Madhu Kumar Patel , Hyderabad V. Deputy Commissioner of Income Tax ,(International Taxation )-2(i/c), Hyderabad

CO 11/Hyd/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3477 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 13-07-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 04-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition; Capital Gains
• Section: 54; 54F; 22

Judgement Text

ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 1 of 8 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No. 343/Hyd/2021 Assessment Year:2012-13 Dy.CIT (International Taxation-2), Hyderabad Vs. Shri Madhu Kumar Patel Hyderabad PAN:BVDPP3797G (Appellant) (Respondent) C.O. No.11/Hyd/2021 (Arising out of ITA No. 343/Hyd/2021) Assessment Year:2012-13 Shri Madhu Kumar Patel Hyderabad PAN:BVDPP3797G Vs. Dy.CIT (International Taxation2), Hyderabad (Appellant) (Respondent) Assessee by : Shri K.A. Sai Prasad, CA Revenue by: Shri Rajendra Kumar, CIT(DR) Date of hearing: 14/07/2022 Date of pronouncement: 21/07/2022 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 12.03.2021 of the learned CIT (A)-10, Hyderabad relating to A.Y.2012-13. The assessee has filed a cross objection against the appeal filed by the Revenue. For the sake of convenience, the appeal as well as the C.O were heard together and are being decided in this common order. ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 2 of 8 2. There is a delay of 80 days in filing of the appeal by the Revenue and one day in filing of the C.O by the assessee. Both sides have already filed condonation applications explaining the reasons for such delay. After hearing both the sides, the delay in filing of the appeal by the Revenue and the C.O. by the assessee are condoned and the appeal as well as the C.O are admitted for adjudication. 3. Facts of the case, in brief, are that the assessee is a Non-Resident and a resident of the United Kingdom. He has not filed his return of income for the impugned A.Y. In this case, a letter was received from the DDIT (Inv.), Unit-II(3) Hyderabad saying that during a search & seizure operation in the case of M/s. SNR Nirman India Pvt Ltd on 3.2.2015, a joint development agreement signed by the assessee Shri Madhu Kumar Patel was traced. As per information, the assessee had entered into joint development agreement with M/s. SNR Nirman India Pvt Ltd on 13/1/2012 to construct residential flats on agreed sharing ratio of 65.35 (65% for the development share and 35% for the landowner’s share) on 9680 sq.yards of land in survey number 51/1, situated at Mansoorabad Village, Saroornagar Mandal, R.R. Distt. As per the JD agreement cum irrevocable general power of attorney dated 13.1.2012, the assessee had received 52 constructed flats as his share admeasuring 65,190 sq.feets (built up area). The total cost of the project was Rs.19,35,96,000/- out of which assessee’s share is Rs.6,77,58,600/- (35%). However, the assessee has not filed return of income for the A.Y 2012-13 declaring the same as taxable income. Hence, an income of Rs.6,77,58,600/- earned by the assessee during the financial year 2011-12 relevant to the A.Y 2012-13 was not offered to taxation. ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 3 of 8 4. On the basis of the above information, the Assessing Officer after recording reasons and after taking prior approval from the CIT (IT & TP) reopened the assessment and issued notice u/s 148 of the Act, dated 19.03.2019. Although this notice was duly served through the e-mail address of the assessee and a copy of the same was also served on 30.03.2019 however, there was no compliance to the said notice. Thereafter, the Assessing Officer issued another letter to the assessee to file the return of income for the A.Y 2012-13 but there was also no compliance. Subsequently, the Assessing Officer issued letter to the SRO, Saroornagar and SRO, Hayatnagar, for ascertaining the market value of land as on 1.4.1981. It was informed that the rate per sq. yard is Rs.1/-. The Assessing Officer accordingly calculated the cost of acquisition of the land at Rs.9,680/-. The Assessing Officer, thereafter, issued another letter to the assessee dated 10.12.2019 giving opportunity to file objections, if any, and show cause as to why the assessment in the case of the assessee should not be completed u/s 144. In response to the same, assessee replied as under: “During the financial year ending 31.3.2012, I have not given possession of my land to the developer, nor I have received any constructed flats from the developer...the development agreement entered into between himself and the builder was only for construction. The builder was more like a financier cum builder. As such there is no transfer within the meaning of section 2(47) r.w.s 53A of the Transfer of Property Act”. 5. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He noted that a plain reading of the JDA dated 13.01.2012 makes it clear that the assessee had entered into an agreement for sale cum irrevocable general power of attorney. He noted that vide para 9 of the agreement, "the landowner (i.e., the assessee) agreed & allows the ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 4 of 8 developer as a licensee to enter into the scheduled property for the development of the same into a multi-stories residential complex”. 5.1 He further noted that para 22 of the JDA reads as under: "The landowner hereby expressly constitutes" the developer as his lawful agent/attorney to act on his behalf to do the acts mentioned in this deed. The developer empowered to enter is authorized & into an agreement of sale with the Scheduled prospective purchasers of the property falling to the share of the assessee or and to receive any undivided part thereof consideration thereof and to deliver the property to possession of the scheduled the nominees of the Developer and to complete the sale of the said property to the nominees of the developer or to any prospective purchasers of flats." 6. Similarly, Para-23 of the JDA empowers and authorizes the developer to participate in all proceedings before the authorities on behalf of the landowner. He, therefore, held that the JDA falls within the ambit of section 53A of the Transfer of Property Act, since in this case the developer has in part performance of the contract, taken possession of the property and is willing to perform his part of the contract of developing the said property and also dealing with the same on behalf of the assessee. Relying on the provisions of section 2(47) of the I.T. Act, the Assessing Officer determined the Long-Term Capital Gain (LTCG) in the hands of the assessee at Rs.6,77,04,992/- by observing as under: “Since the irrevocable general power of attorney has been executed by the assessee in favour of the developer, the developer no longer retains the status of mere licensee. Capital gain tax liability would be attracted by the owner of the land entering into development agreement immediately when the irrevocable POA is executed in favour of the developer, as it constitutes the "transaction" by which the developer is allowed to take possession of the property in part performance of the contract for transfer, within the meaning of Section 2(47)(V). ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 5 of 8 Thus, from the consolidated understanding of the afore stated facts, it is clear that capital gains had accrued to the assessee on 13/01/2012 (date of execution of the JDA cum irrevocable GPA i.e., during the A.Y. 2012-13 and the assessee was thus liable to pay tax during the A.Y. 2012-13. 7. In appeal, the learned CIT (A) upheld the re- assessment proceedings initiated by the Assessing Officer and also held that the provisions of section 2(47)v) and 2(47)(vi) are clearly attracted in this case and the capital gains are to be worked out in the impugned A.Y. He however, admitted the additional ground raised before him for the first-time claiming exemption u/s 54F and on the basis of the arguments advanced by the assessee and relying on various decisions, he held that the assessee is entitled to claim exemption u/s 54F of the Act in respect of 52 residential flats allotted to him by the builder. 8. Aggrieved with such order of the learned CIT (A), the Revenue is in appeal by raising the following grounds of appeal. 1. he Td. CIT(A) has erred in law in admitting the additional grounds of appeal raised Dy the assessee seeking exemption u/s. 54 F of the Act without appreciating the fact that such grounds do not fall under purely legal grounds inasmuch as the assessee is required to prove a bundle of conditions as stipulated u/s.54F of the Act, warranting gathering of fresh facts and appreciation of the same. 2. Without prejudice to the above, the Ld. CITA) has erred on facts and in law in holding that the assessee is entitled to claim exemption u/s.54 F of the Act. in respect of all the 52 residential flats ignoring the fact that they are independent flats located in 5 different blocks and each block consisting of 5 different floors without any common passage, kitchen, entrance, door no., etc. and, therefore, such 52 independent flats cannot be considered as "a residential house". Description Amount 1 Assessee’s share income Jt. Dev. Project (Rs.19,35,96,000 x 35%) 6,77,58,600 2 Cost of acquisition of land (9680 x 65%) 6292 sq.yd x Rs.1/= Rs.6,292/- 6292 3 Indexed value of cost of acquisition (6292 x 852/100) 53,608 4 Income from LTCG (1-3) 6,77,94,992 ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 6 of 8 3. The Ld. CIT(A) has erred in relying upon various case laws in order to allow exemptions u/s.54F of the Act. without appreciating the fact that the facts and legal 1Ssues involved in such case laws are entirely different and distinguishable vis-a-vis facts involved in the case on hand. 4. The Ld. CIT(A) has erred in law in holding that in view of the amendment of section 4 of the Act, which is prospective in nature w.e.f. A.Y. 2015- 16, the assessee is entitled to claim exemption u/s.54F of the Act for the A.Y.2012-13. in respect of all the 52 independent residential flats without appreciating the fact that even before the amendment, multiple residential flats located in different blocks and floors, cannot be construed as a single residential house de horse access to all the 52 flats through a single entrance, having single address, single door no., and a common passage or kitchen, as the case may be, connecting all the flats. 5. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if considered necessary”. 9. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. It is an admitted fact that the assessee had not filed the return of income despite issuance and service of notice u/s 148 of the I.T. Act. As per provisions of section 54F, the assessee is not entitled to deduction u/s 54F, if he has more than one residential flat other than the new asset on the date of transfer of the capital asset. However, it is not known as to whether the assessee owns more than one house other than the new asset since no return was filed and no enquiry was conducted either by the Assessing Officer or the learned CIT(A). We find the learned CIT (A) without ascertaining the basic requirement was carried away by the arguments advanced by the assessee before him and allowed the additional ground raised by the assessee which is not a legal one but requires verification of fact. Neither she has verified the facts herself nor called for a remand report and for the reasons best known to her has allowed the claim of exemption u/s 54F of the I.T. Act in respect of 52 flats without addressing the various ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 7 of 8 issues raised by the Assessing Officer in the assessment order. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. If required, the learned CIT (A) shall call for a remand report from the Assessing Officer. The learned CIT (A) is also directed to consider as to how the assessee is entitled to the benefit of section 54F of the Act when as per the development agreement traced during the course of search and seizure operation in the case of SNR Nirman India Pvt. Ltd the assessee has received 52 constructed flats and whether that will amount to construction of a residential flat. The grounds raised by the Revenue are accordingly allowed for statistical purposes. C.O.No.11/Hyd/2021 10. Assessee in his cross objection has raised the following grounds: 1. The learned First Appellate Authority is not justified in not adjudicating the ground regarding restriction of Cost of Acquisition to Rs.1/- per Sq.yard. 2. The Learned First Appellate Authority is not justified in not adjudicating the ground relating to Computation of Consideration adopted by Ld. Assessing Officer 3.The Learned First Appellate Authority is not justified in not holding that there is no transfer on Development Agreement Cum-GPA. 11. We have heard the rival arguments made by both the sides. Since the appeal filed by the Revenue has been restored to the file of the learned CIT (A) and since the grounds raised by the assessee in the cross objection are not adjudicated by the learned CIT (A), therefore, considering the totality of the facts of the case and in the interest of justice, we deem it fit and proper to restore the grounds raised by the assessee in the C.O to the file of the ITA No 343 of 2021 and CO 11 of 2021 Madhu Kumar Patel Hyderabad Page 8 of 8 learned CIT (A) for adjudication. Needless to say, the learned CIT (A) shall adjudicate the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds raised by the assessee in the C.O are accordingly allowed for statistical purposes. 12. In the result, appeal by the Revenue as well as the C.O filed by the assessee are allowed for statistical purposes. Order pronounced in the Open Court on 21 st July, 2022. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (R.K. PANDA) ACCOUNTANT MEMBER Hyderabad, dated 21 st July, 2022. Vinodan/sps Copy to: S.No Addresses 1 Dy.CIT (International Taxation-2) (I/c) Room No.506, 5 th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad 2 Shri Madhu Kumar Patel, H.No.3-9-376 Ward No.5, Mansoorabad, Chintalkunta, LB Nagar, Hyderabad 500074 3 CIT (A)- 10,Hyderabad 4 CIT-(IT & TP), Hyderabad 5 Chief Commissioner of Income Tax (IT) (SZ) Bengaluru 6 DR, ITAT Hyderabad Benches 6 Guard File By Order