Mohammed Naseer, Hyderabad V. ITO, Ward-8(1), Hyderabad

ITA 718/HYD/2014

• Counselvise Citation: 71822514 RSA 2014
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-01-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA DR S NO
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset; Search and seizure; Cost of acquisition; Fair market value; Procedural lapse
• Section: 54F; 142(1); 131; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER S.NO I.T.A. NO. ASST. YEAR APPELLANT RESPONDENT 1. 666/HYD/14 2004-05 SRI MOHAMMED FAROOQ, HYDERABAD [PAN: BQRPM7083B] INCOME TAX OFFICER, WARD-8(1), HYDERABAD 2. 667/HYD/14 SMT. BILQUEES BEGUM, HYDERABAD [PAN: BHKPB3137R] 3. 668/HYD/14 SRI SHAIK MAHABOOB, HYDERABAD [PAN: DUMPS8418F] 4. 669/HYD/14 SMT. KUBRA BEGUM, HYDERABAD [PAN: BHPPB9721G] FOR ASSESSEE : SHRI S.RAMA RAO, AR FOR REVENUE : SHRI RAJAT MITRA, DR S.NO I.T.A. NO. ASST. YEAR APPELLANT RESPONDENT 1. 718/HYD/14 2004-05 MOHAMMED NASEER, HYDERABAD [PAN: AOYPN7033A] INCOME TAX OFFICER, WARD-8(1), HYDERABAD 2. 719/HYB/14 MOHAMMED QAISER, HYDERABAD [PAN: CCEPK6028G] 3. 720/HYB/14 MOHAMMED SABIR, HYDERABAD [PAN: DVHPS4560L] FOR ASSESSEE : SHRI A.V. RAGHURAM, AR FOR REVENUE : SHRI RAJAT MITRA, DR DATE OF HEARING : 20-01-2015 DATE OF PRONOUNCEMENT : 20-03-2015 ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 2 -: O R D E R PER BENCH : THESE ARE SEVEN APPEALS BY RESPECTIVE ASSESSEES AGA INST SEPARATE BUT COMMON ORDERS OF THE COMMISSIONER OF INCOME TA X(APPEALS), VIJAYAWADA HAVING CONCURRENT JURISDICTION OVER HYDE RABAD VIDE ORDER DATED 31-01-2014. SINCE COMMON ISSUES ARE INVOLVED , THESE ARE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. 2. WE HAVE HEARD THE LD.COUNSELS AND LD.DR AND PERU SED THE PAPER BOOKS PLACED ON RECORD BY THE RESPECTIVE PARTIES. 3. BRIEFLY STATED, ASSESSEES HEREIN ALONG WITH FOUR OTHERS ARE CO- OWNERS OF A PROPERTY BEARING NOS.8-3-483, 486 TO 50 2 ALONG WITH OPEN LAND MEASURING 4702.52 SQ. YDS., (EXCLUDING THE PRO PERTY HAVING BEARING NO.8-3-483 COMPRISING OF 250 SQ. YDS.), AT YELLAREDDIGUDA, HYDERABAD. CONSEQUENT TO THE INFORMATION THAT THES E ASSESSEES HAVE ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. SUN MARK BUILDERS ON 04-11-2003 FOR DEVELOPMENT OF PROPERTY FOR CONSTRUC TION OF RESIDENTIAL FLATS SHARING THE BUILT UP AREA IN THE RATIO OF 39: 61, ASSESSING OFFICER INITIATED PROCEEDINGS U/S.147 OF THE INCOME TAX AC T (ACT) IN ORDER TO CONSIDER THE CAPITAL GAINS ARISING TO THE ASSESSEES . ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEES HAVE RECEIVED REF UNDABLE SECURITY DEPOSIT WHICH WAS NOT REPAID, ALSO RECEIVED FURTHER AMOUNTS FROM THE SAID DEVELOPER AS CONFIRMED BY THEM AND FURTHER ASS ESSEES HAVE GIVEN POSSESSION OF THE PROPERTY FOR DEVELOPMENT, THEREFO RE, CAPITAL GAINS ARISE ON THE DAY OF AGREEMENT I.E., 04-11-2003 RELEVANT T O THE IMPUGNED ASSESSMENT YEAR. ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 3 -: 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS AFTER IS SUANCE OF NOTICES U/S.148 DT.29-03-2011, ASSESSEES WERE ASKED TO FILE RETURNS OF INCOME AGAIN VIDE LETTER DT.05-10-2011 AS THERE WERE NO CO MPLIANCES, SUMMONS U/S.131 OF THE ACT WERE ISSUED AND ASSESSEES HAVE P ROMISED TO FILE RETURNS AFTER OBTAINING THE RELEVANT PAN NUMBERS. THE RETURNS WERE FILED BY FOUR PERSONS SRI MOHAMMED FAROOQ, SMT. BIL QUEES BEGUM, SRI SHAIK MAHABOOB AND SMT. KUBRA BEGUM, WHEREAS RETURN S HAVE NOT BEEN FILED BY THE OTHER THREE ASSESSEES MOHAMMED NASEER, MOHAMMED QAISER AND MOHAMMED SABIR. ASSESSING OFFICER COMPLETED THE ASSESSMENTS U/S.144 OF THE ACT AND BROUGHT TO TAX C APITAL GAINS AT RS.75,90,290/- IN EACH CASE. IN ARRIVING AT THE AB OVE AMOUNT, ASSESSING OFFICER TOOK THE 1/11 TH PORTION OF THE SECURITY DEPOSIT RECEIVED TO AN EXTENT OF RS.11,00,165/- EACH AND ALSO CONSIDERED T HE VALUE OF CONSTRUCTED AREA OF FLATS TO BE RECEIVED IN LIEU OF AREA GIVEN FOR DEVELOPMENT AND ARRIVED AT THE VALUE, BASED ON THE SRO, VALUATION MULTIPLIED BY THE AREA TOTALLY RECEIVED BY THE GROU P (41,226 SQ. FT., X 1700). SALE CONSIDERATION IN EACH HAND WAS ARRIVED AT RS.63,71,290/-. THE COST OF ACQUISITION WAS ARRIVED AT RS.60/- PER SQ. YD, ON THE BASIS OF VALUES OBTAINED FROM SRO, SECUNDERABAD AND SINCE A SSESSEES HAVE NOT INFORMED ANY OTHER DETAILS, TOOK THE INDEXED COST A T RS.1,18,835/-, THEREBY, ARRIVING AT THE CAPITAL GAINS AS MENTIONED ABOVE. 5. BEFORE THE LD.CIT(A), IT WAS CONTENDED THAT ASSE SSEES HAVE ENTERED INTO AGREEMENTS AND CANCELLED IN EARLIER PERIOD ALS O AND THEREFORE TILL THE FINAL HANDING OVER OF THE DEVELOPED AREA, THERE IS NO CAPITAL GAINS ARISING TO THE ASSESSEES. IN ADDITION TO THE YEAR OF TAXAB ILITY OF CAPITAL GAINS, ASSESSEES ALSO BROUGHT TO THE NOTICE OF CIT(A) THE VARIOUS LITIGATIONS, THE PERMISSION GRANTED BY MUNICIPALITY SUBSEQUENTLY IN YEAR 2006 AND ACTUAL HANDING OVER IN 2011. WHILE CONTENDING THAT CAPITAL GAINS DOES NOT ARISE IN THE IMPUGNED ASSESSMENT YEAR, AS AN AL TERNATE CONTENTION, IT WAS ALSO CONTENDED THAT ASSESSING OFFICER HAS TA KEN BOTH THE SECURITY ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 4 -: DEPOSIT AS WELL AS SO CALLED SALE VALUE RATHER THA N COST OF CONSTRUCTION OF THE BUILDING BY THE BUILDER. IT WAS FURTHER SUBMIT TED THAT COST OF ACQUISITION ALSO INCLUDES THE RESIDENTIAL BUILDINGS AVAILABLE ON THE PLOT AND FURTHER COST OF VACATING THE TENANTS, LITIGATI ON EXPENSES CHARGED BY THE BUILDER TO THE OWNERS. ASSESSEE SUBMITTED BEFOR E THE CIT(A), THAT THE COST OF EXPENDITURE AS CHARGED BY THE BUILDER, WHIC H THEY REQUESTED FOR ALLOWING THE SAME WHILE COMPUTING THE CAPITAL GAIN. IN ADDITION TO THE ABOVE, ASSESSEES ALSO CONTENDED THAT THEY ARE ELIGI BLE FOR DEDUCTION U/S.54 / 54F AS THEY HAVE OBTAINED RESIDENTIAL FLAT S IN LIEU OF THE RESIDENTIAL BUILDING PARTED WITH. ASSESSEES FILED DETAILED SUBMISSIONS BEFORE THE LD.CIT(A) INCLUDING RELIANCE ON VARIOUS CASE LAWS, WHICH WAS EXTRACTED BY THE LD.CIT(A) IN THE ORDER. 6. LD.CIT(A) HOWEVER, DID NOT AGREE WITH ASSESSEES CONTENTIONS. ON THE ISSUE OF YEAR OF TAXABILITY, LD.CIT(A) NOTICED THAT ASSESSEE HAS HANDED OVER POSSESSION AND ALSO RECEIVED DEPOSITS A ND FURTHER SURRENDER OF TENANCY LETTERS INDICATE THAT TENANTS HAVE VACATED BEFORE 14 TH MARCH, 2003. RELYING THE ABOVE FACTS AND ALSO REL YING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT [260 ITR 491] AND ANALYSI NG THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT, CONFIRMED THE ACTIO N OF THE ASSESSING OFFICER BY HOLDING THAT ASSESSING OFFICER IS JUSTIF IED IN BRINGING TO TAX THE CAPITAL GAIN DURING THE YEAR ON ENTERING THE DEVELO PMENT AGREEMENT. WITH REFERENCE TO THE COST OF CONSTRUCTION, CIT(A) DID NOT ACCEPT THE EVIDENCE SUBMITTED BY ASSESSEE AND AS ASSESSING OFF ICER REQUESTED THE DETAILS FROM SRO, OFFICE FOR THE FAIR MARKET VALUE, SHE CONFIRMED THE ADOPTION OF COST OF CONSTRUCTION. HOWEVER, THERE I S NO FINDING ON THE ISSUE OF ADOPTION OF SECURITY DEPOSIT AS WELL AS CO ST OF CONSTRUCTION BY THE ASSESSING OFFICER, AS SALE CONSIDERATION. LIKE -WISE, THERE IS ALSO NO ADJUDICATION ON THE ISSUE RAISED BY ASSESSEE WITH R EFERENCE TO COST OF ACQUISITION ALSO. ON THE ISSUE OF CLAIM OF DEDUCTI ON U/S.54/54F, ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 5 -: LD.CIT(A) WAS OF THE OPINION THAT THE CLAIM WAS NOT MADE IN RETURN HENCE, NOT ALLOWABLE. FURTHER CLAIM OF DEDUCTION U/ S.54F CAN NOT BE ALLOWED AS THE CAPITAL GAIN HAS ARISEN ON TRANSFER OF CAPITAL ASSET BEING USED FOR THE RESIDENTIAL PURPOSES BY ASSESSEE, THER EFORE, PROVISIONS OF SECTION 54F ARE NOT APPLICABLE. LD CIT(A) HELD THA T THE FACTS OF THE CASES RELIED UPON ARE DISTINGUISHABLE, WITHOUT SPECIFYING THE DISTINGUISHING FACTORS. IN THE RESULT, ASSESSEES APPEALS WERE DI SMISSED BY THE LD.CIT(A). 7. IN ALL THE APPEALS, THE COMMON ISSUE CONTESTED B Y ASSESSEES IS WITH REFERENCE TO: A. YEAR OF TAXABILITY; B. SALE CONSIDERATION TO BE ADOPTED; C. COST OF ACQUISITION TO BE CONSIDERED; D. CLAIM OF DEDUCTION U/S.54 OR 54F 8. IN ADDITION TO THE ABOVE FOUR COMMON ISSUES, THE THREE ASSESSEES WHO HAVE NOT FILED RETURNS BEFORE THE ASSESSING OFF ICER ALSO RAISED ISSUE OF JURISDICTION IN PASSING THE ORDER U/S.144 EX-PAR TE. THESE ISSUES ARE CONSIDERED AS UNDER. A: YEAR OF TAXABILITY: 9. WITH REFERENCE TO THE YEAR OF TAXABILITY OF CAPI TAL GAINS, THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT ASSESSEES H EREINABOVE ENTERED INTO AN AGREEMENT FOR DEVELOPMENT ON 04-11-2003. I T IS ALSO AGREED UPON BY BOTH THE PARTIES THAT CONSTRUCTION SHALL BE COMPLETED WITHIN 42 MONTHS FROM THE DATE OF AGREEMENT. ASSESSING OFFIC ER WHILE COMPLETING THE ASSESSMENT HAS TAKEN INTO CONSIDERATION THE FAC T OF RECEIPT OF DEPOSIT AND ALSO HANDING OVER THE POSSESSION, WHILE INVOKIN G THE DEFINITION OF TRANSFER U/S.2(47). HE RELIED UPON THE FOLLOWING D ECISIONS: ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 6 -: I. CHATURBHUJ DWARKADAS KAPADIA VS. CIT [260 ITR 491] II. JASBIR SINGH ..IN RE AAR (2007) 294 ITR 196 (AAR); III. DR. T.ATCHUTA RAO VS. ACIT [106 ITD 388 (HYD)] 10. IN VIEW OF THE FACTS AND THE LAW RELIED UPON BY THE ASSESSING OFFICER, HE HELD THAT THE TRANSACTION SATISFIES THE CONDITIONS OF SECTION 53A OF TRANSFER OF PROPERTY ACT AND THEREFORE, TRAN SACTION IS COVERED UNDER 2(47)(V)/(VI). ACCORDINGLY, THE AMOUNT IS TA XABLE IN THE YEAR UNDER CONSIDERATION. THE LD.CIT(A) AS BRIEFLY STATED ABO VE RELIED ON THE ADDITIONAL FACT OF TENANTS BEING VACATED AND COMPLE TION OF THE PROJECT AS PER THE TERMS AND NON-FILING OF RETURNS ADMITTING C APITAL GAINS EVEN AT A LATER POINT OF TIME TO CONFIRM THE ACTION OF AO. 11. BEFORE US, LD.COUNSELS URGED THAT BEFORE ENTERI NG THIS AGREEMENT, ASSESSEES HEREIN HAVE ENTERED INTO MANY JOINT DEVEL OPMENT AGREEMENTS AT VARIOUS POINTS OF TIME WHICH HAVE NOT BEEN FRUCT IFIED. IN SUPPORT THEY FILED VARIOUS COPIES OF THE AGREEMENTS IN THE PAPER BOOK AS UNDER : 1. COPY OF THE JOINT DEVELOPMENT ENTERED INTO BETWEEN THE APPLICANTS & 7 OTHERS AND MOHD. MAHER ALAM KHAN DAT ED 30.8.1994. 2. IRREVOCABLE GENERAL POWER OF ATTORNEY EXECUTED BY T HE APPELLANTS IN FAVOUR OF MOHD. MAHEL ALAM KHAN EXECU TED ON 30.8.1994. 3. DEED OF CANCELLATION OF IRREVOCABLE GPA MENTIONED A T S.NO.2 ABOVE EXECUTED ON 16.10.1997. 4. DEED DATED 23.6.2000 FOR EFFECTING CANCELLATION OF DEVELOPMENT AGREEMENT EXECUTED ON 28.9.1995 IN FAVOUR OF N. RAV I KUMAR. 5. DEVELOPMENT AGREEMENT EXECUTED ON 28.6.2000 BY THE APPELLANTS IN FAVOUR OF SRI DWARAKAMAI ESTATES P. L TD., 6. DEVELOPMENT AGREEMENT ENTERED INTO BETWEEN THE APPE LLANTS AND SMT. P. CHANDRAMATHI EXECUTED ON 24.11.2000. ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 7 -: 12. IT WAS SUBMITTED THAT AFTER CANCELLING THE EARL IER AGREEMENTS, ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. SUN MARK BUILDERS ON 04-11-2003. IT WAS FURTHER SUBMITTED T HAT PROPERTY WAS UNDER UNAUTHORISED OCCUPATION OF HUT DWELLERS AND A SUIT WAS FILED BEFORE THE LAND GRABBING COURT. THE HONBLE COURT STAYED THE IMPLEMENTATION OF THE DEVELOPMENT AGREEMENT. AFTER PROLONGED CONCILIATION PROCEEDINGS, SUBSTANTIAL AMOUNTS WERE PAID FOR GETTING THEM VACATED. ASSESSEES COUNSELS REFERRED TO PAYMENTS LISTED IN ANNEXURE BEFORE THE CIT(A). IT WAS SUBMITTED THAT IMPLEMENT ATION OF THE DEVELOPMENT AGREEMENT STARTED ONLY AFTER 22-11-2006 WHEN MUNICIPAL PERMISSION WAS GRANTED. TILL THEN, THE DEVELOPER C OULD NOT COMMENCE ANY CONSTRUCTION. THE CONSTRUCTION WAS COMPLETED A FTER MARCH, 2010. IN THE INTERREGNUM PERIOD, THE DEVELOPERS ACTIVITY WAS ONLY CLEARING THE LEGAL IMPEDIMENTS. THEREFORE, ASSESSEES ARE UNDER THE IMPRESSION THAT THEY ARE NOT LIABLE TO TAX IN THE IMPUGNED ASSESSME NT YEAR. FURTHER, IT WAS SUBMITTED THAT ASSESSEES WERE SEMI-ILLITERATE A ND HAVING NO OTHER INCOMES, BEING WORKING AS SMALL CAR MECHANICS ETC., AND THEY ARE NOT FULLY CONVERSANT WITH THE LEGAL PROCEEDINGS. IT WA S ALSO FURTHER SUBMITTED THAT THE DEVELOPER HAD SPENT LOT OF AMOUN TS ON BEHALF OF ASSESSEES AND THEREFORE ACCORDING TO THEM, THERE WA S NO CAPITAL GAINS ARISING IN THE TRANSACTION. IT WAS SUBMITTED THAT RELYING ON VARIOUS CASE LAWS, THE MERE PERMISSION FOR DEVELOPMENT DOES NOT ATTRACT THE PROVISIONS OF SECTION 2(47) SO AS TO IMPOSE THE CAP ITAL GAINS TAX IN THE IMPUGNED YEAR. 13. LD. DR, HOWEVER, SUPPORTED THE ORDERS OF THE AU THORITIES. 14. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE VA RIOUS DOCUMENTS. THERE IS NO DISPUTE WITH THE FACT THAT BEFORE ENTER ING IN TO THIS AGREEMENT WITH M/S. SUN MARK BUILDERS, ASSESSEES HA VE ENTERED INTO MANY AGREEMENTS WHICH DID NOT FRUCTIFY. HOWEVER, T HAT DOES NOT MEAN ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 8 -: THAT THIS AGREEMENT ALSO HAD THE SAME FATE. AS SEE N FROM SOME OF THE TERMS OF THE AGREEMENT PLACED ON THE PAPER BOOK, PA RTICULARLY CLAUSE 4, 5, 8 AND 20 AS UNDER THE AGREEMENT HAS SPECIAL TERM S: 4 (A) THE DEVELOPER IS HEREBY PERMITTED BY THE OWNERS TO DEVELOP THE SCHEDULE MENTIONED PROPERTY BY CONSTRUCTING THE REON A RESIDENTIAL COMPLEX CONSISTING OF CELLOR FOR PARKIN G AND GROUND + FOUR UPPER FLOORS. THE DEVELOPER SHALL CONSTRUCT AC CORDING TO THE MCH PERMISSION COVER THE ENTIRE LAND OR SITE COMPRI SED IN THE SCHEDULE MENTIONED PROPERTY. (B) IT IS HEREBY SPECIFICALLY AGREED AND DECLARE TH AT THE DEVELOPER SHALL CONSTRUCT AND COMPLETELY UTILIZING FULLY ENTI TLEMENT AREAS AS SANCTIONED BY THE MUNICIPAL CORPORATION OF HYDERABA D. (C) THAT SINCE THE PORTION OF THE SCHEDULE PROPERTY IS IN OCCUPATION OF TENANTS, THE FIRST PARTY OWNERS SHALL GET THEM EVIC TED IMMEDIATELY AT THEIR COST AND ACCORD PERMISSION TO THE DEVELOPER T O COMMENCE THE DEVELOPMENT WORK AFTER DEMOLISHING THE EXISTING STR UCTURES. 5(A) THE DEVELOPER HEREBY AGREE, COVENANT AND UNDER TAKES TO HANDOVER OR DELIVER 39% OF THE CONSTRUCTED AREA I.E ., SUPER-BUILT AREAS WHICH INCLUDE ALL SHAREABLE AREAS IN COMMON P ASSAGED, BASEMENT, SEWAGE LINES, ELECTRICAL LINES, BALCONIES ETC., IN ALL FLOORS OF THE PROPOSED COMPLEX OR MUTUALLY AGREED BETWEEN THE PARTIES TO THE OWNERS FREE OF COST IN LIEU OF UTILISATION OF T HEIR LAND COMPRISED IN THE SCHEDULE MENTIONED PROPERTY FOR THE ABOVE SAID DEVELOPMENT AND CONSTRUCTION. THE REMAINING 61% OF THE CONSTRUC TED AREA WOULD BE RETAINED BY THE DEVELOPER. THE EARMARKING OF THE PORTIONS SHALL BE MADE AFTER RECEIPT OF THE APPROVED PLANS. (B) THE DEVELOPER SHALL HAVE THE RIGHTS OVER THE SI TE AND TERRACE FLOORS OF THE PROPOSED RESIDENTIAL COMPLEX TO THE E XTENT OF 61%. IN CASE FURTHER FLOOR IS PERMITTED TO BE CONSTRUCTED B Y THE MCH THE SAME SHALL BE APPORTIONED IN THE ABOVE RATIO I.E., 39 : 61 BETWEEN THE OWNERS AND THE DEVELOPER. (C) IF THE OWNERS OR THE DEVELOPER RECEIVED MORE OF CONSTRUCTED AREAS THAT HER/HER/THEY ARE/IS ENTITLED TO IN TERMS OF CLAUSE (A) ABOVE, THEN THE PARTY RECEIVING THE EXTRA CONSTRUCT ED AREAS SHALL PAY TO THE OTHER PART CASH COMPENSATION CALCULATE A T THE COST OF RATE. THE SAID CASH COMPENSATION SHALL BE PAID AT THE TIM E OF DELIVERY OF CONSTRUCTED AREAS. ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 9 -: (D) IT IS ALSO HEREBY SPECIFICALLY AGREED AND DECLA RED THAT THE FLATS CONSTRUCTED AREAS TO BE ALLOTTED TO THE OWNER S SHALL BE COMPLETED IN ALL RESPECTED AND THE POSSESSION OF TH E SAID FLATS OR CONSTRUCTED AREAS SHALL BE HANDED OVER TO THE OWNER S. (E) ANY DEPOSITS AND EXPENSES PAYABLE TO APSEB TRAN SFORMER, SERVICES LINES, SEWERAGE BOARDS, WATER DEPARTMENTS, GENERATOR AND ERECTION CHARGES WILL BE BORNE BY THE OWNERS TO THE EXTENT THEIR SHARE OF THE PROPERTY. (F) IT IS FURTHER AGREED THAT THE OWNERS SHALL PAY ALL THE AMOUNTS FOR ANY EXTRA WORKS SUCH AS LOFTS, SHELVES, RACKS A ND EXTRA-ELECTRICAL POINTS TO THE EXTENT OF THEIR ALLOTTED FLATS AND OT HER BUILT UP AREAS. 8. THAT THE OWNERS HEREBY UNDERTAKE TO DEMOLISH T HE EXISTING BUILDING IN THE SCHEDULE PROPERTY AT THEIR COST AND PLACE THE DEVELOPER IN ACTUAL POSSESSION OR THE SCHEDULE MENT IONED PROPERTY WITHIN A PERIOD OF ONE MONTH FOR THE PURPOSES OF CA RRYING ON THE WORKS OR CONSTRUCTIONS AND FOR THE PURPOSE OF FULFI LLING THE OBLIGATIONS IN TERMS OF THIS AGREEMENT. THE OWNERS HEREBY AGREE NOT TO INTERFERE IN THE CONSTRUCTION OR OTHER WORKS BEI NG CARRIED OUT BY THE DEVELOPER IN OR OVER THE SCHEDULE MENTIONED PRO PERTY PROVIDED THE SAID WORKS OR CONSTRUCTION ARE NOT INCONSISTENT WITH THE TERMS AND CONDITIONS INCORPORATED IN THIS AGREEMENT. 20. IT IS MUTUALLY AGREED UPON AND ALWAYS PROVIDED THAT IN THE EVENT OF THE WORKS AT THE SCHEDULE MENTIONED PROPER TY SUFFERED OR OTHERWISE INTERRUPTED DUE TO IMPOSITION OF STATUTOR Y RESTRICTIONS, NATURAL CALAMITIES, CONTROL OR BAN IMPOSED ON CONST RUCTION MATERIAL I.E., ON SALE, DISTRIBUTION AND PROCUREMENT ETC., P ROHIBITORY ORDERS OF ANY COURT OF LAW OR STATUTORY BODIES, THE TIME INVO LVED IN SUCH PROCESSES OR EVENTUALLY, SHALL BE EXCLUDED FROM THE STIPULATED PERIOD. 15. SUBSEQUENTLY, THE OWNERS HAVE APPOINTED THE DEV ELOPER AS THE GENERAL POWER OF ATTORNEY HOLDER TO DO, EXECUTE AND CARRY OUT ANY OR ALL OF THE FOLLOWING ACTS AS STATED THEREIN. ONE OF TH E CONDITIONS WAS ALSO FOR PAYMENT OF RENT PER MONTH FROM THE DATE OF DISMANTL ING OF HOUSE AND IF PROJECT WAS NOT IN STIPULATED TIME OF 3 YEARS, TH EN A PENALTY OF RS.10,000/- PER MONTH SHALL BE PAID TILL THE COMPLE TION OF CONSTRUCTION. HOWEVER, SIX MONTHS GRACE PERIOD WAS ALLOWED. BY P ERUSING THE ABOVE ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 10 - : TERMS OF THE AGREEMENT AND THE FACT THAT THE RECEIP TS OBTAINED FROM THE TENANTS INDICATE THAT MOST OF THE TENANTS HAVE BEEN SETTLED AND PAID BY THE TIME AGREEMENT WAS ENTERED INTO, WE ARE OF THE OPINION THAT ASSESSEES DID GIVE POSSESSION OF THE PROPERTY TO TH E SAID DEVELOPER AT THE TIME OF ENTERING INTO AGREEMENT AND THE TERMS OF AG REEMENT HAVE BEEN FULFILLED. 16. THE HONBLE A.P. HIGH COURT IN THE CASE OF POTL A NAGESWARA RAO VS. DCIT [365 ITR 249] HELD AS UNDER: EACH AND EVERY INDIVIDUAL CASE STANDS ON ITS OWN F OOTING. BEFORE ADMITTING AN APPEAL THE HIGH COURT MUST EXAMINE THE ISSUE BEFORE IT ON ITS OWN MERITS. THE PENDENCY OF ANOTHER MATTER C ANNOT BE A GROUND TO PROCEED WITH THE MATTER. ON MARCH 7, 2003, THE ASSESSEE ENTERED INTO AN AGRE EMENT WITH A DEVELOPER AND THE PLAN OF THE BUILDING WAS APPROVED ON MARCH 31, 2003. THESE DATES FELL IN THE PREVIOUS YEAR 2002-03 , RELEVANT TO THE A.Y. 2003-04. THUS, THE TRIBUNAL HELD THAT THE LAND BEING A CAPITAL ASSET WAS TRANSFERRED BY THE ASSESSEE TO THE DEVELO PER DURING THE A.Y. 2003-04, FOR CONSTRUCTION AND IT WAS ENOUGH IF THE ASSESSEE HAD RECEIVED THE RIGHT TO RECEIVE CONSIDERATION ON A LATER DATE, SO AS TO ATTRACT THE EXIGIBILITY TO TAX ON CAPITAL GAINS DURING THE YEAR 2003- 04. ON APPEAL: HELD, DISMISSING THE APPEAL THAT THE ELEMENT OF FAC TUAL POSSESSION AND AGREEMENT ARE CONTEMPLATED AS TRANSFER WITHIN M EANING OF THE SECTION 2(47) OF THE INCOME TAX ACT, 1961. WHEN THE TRANSFER IS COMPLETE, AUTOMATICALLY, CONSIDERATION MENTIONED IN AGREEMENT FOR SALE HAD TO BE TAKEN INTO CONSIDERATION FOR PURPOSE OF ASSESSMENT OF INCOME FOR THE ASSESSMENT YEAR WHEN AGREEMENT WAS E NTERED INTO AND POSSESSION WAS GIVEN. IN THE CASE OF THE ASSESS EE, FACTUALLY IT WAS FOUND THAT BOTH THE ASPECTS TOOK PLACE IN THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04. HENCE, THE ASSESSEE WAS LIABLE TO PAY TAX ON THE CAPITAL GAINS FOR THE ASSE SSMENT YEAR 2003- 04. 17. CONSIDERING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT AND THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE A GREEMENT ENTERED INTO BY ASSESSEES ALSO SATISFIES THE PROVISIONS OF SECTI ON 53A OF TRANSFER OF ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 11 - : PROPERTY ACT, AND THEREFORE, THE SAID TRANSACTION A TTRACTS THE PROVISIONS OF SECTION 2(47) IE. DEFINITION OF TRANSFER SO AS T O ATTRACT CAPITAL GAINS DURING THE IMPUGNED YEAR. 18. IN THE CASE OF MR. R. SRINIVASARAO AND OTHERS ITA.NO.1786/HYD/2012 AND OTHERS DATED 28.08.2014, B INJUSARIA PROPERTIES P. LTD., VS. ACIT ITA.NO.157/HYD/2011 DA TED 04.04.2014 AND ALSO IN THE CASE OF K. RADHIKA AND OTHERS VS. DCIT, CENTRAL-II, HYDERABAD IN ITA.NO.208/HYD/2011, RELIED ON BY ASSE SSEES COUNSEL THE AGREEMENTS HAVE NOT BEEN IMPLEMENTED AND IT WAS CON SIDERED THAT THERE WAS NO WILLINGNESS TO PERFORM FOR THE PURPOSE OF SE CTION 53A. IN THOSE CASES, IT WAS HELD UNLESS THE PARTY HAS PERFORMED O R IS WILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT AND IN THE SAME SEQUENCE IN WHICH THESE ARE TO BE PERFORMED, IT CANNOT BE SAID THAT T HE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL COME INTO PLAY ON THE FACTS OF THAT CASE. IT IS FURTHER HELD THAT UNLESS PROVISIO NS OF SECTION 53A OF T.P. ACT ARE SATISFIED ON THE FACTS OF CASE, THE TRANSAC TIONS IN QUESTION CANNOT FALL WITHIN THE SCOPE OF DEEMED TRANSFER UNDER SECT ION 2(47)(V) OF THE I.T. ACT. AS BRIEFLY STATED ABOVE, THE PARTIES HAVE PERF ORMED THE CONTRACT AS PER THE TERMS OF THE CONTRACT. THEREFORE, THE PRINC IPLES LAID DOWN IN THE ABOVE CASE, DOES NOT APPLY TO THE FACTS OF THE PRES ENT CASE. THEREFORE, WE ARE OF THE OPINION THAT CAPITAL GAINS IS CORRECTLY IMPOSED IN THE ORDER UNDER CONSIDERATION. THE ACTION OF THE ASSESSING OF FICER IN LEVYING CAPITAL GAINS IN THE IMPUGNED YEAR IS CONSEQUENTLY UPHELD. B. SALE CONSIDERATION TO BE ADOPTED 19. AS BRIEFLY STATED ABOVE, THE A.O. WHILE CONSIDE RING THE SALE CONSIDERATION HAS TAKEN TWO AMOUNTS FOR CONSIDERATI ON, ONE AMOUNT IS SALE CONSIDERATION RECEIVED UNDER THE GUISE OF REF UNDABLE DEPOSIT OF RS.11,00,165 AND OTHER VALUE OF CONSTRUCTED AREA O F FLATS RECEIVED IN LIEU ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 12 - : OF ASSET GIVEN FOR DEVELOPMENT AT RS.63,71,290 IN EACH CASE. ASSESSEE DID CONTEST THAT BOTH THE AMOUNTS CANNOT BE TAKEN A ND VALUE OF COST OF CONSTRUCTION FOR THE BUILDER HAS TO BE ADOPTED AND NOT THE MARKET PRICE OF SALE VALUE. AS ALREADY STATED ABOVE, LD. CIT(A) DID NOT ADJUDICATE THIS ISSUE AT ALL. 20. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION A.O. CANNOT TAKE BOTH THE AMOUNTS INTO CONSIDERATION AS IT WILL BE A DOUBLE ADDITION. TO THAT EXTENT, A.O. ACTION CANNOT BE UPH ELD. IT IS ALSO ASSESSEES CONTENTION THAT VALUE OF CONSTRUCTED ARE A ADOPTED BY THE A.O. IS ON THE BASIS OF THE SALE PRICE OF CERTAIN APARTM ENTS AND ASSESSEES WERE NOT GIVEN ANY OPPORTUNITY TO PLACE THEIR SUBMI SSIONS. SINCE MOST OF THE ORDERS ARE EXPARTE, THE ASSESSEES CONTENTIONS THAT COST OF CONSTRUCTION OF THE BUILDER SHOULD BE ADOPTED HAS NOT BEEN EXAMINED AT ALL. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE FILE OF A.O. WITH A DIRECTION TO ADOPT VALUE OF CONSTRUC TED AREA OF FLATS IN VIEW LAND PARTED WITH, AFTER GIVING DUE OPPORTUNITY TO T HE ASSESSEE. ASSESSEES CONTENTION SHOULD BE CONSIDERED IN ITS CORRECT PERS PECTIVE AND SHOULD NOT BE BRUSHED ASIDE WITHOUT ANY VALID REASON. WITH THIS DIRECTION, THE ISSUE OF ADOPTING VALUE OF SALE CONSIDERATION IS RE STORED TO THE FILE OF A.O.. ASSESSEES GROUNDS ON THAT ARE ACCORDINGLY ALL OWED FOR STATISTICAL PURPOSES. C. COST OF ACQUISITION : 21. THIS ISSUE ALSO REQUIRE RE-EXAMINATION BY THE A SSESSING OFFICER. ASSESSING OFFICER ADOPTED AMOUNT OF RS.1,18,835 IN EACH CASE AS COST OF ACQUISITION. IT WAS THE CONTENTION OF THE ASSESSEE THAT THERE WERE BUILDINGS ON THE SAID LAND WHICH WERE DEMOLISHED AN D THE COST OF WHICH WAS ALSO TO BE ADOPTED. THEREFORE, COST OF LAND ALO NE CANNOT BE ADOPTED. COST OF BUILDINGS AT THE TIME OF ENTERING INTO AGREEMENT SHOULD ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 13 - : BE CONSIDERED. IN ADDITION, ASSESSEE ALSO CLAIMS TO HAVE PAID LOT OF AMOUNTS TO THE TENANTS, UNAUTHORIZED HUTMENT DWELLE RS AS PART OF CLEARING THE TITLE ALONG WITH LITIGATION EXPENSES. THIS EXPENDITURE ALSO WILL FORM PART OF COST OF ACQUISITION. SUBJECT TO V ERIFICATION AND FURNISHING NECESSARY EVIDENCES, THE A.O. IS DIRECTE D TO EXAMINE, ASSESSEES CONTENTIONS AND ALLOW THE INDEXED COST OF ACQUISITION ON THE BASIS OF FACTS AND LAW. THIS ISSUE ALSO ACCORDINGLY RESTORED TO THE FILE OF A.O. FOR FRESH CONSIDERATION. D. CLAIM OF DEDUCTION UNDER SECTION 54 AND 54F 22. SINCE ASSESSEES HAVE ENTERED INTO A DEVELOPMENT AGREEMENT OF CONSTRUCTING RESIDENTIAL PROPERTIES IN LIEU OF PART ING WITH THE RESIDENTIAL BUILDING, THEY ARE ELIGIBLE FOR DEDUCTION UNDER SEC TION 54/54F AS THE CASE MAY BE. THE A.O. HAD NO OCCASION TO EXAMINE TH IS ASPECT AS THE ASSESSMENT WAS COMPLETED EXPARTE. BEFORE THE LD. CI T(A), ASSESSEE MADE THIS CLAIM WHICH LD. CIT(A) REJECTED ON THE REASON THAT PROVISIONS OF SECTION 54F ARE NOT APPLICABLE. LD. CIT(A) IGNORED THE FACT THAT ALTERNATE CONTENTION UNDER SECTION 54 IS ELIGIBLE TO THE ASSE SSEE. SINCE WE ARE SETTING ASIDE THE ENTIRE COMPUTATION OF CAPITAL GAI NS TO THE FILE OF ASSESSING OFFICER, HE IS DIRECTED TO EXAMINE THE A SPECT OF CLAIM OF DEDUCTION UNDER SECTION 54/54F, KEEPING IN VIEW THE JUDICIAL PRONOUNCEMENTS ON THE ISSUE BY THE ITAT/HIGH COURT. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY FOR MAKING NECESSARY CLAIM S. ASSESSEES WHO HAVE NOT FILED RETURNS I.E., MOHD. NASEER, MOHD. QA ISER, MOHD. SABIR, HAVE FILED COMPUTATION OF CAPITAL GAINS AS PART OF PAPER BOOK, WHICH INDICATE THAT THERE IS NO CAPITAL GAINS OR MARGINAL CAPITAL GAIN WHICH MAY BECOME LESS THAN TAXABLE INCOME. HOWEVER, THIS ASPECT CAN BE EXAMINED BY THE A.O. IN THE PROCEEDINGS CONSEQUENT TO THIS ORDER. ALL THE EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD BE C ONSIDERED AND DETAILED DISCUSSION MAY BE MADE IF THEY ARE NOT ACC EPTED BY THE A.O. SO ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 14 - : THAT THE APPELLATE AUTHORITIES CAN EXAMINE THE CORR ECTNESS OF THE CONTENTIONS. 23. WITH THESE OBSERVATIONS/DIRECTIONS ENTIRE COM PUTATION OF CAPITAL GAIN IN ALL THE SEVEN CASES IS RESTORED TO THE FILE OF A.O. TO DO ACCORDING TO LAW AND FACTS. ASSESSING OFFICER IS FR EE TO MAKE NECESSARY ENQUIRIES IF REQUIRED. NEEDLESS TO STATE AGAIN THAT ASSESSEES SHOULD BE GIVEN DUE OPPORTUNITY. 24. IN ALL THE APPEALS, GROUNDS TO THAT EXTENT ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 25. IN THE CASE OF MOHD. NASEER, MOHD. QAISER, MOH D. SABIR THESE THREE ASSESSEES HAVE NOT FILED RETURNS OF INC OME. ADDITIONAL CONTENTION IN THESE APPEALS WAS THAT THE A.O. HAS N OT GIVEN ANY NOTICE UNDER SECTION 142(1) BEFORE COMPLETING THE ASSESSME NTS TO THE BEST OF HIS JUDGMENT WITH THE PROPOSED ADDITIONS. THE LD. C OUNSEL MADE ELABORATE ARGUMENTS ON THE ISSUE AND RELIED ON VARI OUS CASE LAW INCLUDING HONBLE SUPREME COURT JUDGMENT IN THE CA SE OF BLUE MOON HOTELS 321 ITR 364. WE ARE AFRAID THAT WE CANNOT AC CEPT ASSESSEES CONTENTIONS ON THE ISSUE. FIRST OF ALL, IN SPITE OF RECEIVING NOTICES FROM THE A.O. THESE THREE ASSESSEES HAVE NOT FILED ANY R ETURNS OF INCOME. THEREFORE, FAILURE OF FILING RETURN OF INCOME ITSEL F WILL CALL FOR BEST JUDGMENT ASSESSMENT. MOREOVER, A.O. HAS ISSUED NOTI CE ON 30.03.2011 FOR WHICH ASSESSEES WERE FILED THEIR LETTER DATED 0 3.05.2011. SINCE NO RETURNS OF INCOME WERE FILED BY THESE ASSESSEES SU MMONS UNDER SECTION 131 DATED 15.11.2011 WERE ISSUED AND SERVED ON THE ASSESSEES. ASSESSEES DID APPEAR ON 22.11.2011 AND WHILE RECORD ING THE STATEMENT THEY WERE ASKED WHY CAPITAL GAIN SHOULD NOT BE ASSE SSED. ASSESSEE HAVE ADMITTED THAT THEY WILL OBTAIN THE PAN AND FILE RET URNS OF INCOME. HOWEVER, THEY HAVE NOT FILED RETURNS OF INCOME AS P ROMISED. SINCE THE ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 15 - : A.O. ISSUED NOTICE UNDER SECTION 148 CALLING FOR RE TURN AND ISSUED A SHOW CAUSE NOTICE ON 30.03.2011 AND FURTHER ALSO SU MMONS UNDER SECTION 131 BUT, THERE IS NO COMPLIANCE BY THE ASSE SSEES IN FILING THE RETURNS OF INCOME. WE ARE OF THE OPINION THAT A.O. IS WELL WITHIN HIS RIGHTS TO COMPLETE ASSESSMENT EXPARTE. ASSESSEE WAS INFORMED THAT CAPITAL GAIN WILL BE LEVIED AND ASKED TO EXPLAIN UN DER THE PROVISIONS OF SEC.131 ITSELF. EVENTHOUGH A SEPARATESHOW CAUSE WAS NOT ISSUED GIVING FINAL OPPORTUNITY THIS MAY AT BEST BE A PROCEDURAL LAPSE. SINCE WE ARE SETTING ASIDE THE ASSESSMENTS TO THE A.O. FOR REDOI NG IT, ON THE ISSUE OF COMPUTATION OF CAPITAL GAINS ON MERITS, WE ARE OF T HE OPINION THAT THERE IS NO MERIT IN THESE CONTENTIONS, AS ASSESSEE THEMS ELVES HAVE NOT FILED RETURNS OF INCOME IN SPITE OF SO MANY NOTICES ISSUE D TO THE ASSESSEES. ACCORDINGLY, THIS ISSUE IS REJECTED. 26. IN THE LIGHT OF THE ABOVE, ORDERS OF THE A.O. IN THE SEVEN CASES ARE SET ASIDE ALONG WITH THE ORDERS OF THE LD . CIT(A) AND FRESH ASSESSMENTS HAVE TO BE DONE AS PER THE OBSERVATIONS /DISCUSSIONS GIVEN ABOVE, CONSIDERING THE FACTS OF EACH CASE AND LAW O N THE SUBJECT. 27. IN THE RESULT, APPEALS OF THE ASSESSEES ARE CO NSIDERED PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 20 TH MARCH, 2015. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUN TANT MEMBER HYDERABAD, DATED 20 TH MARCH, 2015. TNMM & VBP ITA NOS. 666, 667, 668 & 669 /HYD/2014 718, 719 & 720/HYD/2014 :- 16 - : COPY TO : 1. MR. MOHAMMED SABIR C/O. R. KANKARIA & UTTAM SIN GHI, CHARTERED ACCOUNTANTS, 5-3-190/CIT(A)- 4, RAJ BHAVAN ROAD, ABOVE ANDHRA BANK, HYDERABAD 500 082. 2. MR. MOHAMMED NASEER 3. MR. MOHAMMED QAISER 4. SMT. BILQUEES BEGUM C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, H.NO.3-6-643, ST. NO.9, HIMAYATNAGAR, HYDERABAD 500 029. 5. MR. MOHAMMED FAROOQ 6. MR. SHAIK MAHABOOB 7. SMT. KUBRA BEGUM 8. THE INCOME TAX OFFICER, WARD 8(1), HYDERABAD. 9. CIT(A), VIJAYAWADA 10. CIT-II, HYDERABAD 11. D.R. ITAT B BENCH, HYDERABAD 12. GUARD FILE