Sri. B.A.Srinath, Bangalore V. Assistant Commissioner of Income-Tax, Bangalore

ITA 2251/BANG/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4152 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 19-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SREENANDINI DAS
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital asset; Fair market value; Reassessment proceedings
• Section: 54F; 234B; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, B ENGALURU BEFORE S HRI N.V.VASUDEVAN , VICE PRESIDENT AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I TA NO. 2251 / BANG/2 0 1 6 (ASSESSMENT YEAR: 20 07 - 08 ) SHRI B.A.SRINATH, NO.75/114, SURVEYOR STREET, BASAVANAGUDI, BENGALURU - 560 004. PAN:AELPS 7713 P VS. APPELLANT ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE 5(2)(1), BENGALURU. RESPONDENT APPELLANT BY : SHRI V.SRINIVASAN, ADVOCATE. RESPONDENT BY : SMT.SREENANDINI DAS, ADDL.CIT DATE OF HEARING : 30/10/2018 DATE OF PRONOUNCEMENT : 31 /10/2018 O R D E R PER INTURI RAMA RAO, A M : THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A) 5, BANGALORE DATED 30/08/2016 FOR THE ASSESSMENT YEAR 2007 - 08. THE APP ELLANT RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NOT BEFORE CIT[A ] - ADMISSION FILED SEPARATELY 2.1 THE ORDER OF ASSESSMENT IS BAD IN LAW AND VOID - AB - INITIO FOR WANT OF REQUISITE JURISDICTION ESPECIALLY, THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S 148 OF THE ACT DID NOT EXIST AND HAVE NOT BEEN COMPLIED WITH AN D CONSEQUENTLY, THE RE - ASSESSMENT REQUIRES TO BE CANCELLED. ITA NO . 2251 /BANG/20 16 PAGE 2 OF 6 2.2 WITHOUT PREJUDICE TO THE ABOVE, THE NOTICE ISSUED U/S.148 OF THE ACT, IS BEYOND THE TIME LIMIT PRESCRIBED U/S.149 AND THEREFORE, THE REASSESSMENT PROCEEDINGS INITIATED IS VOID - AB - INITIO AND C ONSEQUENTLY, THE SAME REQUIRES TO BE CANCELLED. GROUNDS BEFORE CIT[A] 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.93,27,979/ - AS INCOME UNDER THE HEAD SHORT TERM CAPITAL GAINS WITHOUT APPRECIATING THAT THERE WAS NO TRANSFER OF THE SAID PROPERTY DURING THE YEAR UNDER APPEAL UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 4. THE LEARNED CIT[A] IS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO EXEMPTION U/S. 54F OF THE A CT IN RESPECT OF THE RESIDENTIAL FLATS FALLING TO THE SHARE OF THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 5. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HON'BLE CCIT/DG, APPELLANT DENIES HIMSELF LIABLE TO BE CH ARGED TO INTEREST U/S.234 - A AND 234B OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND THE LEVY DESERVES TO BE CANCELLED. 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APP ELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE TOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 2. BRIEFLY , THE FACTS OF THE CASE ARE THAT THE APPELLANT IS AN INDIVIDUAL DERIVING INCOME UNDER CAPITAL GAINS, ETC. THE RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2007 - 08 WAS ORIGINALLY FILED ON 26 / 09 / 2008. APPARENTLY THERE WAS NO SCRUTINY PROCEEDINGS AGAINST THIS RETURN OF INCOME. SUBSEQUENTLY, T HE AO HAD COME TO KNOW THAT THE APPELLANT ALONG WITH S/ SHRI RAMANATH GUPTA BYSANI, BADRI VISHAL S AND SHASHANK B. GUPTA (OWNERS) , HAD EXECUTED A JOINT DEVELOPMENT AGREEMENT WITH M/S.VAISHNAVI INFRASTRUCTURE PVT. LTD., FOR THE DEVELOPMENT OF THE PROPERTY SI TUATED AT NO. 4E AND SITE NO. 5E SITUATED AT INDUSTRIAL ESTATE, YADAVGIRI, DEVARAJA MOHALLA, MYSORE. IN TERMS OF TH E DEVELOPMENT AGREEMENT, THE APPELLANT WAS ITA NO . 2251 /BANG/20 16 PAGE 3 OF 6 TO RECEIVE 40% OF THE BUILT - UP AREA. SINCE THE CAPITAL GAIN ARISING OUT OF THESE TRANSACTIONS W A S NOT OFFERED TO TAX, THE AO HAD FORMED AN OPINION THAT INCOME ESCAPED THE ASSESSMENT . A CCORDINGLY , HE ISSUED NOTICE UNDER SECTION 148 OF THE INCOME - TAX ACT PROPOSING TO REASSESS THE TOTAL INCOME OF THE APPELLANT. IN RESPONSE TO SHOW CAUSE NOTICE, IT WAS SUBMITTED THAT THE ORIGINAL RETURN OF INCOME FILED U/S 139(1) SHOULD BE TREATED AS INCOME IN RESPONSE TO NOTICE U/S 148. SUBSEQUENTLY, THE AO HAD ISSUED A NOTICE UNDER SECTION 143(2) AND THE ASSESSMENT WAS COMPLETED BY HIM VIDE ASSESSMENT ORDER DATED 19.0 2.2015 PASSED UNDER SECTION 143 (3) R.W.S. 147 OF THE INCOME - TAX ACT ,1961 EFFECTING THE MARKET VALUE OF THE BUILT UP AREA RECEIVED BY THE APPELLANT AS CONSIDERATION IN TERMS OF THE DEVELOPMENT AGREEMENT UNDER CAPITAL GAINS. 3. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) CONTENDING INTER ALIA THAT THE TRANSACTION DOES NOT ATTRACT ANY CAPITAL GAIN AS THERE WAS NO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME TAX ACT. FURTHER IT WAS CONTENDED THAT THE CAPITAL GAINS IF ANY AR E ASSESSABLE TO TAX ONLY IN THE YEAR IN WHICH THE COMPLETION OF THE FLATS TAKES PLACE. THE SAID APPEAL HAS BEEN DISMISSED BY THE LEARNED CIT(A) AFTER DUE CONSIDERATION OF ALL ARGUMENTS AND SUBMISSIONS MADE , VIDE IMPUGNED ORDER. 4. BEING AGGRIEVED, THE A PPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 5. HAVING HEARD THE RIVAL SUBMISSIONS, WE FIND THAT THE ISSUES RAISED IN THE PRESENT APPEAL ARE COVERED BY THE DECISION OF THIS CO - ORDINATE BENCH IN THE CASE OF SHRI. SHASHANK B. GUPTA IN ITA NO. 225 0/BANG/2016 WHEREIN THE TRIBUNAL HAS RECORDED THE FINDINGS AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE IN RESPECT OF THE SAME JDA HAS BEEN CONSIDERED BY T HE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF OTHER ITA NO . 2251 /BANG/20 16 PAGE 4 OF 6 CO - OWNERS OF THE LAND NAMELY SRI BADRIVISHAL AND SRI RAMNATH GUPTA VS. ITO (SUPRA) IN PARAS 7 & 8 AS UNDER : '7. REGARDING GROUND NOS. 3 AND 4 IN RESPECT OF MERIT OF THE ADDITION MADE BY THE AO IN BOTH THESE CASES, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT AS PER THE TRIBUNAL ORDER RENDERED IN THE CASE OF ACIT VS M/S SHANKAR VITTAL MOTOR CO. LTD. IN ITA NO. 35(BANG) 2015 DATED 18.03.2016, IT WAS HELD THAT AS PER THE JUDGMENT OF HON'BLE KAR NATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS DR. T.K. DAYALU AS REPORTED IN 292 TAXMANN 531, THE INCOME ON TRANSFER OF LAND BY THE VENDORS TO THE DEVELOPER AS PER JDA IS TAXABLE IN THE YEAR WHEN THE POSSESSION OF THE PROPERTY HAS BEEN HANDED OVER BY TH E VENDOR TO THE DEVELOPER AT THE TIME OF SIGNING OF JDA BUT THE CAPITAL GAIN HAS TO BE COMPUTED ONLY ON THE GUIDANCE VALUE OF THE LAND. HE FURTHER SUBMITTED THAT SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN TWO OTHER CASES ALSO I.E. IN THE CASE OF SHRI N.G. C HANDRA REDDY (HUF) VS DCIT IN ITA NO. 390/BANG/2015 DATED 20.07.2016 AND IN THE CASE OF SHRI K.G. ADAVEESHAIAH AND SHRI K.G. BASAVARAJ VS ITO IN ITA NOS. 2043 & 2044/BANG/2016 ON 23.03.2017. HE SUBMITTED THAT COPY OF ALL THESE THREE TRIBUNAL ORDERS IS AVAI LABLE IN THE COMPILATION OF THE CASE LAWS OF 28 PAGES. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN THE LIGHT OF THIS JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS DR. T.K. DAYALU (SUPRA), WE HOLD THAT THE INCOME UNDER THE HEAD CAPITAL GAIN IN RESPECT OF THE LAND IN QUESTION IS TAXABLE IN THE CURRENT YEAR BECAUSE THE ASSESSEE COULD NOT SHOW THAT THE POSSESSION OF THE LAND WAS NOT HANDED OVER BY THE ASS ESSEE TO THE DEVELOPER IN THE PRESENT YEAR WHEN JDA WAS SIGNED. BUT IN THE LIGHT OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF ACIT VS M/S SHANKAR VITTAL MOTOR CO. LTD. (SUPRA), WE DIRECT THE AO TO CONSIDER THE GUIDANCE VALUE OF THE LAND IN QUESTION ON THE DATE OF SIGNING OF JDA FOR THE PURPOSE OF COMPUTING CAPITAL GAIN AND WITH THIS DIRECTION, THE MATTER IS RESTORED BACK TO THE FILE OF THE AO TO QUANTIFY THE AMOUNT OF CAPITAL GAIN IN BOTH THE CASES.' THUS WHEN THE TRIBUNAL IN THE CO - OWNERS CASE HAS CONSID ERED THE IDENTICAL ISSUE OF CAPITAL GAIN ARISING FROM THE SAME JDA DT.29.3.2007 THEN THERE IS NO SCOPE OF TAKING ANY OTHER VIEW. ACCORDINGLY FOLLOWING THE EARLIER ORDER OF CO - ORDINATE BENCH OF THIS TRIBUNAL DT.16.06.2017 (SUPRA), WE HOLD THAT THE INCOME AR ISING FROM THE JDA IN QUESTION IS ASSESSABLE TO TAX UNDER THE HEAD 'CAPITAL GAIN' IN THE CURRENT YEAR AND THE FULL VALUE CONSIDERATION HAS TO BE COMPUTED BY CONSIDERING THE GUIDANCE VALUE OF THE LAND IN QUESTION ON THE DATE OF JDA. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO RECOMPUTED THE CAPITAL GAIN BY ITA NO . 2251 /BANG/20 16 PAGE 5 OF 6 CONSIDERING THE FULL VALUE CONSIDERATION AS PER THE GUIDANCE VALUE OF THE LAND. 7. AS REGARDS THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE FULL VALUE CONSIDERATION SHOULD BE THE EXCHANGE VALUE OF THE SUPER BUILT UP AREA TO BE RECEIVED BY THE ASSESSEE, WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS NOT ACCEPTED THIS AND COMPUTED THE CAPITAL GAIN BY TAKING THE MARKET VALUE OF THE SUPER BUILT UP AREA. EVEN OTHERWISE WHEN THIS ISSUE HAS ALREADY BEEN DECIDED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL THEREFORE WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LD. DR. 8. THE NEXT ISSUE IS REGARDING THE CLAIM OF DEDUCTION UNDER SECTION 54 OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF FATHIMA BAI VS. ITO 32 DTR 243 AS WELL AS IN THE CASE OF CIT VS. SMT. K.G. RUKMINIAMMA 196 TAXMANN 87 . HE HAS ALSO RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT & ANOTHER VS. ANANDA BASAPPA 309 ITR 329 AND SUBMITTED THAT WHEN THE ASSESSEE IS RECEIVING THE BUILT UP AREA IN THE PROJECT THEN HE IS ELIGIBLE FOR EXEMPTION UN DER SECTION 54 OF THE ACT. 9. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS OBJECTED TO THE CLAIM OF THE ASSESSEE ON THE GROUND THAT SINCE THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION UNDE R SECTION 54 IN THE RETURN OF INCOME THEREFORE THE SAME CANNOT BE ALLOWED. 10. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SINCE THE ASSESSEE DID NOT OFFER ANY INCOME UNDER THE HEAD 'CAPITAL GAIN' ARISING FROM THE JDA IN QUESTION AND OBJECTED TO THE ASSESSMENT OF THE CAPITAL GAIN THEREFORE THE QUESTION OF CLAIMING THE DEDUCTION UNDER SECTION 54 IN THE RETURN OF INCOME DOES NOT ARISE. SINCE THE ASSESSING OFFICER HAS ASSESSED THE CAPITAL GAIN ARISING FROM THE JDA THEREFORE, THE ISSUE OF CLAIMING THE DEDUCTION UNDER SECTION 54 IS CONSEQUENTIAL TO THE ASSE SSMENT OF CAPITAL GAIN IN THE HAND OF THE ASSESSEE. FURTHER THE ASSESSEE RAISED THIS ISSUE BEFORE THE CIT (APPEALS) THEREFORE THERE IS NO IMPEDIMENT IN THE JURISDICTION OF THE APPELLATE AUTHORITY TO ENTERTAIN THIS ISSUE WHICH IS A DIRECT CONSEQUENTIAL ISSU E OF THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER. THEREFORE WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE OBJECTION RAISED BY THE LD. DR. 11. AS REGARDS THE MERITS OF THE CLAIM, WE FIND THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (APPEALS) HAS EXAMIN ED THE CLAIM ON MERITS AND FURTHER WHEN WE HAVE SET ASIDE THE ISSUE OF COMPUTATION OF CAPITAL GAIN THEREFORE THIS ISSUE OF CLAIM OF EXEMPTION UNDER SECTION 54 IS SET ASIDE TO THE RECORD OF THE ASSESSING O FFICER FOR ADJUDICATION AS PER LAW AFTER AFFORDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO . 2251 /BANG/20 16 PAGE 6 OF 6 5. ACCORDINGLY, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH, WE RESTORE THE ISSUE BACK TO THE FILE OF AO FOR ADJUDICATION OF ASSESSMENT OF CAPI TAL GAINS BY ADOPTING FAIR MARKET VALUE OF THE PROPERTY AS ON DATE OF ENTERING INTO JOINT DEVELOPMENT AGREEMENT AND ALSO DIRECT THE AO TO EXAMINE ALLOWABILITY OF DEDUCTION UNDER SECTION 54 OF THE INCOME TAX ACT IF IT IS FOUND THAT THE LAND WHICH IS SUBJEC T MATTER OF JOINT DEVELOPMENT AGREEMENT IS HELD BY THE APPELLANT FOR A PERIOD OF 3 YEARS OR MORE. 10. IN THE RESULT, APPEAL FILED BY THE APPELLANT IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER 2018. SD/ - SD/ - (N.V.VASUDEVAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER PLACE : BENGALURU. D A T E D : 31/10/2018 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BAN GALORE