TMI Blog2017 (12) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue to the file of the AO as the sub-section itself is not applicable for the relevant A.Y. The additional ground of appeal raised by the assessee under Rule 11 of the ITAT Rules is accordingly rejected. As regards the validity of the re-assessment proceedings, we find that the assessee has filed the return of income but has not offered the capital gains arising out of the development agreement in her return of income for the relevant A.Y. Therefore, the AO had the material to form a reasonable belief that the income of the assessee has escaped assessment. Therefore, we uphold the validity of the re-assessment proceedings. As regards the year of the taxability, we find that this issue is now covered in favour of the Revenue by the decision of the Hon'ble jurisdictional High Court in the case of Shri Potla Nageswara Rao vs. DCIT [2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT]. Therefore, the assessee’s grounds of appeal on the year of taxability are rejected. Computation of the short term capital gains - estimated value of the property adopted by the parties to the development agreement - Held that:- As regards the enhancement of the income by the CIT (A), we find that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is not the case of the assessee not offering the capital gains to tax at all but it is the case where she has offered it in the year of receipt of possession of the property. Therefore, it cannot be said that the assessee had not offered the capital gains to tax with an intention to evade the tax. Therefore, we are of the opinion that it is not a fit case for levy of penalty u/s 271(1)(c). - ITA Nos.51 & 579/Hyd/2016, 716/Hyd/2015 And 52/Hyd/2016 - - - Dated:- 30-11-2017 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accountant Member For The Assessee : Shri A.V. Raghuram For The Revenue : Smt. Suman Malik, DR ORDER Per Smt. P. Madhavi Devi, J.M. All the above are assessee s appeals against assessments u/s 143(3) of the Act for the A.Ys 2006-07, 2007-08 and 2011-12 respectively. ITA Nos. 51 52/Hyd/2016 are against the order of the CIT (A)-5 Hyderabad, dated 29.09.2015 for A.Ys 2006-07 2011-12, while ITA No.716/Hyd/2016 is against the order of the CIT (A)-5, Hyderabad, dated 12.3.2015 for the A.Y 2007-08. ITA No.579/Hyd/2015 is against the order of the CIT (A)-5, Hyderabad, dated 22.3.2016 confirming the penalty levied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such built up property was ₹ 8.80 crores. Further, as per the deed, the owners were entitled to 46% share in the constructed area. He observed that though the capital gain has arisen to the assessee on account of the development agreement, she has not offered it for taxation in her return of income for the A.Y 2006-07. 6. Therefore, the case was re-opened by issuance of a notice u/s 148 of the Act. The assessee filed a letter stating that the return originally filed may be treated as the return filed in response to the notice u/s 148 of the Act. Thereafter, the AO issued a show-cause notice proposing to bring to tax the escaped income of ₹ 67,46,666 (being 1/6th of the share of ₹ 8.80 crores x 46%). The assessee filed a letter stating that she had admitted the capital gains in the A.Y 2011-12 on getting possession of the flats and further stated that as per the supplementary development agreement dated 10.04.2010, the entitlement of the land owners has come down to 43% from the earlier 46%. The assessee also relied upon the grounds raised by the Revenue before the Hon'ble High Court of Andhra Pradesh in the case of Dr. Maya Shenoy (124 TTJ 692) for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 43% of the constructed area, would come to ₹ 67,46,666. He observed that the AO has adopted the sale price at ₹ 2200 per sq. yard which is much lower than the value mentioned in the development agreement. He therefore, issued a show-cause notice for enhancement of the capital gain. The assessee submitted that the value of ₹ 8.80 crores is not only a composite value of the super structure and the land but is also for the entire land and that such composite value is fixed based on sale price quoted by the builder. The assessee submitted that the value that is likely to arise after an uncertain period cannot be the basis for adopting the sale consideration in the year of agreement. The CIT (A), however, was not convinced and held that the instance of the transfer of the land and the sale consideration is already mentioned in the agreement and therefore, the said consideration should be taken into consideration for computing the capital gain. The CIT (A) directed the AO accordingly. Thereafter, the CIT (A) also examined the assessee s claim of expenditure of ₹ 80.00 lakhs, which is claimed to have been paid to one Shri Gnaneshwar for arranging the developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion, the capital gains should be deemed to be the income of the previous year in which such transfer takes place. This provision has been introduced w.e.f. 1.4.2018 and it is a substantive provision introduced by the Act and not a proviso or an explanation. In the case of Vatika Township Pvt Ltd, the Hon'ble Supreme Court was considering the prospective/retrospective applicability of the proviso to section 113 introduced by the Finance Act of 2002 and held it to be prospective in operation as it intended to create a charge or burden on the assessees. The Hon'ble Supreme Court has elaborately discussed the law relating to interpretation of taxing statues particularly the prospective/retrospective operation of amendments. At paras 27 to 36, the Hon'ble Supreme Court culled out the general principles concerning the retrospectivity of a legislation as under: General Principles concerning retrospectivity 27. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later 30. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India Ors. v. Indian Tobacco Association[5], the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee who transfers his share in the project to any other person on or before the date of issue of said certificate of completion. It is also proposed to provide that in such a situation, the capital gains as determined under general provisions of the Act shall be deemed to be the income of the previous year in which such transfer took place and shall be computed as per provisions of the Act without taking into account this proposed provisions. It is also proposed to define the following expressions competent authority , specified agreement and stamp duty value for this purpose. It is also proposed to make consequential amendment in section 49 so as to provide that the cost of acquisition of the share in the project being land or building or both, in the hands of the land owner shall be the amount which is deemed as full value of consideration under the said proposed provision. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years. It is also proposed to insert a new section 194-IC in the Act so as to provide that in case any monetary consideration is payable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the legislature in its wisdom intended to impose a harsh levy. In such a case the judicial or quasi judicial authorities cannot help the situation by grabbing the legislative power in holding such later relaxation as retrospective, when the legislature has itself made it prospective. 36. In our considered opinion the border line between a substantive provision having retrospective or prospective effect, is quite prominent. One needs to appreciate the nature of the original provision in conjunction with the amendment. Once a provision has been given retrospective effect by the legislature, it shall continue to be retrospective. If on the other hand if the statute does not amend retrospectively, then one has to dig out the intention of the Parliament at the time when the original provision was incorporated and also the new amendment. If the later amendment simply clarifies its intention of the original provision, it will always be considered as retrospective. Like the case of Gold Coin Health Food P. Ltd. (supra) in which the Hon ble Supreme Court held that the amendment to Explanation 4 to section 271(1)(c)(iii) simply clarified the position which was existing since incepti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to pay would arise only on or after 1st April. As it could never have been the intention of the legislature to require the assessee to do impossible, the amendment made to section 43B was held to have retrospective effect from the date of insertion of the provision. Similarly in Alom Extrusions Ltd. (supra), the implementation of the provision led to the denial of deduction for all times notwithstanding the intention the legislature to allow deduction on payment basis. 39. Here it is important to note that the cases of Allied Motors (P.) Ltd. (supra) and Alom Extrusions Ltd. (supra) are based on the proposition that the implementation of the earlier provisions led to the consequences which were never envisaged. The emphasis is on the removal of unintended consequences and not intended consequences, even if harsh. It is settled legal position that there cannot be any equity about the tax. It is for the Parliament to decide as to in what manner the tax is to be levied and collected. If a provision is made which is harsh but otherwise constitutional and practical of implementation, there cannot be any question of reading down such provision on the ground of equity or hardship. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether : For the amendment of a statute to be construed as being retrospective, should not the amended provision itself indicate, either in terms or by necessary implication, that it is to operate retrospectively? In the light of this question, the Hon ble Supreme Court was called upon to reconsider its earlier judgments in Allied Motors (P.) Ltd. (supra), Suwalal Anandilal Jain (supra), Brij Mohan Das Laxman Das and Podar Cement. The Bench of five Hon ble Judges in this case noted that there is no conflict between the judgments which requires resolution by way of reference. From this judgment it is apparent that those earlier cases before the Hon ble Supreme Court for a decision as to whether the amendments considered therein were retrospective or prospective, were decided on the basis of the nature of amendment and the concerned benches rendered appropriate judgments after taking into consideration all the relevant criteria . 16. Thus, it can be seen that every benefit conferred by the Legislature is not always retrospective in nature. 17. By virtue of above amendment, the Legislature intends to confer a benefit which was hitherto not available and hence it is applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the property as mentioned in the development agreement is clearly for the land as well as the super structure to be built up on such land which is given for development. Though the development agreement does mention the period of completion of the project, it certainly remain uncertain as to whether the construction would be completed within the stipulated period. The market condition and the market rate when the constructed area is handed over to the assessee may also vary and it may be more or less than the estimated value of the property. Therefore, the same cannot be adopted for the computation of the capital gains. In our view, the value adopted by the AO i.e. ₹ 2200 per sft being the SRO value of the land on the date of transfer is reasonable and correct. We, therefore, uphold the order of the AO on the computation of the short term capital gains. 20. As regards the allowability of the expenditure of ₹ 80.00 lakhs which she claimed to have paid to one Shri Gnaneshwar for arranging the development agreement, the assessee has not been able to produce any evidence of making the payment during the relevant previous year even before the Tribunal in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the year of taxability and prayed that if the year of taxability is advanced to A.Y 2007-08, then the additional ground on the allowability of the expenditure in connection with the transfer should be considered. 25. The learned DR, however, opposed the admission of both the additional ground and additional evidence on the ground that they are pure factual issues. 26. Having regard to the rival contentions and the material on record, we find that the assessee has offered the long term capital gain to tax in the year of receipt of constructed area and has also claimed the payment of ₹ 80.00 lakh to Mr. Gnaneshwar was as expenditure incurred in connection with the development agreement. Therefore, the claim is not a fresh claim but it is shifted to A.Y 2007-08 i.e. the year of payment as the long term capital gain is also brought to tax in this year. Therefore, we are inclined to admit the additional ground as well as the additional evidence and deem it fit and proper to remit it to the file of the AO for verification of the additional evidence and adjudication of the additional ground of appeal in accordance with law after allowing the assessee, sufficient opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain arising out of the sale of the flat along with the undivided share of land of the said flat. 31. As regards the disallowance of the claim of expenditure on brokerage, we have considered the allowability of the same for the A.Y 2007-08 and we have remitted it to the file of the AO. Therefore, the grounds of appeal raised by the assessee for the A.Y 2011-12 are all rejected except to the extent of the directions given to the AO to bring to tax only the capital gains on the sale of the flat. ITA No.579/Hyd/2016 A.Y 2006-07 32. This is assessee s appeal for the A.Y 2006-07 against the levy of penalty u/s 271(1) (c) of the Act. The AO has initiated the penalty proceedings u/s 271(1)(c) of the Act for the A.Y 2006- 07 on the ground that the assessee has entered into a development agreement cum GPA but has not offered the long term capital gain to tax in her return of income. 33. The learned Counsel for the assessee submitted that the assessee has offered the income to tax for the A.Y 2011-12 i.e. on receipt of the possession of the property and therefore, there was no concealment and furnishing of inaccurate particulars of income. He submitted that the issue of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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