ACIT 31(1), MUMBAI V. AWADHANARAYAN L SINGH, MUMBAI

ITA 4264/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7738 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 09-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Capital asset
• Section: 143(3); 148

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.4264 /MUM/2015 AND ITA 4267/MUM/2015 ( / ASSESSMENT YEARS : 2008-09 AND 2009-10) ASSTT. COMMISSIONER OF INCOME TAX 31(1), ERSTWHILE ACIT/DCIT 24(3), ROOM NO. 701, C-11, 7 TH FLOOR, BKC BANDRA (E), MUMBAI 400 051. / V. AWADHNARAYAN L SINGH, B-5/102, AWADH HOUSE, THAKUR LAXMI SINGH ESTATE, S.V. ROAD, GOREGAON (W), MUMBAI 400 062 ./ PAN :AAGPS0470C ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI RAJESH KUMAR YADAV (D.R.) ASSESSEE BY : SHRI VIMAL PUNMIYA / DATE OF HEARING : 21-03-2017 / DATE OF PRONOUNCEMENT : 29-03-2017 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THESE TWO APPEALS, FILED BY THE REVENUE, BEING ITA NO. 4264/MUM/2015 AND ITA NO. 4267/MUM/2015, ARE DIRECT ED AGAINST TWO SEPARATE APPELLATE ORDERS BOTH DATED 28 TH APRIL, 2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 42, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEARS 2008-09 AND 2009 -10 RESPECTIVELY, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARI SING FROM TWO SEPARATE PENALTY ORDERS BOTH DATED 21-3-2014 PASSED BY THE L EARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 271(1)(C) OF THE INCOME-TAX ACT,1961 ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 2 (HEREINAFTER CALLED THE ACT) RESPECTIVELY FOR ASS ESSMENT YEARS 2008-09 AND 2009-10. 2. IN THESE TWO APPEALS, THE REVENUE HAS CHALLENGED THE DELETION OF PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF 1961 A CT BY THE LD. CIT(A) VIDE HIS TWO SEPARATE APPELLATE ORDERS BOTH DATED 28 TH APRIL, 2015 FOR ASSESSMENT YEAR 2008-09 AND 2009-10. 3. FIRST , WE SHALL TAKE APPEAL FOR ASSESSMENT YEAR 2008-09 IN ITA NO. 4264/MUM/2015. 4. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE QUANTUM APPEAL FOR ASSESSMENT YEAR 2008-09 HAS BEEN DECIDED BY THE MUMBAI-TRIBUNAL WHEREIN QUANTUM ADDITIONS STOOD DEL ETED BY THE TRIBUNAL IN THE CROSS APPEALS FILED BY THE BOTH ASSESSEE AND RE VENUE , VIDE ITS COMMON ORDERS DATED 24-08-2016 IN ASSESSEES APPEAL IN ITA NO. 3337/MUM/2013 FOR ASSESSMENT YEAR 2008-09 AND ITA NO. 3338/MUM/2013 F OR ASSESSMENT YEAR 2009-10 AND REVENUES APPEAL IN ITA NO. 3411/MUM/20 13 FOR ASSESSMENT YEAR 2008-09 & ITA NO. 3412/MUM/2013 FOR ASSESSMENT YEAR 2009-10. THE LD. COUNSEL FOR ASSESSEE HAS PRODUCED BEFORE THE TR IBUNAL THE COPY OF THE ORDER DATED 24-08-2016 PASSED BY THE TRIBUNAL WHIC H IS PLACED IN FILE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIN CE THE QUANTUM ADDITION HAS BEEN DELETED BY THE TRIBUNAL, THE PENALTY LEVIE D BY REVENUE U/S 271(1)(C) OF 1961 ACT CANNOT BE SUSTAINED. THE LD. COUNSEL A LSO BROUGHT ON RECORD THE TRIBUNAL ORDER IN ITA NO. 6062/MUM/2011 FOR ASSESSM ENT YEAR 2007-08 ORDER DATED 29 TH MARCH, 2016 IN THE CASE OF THE ASSESSEE WHEREIN TH E TRIBUNAL HAS DELETED THE PENALTY LEVIED U/S 271(1)(C) OF 196 1 ACT BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ITA NO. 7363/MUM/2010 AND ITA NO . 7982/MUM/2010 PASSED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 IN ASSESSEES OWN CASE WHEREIN THE QUANTUM ADDITIONS WERE DELETED. THE SAI D ORDER OF THE TRIBUNAL ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 3 DELETING PENALTY LEVIED U/S 271(1)(C) OF 1961 ACT I N ITA NO. 6062/MUM/2011 DATED 29-03-2016 FOR ASSESSMENT YEAR 2007-08 WAS PR ODUCED BEFORE US BY LEARNED COUNSEL FOR THE ASSESSEE AND IS ALSO PLACED IN FILE. 5. THE LD. D.R. FAIRLY CONCEDED THAT THE TRIBUNAL H AS DELETED THE QUANTUM ADDITIONS FOR ASSESSMENT YEAR 2008-09 AND 2009-10 V IDE AFORESAID ORDERS OF THE TRIBUNAL, HENCE, PENALTY LEVIED U/S 271(1)(C) O F 1961 ACT IS NOT SUSTAINABLE SO FAR AS THE APPEALS BEFORE THE TRIBUNAL ARE CONCE RNED. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE TRIBUNAL ORDERS. WE HAVE OBSERVED THAT THE ADDITIONS WHICH WERE MADE IN QUANTUM ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT HAD BEEN DELETED BY THE TRIBUNAL IN ITS ORD ER IN ASSESSEES APPEAL IN ITA NO. 3337/MUM/2013 FOR ASSESSMENT YEAR 2008-09 A ND ITA NO. 3338/MUM/2013 FOR ASSESSMENT YEAR 2009-10 VIDE COM MON ORDER DATED 24 TH AUGUST, 2016 AND IN REVENUE APPEAL IN ITA NO. 3411 /MUM/2013 FOR ASSESSMENT YEAR 2008-09 & ITA NO. 3412/MUM/2013 FOR ASSESSMENT YEAR 2009-10. THE RELEVANT OBSERVATION OF THE TRIBUNAL A RE REPRODUCED BELOW:- ITA.S./3337&3411/MUM/2013-(BY ASSESSEE )AY.2008-09: BASED ON THE FINDING RECORDED,DURING THE ASSESSMENT PROCEEDINGS FOR THE AY.2007-08,THE AO ISSUED A NOTICE U/S.148 OF THE AC T FOR THE YEAR UNDER APPEAL, HOLDING THAT INCOME CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT BY REASON OF OMISSION OR FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THE YEAR UNDER CONSIDERATION.THE ASSESSEE OBJECTED TO THE REOPENIN G OF THE ASSESSMENT.HOWEVER, THE AO HELD THAT A VALID NOTICE WAS ISSUED UNDER SECTION 148 OF THE ACT AND ASSESSED THE INCOME OF T HE ASSESSEE FOR THE YEAR UNDER APPEAL,AS STATED IN THE TABLE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CO NSIDERING THE ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 4 SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER , HE UPHELD THE REOPENING AND PARTLY ALLOWED THE APPEAL FILED BY TH E ASSESSEE. THEREFORE, THE AO AS WELL AS THE ASSESSEE HAVE FILED CROSS APP EALS. 5. DURING THE COURSE OF HEARING BEFORE US, IT WAS BROU GHT OVER NOTICE BY THE REPRESEN -TATIVES OF BOTH THE SIDES THAT IDENTICAL ISSUE HAS BEEN DELIBERATED UPON BY THE TRIBUNAL AND DECIDED, WHILE ADJUDICATIN G THE APPEAL FOR THE AY. 2007-08. WE FIND THAT THE TRIBUNAL HAD DEALT THE ISSUE WHILE DECIDING THE APPEALS FILED BY THE ASSESSEE,HIS BROTHER SATYAPRAKASH SING H AND THE AOS (ITA/ 7363/ MUM/2010, ITA/7982/MUM/2010,ITA.S./7517&7518/ MUM/2010- AY. 2007-08, DATED 02/03/2016.),THAT IT HAD CONSIDE RED THE FACTS OF THE CASE AT LENGTH AND HAD DECIDED THE ISSUE IN FOLLOWI NG MANNER: 2.EVEN THOUGH BOTH THE PARTIES HAVE URGED GROUNDS RELATING TO COMPUTATION OF CAPITAL GAINS IN THE ORIGINAL GROUNDS OF APPEAL, TH EY HAVE FILED AN ADDITIONAL GROUND CONTESTING THEREIN THE CAPITAL GAINS IS NOT ASSESSABLE IN AY 2007-08, SINCE THE TRANSFER HAS TAKEN PLACE IN THE YEAR RELE VANT TO THE AY. 2003-04 IN TERMS OF SEC. 2(47) OF THE ACT. SINCE THIS ADDITION AL GROUND GOES TO THE ROOT OF THE MATTER, WE ADMIT THE SAME AND PROCEED TO DISPOS E OF THE SAME. 3. THE FACTS RELATING TO THE CASE ARE DISCUSSED IN BRIEF. BOTH THE ASSESSEES HAVE INHERITED A LAND FROM THEIR FATHER NAMED SHRI LAXMI SINGH UDIT SINGH. AFTER THE DEATH OF SHRI LAXMI SINGH UDIT SINGH IN THE YEAR 19 86, THE LAND WAS INHERITED BY HIS FIVE SONS. THE DAUGHTERS OF SHRI LAXMI SINGH UDIT SINGH RELINQUISHED THEIR RESPECTIVE RIGHTS IN FAVOUR OF THEIR BROTHERS . THUS EACH SON INHERITED 1/5TH SHARE IN THE LAND. THEY ENTERED INTO AN AGREEMENT O N 10-10-2002 WITH M/S BRICKWORKS TRADING PVT. LTD. FOR DEVELOPMENT OF THE LAND AND ACCORDINGLY EXECUTED A POWER OF ATTORNEY ON 10-10-2002. ACCORDI NG TO THE ASSESSEES THE POSSESSION OF THE LAND WAS HANDED OVER TO THE DEVEL OPERS AT THAT POINT OF TIME ITSELF. 4. THE ASSESSEES HEREIN HAD DECLARED LONG TERM CAPI TAL GAIN IN THE RETURN OF INCOME FILED FOR AY. 2007-08. THE DEPARTMENT NOTICE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF SHRI HARINARYAN L SINGH ( ONE OF THE CO-OWNERS) THAT THE ASSESSEES HEREIN ALONG WITH OTHER CO-OWNERS HAV E EXECUTED A DEVELOPMENT AGREEMENT ON 09-10-2002 WITH M/S BRICKSWORK TRADING PVT. LTD. (DEVELOPER). AS PER THE DEVELOPMENT AGREEMENT, THE DEVELOPER SHA LL GET 60% SHARE AND THE CO-OWNERS SHALL GET 40%. IT WAS NOTICED THAT M/S BR ICKWORK TRADING PVT. LTD. HAS DISTRIBUTED THE PROFIT TO ALL THE CO-OWNERS DUR ING THE F.Y 2006-07 RELEVANT TO THE AY. 2007-08. HENCE THE ASSESSING OFFICER REO PENED THE ASSESSMENT OF THE ASSESSEES HEREIN FOR AY 2007-08 TO ASSESS THE CAPIT AL GAIN ARISING THEREFROM. IN ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 5 THE REOPENED ASSESSMENT, HE VARIED THE CAPITAL GAIN S DECLARED BY THESE ASSESSEES. IN THE APPEALS FILED BY THEM BEFORE LD C IT(A), THEY GOT PARTIAL RELIEF. HENCE THE REVENUE AS WELL AS ASSESSEES ARE IN APPEA L BEFORE US ASSAILING THE DECISION RENDERED BY LD CIT(A) AGAINST EACH OF THEM . 5. THE MAIN CONTENTION URGED IN THE ADDITIONAL GROU ND FILED BY THESE ASSESSEES IS THAT THE 'TRANSFER' OF PROPERTY TOOK PLACE IN THE Y EAR RELEVANT TO THE AY. 2003-04 AND HENCE THE CAPITAL GAINS ASSESSED IN AY 2007-08 WAS NOT IN ACCORDANCE WITH THE LAW. IT WAS FURTHER SUBMITTED THAT THERE IS NO ESTOPPEL AGAINST THE LAW AND HENCE, EVEN IF THE ASSESSEE HAS ERRONEOUSLY OFFERED THE CAPITAL GAINS IN AY 2007- 08, THE SAME CANNOT BE ASSESSED IN THAT YEAR. 6. ON THE CONTRARY, THE LD D.R PLACED STRONG RELIAN CE ON THE ORDERS PASSED BY TAX AUTHORITIES. HE FURTHER SUBMITTED THAT THE ASSE SSEES HAVE GOT THEIR RESPECTIVE SHARE ONLY IN THE YEAR RELEVANT TO THE AY 2007-08 A ND THEY HAVE ALSO DECLARED THE SAME IN THEIR RESPECTIVE RETURNS OF INCOME. ACC ORDINGLY HE SUBMITTED THAT THE ASSESSEES ARE PRECLUDED FROM TAKING A DIFFERENT STA ND AT THIS POINT OF TIME. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IT IS A WELL SETTLED PROPOSITION OF LAW THAT THERE IS NO ESTOPPE L AGAINST LAW AND HENCE WE ARE OF THE VIEW THAT THE ASSESSEES HEREIN ARE ENTITLED TO CONTEND THAT THE INCOME OFFERED BY THEM IS NOT LIABLE TO TAX DURING THE YEA R UNDER CONSIDERATION, IF THE SAID INCOME IS NOT LIABLE TO TAX AT ALL IN THAT YEA R. IN THE INSTANT CASES, THE UNDISPUTED FACT REMAINS THAT THE ASSESSEES HAVE ENT ERED INTO A DEVELOPMENT AGREEMENT WITH M/S BRICKWORK TRADING PVT. LTD. ON 0 9-10-2002. THE VERY FACT THAT THE DEVELOPMENT PROJECT WAS COMPLETED IN THE F Y 2006-07 ITSELF SHOWS THAT THE AGREEMENT SHOULD HAVE BEEN ENTERED MUCH EARLIER . THE POWER OF ATTORNEY EXECUTED IN FAVOUR OF THE DEVELOPER HAS BEEN REGIST ERED IN OCT., 2002. HENCE THERE IS MERIT IN THE SUBMISSIONS OF THE ASSESSEES THAT THE POSSESSION WAS HANDED OVER TO THE DEVELOPER AT THAT POINT OF TIME ITSELF. 8. IN THIS REGARD, WE MAY REFER TO THE PROVISIONS O F SEC. 2(47), WHICH DEFINES THE WORD 'TRANSFER'. FOR THE SAKE OF CONVENIENCE, WE EX TRACT BELOW THE PROVISIONS OF CLAUSE (V) AND (VI) OF SEC. 2(47) OF THE ACT:- '2(47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET, INCLUDES, ...... (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882); OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING T HE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 6 IN THE INSTANT CASE, BY VIRTUE OF DEVELOPMENT AGREE MENT, THE ASSESSEE HAS HANDED OVER THE POSSESSION OF THE IMPUGNED LAND DUR ING THE FY 2002-03. HENCE, IN TERMS OF SEC.2(47)(V) AND 2(47)(VI) OF TH E ACT, THE TAXABILITY OF CAPITAL GAIN HAS TO BE CONSIDERED IN AY 2003-04. OUR VIEW G ETS SUPPORT FROM THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CHATURBHU DWARKADAS KAPADIA VS. CIT ( 260 ITR 491). 9 THE LEGAL POSITION OF DEVELOPMENT AGREEMENT VIS- -VIS SECTION 2(47(V) OF THE ACT WAS CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA, CITED SUPRA. THE RELE VANT OBSERVATIONS OF THE HIGH COURT, IN THAT CASE, ARE EXTRACTED BELOW: 'IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO EFFECTIVE TRANSFER TILL GRANT OF IRREVOCABLE LICENCE. IN THIS CONNECTION, T HE JUDGMENTS OF THE SUPREME COURT WERE CITED ON BEHALF OF THE ASSESSEE, BUT AL L THOSE JUDGMENTS WERE PRIOR TO INTRODUCTION OF THE CONCEPT OF DEEMED TRANSFER U NDER SECTION 2(47)(V). IN THIS MATTER, THE AGREEMENT IN QUESTION IS A DEVELOPMENT AGREEMENT. SUCH DEVELOPMENT AGREEMENTS DO NOT CONSTITUTE TRANSFER I N GENERAL LAW. THEY ARE SPREAD OVER A PERIOD OF TIME. THEY CONTEMPLATE VARI OUS STAGES. THE BOMBAY HIGH COURT IN VARIOUS JUDGMENTS HAS TAKEN THE VIEW IN SEVERAL MATTERS THAT THE OBJECT OF ENTERING INTO A DEVELOPMENT AGREEMENT IS TO ENABLE A PROFESSIONAL BUILDER/CONTRACTOR TO MAKE PROFITS BY COMPLETING TH E BUILDING AND SELLING THE FLATS AT A PROFIT. THAT THE AIM OF THESE PROFESSION AL CONTRACTORS WAS ONLY TO MAKE PROFITS BY COMPLETING THE BUILDING AND, THEREFORE, NO INTEREST IN THE LAND STANDS CREATED IN THEIR FAVOUR UNDER SUCH AGREEMENTS, THAT SUCH AGREEMENTS ARE ONLY A MODE OF REMUNERATING THE BUILDER FOR HIS SERVICES O F CONSTRUCTING THE BUILDING (SEE GURUDEV DEVELOPERS V KURLA KONKAN NIWAS CO-OPE RATIVE HOUSING SOCIETY (2000) 3 MAH LJ 131). IT IS PRECISELY FOR THIS REAS ON THAT THE LEGISLATURE HAS INTRODUCED SECTION 2(47(V) READ WITH SECTION 45 WHI CH INDICATES THAT CAPITAL GAINS IS TAXABLE IN THE YEAR IN WHICH SUCH TRANSACT IONS ARE ENTERED INTO EVEN IF THE TRANSFER OF IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE UNDER THE GENERAL LAW. IN THIS CASE THAT TEST HAS NOT BEEN AP PLIED BY THE DEPARTMENT. NO REASON HAS BEEN GIVEN WHY THAT TEST HAS NOT BEEN AP PLIED, PARTICULARLY WHEN THE AGREEMENT IN QUESTION, READ AS A WHOLE, SHOWS THAT IT IS A DEVELOPMENT AGREEMENT. THERE IS A DIFFERENCE BETWEEN THE CONTRA CT ON ONE HAND AND THE PERFORMANCE ON THE OTHER HAND. IN THIS CASE, THE TR IBUNAL AS WELL AS THE DEPARTMENT HAVE COME TO THE CONCLUSION THAT THE TRA NSFER TOOK PLACE DURING THE ACCOUNTING YEAR ENDING 31.3.1996, AS SUBSTANTIAL PA YMENTS WERE EFFECTED DURING THAT YEAR AND SUBSTANTIAL PERMISSIONS WERE OBTAINED . IN SUCH CASES OF DEVELOPMENT AGREEMENT, ONE CANNOT GO BY SUBSTANTIAL PERFORMANCE OF A CONTRACT. IN SUCH CASES, THE YEAR OF CHARGEABILITY IS THE YEAR IN WHICH THE CONTRACT IS EXECUTED. THIS IS IN VIEW OF SECTION 2( 47(V) OF THE ACT. ...... ........ IN THIS CASE, THE AGREEMENT IS A DEVELOPME NT AGREEMENT AND IN OUR VIEW, THE TEST TO BE APPLIED TO DECIDE THE YEAR OF CHARGE ABILITY IS THE YEAR IN WHICH THE ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 7 TRANSACTION WAS ENTERED INTO. WE HAVE TAKEN THIS VI EW FOR THE REASON THAT THE DEVELOPMENT AGREEMENT DOES NOT TRANSFER THE INTERES T IN THE PROPERTY TO THE DEVELOPER IN GENERAL LAW AND, THEREFORE, SECTION 2( 47)(V) HAS BEEN ENACTED AND IN SUCH CASES, EVEN ENTERING INTO SUCH A CONTRACT C OULD AMOUNT TO TRANSFER FROM THE DATE OF AGREEMENT ITSELF. .... THEREFORE, IF ON A BARE READING OF A CONTRACT IN ITS ENTIRETY AN ASSESSING OFFICER COMES TO THE CONC LUSION THAT IN THE GUISE OF AGREEMENT FOR SALE, A DEVELOPMENT AGREEMENT IS CONT EMPLATED, UNDER WHICH THE DEVELOPER APPLIES FOR PERMISSIONS FROM VARIOUS AUTH ORITIES, EITHER UNDER POWER OF ATTORNEY OR OTHERWISE AND IN THE NAME OF THE ASS ESSEE, THEN THE ASSESSING OFFICER IS ENTITLED TO TAKE THE DATE OF CONTRACT AS THE DATE OF TRANSFER IN VIEW OF SECTION 2(47(V)..... WE DO NOT FIND MERIT IN THE ARGUMENT OF THE ASSESSEE THAT THE COURT SHOULD GO ONLY BY THE DATE OF ACTUAL POSS ESSION AND THAT IN THIS PARTICULAR CASE, THE COURT SHOULD GO BY THE DATE ON WHICH IRREVOCABLE LICENCE WAS GIVEN.' 10. WE FEEL IT NECESSARY TO DISCUSS ABOUT THE FACTS OF THE CASE OF CHARUBHUJ DWARKADAS KAPADIA, REFERRED SUPRA, IN ORDER TO UNDE RSTAND THE LEGAL PROPOSITION LAID DOWN BY THE HON'BLE BOMBAY HIGH CO URT. IN THAT CASE, THE ASSESSEE ENTERED INTO AN AGREEMENT ON 18.8.1994 TO SELL THE PROPERTY TO A BUILDER FOR A CONSIDERATION OF RS.1.85 CRORES WITH A RIGHT TO THE BUILDER TO DEVELOP THE PROPERTY IN ACCORDANCE WITH THE RELEVAN T RULES. THE ASSESSEE SHALL GRANT AN IRREVOCABLE LICENSE TO ENTER UPON THE ASSE SSEE'S SHARE OF THE PROPERTY UPON RECEIPT OF NECESSARY PERMISSIONS AND APPROVALS AND ALSO THE NOC UNDER CHAPTER XXC OF THE INCOME TAX ACT. BY 31.3.1996, TH E BUILDER OBTAINED MOST OF THE APPROVALS AND ALSO PAID MAJOR PORTION OF THE CO NSIDERATION. THE POWER OF ATTORNEY WAS EXECUTED IN FAVOUR OF THE BUILDER ON 1 2.3.1999. THE ASSESSEE OFFERED THE CAPITAL GAINS IN THE AY. 1999-2000, SIN CE THE LICENCE AND POWER OF ATTORNEY WERE GIVEN IN THE FINANCIAL YEAR 1998-99. THE AO AND ITAT HELD THAT THE CAPITAL GAINS IS ASSESSABLE IN THE AY. 1996-97 SINCE SUBSTANTIAL COMPLIANCE OF TERMS OF AGREEMENT HAS TAKEN PLACE BEFORE 31.3.1 996. HOWEVER THE HIGH COURT HELD THAT THE IMPUGNED SALE AGREEMENT IS ONLY A 'DEVELOPMENT AGREEMENT' AND HENCE THE CAPITAL GAIN IS ASSESSABLE IN THE YEAR IN WHICH THE SAID AGREEMENT WAS ENTERED INTO. THUS THE CONTENTIO NS OF BOTH THE ASSESSEE AS WELL AS THAT OF THE REVENUE WITH REGARD TO THE YEAR OF CHARGEABILITY WERE REJECTED. 11. THUS, AS PER THE LEGAL PROPOSITION LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE ABOVE CITED CASE, THE FACTORS SUCH AS 'DATE OF POSSESSION, SUBSTANTIAL COMPLIANCE OF THE CONTRACT ETC.' ARE NO T RELEVANT IN THE CASE OF DEVELOPMENT AGREEMENTS. THE HIGH COURT HAS OBSERVED THAT THE AIM OF THE BUILDER UNDER THE DEVELOPMENT AGREEMENT WAS TO MAKE PROFITS BY COMPLETING THE BUILDING AND THEREFORE, NO INTEREST IN THE LAND STA NDS CREATED IN THEIR FAVOUR UNDER SUCH AGREEMENTS. THUS THE SAID AGREEMENTS ARE ONLY A MODE OF REMUNERATING THE BUILDER FOR HIS SERVICES OF CONSTR UCTING THE BUILDING. THE HIGH COURT HAS NOTICED THAT THE ASSESSEES WERE ENTERING INTO DEVELOPMENT AGREEMENTS ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 8 WITH THE BUILDERS BY CONFERRING PRIVILEGES OF OWNER SHIP TO THEM AND WERE CLAIMING THAT THE CAPITAL GAINS WOULD ARISE ONLY AF TER REGISTERING THE CONVEYANCE DEED. ACCORDINGLY THE HIGH COURT HELD THAT THE SECT ION 2(47)(V) WAS BROUGHT INTO THE STATUTE TO PLUG THIS KIND OF LOOP HOLE. TH US BY CONSIDERING THE OBJECT OF THE DEVELOPMENT AGREEMENTS AND ALSO THE PURPOSE OF INTRODUCTION OF SECTION 2(47)(V) OF THE ACT, THE HON'BLE HIGH COURT HAS FIN ALLY HELD THAT THE YEAR OF CHARGEABILITY IN THE CASE OF DEVELOPMENT AGREEMENTS IS THE YEAR IN WHICH THE CONTRACT WAS EXECUTED. 12. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ASSESSEES HEREIN SUCCEED IN THE ADDITIONAL GROUND URGED BY TH EM.ACCORDINGLY WE HOLD THAT THE CAPITAL GAIN ARISING ON ENTERING OF DEVELOPMENT AGREEMENT IS NOT TAXABLE IN THE AY. 2007-08, BUT TAXABLE IN AY 2003-04. 13. IN VIEW OF THE ABOVE, WE SET ASIDE THE ASSESSME NT OF CAPITAL GAINS MADE IN AY 2007-08 AND HENCE ALL THE GROUNDS URGED BY BOTH THE PARTIES BEFORE US BECOME INFRUCTUOUS. 14. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE ES ARE TREATED AS ALLOWED AND THE APPEALS OF THE REVENUE ARE DISMISSED. RESPECTFULLY, FOLLOWING THE ORDERS OF THE TRIBUNAL FOR THE EARLIER AY.,WE ALLOW THE APPEAL FILED BY THE ASSESSEE AND HOLD THA T INCOME IN QUESTION HAS TO BE ASSESSED IN THE AY. 2003-04.APPEAL FILED BY T HE AO IS DISMISSED. ITA.S.3338&3412/MUM/2013-AY.2009-10: FOLLOWING OUR ORDER FOR THE AY. 2008-09,APPEALS FIL ED BY THE ASSESSEE AND THE AO ARE ALLOWED AND DISMISSED RESPECTIVELY. AS A RESULT, APPEALS FILED BY THE ASSESSEE STAND AL LOWED AND THE APPEALS OF THE AO ARE DISMISSED. KEEPING IN VIEW OF THE ABOVE SAID TRIBUNAL ORDERS D ELETING THE ADDITION IN THE QUANTUM PROCEEDINGS, THEN, IN OUR CONSIDERED VIEW, THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT CANNOT BE SUSTAIN ED. IT IS OBSERVED THAT THE TRIBUNAL IN AFORESTATED ORDERS FOR ASSESSMENT YEAR 2008-09 HAS GIVEN A CATEGORICAL FINDING THAT THE CAPITAL GAIN ARISING O N ENTERING OF DEVELOPMENT AGREEMENT IS NOT TAXABLE IN ASSESSMENT YEAR 2008-09 BUT IS TAXABLE IN ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 9 ASSESSMENT YEAR 2003-04, BY FOLLOWING THE DECISION OF THE TRIBUNAL FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2007-08. THE ORDER OF THE TRIBUNAL DATED 24.08.2016 FOR ASSESSMENT YEAR 2008- 09(SUPRA) DECIDING QUANTUM ASSESSMENTS WHEREIN QUANTUM ADDITIONS WERE DELETED ARE PLACED IN FILE. WE HAVE ALSO OBSERVED THAT THE TRIBUNAL HAS A LREADY DELETED THE PENALTY LEVIED U/S 271(1)(C) OF 1961 ACT VIDE ITS ORDER DAT ED 29-03-2016 IN ITA NO. 6062/MUM/2011 FOR ASSESSMENT YEAR 2007-08 IN ASSESS EES OWN CASE BY FOLLOWING THE TRIBUNAL ORDER IN ASSESSEES OWN CASE IN ITA NO. 7363/MUM/2010 AND ITA NO. 7982/MUM/2010 FOR ASSESSM ENT YEAR 2007-08 DELETING THE QUANTUM ADDITIONS . RESPECTFULLY FOLL OWING THE ORDERS OF THE TRIBUNAL CITED SUPRA, PENALTY U/S 271(1)(C) OF 1961 ACT LEVIED BY AO IS HEREBY DIRECTED TO BE DELETED AND ORDER OF LEARNED CIT(A) DELETING THE PENALTY U/S 271(1)(C) OF THE ACT IS HEREBY CONFIRMED. WE ORDER ACCORDINGLY . 7. IN THE RESULT APPEAL FILED BY REVENUE IN ITA NO. 4264/MUM/2015 FOR ASSESSMENT YEAR 2008-09 IS HEREBY DISMISSED. 8. OUR ABOVE FINDING IN ITA NO. 4264/MUM/2015 FOR A SSESSMENT YEAR 2008-09 SHALL APPLY MUTATIS MUTANDIS TO THE REVENUE S APPEAL IN ITA NO. 4267/MUM/2015 FOR ASSESSMENT YEAR 2009-10 WHEREIN T HE FACTS ARE SIMILAR . WE ORDER ACCORDINGLY. 9. IN THE RESULT APPEAL FILED BY REVENUE IN ITA NO. 4267/MUM/2015 FOR ASSESSMENT YEAR 2009-10 IS HEREBY DISMISSED. 10. IN THE RESULT, APPEALS FILED BY THE REVENUE IN ITA NO. 4264/MUM/2015 FOR THE ASSESSMENT YEAR 2008-09 AND REVENUES APPEA L IN ITA NO. 4267/MUM/2015 FOR THE ASSESSMENT YEAR 2009-10 ARE D ISMISSED. ITA 4264/MUM/2015 AND ITA 4267/MUM/2015 10 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2017. # $% &' 29-03-2017 ( ) SD/- SD/- (D T GARASIA) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 29-03-2017 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI A BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI