Deputy Commissioner of Income Tax, Circle-2(1), Hyderabad V. D Venkateswara Rao, Hyderabad

ITA 2066/Hyd/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7407 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 07-03-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI; M NARMADA
• Assessee Lawyers: K L DEVDAS
• Keywords: Capital asset; Salary income; Difference of opinion; Change of opinion; Set aside; Capital Gains
• Section: 143(3); 2(14); 133(6); 143(1); 201; 143(2); 147; 148; 6; 12; 2; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B' BENCH, HYDERABAD BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN , HONBLE ACCOUNTANT MEMBER ITA NO. 2066 / HYD /201 7 (ASST. YEAR : 20 0 9 - 1 0 ) DCIT, CENTRAL - 2(1), HYDERABAD VS. D. VENKATESWARA RAO, FLAT NO. 201, SRI CHAITANYA RESIDENCY, STREET NO. 2, SAGAR SOCIETY, HYDERABAD. PAN NO. ABPPD 8276 R ITA NO. 2067 / HYD /201 7 (ASST. YEAR : 20 09 - 10 ) DCIT, CENTRAL - 2(1), HYDERABAD D. RAGHAVA RAO, FLAT NO. 201, SRI CHAITANYA RESIDENCY, STREET NO. 2, SAGAR SOCIETY, BANJARA HILLD, HYDERABAD. PAN NO. ABPPD 8275 N ITA NO. 574 / HYD /201 8 (ASST. YEAR : 20 09 - 10 ) DCIT, CENTRAL - 2(1), HYDERABAD M/S. KOHINOOR HATCHERIES PVT. LTD., PLOT NO. 801, PHASE - I, KAVURI HILLS, MADHAPUR, HYDERABAD. PAN NO. AAACK 8477 G C.O.NO. 21/HYD/2018 (ARISING OUT OF ITA NO. 574/HYD/2018) (ASST. YEARS : 2009 - 10) M/S. KOHINOOR HATCHERIES PVT. LTD., PLOT NO. 801, PHASE - I, KAVURI HILLS, MADHAPUR, HYDERABAD. PAN NO. AAACK 8477 G DCIT, CENTRAL - 2(1), HYDERABAD (APPELLANT S ) (RESPONDENT S ) 2 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) ASSESSEE BY : SHRI K.L. DEVDAS C A. DEPARTMENT BY : SHRI Y.V.S.T. SAI & SMT. M. NARMADA DR S . DATE OF HEARING : 07 / 0 3 /201 9 . DATE OF PRONOUNCEMENT : 03 / 0 5 /201 9 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THESE APPEAL S BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - 2 , HYDERABAD , DATED 18 /0 9 /201 7 & 12/01/2018 FOR THE ASSESSMENT YEAR 200 9 - 1 0 . CROSS OBJECTION IS FILED BY THE ASSESSEE IN ITA NO. 574/HYD/2018. SINCE FACTS AND ISSUES ARE COMMON, CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER . 2. FOR THE SAKE OF CONVENIENCE, FACTS ARE TAKEN FROM ITA NO. 2066/HYD/2018 FOR THE A.Y. 2009 - 10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT( A) ERRED IN FACTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE IMPUGNED LAN DS IS NOT CAPITAL ASSET AND ALSO THAT THERE WAS NO TRANSFER OF ASSET, WHICH IS CONTRARY TO THE FACTS OF THE CASE?' 3. THE LD. CIT(A) ERRED IN RELYING UPON THE DECISION OF THE HON'BLE HIGH COURT IN THE WP NO. 2148 OF 2015 IN THE CASE OF M/S. KOHINOOR HATCHERIES PVT LTD, WHEN THE FACTS OF THE PETITIONER ARE DIFFERENT AND DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE? 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS VALIDITY OF THE RE - OPENING OF PROCEEDINGS U/S. 147 IN THE CASE OF THE 3 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) PETITIONER COMPANY AND NOT WHETHER THE LANDS ARE AGRICULTURAL OR NOT AND THAT BEING SO, THE C IT(A) ERRED IN APPLYING THE RATIO OF THE DECISION IN THE SAID CASE TO THE FACTS OF THE PRESENT CASE, WHICH ARE DISTINGUISHABLE? 5. THE LD. CIT(A) OUGHT TO HAVE OBSERVED THAT IN THE PRESENT CASE, NO ASSESSMENT WAS COMPLETED U/S. 143(3) AND THE RETURN WAS ONLY PROCESSED AND THEREFORE THERE WAS NO OCCASION TO EXAMINE WHETHER THE IMPUGNED LANDS ARE AGRICULTURAL OR NOT? 6. THE LD. CIT (A) ALSO ERRED IN HOLDING THAT THERE WAS NO TRANSFER OF ASSET, IGNORING THE FACT THAT THE DEVELOPMENT AGREEMENT WAS STILL IN FORCE AND WAS NOT CANCELLED AND ALSO CONSIDERING THE FACT THAT THE ASSESSEE, RECEIVED ADVANCE CONSIDERATION OF RS. 2,25, 00,000 VIDE TH E SAID AGREEMENT? 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE - SRI D.VENKATESWARA RAO ALONG WITH TWO OTHERS HAVE ENTERED INTO A DEVELOPMENT AGREEMENT FOR DEVELOPMENT OF THE LAND SITUATED AT SURVEY NOS. 549, 550 & 551 IN KOLTHUR VILLAGE, SHAMIRPET MAN D AL, RANGA REDDY DISTRICT . THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT - CUM - GPA, DATED 19/05/2008 WITH M/ S.IPL INFRASERVICES PVT. LTD., HYDERABAD . THE ASSESSEE HAD FILED HIS RETURN OF INCOME IN THE CAPACITY OF INDIVIDUAL AND ALSO DIRECTOR OF M/S. KOHINOOR HATCHERIES PVT. LTD., BY DECLARING TOTAL INCOME OF RS. 3,28,675/ - , AGRICULTURAL INCOME OF RS. 89,150/ - , INCOME FROM SALARY OF RS. 3,27,500/ - AND INCOME FROM OTHER SOURCES OF RS.1,175/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED 4 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) TO AS 'ACT') . SU BSEQUENTLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. KOHINOOR HATCHERIES PVT. LTD. FOR THE A.Y. 2012 - 13, THE COMPANY FILED A COPY OF R EGISTERED DEVELOPMENT AGREEMENT - CUM - GPA ENTERED ON 19/05/2008 AT HYDERABAD (DOC. NO. 1583) BY THE ASSESSEE ALONG WITH TWO OTHERS (I) MR. D. RAGHAVA RAO, DIRECTOR OF THE COMPANY M/S. KOHINOOR HATCHERIES PVT. LTD. AND (II) M/S. KOHINOOR HATCHERIES PVT. LTD. WITH M/S. IPL INFRASERVICES PVT. LTD . FOR DEVELOP MENT OF PROPERTY CONSISTING OF 2 8 ACRES 18 GUNTS. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT AS PE R THE DEVELOPMENT AGREEMENT, SALE CONSIDERATION OF RS. 8,59,98,010/ - WILL BE DISTRIBUTED AMONG THE PARTIES OF THE FIRST PART IN PROPORTIONATE TO THEIR LAND CONTRIBUTION FOR DEVELOPMENT . THE PROPORTIONATE SHARE OF INCOME IN THE HANDS OF PARTIES OF THE FIRST PART IS AS UNDER: - NAME OF THE PARTY LAND GIVEN FOR DEVELOPMENT PROPORTIONATE SHARE SHARE OF SALE CONSIDERATION KOHINOOR HATCHERIES 09 ACRES 05 GUNTS (365 GUNTAS) 365/1138 2,75,82,842 D. VENKATESWARA RAO 17 ACRES 11 GUNTAS (691 GUNTAS) 691/1138 5,22,18,475 D. RAGHAVA RAO 02 ACRES 02 GUNTAS (82 GUNTAS) 82/1138 61,96,693 TOTAL 28 ACRES 18 GUNTAS 1138 GUNTAS 8,59,98,010 THE ASSESSING OFFICER FURTHER NOTED THAT AS THE ASSESSEE DID NOT SHOW ANY INCOME FROM CAPITAL GAIN IN HIS RETURN OF INCOME FILED FOR THE A.Y. 2009 - 10, ON THE DEEMED SALE CONSIDERATION RECEIVED 5 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) ON ITS SHARE OF LAND GIVEN FOR DEVELOPMENT, INCOME TO THE TUNE OF RS. 5,22,18,475/ - CHARGEABLE TO TAX ESCAPED ASSESSMENT UN DER THE HEAD CAPITAL GAINS. ACCORDINGLY, THE ASSESSEES CASE WAS REOPENED. A NOTICE UNDER SECTION 148 , DATED 30/03/2015 WAS ISSUED . IN RESPONSE, THE ASSESSEE FILED A LETTER DATED 22/04/2015 STATING THAT THE RETURN FILED ON 31/07/2009 MAY BE TREATED AS FILED IN RESPONSE TO THE NOTICE ISSUED U/S. 148. SUBSEQUENTLY, THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 143(2) & 142 (1) DATED 06/10/201 5 . IN RESPONSE, THE AR OF THE ASSESSEE APPEARED AND SUBMITTED THAT AS PER THE DEVELOPMENT AGREEMENT - CUM - GPA, NO POSSESSION WAS HANDED - OVER ON THE DATE OF AGREEMENT AND THERE IS NO TRANSFER OF CAPITAL ASSET AND THERE IS NO CAPITAL GAIN CHARGEABLE TO TAX ARISING OUT OF THE SAID DOCUMENT. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO VS. DCIT IN I.T.T.A.NO. 245/2014, DATED 09/04/201 4 , HE HAS OBSERVED THAT THE FIRST PARTY UNDERTAKES TO GIVE THE VACANT POSSESSION OF THE PROPERTY STARTING FROM 8 TH MONTH OF THE DATE OF EXECUTION OF THIS DEED AND SHALL ACCOMMODATE THE SECOND PARTYS PLANS FOR DEVELOPMENT. THEREFORE, ACCORDING TO THE ASSESS ING OFFICER, THERE IS A TRANSFER OF 6 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) CAPITAL ASSET. HE FURTHER OBSERVED THAT INSOFAR AS SUBMISSION OF THE ASSESSEE THAT THE PROPERTY STILL OWNED BY THE ASSESSEE AS OF TODAY IS DEVOID OF MERIT , AS THE DEVELO PMENT AGREEMENT WAS ENTERED ON 19 /05/2008 AND AS P ER POINT NO.3 OF THE SAID AGREEMENT, THE ASSESSEE (FIRST PARTY) SHAL L GIVE THE VACANT POSSESSION OF THE PROPERTY FROM 8 TH MONTH OF THE DATE OF EXECUTION OF THIS DEED. ONCE THE AGREEMENT HAS BEEN ENTERED INTO, TRANSFER OF PROPERTY HAS TAKEN PLACE. FURTHER, THE ASSESSEE HAS NOT FURNISHED ANY SUBSTANTIAL EVIDENCE, WHETHER ANY AGREEMENT HAS BEEN ENTERED INTO BETWEEN THE PARTIE S SUBSEQUENTLY OR CANCELLATION OF DEVELOPMENT AGREEMENT IN SUPPORT OF ITS CONTENTION. ACCORDINGLY, THE ASSESSING OFFICER CALCULATED THE CAPITAL GAINS TO THE TUNE OF RS. 5,22,18,475/ - . 4 . ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE LANDS IMP UGNED ARE AGRICULTURAL LANDS AND AS PER THE DEVELOPMENT AGREEMENT, THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION. IT HAS ALSO BEEN SUBMITTED BEFORE THE LD. CIT(A) THAT AS PER CLAUSE (3) OF THE DEVELOPMENT AGREEMENT , DATED 19/05/2008 THE OWNERS AGREED TO GIVE THE DEVELOPER VACANT POSSESSION OF THE PROPERTY STARTING FROM 8 TH MONTH OF THE DATE OF EXECUTION OF THE DEVELOPMENT AGREEMENT. THIS CLAUSE WAS NOT ACTED UPON AND THE 7 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) POSSESSION OF THE LAND STILL VEST S WITH THE OWNERS. THIS FACT IS ALSO CONFIRMED BY THE DEVELOPER AND SUBMITTED THAT THERE IS NO TRANSFER OF THE CAPITAL ASSET AS PER SECTION 2(47) OF THE ACT , THEREFORE THE CAPITAL GAIN CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. 5 . THE LD. CIT(A) BY CONSIDERING THE DETAILED SUBMISSION MADE BY THE ASSESSEE AND ALSO BY CONSIDERING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO (SUPRA) HAS OBSERVED THAT THE IMPUGNED SUBJECT OF THE LAND IS AN AGR ICULTURAL LAND. THE DEVELOPER HAS NOT TAKEN POSSESSION OF THE LAND AND ALSO NOT CARRIED OUT ANY DEVELOPMENTAL ACTIVITIES IN THE SAID LAND DUE TO SLUMP IN THE REAL ESTATE MARKET. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO CONCLUDE THAT VACANT POSSESSION OF THE LAND WAS HANDED OVER TO THE DEVELOPER AS PER THE TERM S OF THE DEVELOPMENT AGREEMENT - CUM - GPA AND THE DEVELOPER HAS NOT TAKEN STEPS IN FULFILMENT OF THE TERMS OF AGREEMENT AND HELD THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO (SUPRA) HAS NO APPLICATION TO THE FACTS OF THE ASSESSEES CASE AND GAVE A FINDING THAT NEITHER THE LAND UNDER CONSIDERATION IS A CAPITAL ASSET NOR THERE WAS NO TRANSFER OF THE ASSET AS PER THE TERMS OF 8 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) DEVELOPMENT AGREEMENT - CUM - GPA AND A CCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER OF THE LD.C IT (A) IS EXTRACTED AS UNDER: - 6.4 I HAVE CAREFULLY CONSIDERED THE ISSUE, THE SUBMISSIONS MADE BY THE AR THE ASSESSMENT ORDER AND THE CASE RECORDS. THE RETURN OF INCOME FILED BY THE APPELLANT HAS BEEN PROCESSED 143(1). DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF M/S.KOHINOOR HATCHERIES PRIVATE LIMITED FOR THE AY 2012 - 13, IN WHICH THE APPELLANT IS A DIRECTOR, IT CAME TO THE NOTICE OF THE AO THAT THE ABOVE MENTIONED DAGPA WAS ENTERED BY THE COMPANY ALONG WITH TWO OTHER DIRECTORS NAMELY SRI D.VENKATESW ARA RAO AND SRI D. RAGHAVA RAO (APPELLANTS) WITH M/S. IPL INFRASERVICES PRIVATE LIMITED FOR THE DEVELOPMENT OF THE PROPERTY CONSISTING OF 28 ACRES 18 GUNTAS SITUATED AT KOITHUR VILLAGE, SHAMEERPET MANDAL, RANGA REDDY DISTRICT. AS PER THE DAGPA, THE CONSIDE RATION TO THE FIRST AND SECOND APPELLANTS WERE WORKED OUT TO BE RS.5,22,18,475/ - AND RS.61,96,693/ RESPECTIVELY OUT OF THE TOTAL SALE CONSIDERATION WORKED OUT OF RS.8,59,98,010/ (REMAINING CONSIDERATION TO M/S. KOHINOOR HATCHERIES (P) LIMITED). SINCE, THE APPELLANTS HAVE NOT DISCLOSED THE CAPITAL GAINS IN THE RETURNS OF INCOME FILED, THE AO RE - OPENED THE ASSESSMENT AFTER OBTAINING NECESSARY APPROVALS. THE AO NEVER HAD AN OCCASION TO EXAMINE THE RETURN AS THE ASSESSMENT WAS COMPLETED U/S 143(1). IN VIEW OF T HE ABOVE FACTS, THE ARGUMENT OF THE AR THAT THE AO DID NOT HAVE ANY TANGIBLE AND RELEVANT MATERIAL IN POSSESSION TO REOPEN THE ASSESSMENT AND THERE IS NO NEXUS BETWEEN THE REASONS RECORDED AND INCOME ESCAPEMENT IS MISPLACED AND MISCONCEIVED. FROM THE RECOR DS IT IS NOT THAT THE APPELLANTS NOT EVEN SOUGHT THE REASONS RECORDED FOR RE - OPENING OF ASSESSMENT AND DID NOT OBJECT TO THE RE - OPENING OF THE ASSESSMENT BEFORE THE AO. IN VIEW OF THE ABOVE, IT IS HELD THAT THE ACTION OF THE AO IN RE - OPENING THE ASSESSMENT IS VALID AND THEREFORE, THE ADDITIONAL GROUNDS OF APPEAL 1 AND 2 ARE DISMISSED. 7. THE NEXT ISSUE IS WHETHER THE ASSET UNDER SUBJECT MATTER OF APPEAL IS A CAPITAL ASSET OR NOT? IT IS SUBMITTED BY THE AR THAT THE LAND WHICH WERE SUBJECT MATTER OF DAGPA AN D WHICH WERE SUBJECT TO CAPITAL GAINS BY THE AO ARE AGRICULTURAL LANDS SITUATED BEYOND 40 KMS FROM THE MUNICIPAL CORPORATION. PART 9 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) OF THE AGRICULTURAL LANDS WERE SOLD IN THE AY 2008 - 09 BY M/S. KOHINOOR HATCHERIES PRIVATE LIMITED (CONTIGUOUS LANDS OF THE COM PANY AND THE TWO DIRECTORS) AND THE AO COMPLETED THE ASSESSMENT U/S.143(3) ACCEPTING THE APPELLANT'S CLAIM THAT THE LANDS WERE AGRICULTURAL LANDS AND THEREFORE NOT A CAPITAL ASSET. THEREAFTER, THE ASSESSMENT PROCEEDINGS OF THE COMPANY FOR THE AY 2008 - 09 WE RE RE - OPENED ON THE GROUNDS THAT THE AGRICULTURAL LANDS WERE SOLD TO A DEVELOPER FOR COMMERCIAL EXPLOITATION AND THEREFORE, THE LANDS CEASED TO BE AGRICULTURAL LANDS. THE COMPANY I.E. KOHINOOR HATCHERIES PRIVATE LIMITED FILED A WRIT BEFORE THE HON'BLE HIGH COURT OF HYDERABD IN THIS REGARD CHALLENGING THE RE - OPENING OF THE ASSESSMENT U/S.147. THE HON'BLE HIGH COURT IN W.P.NO.2148/2015 VIDE ORDER DATED 16.8.2016 ALLOWED THE APPEAL AND SET ASIDE. PARA - 27 OF THE ORDER IS AS FOLLOWS: - '27. THEREFORE, THE RESPON DENTS CANNOT SHY AWAY FROM THE FACT THAT THERE WAS A FULL AND TRUE DISCL OSURE OF ALL MATERIAL FACTS NECESSARY FO R ASSESSMENT. THIS CASE WILL NOT FALL UNDER THE CATEGORY OF MERE PRODUCT/OF OF BOOKS OF ACCOUNTS AND OTHER RECORDS. THIS CASE VERY DEARLY FALLS UNDE R THE CATEGORY OF TRUE AND FULL DIS CL OSURE, UPON WHICH THE FIRST ASSESSMENT ORDER WAS PASSED ON THE OPINION T HAT THE LANDS SOLD WERE AGRICULTURAL LANDS. THEREFORE, TO SAY AFTER 4 YEARS THAT THE LANDS WERE SOLD TO A REAL ESTATE COMPANY FOR THE PURPOSE OF FORMING A SPECIAL ECONOMIC ZONE, WOULD UNDOUBTEDLY TANTAMOUNT TO A CHANGE OF OPINION, WHICH IS NOT PERMITTED BY LAW.' 7.1 FROM THE AFORESAID FACTS ON RECORD AND THE ORDER OF THE HON'BLE HIGH COURT, IT IS EVIDENT THAT THE LANDS WHICH WERE SUBJECT MATTER OF CAPITAL GAINS IS NOT A CAPITAL ASSET IN TERMS OF PROVISIONS OF SECTION 2(14) OF THE ACT. 7.2 COMING TO THE ISS UE WHETHER THERE WAS ANY TRANSFER OF CAPITAL ASSET IN TERMS OF SECTION 2(47) OF THE ACT, MY CONCLUSIONS ARE AS UNDER: - AS PER, POINT NO.3 OF THE DAGPA, THE APPELLANT UNDERTAKES TO GIVE VACANT POSSESSION OF THE PROPERTY FROM 8 MONTH OF THE DATE OF EXECUTION OF THE DEED. IT IS THE CONTENTION OF THE APPELLANT THAT THIS CLAUSE OF THE AGREEMENT WAS NEVER ACTED UPON DUE TO SLUMP IN THE REAL ESTATE MARKET AND THE POSSESSION OF THE LAND STILL VESTS WITH THE OWNERS. THE APPELLANTS THEMSELVES ARE CULTIVATING PART OF THE LAND AND PART IS BEING USED FOR POULTRY BUSINESS RUN BY M/S. KOHINOOR HATCHERIES PRIVATE LIMITED, WHEREIN THE APPEL LANT IS A DIRECTOR. IN SUPPORT OF THE CONTENTION, THE APPELLANT FILED CERTIFICATE OF M/S. KOHINOOR HATCHERIES PRIVATE LIMITED BEFORE THE AO, WHICH WAS LISTED IN THE 10 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) WRITTEN SUBMISSIONS OF THE AR. APPARENTLY, THE AO ISSUED NOTICE U/S.133(6) OF THE ACT TO TH E DEVELOPER REGARDING THE STATUS OF THE PROJECT AND THE DEVELOPER SEEMS TO HAVE REPLIED THAT THEY HAVE NOT TAKEN OVER THE POSSESSION OF THE LAND AND ALSO NOT CARRIED OUT ANY DEVELOPMENTAL ACTIVITIES IN THE SAID LAND DUE TO SLUMP IN THE REAL ESTATE MARKET. THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO CONCLUDE THAT VACANT POSSESSION OF THE LAND WAS HANDED OVER TO THE DEVELOPER AS PER TERMS OF THE DAGPA AND THE DEVELOPER HAS TAKEN STEPS IN FULFILLMENT OF THE TERMS OF AGREEMENT. THUS, THE DECISION OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO (SUPRA) SHALL NOT BE APPLICABLE TO THE FACTS OF THE APPELLANT. IN VIEW OF THE ABOVE, IT IS HELD THAT THERE IS NO TRANSFER OF LAND WITHIN THE SCOPE OF SECTION 2(47)(V) OF THE ACT. 7.3 IN VIEW OF THE FOREGOING DISCUSSION, IT IS HELD THAT NEITHER THE LAND UNDER CONSIDERATION IS A CAPITAL ASSET NOR THERE WAS ANY TRANSFER OF ASSET AS PER THE TERMS OF THE DAGPA. THEREFORE, THE ACTION OF THE AO IN COMPUTING CAPITAL GAINS ON THE ALLEGED TRANSF ER OF A CAPITAL ASSET IS ERRONEOUS AND DELETED AND THE GROUNDS OF APPEAL ARE ALLOWED. SINCE, THE ARISING OF CAPITAL ASSET HAS BEEN SET ASIDE, THE ALTERNATE GROUNDS OF THE APPEAL REGARDING COMPUTATION OF CAPITAL GAINS ARE NOT ADJUDICATED. 6 . ON BEING AGGR IEVED THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL. 7 . LD. DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE LD.CIT(A) IS NOT CORRECT IN HOLDING THAT THE LANDS WHICH ARE IMPUGNED ARE SUBJECT MATTER OF DISPUTE ARE AGRICULTURAL LANDS BASED ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN W.P.NO. 2148/2015 IN THE CASE OF M/S. KOHINOOR HATCHERIES PVT. LTD. IT IS FURTHER SUBMITTED THAT THE ISSUE B E FORE THE HON'BLE JURISDICTIONAL HIGH COURT IS IN RESPECT OF VALIDITY OF REOPENING OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT AND THEREFORE APPLYING THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT IN THAT CASE 11 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) TO THE PRESENT CASE , IS NOT CORRECT. IT IS FURTHER SUBMITTED THAT THE LD. CIT(A) IS NOT CORRECT IN HO L DING THAT THERE WAS NO TRANSFER OF CAPITAL ASSET FOR THE REASON THAT THE DEVELOPMENT AGREEMENT WAS STILL IN FORCE AND TH E SAME WAS NOT CANCELLED. HE RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO (SUPRA) AND ALSO RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS CIT [(2003) 180 CTR 107 (BOM.)] AND STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 8 . LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER SIMPLY TAKEN INTO CONSIDERATION OF THE DATE OF AGREEMENT AND CAME TO AN ERRONEOUS CONCLUSION THAT THE CAPITAL GAIN HAS TO BE ASSESSED IN THE HANDS OF THE ASSESSEE WITHOUT CONSIDERING THE EXPLANATION AND SUBSEQUENT DEVELOPMENTS , AND SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN POSSESSION AT ALL TO THE DEVELOPER , THEREFORE UNLESS POSSESSION IS HANDED OVER TO THE DEVELOPER, NO TRANSFER IS TOOK PLACE AND CAPITAL GAINS CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. HE FURTHER POINTED O UT THAT WHEN THE ASSESSING OFFICER HAS ISSUED A SHOW - CAUSE NOTICE TO THE ASSESSEE IN RESPECT OF ASSESS A BILITY OF THE CAPITAL GAINS, IT WAS SUBMITTED BEFORE THE 12 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) ASSESSING OFFICER AT PAGE NO. 24 OF THE PAPER BOOK , DATED 28/07/2015 WHEREIN HE SPECIFICALLY SUB MITTED THAT THE POSSESSION IS NOT HANDED OVER TO THE DEVELOPER EVEN TODAY, THE PROPERTY IS WITH THE ASSESSEE AND HE IS RUNNING POULTRY ACTIVITY IN THE SAID PREMISES AND THE DEVELOPER NOT ACTED UPON THE DEVELOPMENT AGREEMENT - CUM - GPA . TO SUPPORT HIS CONTENTI ON, HE FILED A CERTIFICATE ISSUED BY THE LABOUR DEPARTMENT FOR RENEWAL OF REGISTRATION AT PAGE NO. 42 OF THE PAPER BOOK, A CERTIFICATE ISSUED BY THE COMMERCIAL TAXES DEPARTMENT AT PAGE NO. 44 OF THE PAPER BOOK AND ALSO POINTED OUT FROM PAGE NOS. 4 6 TO 4 7 IN RESPECT OF PAYMENT OF ELECTRICITY BILLS AND ALSO POINTED OUT AT PAGE NO. 48 THAT THE PROPERTY TAXES PAID TO THE GOVERNMENT , AND SUBMITTED THAT THE ASSESSEE BY FILING ALL THE DETAILS, HE DISCHARGED THE ONUS CASTED UPON HIM TO SHOW THAT THE POSSESSION HAS NOT BEEN GIVEN. IF AT ALL , THE ASSESSING OFFICER NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE, THE ONUS LIES WITH THE ASSESSING OFFICER TO PROVE THAT THE POS SESSION HAS BEEN HANDED OVER TO THE DEVELOPER . THE ASSESSING OFFICER WITHOUT MAKING ENQUIRY SIMPLY ON THE BASIS OF DEVELOPMENT AGREEMENT TAXED THE CAPITAL GAINS WHICH IS CONTRARY TO LAW . 13 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) HE ALSO SUBMITTED THAT THE LD. CIT(A) HAS HELD THAT THE LANDS WHIC H ARE UNDER CONSIDERATION ARE AGRICULTURAL LANDS BASED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN W.P.NO. 2148/2015 , DATED 16/08/2016 WHEREIN THE HON'BLE HIGH COURT IN PARAGRAPH 24 AT PAGE 9 OF THE ORDER, GAVE A SPECIFIC FINDING THAT THE LANDS WHICH ARE IN DISPUTE ARE AGRICULTURAL LANDS . THIS ISSUE HAS BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, LD. CIT(A) BY FOL LOWING THE SAME HELD THAT THE LANDS WHICH ARE UNDER CONSIDERATION ARE AGRICULTURAL LANDS . HE ALSO SUBMITTED THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO (SUPRA) HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE FOR THE REASON THAT IN THAT CASE, THE POSSESSION NOT HANDED OVER TO THE DEVELOPER, THEREFORE THE ASSESSING OFFICER IS NOT CORRECT IN APPLYING THE RATI O OF THE SAID JUDGMENT TO THE ASSESSEES CASE . HE REL IED ON THE FOLLOWING CASE - LAWS: - 1) CIT VS. GEETADEVI PASARI [(2009) 17 DTR 280 (BOM.)] 2) ACIT VS. R. SRINIVASA RAO 9(2015) 152 ITD 887 (HYD.)] 3) BINJUSARIA PROPERTIES PVT. LTD. VS. ACIT [(2015) 40 ITR 230 (TRIB. HYD.) 4) FIBARS INFRATECH PVT. LTD. VS. ITO [(2014) 98 DTR 281 (HYD.)] 14 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) 5) S. RANJITH REDDY VS. DCIT [(2013) 95 DTR 283 6) P. PRATHIMA REDDY VS. ITO [(2012) 54 SOT 409] 9 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. 10 . THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER THERE IS A TRANSFER OF CAPITAL ASSET OR NOT UNDER SECTION 2(14) OF THE ACT . IN THI S CASE , THE ASSESSEE SRI D. VENKATESWARA RAO IS A DIRECTOR OF M/S. KOHINOOR HATCHERIES PVT. LTD. ALONG WITH SRI D. RAGHAVA RAO HAS ENTERED INTO A DEVELOPMENT AGREEMENT , DATED 19/05/2008 FOR DEVELOPMENT OF THE LAND TO THE EXTENT OF 28 ACRES 18 GUNTAS SITUATED IN SURVEY NOS. 549, 550 & 551 AT KOLTHUR VILLAGE, SHAMIRPET MANDAL, RANGA REDDY DISTRICT WITH M/S. IPL INFRASERVICES PVT. LTD., HYDERABAD . AS PER THE DEVELOPMENT AG REEMENT , THE SECOND PARTY (M/S. IPL INFRASERVICES PVT. LTD.) SHALL PREPARE A COMPREHENSIVE LAYOUT PLAN FOR DIVIDING THE LAND INTO INDIVIDUAL PLOTS FOR CONSTRUCTION OF VILLAS AND SHALL SUBMIT THE PLAN S ALONG WITH NECESSARY APPLICATION FORMS AND PAPERS TO DTCP / APIIC OR ANY COMPETENT AUTHORIT I ES AND GET THEM APPROV ED / SANCTION ED . THE SECOND PARTY SHAL L BEAR ALL EXPENSES FOR PREPARATION OF THE SAID LAYOUT PLAN AND SHALL PAY THE NECESSARY 15 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) FEES TO DCTP/APIIC AND OTHER CONCERNED AUTHORITIES. AS PER CLAUSE (3) OF THE AGREEMENT, THE ASSESSEE ALONG WITH OTHERS HAS TO GIVE VACANT POSSESSION OF THE PROPERTY STARTING FROM 8 TH MONTH OF THE DATE OF EXECUTION OF THIS DEED AND SHALL ACCOMMODATE THE SECOND PART YS PLANS FOR DEVELOPMENT . AS PER CLAUSE (4) OF THE AGREEMENT , THE SECOND PARTY I.E. M/S. IPL INFRASERVICES PVT. LTD. SHALL PROVIDE 35% OF THE VILLAS TO THE ASSESSEE AND 65% WITH THE DEVELOPER. AS PER CLAUSE (6) OF THE AGREEMENT , THE DEVELOPER HAS TO TAKE UP THE ENTIRE DEVELOPMENT WORK, PROVIDE ALL AMENITIES LIKE BT ROADS, DRAINAGE, WATER, SEWERAGE , ELECTRICITY, TRANSFORMER, PARKS, COMMON AMENITIES APA RT FROM CONSTRUCTION OF VILLAS ETC. BY INVESTING ITS OWN FUNDS . ACCORDING TO THE ASSESSEE, THE SECOND PARTY I.E. M/S. IPL INFRASERVICES PVT. LTD. NOT FULFILLED THE TERMS AND CONDITIONS PARTICULARLY IT IS NOT OBTAINED LAYOUT PLAN, REQUIRED APPROVALS AND S ANCTION FROM THE CONCERNED AUTHORITIES DUE TO SLUMP IN REAL ESTATE BUSINESS. AS PER THE AGREEMENT DATED 19/05/2008 , THE ASSESSEE HAS TO HANDOVER THE VACANT POSSESSION OF THE PROPERTY STARTED FROM 8 TH MONTH OF THE DATE OF EXECUTION OF THIS DEED. WHEN THE DEVELOPER IS NOT FULFILLED THE CONTRACT AS PER THE TERMS AND CONDITIONS, THE POSSESSION IS NOT GIVEN TO THE DEVELOPER . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , WHEN 16 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) THE ASSESSING OFFICER ASKED TH E ASSESSEE TO EXPLAIN AS PER THE DEVELOPMENT AGREEMENT DATED 19/05/2008, WHY CAPITAL GAINS CANNOT BE ASSESSED , T HE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT NO POSSESSION IS HANDE D - OVER TO THE SECOND PARTY I.E. M/S. IPL INFRASERVICES PVT. LT D. FOR NOT ACTING ALL THE TERMS AND CONDITIONS DUE TO SLUMP IN THE REAL ESTATE BUSINESS THROUGH A DETAILED LETTER DATED 28/07/2015 AT PAGE NO. 24 PARTICULARLY POINTED OUT AT PAGE NOS. 24 TO 27 THA T NO POSSESSION HAS BEEN HANDED OVER. HE ALSO SUBMITTED BEFORE THE ASSESSING OFFICER BY ANOTHER LETTER DATED 14/12/2015 THAT WITH REGARD TO STATUS OF THE DEVELOPMENT AGREEMENT, POSSESSION OF THE PROPERTY IS WITH THE ASSESSEE AND NO DEVELOPMENT HAS TAKEN P LACE AND THE ASSESSEE IS CARRY I NG POULTRY BUSINESS . TO SUPPORT HIS ARGUMENT, HE HAS SUBMITTED THE RELEVANT DETAILS , SUCH AS RENEWAL OF REGISTRATION CERTIFICATE UNDER THE ANDHRA PRADESH SHOP S AND ESTABLISHMENT ACT, 1988 ISSUED BY THE GOVERNMENT OF TELANGANA DATED 27/02/2015. THE POWER BILLS ISSUED BY THE POWER DISTRIBUTION COMPANY AND ALSO INSPECTION REPORT SUBMITTED BY THE ELECTRICAL INSPECTOR WHICH ARE PLACED AT PAGE NOS. 37 TO 47 AND ALSO PROPERTY TAX PAID BY THE ASSESSEE AT PA GE NO. 48. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, SIMPLY HELD THAT AS PER THE 17 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) DEVELOPMENT AGREEMENT ENTERED ON 1 9 /05/2008 AS PER CLAUSE (3), THE ASSESSEE (FIRST PARTY) SHALL GIVE A VACANT POSSESSION OF THE PROPERTY FROM 8 TH MONTH OF THE DATE OF EX ECUTION OF THIS DEED AND ONCE AGREEMENT HAS BEEN ENTERED INTO, THERE IS A TRANSFER OF PROPERTY HAS TAKEN PLACE. WE FIND THAT THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE SECOND PARTY M/S. IPL INFRASERVICES PVT. LTD. NOT FULFILLED THE CONDITIONS AS PER THE AGREEMENT ENTERED INTO AND THE POSSESSION OF THE PROPERTY IS WITH THE ASSESSEE, THERE IS NO DEVELOPMENT OF THE LAND AND HE HAS FILED ALL THE DETAILS BEFORE THE ASSESSING OFFICER TO SHOW THAT THE POSSESSION IS WI TH THE ASSESSEE. THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY WHETHER THERE IS A POSSESSION WITH THE ASSESSEE OR NOT. WHETHER THE DOCUMENTS PRODUCED BEFORE HIM ARE CORRECT OR NOT, SIMPLY ON THE BASIS OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE, HE CAME TO A CONCLUSION THAT ONCE AGREEMENT IS ENTERED INTO, THERE IS A TRANSFER. ACCORDINGLY, CAPITAL GAINS HA VE TO BE TAXED. HE FURTHER OBSERVED THAT THERE IS NO SUBSEQUENT CANCELLATION OF THE DEVELOPMENT AGREEMENT, THEREFORE THE ASSESSEES EXPLANATION CA NNOT BE ACCEPTED THE POSSESSION IS WITH THE ASSESSEE. IT IS NOT THE CASE OF THE ASSESSEE THAT SUBSEQUENTLY DEVELOPMENT AGREEMENT - CUM - GPA IS CANCELLED . IT IS THE CASE OF 18 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) THE ASSESSEE IS THAT THE DEVELOPER M/S. IPL INFRASERVICES PVT. LTD. HAS NOT OBTAINED N ECESSARY APPROVALS AND PLANS, SANCTIONS FROM THE COMPETENT AUTHORITIES AND NOT ACTED AS PER THE DEVELOPMENT AGREEMENT AND NO DEVELOPMENT HAS TAKEN PLACE AND SUBMITTED THAT THERE IS NO TRANSFER OF THE CAPITAL ASSET. THE ASSESSING OFFICER WITH OUT EXAMINING THE SAME, HE CAME TO A DIFFERENT CONCLUSION THAT THERE IS NO CANCELLATION OF DEVELOPMENT AGREEMENT THEREFORE, POSSESSION IS WITH THE DEVELOPER . WE FIND THAT WHEN THE ASSESSING OFFICER HAS A S KED THE ASSESSEE IN RESPECT OF DEVELOPMENT AGREEMEN T AND POSSESSION OF THE PROPERTY IT IS SUBMITTED BY TH E ASSESSEE THA T THERE IS AN AGREEMENT DATED 01/05/2008 AND AS PER THE AGREEMENT, THE DEVELOPER HAS TO OBTAIN NECESSARY PLANS, APPROVALS AND SANCTION FROM THE COMPETENT AUTHORITIES DUE TO SLUMP IN THE RE AL ESTATE, THE DEVELOPER HAS NOT DEVELOPED THE LAND. THEREFORE THE POSSESSION IS WITH THE ASSESSEE AND IS RUNNING POULTRY IN THE SAME LAND WHICH HE RUNNING EARLIER ALSO. ALL THE RELEVANT DETAILS ARE FILED, IN OUR OPINION, THE ASSESSEE HAS DISCHARGED HIS BURDEN CASTED UPON HIM TO SHOW THAT THE POSSESSION IS WITH THE ASSESSEE . UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE , ONCE THE ASSESSEE HAS DISCHARGED HIS BURDEN, IT IS THE DUTY OF THE ASSESSING OFFICER TO 19 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) EXAMINE THE DETAILS FILED BY THE ASSESSEE AND HE HAS TO PROVE THAT POSSESSION IS STILL WITH THE DEVELOPER AND NOT WITH THE ASSESSEE. IN THIS CASE, THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY AND NOT EXAMINED THE DETAILS SUBMITTED BY THE ASSESSEE, SIMPLY HE CAME TO THE CONCLUSION THAT THERE IS AN AGREEMENT THEREFORE ACCORDING TO THE AGREEMENT, THE ASSESSEE HAS TO GIVE POSSESSION, THEREFORE CAPITAL GAINS HAS TO BE TAXED. ACCORDINGLY, TAXED. SO FAR AS TAXING THE CAPITAL GAINS OF RS. 5,22,18,475/ - , HE HAS NOT GIVEN ANY BASIS FOR THAT AMOUNT AND HE SIMPLY REFERRED THE DEVELOPMENT AGREEMENT. AS PER THE DEVELOPMENT AGREEMENT ONLY THE ASSESSEE HAS TO RECEIVE 35% OF THE DEVELOPED AREA, 65% HAS TO GO TO THE DEVELOPER. WE DO NOT KNOW HOW THE ASSESSING OFFICER CAME TO THE ABOVE FIGURE . THE PAPER BOOK AT PAGE NO. 51 DATED 02/12/2015, THE ASSESSING OFFICER HAS ISSUED A LETTER TO THE PRINCIPAL OFFICERS OF M/S. IPL INFRASERVICES PVT. LTD. UNDER SECTION 133(6) OF THE ACT CALLING VARIOUS DETAILS IN RESPECT OF SCRUTI NY PROCEEDINGS IN THE CASE OF M/S. KOHINOOR HATCHERIES PVT. LTD. AND ASKED THE DEVELOPMENT AGREEMENT - CUM - GPA ENTERED INTO WITH M/S. KOHINOOR HATCHERIES PVT. LTD. , D. VENKATESWARA RAO AND D.RAGHAVA RAO AND CALLED THE DETAILS OF THE DEVELOPMENT CARRIED SUBSEQUENT TO THE AGREEMENT ENTERED INTO WITH THE ABOVE PARTIES 20 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) AND FURNISH THE DETAILS OF THE OWNERSHIP OF THE PROPERTY AS ON THE DATE. THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER ON 01/03/2016 HE HAS NOT DISCUSSED ANYTHING ABOUT THE NOTICE ISSUED TO THE DEVELOPER DATED 02/12/2015 IT IS NOT CLEAR FROM THE ASSESSMENT ORDER WHETHER THE DEVELOPER AS RESPONDED OR NOT. FROM THE ASSESSMENT ORDER, IT IS VERY CLEAR THAT THE ASSESSING OFFICER HAS NOT PO INTED OUT ANYTHING IN RESPECT OF THE NOTICE ISSUED TO THE DEVELOPER AND NOT CALLED ANY EXPLANATION FROM THE ASSESSEE IN RESPECT OF THE SAME. THEREFORE, WE FIND THAT THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY, WHICH IS NECESSARY IN PASSING THE ASSESS MENT ORDER, HE ARRIVED TO A CONCLUSION THAT THERE IS A TRANSFER OF CAPITAL ASSET AND CAPITAL GAINS HAS TO BE ASSESSED BASED ON THE AGREEMENT ENTERED INTO BY THE ASSESSEE DATED 01/05/2008 AND BY CONSIDERING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH CO URT IN THE CASE OF POTLA NAGESWARA RAO (SUPRA) WE FIND THAT ONCE THE ASSESSEE HAS DISCHARGED HIS BURDEN, THE BURDEN LIES ON THE ASSESSING OFFICER TO DISPROVE THAT WHAT IS STATED BY THE ASSESSEE IS NOT CORRECT. IN THIS CASE, THE ASSESSING OFFICER FAILED TO DISCHARGE THE BURDEN LIES WITH HIM. THEREFORE, THE ASSESSING OFFICER TAXING THE CAPITAL GAINS BASED ON THE AGREEMENT IS NOT CORRECT. IN THIS CASE, SUBSEQUE NT TO THE DEVELOPMENT 21 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) AGREEMENT - CUM - GPA , THE ASSESSEE HAD ENTERED INTO A SUPPLEMENTARY AGREEMENT WITH THE DEVELOPER . ACCORDINGLY, HE RECEIVED THE REFUNDABLE SECURITY DEPOSIT OF RS. 2.25 CRORES , THE SAME HAS TO BE REFUNDED AFTER COMPLETION OF THE PROJECT. THIS FACTS WAS NOT CONSIDERED BY THE ASSESSING OFFICER ANYWHERE . WE FIND THAT THIS IS ONLY A REFUNDABLE SECURITY DEPOSIT. THIS IS NOT A RELEVANT TO THE ISSUE INVOLVED IN THIS APPEAL. 11 . SO FAR AS CASE - LAWS RELIED ON BY THE ASSESSEE IN THE CASE OF GEETA DEVI PASARI (SUPRA) , THE HON'BLE BOMBAY HIGH COURT BY CONSIDERING THE IR OWN JUDGMENT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPRA) HAS OBSERVED THAT THE COURT HAS TAKEN A VIEW THAT THE RELEVANT ASSESSMENT YEAR FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS WILL BE THE ASSESSMENT YEAR IN WHICH THE ASSESSEE WAS ACTUALLY PHYSICA L LY PUT IN POSSESSION AND IN THE INSTANT CASE, THERE IS N O DISPU T E THAT THOUG H THE AGREEMENT WAS ENTERED INTO ON 29/03/1994, THE ASSESSEE WAS PUT IN POSSESSION ONLY IN THE YEAR ON 10/04/1998 . IN VIEW THEREOF, THE ASSESSEE WILL BE LIABLE FOR BEING ASSESSED FOR CAPITAL GAINS ONLY IN THE A.Y. 1999 - 2000. FROM THE ABOVE IT IS VERY CLEAR THAT THOUGH THERE IS AN AGREEMENT WAS ENTERED INTO IN THE YEAR 1994 AND ACTUAL POSSESSION IS HANDED OVER TO TH E DEVELOPER IN THE YEAR 1998 22 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) THOUGH CAPITAL GAINS HAS TO BE TAXED IN THE A.Y. 1999 - 2000 . IN THE PRESENT CASE, NO SUCH POSSESSION HAS BEEN HANDED OVER THEREFORE THE ASSESSING OFFICER IS NOT CORRECT IN TAXING THE CAPITAL GAINS . 1 2 . IN THE CASE OF ACIT VS. R. SRINIVASA RAO (SUPRA) , THE HYDERABAD BENCH OF THE TRIBUNAL HAS OBSERVED THAT UNLESS THERE IS WILLINGNESS ON THE PART OF THE DEVELOPER TO PERFORM HIS PART OF THE CONTRACT , THERE CANNOT BE A TRANSFER OF CAPITAL ASSET AS ENVISAGED U/S 2(47)(V) R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT . THE DEPARTMENT HAS FAILED TO CONTROVERT THE FI N DING OF THE LD.CIT(A) BY BRINING MATERIAL ON RECORD TO SHOW THAT THE DEVELOPER HAS TAKEN ANY STEPS TOWARDS DEVELOPMENT ACTIVITY. FURTHER, WE MAY OBSERV E , THOUGH THE ASSESSING OFFICER REFERRING TO THE DEVELOPMENT AGREEMENT HAS INFERRED THAT POSSESSION OF T HE PROPERTY WAS HANDED OVER TO THE DEVELOPER, HOWEVER, ON GOING THROUGH THE PLEADINGS AND PRAYER OF THE PLAINTIFFS IN THE PLAINT FILED IN CIVIL COURT, A COPY OF WHICH IS AT PAGE 51 OF ASSESSEES PAPER BOOK , IT APPEARS ASSESSEE ALONG WITH OTHERS ARE STILL H AVING PHYSICAL POSSESSION OVER THE PROPERTY. BE THAT AS IT MAY, AFTER CAREFUL CONSIDERATION OF FACTS AND MATERIALS ON RECORD, WE ARE OF THE VIEW, CIT(A)S ORDER BEING WELL FOUNDED AND WELL REASONED 23 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) NEEDS TO BE UPHELD. IN THE PRESENT CASE, THE ASSESSING O FFICER HAS FAILED TO PROVE THAT THE POSSESSION IS HANDED OVER TO THE DEVELOPER AND THE LD. CIT(A) BY CONSIDERING ALL THE RELEVANT DOCUMENTS, HE GAVE A FI N DNING THAT NO POSSESSION IS HANDED OVER TO THE DEVELOPER . THEREFORE, THE ABOVE DECISION OF THE ITAT, HYDERABAD BENCH SQUARELY APPLIES TO THE PRESENT CASE. 1 3 . IN THE CASE OF BINJUSARIA PROPERTIES PVT. LTD. VS. ACIT (SUPRA) , THE HYDERABAD BENCH OF THIS TRIBUNAL HAS OBSERVED THAT WHEREIN ASSESSEE FULFILLED ITS PART OF OBLIGATION UNDER DEVELOPMENT AGREEMENT , DEVELOPER HAS NOT DONE ANYTHING TO DISCHARGE OBLIGATIONS CAST ON IT UNDER DEVELOP AGREEMENT , CAPITAL GAINS CANNOT BE BROUGHT TO TAX IN THE YEAR UNDER APPEAL, MERELY ON BASIS OF SIGNING OF DEVELOPMENT AGREEMENT DURING IMPUGNED YEAR. IN THE PRESENT CASE , THE DEVELOPER HAS NOT DISCHARGED HIS OBLIGATION AS PER THE AGREEMENT , THEREFORE TAXKING THE CAPITAL GAINS IS NOT JUSTIFIED. THE ABOVE DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. 1 4 . IN THE CASE OF P. PRATHIMA REDDY VS. ITO (SUPRA) , THE ITAT, HYDERABAD BENCH HAS HELD THAT UNLESS THE PARTY HAS PERFORMED OR IS WILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT, AND IN THE SAME SEQUENCE IN WHICH THESE ARE TO BE PERFORMED, IT CANNOT BE 24 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) SAID THAT THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL COME INTO PLAY AND THEREFORE THERE IS TRANSFER. IN THE PRESENT CASE , THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT THE ASSESSEE HAS HANDED OVER THE POSSESSION TO THE DEVELOPER AND THE DEVELOPER HAS PERFORMED IN ALL THE DEVELOPMENT ACTIVITIES SUBSEQUENT TO THE AGREEMENT ENTERED INTO, THOUGH A NOTICE WAS ISSUED AND DEVELOPER AND NOT CHOSEN TO DISCUSS ANYTHING IN THE ASSESSMENT ORDER. 1 5 . THE LD. CIT(A) HAS CONSIDERED THE ARGUMENT OF THE ASSESSEE AND THE RELEVANT MATERIAL FILED BEFORE HIM AND GA VE A CATEGORICAL FINDING THAT THE POSSESSION HAS NOT BEEN HANDED OVER TO THE DEVELOPER AND, THEREFORE, THERE IS NO TRANSFER OF CAPITAL ASSET AS PER SECTION 2(14) OF THE ACT. 16 . INSOFAR AS ALTERNATIVE FINDING GIVEN BY THE LD. CIT(A) BASED ON THE HON'BLE HIGH COURT OF TELANGANA & ANDHRA PRADESH IN W.P.NO. 2148/2015 AT PARAGRAPH 24 IT HAS BEEN HELD THAT THE LANDS ARE AGRICULTURAL LANDS THOUGH THE ISSUE BEFORE THE HIGH COURT IN RESPECT OF REOPE NING, BUT GAVE A FINDING THAT THE ASSESSING OFFICER HAS EXAMINED SPECIFICALLY IN RESPECT OF NATURE OF THE LAND AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) BASED ON THAT, LD. CIT(A) GAVE A FINDING . 25 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) 1 7. SO FAR AS CASE - LAWS RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IN THE CASE POTLA NAGESWARA RAO (SUPRA) AND CHATURBHUJ DWARKADAS KAPADIA (SUPRA) , HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 1 8. IN VIEW OF THE ABOVE, WE FIND THAT NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 1 9. FACTS INVOLVED IN ITA NOS.2067/HYD/2017 & 574/HYD/2018 ARE SIMILAR TO THE FACTS INVOLVED IN ITA NO. 2066/HYD/2017, THEREFORE, THE ORDER PASSED IN ITA NO. 2066/HYD/2017 SHALL APPLY MUTATIS MUTANDIS TO THESE APPEALS ALSO. 20. SO FAR AS CROSS OBJECTION IS CONCERNED, IT IS ONLY SUPPORTIVE TO THE ORDER OF THE LD. CIT(A). IN VIEW OF OUR DECISION ABOVE, NO SEPARATE ADJUDICATION IS REQUIRED, THEREFORE, SAME IS DISMISSED. 21 . IN THE RESULT, ALL THE APPEAL S FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARE DISMISSED. SD/ - SD/ - ( S. RIFAUR RAHMAN ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 RD M AY , 201 9 . VR/ - 26 ITA NO S . 2066 & 2067 / HYD/2017 ITA NO.574/HYD/2018 & C.O.NO. 21/HYD/2018 ( D. VENKATESWARA RAO & OTHERS ) COPY TO: 1. THE ASSESSEE A) D. VENKATESWARA RAO B) D. RAGHAVA RAO C) M/S. KOHINOOR HATCHERIES PVT. LTD., ALL ARE RESIDENTS OF FLAT NO. 201, SRI CHAITANYA RESIDENCY, STREET NO. 2, SAGAR SOCIETY, BANJARA HILLD, HYDERABAD. 2. THE REVENUE DCIT, CENTRAL - 2(1), HYDERABAD 3. THE PR. CIT - 2, HYDERABAD. 4. THE CIT(A) - 2, HYDERABAD. 5. THE D.R . , HYDERABAD. 6. GUARD FILE. BY ORDER