AI Insights
The case involves appeals by the Revenue against the assessees concerning the assessment of Long Term Capital Gains (LTCG) arising from a Development Agreement for a property co-owned by the assessees. A search conducted on the assessees led to the issuance of notices under section 153A of the Income Tax Act, 1961, prompting the filing of returns which declared income similar to that declared in earlier returns. The Assessing Officer (AO) made substantial additions to the income, treating the execution of the Development Agreement as a transfer of property. The CIT(A) reversed this decision, leading to the Revenue's appeal to the Tribunal. The Tribunal found that the property transfer, as per the Development Agreement, did not occur in the assessment year in question, thus upholding the CIT(A)'s decision.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 114318 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 10 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
26-03-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
D
Next Hearing Date
05-01-2023
Assessment Year
2015-2016
Appeal Filed On
28-04-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The DCIT, Central Circle-2, Vadodara Vs Shri Mukesh Jamnadas Shah, 36, Sampatrao Colony, B/h- Royal Hotel, R.C. Road, Alkapuri, Baroda PAN: AAZPS0709H & The DCIT, Central Circle-2, Vadodara Vs Shri Amit Mukesh Shah, 36, Sampatrao Colony, B/h- Royal Hotel, R.C. Road, Alkapuri, Baroda PAN: AMZPS6602D & The DCIT, Central Circle-2, Vadodara (Appellant) Vs Shri Surbhit Mukesh Shah, 36, Sampatrao Colony, B/h- Royal Hotel, R.C. Road, Alkapuri, Baroda PAN: APNPS9232C (Respondent Assessee Represented : Shri K.P. Singh, A.R. Revenue Represented : Shri Aarsi Prasad, CIT-DR Date of hearing : 06-01-2023 Date of pronouncement : 27-03-2023 IT(SS)A Nos: 201 to 203/Ahd/2019 Assessment Year: 2015-16 I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 2 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These appeals are filed by the Revenue as against the separate Appellate orders dated 04.02.2019 and rectification orders dated 21.02.2019 passed by the Commissioner of Income Tax(Appeals)-12, Ahmedabad as against the assessment order passed under section 153A r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015-16 in the case of Shri Mukesh J. Shah, Amit M. Shah and Surbhit M. Shah respectively. Since the above three assessees are co-owners of the property and sale of the property and applicability of Capital Gain is the common issue involved in all these three cases, the same are taken for common disposal. 2. We have taken IT(SS)A No. 201/Ahd/2019 in the case of Shri Mukesh J. Shah cases as the lead case. 2.1. The brief facts of the case is that, a search was conducted on 22.09.2015 in the Akshar Group of cases and the assessee was also covered under the ambit of the said search proceedings. Accordingly notice u/s. 153A of the I.T. Act was issued to the assessee on 11.07.2016 requiring the assessee to file the Return of Income. In response, the assessee filed his Return of Income u/s. 153A on 24.08.2016 declaring total income at Rs.18,54,440/- for the AY 2015-16, same as the total income declared in the Return of Income filed u/s 139(1) filed on 11/05/2016. In response to notices I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 3 u/s. 143(2) and u/s. 142 (1), the AR of assessee attended and furnished the details. The Ld. A.O. assessed the total income at Rs.42,26,72,920/- by making additions of Rs.42,05,18,483/- on account of LTCG holding the land to have been transferred under the Development Agreement co-owned by the assessee along with his father and his brother and another addition of Rs.3,00,000/- as unexplained expenditure u/s. 69C. 3. Aggrieved against the assessment order, the assessee filed an appeal before Ld. CIT(A)-12, Ahmedabad. The Ld. CIT(A) deleted the addition on account of LTCG of Rs. 42,05,18,483/- holding the transfer of property has not taken place at the time of executing of the Development Agreement dated 25.09.2014 and therefore the addition is legally not tenable as follows: 6.2. As to the addition of Rs.42,05,18,483/- under the head 'Income from LTCG% it is noted from the assessment order that during the search a development agreement dated 25/09/2014 between Shri Vipul Dharsandiya on behalf of the partnership firm, M/s Akshar PHC Realcon (Developer) and Shri Mukesh Shah, Shri Amit Shah and Shri Surbhit Shah (owners of the land) for a consideration of Rs.127 crore was found and seized. The development agreement was in respect of the land admeasuring 32,987.32 sq. meters bearing City Survey No. 1821/1/2/1 in Survey No.924 & 925 Paiki, Gotri, Vadodara for the construction of the project named Akshar Pavillion. The development agreement seized during the search was signed only by Shri Vipul Dharsandiya and not "by the owners of the land and was neither notarized nor registered. However, during the course of post search investigation the partners of Akshar PHC Realcon submitted a cop}' of the signed Development Agreement (DA) dated 25/09/2014. The comparisons of both the documents are tabulated at page 3 of the assessment order and it is concluded by the AO that the two (2) agreements are for the same property. The AO held that though as per the development agreement the proceeds would continue to come in future, the price of the land has been determined and substantial transfer of the capital assets has been completed and therefore the arrangement/agreement fits in the definition of "transfer" as per section 2(47)(v) of the IT Act r.w.s. 53A of the Transfer of Property Act. The AO also noted that the project had already commenced before the date of search and survey, the plan already had been passed by the municipal authorities and the bookings of the project had already commenced. Accordingly the AO show caused the appellant (and the other co-owners of land and the partners of the firm) as to why the date of execution of the development agreement should not be treated as the date of transfer of land and as to why the LTCG arising out of said transfer should not be worked out for F.Y.2014-15 (relevant to A.Y. 2015-16) based on the total sale I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 4 consideration of Rs.127 crore. The appellant's submissions made during the assessment proceedings are at pages 5 to 11 of the assessment order. The AO relied upon the decision in the case of Chaturbhuj Dwarkadas Kapadia Vs. CIT (129 taxman 497) and held that the sellers i.e. Shri Mukesh Shah, Shri Amit Shah and Shri Surbhit Shah had entered into contract for transfer of land with Shri Vipul Dharsandia as Developer on behalf of the firm, M/s. Akshar PHC Realcon and the contract is in writing, that the consideration of the land has been determined (Rs.127 crore), that part of the consideration (about Rs.20 crore) has been received and remaining payments are to be received as per the schedule mentioned in the agreement, that assessee (along with other co-owners of the land) had entered into contract for transfer of property and has given physical possession of the property to the developer and that after approval of the construction plan, the construction activity has begun and some of the houses and shops have been booked and sold and thus as per the case law relied upon by the AO, the date of execution of developing agreement is to be considered as date of transfer of the property for the purpose of computation of capital gains. In other words, as per the AO, the LTCG has arisen in the A.Y.2015-16 itself and on the total consideration of Rs.127 crore, even though, the proceeds would continue to come in future. The AO has also discussed various aspects of section 2(47) and section 45(2) of the Income Tax Act, "intention" "contract" "transfer", "consideration" and such other relevant terms. The AO has also mentioned about "form vs. substance" in case of an agreement. 4. Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law, the ld, CIT(A) has erred in deleting the addition of Rs.42,05,18,483/- on account of Long Term Capital Gain for A.Y.2015-16, when it is on record that the assessee along with other co-owners had entered into an agreement with Akshar PHC Realcon for a joint venture with respect to development on a piece of land under consideration. Therefore, the transaction involved certainly falls within the meaning of transfer as per section 2(47)(v) of the Income-tax Act, 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) should alternatively have upheld the above addition of Rs.42,05,18,483/- on account of Long Term Capital Gain for A.Y. 2015-16 u/s 45(2) r.w.s. 2(47)(iv) of the I. T. Act, as the land in consideration was a part of stock-in-trade of the assessee once a joint venture was formed for development. 3. It is, therefore, prayed that the order of the Ld. CIT(A)-12, Ahmedabad may be set aside and that of the AO may be restored to the above extent. 4.1. The cases were argued by both parties on 29-12-2022 at length. The Ld. A.R. was requested to provide when the capital gain was offered by the assessee on transfer of land to the firm. The Ld. A.R. sought time to file the details. Both the parties filed their I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 5 submissions before us. The crux of the Revenue argument is as follows: 8. As can be seen from the above clauses referred in preceding para 7 that several restrictions were imposed on the owner to transfer/sell of the Gotri land after the execution of development agreement dated 25.09.2014. Further, there are several clauses, which say that the Developer shall execute Development Agreement with owners upon receipt of approval of Plan and the sale deed of flats (refer Page No. 177 of respondent PB submitted on 05.01.2023) also says that a development agreement was executed and registered as per the order no. 9763/2014 passed by Deputy Collector, Stamp Duty. However, no such development agreement was furnished by the respondent either during the search assessment or appellate proceedings before the Ld. CIT(A), which has direct bearing on the issue in hand. 9. As pointed out above, the Ld. CIT(A) didn't consider all the clauses of the seized development agreements dated 25.06.2014 and 25.09.2014 or even modified development agreement dated 25.09.2014 and completely relying on only on clause of the modified development agreement dated 25.09.2014 submitted by the appellant after the search action before the AO in which word of "vacant possession" has been substituted by "without possession". Hence, the Ld. CIT(A) has erred in deleting the addition on a/c of capital gain treating no transfer of land to the developer in the present assessment year 2015-16 as per the Section 2(47)(v) of the Income Tax Act r.w.s. 53A of the Transfer of Property Act, which deserves to be aside and it is requested that AO's order may be upheld. 5. Per contra, the Ld. Counsel for the assessee submitted before us that the total land belong to the assessee’s were 32,987 Sq.Mtr. out of which land used for construction and sold out up to Assessment Year 2022-23 amounted to 28,609.89 Sq.Mtr. only and still 4,377.10 Sq.Mtr. worth construction is yet to be sold. The Ld. A.R. further submitted the details of Capital Gain offered by the assessee as per his Return of Income filed for the various Assessment Years 2017-18 to 2022-23 by the three co-owners by way of chart as follows: Capital Gain calculated by assessee as per return of income Land SQ. MTR. Rate Total Amt Mukesh Shah Partners Amit Shah Surbhit Shah Land Acquisition cost-AY.2017-18 Land Sold Index cost of acquisition 894.7103 894.7103 750 38500 750 671,032.73 34,446,346.55 1125/100 223,677.58 11,482,115.52 2,516,372.72 223.677.58 11,482,115.52 2,516,372.72 223,677.58 11,482,115.52 2,516,372.72 I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 6 Capital Gain 8,965,742.80 8,965,742.80 8,965,742.80 Land Acquisition cost-AY.2018-19 Land Sold Index cost of acquisition 12344 12344 12000 38500 12000 148,128,000.00 475,244,000.00 272 /100 49,376,000.00 158,414,666.67 134,302,720.00 49,376,000.00 158,414,666.67 134,302,720.00 49,376,000.00 158,414,666.67 134,302,720.00 Capital Gain 24,111,946.67 24,111,946.67 24,111,946.67 Land Acquisition cost -AY.20 19-20 Land Sold Index cost of acquisition 5220 5220 12000 38500 12000 62,640,000.00 200,970,000.00 280 /100 20,880,000.00 66,990,000.00 58,464,000.00 20,880,000.00 66,990,000.00 58,464,000.00 20,880,000.00 66,990,000.00 58,464,000.00 Capital Gain 8,526,000.00 8,526,000.00 8,526,000.00 Land Acquisition cost-AY.2020-21 Land Sold Index cost of acquisition 6796.24 6796.24 12000 38500 12000 81,554,880.00 261,655,240.00 289 /100 27,184,960.00 87,218,413.33 78,564,534.40 27,184,960.00 87,218,413.33 78,564,534.40 27,184,960.00 87,218,413.33 78,564,534.40 Capital Gain 8,653,878.93 8,653,878.93 8,653,878.93 Land Acquisition cost-AY,2021-22 Land Sold Index cost of acquisition 2746.66 2746.66 12000 38500 12000 32,959,920.00 105,746,410.00 301 /100 10,986,640.00 35,248,803.33 33,069,786.40 10,986,640.00 35,248,803.33 33,069,786.40 10,986,640.00 35,248,803.33 33,069,786.40 Capital Gain 2,179,016.93 2,179,016.93 2,179,016.93 Land Acquisition cost-AY.2022-23 Land Sold Index cost of acquisition 608.285 608.285 9400 38500 9400 5,717,879.00 23,418,972.50 317 /100 1,905,959.67 7,806,324.17 6,041,892.14 1,905,959.67 7,806,324.17 6,041,892.14 1,905,959.67 7,806,324.17 6,041,892.14 Capital Gain 1,764,432.02 1,764,432.02 1,764,432.02 Total Capital Gain 54,201,017.35 54,201,017.35 54,201,017.35 Land sold Total land Balance 28609.8953 32987 4377.1047 5.1. Thus the assessee submitted that he has offered the Capital Gains for different Assessment Years on the event of execution of Sale Deed to various purchasers of the property appropriate capital I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 7 gains were paid. The assessee also annexed the respective Income Tax Returns filed by the assessees in the Paper Book from Page No. 1 to 137. The assessee also filed Return of Income filed by the Developer Akshar PHC Realcon for the above assessment years. The assessee also placed on record a registered Sale Deed bearing Document No. 2132 dated 16.03.2017 and Sale Deed Document No. 5594 of 2019 dated 17.05.2019 which clearly shows that the assessees being the owner and confirming party transferred the above property to the third party purchasers. Thus the Ld. A.R. claimed the physical ownership of the property vest on the assessees and the transfer of property happened during various Assessment Years from 2017-18 to 2022-23 and the respective Capital Gains were offered for taxation. 5.2. The Ld. Counsel further brought to our attention to the partnership Deed of M/s. Akshar PHC Realcon, the three assessees are partners of the firm holding 10% share along with seven other partners. Thus the Ld. Counsel pleaded the land was not transferred to the firm but only permission to get plan approval and other statutory approvals from various authorities were given to the firm for development of the above land. The respective assessees having returned the respective share of Capital Gains from the Assessment Years 2017-18 to 2022-23 on sale of their respective shares of land. The question of adding the entire sale transaction for the present Assessment Year 2015-16 is against the provisions of law and the Ld. CIT(A) has correctly deleted the above addition. The findings of the Ld. CIT(A) does not require any interference. I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 8 Thus the ld. A.R. pleaded to dismiss the appeals filed by the Revenue. 6. We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the assessee and written submissions filed by the both parties. Though the Ld. CIT-DR submitted before us that there were two Development Agreements dated 25.06.2014 and 25.09.2014 were found by the Department and the clauses of the Development Agreement clearly holds the transfer of possession taken place interpreting various provisions of the Development Agreement pleaded that the Ld. CIT(A) erred in deleting the addition on account of Capital Gain treating no transfer of the land to the Developer in the present Assessment Year 2015-16 as per Section 2(47)(v) of the Act r.w.s. 53A of the Transfer of Property Act. However the Ld. D.R. could not controvent the registered Sale Deed bearing Document No. 2132 dated 16.03.2017 wherein third parties purchasers namely Ms. Jigisha Ramchandra Parmer and Mr. Kalpesh Pushpabadan Jadav who purchased Flat No. 304, 3 rd Floor in Tower C-2, wherein the respondent-assessees namely Shri Mukesh Jamnadas Shah, Amit Mukeshbhai Shah and Surbhit Mukeshbhai Shah along with the Developer namely M/s. Akshar PHC Realcon through its authorized partner Shri Vipulkumar Jamnadas Dharsandia has executed the Sale Deed in favour of the purchasers. 6.1. Similarly, 1 st Floor, Shop No. 26 in Tower A-1 was purchased by one Purvi Vikram Saiyan on 17.05.2019 wherein also the I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 9 assessees herein along with the partnership firm executed the Sale Deed in favour of the purchaser. These registered documents undoubtedly clear that the possession of the property rest with the assessees till the completion of sale to third parties. Further as reproduced in the Table in Para 5 of this order, the three assessees had filed their respective Capital Gains on sale of constructed properties from the Assessment Year 2017-18 to 2022-23. 6.2. Thus the Grounds raised by the Revenue is devoid of merits and the same are liable to be dismissed. Therefore, we have no hesitation in upholding the order passed by the Ld. CIT(A) and delete the addition on LTCG of Rs.42,05,18,483/- made by the Assessing Officer. 7. In the result, the appeal filed by the Revenue is hereby dismissed. IT(SS)A Nos. 202 & 203/Ahd/2019 for A.Y. 2015-16 8. Since the respondent-assessee herein are the two brothers who held jointly the above property with their father Shri Mukeshbhai Jamnadas Shah in whose case in IT(SS)A No. 201/Ahd/2019, we have deleted the addition of LTCG made by the Assessing Officer of Rs.42,05,18,483/-. Since identical Capital Gain arising out of the same transaction being co-owners of the land, the decision rendered in IT(SS)A No. 201/Ahd/2019 will hold it equally good for the present two assessees being the co-owners of the land. I.T(SS).A Nos. 201 to 203/Ahd/2019 A.Y. 2015-16 Page No DCIT Vs. Shri Mukesh J. Shah and Ors. 10 Therefore the grounds raised by the Revenue are hereby dismissed and the appeals filed by the Revenue are dismissed. 9. In result, the appeals filed by the Revenue IT(SS)A Nos. 201 to 203/Ahd/2019 are dismissed. Order pronounced in the open court on 27-03-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 27/03/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद
Other Referred Cases
Chaturbhuj Dwarkadas Kapadia Vs. CIT (129 taxman 497)
Laws Referred To
Income Tax Act, 1961
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