T. Narsimha Rao (HUF), Secunderabad V. Income Tax Officer, Ward-10(5), Hyderabad

ITA 1586/Hyd/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5979 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-05-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 14-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARMADA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Difference of opinion; Change of opinion
• Section: 50C; 133(6); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1 1583/H/17 2010-11 T. PRABHAKAR RAO (HUF), SECBAD. PAN AAAHT 5253 N INCOME-TAX OFFICER, WARD 10(5), HYD. 2 1584/H/17 -DO- T. RAMESH (HUF), SECBAD PAN AAAHT3794 G -DO- 3 1585/H/17 -DO- T. NARAYANA RAO (HUF), SECBAD PAN AAAHT 3563 R -DO- 4 1586/H/17 -DO- T. NARSIMHA RAO (HUF), SECBAD PAN AACHT 9711 M -DO- 5 1587/H/17 -DO- T. ASHOK KUMAR (HUF), SECBAD PAN AACHT 9712 J -DO- 6 1588/H/17 -DO- T. KASHINATH (HUF), SECBAD PAN AABHT 8867 P -DO- 7 1589/H/17 -DO- T. JAYA PRAKASH (HUF), SECBAD PAN AACHT 8427 L -DO- 8 1590/H/17 -DO- T. NAGRAJ (HUF), SECBAD PAN AACHT 2363 R -DO- 9 1591/H/17 -DO- T. BALAKRISHNA (HUF), SECBAD PAN AACHT 2362 Q -DO- 10 1592/H/17 -DO- T. RAJESWAR RAO (HUF), SECBAD PAN AAAHT 9214R -DO- ASSESSEE BY: SHRI A.V. RAGHURAM REVENUE BY: SMT. M. NARMADA DATE OF HEARING: 16/05/2018 DATE OF PRONOUNCEMENT: 25/05/2018 O R D E R PER BENCH: THESE APPEALS ARE FILED BY THE ASSESSEES, WHO ARE FAMILY MEMBERS, AGAINST ORDERS OF CIT(A) - 6, HY DERABAD, ALL DATED, 27/06/2016. AS ISSUE IS IDENTICAL IN ALL THE SE APPEALS, I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 2 THEY WERE CLUBBED AND HEARD TOGETHER, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY THE FACTS AS TAKEN FROM T. BALAKRISHNA ( HUF) IN ITA NO. 1591/HYD/2017 ARE, THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS HAD ENTERED INTO AN AGREEMENT WITH M /S SAPTAGIRI CONSTRUCTION FOR DEVELOPMENT OF THE PROPE RTY BEARING NO. 9-1-219/232, ST. MARYS ROAD, SECUNDERA BAD AND FOR CONST RUCTION OF A MULTI-STOREYED COMMERCIAL COMPLEX CONSISTING OF SHOPS, SHOWROOMS, OFFICES, PARKING PL ACES AND OTHER COMMERCIAL UNITS ETC., VIDE 'AGREEMENT FOR DE VELOPMENT- CUM-GPA' THAT WAS GOT REGISTERED VIDE DOCUMENT NO. 40/2000 DATED 10/01/2000. 2.1 AS PER THE ABOVE AGREEMENT CUM GPA IT WAS AGREE D THAT THE DEVELOPER WOULD BEAR ALL THE EXPENSES INCLUDING CONSTRUCTION AND OTHER COSTS THAT MAY ARISE FROM TI ME TO TIME. IT WAS AGREED THAT AFTER COMPLETION OF THE SAID CON STRUCTION THE LAND LORDS WOULD GET 45% OF THE BUILT-UP AREA, AS E ARMARKED IN THE SANCTIONED PLAN, FREE OF COST IN LIEU OF UTILIS ATION OF THE LAND OWNED BY LANDLORD. THE DEVELOPER WOULD RETAIN THE REMAINING 55% OF THE BUILT-UP AREA. AS PER THE TERM S AND CONDITIONS OF THE AGREEMENT FOR DEVELOPMENT-CUM-GPA AND SUBSEQUENT SUPPLEMENTARY AGREEMENT DATED 17/01/2000 AND OTHER ORAL SETTLEMENTS THE LANDLORDS WERE SUPPOSED TO RECEIVE THE CONSTRUCTED AREA OF THEIR SHARE IN THE FINANCIA L YEAR 2009- 10 RELEVANT TO THE A.Y. 2010-11. THOUGH THE ORIGINA L AGREEMENT HAD BEEN ENTERED INTO ON 10/01/2000 AND T OKEN AMOUNTS OF ADVANCES WAS RECEIVED AS PER CLAUSE-30(A ) TO (E) OF THE AGREEMENT, THE DEVELOPER WAS TO GET THE LAND VACATED FROM THE OCCUPANTS LIKE RESIDENTIAL PORTIONS, PART OF PETROL PUMP ETC. AND IF NECESSARY THE DEVELOPER WAS TO PRO VIDE ALTERNATIVE ACCOMMODATION ELSEWHERE TO THE OCCUPANT S FOR I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 3 GETTING POSSESSION OF THE LAND FOR CARRYING ON DEVE LOPMENT ACTIVITY ON THE SAID LAND. THE DEVELOPER THEREFORE DID NOT IMMEDIATELY TAKE POSSESSION OF THE SAID LAND AND HA D COMMENCED THE SAME AFTER GETTING THE LAND VACATED I N THE YEAR 2003. ACCORDING TO THE ASSESSING OFFICER, AS A GREED, THE DEVELOPER COMPLETED THE CONSTRUCTION AND WAS READY TO HANDOVER THE COMPLETED 45% SHARE OF THE LANDLORD IN THE FINANCIAL 2009-10 WHICH WAS SEEN FROM THE DEVELOPER 'S LETTER DATED 22/12/2009 ADDRESSED TO THE LAND LORDS (ASSES SEE) THAT MENTIONED SETTLEMENT AMOUNTS TO BE PAID AND STATED THAT THE CONSTRUCTION OF THE PORTION ALLOTTED TO LANDLORDS W AS COMPLETE AND REQUESTED THE LANDLORDS TO TAKE POSSESSION OF T HE COMPLETED SHARE (I.E.45%) OF THE BUILT-UP AREA. THU S, ACCORDING TO THE ASSESSING OFFICER, THOUGH THERE WA S AN AGREEMENT IN THE YEAR 2000, THE CONSTRUCTION WORK W AS COMPLETED IN F. Y 2009 - 10 AND THEREFORE CAPITAL G AINS ARISING, IF ANY, IN THE HANDS OF THE LANDLORDS WERE ASSESSABLE TO TAX ONLY IN THE AY 2010-11. 2.2 IN VIEW OF THE ABOVE OBSERVATIONS, THE AO ISSU ED A NOTICE U/S. 148 TO THE ASSESSEE AND LATER A LETTER WAS ISSUED, ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE CAP ITAL GAINS ARISING ON ACCOUNT OF TRANSFER OF PROPERTY IN QUESTION, SHOULD NOT BE TAXED IN VIEW OF THE PROVISION OF SEC TION 5OC OF THE I.T. ACT, 1961. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED ITS OBJECTIONS, WHICH ARE AS UND ER: (I) A COMBINED READING OF THE CHARGING SECTION 45 A ND SECTION 2(47) SHOWED THAT CAPITAL GAINS IN ITS CASE WOULD ARISE EITHER IN THE PREVIOUS YEAR 1999-2000 W HEN DEVELOPMENT AGREEMENT WAS ENTERED INTO OR IN THE PREVIOUS YEAR 2003-04, WHEN ALL THE TENANTS WERE VACATED AND CONSTRUCTION WAS STARTED AND THAT IT CO ULD NOT ARISE IN THE PREVIOUS YEAR 2009 -10 PERTAINING TO THE A.Y. 2010-11 WHEN THE BUILDER WAS READY TO HAND OVE R POSSESSION OF THE BUILT -UP AREA. I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 4 (II) THE CHARGING SECTION MANDATED SOME POSITIVE AC TION I.E. TRANSFER ON PART OF THE TRANSFEROR (OWNER OF T HE PROPERTY) AND NOT ON THE PART OF THE TRANSFEREE (BU ILDER) RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKDAS KAPADIA. ( 260 ITR 491). (III) THAT A NOTICE WAS ISSUED U/S. 133 (6) DTD.16/08/2013 FOR THE A.Y. 2007-08 IN WHICH THE ASSESSING OFFICER HAD OBSERVED THAT THOUGH THE DEVELOPMENT AGREEMENT WAS ENTERED INTO IN THE YEAR 2000, THE EFFECTIVE TRANSFER OF CAPITAL ASSET WAS M ADE IN THE YEAR 2006 AND HENCE, THE ASSESSEE WAS LIABLE FO R CAPITAL GAINS IN THAT YEAR. THEREAFTER, ON THE SAME ISSUE, NOTICE U/S. 147/148 WAS ISSUED FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION. MERE READINESS OF THE BUILDER TO HAND OVER BUILT UP AREA TO THE PROPERTY OWNER WOULD NOT AMOUNT TO TRANSFER BY THE OWNER OF THE PROPERTY. (IV) THE PROPERTY OWNERS TILL DATE HAD NOT TAKEN POSSESSION OF THE BUILT UP AREA AS THE BUILDER HAS NOT FULFILLED HIS RESPONSIBILITIES/TERMS AS PER THE DEVELOPMENT AGREEMENT DATED 10/01/2000 VIZ. THE BUILDER HAD NOT CONSTRUCTED THE BUILDING AS PER MUN ICIPAL SANCTION; THE BUILDER HAD NOT OBTAINED COMPLETION CERTIFICATE NOR OCCUPANCY CERTIFICATE FROM THE CONC ERNED AUTHORITIES; THE PORTION FALLING TO THE PROPERTY OW NER WAS ISOLATED AND DID NOT HAVE ACCESS TO CORRIDOR/LIFTS ETC. THE MATTER WAS SETTLED IN ARBITRATION AND FINAL AWA RD WAS PASSED ON THE 15/10/2016. (V) PLAIN READING OF THE FINAL AWARD PASSED BY THE SOLE- ARBITRATOR MADE IT CRYSTAL CLEAR THAT THE POSSESSIO N HAD NOT BEEN HANDED OVER TO THE LAND OWNERS AS ON THAT DATE. HENCE, NO CAPITAL GAINS HAD ACCRUED AND THERE WAS NO CAPITAL GAINS TAX LIABILITY. 2.3 THE AO DID NOT FIND THE REPLY OF THE ASSESSEE TO BE ACCEPTABLE. ACCORDING TO HIM, IN THE FINAL AWARD, I T WAS MENTIONED THAT THOUGH THE CONSTRUCTION WAS NOT IN A CCORDANCE WITH THE TERMS AND CONDITIONS OF THE DEVELOPMENT AG REEMENT, THE DEVELOPER WAS READY TO HANDOVER THE POSSESSION ON THE SAID DATE AS INTIMATED BY IT IN ITS LETTER DATED 22 /12/2009. SINCE THE BUILDER WAS READY TO HANDOVER THE SAID CO NSTRUCTION AND THE CONSTRUCTION WORK WAS COMPLETED IN THE F.Y. 2009-10 I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 5 AND WAS READY TO BE TAKEN POSSESSION OF BY THE LAND LORD, CAPITAL GAINS ARISING IF ANY, IN THE HANDS OF THE L ANDLORDS WERE ASSESSABLE TO TAX ONLY IN THE ASSESSMENT YEAR 2010- 11. ACCORDING TO THE ASSESSING OFFICER, ALTERATIONS/AD DITIONS/ DELETIONS IF ANY, IN KEEPING WITH THE DEVELOPMENT A GREEMENT TO THE EXISTING COMPLETED CONSTRUCTION WERE SUBJECT MA TTERS OF APPEAL ETC. AND WERE NOT RELEVANT FOR DETERMINING T HE CAPITAL GAINS. 2.4 THE ASSESSING OFFICER OBSERVED THAT THE PROPOSE D CONSTRUCTION CONSISTED OF 108,000 SQ. FT. WHICH THE BUILDER AND THE LAND LORD HAD AGREED TO SHARE IN THE RATIO OF 5 5:45. THE LAND LORDS BELONGED TO TWO FAMILIES VIZ. TELUKUNTA AND DANDOO, EACH HAVING EQUAL SHARE OF THE LAND TRANSFE RRED. HENCE, OUT OF THE TOTAL BUILT-UP AREA, BOTH TELUKUN TA AND DANDOO FAMILIES GOT 50% SHARE EACH I.E. 50% OF 48,6 00 SQ. FT. WHICH CAME TO 24,300 SQ. FT. EACH. THE ASSESSEE, A MEMBER OF TELUKUNTA GROUP, OWNED 4.16% OF THE LAND LORDS' POR TION. IN VIEW OF THE SAME, SALE CONSIDERATION ATTRIBUTABLE T O ITS SHARE WAS PROPORTIONATELY WORKED OUT BY ADOPTING THE VALU E OF THE COMPLETED CONSTRUCTION AS PER THE SRO RATES. TAKING THE COST PER SQUARE FEET AT RS.2,100/- AS PER SRO IN THE YEA R 2009, THE ASSESSING OFFICER RECALCULATED THE COST OF CONSTRUC TED AREA AT RS.5,10,30,000/- (RS.24,300 X 2100). ALTERNATIVELY, HE ALSO TOOK THE CONSIDERATION VALUE OF THE LAND FOREGONE I .E. 55% OF 4534 SQ. YARDS I.E. 2493.7 SQ. YARDS AT RS.11,96,97 ,600/-BY TAKING THE SRO VALUE OF THE LAND AS ON 2009 AT RS. 48,000 PER SQ. YARD. TELUKUNTA'S FAMILY SHARE BEING 50%, THE CONSIDERATION TO BE CONSIDERED IN THEIR HANDS WAS T AKEN AT RS.5,98,48,800/-. AS THE AMOUNT OF RS.5.98 CRORES W AS HIGHER THAN COST OF CONSTRUCTION OF RS. 5.10 CRORE, THE AS SESSING OFFICER CALCULATED THE LONG TERM CAPITAL GAINS BY A DOPTING RS.5.98 CRORE AS FULL VALUE OF CONSIDERATION. AFTER DEDUCTING I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 6 INDEXED COST OF ACQUISITION OF RS.47,28,055/- AND C OST OF THE STRUCTURE IN THE YEAR 2000 OF RS. 12,00,000/- AS GIVEN BY THE ASSESSEE (TELUKUNTA'S SHARE 50% OF 12 LAKHS : RS. 6,00,000/-) WHICH AFTER INDEXATION CAME TO RS.9 ,74,808/-, LONG TERM CAPITAL GAINS WERE TAKEN AT RS.5,41,45,93 7/-. AS THE ASSESSEE'S SHARE WAS 4.16%, LONG TERM CAPITAL GAINS FALLING TO ITS SHARE WERE COMPUTED AT RS.22,52,470/-. THE ASSE SSEE HAD FILED RS.1,14,025/- RETURN OF INCOME. AFTER ALLOWI NG THE BASIC EXEMPTION, THE TOTAL INCOME WAS ASSESSED AT RS. 22, 06,495/-. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. THE CIT(A) UPHELD THE VALIDITY OF REOPENING OF ASSESSMENT MADE BY THE AO U/S 147 OF THE ACT AS WE LL AS UPHELD THE COMPUTATION OF LONG TERM CAPITAL GAINS D ONE BY THE AO. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE FAIR MARKET VALUE OF THE SUPERSTRUCTURE AS ON 01/04/1981 SHOULD HAVE BEEN ADOPTED AND INDEXED, WAS ACCEPTED BY THE CIT(A) AND DIRECTED THE AO TO TAKE 1981 AS BASE YEAR AND R ECALCULATE THE INDEXED COST OF ACQUISITION AND RECOMPUTE THE L ONG TERM CAPITAL GAINS AS THE AO ADOPTED THE VALUE OF SUPERS TRUCTURE AT RS. 12 LAKHS BUT ALLOWED INDEXATION WITH EFFECT FRO M FY 2000- 2001. HOWEVER, HE HAS NOT DISPUTED THE CLAIM THAT THE SUPERSTRUCTURE EXISTED SINCE 1981. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS, WHI CH ARE COMMON IN ALL THE APPEALS UNDER CONSIDERATION: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE ID. COMMISSIONER OF INCOME TAX (APPEAL S)- 6, HYDERABAD, DISMISSING THE APPEAL OF THE APPELLAN T IS PERVERSE, ILLEGAL AND UNSUSTAINABLE ON FACTS AND IN LAW. I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 7 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE INCOME TAX ACT. THE COMMISSIONER (APPEALS) FAILED T O APPRECIATE THAT AS PER THE SETTLED POSITION OF LAW, THERE WAS NO ESCAPEMENT OF INCOME TO TAX IN THE PREVIOUS YEAR RELEVANT TO ASST. YEAR UNDER CONSIDERATION AND THEREFORE THE REOPENING IS BAD IN LAW. 3. WITHOUT PREJUDICE TO ABOVE, THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING THE ACTION OF THE ASS ESSING OFFICER IN BRINGING TO TAX THE ALLEGED CAPITAL GAIN S IN THE ASST. YEAR UNDER CONSIDERATION. 4. WITHOUT PREJUDICE TO ABOVE GROUNDS, THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING THE ACTIO N OF THE ASSESSING OFFICER IN ADOPTING THE COST OF LAND SURRENDERED FOR DEVELOPMENT AT RS.5.98 CRORES. THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED TH AT WHAT THE APPELLANT GOT ON SURRENDER OF LAND IS THE SUPER STRUCTURE, WHICH COSTED THE BUILDER RS. 1.93 CRORES , AND THEREFORE THE SAME OUGHT TO HAVE BEEN ADOPTED. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE HONBLE TRIB UNAL MAY BE PLEASED TO ALLOW THE APPEAL. 6. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AO HAS ISSUED NOTICE U/S 148 OF THE ACT BASED ONLY ON THE LETTER OF THE BUILDER DATED 2009 AND TAXED THE CAPITAL GAINS BASE D ON THE PROVISIONS OF SECTION 50C OF THE ACT BY OBSERVING T HAT SINCE THE BUILDER WAS READY TO HANDOVER THE POSSESSION AN D THE CONSTRUCTION WAS COMPLETED AND WAS READY FOR TAKING POSSESSION BY THE LANDLORDS, THE CAPITAL GAINS IS T O BE TAXED IN THE AY 2010-11. LD. AR SUBMITTED THAT TO ATTRACT C APITAL GAINS, THERE SHOULD BE TRANSFER AND MERE READINESS OF THE BUILDER TO HANDOVER BUILT UP AREA TO THE PROPERTY O WNER WOULD NOT AMOUNT TO TRANSFER BY THE OWNER OF THE PROPERTY . FURTHER, HE SUBMITTED THAT CAPITAL GAINS ARISES IN THE CASE OF DEVELOPMENT AGREEMENT IN THE YEAR OF EXECUTION OF T HE DEVELOPMENT AGREEMENT AND NOT IN THE YEAR OF HANDIN G OVER POSSESSION OF THE PROPERTY AS PER SUBSECTION (1) OF SECTION 45 I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 8 WHICH IS THE CHARGING SECTION READ WITH SECTION 2(4 7(V) OF THE ACT. 6.1 LD. AR SUBMITTED THAT VARIOUS JUDICIAL RULINGS SUPPORT THE ABOVE VIEW. BOMBAY HIGH COURT IN THE CASE OF CHATUR BHUJ DWARKADAS KAPADIA (2003) (260 ITR 491), JASBIR SING H SARKARIA (2007) 294 ITR 196 (AAR), POTLA NAGESHWAR RAO VS. DCLT (2014) 365 ITR 249 (AP). THIS CONTENTION WAS A LREADY ACCEPTED BY THE DEPARTMENT AS MENTIONED ABOVE, WHER EIN THE PROCEEDINGS WERE DROPPED AGAINST THE NOTICES ISSUED BY THE INTELLIGENCE WING AND UNDER 133(6) OF THE ACT BASED ON THE SAME FACTS. HENCE, THERE IS NO TRANSFER IN AY 2010- 11. 6.2 HE SUBMITTED THAT RE-OPENING THE ASSESSMENT AGA IN ON THE SAME FACTS BY ANOTHER AO AMOUNTS TO CHANGE OF O PINION AND IS BAD IN LAW. THERE ARE VARIOUS JUDICIAL PRONO UNCEMENTS WHICH STATE THAT A MERE CHANGE OF OPINION CANNOT BE A BASIS FOR ISSUING NOTICE UNDER SECTION 148 OF THE ACT. VI JAY POWER GENERATORS LTD. V. ACIT (DELHI)(TRIB.), JAGDISHBHAI GOVINDLAL PATEL V. ITO (2015) 371 ITR 419/ 232 TAXMAN 334 (GU J) (HC) THE AO HAS JUST IGNORED THE ABOVE CONTENTION AND H AS NOT ADDRESSED THE ABOVE ISSUE AT ALL. 6.3 REFERRING TO THE ABOVE SUBMISSIONS, LD. AR SUBM ITTED THAT THE NOTICE U/S.148 OF THE ACT IS BAD IN LAW A ND THE AO HAS FAILED TO BRING SUFFICIENT MATERIAL ON RECORD T O SHOW THAT TRANSFER HAS TAKEN PLACE DURING THE AY 2010-11 AND, THEREFORE, REQUESTED THE BENCH TO QUASH THE NOTICE U/S.148 OF THE ACT AND PASS THE ORDER ON MERITS OF THE CASE. 6.4 WITH RESPECT TO THE CALCULATION OF CAPITAL GAIN S, THE LD. AR SUBMITTED THAT THE SALE CONSIDERATION ADOPTED BY THE AO FOR THE CALCULATION OF CAPITAL GAIN IS THE STAMP DU TY VALUE OF I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 9 THE LAND OR STAMP DUTY VALUE OF CONSTRUCTED PORTION WHICHEVER IS HIGHER. ACCORDING TO LD. AR, THE SALE CONSIDERAT ION SHOULD BE THE COST OF CONSTRUCTION OF THE STRUCTURE AND NO T THE STAMP DUTY VALUE OF THE LAND. THE SAME HAS BEEN HELD IN T HE CASE OF ITO VS. N.S.NAGRAJ ITA NO.676/BANG/2011. THE COST O F CONSTRUCTION OF THE SEMI-FINISHED BUILDING IS RS.4, 30,00,000/- AS PER THE SALE DEED EXECUTED BY THE BUILDER ON 27- 08-2008. OUT OF THIS 45% I.E. RS.1,93,50,000/-. THE ASSESSEE 'S FAMILY SHARE IS HALF OF THIS I.E. RS.96,75,000/-. THE AO H AS TO ADOPT THIS VALUE AS FULL VALUE OF CONSIDERATION INSTEAD O F STAMP DUTY VALUE OF LAND. 6.5 LD. AR SUBMITTED THAT THERE IS ALSO A MISTAKE A PPARENT FROM RECORDS WITH RESPECT TO THE COST OF STRUCTURE I.E. THE INDEXATION HAS BEEN DONE FROM 2009 ONWARDS INSTEAD OF 1981. IF DONE FROM 1981 THE VALUE WOULD BE RS. 6,00,000 (RS.12,00,000/2)*632/100 = 37,92,000/-. INSTEAD, TH E AO HAS TAKEN THE INDEXED VALUE AS RS.9,75,808/-. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F REVENUE AUTHORITIES. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE ASSESSMENT W AS REOPENED BY ISSUE OF NOTICE U/S 148 ON 29/03/2016 A ND THE REASON FOR REOPENING WAS SUBMITTED BY AO VIDE LETTE R DATED 20/06/2016 (WE NOTICE THAT THE ASSESSEE LETTER REFE RENCE WAS MENTIONED AS 18/04/2014, WHEREAS THE ACTUAL LETTER REFERENCE WAS 18/04/2016), THERE IS A TYPOGRAPHICAL MISTAKE C OMMITTED BY AO). THE REASONS RECORDED BY AO TO REOPEN THE ASSESSMENT WAS AS UNDER: ON VERIFICATION OF THE LETTER OF THE DEVELOPER M/ S SAPTAGIRI CONSTRUCTIONS LETTER DT: 22.12.2009 IT IS NOTICED I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 10 THAT THE BUILDER WAS READY TO HANDOVER THE POSSESSI ON OF CONSTRUCTION SPACE TO THE LAND LORDS IN THE FY 2009 -10 RELEVANT TO THE AY 2010-11. THEREFORE THERE WAS SIMULTANEOUS TRANSFER OF POSSESSION OF 55% OF LAND BY THE ASSESSEE TO THE BUILDER AND POSSESSION OF 45% O F BUILT-UP ARE BY THE BUILDER TO THE ASSESSEE IN FY 2 009- 10 IN TERMS OF SECTION 2(47) OF THE INCOME TAX ACT, 1961 READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY A CT. ON VERIFICATION, IT IS NOTICED THAT THE ASSESSEE HAS N OT FILED HIS ROI FOR THE A. Y 2009-10. IN THE VIEW OF THE AB OVE, THE INCOME UNDER THE HEAD CAPITAL GAINS CHARGEABLE TO TAX ON ACCOUNT OF TRANSFER OF THE SAID LAND HAS ESC APED ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE INCOME TAX ACT, 1961'. IT IS CLEAR THAT THE MAIN REASON FOR REOPENING/INIT IATING THE PROCEEDINGS ARE THE LETTER OF THE BUILDER, IN WHICH , IT IS STATED THAT THE BUILDINGS ARE READY FOR OCCUPATION AS PER THE JOINT DEVELOPMENT AGREEMENT (JDA). IT WAS ALSO BROUGHT TO THE NOTICE IN THE INITIAL STATE ITSELF THAT THE BUILDIN G CONSTRUCTED BY THE DEVELOPER ARE NOT AS PER THE NORMS AGREED AND SUBSEQUENTLY SUBJECT TO LITIGATION. THE FINAL ORDER OF THE ARBITRAL AWARD WAS ALSO SUBMITTED BEFORE THE AO. IT CLEARLY SHOWS THAT THE BUILDING CONSTRUCTED BY THE DEVELOPE R IS NOT AS PER APPROVAL AND THE SAME WAS NOT ACCEPTED BY THE A SSESSEE NOR POSSESSION WAS TAKEN. 8.1 BEFORE US, THE QUESTION RAISED IS, IN THE CASE OF JDA TRANSACTION, AT WHAT POINT OF TIME, CAPITAL GAIN AR ISES. IT IS SETTLED LAW THAT IN THE YEAR IN WHICH THE POSSESSIO N OF THE PROPERTY IS PASSED ON TO THE DEVELOPER IS THE YEAR IN WHICH THE PROVISION OF CAPITAL GAINS GET ATTRACTED. IN THE CA SE OF POTLA NAGESWARA RAO (SUPRA) THE HONBLE AP HIGH COURT HEL D AS UNDER: THE ELEMENT OF FACTUAL POSSESSION AND AGREEMENT AR E CONTEMPLATED AS TRANSFER WITHIN THE MEANING OF THE AFORESAID SEC TION. WHEN THE TRANSFER IS COMPLETE, AUTOMATICALLY, CONSIDERATION MENTIONED IN THE AGREEMENT FOR SALE HAS TO BE TAKEN INTO CONSIDERATI ON FOR THE PURPOSE OF ASSESSMENT OF INCOME FOR THE ASSESSMENT YEAR WHE N THE AGREEMENT I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 11 WAS ENTERED INTO AND POSSESSION WAS GIVEN. HERE, FA CTUALLY IT WAS FOUND THAT BOTH THE AFORESAID ASPECTS TOOK PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04. FROM THE ABOVE DECISION, WHEN THE TRANSFER IS COMPL ETE, AUTOMATICALLY, CONSIDERATION MENTIONED IN THE AGREE MENT FOR SALE HAS TO BE TAKEN INTO CONSIDERATION FOR THE PUR POSE OF ASSESSMENT OF INCOME FOR THE AY WHEN THE AGREEMENT WAS ENTERED INTO AND POSSESSION WAS GIVEN. THEREFORE, I N THE GIVEN CASE, THE ASSESSEE HAS ENTERED INTO JDA IN THE YEAR 10/01/2000 AND POSSESSION WAS HANDED OVER FOR DEVEL OPMENT. BUT DUE TO OCCUPATION OF THE PROPERTY BY THE TENANT S, THE DEVELOPER WAS ABLE TO VACATE THE TENENTS ONLY IN TH E YEAR 2003. HENCE, IT CAN BE CONSTRUED THAT THE ACTUAL VA CANT POSSESSION WAS HANDED OVER TO THE DEVELOPER ONLY IN 2003. THEREFORE, THE ACTUAL TRANSFER TOOK PLACE IN THE YE AR 2003. THE PROVISIONS OF CAPITAL GAINS ARE ATTRACTED IN THE YE AR 2003. HENCE, THE STAND OF THE AO TO CHARGE THE CAPITAL GA INS IN THE YEAR 2010-11 IS NOT PROPER. SECONDLY, THE REASON FO R BRINGING TO TAX IN THE YEAR 2010-11 WAS THE LETTER OF THE DE VELOPER TO ANNOUNCE THAT THE BUILDING IS READY FOR OCCUPATION WITHOUT COMPLYING TO THE JDA AND APPROVAL NORMS. EVEN THO UGH THE SAME WAS BROUGHT TO THE NOTICE OF THE AO, ACCORDING TO US, THE REASON FOR REOPENING THE ASSESSMENT IS ON FAULTY GR OUND. 8.2 IN OUR CONSIDERED VIEW, THE INCOME CHARGEABLE T O TAX FALLS ONLY IN THE AY 2003-04 AND NOT IN AY 2010-11. THEREFORE, THE ASSESSMENT COMPLETED U/S 144 R.W.S. 147 IS HELD TO BE NOT IN ACCORDANCE WITH LAW, HENCE, THE SAME IS QUASHED. 8.3 SINCE, THE ASSESSMENT ITSELF IS QUASHED, THE OT HER GROUNDS RAISED BY THE ASSESSEE ARE NOT REQUIRED TO BE ADJUDICATED AT THIS STAGE. THEREFORE, THE GROUND RA ISED BY THE ASSESSEE IN THIS REGARD IS ALLOWED. I.T.A. NO. 1583 /HYD/2017 AND OTHERS T. PRABHAKAR RAO (HUF) AND OTHERS. 12 8.4 AS THE FACTS AND GROUNDS RAISED IN ALL OTHER AP PEALS ARE IDENTICAL TO THAT OF ITA NO. 1591/HYD/2017 IN THE C ASE OF T. BALAKRISHNA (HUF), FOLLOWING THE CONCLUSIONS DRAWN THEREIN WE ALLOW THE GROUNDS RAISED IN THESE APPEALS AS WELL. 9. IN THE RESULT, ALL THE APPEALS UNDER CONSIDERATI ON, ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2018. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH MAY, 2018 KV COPY FORWARDED TO: 1 T. PRABHAKAR RAO (HUF), SECBAD C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2 T. RAMESH (HUF), SECBAD 3 T. NARAYANA RAO (HUF), SECBAD 4 T. NARSIMHA RAO (HUF), SECBAD 5 T. ASHOK KUMAR (HUF), SECBAD 6 T. KASHINATH (HUF), SECBAD 7 T. JAYA PRAKASH (HUF), SECBAD 8 T. NAGRAJ (HUF), SECBAD 9 T. BALAKRISHNA (HUF), SECBAD 10 T. RAJESWAR RAO (HUF), SECBAD 11 ITO, WARD 10(5), IT TOWERS, AC GUARDS, HYDERA BAD 12 CIT(A) - 6, HYDERABAD 13 PR. CIT - 6, HYDERABAD 14 THE DR, ITAT, HYDERABAD 15 GUARD FILE S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER