TMI Blog2019 (3) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... From the above discussion, it is clear that the possession of the land was handed over to the developer with the right of ownership as de-facto and not dejure. The transfer in the ownership has not passed on to the developer until the developer undertakes to complete the project as per the terms or at least 90% of the project has to be complete or to the satisfaction of the parties involved in the agreement. In the given case, there is no possibility of completing the project in certainty. Considering the uncertainties and that no real development activities were carried on by the developer in AY 2009-10, in our considered view, there is no incidence of transfer of property as per section 2(47)(v) in the AY 2009-10. Therefore, AO cannot tax the capital gains in AY 2009-10. Accordingly, ground raised by the revenue in this regard, is dismissed. Proceedings u/s 153C - AO has initiated proceedings u/s 147 after forming an independent opinion with regard to escapement of income on the basis of receipt of information from AO of the searched person communicating after the CIT(A)’s order and not on the basis of receipt of seized document - HELD THAT:- As far as this assessee is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CO Nos. 65 66/Hyd/16 filed by the assessees against the orders of CIT(A) 3, Hyderabad. As identical issues are involved in all these appeals, they were clubbed and heard together and therefore, a common order is passed for the sake of convenience. ITA No. 765 773/Hyd/2017 by the assessee and the revenue 2. The factual details and background of the case are that the assessee, is an individual, and there was search and seizure operation u/s 132 of IT Act 1961 in the residential premises of the assessee on 07.07.2008. He filed return of income for A.Y.2009-10 on 30.07.2009 admitting income of ₹ 58,28,850/-. The scrutiny assessment u/s 143(3) was completed on 19.11.2010 assessing the income at ₹ 58,86,933/-. 2.1 During the course of search proceedings certain documents identified as A/GR/RES/01 were seized. These were the copies of development agreement and the supplementary agreement entered by the assessee with M/s Legend Estates Pvt. Ltd. 2.2 Vide development agreement dated 3.2.2007 the assessee Sri Kosetti Gopal Raj and his sons Sri K. Nagaraju and Sri K. Kishore Kumar entered into an agreement with M/s. Legend Estates Pvt Ltd for development of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is unregistered. In Clause 3 of this agreement the assessee acknowledges the receipt of ₹ 12 Crores. 2.6 There was another supplementary agreement dated 6.11.2012 incorporating all contents of supplementary agreement dated 11.2.2011. This agreement dated 6.11.2012 was registered. 2.7 Originally the Assessing Officer brought the capital gain to tax in A.Y.2008-09 taking the date of transfer as 17.11.2007.It is pertinent to mention that an unsigned and un registered agreement dated 17.11.2007 was found during search. The capital gains assessed in this order was ₹ 61,50,25,350/-. 2.8 On first appeal, the CIT(A) vide his order dated 28/11/2011 directed the AO to bring the capital gains to tax for the AY 2009-10 as the possession of land was handed over after obtaining the municipal permission on 05/08/2008. 2.9 On further appeal both by Department and the assessee, the coordinate bench of this Tribunal vide ITA No.140/Hyd/2012 dated 30.08.2013 upheld the order of CIT(A) and directed the Assessing Officer to examine the taxability of capital gain for A.Y.2009-10 subject to Sec.149, 150 and 153 of the IT Act. The relevant para of Hon'ble Tribunal is repeat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot have much relevance. In the aforesaid circumstances. therefore, the conclusion arrived at by the CIT(A) to the effect that there is a transfer within the meaning of section 53A read with section 2(47)(v) of the Act cannot be held to be without any substance. The aforesaid conclusion of the CIT(A) certainly is capable of being examined in the light of the ratio laid down by the Hon'ble Bombay High Court in case of Chaturbhuj Dwarakadas Vs ACIT, 260 ITR 491 (Bom.) and K. Radhika Vs DCIT, ITAT, Hyderabad, 47 SOT 180. We, therefore, do not find any infirmity in the order of the CIT(A) in directing the Assessing Officer to examine the issue of taxability of capital gain in the assessment year 2009-10 when his powers under the statute are co-terminus with that of the Assessing Officer. In our view the statute has neither put any fetters not the CIT(A) is powerless in directing the Assessing Officer to examine the taxability of a particular income in an approximate assessment year even if he finds it not taxable in the assessment year under dispute. The assessee certainly cannot have any grievance in assessability of an income in a particular assessment year if otherwise it is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case assessment for AY 2008-09 was completed on 19/11/2010 and on this date of 19/11/2010, notice u/s 148 could be issued for AY 2009-10, hence, notice u/s 148 dated 30/08/2013 is perfectly valid. 4.1 As regards merits of the case, the CIT(A) elaborately discussed the issue at length with various case law as well as referring to the Finance Bill 2017, directed the AO to tax the capital gains in the year of completion of project taking sale consideration at stamp duty value or actual consideration received, whichever is higher. 5. Aggrieved by the order of CIT(A), the assessee as well as revenue are in appeal before us raising the following grounds of appeal: 5.1 Grounds raised by the assessee: 1. The learned CIT(A)-3, Hyderabad (CIT(A) having held that no capital gains was assessable for asst. year 2009-10 ought to have clearly held that in the absence of the basis for quantification of long term capital gains at ₹ 54,94,81,659 not having been clearly spelt ought to have annulled the computed figure of Rs..54,94,81,659. 2. The learned (CIT(A) ought to have clearly held that the entire re-assessment proceedings u/s.147 rws 148 are illegal without jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to have quashed the re-assessment proceedings. 8. The reasons recorded by the AO to reopen the assessment proceedings is on the same set of facts which were in existence when the assessment order was passed for AY. 2008-09 and therefore, there was no fresh material in the possession of the AO to reopen the assessment proceedings and in the absence of any tangible material there was no nexus between the reasons recorded and the income escaping assessment and therefore the reopening proceedings are bad in law, invalid without jurisdiction and therefore must be quashed. 9. The learned CIT(A) failed to note that the provisions of section2(47)(v) of the I.T. Act, 1961 governed sales transactions where possession was given without registration and therefore ought to have clearly held that the transactions relating to the development agreement were outside the scope of the aforesaid section and thus ought to have clearly held that no income accrued to the assessee in the AY. 2009-10. 10. The learned (CIT(A) ought to have clearly held that the DClT erred in coming to a suo motto conclusion without accosting the assessee with the website information of M/s. Legend Estates P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entered prior to 01-04-2017. 4. The Ld. CIT(A) erred in directing the Assessing Officer to tax the Capital Gains in the year of completion of project taking sale consideration at stamp duty value or actual consideration received, whichever is higher ignoring the legal provisions. 5. Any other ground that may be urged at the time of hearing. 6. With regard to ground No.1, the ld. AR submitted that AO reopened the assessment considering the findings given by CIT(A) for the AY 2008-09. He argued that CIT(A) has given direction for the other AYs. In this regard, he relied on the following case laws: 1. Rajinder Nath Vs. CIT, [1979] 120 ITR 14 (SC) 2. ITO Vs. Murlidhar Bhagwan Das (SC) [1964] 52 ITR 335 3. Computer Science Corporation of India (P) Ltd. Vs. Addl. CIT, [2014] 268 CTR 110 (MP) 4. Munjal Showa Ltd. Vs. DCIT, [2016] 382 ITR 555 (Del.) Further, he submitted that there is no link with the tangible material for the reopened assessment for AY 2009-10. For this proposition, he relied on the judgment in the case of CIT Vs. Kelvinator India Ltd. 320 ITR 561 (SC). 6.1 With regard to merits of the case, ld. AR submitted that assessee has entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.) 7. Ld. DR submitted that reopening should not be on isolation, but, in this case, ITAT has confirmed the findings of ld. CIT(A) for the AY 2008-09, therefore, the AO has initiated proceedings based on the registered document clauses. He further submitted that change of development agreement cannot infer anything as assessee has already parted with the land. He also submitted that assessee has entered into huge financial dealings in this project, therefore, the ld. CIT(A) has rightly decided the issue in favour of the revenue in AY 2008-09. 7.1 With regard to deduction u/s 54F, ld. DR submitted that the flats are at unfinished condition and the same are not in position of habitation and, therefore, it has not fulfilled the conditions laid down in section 54F. Further, he submitted that as per section 54F, assessee is eligible to claim deduction only on one flat. 7.2 With regard to Department s appeal being ITA No. 765/Hyd/2017, he submitted that ld. CIT(A) has taken cognizance of the amendment to section 45(5A) in the Finance Act, 2017. He submitted that since the amendment is prospective in nature, CIT(A) should not have relied on such amendment to adjudicate the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development intact, this agreement was unregistered. iii) As per original agreement, the project should have completed by 05/08/2011 ( considering the date of municipal permission). iv) Assessee entered into another supplemental agreement dated 06/11/2012 incorporating all contents of supplementary agreement dated 11/02/2011. This supplement agreement was registered. v) Ld. CIT(A) has taken note of the current status of the project at the time of passing her order as below: As on the date of passing this order, the construction is at different stages, in some of the blocks construction is in progress, some of the blocks have not even started construction. In any case, no flat is fully completed except a model flat which is constructed for showing it to customers, which is being used for office purpose by developer. Though developer entered sale agreements with purchasers and collected the amounts, it did not complete construction of any flat, did not handover any flat to the purchasers. It is reliably learnt that the purchasers have filed suit against the developer. The owner did not enter any agreement with anybody as the construction of the project is abnormally dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, a copy of which is at page 51 of assessee's paper book, it appears assessee along with others are still having physical possession over the property. Be that as it may, after careful consideration of facts and materials on record, we are of the view, CIT(A)'s order being well founded and well reasoned needs to be upheld. Another crucial aspect which needs to be commented upon the CIT(A) has also held that the transaction will not attract capital gain as the asset transferred being an agricultural land is not a capital asset as defined uls 2(14) of the Act. This finding of e learned CIT(A) remains unchallenged and uncontroverted by the Department. For this reason also, short term capital gain computed by the AO cannot be sustained. In view of the aforesaid, we do not find any reason to interfere with the order of the CIT(A). 14. So far as the ground raised by the department challenging the view of CIT(A) to the effect that there cannot be any capital gain in absence of value of consideration received or accrued, we are at the view, the same is not required to be adjudicated as it is of mere academic interest in view of our finding that there is no transfer of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o possess the land and expected the developer to get municipal permission and expected to complete the project within reasonable period. In this case, the developer except getting municipal permission, has not performed any action to complete the project on time. The sole purpose of entering into JDA is to develop the property in compensation to surrendering the ownership of agreed proportion and not just to get the municipal permission. The municipal permission allows to carry out the development activities in the land, therefore, the developer gets authorisation from the municipal authorities and the owner of the property to commence development activities, in that process, the land is handed over to the developer as the defacto owner and the real ownership is not passed. This permission to hold the land for development does not give rightful ownership to the developer. This right accrues to the developer with a condition that the development will be done on the project on the wholesome basis. To invoke section 53A, there has to be reasonable certainty on the commitment from the developer. In the given case, the developer should have completed the project by 05/08/2011 but, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have held that the action u/s. 153C alone was the correct course of action relying on the decision of ITAT in the case of Mirza Rafiulla Baig, the facts of which are not identical to the present case. 3. The Learned CIT(A) ought to have appreciated that the Assessing Officer has initiated proceedings u/s .147 of the IT Act after forming an independent opinion with regard to escapement of income on the basis of receipt of information from the AO of the searched person communicating the CIT(A) order in the assessment done by him, and not on the basis of receipt of seized document. 4. The learned CIT(A) ought to have appreciated that the provisions of section 153C are not attracted in the present case, since the AO who was having the jurisdiction over the searched person did not form 'satisfaction' required as per the said provisions to transfer the related material as he was of the opinion that the entire capital gains had arisen in the hands of the assessee on whom he was having jurisdiction and assessed accordingly. Therefore, transfer of any document did not arise and consequently provisions of section 153C are not attracted. 5. Any other grounds that may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out in the case of Janapriya Engineers Syndicate and proceedings u/s 147 were initiated on the basis of the information received by the Assessing Officer about the agreement of sale between the assessee and Janapriya Engineers Syndicate. The ITAT held that the proceedings u/s 147 based on the information that came to light as a result of the search in the case of Janapriya Engineers Syndicate, had no legal sanctity as the same was against the spirit of the provisions of sec.153C. 5.2 The facts in the assessee's case are identical. The development agreement, to which the assessee was also a signatory, was a document that belonged as much to the assessee as to Sri K. Gopal Raj. Under the circumstances, the relevant provision of the Act enabling the Assessing Officer to assume jurisdiction was Sec. 153C and not sec. 147. Under the circumstances, the assessment is held to be void ab initio. The second ground of appeal is allowed. 13. Aggrieved by the order of CIT(A), the revenue is in appeal before us. 14. Considered the rival submissions and perused the material on record. We noticed that a search and seizure operation conducted on 07/07/2008 in the case of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion relevant to search requires the AO of the searched person to record satisfaction and he forms the wrong satisfaction, it fails there itself. Further, as per section 153C, not only AO of the searched person but AO of the other person to whom the incriminating material allegedly belongs also has to form satisfaction before initiating proceedings u/s 153C. It cannot be compensated by invoking section 147 as the mandate of section 147 is different. Since, the liability of assessee arises only because of search proceedings, proceedings u/s 153C alone can be initiated. Therefore, we uphold the order of CIT(A) on this issue and dismiss the ground raised by the revenue accordingly. 15. As the facts and grounds in the case of Kosetty Nagaraju in ITA No. 343/Hyd/2016 are materially identical to that of Kosetty Kishore in ITA No. 342/Hyd/2015, following the decision therein, we dismiss the grounds raised by the revenue in this case also. 16. As we have upheld the orders of CIT(A) dismissing the revenue appeals, the COs filed by the assessees have become infructuous and therefore, the same are dismissed as infructuous. 17. In the result, appeal of the assessee in ITA No. 773/Hyd/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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