Income Tax Officer, Ward-7(1), Hyderabad V. Ayesha Megdlene Komanapalli, Hyderabad

ITA 848/Hyd/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7081 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 19-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 22-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SRINIVAS
• Assessee Lawyers: H SRINIVASULU
• Keywords: Search and seizure; Period of limitation; Additional evidence; Capital Gains
• Section: 201; 13; 153C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER IT A NO. 848 /H/20 1 9 ASSESSMENT YEAR: 2 0 1 3 - 1 4 INCOME - TAX OFFICER, WARD 7(1), HYDERABAD. VS. AYESHA MAGDELENE KOMANPALLI, HYDERABAD. PAN A DFPK 0621D (APPELLANT) (RESPONDENT) ITA NO. 849 /H/20 19 ASSESSMENT YEAR: 201 3 - 14 INCOME - TAX OFFICER, WARD 7(1), HYDERABAD. VS. LENA PRASAD RAO PATTA, HYDERABAD. PAN AB FPL 6797 F (APPELLANT) (RESPONDENT) REVENUE BY: SHRI D. SRINIVAS ASSESSEE BY: SHRI H. SRINIVASULU DATE OF HEARING: 19 /0 7 /2021 DATE OF PRONOUNCEMENT: 24 /0 8 /2021 O R D E R PER L.P. SAHU, A.M. : BOTH T H E S E APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST CIT(A) 11, HYDERABAD S SEPARATE ORDER S DATED I TA NO S . 848 & 849 / /HYD /20 1 9 : - 2 - : 31 / 1 2 /20 1 8 FOR AY 20 13 - 1 4 INVOLVING PROCEEDINGS U/S 14 3(3) RWS 153C OF THE INCOME - TAX ACT, 1961; IN SHORT THE ACT . AS IDENTICAL ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THE SAME WERE CLUBBED AND HEARD TOGETHER AND THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. THE DECISION TAKEN IN ITA NO. 848/HYD/2019 MUTATIS - MUTANDIS SHALL APPLY TO ITA NO. 849/HYD/2019. 1.1 THE GROUNDS RAISED I N BOTH THE APPEALS ARE COMMON, THEREFORE, THE GROUNDS RAISED IN AY 848/HYD/2019 ARE AS UNDER: 1. THE LD.CIT(A) ERRED BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT AT THE TIME OF COMPLETION OF ASSESSMENT, THERE WAS ONLY ONE REGISTERED JDA DATED 12 - 07 - 2012 WHICH WAS IRREVOCABLE AND BINDING ON ALL THE PARTIES INCLUDING THEIR HEIRS, EXECUTORS, ADMINISTRATORS, LEGAL REP RESENTATIVES ETC. 3. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THA T THE DEED OF CANCELLATION DATED 30 - 032016 AND FRESH/NEW JDA DATED 29 - 04 - 2017 WERE NOT IN EXISTENCE AT THE TIME OF ASSESSMENT AND THEREFORE LONG TERM CAPITAL GAINS ARISING OUT OF THE JDA DATED 12 - 07 - 2012 WAS RIGHTLY ASSESSED TO TAX IN THE ASSESSMENT ORDER. 4. THE LD.CIT(A) ERRED IN ALLOWING ADDITIONAL EVIDENCE IGNORING THE FACT THAT THE CIRCUMSTANCES MENTIONED IN RULE 46A(1), TO ADMIT ADDITIONAL EVIDENCE ARE NOT EXISTING IN THE INSTANT CASE. 5. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIME OF HEARIN G . I TA NO S . 848 & 849 / /HYD /20 1 9 : - 3 - : 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D HER RETURN OF INCOME ON 26/07/2013 DECLARING INCOME AT RS. 1,52,500/ - . A SEARCH AND SEIZURE ACTION WAS CA RRIED OUT ON 26/02/2014 IN THE CASE OF SRI SAMUEL RAJKUMAR PATTA, INTERNATIONAL OUT REACH GROUP OF CASES, IN WHICH, CERTAIN DOCUMENTS WERE FOUND SPECIFICALLY DOCUMENTS RELATED TO JOINT DEVELOPMENT AGREEMENT IN RESPECT OF THE LAND AT GACHIBOWLI WHEREIN THE ASSESSEE ALSO HAS A SHARE AND AS SUCH IT WAS FOUND TO HAVE BEARING ON THE DETERMINAT ION OF THE TOTAL INCOME OF THE ASSESSEE. 2.1 ACCORDINGLY, THE AO INITIATED THE PROCEEDINGS U/S 153C OF THE ACT AND A NOTICE U/S 153C DATED 25/06/2015 WAS ISSUED AND SERVED UPON THE ASSESSEE ON 26/06/2015. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FI LE D RETURN OF INCOME ON 06/10/2015 DECLARING AN INCOME OF RS. 1,52,500/ - AS DECLARED IN THE ORIGINAL RETURN OF INCOME. 2.2 AS PER THE DOCUMENTS FOUND DURING THE SEARCH, THE AO OBSERVED THAT THE ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT (IN SH ORT JDA) WITH M/S SHANTA SRIRAM CONSTRUCTIONS PVT. LTD., IN CONNECTION WITH THE LAND AT GACHIBOWLI IN JUNE, 2008, WHICH WAS SUBSEQUENTLY CANCELLED ON 25/06/2012. AGAIN A FRESH JDA LLP WAS ENTERED INTO ON 12/07/2012 AND ALSO GOT REGISTERED. AS PER THIS A GREEMENT ASSESSEES SHARE WITH HER SON SRI SAMUEL I TA NO S . 848 & 849 / /HYD /20 1 9 : - 4 - : RAJKUMAR PATTA AND DAUGHTER SMT. AYESHA MAGDALENE IS SHOWN AT 42.5% INSTEAD OF 50% AS PER EARLIER AGREEMENT. SINCE THE ASSESSEE DID NOT OFFER CAPITAL GAINS ON THE ABOVE JDA DATED 12/07/2012, THE AO ISSUED A SHOW CAUSE NOTICE DATED 22/02/2015 REQUESTING HER EXPLANATION AS TO WHY SHE DID NOT OFFER CAPITAL GAINS IN HER HANDS ON ACCOUNT OF THE ABOVE JDA AND ALSO TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE COMPUTED AND TAXED IN HER HANDS AS PER THE PRO VISIONS OF INCOME TAX LAW. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, THE ASSESSEE FILED A LETTER DATED 03/03/2016 STATING THAT THE CAPITAL GAINS IS NOT ATTRACTED IN HER CASE BECAUSE AFTER ENTERING INTO AGREEMENT DEVELOPER HAS NOT TAKEN UP A N Y ACTIVITY, NO PLAN HAD BEEN APPROVED, NO ACTION HAD BEEN INITIATED BY THE BUILDER. REJECTING THE SUBMISSIONS OF THE ASSESSEE, THE AO COMPUTED THE LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AT RS. 17,13,60,000/ - FOR THE IMPUGNED AY 2013 - 14. 3. WHEN THE ASSES SEE PREFERRED AN APPEAL BEFORE THE CIT(A) AGAINST THE ORDER OF AO, THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF CAPITAL GAINS IN THE HANDS OF THE ASSESSEE BY OBSERVING AS UNDER: 8. I HAVE CONSIDERED THE ASSESSMENT ORDER, DOCUMENTS PLACED ON RECORD BY THE ASSESSEE, THE REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE THEREON. IT IS SEEN THAT ORIGINALLY JDA WAS ENTERED INTO IN JUNE, 2008. THE ABOVE JDA WAS CANCELLED AND FRESH JDA WAS SIGNED ON 12.07.2012. THIS AGREEMENT DT.12.07.2012 IS ISSUE IN I TA NO S . 848 & 849 / /HYD /20 1 9 : - 5 - : PRESENT ORDER. THE AO HELD THAT THE SIGNING OF DEVELOPMENT AGREEMENT GAVE RISE TO TAXABLE CAPITAL GAINS AND ACCORDINGLY BROUGHT THE SAME TO TAX. THE AO RELIED ON THE DECISION IN THE CASE OF MR. POTLA NAGESHWAR RAO VS DCIT ( ITTA 245 OF 2014) OF THE JURISDICTIONAL HIGH COURT. THE ASSESSEE CONTENDS THAT THERE WAS NO DEVELOPMENT UNDERTAKEN BY THE DEVELOPER AFTER SIGNING THE AGREEMENT. THE DEVELOPER HAS NOT APPLIED FOR PLAN APPROVAL NOR ANY PLAN GOT APPROV ED. THE DEVELOPER HAS NO INTENTION TO CARRY ON THE DEVELOPMENT AS PER THE AGREEMENT. FURTHER, THE ASSESSEE HAS CANCELLED THE JDA AND CANCELLATION DEED HAS BEEN ENTERED INTO ON 30.03.2016. AFTER THAT THE ASSESSEE ENTERED INTO A FRESH JDA ON 29.04.2017. THE AO'S CONTENTION IS THAT THE CANCELLATION DEED AND SUBSEQUENT AGREEMENT ARE ENTERED INTO AFTER THE ASSESSMENT ORDER WAS PASSED AND IT IS AN AFTER THOUGHT. ON CONSIDERATION OF THE ABOVE, IT IS SEEN THAT THERE IS NO DEVELOPMENT UNDER TAKEN BY THE DEVELOPER AS CONTEMPLATED IN THE ASSESSMENT. THIS FACT HAS NOT BEEN DISPUTED/ CONTRADICTED BY THE AO. FURTHER, IN THE NEW JDA, DT.29.04.2017, NEW PARTNER IS ADMITTED AND ASSOCIATED WITH THE LLP. THE TERMS AND CONDITIONS ALSO DIFFER. THE CANCELLATION DEED AND NEW JDA C AN NOT BE BRUSHED ASIDE AS AFTER THOUGHT AS SUBSTANTIAL AMOUNT OF STAMP DUTY A MOUNT ING TO RS.L,02,20,600 HAS BEEN PAID ON EXECUTION OF NEW JDA. AS NO DEVELOPMENT HAS TAKEN PLACE AS PER THE AGREEMENT TILL 30.03.2016 AND THE JDA ITSELF HAS BEEN CANCELLED, IT IS HELD THAT NO CAPITAL GAINS IS TAXABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, THE ADDITION MADE IS LIABLE TO BE DELETED AND THE SAME IS DELETED. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE ITAT. 5. BEFORE US, THE LD. DR SUBMITTED THAT THE AGREEMENT MADE BY THE ASSESSEE ON 12/07/2012 WAS A REGISTERED JDA I TA NO S . 848 & 849 / /HYD /20 1 9 : - 6 - : AND, THEREFORE, SECTION 2(47) WILL APPLY AND THE AO HAS COMPUTED T HE CAPITAL GAINS ACCORDINGLY IN THE HANDS OF THE ASSESSEE. HE FURTHER SUBMITTED THAT BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT LATER ON CANCELLED THE JDA ENTERED ON 12/07/2012, WHICH WAS NOT SUBMITTED BEFORE THE AO. HE, THEREFORE, CONTENDED THAT THE A SSESSEES INTENTION TO AVOID TAX ON THE CAPITAL GAINS RECEIVED ON THE TRANSFER OF PROPERTY. HE FURTHER SUBMITTED THAT THE ASSESSMENT ORDER WAS PASSED ON 21/03/2016 AND THE ASSESSEE HAS EXECUTED THE CANCELLATION OF JDA ON 30/03/2016, WHICH WAS AN AFTER THOU GHT AND, THEREFORE, THE JDA ENTERED ON 29 TH APRIL, 2017 WAS AFTER COMPLETION OF THE ASSESSMENT. HE, THEREFORE, CONTENDED THAT THE VIEW TAKEN BY THE CIT(A) IS NOT CORRECT AND ALTERNATIVELY, HE SUBMITTED THAT THE AO SHOULD BE GIVEN LIBERTY TO INVOKE CAPITAL GAINS AS PER THE FRESH JDA EXECUTED ON 29 /04/2017. 6. THE LD. AR, ON THE OTHER HAND, FILED A PAPER BOOK CONTAINING 01 TO 304 AND ANOTHER PAPER BOOK CONTAINING WRITTEN SUBMISSIONS. BESIDES RELYING ON THE ORDER OF CIT(A), THE LD. AR SUBMITTED THAT SINCE 20 08 THERE WAS NO ACTIVITY REGARDING CONSTRUCTION AND NO ESTIMATE OBTAINED FOR THE COMPLETION OF THE DEVELOPMENT PROPERTY AND NO CONSTRUCTION ACTIVITY WAS UNDERTAKEN BY THE DEVELOPER. HE FURTHER STATED THAT THE JDA WAS EXECUTE D ON 01/06/2008 WITH THE SAME PR OPERTY AND NO CAPITAL GAIN TAX ASSESSMENT WAS MADE BY THE AO. IN THE IMPUGNED ASSESSMENT YEAR, THE I TA NO S . 848 & 849 / /HYD /20 1 9 : - 7 - : JDA WAS GOT CANCELLED WITHOUT ANY EFFORTS DONE BY THE DEVELOPER. THEREFORE, THE CAPITAL GAINS WILL NOT ARISE. 7. AFTER HEARING BOTH THE PARTIES AND PERUSIN G THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES, WE OBSERVE THAT THE FIRST DEVELOPMENT AGREEMENT ENTERED ON 01/06/2008 WAS CANCELLED ON 25/06/2012. AGAIN JDA ENTERED ON 12/07/2012, WAS ALSO CANCELLED ON 30/03/2016, WHICH IS AFTER COMP LETION OF THE ASSESSMENT ON 21/03/2016. THE ASSESSEE SUBMITTED FURTHER AGREEMENT ENTERED ON 29 TH APRIL, 2017. DURING THE COURSE OF PROCEEDINGS, THE LD. AR OF THE ASSESSEE FILED AN ADDITIONAL EVIDENCE UNDER RULE 29, APPELLATE TRIBUNAL RULES, 1963 . ON PERUSA L OF THIS DOCUMENTS ALONG WITH PHOTOGRAPHS, WE FIND THAT CONSTRUCTION ACTIVITY IS UNDERGOING, BUT, IT IS NOT CLEAR WHEN THE PHOTOGRAPHS WERE TAKEN, WHICH ARE PLACED ON RECORD. WE FIND THAT THE FRESH JDA EXECUTED ON 29/04/2017 WAS REGISTERED AND PAID REGIS TRATION CHARGES OF RS. 1,02,20,600/ - . IT CLEARLY SHOWS THAT EARLIER JDAS WERE NOT MATERIALIZED, ON THE BASIS OF WHICH ASSESSMENTS WERE COMPLETED BY THE AO. THEREFORE, CAPITAL GAINS IN AY 2013 - 14 IN THE HANDS OF THE ASSESSEE DO NOT ARISE, CONSIDERING THE AD DITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE BEFORE US AS PER RULE 29, IT IS CLEAR THAT CONSTRUCTION ACTIVITY IS GOING ON, WHICH SHOWS THAT THE JDA MADE ON 29 TH APRIL, 2017 IS MATERIALIZED. THEREFORE, IN OUR CONSIDERED OPINION, CAPITAL GAINS COMPUTED BY THE AO FOR THE IMPUGNED AY 2013 - 14 IS I TA NO S . 848 & 849 / /HYD /20 1 9 : - 8 - : NOT CORRECT AND UPHOLDING THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF CAPITAL GAINS IN THE HANDS OF THE ASSESSEE, WE DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. T HE JDA EXECUTED ON 29 TH APRIL, 2017 WHICH WAS MATERIALIZED AND AS WE HAVE DECIDED THE ISSUE AGAINST THE REVENUE CITED SUPRA , THEREFORE , IN THE INTEREST OF JUSTICE WE GIVE THE FOLLOWING DIRECTION : T HE AO IS DIRECTED TO TAKE NECESSARY ACTION FOR DETERMINING THE CAPITAL GAINS ON IMPUGNED PROPERTY IN THE RESPECTIVE YEAR/YEARS . THIS PARTICULAR DIRECTION IS BEING ISSUED IN TERMS OF SEC. 150 OF THE ACT AND, THEREFORE, T HE LIMITATION STIPULATED U/S 149 OF THE ACT IS NOT APPLICABLE FOR REOPENING THE ASSESSMENT U/S. 147 OF THE ACT. IN THIS REGARD, THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: 1) B.A.R. ABDUL REHMAN SAHEB VS. ITO (1975) 100 ITR 541 (AP) 2) SUKH DAYAL PAHWA VS. CIT (1983) 140 ITR 206 (MP) 3) MAUNA REALTORS (P.) LTD VS. UNION OF INDIA (2009) 3151TR 393 (POTNO) IN ALL THE ABOVE MENTIONED DECISIONS, INCLUDING THE JUDGMENT OF H ON'BLE JURISDICTIONAL HIGH COURT, IT HAS I TA NO S . 848 & 849 / /HYD /20 1 9 : - 9 - : BEEN JUDICIOUSLY HELD THAT THE AO CAN RE - OPEN THE ASSESSMENT BEYOND THE PERIOD OF LIMITATION U/S 149 OF THE ACT, ON THE BASIS OF FINDINGS AND DIRECTION ISSUED BY THE FIRST APPELLATE AUTHORITY I.E. CIT (A), APART FRO M THE HON'BLE ITAT, HON'BLE HIGH COURT AND HON'BLE SUPREME COURT, AS THE CASE MAY BE. 8. AS FACTS AND GRO UNDS RAISED IN ITA NO. 849/HYD/2019 ARE MATERIALLY IDENTICAL TO THAT OF ITA NO. 848/HYD/2019, FOLLOWING THE CONCLUSIONS DRAWN THEREIN, WE DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE UNDER CONSIDERATION ARE DISMISS ED IN ABOVE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST , 2021 . SD/ - SD/ - ( S.S. GODARA ) (L . P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 24 TH AUGUST , 20 2 1 . K V I TA NO S . 848 & 849 / /HYD /20 1 9 : - 10 - : C OPY TO : 1 ITO, WARD 7(1), ROOM NO. 806, 8 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYDERABAD . 2 SMT. AYESHA MAGDELENE KOMANPALLI LENA PRASAD RAO PATTA, D.NO. 12 - 2 - 823/A/11, SANTOSH NAGAR COLONY, MEHADIPATNAM, HYDERABAD 500 028 3 C I T(A) 11 , HYDERABAD. 4 PR. CIT (CENTRAL) , HYDERABAD. 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.