D.Venkata Surya Narayana Raju, Visakhapatnam V. THE ITO, WARD - 4(1), Visakhapatnam

ITA 69/VIZ/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8943 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 04-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDHAM
• Keywords: Cost of acquisition
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NOS. 68 & 69/VIZ/2014 (ASST. YEAR : 2006-07 & 2008-09) D. VENKATA SURYANARAYANA RAJU, FLAT NO.1, 2 ND FLOOR, RAYUDU ENCLAVE, ABID NAGAR, AKKAYYAPALEM, VISAKHAPATNAM. VS. ITO, WARD-4(1), VISAKHAPATNAM. PAN NO. AEPPN 4879 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADVOCATE. DEPARTMENT BY : SHRI T. SATYANANDHAM SR.DR DATE OF HEARING : 12/04/2017. DATE OF PRONOUNCEMENT : 28/04/2017. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM, EACH DATED 05/12/2013 FOR THE ASSESSMENT YEARS 2006-07 TO 2008-09. ITA NO. 68/VIZ/2014 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS HAVING INCOME FROM HOUSE PROPERTY AND PETTY CONTRACT, FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 98,247/- ON 27/05/2006. THE RETURN FIELD BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT'). THEREAFTER, CASE OF THE 2 ITA NOS. 68 & 69/VIZ/2014 (D. VENKATA SURYANARAYANA RAJU) ASSESSEE WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT AND AFTER FOLLOWING DUE PROCEDURE, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SEC. 147 OF THE ACT BY BRINGING SHORT TERM CAPITAL GAINS OF RS. 50,21,060/- AND TOTAL INCOME WAS DETERMINED AT RS.51,20,310/-. IN THE ASSESSMENT ORDER, ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. SAI GANESH BUILDERS VIDE UNREGISTERED DOCUMENT DATED 24/08/2005, BY WHICH ASSESSEE AND BUILDER HAVE TO SHARE BUILT-UP AREA IN 35 : 65 RATIO AND ASSESSEE WAS ENTITLED TO 13 FLATS (14156 SQ.FT. OF BUILT-UP AREA) INCLUDING COMMON AREA. THUS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD GIVEN HIS SITE FOR DEVELOPMENT, WAS PURCHASED FOR A CONSIDERATION OF RS. 6,60,000/- VIDE DOCUMENT DATED 12/07/2004. THE ASSESSING OFFICER FURTHER OBSERVED THAT SITE WAS PURCHASED IN JULY 2004 AND WAS GIVEN FOR DEVELOPMENT IN AUGUST 2005, HENCE, CAPITAL GAIN ARISING FROM TRANSFER OF SITE FOR DEVELOPMENT WAS HELD TO BE SHORT TERM CAPITAL GAIN. THE ASSESSING OFFICER FURTHER NOTED THAT THE SITE TRANSFERRED TO THE BUILDER WAS 707-20 SQ.YDS AND IN LIEU OF WHICH, 14156 SQ.FT. OF BUILT-UP AREA WAS OBTAINED. THE COST OF THE SITE WAS WORKED OUT AT RS. 4,29,000/- AND COST OF BUILT-UP AREA WAS ADOPTED AT RS. 385/- PER SQ.FT., BASED ON DETAILS OBTAINED FROM SRO, GAJUWAKA. WITH THESE INFORMATION, ASSESSEE WAS CALLED TO EXPLAIN AS TO WHY CAPITAL GAIN SHOULD NOT BE DETERMINED AT RS. 51,20,310/-. BEFORE THE ASSESSING OFFICER, ASSESSEE HAS REPLIED THAT HE HAD NOT RECEIVED ANY AMOUNT FROM BUILDER AND NOT ADMITTED ANY CAPITAL GAINS AND THE 3 ITA NOS. 68 & 69/VIZ/2014 (D. VENKATA SURYANARAYANA RAJU) CONSIDERATION PAID FOR THE SITE WAS RS. 38.50 LAKHS INCLUDING DEVELOPMENT AND COMMISSION CHARGES AND LEVELLING CHARGES OF RS.5,50,200/- AND REQUESTED THE ASSESSING OFFICER TO ALLOW THE SAME. HOWEVER, THE ASSESSING OFFICER NOTICED THAT COST OF ACQUISITION OF SITE AT RS. 6,60,000/- ONLY AND DETERMINED SHORT TERM CAPITAL GAIN AT RS.50,21,060/-. 3 . ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE MAIN ARGUMENT BEFORE THE LD. CIT(A) WAS THAT THERE WAS NO TRANSFER OF PROPERTY FOR THE ASSESSMENT YEAR 2006-07 UNDER THE DEVELOPMENT AGREEMENT AND NO TRANSFER OF PROPERTY CAN TAKE PLACE ON THE BASIS OF UNREGISTERED DEVELOPMENT AGREEMENT DATED 24/08/2005. THE LD. CIT(A) HAS CONSIDERED THE ARGUMENTS RAISED BY THE ASSESSEE AND PASSED A DETAILED ORDER AND HELD THAT EVEN THOUGH, THE DEVELOPMENT AGREEMENT IS NOT REGISTERED, BOTH THE PARTIES HAVE ACTED UPON THE VERY SAME DEVELOPMENT AGREEMENT AND THE CAPITAL GAIN HAS TO BE TAXED IN THIS SUBJECT YEAR AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS CALCULATED THE SHORT TERM CAPITAL GAINS BASED ON THE UNREGISTERED DOCUMENT DATED 24/08/2005 AND ACTUALLY THERE WAS NO TRANSFER TOOK PLACE ON THE BASIS OF SUCH UNREGISTERED DOCUMENT AND 4 ITA NOS. 68 & 69/VIZ/2014 (D. VENKATA SURYANARAYANA RAJU) SUBMITTED THAT IF AT ALL CAPITAL GAIN HAS TO BE TAXED FOR THE ASSESSMENT YEAR 2007-08 AND NOT FOR THE ASSESSMENT YEAR 2006-07. 6 . ON THE OTHER HAND, THE DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 8 . THE ASSESSEE HAS PURCHASED A SITE VIDE DOCUMENT DATED 12/07/2004. SUBSEQUENTLY, HE HAD ENTERED INTO DEVELOPMENT AGREEMENT WITH M/S. SAI GANESH BUILDERS ON 24/08/2005. IT IS UNDISPUTED FACT THAT THE DEVELOPMENT AGREEMENT ENTERED BY THE ASSESSEE WAS UNREGISTERED ONE. THE CONTENTION OF THE ASSESSEE IS THAT DEVELOPMENT AGREEMENT WAS UNREGISTERED, THEREFORE, THERE IS NO TRANSFER TAKES PLACE. WE FIND THAT ASSESSEE AS WELL AS BUILDER UNDISPUTEDLY ACTED UPON THE VERY SAME AGREEMENT DATED 24/08/2005. EITHER ASSESSEE OR BUILDER AT ANY POINT OF TIME HAS NOT DISPUTED THE DEVELOPMENT AGREEMENT. WE ALSO FIND THAT AS PER THE AGREEMENT DATED 24/08/2005, BUILDER CONSTRUCTED THE FLATS AND ASSESSEE ALSO COOPERATED WITH THE BUILDER AND ALL THE TRANSACTIONS ARE COMPLETED BY THE BUILDER WITHOUT ANY DISPUTE WITH THE ASSESSEE. SIMPLY BECAUSE, THE AGREEMENT WAS NOT TRANSFERRED, IT CANNOT BE SAID THAT THE TRANSFER HAS NOT TAKEN PLACE, UNLESS EITHER OF THE PARTIES DISPUTED UNREGISTERED AGREEMENT. THE LD. CIT(A) HAS CONSIDERED THE ARGUMENTS RAISED BY THE ASSESSEE AND HELD THAT SHORT TERM CAPITAL GAIN HAS TO BE TAXED IN THE ASSESSMENT 5 ITA NOS. 68 & 69/VIZ/2014 (D. VENKATA SURYANARAYANA RAJU) YEAR 2006-07. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER:- 5.5 I HAVE CONSIDERED THE SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH THE BUILDER M/S. SAI GANESH BUILDERS ON 24/08/2005 IN RESPECT OF THE SUBJECT SITE PURCHASED BY HIM IN 2004. IT IS NOT IN DISPUTE THAT THE DEVELOPMENT AGREEMENT WAS UNREGISTERED ONE. THE CONTENTION OF THE ASSESSEE IS THAT TRANSFER OF RIGHTS IN RESPECT OF AN IMMOVABLE PROPERTY CANNOT TAKE PLACE UNDER AN UNREGISTERED DOCUMENT. IT WAS ARGUED THAT THE PURPORTED TRANSACTION UNDER THE UNREGISTERED DEVELOPMENT AGREEMENT WOULD NOT CONSTITUTE TRANSFER AND CONSEQUENTLY THERE WOULD NOT BE ANY CAPITAL GAINS. I HAVE PERUSED THE COPY OF THE DEVELOPMENT AGREEMENT. PARA (6) OF THE TERMS OF THE AGREEMENT SPECIFY THAT THE OWNER HAS DELIVERED SCHEDULE MENTIONED PROPERTY TO THE 1 ST PARTY BUILDER FOR CONSTRUCTION OF APARTMENT. THE DEVELOPER HAS TO GET DETAILED PLAN, ESTIMATES AND DESIGNS AT HIS OWN COST AND HAS TO SECURE APPROVAL OF BUILDING PLAN FROM THE MUNICIPAL CORPORATION. THE EXPENSES RELATING TO CONSTRUCTION ARE BORNE BY THE DEVELOPER, AND HAS TO DELIVER THE MENTIONED AREA TO THE OWNER WITH 18 MONTHS OF THE AGREEMENT THUS THE DEVELOPMENT AGREEMENT DEARLY STIPULATE OF THE DELIVERY OF THE PROPERTY TO THE DEVELOPER FOR CONSTRUCTION OF APARTMENT AND ON WHICH THE DEVELOPER HAS TO CONSTRUCT AND DELIVER THE APARTMENT TO THE ASSESSEE WITHIN 18 MONTHS, AS THERE IS DELIVERY OF POSSESSION OF THE PROPERTY TO THE DEVELOPER IN PURSUANCE OF THE DEVELOPMENT AGREEMENT THE CONDITIONS OF 'TRANSFER' DEFINED IN SECTION 2(47) IS FULFILLED, EVEN THOUGH THE DOCUMENT WAS NOT REGISTERED. AS SUCH 'TRANSFER' HAD TAKEN PLACE DURING THE SUBJECT YEAR, AND THE INCIDENCE OF CAPITAL GAINS IS ATTRACTED FOR THIS YEAR. I FIND THAT THE AO HAS DISCUSSED THE REASONS FOR THE ISSUE OF NOTICE U/S.148 IN THE IMPUGNED ASSESSMENT ORDER, IN WHICH IT IS CATEGORICALLY MENTIONED THAT 'TRANSFER' HAD TAKEN, PLACE UNDER DEVELOPMENT AGREEMENT AND THE RESULTING CAPITAL GAIN ARISING FROM THE TRANSFER OF 707-2 SQ-YARDS OF SITE GIVEN FOR DEVELOPMENT DURING THE YEAR IS ASSESSABLE FOR THIS YEAR. HENCE, I AM OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ACTION OF THE AO IN TAKING ACTION U/S.147 OF THE IT.ACT, AND THE IMPUGNED NOTICE ISSUED BY THE AO U/S.148 IS HELD TO BE VALID. 5.6 THE ASSESSEE HAS SUBMITTED THAT ALL THE SALE DEEDS IN RESPECT OF COMPLETED APARTMENTS WERE EXECUTED BY THE ASSESSEE IN HIS CAPACITY AS OWNER, AND ON THAT BASIS IT WAS ARGUED THAT THERE WAS NO 'TRANSFER' UNDER THE DEVELOPMENT AGREEMENT AND THAT THE REQUISITE OF 'TRANSFER FOR LEVY OF CAPITAL GAINS HAD TAKEN PLACE ONLY IN THE YEAR OF EXECUTION OF SALE DEEDS FOR APARTMENTS. IT WAS ALSO ARGUED THAT NO POWER OF ATTORNEY WAS EXECUTED IN FAVOUR OF BUILDER. I HAVE CONSIDERED THE SUBMISSIONS AND ALSO PERUSED THE SALE DEEDS. IT IS NOTED THAT THE SALE DEEDS TO THE PURCHASERS OF THE APARTMENTS WERE EXECUTED BY THE ASSESSEE AND THE BUILDER, IN THEIR CAPACITY AS VENDORS. IF THE BUILDER HAD NOT ACQUIRED ANY INTEREST IN THE SUBJECT IMMOVABLE PROPERTY, THEN HE WOULD NOT BE REFERRED AS VENDOR IN THE SALE DEEDS. IF THE BUILDER WAS MERELY A LICENCE HE WOULD NOT DERIVE ANY INTEREST IN THE SUBJECT PROPERTY AND WOULD NOT BE REFERRED AS VENDOR IN THE SALE DEEDS. IT IS 6 ITA NOS. 68 & 69/VIZ/2014 (D. VENKATA SURYANARAYANA RAJU) IMMATERIAL THAT POWER OF ATTORNEY WAS NOT EXECUTED. THUS, THE RECITALS IN THE SALE DEEDS, NARRATING THE DEVELOPER ALSO AS, VENDOR OF THE PROPERTY CLEARLY SHOW THAT THE TRANSFER OF INTEREST HAD TAKEN PLACE UNDER THE DEVELOPMENT AGREEMENT IN FAVOUR OF THE DEVELOPER AND SUCH TRANSFER IS LIABLE FOR CAPITAL GAINS IN THIS SUBJECT YEAR, BEING THE YEAR OF TRANSFER OF SITE FOR DEVELOPMENT. HENCE, I DO NOT FIND ANY INFIRMITY IN THE AO'S ACTION IN DETERMINING -SHORT CAPITAL GAINS FOR THIS YEAR FOR THE TRANSFER EFFECTED UNDER THE DEVELOPMENT AGREEMENT ACCORDINGLY THESE TWO GROUNDS ARE DISMISSED. 9. WE FIND THAT ASSESSEE IS NOT ABLE TO POINT OUT ANY MISTAKE COMMITTED BY THE LD. CIT(A), EXCEPT STATING THAT THE AGREEMENT IS UNREGISTERED. IN VIEW OF OUR ABOVE DISCUSSION AND BY CONSIDERING THE ORDER PASSED BY THE LD. CIT(A), WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 10 . INSOFAR AS LEVY OF INTEREST UNDER SECTION 234-B & 234-C ARE CONCERNED, THESE ARE CONSEQUENTIAL IN NATURE, HENCE, SAME IS DISMISSED. ITA NO.69/VIZ/2014 11 . THE FACTS INVOLVED IN THIS CASE ARE SIMILAR TO THAT OF ITA NO. 68/VIZ/2014, HENCE, OUR DECISION IN PRECEDING PARAGRAPH OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL ALSO. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF APRIL, 2017. SD/- SD/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH APRIL, 2017. 7 ITA NOS. 68 & 69/VIZ/2014 (D. VENKATA SURYANARAYANA RAJU) VR/- COPY TO: 1. THE ASSESSEE - D. VENKATA SURYANARAYANA RAJU, FLAT NO.1, 2 ND FLOOR, RAYUDU ENCLAVE, ABID NAGAR, AKKAYYAPALEM, VISAKHAPATNAM. 2. THE REVENUE - ITO, WARD-4(1), VISAKHAPATNAM. 3. THE CIT-2, VISAKHAPATNAM. 4. THE CIT(A), VISAKHAPATNAM. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER