before us, the Ld. AR for the assessee vehemently opposed the findings of the Sub-ordinate Authorities and reiterated his submissions made before them and contended that Section 50C of the Act is not applicable in the case of the assessee for the reasons that there has not been any transfer of capital asset, land or building etc. in favour of the developer by the assessee and what was transferred was only development rights to develop the property. The ownership of the land still belonged to the assessee. The Ld. AR brought to our notice the Development Agreement dated 18.04.2006 entered into by the developer, Shri Abhijit Dileep Nagpure and the assessee which has been annexed in the paper book filed before us.

That in the said development agreement, specifically Clause 10 under the head „Records of Rights‟, it is specifically mentioned that ownership of the above property is still registered in the name of Shri Baburao Gangaram Jadhav. This Clause has to be read with Clause 2, backgrounds of the facts has been stated wherein it is mentioned that the said property was originally owned by Shri Baburao Gangaram Jadhav. The assessee is wife of Shri Baburao Gangaram Jadhav. She has filed Suit No.35/96 in the Civil Court,

Similarly in the „Protection‟ Clause of the said development agreement wherein it is stated that the responsibility of the developer to protect the said property, the possession of the said property as well as to protect the ownership rights of the owner/second party (assessee) in the said property…………………. and to perform all such acts………………. for the purposes of protecting the possession of the property and ownership rights of the second party vested therein. Furthermore, Clause 4 of the said development agreement which deals with possession of the property on the basis of which addition of capital gain has been initiated by Sub-ordinate Authorities u/s.50C of the Act, it clearly states that the owner i.e. the assessee has handed over the actual possession of the said property to the developer for the purposes of carrying out development work on the said property on license basis. That it is also mentioned, the owner has given the developer the right to develop the property and undertake construction on the said property.

We find this clause does not say anything about any change of ownership from the assessee to the developer. There is also no mention of any registered documents with the concerned authority being filed to suggest that ownership has been transferred by the assessee in favour of the developer. It is merely a transfer of development rights to the developer and that to on

The Ld. AR had also referred to the Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Re-settlement Act, 2013 which is also annexed in the paper book and therein in the definition part i.e. Section 3(r) defines the „land owner‟. It gives there definition stating that „the land owner includes any person whose name is recorded as the owner of the land or building or part thereof, in the records of the authority concerned‟. If any land acquisition takes place then compensation would be given only to the owner of the land as according to Section 3(r) of the said land Acquisition Act. In this case, in the development agreement itself in the record of rights, we have examined the property is still registered in the name of the husband of the assessee vide Mutation Entry No.5225 and the Compromise Deed entered into earlier between husband and the assessee, the records of rights is now in the name of the assessee. Therefore, there has not been any transfer of ownership of the property in favour of the developer by the assessee.

The starting line of Section 50C of the Acts states that “where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both………………..” . Therefore, the said provision speaks of transfer of capital asset and not transfer of development rights as has taken place in this case. We have also examined that Clause 4 of the said development agreement which talks of transfer of possession there also, nothing suggests even in form of whisper that there has been any change of ownership from the assessee in favour of the developer. Rather on license basis, the developer had been authorized to carry out development work on the said property.

The Ld. AR for the assessee has also cited the judgment of the Hon‟ble Karnataka High Court in the case of V.S. Chandrashekhar Vs. ACIT, ITA No.70/2015 dated 02.02.2021 wherein at Para 11 of the said judgment, the Hon‟ble High Court has discussed the circumstances of applicability of Section 50C of the Act. The relevant portion is extracted as follows:

Additional Ground No.3 is with regard to the contention of the assessee that the Ld. CIT(Appeal) had erred in upholding the fair market value of the impugned land as on 01.04.1981 adopted by the Assessing Officer without appreciating that the said fair market valuation was arbitrary and incorrect on the facts of the case and hence, the fair market valuation of the land as on 01.04.1981 as claimed by the assessee should have been adopted for the purposes of computing the cost of acquisition of the said land.

The Ld. AR for the assessee apart from reiterating the submissions made before the Sub-ordinate Authorities, vehemently submitted that the Assessing Officer had adopted fair market value on ad-hoc basis and he referred Para 4 of the Assessing Officer‟s order wherein the issue had been discussed.

The Ld. CIT(Appeal) on the other hand discussed the issue at Para 7 of his order. The Ld. AR for the assessee submitted that before the Ld. CIT(Appeal) in the written submissions filed, the assessee has given basis of the calculation of the fair market value of the land. We have gone through the submissions made in this regard by the assessee before the Ld. CIT(Appeal) and other relevant records/documents and we find that as like the Assessing Officer even the assessee has not brought out any cogent reason or any logical basis for such determination of the fair market value. Alternatively, it

The Ld. DR did not raise any objection with regard to the submissions put forth by the Ld. AR of the assessee.

Having heard the parties, we are of the considered view, in the interest of justice that the fair market value of the land has to be adopted on a reasonable basis and it must be reflected from the order of the Assessing Officer itself. Reasons behind such determination of the fair market value should be clearly spelled out in the order. Therefore, we set aside the order of the Ld. CIT(Appeal) on this issue and restore the same to the file of the Assessing Officer for adjudication as per law complying with the principles of natural justice. Thus, Additional Ground No.3 raised in appeal by the assessee is allowed for statistical purposes.

Coming to the grounds of appeal in the appeal memo filed by the assessee, at the very outset, the Ld. AR for the assessee submitted that Ground No.5 is general in nature and hence, requires no adjudication.

Ground No.4 pertains to condonation of delay which has already been condoned at the very outset. In effect thereby, Ground No.4 raised in grounds of appeal in appeal memo is allowed.

The Ld. AR for the assessee submitted that he is not pressing Ground No.2 and 3 and in view thereof, Ground No.2 and 3 raised in grounds of appeal in appeal memo are dismissed as not pressed.

The only effective ground remained is Ground No.1 in which the assessee submitted that the Ld. CIT(Appeal) was not justified in directing the Assessing Officer to recalculate LTCG by applying provisions of Section 50C of the Act by adopting sale consideration of Rs.64,50,000/- as determined by DVO in his valuation report. Further it was submitted by the assessee that the consideration being as per agreed consideration, the same be accepted.

Now on this ground, general facts of the case we have already discussed while adjudicating Additional Ground No.2. That further facts brought on record at Para 6.1 of the Ld. CIT(Appeal)‟s order wherein it is brought out that the assessee entered into development agreement with Shri Nagpure on 18.04.2006 and through this development agreement, the assessee has transferred her development rights of the land in favour of the developer which we have already analyzed while adjudicating the applicability of Section 50C of the Act. We have examined that through this development agreement only the development rights of the land had been transferred to the developer, for which, Section 50C of the Act was not applicable as ownership of the land was still with the assessee. Thereafter, the assessee entered into a Sathekat agreement on 16.04.2008 with one Smt. Sangeeta Bhupendra Shah wife of Shri Bhupendra S. Shah, Proprietor of M/s. Bhavik Developers in respect of the said land /property at S No.14/1A/3 for Rs.36 lacs.

It was contended by the Ld. AR for the assessee that when the assessee entered into development agreement dated 18.04.2006, that time the assessee had received Rs.36 lakhs and thereafter, when the assessee transferred her ownership rights also as per the sale deed agreement dated 24.02.2009 that was within the said amount already received by the assessee i.e. 36 lacs. Meaning thereby, the assessee has not received any amount in

We have examined that development rights were parted away with by the assessee through development agreement dated 18.04.2006. Admittedly, the assessee received only Rs.36 lakhs which covered not only the consideration for transfer of development rights on 18.04.2006 but also for transfer of ownership rights in the year 2009. The year under consideration has only relevance with the transfer of development rights, in respect of which section 50C of the Act has been held supra to be not applicable. In that view of the matter, the computation of capital gain for the extant year has to be done u/s 48 of the Act sans provisions of section 50C of the Act. As regards the transfer of ownership rights in the year 2009, the capital gains on such transfer can be the subject matter of consideration by the AO only for such later year and not under the year in question. Thus, the ground No.1 taken in the Memorandum of appeal challenging the adoption of stamp value as full value of consideration is hereby allowed.

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