PENUPETRUNI CHINNA RAO, CHENNAI V. ITO, INTERNATIONAL TAXATION, WARD-1(1), CHENNAI

ITA 401/CHNY/2022

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2812 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 03-03-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 23-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Additional evidence; Cost of acquisition; Fair market value; Competent authority; Capital Gains
• Section: 54; 143(3); 143(1); 143(2)

Judgement Text

आयकर अपीलीय अिधकरण “बी” ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय ी महावीर िसंह, उपा ! एवं माननीय ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.401/Chny/2022 (िनधा*रण वष* / As sessment Year: 2016-17) Mr. Penupatruni Chinna Rao 8, Pughs Road, Sundaram Salai, R.A. Puram, Chennai-600 028. बनाम / V s . ITO International Taxation, Ward-1(1), Chennai. थायीलेखासं./जीआइआरसं./PAN/GIR No. AECPC-1481-R (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Ms. N.V. Lakshmi (Advocate) - Ld. AR थ कीओरसे/Respondent by : Shri D. Hema Bhupal (JCIT)- Ld. Sr. DR सुनवाईकीतारीख/Date of final Hearing : 04-03-2024 घोषणाकीतारीख /Date of Pronouncement : 25-04-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of an order passed by learned Commissioner of Income Tax (Appeals)-16, Chennai [CIT(A)] on 25-03-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 30-12-2018. The grounds of appeal read as under: - A. The order of learned Commissioner of Income (A) Tax-16, Chennai, is erroneous, bad in law, prejudicial to the appellant and contrary to the facts and circumstances of the case. B. The learned CIT(A) erred in holding that income from long term capital gains arising out of transfer of immovable property is assessable in the assessment year (A Y) 2016-17 as against the appellant contending that the long-term capital gain is assessable in the AY 2013-14. 2 C. The learned CIT(A) failed to appreciate that in view of the satisfaction of the conditions prescribed in section 2(47)(v) r.w.s.53A of the Transfer of Property Act, 1882, particularly, handing over of possession to the purchaser developer or his nominees during the previous year relevant to the AY 2013-14 the transfer of the impugned property took place in the previous year relevant to the AY 2013-14. D. The learned CIT(A) erred in holding that the agreement for sale was substantially modified on 30.09.2013 without appreciating that the Supplementary Agreement only related to changes in allotments of Flats between the appellant and the developer, with no change in the substantive part of the agreement. Thus, the learned CIT(A) failed to appreciate that the Supplementary Agreement did not make any change in the substantial part of the deed which conferred respective rights to the developer and the appellant. E. The learned CIT(A) ought to have appreciated that the capital gains is assessable only in the AY 2013-14, on account of satisfaction of conditions prescribed in section 2(47)(v) r.w.s.53A of the Transfer of Property Act, 1882, notwithstanding the fact that the assessee has wrongly offered the capital gain in the impugned AY. F. The learned CIT(A) should have gone by the departmental principle declared in CBDT Circular No.14(XL-35) of 1955 dated 11.04.1955 that Officers of the department must not take advantage of ignorance of an assessee as to be rights. G. Without prejudice, the learned CIT(A) ought to have noted that going by the proviso to section 50C(1) of the Act which has been held to have retrospective operation for the purpose of guideline value, the agreement of sale which took place in the previous year relevant to the AY 2013-14, only should have been considered as the date of transfer. H. The learned CIT(A) erred in endorsing the view of the AO that build, constructed was to the tune of 18593 sq.ft. as against 20,000 sq.ft. I. The learned CIT(A) ought to have seen from the ‘agreement for development' that 20,000 sq.ft. (12000 sq.ft. in the front and 8000 sq.ft. in the rear) was in existence at the time of agreement for sale by way of development of property as against 18592 sq.ft. claimed by the AO. J. The learned CIT(A) erred in endorsing the method adopted by the assessing officer of taking PWD rates for computing cost of construction of building in a city like Chennai, and not CPWD (Central Public Works Department) rates, which ought to be applied to a building in a metropolitan city area. K. The learned CIT(A) erred in adopting cost of Rs.2,95,33,000/- as cost to be apportioned for computation of deduction under section 54, among all the flats as against cost exclusively incurred for two of appellant's flats which were joined together as one unit. 1.2 The Ld. AR has filed additional grounds of appeal which read as under: - The assessing officer erred in making disallowance of part of indexed cost of acquisition in a limited scrutiny to verify the large deduction claimed u/s 54B, 54C, 54D, 54G, 54GA of the Act without converting the assessment into a complete scrutiny. 1.3 The assessee seeks admission of additional evidences. The petition, in this regard, read as under: - 3 The assessing officer completed the assessment in the case of the Petitioner for A Y 2016- 17 under section 143(3) of the Income Tax Act, 1961 ["Act"] vide assessment order dated 30.12.2018 wherein the assessing officer disallowed part of the indexed cost of land and building claimed by the petitioner in calculating the capital gains and also disallowed part of the deduction claimed by the petitioner u/s 54 of the Act. The said capital gain and deduction arose out of a Joint Development Agreement with one M/s. Fourcee Housing ["Builder"]. During the course of assessment, the petitioner was represented by one Shri. R. Sundar, FCA and the petitioner had provided him with a confirmation provided by the Builder wherein they confirmed the date on which possession of the property was given to them by the petitioner, the date on which the demolition of existing buildings were completed and the date on which the new flats after completion of construction were handed over to the petitioner. The petitioner believes that the said confirmation was produced before the learned assessing officer during the course of assessment but he is not absolutely sure. Since the Authorised representative has also changed subsequently, the Petitioner wishes to submit the said confirmation before this Hon'ble Tribunal as additional evidence out of abundant caution. The petitioner submits that the said confirmation issued by the Builder is absolutely important and has a bearing on the determination of the year of chargeability of capital gain. Non consideration of the said confirmation would therefore result in gross injustice to the Petitioner. The Petitioner also submits that the consideration of the confirmation issued by the Builder would not result in prejudice to the interest of the revenue. In view of the aforementioned submissions, the petitioner is submitting the following additional evidence before Your Honour: Confirmation issued by M/s. Fourcee Housing dated 14.12.2018 wherein they confirmed the date on which possession of the property was given to them by the petitioner, the date on which the demolition of existing buildings were completed and the date on which the new flats after completion of construction were handed over to the petitioner. Prayer: The Petitioner prays that Your Honours may be pleased to admit the aforementioned evidence and thus render justice. 1.4 As is evident, the issue that fall for our consideration is to determine the year of taxability of capital gains and computations made under the head capital gains. The Ld. AR advanced arguments supporting the case of the assessee. The Ld. Sr. DR, on the other hand, submitted that the case was selected for ‘Limited Scrutiny’ and therefore, the grounds urged by Ld. AR qua year of taxability could not have been considered by Ld. AO. Having heard rival submissions, the appeal is disposed-off as under. The assessee is a non-resident individual and he filed his return of income on 31-03-2017 declaring income of Rs.47.31 Lacs. The assessee admitted certain capital gains in the return of 4 income. The return of income was processed u/s 143(1) on 12-04-2017. However, the case was selected for ‘Limited Scrutiny’ though CASS to examine the issue ‘whether the deduction from capital gains has been claimed correctly’. The same is evident from notice issued u/s 143(2) on 19-09-2017 vide DIN ITBA/AST/S/143(2)/2017-18/1006434381(1). Assessment Proceedings 2.1 During assessment proceedings, it transpired that the assessee sold two properties situated at Door No.2 & 2A, Pughs Road, Adyar, Madras-28 for Rs.900 Lacs vide sale deeds dated 07-03-2016 and 14- 03-2016. Through the sale deeds, the assessee conveyed undivided share (UDS) of 2137 square feets each to different parties. It was stated that in lieu of joint venture agreement (JVA), the assessee got his share of apartments constructed and handed over in compensation for the UDS area foregone to the builder. Through two sale deeds, the assessee conveyed UDS of 4274 square feets. The assessee computed long-term capital gain (LTCG) of Rs.551.39 Lacs. Against the same, the assessee claimed deduction u/s 54 for Rs.520.71 Lacs and the remaining long-term capital gain (LTCG) of Rs.30.67 Lacs was offered to taxation. The sale consideration was found acceptable by Ld. AO. 2.2 It was noted by Ld. AO that the assessee acquired the property on 27-08-1966 and the property consisted of 15 grounds and 558 square feets including the bungalows, out-house, cattle shed, garage and garden. Subsequently, by deed of trust dated 01-02-1971, the assessee transferred a portion of the property thereby retaining 9 grounds and 425 square feets. 2.3 Subsequently, the assessee entered into ‘agreement for development’ on 30-11-2011 with M/s Fourcee Housing for development 5 of the said property. A copy of the same is on record. The recital of the agreement takes note of the fact that the property has old residential building in the front and rear measuring 1200 square feets and 8000 square feets respectively which is in an old / dilapidated condition and therefore, the owner seeks to re-develop the same. The agreement also takes note of the fact the FSI of approx. 45000 square feets could be constructed out of which the owner would get 34225 square feets in consideration to transfer of 23.5% UDS pertaining to 10575 Square Feet. The owner was to retain 76.5% of UDS. The consideration for transfer of 23.5% of UDS has been agreed at Rs.844 Lacs and the cost of construction of 34425 square feets of built-up area (76.5%) has been agreed to be same i.e., Rs.844 Lacs. Out of Rs.844 Lacs, Rs.700 Lacs represent cost of construction of 34425 square feets plus the assessee would be paid cash consideration of Rs.144 Lacs in monthly payment of Rs.4 Lacs each. 2.4 However, the terms of agreement have undergone a substantial change and a supplementary agreement has been entered into by the assessee on 30.09.2013. A copy of the same is also on record. The same stem from the fact that the proposed construction was originally designed for multi storied building with stilt car park + 5 floors and the same was not approved by appropriate authority. Subsequently, a revised plan of the building was submitted consisting of stilt + 4 floors totalling 12 flats. As per new agreement, the total built up area has been arrived at 41200 square feets out of which the assessee would be entitled for 33200 square feets. The owner has now retained 80.6% of the UDS instead of 76.5% as per earlier agreement. The builder was to retain two flats measuring 8000 sq. feets with 19.40% of UDS in addition 6 to owner making payment of sum of Rs.295.33 Lacs. As per the terms, the developer agreed to construct 33200 sq. ft. at cost of construction of Rs.1051.33 Lacs against owner aggreing to transfer 19.40% of UDS for a sale consideration of Rs.900 Lacs. The builder was to pay 36 monthly payments of Rs.4 Lacs each totalling to Rs.144 Lacs. The balance amount of Rs.756 Lacs was to be adjusted towards cost of construction of owner’s share. The owner has agreed to pay balance sum of Rs.295.33 Lacs (Rs.1051.33 Lacs minus Rs.756 Lacs) towards the cost of construction of his portion of 33200 sq. ft. The details of flats as proposed to be constructed have also been enumerated therein. The assessee was to get 10 flats (UDS 80.60%) whereas the developer was to get 2 flats (UDS 19.4%) in the proposed structure. 2.5 In the above background, Ld. AO proceeded to verify the cost of acquisition. The assessee computed indexed cost of land as Rs.22.44 Lacs and indexed cost of building as Rs.326.16 Lacs. It transpired that the assessee adopted Fair Market Value (FMV) of the land as on 01-04- 1981 at Rs.23,000/- per ground and worked out the value of 21666 Square feets at Rs.2.07 Lacs as on 01-04-1981. The Ld. AO thus observed that the assessee has taken the entire cost, applied indexation from 1981-82 and claimed the same as indexed cost of acquisition against the sale consideration. Since the extent of property conveyed was 4274 square feets only and the balance being retained by the assessee himself, only the proportionate cost attributable to the extent of land conveyed could be claimed towards cost of construction. The proportionate indexed cost was worked out by Ld. AO as Rs.4.42 Lacs and accordingly, the differential of Rs.18.01 Lacs was added back as Long–Term Capital Gains (LTCG). 7 2.6 With respect to building, the assessee claimed to have spent an amount of Rs.35 Lacs towards cost of construction in the year 1983-84 and worked out indexed cost of Rs.326.16 Lacs. The above cost was claimed towards 20000 sq. feets of building. However, the said claim could not be substantiated by any documentary evidences. It could also not be established that the construction took place during the year 1983- 84. The assessee only produced copy of demolition plan as an evidence for existence of building and online status of property tax payments details from the year 1993-94. The said claim was held by Ld. AO to be on vague estimation and therefore, this claim could not be allowed to the assessee. 2.7 The Ld. AO noted that having regards to material on record, it could be seen that there existed a building at the time of demolition. The perusal of demolition plan would show that the extent of building at the time of demolition was only 18593 square feets and not 20000 square feets as claimed by the assessee. The property was originally owned by his mother on 28-05-1958 and subsequently constructed thereon. The property vested with official assignee and the assessee acquired the said property from High Court on 27-08-1966. The construction of the building could have taken place from the years 1958 to 1965 since none of the subsequent documents of conveyance make any mention about construction made by the assessee. It could be seen from the deed of original acquisition by the assessee dt. 27.08.1966 that the property consisted of 15 grounds and 558 Square feets including the Bungalows, out-house, cattle shed, garage and garden. But there was no mention about the extent of building in the said deed. Therefore, it was to be 8 concluded that the building of 18593 square feet existed since the date of acquisition by the assessee. 2.8 In the above background, Ld. AO computed Fair Market Value (FMV) of the building as on 01-04-1981 by applying PWD rates and arrived at cost of building as Rs.16.67 Lacs. Considering the plea of the assessee that building was made of superior construction, Ld. AO adopted cost of building as on 01-04-1981 to be Rs.20 Lacs. Since the building was 16 years old as on 01-04-1981, taking the life of building to be 80 years and salvage value of 10%, Ld. AO depreciated the cost and revised the cost of building as on 01-04-1981 to Rs.16.40 Lacs. 2.9 The assessee claimed deduction u/s 54 for Rs.520.81 Lacs the working of which has been given in para 8.1 as under. Cost of construction as per builder is Rs.7,56,00,000/- for 31518 sqft is Rs.2399/- sqft Built up area of 6300 sqft @ 2399 sqft (cost price of builder) Rs.1,51,13,700 Cash outflow for 1682 sqft included in built up-area of 6300 sq.ft Rs.2,95,55,000 Cost of service tax paid (for 9 flats) Rs. 53,21,820 Alteration and other cost paid (for 9 flats) Rs. 21,02,660 Deduction u/s.54 Rs. 5,20,71,180 The assessee submitted that out of 10 flats allotted to the assessee, two flats were combined into one contiguous unit. The assessee furnished copy of EB card and property tax assessment to support the same. Accordingly, the deduction u/s 54 was worked out by the assessee. 2.10 The Ld. AO faulted the working of the assessee on the ground that entire costs attributable to all the flats allotted to the assessee were considered by the assessee towards the cost of the new asset meant for deduction u/s 54. Upon perusal of supplementary agreement, Ld. AO held as under: - 8.2 It could be seen here that the costs attributable to al the flats allotted to the assessee has been entirely taken by him towards the cost the new asset meant for deduction u/s.54. 9 For clarity, the extract of relevant terms of the Supplementary Agreement dt.30-09-2013 between the assessee and the developer is captured here: "WHEREAS in terms of the Development Agreement date 30.11.2011, based on a proposed construction of 45,000 sq.ft., the Owner agreed to sell 23.5% in the Schedule mentioned property for a sale consideration of Rs.8,44,00,000/- and the Developer agreed to construct and deliver 76.5% of the proposed built up area measuring 34,425 sq.ft. at the cost of construction of Rs.7,00,00, 000/- and Rs.1,44,00,000/- to be paid at Rs.4,00,000/- per month for 36 months; WHEREAS the proposed, construction was original designed for multi-storied building with stilt car park 6 floors and the same was returned unapproved by the C.M.D.A. Subsequently a revised Plan under Special Building Category was submitted consisting of Stilt + 4 floors totaling 12-flats; WHEREAS now the total built up area has been arrived at 41,200 sq.ft consisting of 4 floors over and above stilt car park. WHEREAS as per originally agreed ratio of 76.5:23.5 the owner is entitled for 31,518 sq.ft and the Developer is entitled for 9,682 sq.ft The Owner wanted to retain 80.60% undivided share instead of 76.5% undivided share relating to construction of 33,200 sq.ft. from and out of 41,200 sq.ft. proposed to be constructed; The Developer agreed to construct 33,200 sq.ft. at the cost of construction of Rs.10,51,33,000/- for which the Owner agrees to transfer 19.40% of undivided share in the Schedule mentioned property, for a sale consideration of Rs.9,00,00,000/-,out of which the Developer has been paying Rs.4,00,000/- every month for 36 months as per the Development Agreement dated 30.11.2011, totaling Rs.1,44,00,000/- and the Developer agrees to adjust the balance sum of Rs.7,56,00,000/- towards Cost of construction of Owner's share; The Owner agrees to pay the balance sum of Rs.2,95,33,000/- (Rs.10,51,33, 000/- minus Rs.7,56,00,000/-) towards the cost of construction of his portion of 33,200 sq.ft." It is clear from the above that the cost of construction charged by the developer at Rs.10,51,33,000/- is towards the entire built up area of 33200 sq.ft. entitled to the assessee by virtue of the revised agreement dt.30-09-2013. The sale consideration of the UDS parted to the developer being fixed at Rs.9,00,00,000/-, the balance of Rs.1,51,33,000/- has to be paid by the assessee to the developer towards Construction cost post supplementary agreement. Further, the amount of Rs.1,44,00,000/- already paid by the developer to the assessee in terms of original agreement was adjusted against the above sale consideration of Rs.9 crore. By Summing up, an amount of Rs.2,95,33,000/- was payable by the assessee to the developer as a result of revised equation arising out of the terms of Supplementary Agreement. 8.3 In this regard, the Statement of Account dt.11-03-2017 issued to the assessee by the developer is captured here for clarity. From the above, it could be clearly seen that the developer has charged a total amount of Rs.11,25,57,480/- as cost of construction of 33,200 sq.ft. of building plus Service Tax, TNEB and other incidentals. This was also confirmed by the Managing Partner of M/s. Fourcee Housing Ms. Rama Chandiramani, from whom a statement u/s.131 was recorded on 20-12-2018. The relevant portion of the statement is extracted as under: - 11) What is the basis of arriving at cost of construction of Rs.10.51.33,000/- for 33,200 sq.ft. Ans. In the original JDA, 34,425 sq.ft. construction was agreed to be done at a cost of Rs.7,00,00, 000/-. Since 2 years had elapsed taking into consideration the escalation in 10 construction cost, the cost of construction 33,200 sq.ft. was mutually agreed at Rs.10,51,33,000/- 12) What is the total cost of construction including the mandatory applicable charges in respect of the owner's portion of building? Ans.: The cost of construction including the mandatory applicable charges in respect of the owner's portion of building i.e., 33,200 sqft is Rs.11,25,57,480/- (inclusive of Service Tax, TNEB and other charges)" In view of the above, it is clear that the amount of Rs.2,95,33,000/- and other mandatory and incidental charges are attributable to all the flats allotted to the assessee. As such, it is not proper to claim the differential cost of all the flats towards his own flat A14 of 6300 sq.ft. The assessee is eligible to claim the cost of acquisition which is proportionate to 6300 sq.ft. out of the total cost for 33200 sq.ft. 8.4 The discrepancy in the claim made by the assessee was pointed out to the AR and he was asked to submit the correct working. Vide submission furnished on 28-12-2018, the AR has submitted the same working thereby reiterating the quantum of deduction u/s.54. The claim of the assessee is grossly at variance with the facts of the matter. As such, the deduction u/s.54 is reworked accordingly. In spite of being party to all the transactions and being in possession of all the relevant documents such as supplementary agreement and developer's statement, making the above claim with the false premise amounts to furnishing inaccurate particulars. The Ld. AO thus observed that the cost of construction charged by the developer for Rs.1051.33 Lacs was towards entire built-up area of 33200 square feets as allotted to the assessee. The sale consideration of UDS parted to the developer was fixed at Rs.900 Lacs. Therefore, the difference of Rs.151.33 Lacs was to be paid by the assessee towards construction cost post supplementary agreement. Further, the amount of Rs.144 Lacs as already paid to the assessee in terms of original agreement was adjusted against the sale consideration of Rs.900 Lacs. In other words, the assessee paid amount of Rs.295.33 Lacs towards construction in terms of supplementary agreement. 2.11 Finally, deduction u/s Sec.54 was worked out by taking cost of Rs.1125.57 Lacs for 33200 square feets. The proportionate deduction u/s 54 was worked out at Rs.213.58 Lacs. 2.12 The working of Ld. AO resulted into addition of Rs.474.02 Lacs in the hands of the assessee which was subjected to assessee’s further challenge before Ld. first appellate authority. 11 3. Appellate Proceedings 3.1 The assessee assailed the assessment, inter-alia, by submitting that the gains were assessable in AY 2013-14 in accordance with Sec. 2(47) on the date of handing over the possession and not in this year during which the sale deed was executed. The assessee also assailed computation made by Ld. AO. It was submitted that JDA was entered on 30-11-2011 and possession of the property was given in April, 2012. The assessee received the consideration as per terms of JDA. The assessee submitted that it filed objection before Ld. AO on 24-12-2018 who ignored the submission of the assessee. 3.2 However, Ld. CIT(A) rejected the same on the ground that the aforesaid letter was filed by the assessee just 6 days prior to completion of assessment. The assessee did not provide any evidence regarding anything about transfer of property in return filed in A.Y. 2013-14. If the property was actually transferred in April, 2012, the assessee should have offered capital gain in that year. Though original JDA was signed on 30-11-2011, however, it could not be said that the original agreement was final in terms of provision of section 2(47) of the Act. In fact, the original building plan was not approved by CMDA. The assessee and the builder had to sign a supplementary agreement on 30-09-2013 in which there was substantial modification of the building plan. The original building plan was for stilt parking with five floors whereas the approved plan was for stilt plus four flours. Even the quantum of individual share to be retained by the owner was increased from 76.5% to 80.60%. Those kinds of changes ought not to have been there if the transfer was completed and possession was handed over in February, 2012. The assessee has also not pointed out that any provision in the original JDA 12 stating that the undivided share could have been treated as being transferred on the date of execution of agreement. 3.3 The Ld. CIT(A) held that the decision of Bangalore Tribunal in N A. Harris vs ACIT [ITA No. 988/Bang/2018 decided on 15.02.2021] would apply wherein the assessee entered into JDA with developer on 08-01- 2004. In Financial Year 2011-12, assessee received super built-up area of commercial space. He offered capital gains to tax. However, in appeal, he took stand that due to wrong professional advice, he inadvertently offered the income in A.Y 2012-13 whereas the transfer crystallized on the date in which JDA was entered into with the builder. It was stand of assessee that the income was not taxable in A.Y 2012-13 according to the Income tax Act. It was decided by Tribunal that willingness to perform for the purpose of Sec. 53A would be vital. It is the qualified and unconditional willingness on the part of the vendee to perform its obligation. Unless the party has performed or willing to perform its obligation under the contract, it could not be said that the provisions of Sec.53A would come into play. Unless the provisions of Sec.53A are satisfied, the transaction in question could not fall within the scope of deemed transfer u/s 2(47). Since the transferee neither performed nor was it willing to perform its obligation under JDA in FY 2004-05, the arguments of the assessee were not tenable. The municipal sanction was obtained subsequently. Therefore, it could not be held that the transfer took place in AY 2005-06. 3.4 The Ld. CIT(A) held that in the present case also, the original plan was not approved and the new plan was approved subsequently. The supplementary agreement incorporating the changes was signed only on 30.09.2013. Therefore, it could not be said that the income arose in AY 13 2013-14. Therefore, the year of JDA could not be treated as the year of transfer for purpose of taxation of capital gains considering the facts of the case. 3.5 The Ld. CIT(A) also noted that amendment carried out by the Finance Act to Section 45(5A), though applicable from A.Y. 2018-19, lays down that in cases of specified agreement for development of real estate project, capital gain shall be chargeable to tax in the year in which completion certificate is given by the competent authority. This will put at rest many disputes arising in cases of JDA regarding the year in which capital gain arises. Though the amendment was not applicable in case of present assessee, the intent of Legislature on the issue was very clear with effect from the amendment. 3.6 The facts in the decision of Chennai Tribunal in Smt. T. Kanniya Rani (ITA No.3357/Mds/2016), as relied upon by the assessee, were held to be distinguishable. In that case, the assessee had already offered gains in AY 2002-03 and Ld. AO sought to tax the same again in AY 2010-11 on the plea that sale deed was executed in later year. It was held that when irrevocable power of attorney was executed and when the gains were offered in AY 2002-03, there was no question of taxing the same in the year of registration. In the present case, the original JDA was substantially modified on 30-09-2013. The building plan was drastically changed and share of assessee and the builder also got substantially changed. Two sale deeds were signed in 2016 on different dates by assessee with two different-parties. Income was never offered in AY 2013-14. Therefore, the contention of assessee could not be accepted. 3.7 The issue, on merits, was adjudicated by Ld. CIT(A) as under: - 14 6.2.1 Regarding the cost of acquisition of land, it is seen that assessee had transferred only UDS of 4274 sq.ft. out of 21,666/- sq ft. In computing the cost of land, the assessee took the total cost of whole area of land and claimed indexation benefit thereon. The AO restricted the cost to proportionate area transferred to the builder. It resulted into addition of Rs. 18,01,746/-. Considering the facts, I do not find any reason to interfere with the action of the AO. 6.2.2 Second adjustment made is regarding cost of old building. The AO had narrated the issue in details at paras 7.2.1 to 7.2.4 of his order. The appellant had not controverted the AO's finding in course of appeal proceedings. In fact, appellant had made certain claims regarding construction stated to have been made in 1983-84 but which he was unable to substantiate. Hence, there is no reason to interfere with the finding of the AO. 6.2.3 Regarding quantum of deduction u/s 54, appellant was claiming a sum of Rs.2,95,33,000/-, which was cost to be apportioned among all the flats, as cost exclusively incurred for the two of his flats which were joined together as one unit. The claim is incorrect. The AO had taken proportionate share of assessee's 6300 sq ft of combined two flats as cost of acquisition of new property for deduction u/s 54 of the Act. Hence, the decision of the AO needs no interference. In view of the above, ground No. 7 is dismissed. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 4. From the fact, it emerges that the assessee has sold two properties vide sale deeds dated 07-03-2016 and 14-03-2016. Through the sale deeds, the assessee has conveyed undivided share (UDS) of 2137 square feets each to different parties. It could also be seen that the assessee entered into a joint venture agreement (JVA) on 30-11-2011 under which the assessee got his share of apartments constructed in lieu of transfer of UDS foregone to the builder. Considering the sale transactions which have fructified in this year, the assessee has computed Long-Term Capital Gains and after claiming deduction u/s 54, offered the taxable gains to tax in his return of income for this year. 5. It also emerges that the property under consideration is land with certain building which was acquired by the assessee in the year 1966 and a part of the property was sold by the assessee in the year 1971. Subsequently, the assessee entered into ‘agreement for development’ on 30-11-2011 with M/s Fourcee Housing for development of the said 15 property. However, the terms of the agreement have undergone substantial change and a supplementary deed has been executed by the assessee on 30-09-2013. This is in view of the fact that the original design was not approved by the appropriate authority. As per new agreement, the assessee was entitled for 10 flats having UDS of 80.60%. The remining 2 flats having UDS of 19.40% was to belong to builder. The assessee has executed sale deeds for these flats during this year and offered capital gains to tax. As per the revised terms, the sale consideration has been fixed as Rs.900 Lacs and the developer has agreed to construct assessee’s portion of 33200 sq. ft. at cost of construction of Rs.1051.33 Lacs. The builder has paid 36 monthly payments of Rs.4 Lacs each totalling to Rs.144 Lacs. The balance amount of Rs.756 Lacs was to be adjusted towards cots of construction of owner’s share. The owner has agreed to pay balance sum of Rs.295.33 Lacs (Rs.1051.33 Lacs minus Rs.756 Lacs) towards the cost of construction of his portion of 33200 sq. ft. The assessee was to get 10 flats (UDS 80.60%) whereas the developer was to get 2 flats (UDS 19.4%) in the proposed structure. 6. Initially, the return of income was processed u/s 143(1). However, the case was selected for ‘Limited Scrutiny’ though CASS to examine the issue ‘whether the deduction from capital gains has been claimed correctly’. The same is evident from notice issued u/s 143(2) on 19-09- 2017 vide DIN ITBA/AST/S/143(2)/2017-18/1006434381(1). In other words, the subject matter of limited scrutiny was to examine whether deduction from capital gains was claimed by the assessee correctly or not. The scope of scrutiny was limited to that extent only and nothing beyond. If AO was to travel beyond the subject matter of limited scrutiny, 16 he was required to convert the same into full scrutiny subject to procedure as prescribed in the Act. At the same time, it could also be seen that the scope of limited scrutiny was to examine the issue ‘whether the deduction from capital gains has been claimed correctly’. The said examination, in our considered opinion, would encompass examination of all the computations made under this head including ascertainment of cost of acquisition / improvement and examination of deduction as claimed by the assessee. This being so, the additional ground raised by the assessee do not find our favor. The Ld. AO could very well examine the computation of cost of acquisition / improvement. The said ground stand rejected. 7. The Ld. AR has filed additional evidences in support of the submissions that the Joint Venture Agreement giving rise to impugned capital gains was entered into by the assessee on 30-11-2011. It has also been submitted that the possession of the land was offered during AY 2013-14. Therefore, the impugned gains would be assessable in AY 2013-14. The Ld. AR, in the alternative, submitted that the assessee has provided the confirmation given by the builder vide letter dated 14.12.2018 wherein they confirmed that the possession of old house was handed over to them in April, 2012, the demolition was completed in July, 2012 and the possession of the completed flats Nos. A-1 to A-8 was handed over to the assessee on 30-03-2015. The Ld. AR also relies on completion certificate issue by Chennai Metropolitan Development Authority on 25-02-2015 in support of the claim that the impugned gains would be assessable in AY 2015-16. The Ld. AR submitted that aforesaid confirmation would have material bearing to determine the year of year of chargeability of capital gain. The Ld. AR further submitted 17 that non-consideration of the said confirmation would result in gross injustice to the assessee. The Ld. AR has argued that since the possession was handed over by the assessee in AY 2013-14, the capital gains would be taxable in that year. Alternatively, the gains would be taxable in the year of completion i.e., AY 2015-16. The Ld. AR thus argued on the year of taxability of impugned capital gains. 8. We have carefully considered the submissions made by Ld. AR and also perused the additional evidences as sought to be filed before us. Upon due consideration, we are unable to persuade ourselves to all these submissions. The reasons are simple. Firstly, the assessee himself has offered gains for the first time in this year only. In fact, the gains have been offered in this year only and not in any other year. Nothing has been shown to us that these gains have ever been offered either in AY 2013-14 or in AY 2015-16 or in any other year. The assessee cannot take contrary stands. At the fag-end of assessment proceedings, the assessee filed a letter stating that the gains would not be chargeable in this year but the same would be chargeable either in the year of entering into joint venture agreement and during the year when the possession of the new flats was given by the builder to the assessee. However, it is nowhere been shown to us that the assessee himself has acted on these arguments and offered capital gains in any other assessment years. The assessee is only making contrary stand. Accepting the same would mean that the revenue would never be able to tax the impugned capital gains which could not be permitted. Therefore, we are unable to accept these arguments. 9. Secondly, it is crystal clear that the case was selected for ‘limited scrutiny’ to examine the issue of deduction claimed by the assessee 18 under the head capital gains as offered by the assessee in the return of income. The year of taxability was not within the scope of ‘limited scrutiny’ and the aforesaid question could not have been even gone into by Ld. AO. 10. Therefore, all these arguments as well as additional evidences as urged by Ld. AR could not find our acceptance and hence, rejected. The Ld. CIT(A), in our considered opinion, has clinched the issue in correct perspective by relying upon the decision of a Tribunal. We concur with the same. Ground Nos. A to H, additional grounds of appeal as well as alternative grounds including admission of additional evidences as urged by Ld. AR stand dismissed. 11. Coming to the merits of the case, so far as the computation of cost of land is concerned, we find that the assessee has parted with only a part of the land. Therefore, he is not correct in considering entire cost of land while computing the gains. Only proportionate cost could be allowed to the assessee. We confirm the stand of Ld.AO to that extent. 12. So far as the cost of building is concerned, it could be seen that the assessee has claimed to have spent an amount of Rs.35 Lacs towards cost of construction in the year 1983-84 and worked out indexed cost of Rs.326.16 Lacs. The above cost has been claimed towards 20000 sq. feets of building. However, the said claim has remained unsubstantiated. The assessee has only produced copy of demolition plan as evidence for existence of building and online status of property tax payments details from the year 1993-94 without any documentary evidences supporting the expenditure. The said claim has rightly been held to be on vague estimation. The Ld. AO, upon perusal of documents, further noted that there existed a building at the time of demolition. The perusal of 19 demolition plan would show that the extent of building at the time of demolition was only 18593 square feets and not 20000 square feets as claimed by the assessee. The property was originally owned by assessee’s mother on 28-05-1958 and subsequently constructed thereon. The property vested with official assignee and the assessee acquired the said property from High Court on 27-08-1966. The construction of the building could have taken place from the years 1958 to 1965 since none of the subsequent documents of conveyance make any mention about construction made by the assessee. It has further been noted by Ld. AO that originally the property consisted of 15 grounds and 558 Square feets including the Bungalows, out-house, cattle shed, garage and garden. But there was no mention about the extent of building in the said deed. Therefore, it was to be concluded that the building of 18593 square feet existed since the date of acquisition by the assessee. Considering the same, Ld. AO has computed Fair Market Value (FMV) of the building as on 01-04-1981 by applying PWD rates and arrived at cost of building as Rs.16.67 Lacs. Considering the plea of the assessee that building was made of superior construction, Ld. AO adopted cost of building as on 01-04-1981 to be Rs.20 Lacs. Since the building was 16 years old as on 01-04-1981, taking the life of building to be 80 years and salvage value of 10%, Ld. AO depreciated the cost and revised the cost of building as on 01-04-1981 to Rs.16.40 Lacs. We substantially concur with all these findings of Ld. AO except for the fact that when FMV of the building has been considered as on 01-04-1981, there is no further requirement to depreciate the same. Therefore, we direct Ld. AO to adopt FMV of the building as on 01-04-1981 as Rs.20 Lacs and re-compute the gains. 20 13. So far as the claimed of deduction u/s 54 is concerned, the working as tabulated by us in para 2.9 would show that the assessee has attributed cash outflow, service tax component and alteration cost of all the flats to two flats (which has been joined together) against which this deduction has been claimed. The same is not correct methodology. The working made by Ld. AO, as submitted by Ld. Sr. DR is as under: - Calculation of deduction u/s 54 as per the Asst. Order Cost of construction of 33,200 sft 10,51,33,000 TNEB charges and other incidentals 21,02,660 Service Tax Payable 53,21,820 Total cost for 33,200 sft 11,25,57,480 Cost per sft 3,390 Cost of acquisition of new asset 6300*3390 2,13,58,799 The aforesaid working could not be faulted with. We concur with the same. Consequently, ground Nos. I to K stand dismissed except to the extent that FMV of the building as on 01-04-1981 would be taken as Rs.20 Lacs. The Ld. AO is directed to re-compute the gains. 14. In the result, the appeal stand partly allowed. Order pronounced on 25 th April, 2024 Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा34 / VICE PRESIDENT लेखा सद6 / ACCOUNTANT MEMBER चे8ई Chennai; िदनांक Dated : 25-04-2024 DS आदेशकीHितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु@/CIT 4. िवभागीय ितिनिध/DR 5. गाडEफाईल/GF