Santosh Kumar Subbani., Hyderabad V. Income Tax Officer, Ward-11(3), Hyderabad

ITA 1348/Hyd/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3226 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR PANDEY
• Assessee Lawyers: B V KRISHNA RAO
• Keywords: Capital asset; Set aside; Capital Gains
• Section: 13; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI P. MADHAVI DEVI, JUDICIAL MEMBER AND D.S. SUNDER SINGH, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCE) ITA NO. 1348/ H YD/2017 AY: 2007 - 08 SANTOSH KUMAR SUBBANI, HYDERABAD. PA N AVDPS 7225F VS. INCOME - TAX OFFICER, WARD 11( 3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.V. KRISHNA RAO REVENUE BY : SHRI SUNIL KUMAR PANDEY DATE OF HEARING DATE OF PRO NOUNCEMENT : : 09/11/2020 13 /11/2 020 ORDER PER D.S. SUNDER SINGH, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 5, HYDERABAD , DATED 30/05/2017 FOR THE AY 2007 - 08. 2. ALL THE GROUNDS RAISED IN THIS APPEAL ARE RELATED TO TAXING THE SHORT TERM CAPITAL GAINS OF RS. 4,38, 029/ - INVOKING THE PROVISIONS OF DEEMED TRANSFER U/S 2(47(V) O F THE IT ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DID NOT FILE THE RETURN OF INCOME FOR THE AY 2007 - 08 .THE AO HAVING RECEIVED THE 2 ITA.NO. 1348 /HYD/201 7 SANTOSH KUMAR SUBBANI, HYD. INFORMATION WITH REGARD TO TRANSFER OF PROPERTY T HROU GH SALE CUM DEVELOPMENT AGREEMENT - CUM - GPA WITH M/S 21 ST CENTURY INVESTMENTS & PROPERTIES LD. . VIDE DOCUMENT N O. 5126/2007, DATED 26/03/2007 ISSUED THE NOTICE U/S 148 ON 29/03/2014 AND IN RESPONS E TO WHICH, THE ASSESSEE FILED THE RETURN OF INCOME ON 2 3 /02/2015 ADMITTING THE TOTAL INCOME OF RS. 74,380/ - FROM OTHER SOURCES AND AGRICULTURAL INCOME OF RS. 1,65,340/ - . THE CASE WAS TAKEN UP FOR SCRUTINY AND DETAILS WERE CALLED FOR. AS PER THE INFOR MATION RECEIVED BY THE AO, THE ASSESSEE HAD ENTERED INTO DEV E LOPMENT AGREEMENT - CUM - GPA WITH M/S 21 ST CENTURY INVESTMENTS & PROPERTIES LT D . , VIDE DOCUMENT NO. 5126/2007, DATED 26/03/2007 AND TRANSFERRED THE LAND ADMEASURING 0.15 GUNTAS AT SURVEY NO. 343 LOCATED AT NIZAMPET VILLAGE, RR DIST. THE DEVELOPER HAS TO COMPLE TE TH E DEVELOPMENT WITHIN 24 MONTHS AND THE ASSESSEE HAS TO RECEIV E 5000 SQ U ARE FEET BULT - UP A REA . T HE ASSESSEE BEFORE THE AO SUBMITTED THAT THE DEVELOPER DID NOT PERFORM THE CONSTRUCTION ACTIVITY , AND H ENCE, ARGUED THAT THERE IS NO CASE OF CAPITAL GAINS . THE A O CONDUCTED THE ENQUIRIES, THROUGH INSPECTOR AND FOUND THAT NO DEVELOPMENT WAS TAKEN PLACE ON THE SAID LAND. HOW EVER, S INC E , THE ASSESSEE HAS HAND ED OVER THE PROPERTY AS PER THE AGREEMENT DATED 26/03/200 TO THE DEVELOPER , THE AO VIEWED THAT IT WAS HIT B Y SECTION 2(47)(V) OF THE IT ACT AND ACCORDINGLY, ASSESSED THE SRO VALUE OF RS. 11,89,883/ - / - AS SALE CONSIDERATION AN D ACCORDINGLY DETERMINED THE SHORT TERM CAPITAL GAINS AS UNDER: MARKET VALUE OF T HE BUIL T - UP AREA INCLUDING LAND AS ADOPTED BY THE SR O AT TH E TIME OF REGISTRATION RS. 59,40,000 3 ITA.NO. 1348 /HYD/201 7 SANTOSH KUMAR SUBBANI, HYD. OF THE DEVELOPMEN T AGREEMENT MARKET VALUE OF THE LAND AT THE TIME OF REGISTRATION OF THE DEVELO PMENT AGREEMENT (ADOPTED THE SAME VALUE OF THE LAND AS DETERM INED AT THE TIME OF PURCHASE OF THE LAND BY THE ASSESSE E AS TH E SRO HAS NOT GIVEN THE BIFURCATION OF THE VALUE LAND AND VALUE OF BUILT UP AREA AT THE TIME OF REGISTRATION OF DEVELOPMENT AGREEMENT.) RS. 16,42,310 MARKET VALUE OF THE BUILT UP AREA EXCLUDING LA ND AS ADOPTED BY THE SRO RS. 42,97,690 MARKET VALUE OF THE BUILT UP AREA ASSIGNED TO THE ASSESSEE AS PER THE DEVEL OPMENT AGREEMENT (I.E. SALE CONSIDERATION IN LIEU OF TRANSFER OF LAND) TOTAL VALUE OF THE LAND ADMEASURING 1815 SQ.YDS. 16,42,310/ - LESS: VALUE OF LAND ADMEAUSRING500 SQ.YDS. RETAINED BY TH E ASSES SEE AS PER DEVELO PMENT AGREEMENT CUM GPA 4,52,427 VALUE OF LAND ADMEASURING 1315 SQ.YDS TRANSFERRED TO THE DEVELOPER 11,89,883/ - THE SHORT TERM CAPITAL GAINS IS WORKED OUT A S UNDER: SALE CONSIDERATION RS. 16,27,912/ - LESS: COST OF LAND SO L D. RS. 11,89,883/ - STCG RS. 4,38,029/ - 3.1. AGAINST THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE OBSERVING THAT THERE WAS EXCHANGE OF PROPERTY, WHICH AMOUNT ED TO TRANSFER WITHIN THE MEANING OF SECTION 2(47(V) OF THE ACT ON 24/03/2006 AND THE GAIN RESULTING FROM SUCH TRANSFER REQUIRED TO BE TAXED IN THE YEAR IN WHICH THE AGREEMENT WAS ENTERED INTO COUP LED 4 ITA.NO. 1348 /HYD/201 7 SANTOSH KUMAR SUBBANI, HYD. WITH BY GIVING POSSESSION OF T HE PROPERTY TO THE DEVEL OPER. AGAINST T HE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD ENTERED INTO DEVELOPMENT AGREEMENT WITH M /S 21 ST CENTURY INVESTMENTS AND PR OPERTIES LTD. FOR CONSTRU CTION OF DUPLEX HOUSES AND THE ASSESSEE WAS TO RECEIVE THE BUILT UP AREA OF 5000 SQ.FT. HE SUBMITTED THAT, HOWEVER, AFTER ENTERING DEVELOPMENT AGREEMENT, THE DEVELOPER HAS VANISHED AND NO DEVELOPM ENT TOOK PLACE. THOUGH ON PAPER PROPERTY WAS GIVEN FOR DEVE LOPMENT, THE FA CT IS THAT NO DEVELOPMENT WAS TAKEN PLACE AND NO CONSTRUCTED AREA WAS RECEIVED BY THE ASSESSEE THUS THE INCOME NEITHER ACCRUED NOR RECEIVED BY THE ASSESSEE AND, HENCE , THE LD. AR ARG UED THAT THE SAME CANNOT BE TREATED AS TRANSFER WITHIN THE MEANING OF SECT ION 2(47)(V) OF THE AC T TO T HE CAPITAL GAINS AND THE SAME IS UNJUSTIFIED . SINCE THERE WAS NO REAL INCOME RECEIVED BY THE AO, THE LD. . AR ARGUED THAT THE CIT(A) MISGUI DED HIMSELF IN CONFIR MING THE ADDITION, THEREFORE, REQUESTED TO SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 5. THE LD. . DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES AND ARGUED THAT SINCE THE ASSESSEE HAS ENTERE D INTO DEVELOPMENT AG REEMENT AND GIVEN POSSESSION OF THE LAND TO THE DEV ELOPER, THE CAPITAL GAINS GETS ATTRACTED, AS DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO VS. 5 ITA.NO. 1348 /HYD/201 7 SANTOSH KUMAR SUBBANI, HYD. DCIT,( ITTA NO. 245 OF 2014 DATED 09 - 04 - 2014) CAPIT AL GAINS REQUIRED TO BE BROUGHT TO TAX. 6. WE HAVE HEARD BOTH THE PARTI ES AND PERUSED THE MATERI AL ON RECORD. IN THE INSTANT CASE, THE ASSESSEE HAS ENTERED INTO DEVELOPMENT AGREEMENT FOR CONSTRUCTION OF DUPLEX HOUSES AND ASSESSEE WAS TO RECEIVE THE CONSTRUCT ED AREA OF 5000 SQ .FT BY VIRTUE OF DEVELOPMENT AGREEMENT. HOWEVER, AF TER ENTERING INTO AGREEME NT, THE DEVELOPER HAS VANISHED AND NO REAL DEVELOPMENT TOOK PLACE TILL DATE AS VERIFIED AND CONFIRMED BY THE AO THROUGH THE DEPARTMENTAL INSPECTOR. IT APPEARS THAT NEITHE R DEVELOPMENT HAS TAKEN PLACE NOR DEVELOPED AREA WAS RECEIVED BY THE ASSESSEE. THIS FACT W AS CONFIRMED BY THE AO HIMSELF. FROM THE ABOVE, IT IS CLEAR THAT THERE WAS NO REAL INCOME EXCEPT NOTIONAL INCOME AS PER THE DEVELOPMENT AGREEMENT, WHICH HAS NEVER BEE N RECEIVED BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE FACTS, T HE QUESTION WHETHER THE POS SESSION IS LYING WITH THE DEVELOPER OR TAKEN OVER BY THE ASSESSEE IS THE ISSUE, WHICH DECIDES THE TAXABILITY OF CAPITAL GAINS. IT APPEARS THAT TILL DATE DEVELOPMENT AGREEMENT WAS NOT CANCELLED AND NO PU BLIC NOTICE WAS ISSUED BY THE ASSE S SEE FOR CANCELLATIO N OF DEVELOPMENT AGREEMENT AS STATED BY THE LD. AR DURING THE COURSE OF APPEAL PROCEEDINGS. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IS REQUIRED TO BE REMITTED BA CK TO THE FILE OF TH E AO WITH A DIRECTION TO DE CIDE THE CAPITAL GAINS AFTE R VERIFYING WHETHER THE POSSESSION IS TAKEN BACK BY THE ASSESSEE OR NOT AND THE ASSESSEE CANCELLED THE DEVELOPMENT 6 ITA.NO. 1348 /HYD/201 7 SANTOSH KUMAR SUBBANI, HYD. AGREEMENT OR NOT. IN CASE, THE POSSESSION IS TAKEN BACK BY THE ASSE SSEE AND THERE WAS NO DEVE LOPMENT , T HE ASSESSEE SUCCEEDS IN APPEAL . A CC ORDINGLY , WE REMIT THE MATTER BACK TO THE FILE OF AO T O DECIDED THE ISSUE FRESH AS PER THE DIRECTIONS GIVEN IN THIS ORDER. IT IS NEEDLESS TO SAY THAT THE AO MUST AFFORD REASO NABLE OPP ORTUNITY TO THE ASSESSEE. ACCORDINGLY, THE GROUND S RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER , 20 20 SD/ - SD/ - ( P. MADHAVI DEVI ) (D.S. SUNDER SINGH) JUDICIAL MEMEBR ACCOUNTANT MEMBER HYDERABAD, DATED: 13 TH NOVEMBER , 2020 . KV COPY TO: 1) SUBBANI SANTOSH KUMAR, H.NO. 3 - 5 - 82/16, VIVEKANANDA NAGAR, KUKATP ALLY, HYDERABAD 500 072 2) IT O , WARD 1 1 ( 3 ), 10 T H FLOOR, SIGNATURE TOWER S, KONDAPUR, HYDERABAD 500 084. 3) CIT(A) 5, HYDERABAD. 4) PR. CIT 5 , HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6) GUARD FILE.