2014 (1) TMI 1186 - HC - Income Tax

Delayed return filed Intention to avoid tax - determination of date of which possession of property was handed over - Held that - There is no term in the aforesaid agreements which expressly says that possession has been delivered by the assessee to the builder - If 96 apartments were ready for sale it is quite possible that constructions had taken two years - 30.6.1994 is the date of agreement. If on 18.12.1996 they were ready for sale the finding recorded by the authorities that possession delivered on the date of the agreement is probable - When the agreement does not specify the delivery of possession and in the absence of any material produced by the assessee to show that when the possession is delivered which shows foundation had been laid for all the even phases and constructions were almost complete in 4 phases and it had to be finished. Coupled with the fact that in 1996 Power of Attorney was executed to sell the flats an obvious inference that can be drawn from the material on record is that possession has been delivered under the agreement; payment of Rs.10 lakhs was paid that is the reason why roughly about Rs.35 lakhs has been paid between 30.6.1994 and 31.5.1996 - It is a joint development agreement - Without possession of the property no construction can be taken - the finding recorded by the authorities that possession was taken on 30.6.1994 is probable one and that being a concurrent finding of fact it is not open for the court in the absence of clinching material to hold otherwise - No substantial question of law does arise for consideration in the appeal Decided against Assessee.

Summary

Issues:
1. Whether possession of the property was delivered by the assessee to the builder, triggering capital gain tax liability.
2. Whether the agreements executed by the assessee indicate the delivery of possession.
3. Whether the possession was delivered on the date of the agreement as claimed by the authorities.
4. Whether there are valid reasons for the reopening of the assessment.

Analysis:
1. The judgment revolves around the issue of possession delivery triggering capital gain tax liability. The assessee entered into a joint development agreement with a property developer, agreeing to sell a percentage of land. The authorities found that possession was handed over to the developer, leading to the transfer of the property as per the Income Tax Act. The court upheld this finding, emphasizing that possession was crucial for construction and the transfer had indeed occurred.

2. The contention raised was that the agreements did not explicitly mention the delivery of possession. However, the court noted that possession was implied from the actions of the parties. The Power of Attorney executed later supported the inference that possession had been transferred, as it was for selling constructed apartments on the land. The court found the absence of explicit terms irrelevant, given the circumstances and subsequent events.

3. Addressing the timing of possession delivery, the court analyzed the timeline of events and payments made. The court noted that significant payments were made between 1994 and 1996, indicating progress in construction. The subsequent cancellation of the agreement and involvement of a new builder further supported the conclusion that possession had been delivered earlier, aligning with the authorities' findings.

4. Lastly, the judgment dismissed the challenge regarding the reopening of the assessment. The court highlighted that the facts of the case, including the delayed filing of returns, suggested an attempt to avoid tax liabilities. The court found no merit in the argument against the assessment reopening, emphasizing the importance of compliance and timely reporting of income.

In conclusion, the court upheld the findings of the authorities regarding possession delivery and capital gain tax liability. The judgment emphasized the significance of possession in property transactions and dismissed challenges to the assessment reopening, emphasizing the importance of tax compliance.