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2015 (5) TMI 536 - ITAT HYDERABAD

2015 (5) TMI 536 - ITAT HYDERABAD - TMI - Revision u/s 263 - levy of tax on capital gains pursuant to the development agreement - Held that:- In the present case, AO has not at all examined the issue, though, materials relating to entering into the development agreement are available on record. Therefore, there being failure on the part of AO to conduct enquiry and examine the issue or otherwise apply his mind to facts and materials on record, assessment order is erroneous and prejudicial to the .....

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t development work requires examination on the basis of evidence produced by assessee. Further, AO is required to examine assessee’s claim that he is no more owner of the property as it was sold to his wife by registered agreement of sale on 04/04/06. AO also is required to determine the year of taxability considering the claim of assessee that capital gain on transfer of land to the builder was offered by the land owners in A.Y. 2011-12 upon cancellation of development agreement and execution o .....

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/2012 - Dated:- 10-4-2015 - IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD Shri B. Ramakotaiah And Shri Saktijit Dey JJ. ITA No. 673/Hyd/2012, ITA No. 674/Hyd/2012, ITA No. 675/Hyd/2012 Kushal Kumar Kankaria, Dinesh Kumar Kankaria, Sanjay Kumar Kankaria Versus Asst. Commissioner of Income tax, For the Appellant : Shri Y. Ratnakar For the Respondent : Smt. G. Aparna Rao 10-04-2015 ORDER Per Saktijit Dey, J.M.: These appeals by three different assessees are directed against sep .....

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case of assessee was completed u/s 143(3) read with section 153A vide order dated 09/12/09. Ld. CIT while examining the assessment records of assessee for the year under consideration was of the view that assessment order passed is erroneous and prejudicial to the interests of revenue, as AO has failed to bring to tax the capital gain arising from transfer of land to the developer under development agreement. Accordingly, he issued a notice u/s 263 of the Act to assessee to show cause as to why .....

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conditions agreed upon. Assessee submitted, transfer liable to capital gain will occur only when the constructed area falling to the share of the land owner is handed over to him by the developer and not before. It was submitted, at the time of development agreement no consideration passes to the owner as the constructed area contemplated therein did not exist but will come into existence only at a later date. The security deposits taken is only to guard against the obligation to be carried out .....

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)(v). Thus, assessee having entered into a development agreement and delivered possession, there is transfer of capital asset within the meaning of section 2(47)(v) during the relevant PY. In this context, ld. CIT relied upon a decision of the ITAT, Hyderabad Bench in case of Dr. Maya Chenoy Vs. ACIT. Ld. CIT further observed that assessee along with other two coowners have executed a registered sale deed-cum-GPA on 07/06/10 with the same developer and the amount which was received by assessee a .....

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e has preferred appeal before us raising number of grounds challenging the order passed u/s 263 both on jurisdictional issue as well as on merits. 5. In course of hearing, ld. AR also has raised the following additional grounds: 1. The appellant contends that in the facts and circumstances of the case the subject matter relating to the levy of tax on capital gains pursuant to the development agreement is debatable, not free from doubt and on which divergent views are possible. Hence the ld. CIT .....

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vide registered sale deeds executed on 26/02/05 for land admeasuring 1280 sq.yds. with built up area of 600 sq.ft. for a total consideration of ₹ 1,05,60,000. Subsequently, assessee has transferred his share in the property admeasuring 426 sq.yds. along with built up area of 200 sq.ft. to his wife Smt. Chhaya Devi Kankaria. It was submitted, though, as per the general law a sale is yet to be completed, however, as far as the income-tax Act is concerned, transfer of the asset has taken pla .....

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ment dated 16/04/07 had to be cancelled by a MoU dated 06/06/10. It was submitted, a sale deed was ultimately executed on 07/06/10 selling property to the developer, only for the reason, the developer was not willing to perform his part of the obligations under the development agreement nor was he cooperating in relegating the parties to their original position. Therefore, property was sold by land owners for a consideration of ₹ 7.20 crore. It was submitted, as the property was finally so .....

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ernatively, it was contended by ld. AR, if ld. CIT felt that there was absence of enquiry and non-application of mind by AO, then, he should have directed AO to examine the issue instead of straightway directing him to compute capital gain. In support of such contention, ld. AR relied upon the following decisions: 1. Suraj Lamp & Industries (P) Ltd., Vs. State of Haryana, 340 ITR 01 (SC) 2. Parvez Nazir Hussein Jafri Vs. CIT 354 ITR 235 (SC) 3. CIT Vs. Max India Ltd. 295 ITR 282 (SC) 4. CIT .....

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claim of assessee submitted before us, assessment order would clearly reveal that AO has neither enquired into the matter nor has applied mind to the materials on record. Therefore, when AO has not taken any view at all, it cannot be said that the view taken by AO is one of the possible view. Ld. DR referring to the development agreement submitted before us, development agreement clearly establishes the fact that assessee has transferred the land to the developer in terms with the development a .....

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at there being no valid reasons shown by assessee as to why they were not taken before AO or ld. CIT they cannot be entertained at this stage. 8. In the rejoinder, ld. AR submitted before us, as there is no quantification of sale consideration under the development agreement except the percentage of constructed area to be received, it cannot be said that there was transfer of land for a consideration. 9. We have considered the submissions of the parties and perused the orders of revenue authorit .....

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uted that in pursuance to the development agreement assessee has handed over possession of land to the developer and the developer has started development activity. The main thrust of the argument of assessee is two fold. Firstly, assessee is not the owner of land as he has transferred it to his wife vide registered agreement of sale-cum-GPA executed on 04/04/06. Thus, it was submitted, when assessee is not at all owner of the property, capital gain cannot be assessed at his hand. Second argumen .....

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of sale-cum-GPA with his wife Smt. Chhaya Devi Kankaria on 04/04/06 agreeing to sale his share in property for a consideration of ₹ 44,73,000. A copy of the said document, which is placed at page 73 of the paper book also indicates that the amount of ₹ 44,73,000 was paid to assessee vide cheque No. 963374 dated 04/04/06 drawn on Canara Bank, Masab Tank, Hyderabad. However, it is to be noted that in the development agreement of sale-cum-GPA dated 16/04/07 name of assessee appears as .....

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xecuted between parties on first day of October 07, the name of Smt. Chhaya Devi Kankaria does not appear as land owner. Therefore, if at all the land was agreed to be sold to Smt. Chhaya Devi Kankaria on 04/04/06, then, how come the name of Smt. Chhaya Devi Kankaria as land owner is not appearing in the supplementary agreement executed with the developer on first day of October 07 and 16/04/07 requires to be examined. 10. Furthermore, on perusal of the assessment order it is very much evident t .....

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the seized material, but, that does not ipso-facto prove that AO has examined the issue relating to transfer of land under the development agreement and has formed an opinion. On the contrary, it reveals total non-application of mind by AO. Availability of material on record does not absolve the AO from making enquiry or applying his mind to the said material. Availability of materials on record by itself will not prove that AO has applied his mind to those materials and formed an opinion unles .....

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ls on record are so glaring to indicate that AO has not at all enquired into the matter or applied his mind to the issue on which the order is sought to be revised, then, it cannot be said that ld. CIT cannot invoke the power u/s 263 of the Act as two views are possible on that issue. In the present case, though, assessee along with other coowners has entered into a development agreement and handed over possession of property to developer, admittedly assessee has neither offered any capital gain .....

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sdictional High Court in case of P. Nageswara Rao Vs. CIT (supra) has held that once possession is handed over to developer in pursuance to a development agreement there is transfer in terms with section 2(47)(v). In these circumstances, the failure on the part of AO in making any enquiry and examining the issue of accrual of capital gain has rendered the assessment order erroneous and prejudicial to the interests of revenue. Therefore, invoking of power u/s 263 of the Act in the facts of the pr .....

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aforesaid judgment of the Hon ble Apex Court it becomes clear that the ratio laid down is applicable to contract of sale as envisaged u/s 54 and 55 and not section 53A of the T.P. Act. Moreover, in the aforesaid decision the Hon ble Apex Court was not called upon to examine import of expression transfer as envisaged u/s 2(47) and more particularly sub-clause (v) of section 2(47) of the I.T. Act, 1961, which takes within its ambit contracts of the nature referred to in section 53A of T.P. Act. Fu .....

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t developer was not wi lling to perform his part of the contract. Whereas, in the present case, AO has not at all examined the issue. As far as other decisions of the Hon ble High Courts relied upon by the ld. AR, there cannot be any dispute with regard to the principle decided therein to the effect that where two views are possible and AO has taken one of the view, jurisdiction u/s 263 will not arise. However, in the present case, AO has neither applied his mind nor examined the issue by making .....

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o be decided on the basis of facts involved. AO has to decide the issue of accrual of capital gain under a development agreement by examining various factors, like date of handing over of possession, willingness of developer to start development work, consideration received etc. However, in the present case, AO has not at all examined the issue, though, materials relating to entering into the development agreement are available on record. Therefore, there being failure on the part of AO to condu .....

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