TMI Blog2016 (1) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain transaction on transfer of property, the capital gains occurs when the transfer is complete or deemed to be complete. If the terms of agreement have been fulfilled by the developer/ builder, the capital gain is to be brought to tax in the year in which the agreement was concluded i.e., in this case in the year 2007-08. In case the terms of the agreement are not fulfilled and the agreement has not been implemented as per the terms, then, there can be no transfer in strict sense, capital gain does not arise even though certain advances were received. If it is a business transaction, A.O. missed the point that assessees herein have paid an amount of ₹ 20 lakhs at the time of agreement as initial payment which will be a deduction, along with subsequent expenditure if any, so as to arrive at the correct income. Just because the parties herein have received certain amounts in different assessment years, they cannot be brought to tax on receipt basis without understanding the nature of payments. In view of this, without giving any findings on the respective contentions, we are of the opinion that these issues are to be examined in detail to arrive at proper conclusions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissions etc., and also in view of litigation involved, the heirs of original owner and the these two assessees as confirming parties, entered into development agreement cum- GPA on 16th October, 2006 in favour of M/s. Santha Sriram Constructions Pvt. Ltd., (in short SSCPL ), Hyderabad. As per the terms of agreement, SSCPL being third party would pay ₹ 4 crores to the first party i.e., land owners and both parties i.e., land owners being first party and consenting parties being second party the register 57% of the land to the third party. Balance of ₹ 1 crore was to be paid at the time of obtaining sanction from concerned authorities. There were other terms of agreement also which would indicate that constructed area would be devolving on third party/second party and first party would not have any rights in the constructed area. Be that as it may, there were search and seizure operations at the premises of SSCPL on 25.03.2010 and certain incriminating material was found more particularly, the agreement and as theses assessee have not disclosed any of these transactions to the department, proceedings under section 153C were initiated. There is no challenge to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT vs. Kabul Chawla dated 28th August, 2015 in support of his contention that additions cannot be made arbitrarily and without any relevance or nexus with the seized material. 5.1 Ld. D.R. in reply, relied on the judgment of the Hon ble jurisdictional High Court in the case of Gopal Lal Bhadruka vs. DCIT 346 ITR 106 to submit that for the purpose of section 153A/153C A.O. could take into consideration of material, other than what was available during the search and seizure operation, for making an assessment of the undisclosed income of the assessee. 6. We have considered the issue and examined the facts on record. As far as the assessee Mr. M. Suveer Reddy s income for A.Y. 2004-05 to 2007-08 on his electric contract business is concerned, there were no search and seizure operations in assessee s premises and 153C proceedings were initiated only on the basis of certain incriminating material available in the business premises of SSCPL. Even though jurisdictional High Court in the case of Gopal Lal Bhadruka (supra) has examined the jurisdiction of the A.O. in completing the assessments under section 153A, what is relevant is that A.O. could take into considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. In so far as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive years as commission in the transaction. Assessees contended before the Ld. CIT(A) that assessees has rights over the property and those rights were transferred to SSCPL and the amounts are received as advance therefrom. Unless the parties herein received developed property, there cannot be any accrual of income. Ld. CIT(A), however, did not agree with the above contentions and confirmed the amount. 8. Before us, Ld. Counsel submitted that the amounts received from SSCPL are not commission received but as part of development agreement. This development agreement has not been fully implemented as the relevant sanctions from the concerned authorities have not been obtained and virtually there is no development on the property, after payment of initial amounts. It was submitted that the amounts received are to be considered as part of capital gains as and when complete transfer takes place. It was the submission that Revenue did not analyse the nature of transaction and wrongly brought the amount to tax in the year of receipt as commission, even though the parties herein have rights to acquire the property and such right was transferred to SSCPL. It is the submission that capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving a lien for purchase of property from the owner(s). The entire payment made by SSCPL was neither examined nor brought on record by the A.O. in order to examine this aspect. It is also surprising to note that Revenue has not considered whether the transaction is to be considered as one involved capital gain or involving business transaction. Assessees herein have entered into an agreement for purchase of property may be for the purpose of investment or may be for the purpose of business activity. However, after so many years, since, no progress have been made, they have in turn, handed-over the property to another builder -cumdeveloper vide second agreement. Since the assessees have a lien over the property by virtue of the earlier purchase agreement, they have become consenting parties in the latter agreement. Therefore, if it is considered as an investment transaction, capital gains arises to the parties herein. When enquired, whether any action was taken on the owners for bringing the capital gain to tax and whether amounts received by assessees are part of transfer of property being transfer of rights, there is no clarity from either parties. What A.O. has done in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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