TMI Blog2014 (6) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with S.45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law - the date on which possession was handed over to the developer is relevant for determination of the year in which the capital gains are assessable to tax – there was no merit in the contentions of the assessee that there is no taxability of capital gains – Decided against Assessee. Addition of undisclosed income u/s 64(1) of the Act - Gifts received by minor children - Held that:- The gifts received by the assessee’s children cannot be disbelieved in total - even though the claim of the assessee is in relation to gifts aggregating to Rs 29,10,000, actual withdrawals are seen only at Rs. 26,00,000 - there was a receipt of gifts only to the extent of Rs 26,00,000 only because there are withdrawals only to the extent of Rs 26,00,000 from the accounts of Sri. Y. Venkateswar Rao - donor has confirmed having given gifts and donees also claim to have received gifts - the donees have received gifts of Rs 26,00,000 only and accordingly confirmed the view taken by the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a period of two years as contemplated u/s 54B of the Act, assessee is entitled for relief u/s 54B of the Act – thus, the matter is remitted back to the AO for fresh adjudication as to the nature of land i.e., whether the land can be classified as agriculture land and also beyond 8 kms. of any municipality – Decided in favour of Revenue. - ITA No. No.1519/H/2011 No.1520/H/2011 No.1528/H/2011 Co.75/H/2011 No.1567/Hy/11 CO.79/H/2011 No.1521/H/2011 No.1529/H/2011 CO.76/H/2011 No.1530/H/2011 CO.77/H/2011 No.1568/H/2011 CO.80/H/2011 1531/H/2011 CO.78/H/2011 No.1522/H/2011 - - - Dated:- 22-3-2012 - Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Petitioner : Smt. K. Mythili Rani (DR) For the Respondent : Shri T. Gandhi (AR) ORDER Per Asha Vijayaraghavan, JM . These appeals and Cross Objections preferred by the assessee as well as the Revenue are directed against the order passed by the Learned CIT(A) VII, Hyderabad and they are pertaining to the assessment years 2003-04, 2004-05 2008- 09. Since issued involved in these appeals are common in nature, they are clubbed, heard and disposed off together for the sake of convenience. Sri. Potla Nages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer has also made a similar addition for assessment year 2004-05, therefore the assessing officer is not justified to assess the capital gains in assessee s hand for the assessment year 2003-04 which is relevant assessment year and also for the assessment year 2004-05. 7. The CIT(A) dismissed the Assessee s appeal on this issue observing as under: The submission made by the authorized representative has been considered. The details furnished in this regard are also perused. Having verified the facts and circumstances of the case, it appears to me that the assessing officer is justified to assess the property transferred to M/s Bhavya Constructions Pvt. Ltd for the assessment year under consideration. It may be further seen that the deed for the development of property was entered on 7.3.2003 and assessee also had received token advance and the said transfer of property was taken up by the developers for further action including getting the approval of the plan for construction from the municipality. Therefore the assessee almost has completed the transfer of the property to M/s Bhavya Constructions Pvt. Ltd., for a consideration of getting four flats equiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential flats/villas and having handed over the possession of the vacant land to the developer on promise to be handed over four flats equivalent to 40% of the value of the property to be constructed, it was a clear case of transfer by exchange within the meaning of S.2(47)(i) of the Act. Property was handed over in part performance under S.53A of the Transfer of Property Act, and it could not be said that the transaction was without consideration. The possession of the land having been handed over to the developer in the assessment year under consideration, the transfer takes place in the assessment year under consideration only, and consequently the assessee is liable to be assessed to tax in relation to the capital gains in the year under consideration itself. For this purpose, we place reliance on the decision of the coordinate Benches of this Tribunal in Smt. Maya Shenoy V/s. ACIT (2009)124 TTJ(Hyd) 692). We also find support in this behalf, from the judgment of the Hon ble Bombay High Court in the case of Chaturbhuj Dwarkaddas Kapadia V/s. CIT (260 ITR 491), wherein it has been held that S.2(47)(v) read with S.45 indicates that capital gains was taxable in the year in which su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the daughter Kum. Potla Shanthi as not being proved and therefore added the same as undisclosed income of the father, the Assessee herein. 12. There was a search and seizure operation u/s 132 of the IT Act 1961 conducted in the case of assessee on 6.1.2009 wherein certain documents were found and seized. Consequent to the search operation the assessee s case is notified with DCIT Central Circle 4 Hyderabad. The assessee also happened to be a Director of M/s Crown Beer International Limited for the previous year relevant to the assessment year under consideration. The assessment was completed by the assessing officer based on the material available on record. 13. With regard to first ground of appeal it is the submission of the authorized representative that the assessing officer has wrongly made an addition of Rs 15,90,000 towards unexplained gifts which is actually received by the assessee s minor son P. Nishanth. The assessing officer also is seen to have added Rs 19,00,000 towards unexplained gifts received by the assessee s minor daughter P. Shanthi. The assessing officer has treated the above said gifts received by the assessee s minor children as unexplained and tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been explained as out of the gifts received from Sri Y. Venkateswar Rao and Smt.Y. Vimala assessee s blood relatives cannot be believed to be genuine. The authorized representative also has furnished certain bank accounts for having received the money from Sri. Y.Venkateswara Rao wherein it is shown that the remittances from Sri.Y.Venkateswar Rao is at Rs.29,15,172 and out of which it is claimed that Rs 26 lakhs is utilized for purchase of property. Further it is submitted that the gift given by Smt. Y.Vimala at Rs 90,000 to P. Shanthi and Rs. 4,90,000 to P. Nishanth are reflected in the bank statement of Smt.Y.Vimala therefore the assessing officer should have believed that assessee s children have received gifts from Sri. Y.Venkateswar Rao and Smt.Y. Vimala as gifts which has been utilized for purchase of lands in children s name. 19. The Ld. CIT(A) observed that having verified the facts and circumstances of the case it appears that the assessee has not disclosed the financial gifts received by his minor children in any return of income filed by the assessee since they were not income receipt. The Ld. CIT(A) therefore pointed out that as observed by the assessing officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een received from Smt. Y. Vimala by P, Nishanth and P. Shanthi , the Ld. CIT(A) held that the explanation offered is not satisfactory, though there are some withdrawals from the accounts of Smt. Y. Vimala it cannot be strictly related with the issue of gifts. Therefore the addition of gifts off Rs 5,80,000 (Rs. 4,90,000 + Rs 90,000) were confirmed by the CIT(A). 22. Aggrieved the Assessee is in appeal before us. 23. The learned counsel for the assessee Shri T. Gandhi relied on the decision of the CIT Vs. Mayavati (338 ITR 0563) Hon ble Rajasthan High Court in the case of CIT Vs. Ram Dev Kumar Chitlangia (315 ITR 0435). 24. The Ld. Counsel for the assessee Shri. T. Gandhi submitted before us that the CIT(A) erred in confirming the gifts shown in the accounts of the minors to the extent of Rs. 8,90,000/- as unproved and adding it as income of the father viz., the assessee herein. 25. We heard the parties on this issue and perused the material available on record. We find that the Ld. CIT(A) concluded that considering the facts and circumstances of the case it appears that the gifts received by the assessee s children cannot be disbelieved in total. He noted that even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine. In the circumstances the appeal of the revenue against the confirmation of the CIT(A) accepting the gift of Rs. 26,00,000/- is rejected. 29. In the result the appeal of the revenue in ITA No.1528/Hyd/2011 is dismissed. CO.75/Hyd/2011(in ITA No.1528/Hyd/2011) raised by the assessee : 30. This cross objection filed by the assessee against Shri Nageswara Rao is in support of the CIT(A) order deciding the issue in his favour. As we have disposed off the appeal by the revenue in 1528/H/11 for this year considering all the arguments, the CO filed by the assessee has become infructuous. 31. In the result CO No 75/H/2011 filed by the assessee in the revenue s appeal ITA No 1528/H/11 is dismissed. ITA NO 1521/H/11- Potla Ngeswara Rao- Assessee s appeal for 2008-09- 32. The only ground in the Assessee s appeal is against the order of the CIT(A) determining the capital gains arising from development agreement between the Assessee herein along with his son and daughter, the other co-owners of the land, with M/s Adithya Constructions, they are disposed of together. The facts of the case are as under: 33. During the year under consideration, the assessee along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the two parties was duly fulfilled and M/s Aditya Constructions has already completed construction and sold some houses. ii) As per section 2(47) (v) of the Act, transfer includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882). In the present case transfer of the capital asset has taken place and possession of the property was handed over to M/s Aditya Constructions on 11.4.2007 hence capital gain will arise on the date of transfer. Accordingly, the assessee s share worked out for the year under consideration amounting to Rs.86,25,807/- is to be treated as long term capital gains and accordingly brought to tax. Penalty u/s 271(1) (c ) and 271AAA of the IT Act initiated separately. 39. On appeal before the CIT(A) the Assessee contended that there was not even a part performance of the contract as referred in section 53A of Transfer of Property Act as such the said unfinished transaction cannot come under section 2 (47)(v) of the Act, 1961 and therefore, the Assessing Officer cannot t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n area to the assessee, therefore, it is not fair to assume that the transferee has completed the contract and returned 30% of the construction area. It is further submitted that the assessee and others only would be entitled to 30% of the 13 houses constructed by the transferee, therefore, it is not justified to assume that assessee and other two partners have received 30% of the constructed area. 44. As it could be seen from the facts of the case that the assessee and others have transferred the property for construction of the independent house in lieu of receiving 30% of constructed area, therefore, there is a transfer of property, hence, the capital gains has to be charged in case of the assessee and other partners. Therefore, the assessee has to be charged for capital gains of Rs.58,39,972/- instead of Rs.86,25,807/-. Hence the assessee gets a relief of Rs.27,86,015. Therefore, this ground of appeal is partly allowed. 45. Aggrieved both the assessee as well as the Department are in appeal. The main contention of the Assessee is that as the development agreement was cancelled there was no transfer of property as contemplated u/s 2(47) of the IT Act read with sec 53A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against the recomputation of capital gains arising from the development agreement between the Assessee and M/s Adarsh Construction. The main grievance of the revenue is that the CIT(A) had not made similar adjustments in the case of the other coowner viz., Kum. Potla Shanthi. As we have set aside this issue to the files of the AO in the Assessee s appeal in ITA No 1521/H/11 supra, the revenue s appeal on this issue is also set aside to the files with the same directions as in the Assessee s appeal. 49. The second ground in the revenue s appeal is against the allowance of Rs. 1.00 lakh claimed by the Assessee. 50. The Assessing Officer observed that the assessee had contested for MLC from local body segment of Khammam District which covers the entire local bodies in the district. He also noted that the assessee s expenditure on election is not reasonable. It is also observed by the Assessing Officer that since the assessee would have travelled through out the district and had to spend money for canvassing, therefore, the expenditure claimed by the assessee at Rs.25,000 is very meagre, hence he has made an addition of Rs.1 lakh towards alleged election expenditure. 51. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Bowrampet Dundigal villages of Qutbullapur municipality during the FY 2003-04 in the name of his son Potla Nishanth and daughter Potla Shanthi. Out of this land 13 acres was given for development to M/s Amsri Developers in the year 2007 against consideration of 35% of constructed area. Sri Potla Nageswara Rao father of the assessee has sold 6.25 acres of land to M/s Varun constructions. 60. The AO observed as follows: It is seen that the assessee has shown profit on sale of 1.25 acres of this land at Rs. 15591203 in the capital account. However, no capital gains was offered claiming it to be an agricultural land. Since the transactions of handing over the land for development and sale of land took place in the same year, and out of the same stretch of 21.27 acres of land, the assessee s argument that the land is partly agricultural and partly exploited for development of residential purpose is not at all tenable. 61. There was a search and seizure operation u/s 132 of the IT Act 1961 conducted in the case of Sri Potla Nageswara Rao wherein certain documents were found and seized. Consequent to the search operation the assessee s case is also notified with DCIT Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim. reference was made to the Honourable Punjab and Haryana High Court Judgment in the case of Commissioner of Income tax vs Lal Singh (2010) 325 ITR 0588 and Honourable Income Tax Appellate Tribunal Amritsar in the case of Deputy Commisioner of Income tax vs Capital Local Area Bank Ltd (2010) 006 ITR (Trib) 0314 where it was held that land classified in revenue records as agriculture and is situated beyond 8 kms of local limits of the municipality shall not be considered capital asset as land down in sec 2(14) of the Income Tax Act 1961. 66. Further the learned counsel for the assessee submitted that the Assessing Officer ought to have considered all facts as a whole and not piece meal and he relied upon the judgment of Honourable Cochin High Court in the case of Assistant Commissioner of income Tax vis Hotel Harbour View (2010) 002 ITR (Tribunal) 0178. 67. He submitted that at the relevant time the land in question had not ceased to be put to use other than for agricultural purpose. The land was agricultural land when it had been purchased by the assessee and it was not put to any alternative use. The land as proved on record was actually being used for agriculture involvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose as appearing in the revenue records/ Therefore the same could not have been treated for short term capital gains purpose. 71. The Authorized Representative also relied upon the decision of Hon ble Punjab and Haryana High Court in the case of CIT Lal Singh (2010) 325 ITR 588 wherein the assessee produced a certificate from the Tasildar to the effect that the land which the assessee had sold was situated beyond 8 kilometers from the Gurgaon municipal limits. The Assessing Officer not accepting the report of the Tasildar and instead relying upon the report given by the inspector denied the assessee exemption under section 548 of the Income Tax Act 1961. The Commissioner (A) set aside the order and this was confirmed by the Tribunal. On appeal to the High Court, it was held, dismissing the appeal of the revenue, that the Commissioner (A) had rightly not accepted the report of the inspector. In the report neither the khasra number of the land of the assessee was given nor had it been explained how the distance of the land from the municipal limits was measured. On the other hand the Commissioner (A) has rightly relied upon the report given by the Tashildar on the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned DR Shri Smt. Mythili Rani, relied on the decision of the Hon ble Supreme Court in the case of Sarifabibi Mohammed Ibrahim Others Vs. CIT (204 ITR 631) (SC). 78. The Ld. Counsel for the assessee Shri Gandhi, strongly supporting the order of the CIT(A), relied on the decision of the Hyderabad B Bench in the case of Srinivas Pandit (HUF) Vs. ITO in ITA No.56/H/2007, besides the following other decisions- 1. The Tribunal, Amrister Bench in the case of DCIT Vs. Capital Local Area Bank Ltd. (6 ITR (Trib.) 314) 2. The Hon ble Punjab Haryana High Court in the case of CIT Vs. Lal Singh (325 ITR 588). 79. he learned counsel also reiterated the written submissions furnished before the CIT(A) as under: Addition of short term capital gain (agriculture Lands) of Rs.2,26,93,975/- 1. Your assessee submitted that the Assessing Officer has erred by estimating notional Short term capital gain on the basis of development agreement for agriculture lands situated at Ranga Reddy Distt. Away by 13 kms. From the nearest municipality limits at Rs.2,26,93,795/-. In total violation of the law and against the facts and the addition is erroneous. 2. The Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land and that is referred on annexure 1A of the said Development Agreement. 80. It has been brought to our notice by the learned counsel that a capital gain on sale of agriculture land is exempt. The jurisdictional Tribunal in the case of Srinivas Pandit (HUF) has held as follows: In this case also admittedly, the entire transactions was made through Rajendra Nagar Revenue Authorities and not through Hyderabad Revenue Authorities. Therefore, as found by the Coordinate Bench of the Tribunal in the case of Capital Local Area Bank Ltd. (supra) , the jurisdictional Municipality is Rajendra Nagar Municipality and not the Hyderabad Municipality. Since Rajendra Nagar Municipality is not admittedly notified by the Central Government, the agricultural land in question cannot be treated as capital asset by taking the distance from the limits of Hyderabad Municipality. By respectfully following decisions of the Coordinate Bench cited supra, we hold that the land in question cannot be treated as capital asset within the meaning of Sec. 2(14)(iii)(b) of the IT Act. Accordingly, Orders of the lower authorities are set aside. In the result, the appeal of the assessee is allowed. 81. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Narsing Village who mentioned that due to pressure of work, he did not fill the columns of cultivation in the pahani patrika during the financial year 2005-06 for all the lands in the entire village. This fact also brought to the knowledge of the lower authorities. However, no enquiries were carried out in this regard. On the other hand, there was information from the Dy. Collector that the land was under cultivation for the financial year 2006-07 and 2004-05 and in earlier years. However, the affidavit filed by the VRO shows that the land was under cultivation in the asst. year under consideration also. Further, the lower authorities observed that there was a dispute regarding the ownership of the agricultural land and there cannot be any agricultural operations. This finding of the lower authorities goes against the revenue records which show that the land was under cultivation during the financial year 2006-07 and for 2004-05 and also against VRO s Certificate. Being so, in our opinion, the certificate issued by the VRO, who is concerned revenue authority to issue the said certificate has to be relied upon and it is not possible to reject the same without examining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erabad Municipal Corporation. Further, it was held recently by the Hon ble Punjab Haryana High Court in the case of CIT vs. Smt. Anjana Sehgal (supra) that the expression from the local limits of any municipality used in section 2(14)(iii)(b) of the Income-tax Act denotes any municipality or municipality of the District in which the land is situated . Further, capital gains arising from the transfer of agricultural land situated in municipal or other urban areas or notified adjoining areas will be liable to income-tax. In this view of the matter, and considering the facts and the circumstances of the present case, in our considered view, the lower authorities are justified in determining the land in question, as capital asset liable for income-tax. With regard to determination of cost of acquisition of the land disposed of, we are of the opinion that considering the proximity of the land to the city, it is reasonable to fix the value of as on 1.4.1981 at Rs.30,000 per acre, instead of Rs.10,000 determined by the Assessing Officer, as against Rs.1,40,000 claimed by the assessee. One of the reasons for which the claim of the assessee for relief under S.54B was rejected by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sale of land to M/s Amsri developers P Ltd. It is the contention of the Assessee that the lands sold were agricultural lands, not falling within the notified limits of Municipality and hence is not exigible to capital gains. The issue involved in this appeal is similar to the one, we have already considered in the case of this very issue in ITA No.1529/H/2011 for the assessment year 2007-08. Facts and circumstances being identical in this year as well, we set aside the order of the CIT(A) and restore the matter to the file of the assessing officer for fresh examination with directions similar to the ones given for the preceding year hereinabove. 88. In the result the revenue s appeal in ITA 1530/H/11 is allowed for statistical purposes. CO No 77/H/11 in ITA 1530/H/11 for AY 2008-09: Cross Objection by Assessee: 89. This cross objection filed by the Assessee Ms. Potla Shanthi is in support of the CIT(A) order deciding the issue in her favour. As we have set aside the appeal by the revenue, in 1530/H/11 for this year, to the file of the assessing officer for fresh consideration, this CO filed by the Assessee has become infructuous and dismissed accordingly. 90. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains. The AO did not accept the contention of the Assessee and after deducting cost of acquisition of Rs. 15 lakhs assessed the balance Rs. 4.85 Crores as Short term capital gains. 94. On appeal the CIT(A) accepted the contention of the Assessee that the lands were agricultural lands and hence the sale of the same were not subject to capital gains, for the same reasons as has been stated in the case of Ms. Potla Shanthi referred to above. 95. Aggrieved the revenue is on appeal and raised the same grounds as has been raised in the case of Ms. Potla Shanthi in ITA 1529/H/11 supra. In that case we have set aside the issue to the file of the AO with certain observations: 96. The facts of this case are identical with those of Assessee s sister Kum. Potla Shanthi and the assessee has sold the lands from the same area as his sister. Hence following our decision in the case of Ms. Potla Shanthi for this very assessment year in ITA No 1529/H/11, we set aside the issue with regard to determination of the nature of land, viz. agricultural land or not and assessable as capital gains or not, to the files of the Assessing officer with similar directions, for deciding the same afres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross objection by Assessee 105. This cross objection filed by the Assessee Shri Potla Nishanth is merely in support of the CIT(A) order deciding the issue in his favour. As we have set aside the appeal by the revenue, in 1531/H/11 for this year, to the file of the assessing officer for fresh consideration, this CO filed by the Assessee has become infructuous and dismissed accordingly. 107. In the result the Assessee s CO No 78/H/11 for AY 2008- 09 is dismissed. ITA No1522/H/11: Sri. Potla Nishanth- Assessee s appeal for AY 2008-09: 108. The facts in the Appeal of the Assessee are identical with the appeal of his father Sri. Potla Nageswara Rao in ITA No 1521/H/11. In that case we have set aside the appeal to the files of the AO with certain observations. 109. Facts and circumstances of the case being identical with the ones we have considered in the context of appeal of assessee s father, in ITA No.1522/Hyd/2011, following the same we set aside the appeal of the Assessee in ITA No 1522/H/11 to the files of the AO for recomputing the capital gains as per our observations in the case of Sri Potla Nageswar Rao in ITA No 1521/H/11. 110. In the result the Assessee s ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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