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TMI Blog2023 (5) TMI 1442X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the sales revenue of the flats constructed on the said land. The assessee received part consideration from sale of land for the first time in the period relevant to assessment year 2013-14. The assessee offered income from sale of land under the head "Capital Gains". The Assessing Officer (AO) after due enquiry accepted the income returned by the assessee under the head "Capital Gains". Similarly, in the assessment year 2014-15, the income offered by the assessee from sale of land under the head "Capital Gains" was accepted by the AO. In the impugned assessment year, the assessment was selected for limited scrutiny to examine: Whether the capital gains/land is genuine and has been correctly shown in the return of income? The AO issued notice u/s 142(1) of the Act (at page 1 of the Paper Book-II). The assessee gave a detailed reply to the said notice. A copy of the reply dated 01.11.2017 is at page 28 of the Paper Book-I. The AO completed the assessment vide order dated 27.12.2017 accepting income declared by the assessee. The PCIT issued show cause notice dated 09.03.2020 u/s 263 of the Act. The PCIT invoked Explanation 2(a) of section 263 of the Act to contend that the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on the decision in the case of Gabriel India Limited, 203 ITR 108 (Bombay). The ld. Counsel finally submitted that impugned order u/s 263 of the Act passed by the PCIT is liable to be quashed as the AO has made necessary enquiry in assessment proceedings. 5. Per contra, Dr. Mahesh Akhade representing the Department strongly supported the impugned order. The ld. Departmental Representative (DR) submitted that a perusal of the assessment order dated 27.12.2017 would show that it is a cryptic order and the AO has not applied his mind on an issue for which the case was selected under limited scrutiny. In respect of assessment order for AY 2013-14 and 2014-15, the ld. DR submitted that the assessment orders for preceding assessment years are also wrong as the AO in the preceding assessment years has not decided the issue in right perspective. He submitted that in any case each assessment year is independent assessment year and assessment for each assessment year has to be examined independently. The principle of res judicata does not apply in income tax proceedings. The AO has to investigate each assessment year and has to pass assessment order on the facts on each assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital asset into stock in trade. Insofar as mode of consideration is concerned, It has been mutually agreed between assessee and Godrej Properties Limited to share revenue generated from sale of flats. Hence, the assessee received its share of consideration as and when flats are sold. Insofar as the relation between the assessee and the developer, the ld. Counsel referred to Clause 28 of the agreement and submitted that the relation between the parties is strictly on principal to principal basis and it has been specifically mentioned that nothing contained in the agreement shall be construed as constituting a partnership between the parties or a joint venture between the parties. The owner of the land will not be liable for the tax, deals, matters and things entered into, executed or agreed to be done by the developer with third party. The ld. Counsel further placed reliance on the following decisions to support her submissions: 1. Malabar Industries Co. Ltd. vs. CIT, 243 ITR 83; 2. JRD Tata Trust vs. DCIT, 112 taxmann.com 275 (Mumbai Trib.) 7. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee on revenue sharing model as and when the flats are sold. The sale proceeds of constructed part of building is shared in ratio of 50% each by the assessee (owner of the land) and the developer. 10. One of the contention raised by the Revenue is that the revenue sharing model indicates that the assessee is also bearing risk. Here it would be relevant to refer to some of the Clauses in the development agreement (supra). The extract of the relevant Clauses from the agreement are reproduced herein below: "3. SECURITY DEPOSIT 3.1 The Developer shall pay to the Owner an Interest Free Refundable Security Deposit for an amount of Rs.10,00,00,000/- (Rupees Ten Crores only) (hereinafter referred to as "the Deposit) for the due observance and performance of the obligations undertaken by the Developer in respect of the transaction/ arrangement of development of the said property in the following manner :- (i) A sum of Rs.2,00,00,000/- (Rupees Two Crores only) has been paid by the Developer to the Owner on or before the execution hereof (the payment and receipt whereof the Owner doth hereby admit and acknowledge and acquit release and discharge the Developer from the same) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Project Completion is not achieved by the Developer within the period as set out in clause 23.1 hereinabove, the Developer shall be liable to pay to the Owner, liquidated damages, calculated at the rate of Rs.4,00,000/- (Rupees Four Lakhs only) per month of delay beyond the stipulated period (including the grace period) in clause 23.1 herein above. 23.2 The Developer shall alone be responsible for the following losses or claims that may arise to the Project. Xxxxxxxxxxxx xxxxxxxxxxxx 25. OWNERSHIP OF THE PROPERTY The possession of the said property is and shall always continue to be with the Owner until the time possession of the completed residential units in the proposed building/s shall be handed over by the Developer to the respective purchasers of such residential units. The authority and permission to be granted by the Owner to the Developer to commence construction of the proposed residential building/s shall not be construed to be handing over or giving possession of the property to the Developer. xxxxxxxxxxxxx xxxxxxxxxxxx 28. RELATIONSHIP BETWEEN THE PARTIES Nothing contained herein shall be construed as or be deemed to Developer as constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it can be presumed that they have attained finality. The impugned assessment year is a third assessment year. Since, the agreement consequent to which the income was offered to tax as capital gains was the same, there could have been no deviation in the nature of income. We are live to the fact that the principle of res judicata do not apply in income tax proceedings, nevertheless, where there is no change in the facts and circumstances from the preceding assessment year, the Rule of Consistency cannot be ignored (Re. Distributors Baroda (P) Ltd. vs. Union of India, 155 ITR 120 (SC) and Radhasoami Satsang vs. CIT, 193 ITR 321 (SC)) 12. The Revenue has raised another objection that there is no discussion in the assessment order with respect to genuineness of the capital gains for which the case of assessee was selected for limited scrutiny. Undisputedly, in the assessment order, there is no discussion with respect to the capital gains on sale of land. However, from the documents on record it is evident that the AO has issued notice u/s 142(1) of the Act for making enquiry. The assessee has responded to the notice giving the details of the transactions. The AO thereafter has n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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