P.S.V.JAYALAKSHMI, Visakhapatnam V. The CIT-II, Visakhapatnam, Visakhapatnam

ITA 18/VIZ/2012

• Counselvise Citation: 1825314 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Capital asset; Fair market value; Competent authority; Non passing of speaking order
• Section: 143(3); 54F; 263

Judgement Text

ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 ASSESSMENT YEAR : 2008-09 P.S.V. JAYALAKSHMI VISAKHAPATNAM VS. CIT-II VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.ACFPJ 5565N ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 27.02.2014 DATE OF PRONOUNCEMENT : 06.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THESE ARE APPEALS BY THE SAME ASSESSEE CHALLENGING DIFFERENT ORDERS OF THE CIT-2 VISAKHAPATNAM. WHILE ITA NO.372/VIZAG /2011 IS AGAINST THE ORDER DATED 21.11.11 PASSED U/S 263 OF THE INCOME-TA X ACT. ITA NO.18/VIZAG/2012 IS AGAINST THE ORDER IMPOSING PENA LTY U/S 271(1)(C) OF THE ACT BOTH PERTAINING TO ASSESSMENT YEAR 2008-09. 2. WE WILL FIRST TAKE UP ITA NO.372/VIZAG/2011. TH E ASSESSEE HAS RAISED 7 GROUNDS CHALLENGING THE ORDER PASSED U/S 263 OF T HE ACT ON VARIOUS COUNT. 3. BRIEFLY STATED THE ASSESSEE IS AN INDIVIDUAL. T HE ASSESSEE WAS OWNER OF A PLOT OF LAND ADMEASURING 687.5 SQ.YDS. AT VISA KHAPATNAM. AS CLAIMED BY THE ASSESSEE, IN APRIL, 2006 SHE ENTERED INTO AN ORAL AGREEMENT WITH A DEVELOPER NAMELY M/S. VINAYAGAR PROMOTERS & BUILDER S, VISAKHAPATNAM FOR CONSTRUCTION OF AN APARTMENT AND IN PURSUANCE TO TH E SAID ORAL AGREEMENT, THE ASSESSEE HAS HANDED OVER POSSESSION OF THE LAND TO THE DEVELOPER WHO AFTER COMPLETING THE NECESSARY FORMALITIES LIKE OBT AINING APPROVED PLAN, ETC., ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 2 STARTED CONSTRUCTION OF THE APARTMENT, CONSIDERABLE PORTION OF WHICH WAS CONSTRUCTED BY THE END OF FINANCIAL YEAR 2006-07. EVEN THOUGH THE ASSESSEE AND THE BUILDER EXECUTED A REGISTERED DEVELOPMENT A GREEMENT CUM GPA ON 7.7.2007, THE ASSESSEE SUBMITTED HER RETURN FOR THE ASSESSMENT YEAR 2007-08 DECLARING CAPITAL GAIN ARISING AS A RESULT OF HANDI NG OVER POSSESSION OF THE LAND IN FAVOUR OF THE DEVELOPER IN APRIL, 2006. FO R THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED HER RETURN OF INCOME ON 30 .7.2008 DECLARING INCOME AT RS.81,31,983/- INCLUDING CAPITAL GAIN, BOTH LONG TERM AND SHORT TERM, ARISING OUT OF SALE OF BUILT UP AREA WITH UNDIVIDED SHARE IN LAND. INITIALLY, THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. HOWEVE R, SUBSEQUENTLY ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMEN T. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER ON THE BASIS OF INFORMATION OBTAINED FROM THE ASSESSEE COMPLETED TH E ASSESSMENT VIDE ORDER DATED 31.12.2010 BY ACCEPTING THE INCOME RETURNED. THE CIT IN EXERCISE OF POWER U/S 263 OF THE ACT WHILE EXAMINING THE ASSESS MENT RECORD OF THE IMPUGNED ASSESSMENT YEAR NOTICED THAT THE ASSESSEE UNDER A REGISTERED DEVELOPMENT AGREEMENT EXECUTED ON 7.7.2007 WITH M/S . VINAYAGAR PROMOTERS & BUILDERS, VISAKHAPATNAM HAS ALLOWED THE DEVELOPER TO DEVELOP 687.5 SQ.YDS. OF LAND OWNED BY HER FOR CONSTRUCTION OF AN APARTMENT. AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, THE DEVELOP ER SHALL DELIVER TO THE ASSESSEE 12265 SQ.FT. OF BUILT UP AREA BEING 55% OF THE TOTAL BUILT UP AREA OF 22300 SQ.FT. THE DEVELOPMENT AGREEMENT ALSO AUTHOR IZES THE DEVELOPER/BUILDER TO SELL LAND OR LAND WITH STRUCTU RES SUBJECT TO THE TOTAL EXTENT WHICH SHALL NOT EXCEED 309 SQ.YDS. AND HIS P ORTION OF BUILT UP AREA OF 10035 SQ.FT. THE CIT CONSTRUED THAT THE ASSESSEE I N FACT RECEIVED 12265 SQ.FT. OF BUILT UP AREA IN EXCHANGE FOR 309 SQ.YDS. OF LAND. HE FURTHER NOTICED THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMEN T YEAR 2008-09, THE ASSESSEE HAD SOLD 3608 S.FT. OF BUILT UP AREA WITH UNDIVIDED SHARE IN LAND TO THE EXTENT OF 63.25 SQ.YDS. TO M/S. BHARATI AIRTEL LTD. FOR A TOTAL CONSIDERATION OF RS.1,10,38,500/-. IN RESPECT OF THE SALE OF BUIL T UP AREA OF 3068 SQ.FT. AND UNDIVIDED SHARE IN LAND OF 63.25 SQ.YDS., ASSESSEE OFFERED SHORT TERM CAPITAL GAIN OF RS.66,61,192/- AND LONG TERM CAPITAL GAIN O F RS.6,93,584/-. THE CIT RELYING ON SAME JUDICIAL PRECEDENTS NOTED THAT IN O RDER TO ATTRACT THE ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 3 PROVISIONS OF SECTION 53A OF TRANSFER OF PROPERTY A CT READ WITH TRANSFER AS ENVISAGED U/S 2(47)(V) OF THE ACT FOLLOWING 5 CONDI TIONS HAS TO BE FULFILLED. I. THERE SHOULD BE A CONTRACT FOR CONSIDERATION. II. THE CONTRACT SHOULD BE IN WRITING AND SIGNED BY THE TRANSFEROR AND TRANSFEREE. III. IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY. IV. POSSESSION OF PROPERTY SHOULD BE GIVEN TO THE TRANS FEREE. V. THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFO RM HIS PART OF CONTRACT. THE CIT WAS OF THE VIEW THAT IF THE AFORESAID TESTS ARE APPLIED TO THE FACTS OF THE ASSESSEES CASE, THEN IT BECOMES APPARENT TH AT THE ASSESSEE HAS FULFILLED ALL THE 5 CONDITIONS WHILE ENTERING INTO THE DEVELOPMENT AGREEMENT WITH THE DEVELOPER/BUILDER AND AS SUCH TRANSFER OF THE LAND STOOD COMPLETED WHEN THE ASSESSEE DELIVERED THE POSSESSION OF THE L AND TO THE DEVELOPER/BUILDER ON 7.7.2007 HENCE RESULTANT CAPIT AL GAIN ARISES IN RESPECT OF THE ENTIRE LAND TRANSFERRED TO THE DEVELOPER/BUILDE R DURING THE ASSESSMENT YEAR UNDER DISPUTE. HE THEREFORE WAS OF THE VIEW T HAT THE ASSESSING OFFICER SHOULD NOT HAVE ACCEPTED THE COMPUTATION OF CAPITAL GAIN MADE BY THE ASSESSEE AND RATHER SHOULD HAVE TAXED THE ENTIRE SA LE CONSIDERATION AS LONG TERM CAPITAL GAIN AFTER ALLOWING NECESSARY DEDUCTIO N U/S 48 OF THE ACT. THE CIT ALSO DID NOT ACCEPT ASSESSEES MODE OF COMPUTAT ION OF CAPITAL GAIN AND IN THE SHOW CAUSE NOTICE HIMSELF COMPUTED LONG TERM CA PITAL GAIN AT RS.3,01,50,575/- ON THE BASIS OF COST OF BUILT UP A REA SOLD BY THE ASSESSEE TO M/S. BHARATI AIRTEL. HE FURTHER NOTED THAT THE ASS ESSEE HAS NOT OFFERED TO TAX THE COMPENSATION AMOUNT RECEIVED FROM THE DEVELOPER IN TERMS OF CLAUSE 25 OF THE DEVELOPMENT AGREEMENT WHICH @ RS.40,000/-P.M . WORKS OUT TO A SUM OF RS.3,60,000/-. THE THIRD INSTANCE OF ERROR COMM ITTED BY THE ASSESSING OFFICER WHICH CAUSED PREJUDICE TO THE REVENUE AS PO INTED OUT BY THE CIT IS, THOUGH THE ASSESSEE HAS OFFERED RENTAL INCOME OF RS .9,41,925/- BUT AS PER TDS CERTIFICATE ISSUED BY M/S. BHARATI AIRTEL LTD. THE RENT PAID IS RS.10,19,568/- WHICH HAS RESULTED IN UNDER ADMISSIO N OF RENTAL INCOME TO THE EXTENT OF RS.77,643/-. ACCORDINGLY, THE CIT ASKED THE ASSESSEE TO EXPLAIN ON THE ISSUES POINTED OUT IN THE SHOW CAUSE NOTICE. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE MADE A DETAILED SUBMISSI ON, A COPY OF WHICH IS ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 4 PLACED AT PAGE 7 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE IN FACT HAD GIVEN POSSESSION OF HER PROPERTY TO THE BUILDER FOR DEVELOPMENT PURPOSE S IN APRIL, 2006 WITH THE SAME TERMS AND CONDITIONS WHICH WERE SUBSEQUENTLY R EDUCED TO WRITING IN THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2007. IT WAS SUBMITTED THAT SINCE THE PURCHASER OF THE PART SHARE OF THE ASSESS EE IN THE CONSTRUCTED AREA I.E. BHARATI AIRTEL INSISTED UPON A REGISTERED DEVE LOPMENT AGREEMENT, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT ON 7. 7.2007 WITH THE BUILDER AND GOT IT REGISTERED ONLY FOR PRACTICAL CONVENIENC E AND NECESSITY. OTHERWISE, THE PROPERTY FOR ALL PRACTICAL PURPOSES SHOULD BE C ONSIDERED TO HAVE BEEN TRANSFERRED TO THE DEVELOPER IN THE FINANCIAL YEAR 2006-07 RELEVANT TO THE ASSESSMENT YEAR 2007-08. IT WAS SUBMITTED THAT ONL Y BECAUSE POSSESSION OF THE PROPERTY WAS DELIVERED TO THE DEVELOPER IN APRI L, 2006 THE DEVELOPER STARTED CONSTRUCTION BY OBTAINING NECESSARY PERMISS ION FROM MUNICIPAL CORPORATION, THEREFORE, IT HAS BECOME POSSIBLE ON T HE PART OF THE ASSESSEE TO SALE A PORTION OF HER SHARE OF 3608 SQ.FT. IN THE C ONSTRUCTED AREA TO BHARATI AIRTEL LTD. ON 26.7.2007. THIS SHOULD CLEARLY ESTA BLISH THAT THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2007 FOR ALL PRACTI CAL PURPOSES SHOULD BE CONSIDERED TO BE RELATING BACK TO THE MONTH OF APRI L, 2006 WHEN THE LAND WAS GIVEN POSSESSION TO THE BUILDER. IT WAS CONTENDED THAT THE DELIVERY OF POSSESSION IN APRIL,, 2006 IS ALSO MENTIONED IN THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2007. THE ASSESSEE THEREFORE C ONTENDED THAT AS THE POSSESSION OF THE PROPERTY WAS DELIVERED TO THE BUI LDER IN APRIL, 2006 AND THE MAJOR PART OF THE CONSTRUCTION WAS ALSO COMPLETE IN ALL RESPECTS EVEN PRIOR TO MARCH, 2007 WHICH HAS MADE IT POSSIBLE FOR THE ASSE SSEE TO ENTER INTO SALE DEED WITH A PURCHASER OF THE CONSTRUCTED AREA IN TH E MONTH OF JULY, 2007, THE TRANSFER IN TERMS OF SECTION 2(47)(V) OF THE ACT SH OULD BE CONSIDERED TO HAVE TAKEN PLACE IN THE FINANCIAL YEAR 2006-07 AND NOT I N FINANCIAL YEAR 2007-08 I.E. ON 7.7.2007 WHEN THE REGISTERED DEVELOPMENT AG REEMENT WAS EXECUTED. IT WAS THEREFORE SUBMITTED THAT SINCE THE TRANSFER H AS TAKEN PLACE DURING THE FINANCIAL YEAR 2006-07 AND THE ASSESSEE HAS DECLARE D CAPITAL GAIN IN THE ASSESSMENT YEAR 2007-08 CORRESPONDING TO THE FINANC IAL YEAR 2006-07, THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT AFTER CONDUCTING ENQUIRY AND ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 5 VERIFYING NECESSARY DETAILS CANNOT BE SAID TO BE EI THER ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THER E CANNOT BE ANY MISTAKE IN THE COMPUTATION AND IN THE RETURN OF INCOME FILED B Y THE ASSESSEE FOR ASSESSMENT YEAR 2008-09. IT WAS SUBMITTED THAT SIN CE THE ASSESSING OFFICER HAS ALREADY ASSESSED THE CAPITAL GAIN OFFERED BY TH E ASSESSEE IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2007-08, THE P RESUMPTION THAT THERE IS ERROR IN COMPUTING LONG TERM CAPITAL GAIN OFFERED B Y THE ASSESSEE IN ASSESSMENT YEAR 2008-09 IS NOT CORRECT. SO FAR AS THE COMPUTATION OF CAPITAL GAIN MADE BY THE CIT IN THE SHOW CAUSE NOTICE IS CO NCERNED, THE ASSESSEE OBJECTED TO THE SAME BY CONTENDING THAT THE AMOUNT OF SALE CONSIDERATION RECEIVED BY THE ASSESSEE ON SALE OF PART OF CONSTRU CTED AREA TO M/S. BHARATI AIRTEL LTD. CANNOT BE MADE THE BASIS FOR ARRIVING A T THE VALUE OF CONSIDERATION RECEIVED BY HER ON TRANSFER TO THE BUILDER. IT WAS CONTENDED BY THE ASSESSEE THAT THOUGH THE REGISTERED SALE DEED FOR SALE OF TH E CONSTRUCTED AREA TO M/S. BHARATI AIRTEL LTD WAS EXECUTED ON 26.7.2007, BUT T HE ASSESSEE HAS STARTED RECEIVING SALE CONSIDERATION FROM M/S. BHARATI AIRT EL LTD. FROM 16.5.2006 ITSELF WHICH CLEARLY ESTABLISHES THE FACT THAT THE CONSTRU CTION WAS GOING ON MUCH PRIOR TO THE EXECUTION OF THE REGISTERED DEVELOPMEN T AGREEMENT ON 7.7.2007. THUS IT WAS CONTENDED BY THE ASSESSEE THAT THESE FA CTS WOULD CLEARLY SHOW THAT THE ASSESSMENT ORDER PASSED CANNOT BE CONSIDER ED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SO FAR AS THE SECOND ISSUE OF COMPENSATION IS CONCERNED, IT WAS SUBMITTED BY THE ASSESSEE THAT THE COMPENSATION CLAUSE IN THE DEVELOPMENT AGREEMENT IS A GENERAL CLAUSE DRAFTED IN A ROUTINE WAY IN MOST OF THE DEVELOPMENT AGREEMENTS. IT WAS SUBMITTED THAT SINCE THE ASSESSEE DID NOT RECEIVE A NY COMPENSATION, THE QUESTION OF OFFERING THE SAME TO TAX WILL NOT ARISE . IT WAS FURTHER SUBMITTED THAT AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, THE COMPENSATION CLAUSE IS OPERATIVE AFTER 24 MONTHS FROM THE DATE O F MUNICIPAL APPROVAL I.E. FROM 9.5.2006. HENCE, EVEN IF THE SAID CLAUSE IS I MPOSED WILL NOT BE APPLICABLE FOR THE ASSESSMENT YEAR UNDER DISPUTE. WITH REGARD TO THE THIRD ISSUE OF DIFFERENCE BETWEEN THE RENTAL INCOME OFFER ED AND RENTAL INCOME SHOWN IN THE TDS CERTIFICATE, IT WAS SUBMITTED BY T HE ASSESSEE THAT THE DIFFERENCE AROSE ON ACCOUNT OF SERVICE TAX COLLECTE D FROM THE TENANT WHICH ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 6 WAS REMITTED TO THE GOVERNMENT ACCOUNT. IT WAS THE REFORE SUBMITTED THAT IN VIEW OF THE EXPLANATION SUBMITTED, THE ASSESSMENT O RDER CANNOT BE CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE NECESSITATING PROCEEDING U/S 263 OF THE ACT. 4. THE CIT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN REPLY TO SHOW CAUSE NOTICE AS WELL AS SUBMISSIONS MADE AT TH E TIME OF HEARING BEFORE HIM AGAIN RELIED UPON THE DECISIONS REFERRED TO BY HIM IN THE SHOW CAUSE NOTICE AND OPINED THAT AS PER THE RATIO LAID DOWN I N THE SAID DECISIONS TRANSFER OF CAPITAL ASSET BEING AN IMMOVABLE PROPER TY, TAKES PLACE IN THE YEAR IN WHICH A LEGALLY ENFORCEABLE CONTRACT IN WRITING AS SIGNED BY THE TRANSFEROR AND TRANSFEREE IS ENTERED INTO FOR A CONSIDERATION WITH REFERENCE TO THE TRANSFER OF AN IMMOVABLE PROPERTY, THE POSSESSION O F WHICH TO BE GIVEN TO THE TRANSFEREE AND THE TRANSFEREE SHOULD BE READY AND W ILLING TO PERFORM HIS PART OF THE CONTRACT. HE FURTHER MENTIONED THAT THE YEA R IN WHICH ALL SUCH INGREDIENTS ARE SATISFIED, THE PROVISIONS OF SECTIO N 2(47)(V) OF THE ACT READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT IS ATTRACTED FOR RECOGNIZING THE TRANSACTION AS TRANSFER AND ON SUCH ACCOUNT THE LIABILITY TO CAPITAL GAINS TAX ARISES. ON THE BASIS OF THE AFORESAID PRINCIPL E, THE CIT NOTED THAT IN ASSESSEES CASE ALL THE INGREDIENTS IN RESPECT OF T HE TRANSACTION ARISING OUT OF THE DEVELOPMENT AGREEMENT WITH POWER OF ATTORNEY DA TED 7.7.2007 WERE FULFILLED ONLY DURING THE FINANCIAL YEAR RELEVANT T O THE ASSESSMENT YEAR 2008- 09. HENCE, THE CAPITAL GAIN AROSE IN THE HANDS OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 WITH REFERENCE TO THE VALUE OF THE ENTIRE BUILT UP AREA OF 12265 SQ.FT. AND ALSO THE VALUE OF THE UNDI VIDED LAND TO THE EXTENT OF 63.25 SQ.YDS. WHICH TOO WAS SOLD TO M/S. BHARATI AI RTEL LTD. THE CIT THOUGH ACCEPTED THE FACT THAT SOME OF THE INGREDIENTS OF T RANSFER SUCH AS HANDING OVER OF THE POSSESSION OF LAND TO THE DEVELOPER AND STARTING OF CONSTRUCTION WORK BY THE DEVELOPER AFTER OBTAINING APPROVAL FROM THE MUNICIPAL AUTHORITIES IN THE FINANCIAL YEAR 2006-07 IS PRESENT BUT WHAT I S LACKING IS A WRITTEN CONTRACT. THE CIT NOTED THAT HANDING OVER OF THE L AND FOR DEVELOPMENT MAY AT BEST BE CONSTRUED AS SORT OF MUTUAL UNDERSTANDIN G BETWEEN THE ASSESSEE AND THE DEVELOPER FOR INITIATING THE PROCESS OF DEV ELOPMENT. HOWEVER, ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 7 WITHOUT ANY WRITTEN AGREEMENT EXECUTED BETWEEN THE PARTIES DURING SAID YEAR NO LEGALLY ENFORCEABLE MUTUAL RIGHTS AND OBLIGATION S AS CONTEMPLATED U/S 53A OF THE TRANSFER OF PROPERTY ACT ARISE BETWEEN BOTH THE PARTIES. HENCE, NO TRANSFER IN TERMS OF SECTION 2(47)(V) CAN BE SAID T O HAVE TAKEN PLACE DURING THE FINANCIAL YEAR 2006-07. THE CIT FURTHER WAS OF THE VIEW THAT IN ABSENCE OF A WRITTEN AGREEMENT DULY SIGNED BY BOTH THE PART IES THERE WOULD BE NO LEGAL FORCE BEHIND THE MUTUAL RIGHTS AND OBLIGATION S OF THE PARTIES TO THE TRANSACTION. WHEN THE CIT EXPRESSED THIS VIEW TO T HE ASSESSEE, AS NOTED BY THE CIT IN HIS ORDER, AUTHROISED REPRESENTATIVE OF THE ASSESSEE SOUGHT ADJOURNMENT FOR A FORTNIGHT FOR OBTAINING A LEGAL O PINION ON THE ISSUE AS APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE AS SESSEES CASE. IN THE SUBSEQUENT DATE OF HEARING, THE ASSESSEE SUBMITTED A COPY OF MEMORANDUM OF UNDERSTANDING DATED 3.4.2006 FOR DEVELOPMENT OF PROPERTY BETWEEN ASSESSEE AND THE DEVELOPER WHICH CONTAINED SAME TER MS AND CONDITIONS AS EMBODIED IN THE REGISTERED DEVELOPMENT AGREEMENT DA TED 7.7.2007. THE CIT OBSERVED THAT THIS MEMORANDUM OF UNDERSTANDING WAS NEVER MENTIONED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING OR TI LL THE FINAL STAGE OF REVISIONARY PROCEEDING AND ONLY WHEN THE CIT EXPRES SED HIS VIEW AND OFFERED AN OPPORTUNITY TO THE ASSESSEE TO FURNISH AN EXPERT LEGAL OPINION AS REQUESTED BY THE ASSESSEE, THE ASSESSEE HAS FURNISHED A COPY OF THE MEMORANDUM OF UNDERSTANDING. THE CIT HAVING A DOUBT THAT THE ASS ESSEE HAD ADOPTED A DUBIOUS MEANS TO GET OVER THE LACK OF ANY WRITTEN A GREEMENT AND HAS MANUFACTURED THIS MEMORANDUM OF UNDERSTANDING, CAUS ED NECESSARY ENQUIRY IN THE OFFICE OF THE DISTRICT REGISTRAR, VISAKHAPAT NAM WITH REGARD TO THE STAMP VENDOR WHO PURPORTEDLY SOLD THE NON-JUDICIAL STAMP PAPER OF THE DENOMINATION OF RS.100/- TO THE ASSESSEE ON 3.4.200 6. AS PER THE ENQUIRY CONDUCTED, IT CAME TO LIGHT THAT THE ORIGINAL SALES REGISTER OF STAMP PAPERS FOR THE YEAR 2006 MAINTAINED BY THE STAMP VENDOR SMT. C .H. JHANSI, STAMP PAPER OF THE DENOMINATION OF RS.100/- HAD BEEN SOLD TO SHRI Y. VENU GOPAL ON 21.4.2006 VIDE SERIAL NO.3817 AND THERE WAS NO PURCHASER OF SUCH STAMP PAPER BY THE NAME OF SMT. P.S.V. JAYALAKSHMI. IT WA S FURTHER ASCERTAINED FROM THE OFFICE OF THE DIST. REGISTRAR THAT THE STA MP VENDOR LICENSE OF SMT. C.H. JHANSI WAS SUSPENDED ON 4.9.2010 FOR HAVING SO LD ANTE DATED STAMP ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 8 PAPERS TO VARIOUS PARTIES AND THE ENDORSEMENT ON SU CH ANTE DATED STAMP PAPER WERE FOUND TO BE MADE BY DIFFERENT INDIVIDUAL S OTHER THAN SMT. JHANSI. TAKING UP FURTHER ENQUIRY WITH SMT. JHANSI, IT WAS ASCERTAINED THAT SHE DENIED TO HAVE SOLD ANY STAMP PAPER BEARING NO.AP68 5091 SL. NO.3817 DATED 3.4.2006 TO SMT. P.S.V. JAYALAKSHMI. FROM THE BASI S OF THE AFORESAID ENQUIRY, THE CIT INFERRED THAT THE ASSESSEE HAS IND ULGED IN DISHONEST CONDUCT BY PRESENTING A COPY OF THE PURPORTED MEMORANDUM OF UNDERSTANDING DATED 3.4.2006 AFTER SEEKING AN ADJOURNMENT FOR OBTAINING AND FURNISHING EXPERT LEGAL OPINION ON THE ISSUE OF TRANSFER. FROM THIS THE CIT CONCLUDED THAT THE MOU IS A FABRICATED DOCUMENT WHICH NEVER EXISTED PR IOR TO THE DEVELOPMENT AGREEMENT DATED 7.7.2007. THEREFORE THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2007 CAN BE SAID TO BE THE ONLY WRITTEN C ONTRACT SIGNED BY THE ASSESSEE AND THE DEVELOPER WHICH TOGETHER WITH THE FACT THAT THE OTHER CONDITIONS RELATING TO THE HANDING OVER OF THE POSS ESSION OF THE PROPERTY, DETERMINATION OF THE CONSIDERATION, PERFORMANCE OF ITS PART OF THE CONTRACT BY DEVELOPER FULFILS THE CONDITIONS OF TRANSFER IN TRU E SENSE AS ENVISAGED U/S 2(47)(V) OF THE ACT READ WITH SECTION 53A OF THE TR ANSFER OF PROPERTY ACT ONLY DURING THE FINANCIAL YEAR 2007-08 RELEVANT TO THE A SSESSMENT YEAR 2008-09, HENCE, THE ASSESSEE IS LIABLE FOR CAPITAL GAINS TAX IN RESPECT OF THE LAND GIVEN FOR DEVELOPMENT ONLY DURING THE ASSESSMENT YEAR 200 8-09 AND NOT IN EARLIER ASSESSMENT YEAR. IN SUPPORT OF SUCH CONCLUSION, THE CIT RELIED UPON A DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF CI T VS. G. SAROJA 301 ITR 124 WHEREIN IT IS HELD THAT UNDER SECTION 2(47)(V) A TRANSFER OF AN IMMOVABLE PROPERTY COULD BE RECOGNIZED ONLY IF THE CONDITIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY TAX IS SATISFIED. WHEREAS SEC TION 53A OF THE TRANSFER OF PROPERTY ACT CLEARLY ENVISAGES THAT UNLESS THERE IS A WRITTEN AGREEMENT DULY SIGNED BY THE CONTRACTING PARTIES, SECTION 53A OF T HE T.P. ACT WOULD NOT COME INTO OPERATION. ACCORDINGLY, THE CIT WAS OF THE VI EW THAT THE TRANSFER HAS TAKEN PLACE ONLY IN THE ASSESSMENT YEAR 2008-09 AND NOT IN THE ASSESSMENT YEAR 2007-08. HAVING HELD SO, THE CIT WENT INTO TH E COMPUTATION PART OF THE CAPITAL GAIN. THE CIT FELT THAT THE FIRST AND FORE MOST INGREDIENT IS THE DETERMINATION OF SALE CONSIDERATION SINCE NO MONEY IS RECEIVED BUT THE ASSESSEE HAS RECEIVED CONSTRUCTED AREA OF 12265 SQ. FT. IN LIEU OF 378.5 ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 9 SQ.YDS. OF LAND OUT OF THE TOTAL LAND AREA OF 687.5 SQ.YDS. THEREFORE, THE CONSIDERATION CAN BE RECKONED NOT IN PHASES BUT IN ONE GO AND THE FULL QUANTUM IS TO BE DETERMINED WITH REFERENCE TO THE M ARKET VALUE OF PER SQ.FT. OF THE CONSTRUCTED AREA. THE CIT TAKING NOTE OF TH E FACT THAT THE ASSESSEE HAD SOLD OUT A SHARE OF THE CONSTRUCTED AREA OF 360 8 SQ.FT. TO M/S. BHARATI AIRTEL LTD., AT A RATE OF RS.2603.46 PS. PER SQ.FT. HENCE, THAT RATE IS THE FAIR MARKET VALUE DURING THE RELEVANT FINANCIAL YEAR AND APPLYING SUCH RATE TO THE TOTAL CONSTRUCTED AREA OF 12265 SQ.FT. WORKED OUT T HE SALE CONSIDERATION ON TRANSFER OF LAND TO RS.3,19,33,872/- AND AFTER ALLO WING BENEFIT FOR INDEXED COST OF LAND AND INDEXED COST OF IMPROVEMENT DETERM INED UNDER LONG TERM CAPITAL GAIN IN RESPECT OF CONSTRUCTED AREA AT RS.3 ,00,73,986/- AND IN RESPECT OF UNDIVIDED SHARE OF LAND OF 63.25 SQ.YDS. AT RS.1 5,74,798/-. HENCE, THE TOTAL CAPITAL GAIN WAS COMPUTED AT RS.3,16,48,784/- AND AFTER ALLOWING DEDUCTION U/S 54F OF THE ACT FOR AN AMOUNT OF RS.8, 81,214/- THE TAXABLE CAPITAL GAIN WAS WORKED OUT TO RS.3,07,67,570/-. S O FAR AS UNDER ASSESSMENT OF RENTAL INCOME IS CONCERNED, THE CIT ACCEPTED THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE DIFFERENCE OF RS.77,643 /- POINTED OUT BY HIM IN THE SHOW CAUSE NOTICE. HOWEVER, CIT NOTED THAT IN THE COMPUTATION OF INCOME THE ASSESSEE HAS DEDUCTED AN AMOUNT OF RS.77 ,722/- FROM THE RENTAL INCOME BY CLAIMING IT TO BE A PROPERTY TAX. AS NOT ED BY THE CIT IN HIS ORDER A CROSS CHECK OF THE PROPERTY TAX RECEIPT ISSUED BY T HE GVMC WITH THE STATEMENT AVAILABLE ON THE GVMC WEBSITE REVEALED TH AT TWO PAYMENTS OF RS.38,861/- AGGREGATING TO RS.77,722/- HAS BEEN MAD E BY THE ASSESSEE ON 27.10.2008 WHICH IS IN THE FINANCIAL YEAR 2008-09 R ELEVANT TO THE ASSESSMENT YEAR 2009-10. HE THEREFORE CONCLUDED THAT THE ASSE SSEE HAS WRONGLY CLAIMED EXCESS DEDUCTION OF RS.77,722/- SO FAR AS THE THIR D ISSUE OF COMPENSATION RECEIVED FROM THE DEVELOPER IS CONCERNED, THE CIT A CCEPTED THE EXPLANATION OF THE ASSESSEE AND DROPPED THE PROCEEDINGS IN THAT REGARD. ON THE BASIS OF THE AFORESAID CONCLUSION, THE CIT HELD THAT THE ASS ESSMENT ORDER PASSED U/S 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE AND ACCORDINGLY SET ASIDE THE ASSESSMENT ORDER BY D IRECTING THE ASSESSING OFFICER TO PASS CONSEQUENTIAL ORDER BY GIVING EFFEC T TO THE DIRECTIONS CONTAINED ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 10 IN THE ORDER U/S 263 OF THE ACT. AGGRIEVED THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. A.R. REITERATING HIS SUBMISSIONS MADE BE FORE CIT STATED THAT THE BUILDER WAS GIVEN POSSESSION IN APRIL, 2006 AND IMMEDIATELY THEREAFTER HE STARTED CONSTRUCTION AFTER COMPLETING ALL THE FORMA LITIES LIKE OBTAINING APPROVED PLAN, ETC. THE LD. A.R. REFERRING TO THE D EVELOPMENT AGREEMENT, A COPY OF WHICH IS PLACED AT PAGE 35 OF THE PAPER BOO K, SUBMITTED THAT EVEN THE DEVELOPMENT AGREEMENT CLEARLY MENTIONED ABOUT H ANDING OVER OF POSSESSION TO THE DEVELOPER IN APRIL 2006. IT IS AL SO MENTIONED IN THE SAID DEVELOPMENT AGREEMENT THAT AFTER TAKING POSSESSION OVER THE LAND THE DEVELOPER HAS OBTAINED NECESSARY PERMISSIONS AND AP PROVED PLAN FROM THE GVMC AND COMMENCED CONSTRUCTION OF THE APARTMENT. IT WAS CONTENDED THAT THE CONSTRUCTION WAS ALMOST COMPLETE BY THE END OF 31.3.2007 AND THE ASSESSEE IN FACT HAD RECEIVED THE BUILT UP AREA IN FINANCIAL YEAR 2006-07 ITSELF. THEREFORE SINCE THE POSSESSION WAS DELIVERED TO THE DEVELOPER AND HE ALSO STARTED CONSTRUCTION OF THE APARTMENT, TRANSFER F OR ALL INTENT AND PURPOSE SHOULD BE CONSIDERED TO HAVE TAKEN PLACE IN FINANCI AL YEAR 2006-07, HENCE THE ASSESSEE HAS CORRECTLY OFFERED THE CAPITAL GAIN S IN THE FINANCIAL YEAR 2007- 08. THE LD. A.R. SUBMITTED THAT ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 AS WELL AS 2008-09 WERE COMPLETED U/S 143(3) OF THE ACT AFTER CONDUCTING NECESSARY ENQUIRY. REFERRING TO THE DETAILS SUB MI TTED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING FOR BOTH T HE ASSESSMENT YEARS, THE LD. A.R. SUBMITTED THAT THE ASSESSING OFFICER HAS C OMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AFTER CONDUCTING NECESSARY EN QUIRY WITH REGARD TO THE DEVELOPMENT AGREEMENT, HENCE THE ORDER PASSED BY HI M CANNOT BE CONSIDERED TO BE ERRONEOUS OR PREJUDICIAL TO THE IN TEREST OF REVENUE. THE LD. A.R. SUBMITTED THAT THE RETURN FOR THE ASSESSMENT Y EAR 2007-08 WAS FILED BY THE ASSESSEE ON 31.7.2007 BY WHICH DATE THE WRITTEN DEVELOPMENT AGREEMENT HAS ALREADY COME INTO EXISTENCE. THEREFORE, THE AS SESSEE WAS HAVING KNOWLEDGE OF THE VALUE SHOWN IN THE DEVELOPMENT AGR EEMENT AND ACCORDINGLY HAS COMPUTED THE CAPITAL GAIN ON THE BA SIS OF THE VALUATION SHOWN IN THE DEVELOPMENT AGREEMENT. IN THIS CONTEXT , THE LD. A.R. REFERRED ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 11 TO COMPUTATION FOR 2007-08 AT PAGE 73 OF THE PAPER BOOK. SIMILAR COMPUTATION FOR ASSESSMENT YEAR 2008-09 IS ALSO PLA CED AT PAGE 67 OF THE PAPER BOOK. THUS IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE ISSUE NOT ONLY ONCE BUT TWICE WHILE TAKING UP SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08 AND 2008- 09. THE LD. A.R. SUBMITTED THAT THE APPROACH OF TH E CIT IS INCONSISTENT BECAUSE WHILE IN THE SHOW CAUSE NOTICE THE CIT RELY ING UPON CERTAIN JUDICIAL PRECEDENTS HAD OPINED THAT CAPITAL GAIN IS LEVIABLE IN THE YEAR IN WHICH THE DEVELOPMENT AGREEMENT IS ENTERED INTO OR THE POSSES SION OF LAND HANDED OVER TO THE BUILDER BUT RELYING UPON SAME DECISIONS IN ORDER PASSED U/S 263, THE CIT HAS TAKEN A U TURN BY OBSERVING THAT TRANSF ER IN TERMS OF SECTION 2(47)(V) READ WITH SECTION 53A OF THE ACT CAN BE CO NSIDERED TO HAVE TAKEN PLACE ONLY WHEN THE WRITTEN AGREEMENT IS EXECUTED. THE LD. A.R. SUBMITTED THAT THE CONCLUSION REACHED BY THE CIT IS NOT IN AC CORDANCE WITH THE PROPOSITION LAID DOWN IN THE DECISIONS RELIED UPON BY HIM. THE LD. A.R. SUBMITTED THAT IN NONE OF THE DECISIONS REFERRED TO BY THE CIT IT IS THE PROPOSITION THAT ONLY WHEN THE DEVELOPMENT AGREEMEN T IS EXECUTED THE TRANSFER IS DEEMED TO HAVE TAKEN PLACE IRRESPECTIVE OF THE FACT WHETHER POSSESSION HAS BEEN DELIVERED, ANY CONSIDERATION HA S BEEN RECEIVED OR WHETHER THE DEVELOPER HAS ACTED IN TERMS WITH SUCH AGREEMENT. THE LD. A.R. REFERRING TO EACH OF THE DECISION RELIED UPON BY TH E CIT SUBMITTED THAT IF FACTS RELEVANT TO THE CASES CONSIDERED BY THE CIT IS CARE FULLY EXAMINED THEN IT WILL BE CLEAR THAT EXECUTION OF DEVELOPMENT AGREEMENT CO UPLED WITH DELIVERY OF POSSESSION AND RECEIPT OF CONSIDERATION WERE THE FA CTORS WHICH WERE CONSIDERED FOR ARRIVING AT THE CONCLUSION. THE LD. A.R. REFERRING TO A DECISION OF ITAT HYDERABAD BENCH IN CASE OF M/S. FIBARS INFRA TECH PVT. LTD. IN ITA NO.477/HYD/2013 DATED 3.1.2014 SUBMITTED THAT AS PE R THE PROPOSITION OF LAW LAID DOWN IN THE SAID DECISION, THE DATE OF EXE CUTION OF DEVELOPMENT AGREEMENT IS NOT RELEVANT. WHAT IS RELEVANT IS DEL IVERY OF POSSESSION AND THE INTENTION OF THE DEVELOPER TO PERFORM ITS OBLIGATIO N UNDER THE DEVELOPMENT AGREEMENT. HE FURTHER REFERRED TO A DECISION OF TH E HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. SADIA SHEIKH, TAX APPEAL N O.11 & 12 OF 2013 IN JUDGEMENT DATED 2.12.2013, WHEREIN THE HONBLE BOMB AY HIGH COURT ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 12 CONSIDERING THE FACT THAT POSSESSION WAS NOT HANDED OVER TO THE DEVELOPER U/S 53A OF THE TRANSFER OF PROPERTY ACT IN ASSESSME NT YEAR 2003-04 UPHELD THE VIEW OF THE CIT(A) AND TRIBUNAL IN HOLDING THAT THE ASSESSEE IS LIABLE TO CAPITAL GAIN TAX IN THE YEAR 2008-09. THE LD. A.R. REFERRED TO A DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. NAJU DARA DEBOO (2013) 86 CCH 55 WHEREIN THE HONBLE ALLAHABAD HIGH COURT HELD THAT CAPITAL GAIN CAN BE CHARGED ONLY ON RECEIPT OF SALE CONSIDE RATION AND NOT OTHERWISE WHEN ONLY AN AGREEMENT IS SIGNED AND NO MONEY IS RE CEIVED . SO FAR AS THE CITS RELIANCE ON THE DECISION OF HONBLE MADRAS HI GH COURT IN CASE OF CIT VS. G. SAROJA IS CONCERNED, THE LD. A.R. SUBMITTED THAT THE HONBLE MADRAS HIGH COURT HAS DECIDED THE ISSUE ONLY ON THE BASIS OF SE CTION 2(47)(V) OF THE ACT AND HAS NOT CONSIDERED THE PROVISION CONTAINED U/S 2(47)(VI) OF THE ACT WHICH TAKES WITHIN ITS SCOPE AND AMBIT ANY TRANSACTION WH ICH HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOV ABLE PROPERTY. THEREFORE, IN THE CONTEXT OF SECTION 2(47)(VI) OF T HE ACT EVEN IN ABSENCE OF A WRITTEN AGREEMENT IT HAS TO BE HELD THAT THE HANDIN G OVER OF POSSESSION TO THE DEVELOPER BY THE ASSESSEE FOR DEVELOPMENT OF TH E PROPERTY AMOUNTS TO TRANSFER. CHALLENGING THE COMPUTATION OF CAPITAL G AIN MADE BY THE CIT THE LD. A.R. SUBMITTED THAT THE VALUATION MADE BY THE C IT BY ADOPTING THE COST OF SALE OF THE APARTMENT BY THE ASSESSEE TO BHARATI AIRTEL IS TOTALLY ERRONEOUS. THE CIT COULD NOT HAVE ADOPTED THE COST OF SALE OF THE CONSTRUCTED AREA TO BE THE CONSIDERATION FOR TRANSFER OF LAND TO THE DEVEL OPER AS THE VALUATION HAS BEEN CLEARLY MENTIONED IN THE DEVELOPMENT AGREEMENT . EVEN OTHERWISE ALSO THE CIT COULD HAVE TAKEN COST TO THE BUILDER AS THE VALUE. WITH REGARD TO THE CITS FINDING IN RESPECT OF THE MOU THE LD. A.R. SU BMITTED THAT THE EVIDENCE BROUGHT ON RECORD BY THE CIT IS NOT CONCLUSIVE TO P ROVE THAT THE MOU IS A FABRICATED DOCUMENT BEING EXECUTED ON AN ANTE DATED STAMP PAPER. ARGUING ON THE TECHNICALITIES OF THE SHOW CAUSE NOTICE, THE LD. A.R. SUBMITTED THAT THE REASONS ON WHICH THE SHOW CAUSE NOTICE WAS ISSUED W AS DIFFERENT WHEREAS THE CIT HAS PROCEEDED TO PASS THE ORDER U/S 263 ON A DIFFERENT FOOTING SO FAR AS THE ISSUE OF UNDER ASSESSMENT OF RENTAL INCOME I S CONCERNED. THE LD. A.R. ALSO SUBMITTED THAT THE INFERENCE DRAWN BY THE CIT IS ALSO FACTUALLY INCORRECT AS THE ASSESSEE HAS PAID THE MUNICIPAL TAX WITHIN T HE FINANCIAL YEAR. IN ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 13 CONCLUSION, THE LD. A.R. SUBMITTED THAT THE ASSESSI NG OFFICER HAVING COMPLETED THE ASSESSMENT AFTER CAUSING NECESSARY EN QUIRY AND PROPER APPLICATION OF MIND, THE CIT WAS TOTALLY UNJUSTIFIE D IN INVOKING HIS JURISDICTION U/S 263 OF THE ACT AS THE ASSESSMENT ORDER PASSED C ANNOT BE CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE. IN SUPPORT OF SUCH CONTENTION, THE LD. A.R. RELIED UPON THE FOLLOWING DECISIONS: 243 ITR (SC) MALABAR INDUSTRIES 354 ITR 35 A.P. SPECTRA SHARES AND SCREEPS. 6. THE LD. D.R. ON THE OTHER HAND STRONGLY SUPPORTI NG THE ORDER PASSED BY THE CIT SUBMITTED THAT A MERE PERUSAL OF THE ASS ESSMENT ORDER WOULD MAKE IT CLEAR THAT IT IS A NON SPEAKING ORDER AND H AS BEEN PASSED WITHOUT APPLICATION OF MIND. COUNTERING THE SUBMISSIONS OF THE LD. A.R. THAT THERE WAS AN ORAL AGREEMENT IN APRIL, 2006, THE LD. A.R. SUBMITTED THAT THERE IS NO MENTION OF SUCH ORAL AGREEMENT IN THE REGISTERED DE VELOPMENT AGREEMENT ON 7.7.2007. HENCE, IN ABSENCE OF A WRITTEN AGREEMENT TRANSFER IN TERMS OF SECTION 53A OF THE T.P. ACT CANNOT BE CONSIDERED TO HAVE TAKEN PLACE. 7. THE LD. D.R. RAISING THE ISSUE OF THE MOU SUBMIT TED THAT THE FACT ON RECORD BROUGHT AS A RESULT OF ENQUIRY CONDUCTED BY THE CIT CLEARLY REVEALED THAT THE ASSESSEE HAS MANUFACTURED THE MOU ONLY TO GET OVER THE HURDLE THAT THERE IS NO WRITTEN AGREEMENT SHOWING TRANSFER OF T HE PROPERTY IN THE FINANCIAL YEAR 2006-07. IN THIS CONTEXT, THE LD. A. R. DREW OUR ATTENTION TO THE STAMP VENDOR STATEMENT ORDER PASSED BY THE DISTRICT REGISTRAR SUSPENDING LICENSE OF THE STAMP VENDOR AND COPY OF THE STAMP V ENDORS REGISTER TO PROVE THAT THE MOU IS A FABRICATED DOCUMENT. IT WAS THERE FORE SUBMITTED BY THE LD. D.R. THAT THE EXERCISE OF POWER U/S 263 OF THE ACT IS JUSTIFIED SINCE PREJUDICE HAS BEEN CAUSED TO THE REVENUE BY VIRTUE OF AN ERRO NEOUS ORDER PASSED BY THE ASSESSING OFFICER. 8. WE HAVE HEARD THE PARTIES AT LENGTH, PERUSED THE ORDERS BEFORE US AS WELL AS OTHER MATERIALS ON RECORD. WE HAVE ALSO CA REFULLY APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. BEFORE G OING INTO THE MERITS OF THE ISSUE, IT IS NECESSARY TO RECORD CERTAIN PRIMARY FA CTS. THERE IS NO DISPUTE THAT ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 14 THE REGISTERED DEVELOPMENT AGREEMENT CUM GPA BETWEE N THE ASSESSEE AND THE DEVELOPER WAS EXECUTED ON 7.7.2007. HOWEVER A PERUSAL OF THE DEVELOPMENT AGREEMENT, A COPY OF WHICH IS PLACED AT PAGE 35 OF THE PAPER BOOK OF THE ASSESSEE, WOULD REVEAL THAT THE SAID DE VELOPMENT AGREEMENT CLEARLY MENTIONS THAT THE ASSESSEE HAS ENTRUSTED TH E DEVELOPMENT WORK OVER HER LAND TO THE DEVELOPER IN APRIL, 2006. IT FURTH ER MENTIONS THAT IN PURSUANCE THERE OF THE DEVELOPER HAS ALREADY OBTAIN ED NECESSARY PERMISSIONS APPROVED PLAN VIDE VA NO.10376/06/ACP-III DATED 9.5.2 006 FROM GVMC IN THE NAME OF THE FIRST PARTY AND HAS COMMENCED CONST RUCTION OF THE APARTMENT. FROM THIS, IT BECOMES VERY MUCH CLEAR T HAT PRIOR TO THE EXECUTION OF THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2 007, THERE WAS A CONTRACT BETWEEN THE ASSESSEE AND THE DEVELOPER, MA Y BE ORAL, IN APRIL, 2006 AS PER WHICH NOT ONLY THE POSSESSION WAS HANDED OVE R TO THE DEVELOPER BUT THE DEVELOPER ALSO STARTED PERFORMING HIS PART OF O BLIGATION BY NOT ONLY OBTAINING NECESSARY PERMISSION AND APPROVAL OF PLAN BUT ALSO BY STARTING THE CONSTRUCTION ACTIVITY. THEREFORE, CONSIDERED IN TH E AFORESAID CONTEXT IT HAS TO BE ACCEPTED THAT THE REGISTERED DEVELOPMENT AGREEME NT EXECUTED ON 7.7.2007 IS ONLY A CULMINATION OF THE AGREEMENT ALR EADY ENTERED INTO BETWEEN THE PARTIES IN APRIL, 2006 UNDER WHICH THE POSSESSI ON OF THE PROPERTY WAS HANDED OVER TO THE DEVELOPER AND HE ALSO STARTED TH E DEVELOPMENT ACTIVITY. THEREFORE, THE REGISTERED DEVELOPMENT AGREEMENT DAT ED 7.7.2007 MUST RELATE BACK TO THE DATE ON WHICH THE POSSESSION WAS HANDED OVER TO THE DEVELOPER. AS WOULD BE VERY MUCH CLEAR FROM THE ORDER OF THE C IT HE ALSO ACCEPTS THIS FACT BY OBSERVING THAT SOME OF THE INGREDIENTS SUCH AS HANDING OVER OF THE POSSESSION OF THE LAND TO THE DEVELOPER AND STARTIN G OF THE CONSTRUCTION WORK BY THE DEVELOPER AFTER OBTAINING APPROVAL FROM MUNI CIPAL AUTHORITIES HAS TAKEN PLACE DURING THE ACCOUNTING YEAR 2006-07. HO WEVER, HE HAS REFUSED TO ACCEPT THAT TRANSFER HAS TAKEN PLACE DURING THE ASS ESSMENT YEAR 2006-07 SOLELY ON THE BASIS THAT NO WRITTEN AGREEMENT WAS T HERE. THE WRITTEN AGREEMENT CANNOT BE A SOLE CRITERIA TO DECIDE THE D ATE OF TRANSFER, IF THERE ARE OTHER MATERIALS ON RECORD WHICH CLEARLY ESTABLISH T HAT DELIVERY OF POSSESSION WAS HANDED OVER TO THE DEVELOPER AND THE DEVELOPER HAS ALSO COMMENCED THE DEVELOPMENT WORK AFTER OBTAINING NECESSARY APPR OVAL FROM THE COMPETENT ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 15 AUTHORITIES. EVEN OTHERWISE, THE HANDING OVER OF P OSSESSION IN APRIL 2006 IS MENTIONED IN WRITING IN THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2007. RECORDING AN EVENT IN WRITING NEED NOT B E DONE ON THE SAME DAY AND CAN BE DONE SEPARATELY. THOUGH THE CIT HAS PUT MUCH EMPHASIS ON THE SO CALLED MOU DATED 3.4.2006 BUT IN OUR CONSIDERED VIEW PRESENCE OR ABSENCE OF MOU NEITHER WOULD BE RELEVANT NOR WOULD TURN THE ISSUE IN ONE WAY OR OTHER WHEN THERE ARE SUFFICIENT EVIDENCES ON RECORD TO SHOW THAT POSSESSION WAS DELIVERED TO THE DEVELOPER WHO COMME NCED DEVELOPMENT ACTIVITY IN THE FINANCIAL YEAR 2006-07. EVEN OTHE RWISE ALSO, THE CONCLUSION DRAWN BY THE CIT THAT MOU IS A FABRICATED DOCUMENT SOLELY ON THE BASIS OF THE EVIDENCE COLLECTED BY HIM CANNOT BE ACCEPTED AS SUCH EVIDENCE CANNOT BE CONSIDERED TO BE CONCLUSIVE. AS CAN BE SEEN FRO M THE STATEMENT OF THE STAMP VENDOR SHE HAS STATED THAT SHE HAS NOT SOLD T HE STAMP PAPER BUT IT WAS SOLD BY SOME OTHER PERSONS WORKING UNDER HER. THEREFORE, SHE HAS NOT DENIED THAT THE STAMP PAPERS WERE SAME. SIMILARLY, THE ORDER OF THE DISTRICT REGISTRAR SUSPENDING THE LICENSE OF THE STAMP VENDO R IS PASSED IN THE YEAR 2010 IN RESPECT OF SOME OTHER INSTANCES OF SALE OF STAMP PAPERS AND WHICH DO NOT RELATE TO THE ASSESSEE. THEREFORE, IT IS OF LITTLE RELEVANCE SO FAR AS THE SALE OF STAMP PAPER IN THE YEAR UNDER CONSIDERATION . EVEN ASSUMING THAT AS PER THE VERSION OF THE CIT THE MOU IS A FABRICATED DOCUMENT, IT NO WAY TAKES US AWAY FROM THE FACT THAT ASSESSEE HAS DELIVERED P OSSESSION OVER THE PROPERTY TO THE BUILDER AND BUILDER HAS ALSO STARTE D PERFORMING HIS PART OF THE OBLIGATION BY COMMENCING DEVELOPMENT WORK AFTER OBT AINING NECESSARY APPROVAL FROM THE COMPETENT AUTHORITY AND HAS COMPL ETED MAJOR PORTION OF THE WORK BY END OF FINANCIAL YEAR 2006-07. THE CIT ALSO ADMITS THIS FACT. THEREFORE, IT HAS TO BE INFERRED THAT THERE WAS AN AGREEMENT BETWEEN THE PARTIES, MAY BE ORAL, IN TERMS OF WHICH THE ASSESSE E DELIVERED POSSESSION BUT THE SAME WAS BROUGHT INTO WRITING SUBSEQUENTLY AND THE DEVELOPER COMMENCED CONSTRUCTION OF APARTMENT. IT ALSO DEFIES COMMON SENSE THAT THE DEVELOPER WOULD HAVE VENTURED INTO THE PROJECT INVE STING HUGE AMOUNT OF MONEY WITHOUT ANY AGREEMENT WITH THE OWNER OF LAND. CONSIDERED IN THIS CONTEXT IT HAS TO BE UNDERSTOOD THAT THERE WAS AN A GREEMENT EARLIER PURSUANCE TO WHICH LAND WAS HANDED OVER TO THE DEVE LOPER WHO COMMENCED ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 16 THE DEVELOPMENT WORK AND THE REGISTERED DEVELOPMENT AGREEMENT DATED 7.7.2007 IS ONLY FOR THE PURPOSE OF GIVING A LEGAL SHAPE TO THE AGREEMENT ALREADY REACHED BY THE PARTIES. REVERTING BACK TO THE FACTS OF THE CASE, ANOTHER FACTOR WHICH ALSO ESTABLISHES THE HANDING O VER OF POSSESSION OF LAND AND CONSTRUCTION OF THE PROPERTY IN THE FINANCIAL Y EAR 2006-07, IS THE SALE OF THE CONSTRUCTED AREA OF 3068 SQ.FT.BY THE ASSESSEE TO M/S. BHARATI AIRTEL LTD. ON 26.7.2007. THIS CLEARLY SHOWS THAT THE DEVELOPE R HAS IN FACT STARTED THE CONSTRUCTION ACTIVITY IN THE FINANCIAL YEAR 2006-07 , OTHERWISE IT WOULD NOT HAVE BEEN POSSIBLE ON HIS PART TO DELIVER THE BUILT UP AREA TO THE ASSESSEE SO AS TO ENABLE HER TO SALE IT ON 26.7.2007. IT IS A FACT ON RECORD THAT THE ASSESSEE HAS DECLARED CAPITAL GAIN FROM TRANSFER OF LAND UNDER THE DEVELOPMENT AGREEMENT IN THE RETURN FILED FOR THE A SSESSMENT YEAR 2007-08 AND THE ASSESSMENT HAS ALSO BEEN COMPLETED BY THE A SSESSING OFFICER U/S 143(3) OF THE ACT AFTER CAUSING NECESSARY ENQUIRY, WHICH WOULD BE EVIDENT FROM THE COMPLIANCE FILED BEFORE THE ASSESSING OFFI CER, COPIES OF WHICH HAS BEEN PLACED IN THE PAPER BOOK. THE ASSESSEE HAS AL SO DECLARED CAPITAL GAIN ARISING OUT OF THE SUBSEQUENT SALE OF BUILT UP AREA IN THE ASSESSMENT YEAR 2008-09. THE RETURN FOR ASSESSMENT YEAR 2008-09 WA S ALSO SUBJECTED TO SCRUTINY ASSESSMENT PROCEEDING BY THE ASSESSING OFF ICER. WHEN THE ASSESSING OFFICER HAS EXAMINED THE ISSUE OF CAPITAL GAIN IN T WO SUCCESSIVE ASSESSMENT YEARS IN SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSES SMENT ORDER PASSED CANNOT BE TERMED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITHOUT ESTABLISHING THAT THE PREJUDICE CAUSED WAS AS A RESULT OF ABSENCE OF ENQUIRY OR NON APPLICATION OF MIND TO THE FACTS ON RECORD. A PERUSAL OF THE ORDER PASSED BY THE CIT WOULD SHOW THAT THE CIT NOW HERE HAS HELD THAT THE ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE BECAUSE OF LACK OF ENQUIRY OR DUE TO NON AP PLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER. IT WOULD BE FURTHER EVIDENT FROM THE ORDER OF THE CIT THAT HE CONSIDERED THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE BASIS OF CERTAIN DECISIONS REFERRED TO BY HIM IN THE SHOW CAUSE NOTICE AS WELL AS THE O RDER PASSED U/S 263 OF THE ACT. A CAREFUL EXAMINATION OF THE DECISIONS SHOW T HAT THE ISSUE RELATING TO YEAR OF TRANSFER AND TAXING OF CAPITAL GAIN HAS BEE N DECIDED IN THOSE CASES ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 17 CONSIDERING THE FACTS INVOLVED THEREIN. THEREFORE, THE CIT COULD NOT HAVE APPLIED THE RATIO LAID DOWN THEREIN WITHOUT EXAMINI NG THE DIFFERENCE IN FACTUAL POSITION IN THOSE CASES IN COMPARISON TO THE ASSESS EE. FURTHERMORE AS HAS BEEN POINTED OUT BY THE ASSESSEE WHILE IN THE SHOW CAUSE NOTICE THE CIT HAS OPINED THAT CAPITAL GAIN IS LEVIABLE IN THE YEAR IN WHICH THE DEVELOPMENT AGREEMENT IS ENTERED INTO OR THE POSSESSION OF LAND WAS HANDED OVER BY RELYING UPON THE DECISIONS REFERRED THEREIN BUT IN THE ORDER PASSED U/S 263 OF THE ACT, THE CIT HAS COMPLETELY CHANGED HIS STAND O N THE BASIS OF THE VERY SAME DECISION BY HOLDING THAT IN ABSENCE OF A WRITT EN AGREEMENT, NO TRANSFER TAKES PLACE, THOUGH HE ADMITS THE FACT THAT DELIVER Y OF POSSESSION AS WELL AS COMMENCEMENT OF WORK BY DEVELOPER HAS TAKEN PLACE I N THE FINANCIAL YEAR 2006-07. IT IS TO BE NOTED THAT THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. SRI SADIA SHEIKH (SUPRA) HAS HELD THAT TRANSFER WOULD BE DEEMED TO HAVE TAKEN PLACE WHEN THE POSSESSION WAS HANDED OVER TO THE DEVELOPER U/S 53A OF THE TRANSFER OF PROPERTY ACT. SIMILARLY, THE AL LAHABAD HIGH COURT IN THE CASE OF CIT VS. NAJOO DARA DEBOO (SUPRA) HAS HELD T HAT THE CAPITAL GAIN CAN BE CHARGED ONLY ON THE RECEIPT OF SALE CONSIDERATIO N AND NOT OTHERWISE, WHEN ONLY AN AGREEMENT IS SIGNED AND NO MONEY IS RECEIVE D. EVEN IN CASE OF CIT VS. CHATURBHUJ DWARAKADAS KAPADIA 260 ITR 491 THE H ONBLE BOMBAY HIGH COURT HAS HELD THAT IF THE CONTRACT READ AS A WHOLE INDICATES PASSING OF OR TRANSFERRING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER, THEN THE DATE OF CONTRACT WOULD BE RELEVANT TO DECI DE THE YEAR OF CHARGEABILITY. THE ITAT HYDERABAD BENCH IN CASE OF DR. MAY SHENOY VS. ACIT (124 TTJ 692) WHILE CONSIDERING A CASE WHERE D EVELOPMENT AGREEMENT WAS EXECUTED IN THE YEAR 1995 BUT POSSESSION WAS DE LIVERED TO THE DEVELOPER IN DECEMBER, 1999 HELD THAT CAPITAL GAIN AROSE IN A SSESSMENT YEAR 2000-01. THEREFORE, THE STRESS IS ON PASSING OF OR TRANSFERR ING OF COMPLETE CONTROL OVER THE PROPERTY IN FAVOUR OF THE DEVELOPER. CONSIDERE D IN THE AFORESAID PERSPECTIVE IT CAN BE SEEN THAT IN CASE OF THE ASSE SSEE, THERE IS NO DISPUTE TO THE FACT THAT THE DELIVERY OF POSSESSION WAS TRANSF ERRED TO THE DEVELOPER IN APRIL, 2006. THEREFORE, THE DEVELOPER WAS INVESTED WITH COMPLETE CONTROL OVER THE PROPERTY FOR DEVELOPMENT PURPOSES AND IN F ACT THE DEVELOPER HAS COMMENCED HIS DEVELOPMENT ACTIVITIES BY OBTAINING N ECESSARY APPROVAL ETC. ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 18 FROM APPROPRIATE AUTHORITIES. THEREFORE, CONSIDERE D IN THE LIGHT OF THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN CASE OF C HATURBHUJ DWARAKADAS KAPADIA (SUPRA) ALSO, THE TRANSFER IN CASE OF THE A SSESSEE HAS TAKEN PLACE IN THE FINANCIAL YEAR 2006-07 RELEVANT TO THE ASSESSME NT YEAR UNDER DISPUTE. THEREFORE, IF WE ANALYSE THE VARIOUS DECISIONS PLAC ED BEFORE US PROPOUNDING THE LAW AS DEALT WITH HEREIN ABOVE, IT IS TO BE NOT ED THAT MORE THAN ONE VIEW HAVE BEEN EXPRESSED IN THESE DECISIONS WITH REGARD TO THE YEAR OF CHARGEABILITY TO CAPITAL GAIN. THE VIEW TAKEN BY T HE AO BEING IN CONSONANCE WITH THE RATIO PROPOUNDED IN SOME OF THE DECISIONS, THE ASSESSMENT COMPLETED IN TERMS THEREOF CANNOT BE CONSIDERED TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE ONLY BECAUSE THAT VIEW IS NOT ACCEPTABLE TO CIT. IT IS WELL SETTLED PRINCIPLE THAT, CIT CAN INVOKE PROVISIONS OF SECTION 263 OF THE ACT IF THE ORDER SOUGHT TO BE REVISED IS NOT ONLY ERRONEOUS BUT AT THE SAME TIME PREJUDICIAL TO THE INTEREST OF REVENU E. 9. THE HONBLE SUPREME COURT IN CASE OF MALABAR IND USTRIES 243 ITR 83 AND CIT VS. MAX INDIA LTD. 295 ITR 282 HAS HELD THA T EVERY LOSS OF REVENUE AS CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE CONS IDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WHERE AN A O ADOPTED ONE OF THE COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED IN LO SS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WI TH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER PREJUDICIAL TO THE INTERESTS OF REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. FURTHER, THE ORDER PASSED BY THE LOWER AUTHORITY MU ST REVEAL LACK OF ENQUIRY AND NON APPLICATION OF MIND. THE HONBLE A.P. HIGH COURT IN CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. VS. CIT (SUPRA) WHILE E XAMINING THE POWERS OF COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT CONSI DERED THE AFORESAID DECISION OF THE HONBLE SUPREME COURT AND MANY OTHE R DECISIONS OF OTHER HIGH COURTS CULLED OUT THE FOLLOWING PRINCIPLES:- ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 19 (A) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CO NDITIONS, NAMELY (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTI F THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUERECOURSE CANNOT BE HA D TO SECTION 263(1) OF THE ACT. (B) EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN OR DER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMI SSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE : OR WHERE TWO VIEWS ARE POSSIBLE A ND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. (C) TO INVOKE THE SUO MOTU REVISIONAL POWERS TO REO PEN A CONCLUDED ASSESSMENT UNDER SECTION 263, THE COMMISSIONER MUST GIVE REASONS; TH AT A BARE REITERATION BY HIM THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, WILL NOT SUFFICE; THAT TH E REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE ASSESSM ENT OR CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSM ENT WERE CALLED FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THUS, WHILE THE INCOME-TAX OFFICER IS NOT CALLED UPON TO WRITE AN E LABORATE JUDGMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE COMMISSIONER NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO ; THAT I F A QUERY IS RAISED DURING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WH ICH WAS ANSWERED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT B Y ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTER FERENCE AND REVISION. (E) THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WI TH A VIEW TO START FISHING AND ROVING INQUIRIES IN MATTERS OR ORDERS WHICH ARE ALR EADY CONCLUDED ; THAT THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIG ATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESE NT AS TO WHAT SHOULD BE THE INFERENCE OR PROPER INFERENCE EITHER OF THE FACTS D ISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCE ; THAT IF THIS IS PERMITTED, LITIGATIO N WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. (F) WHETHER THERE WAS APPLICATION OF MIND BEFORE AL LOWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN ; THAT IF THERE WAS AN INQU IRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MA TTER; THAT IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN ; THAT AN ASSESSMENT ORDER MADE BY THE INCOME-TAX OFFICER CANNOT BE BRAN DED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY ; THERE MUST BE SOME PRIMA FACIE M ATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSE D OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST, HAS BEEN IMPOSED. ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 20 10. APPLYING THE AFORESAID TESTS LAID DOWN BY THE H ONBLE JURISDICTIONAL HIGH COURT TO THE FACTS OF THE PRESENT CASE, IT HAS TO BE HELD THAT EXERCISE OF JURISDICTION BY THE CIT U/S 263 OF THE ACT IS NOT P ERMISSIBLE IN LAW AS THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER A FTER CAUSING NECESSARY ENQUIRY AND APPLYING HIS MIND TO THE FACTS AND MATE RIALS ON RECORD. IT IS ALSO A FACT TO BE NOTED THAT THE ASSESSEE HAS DECLARED T HE CAPITAL GAIN BY TREATING THE TRANSFER TO HAVE TAKEN PLACE IN THE FINANCIAL Y EAR 2006-07 AND ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 HAS BEEN COMPLETED BY ASSESSING THE CAPITAL GAIN OFFERED BY THE ASSESSEE IN A SCRUTINY ASSESSME NT PROCEEDING. THEREFORE, THE SAME CAPITAL GAIN CANNOT BE TAXED TWICE. AS TH E ASSESSEE CANNOT BE PUT TO DOUBLE JEOPARDY. EVEN THE COMPUTATION OF CAPITA L GAIN MADE BY THE CIT IS ALSO NOT CORRECT. AS WOULD BE EVIDENT FROM THE COM PUTATION MADE, THE CIT HAS DETERMINED THE DEEMED SALE CONSIDERATION ON TRA NSFER OF LAND TO DEVELOPER ON THE BASIS OF THE COST OF SUBSEQUENT SA LE OF THE BUILT UP AREA TO BHARATI AIRTEL LTD. IN OUR VIEW THAT CANNOT BE CON SIDERED TO BE FAIR MARKET VALUE OF LAND AT THE TIME TRANSFER BY THE ASSESSEE TO THE DEVELOPER. IT IS THE CONTENTION OF THE ASSESSEE THAT THE VALUE MENTIONED IN THE DEVELOPMENT AGREEMENT DATED 7.7.2007 AND ACCEPTED BY SRO HAS BE EN ADOPTED BY HER WHILE COMPUTING THE CAPITAL GAIN. EVEN IF THE VALU E AS MENTIONED IN THE DEVELOPMENT AGREEMENT WAS NOT ACCEPTABLE TO CIT HE COULD HAVE ASCERTAINED THE COST INCURRED BY THE BUILDER FOR CONSTRUCTION A ND ADOPTED THAT FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN BUT UNDER NO CIRCUMSTANCES THE COST OF SALE OF THE BUILT UP AREA CAN BE ADOPTED AS THE COS T OF TRANSFER FOR THE PURPOSE OF CAPITAL GAIN. IN THIS COUNT ALSO THE ORDER OF THE CIT IS NOT SUSTAINABLE. AS CAN BE SEEN THE ALLEGED LOSS OF RE VENUE FOR WHICH THE ASSESSMENT ORDER HAS BEEN REVISED IS DUE TO COMPUTA TION OF CAPITAL GAIN MADE BY THE CIT ON APPLYING THE RATE OF COST OF SAL E OF 3068 SQ.FT. TO THE G) THE POWER OF THE COMMISSIONER UNDER SECTION 263( 1) IS NOT LIMITED ONLY TO THE MATERIAL WHICH WAS AVAILABLE BEFORE THE ASSESSI NG OFFICER AND, IN ORDER TO PROTECT THE INTERESTS OF THE REVENUE, THE COMMISSIO NER IS ENTITLED TO EXAMINE ANY OTHER RECORDS WHICH ARE AVAILABLE AT THE TIME O F EXAMINATION BY HIM AND TO TAKE INTO CONSIDERATION EVEN THOSE EVENTS WHICH AROSE SUBSEQUENT TO THE ORDER OF ASSESSMENT. ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 21 TOTAL BUILT UP AREA RECEIVED BY THE ASSESSEE UNDER THE DEVELOPMENT AGREEMENT. SINCE, WE HAVE HELD SUCH COMPUTATION OF CAPITAL GAIN BY THE CIT TO BE ERRONEOUS THERE WOULD HARDLY BE ANY LOSS TO T HE REVENUE, WHETHER THE CAPITAL GAIN ON TRANSFER OF LAND TO DEVELOPER IS AS SESSED IN ASSESSMENT YEAR 2007-08 OR 2008-09. SO FAR AS THE DECISION OF HON BLE MADRAS HIGH COURT IN CASE OF CIT VS. G. SAROJA (SUPRA) IS CONCERNED, ON CAREFUL READING OF THE SAME WOULD SHOW THAT IT IS FACTUALLY DISTINGUISHABL E. IN CASE OF G. SAROJA THERE IS NO WRITTEN AGREEMENT AT ALL, THEREFORE THE HONBLE MADRAS HIGH COURT HELD THAT THERE CANNOT BE ANY TRANSFER U/S 53A OF T .P. ACT READ WITH SEC. 2(47)(V) OF THE ACT. WHEREAS IN CASE OF THE ASSESS EE THERE IS A WRITTEN AGREEMENT. FURTHER, IN CASE OF G. SAROJA, THE HON BLE MADRAS HIGH COURT CATEGORICALLY HELD THAT, APART FROM THE FACT THAT T HERE IS NO WRITTEN AGREEMENT WITH THE BUILDER, THE REVENUE ALSO FAILED TO PROVE THAT POSSESSION WAS DELIVERED TO THE DEVELOPER OR ANY CONSIDERATION WAS RECEIVED BY THE ASSESSEE FROM DEVELOPER. WHEREAS, IN CASE OF THE ASSESSEE F ACTS ON RECORD CLEARLY PROVE THAT POSSESSION OF THE PROPERTY WAS DELIVERED TO THE DEVELOPER IN FINANCIAL YEAR 2006-07. IN FACT THE CIT HIMSELF IN HIS ORDER HAS ADMITTED THAT POSSESSION OVER THE PROPERTY WAS GIVEN TO THE DEVEL OPER AND THE DEVELOPER HAS COMMENCED CONSTRUCTION WORK IN THE FINANCIAL YE AR 2006-07. THEREFORE, IN OUR CONSIDERED VIEW THE DECISION OF CIT VS. G. S AROJA (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. TH OUGH THE LD. A.R. ALSO MADE AN ATTEMPT TO DISTINGUISH THE DECISION OF THE HONB LE MADRAS HIGH COURT BY CONTENDING THAT THE HONBLE MADRAS HIGH COURT HAS D ECIDED THE ISSUE WITHOUT CONSIDERING SEC. 2(47)(VI) OF THE ACT WHICH TAKES W ITHIN ITS SWEEP ANY TRANSACTION WHICH RESULTS IN TRANSFERRING OR ENABLI NG THE ENJOYMENT OF ANY IMMOVABLE PROPERTY, BUT WE DO NOT FEEL THE NECESSIT Y TO ENTER INTO THAT ASPECT AS FACTUALLY THE DECISION OF THE HONBLE MAD RAS HIGH COURT IN CASE OF G. SAROJA (SUPRA) IS FOUND TO BE INAPPLICABLE. IN A FORESAID VIEW OF THE MATTER, WE HAVE NO HESITATION IN HOLDING THAT THE CIT WAS N OT JUSTIFIED IN COMING TO THE CONCLUSION THAT TRANSFER UNDER THE DEVELOPMENT AGREEMENT HAS TAKEN PLACE IN THE FINANCIAL YEAR RELEVANT TO THE ASSESSM ENT YEAR 2008-09 AND CONSEQUENTLY TREATING THE ASSESSMENT ONLY TO BE ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. SO FAR AS THE OTHER ISSUE OF UNDER ASSESSMENT OF ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 22 RENTAL INCOME IS CONCERNED, IT IS A FACT ON RECORD THAT IN THE SHOW CAUSE NOTICE, THE CIT HAS POINTED OUT DIFFERENCE OF RS.77 ,643/- WHICH WAS EFFECTIVELY RECONCILED BY THE ASSESSEE IN COURSE OF THE PROCEEDING U/S 263 OF THE ACT. HOWEVER, THE CIT BY RAISING ANOTHER ISSUE HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF REVENUE SINCE ACCORDING TO HIM THE ASSESSEE HAS NOT PAID THE MUNI CIPAL TAX WITHIN THE RELEVANT FINANCIAL YEAR. HOWEVER, ON EXAMINING THE MATERIAL PRODUCED BEFORE US WE FIND THE CONCLUSION DRAWN BY THE CIT TO BE FA CTUALLY INCORRECT. THE MUNICIPAL RECEIPT AS FURNISHED IN THE PAPER BOOK CL EARLY INDICATES THAT THE MUNICIPAL TAX WAS PAID WITHIN THE FINANCIAL YEAR 20 07-08. THEREFORE, ON THIS GROUND ALSO THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE CIT WAS NOT CORRECT IN REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT PASSED U/S 263 AND RESTORE THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT FOR THE ASSESSME NT YEAR UNDER CONSIDERATION. ITA NO.18/VIZAG/2012: 11. THIS IS AN APPEAL AGAINST THE ORDER PASSED BY T HE CIT IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. SINCE WE HAVE ALLOWED ASS ESSEES APPEAL AGAINST THE ORDER PASSED U/S 263 OF THE ACT, THE PENALTY IMPOSE D U/S 271(1)(C) OF THE ACT IN CONSEQUENCE THEREOF CANNOT SURVIVE. ACCORDINGL Y, WE ALLOW THE APPEAL OF THE ASSESSEE BY DELETING THE PENALTY IMPOSED. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 6 TH MAR14. SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 6 TH MARCH, 2014 ITA NOS.372/VIZAG/2011 & 18/VIZAG/2012 P.S.V. JAYALAKSHMI, VSKP 23 COPY TO 1 P.S.V. JAYALAKSHMI, D.NO.10-50-23, CHAYA SIRIPU RAM, VISAKHAPATNAM 2 CIT-II, VISAKHAPATNAM 3 THE CIT(A), VISAKHAPATNAM 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM