NAVEEN KUMAR MUSINIPALLY,USA V. ADIT (INT-TAXN)-1, HYDERABAD

ITA 323/HYD/2024

AI Insights

The case involves Naveen Kumar Musinipally, a non-resident Indian, who appealed against the order of the Commissioner of Income Tax (Appeals) - 10, Hyderabad, which confirmed the taxation of long-term capital gains from a development agreement under Section 153C read with Section 144C(3) of the Income Tax Act, 1961. The primary legal issues revolved around the jurisdiction of the Assessing Officer in Hyderabad, the validity of the development agreement as a transfer of capital asset, and the assessment of fair market value for tax purposes. The Tribunal dismissed the appeal, supporting the lower authorities' findings and rejecting the assessee's arguments.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472517 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 24-10-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 01-04-2024
• Other Referred Cases: PCIT Vs. Sri Sai Lakshmi Industries (P) Ltd., Daeshana Anand Damle vs. Dy.C.I.T, Pr.C.I.T vs. Emporis Properties (P) Ltd, Mrs. Margrit Goverdhan vs. I.T.O, CIT Vs. Balbir Singh Maini
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRINATH SADANALA
• Assessee Lawyers: K.C.DEVDAS
• Keywords: Capital asset; Opportunity of being heard; Fair market value; Capital Gains; Search and seizure; Valuation report; Rectification of order
• Section: 48; 132; 13; 153C; 72

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” , HYDERABAD BEFORE SHRI LALIET KUMAR, HON’BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER ITA No.323/Hyd/2024 Assessment Year: 2016-17 Naveen Kumar Musinipally, USA. PAN : APEPM4130Q. Vs. ADIT (International Taxation) – 1, Hyderabad. (Appellant) (Respondent) Assessee by: Shri K.C. Devdas, C.A. and Ms. S. Divya, C.A. Revenue by: Shri Srinath Sadanala, Sr.A.R. Date of hearing: 24.10.2024 Date of pronouncement: 14.11.2024 O R D E R PER LALIET KUMAR, J.M. The appeal of the assessee for A.Y. 2016-17 arises from the order of Commissioner of Income Tax (Appeals) – 10, dated 09.02.2024 under section 153C r.w.s.144C(3) of the Income Tax Act, 1961 (in short, “the Act”). ITA No.323/Hyd/2024 2 2. The grounds raised by the assessee read as under : “Under the facts and circumstances of the case, 1. The order of the Commissioner of Income Tax Appeals -10, Hyderabad (The Ld.CIT(A)') in confirming the taxation of long-term capital gains arising on the development agreement under section 153C r.w.s 144C(3) of the Income Tax Act 1961 (the Act') in the subject AY is unsustainable both on facts and in law. A. LEGAL GROUNDS 2. The Ld.CIT (A) failed to appreciate that the Ld.AO under section 153C r.w.s 144C(3) of the Act is without jurisdiction and invalid as the transfer of the case was made without complying with the provisions of section 127 of the Act. Therefore, erred in confirming the assumption of jurisdiction by the Assistant Director of Income Tax (International Taxation) -1, Hyderabad ('the Ld.AO') u/s section 153C r.w.s 144C(3) of the Act. 3. The assessment framed by the Ld.AO is without complying with the procedures prescribed u/s 153C of the Act. Therefore, the assessment is bad in law and deserves to be quashed. B. FACTUAL GROUNDS 4. Without prejudice to the above legal grounds, the Ld.CIT (A) and the Ld.AO failed to appreciate that there was no \"Transfer\" within the meaning of section 2(47)(v) of the Act since the possession of the land on the date of the development agreement still vests with the Assessee. Therefore, they erred in taxing the capital gain on the development agreement in the subject AY. 5. Without prejudice to ground no. 4, that there is no transfer within the meaning of section 2(47)(v) of the Act during the subject AY, the Ld.CIT(A) failed to appreciate that the value of the land as per the Sub Registrar Office (SRO) is merely a guideline value for the purpose of the levy of stamp duty under the stamp Act and does not represent the Fair Market Value. Therefore, erred in confirming the SRO value of the land as on 01.04.2001 as the fair market value as on 01.04.2001. 6. The LD.CIT(A) erred in holding that the assessee is liable to interest under section 234A of the Act as it is consequential in nature.” ITA No.323/Hyd/2024 3 3. The brief facts of the case are that the assessee, who is an individual and non-Resident of India, has not filed return of income for A.Y. 2016-17. A search and seizure operation u/s 132 of the Act was conducted on 26.04.2018 in the case of Sri K. Indra Sena Reddy, Hyderabad, wherein some incriminating material pertaining to the assessee was found and seized in the residential premises of said Indra Sena Reddy. Accordingly, satisfaction notes u/s 153C of the Act was recorded. Subsequently, notice u/s 153C of the Act was issued by the ACIT, Central Circle – 1(1) and the assessee also submitted information from time to time. As per the information available with the Department, it was noticed that during the assessment year 2016-17, assessee had entered into a Development Agreement cum General Power of Attorney (GPA) with M/s. Giridhari Homes Pvt. Ltd. As per the said GPA, assessee was entitled to Rs.36,440/- per s.f.t. and the market value of the proposed project was Rs.10,22,88,000/-. Though the said transaction was taxable, assessee has not offered the same for taxation and hence, notice u/s 142(1) of the Act was issued. After verifying the claim and submissions of the assessee along with valuation report issued by the SRO and the material available on record, Assessing Officer did not accept the claim of the assessee and thus, calculated the capital gains of the assessee at Rs.5,73,96,907/-. Thus, Assessing Officer completed the assessment u/s 153C r.w.s. 144C(3) of the Act dt.06.05.2022 and initiated penalty proceedings separately u/s 271(1)(C) of the Act. ITA No.323/Hyd/2024 4 3.1 Feeling aggrieved with the order of Assessing Officer, assessee filed an appeal before the ld.CIT(A), who granted part relief to the assessee. 4. Before us, ld.AR has made four arguments. Firstly, the assessee, being an NRI, was assessed to have no source of income in India and therefore, was taxable under the residual charge at Delhi, having a PAN number. The ld.AR further submitted that the AO had not objected to the ground raised by the assessee regarding the transfer of jurisdiction from Delhi to Hyderabad. For this, the ld.AR has drawn our attention to Paragraph 6 on page 3, which states that there was no transfer of jurisdiction under Section 127 of the Income Tax Act, 1961 to the AO at Hyderabad and the said paragraph 6 reads as under : “6. Further, with regard to your objection about the requirement of passing of order under section 127 of Income Tax Act, 1961, it is requested to kindly note that the source of income lies in the territory on which jurisdiction of the undersigned extended hence order u/s 127 of the Income Tax Act, 1961 is not required. Further, you are requested to note that your PAN got migrated from Circle 1(1)(1) (IT), New Delhi which is default circle for all PANs pertaining to the Non Residents and PAN got transferred under section 120 of the Income Tax Act from default circle to respective jurisdiction of the assessee. 4.1. Therefore, the AO at Hyderabad does not have jurisdiction, and the assessment order passed by the AO at Hyderabad is bad in law. The ld.AR has also drawn our attention to Section 127 of the Income Tax Act, which is to the following effect : ITA No.323/Hyd/2024 5 “127.Power to transfer cases.— (1) The 5 [Principal Director General or Director General] or 6 [Principal Chief Commissioner or Chief Commissioner] or 7 [Principal Commissioner or Commissioner] may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same 5 [Principal Director General or Director General] or 6 [Principal Chief Commissioner or Chief Commissioner] or 7 [Principal Commissioner or Commissioner],— (a) where the 5 [Principal Director General or Director General] or 6 [Principal Chief Commissioner or Chief Commissioner] or 7 [Principal Commissioner or Commissioner] to whom such Assessing Officers are subordinate are in agreement, then the 1 [Principal Director General or Director General] or 2 [Principal Chief Commissioner or Chief Commissioner] or 3 [Principal Commissioner or Commissioner] from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the 1 [Principal Directors General or Directors General] or 2 [Principal Chief Commissioner or Chief Commissioner] or 3 [Principal Commissioner or Commissioner] aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such 1 [Principal Director General or Director General] or 2 [Principal Chief Commissioner or Chief Commissioner] or 3 [Principal Commissioner or Commissioner] as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. ITA No.323/Hyd/2024 6 (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.] Explanation.—In section 120 and this section, the word “case”, in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.” 4.2. The second argument of the ld.AR before us is that the JDA, based on which the additions were made in the assessment for 2016-17, though registered, did not result in a transfer of possession. For this purpose, he has drawn our attention to page 26 of the paper book, where the terms and conditions from pages 46 to 48 are available, and submitted that there was no clause dealing with the transfer of possession by the assessee, along with others, in favour of M/s. Giridhari Homes Private Limited, the developer. It was submitted that the ld.CIT(A) and the AO had wrongly relied upon the provisions of the JDA while passing their respective orders. Our attention was drawn to pages 31 and 32 of the order passed by the ld.CIT(A) where certain clauses of the JDA were mentioned. The ld.AR contended that even from a bare reading of the clauses mentioned by the ld.CIT(A) in his order at page 30, it is clear that there was no transfer of possession in the eyes of the law, and therefore, the addition is not sustainable. ITA No.323/Hyd/2024 7 4.3. The third argument raised by the ld.AR is that in the year 2019-20, the assessee declared the capital gain in respect of the land and flats that came into his possession, and thereafter, claimed exemption. It was submitted that the AO failed to consider the valuation report prepared by the assessee and discarded it on the ground that the valuation report prepared by the AO was not in conformity with the Fair Market Value of the property as per SRO’s letter dt.01.04.2001. It was submitted that the amendment in the Act mandates the AO to consider the SRO value, came in subsequent years and hence, the same is not applicable in this case. 4.4. The ld.AR relied on the decision of the Hon'ble Karnataka High Court in the case of PCIT Vs. Sri Sai Lakshmi Industries (P) Ltd. Reported in (2023) 157 taxmann.com 172 (Karnataka) where the Hon'ble Karnataka High Court decided the issue in favor of the assessee. The relevant portion of the Hon'ble Karnataka High Court's decision read as under : “14. In clause No.13.1, it is clarified that the powers vested are only administrative in nature. Clause 13.2 shows that power of attorney shall permit the developer to enter into agreement to sell, construction agreements and sale deeds with the prospective third party purchaser. It is also clarified that the GPA shall become effective only upon approval of developmental plan and installment being paid. 15. A combined reading of Clause 3.1 and 13 shows that parties have specifically agreed that assessee shall continue to own entire JD property until conveyance deed took place. Clause 13 is in consonance with clause 3.1. There is no material on record to show that any conveyance had taken place in A.Y. 2014-15. Unless, there is material to establish that there was any conveyance, the view taken by the Assessing Officer, is perverse and the said view has rightly been reversed by both CIT(A) and ITAT. ITA No.323/Hyd/2024 8 5. The ld.AR in support of his contentions filed written submissions, which is to the following effect : 1. The above Appeal was heard on 24.10.2024 before the I.T.A.T “A” Bench, Hyderabad. (a) Please refer to the written submissions filed before CIT(A)-1. [Pages 1 to 25 Yellow Colour Paper Book filed on 18.07.2024]. 2. The Appellant is a non-resident and does not have a residential house in India except for an inherited dilapidated building which does not satisfying the criteria of a residential house. [Please see the Judgement of the Orrisa High Court in C.W.T vs. K.B. Pradhan [130 ITR 393]. 3. The address given by the Non-Resident was 1194, Valley Quail Circle, Almaden, San Jose, Almaden, 99-Foreign, 2-UNITED STATES OF AMERICA. Please see Page 112 of Paper Book filed on 24.10.2024 for profile. 4. The Appellant being a non-resident with no address in India was assessed for A.Y.N2013-2014 by D.C.I.T, Circle, International Tax-1(1)(1) Delhi. [Please see pages 104-105 and Pages 107-109 of yellow plastic cover Paper Book filed on 18.07.2024]. 5. Notice u/s.153C for A.Y. 2016-2017 was served on 31.03.2021 by A.D.I.T(Int.Taxation)-1, Hyderabad. However no order was passed u/s.127 nor an opportunity was given before Transfer. 6. The Appellant submitted a return of Income on 26.04.2021 in response to notice u/s.153C before ADIT (International Taxation)-1, Hyderabad. 6.1. On the base of the above facts the Appellant raised a ground challenging the jurisdiction of the Assessing Officer Hyderabad passing an order for the assessment year 2016-2017 on the ground that no order of transfer was passed u/s.127 to transfer the case from Delhi to Hyderabad. 6.2. Please see the Green colour Paper Book containing 123 Pages where the Appellant has relied on precedents challenging the assessment made without a transfer order u/s.127 and in particular to the following decisions:- 6.3. Precedents on Section 127 :- ITA No.323/Hyd/2024 9 (a) Jerri Keerthana Reddy vs. I.T.O (Pages 1 to 11 of Precedents Paper Book). Reference is made to PARA 19 at Pages 10 & 11 wherein it was held that change of address of Records and migration of PAN are not strictly relevant where the jurisdiction is governed by the statutory provisions. (b) The Appellant commends the acceptance of the precedents on Section 127 order which is mandatory to be passed on transfer from New-Delhi to Hyderabad. Please see Dy.C.I.T vs. Sunil Kumar Sharma (Pages 98 to 123) of green plastic cover filed on 24.10.2024. 7. All the other judgments are on the same plane from serial no’s 1 to 11 except S.No. 2. Please consider the challenge to jurisdiction of assessment u/s.127 of the I.T Act, 1961 in view of the written submissions filed before C.I.T(A) at pages 1 to 25 of the Paper Book filed on 24.10.2024. 8. Ground Relating to assessment of Development Agreement :- Development Agreement was entered on 30.12.2015 but no possession was given by the Appellant. The Developer was only given permissive possession for entry and exit for the limited purpose of development. 8.1. Reliance is placed on the following Decisions:- S.No: Name of the Case Citation Court Page No’s: 1. Pr.C.I.T vs. Sri Sai Lakshmi Industries (P) Ltd 458 ITR 373 Karnataka High Court Please See pages 1 to 4 of Precedents presently enclosed 2. Daeshana Anand Damle vs. Dy.C.I.T 459 ITR 60 Bombay High Court Please See Pages 9 to 12 of Precedents- P.B-III 3. Pr.C.I.T vs. Emporis Properties (P) Ltd 458 ITR 68 Calcutta High Court Please See Pages 13 to 16 of Precedents- P.B-III 4. Mrs. Margrit Goverdhan vs. I.T.O 458 ITR 91 Karnataka High Court Please See Pages 17 to 25 of Precedents- P.B-III 8.2. As no possession was given the capital gains arising on of the Development Agreement was disclosed voluntarily by the Appellant in the assessment year 2019-2020 as the Developer gave possession of two flats during the financial year 2018-2019 relating to A.Y. 2019- ITA No.323/Hyd/2024 10 2020 which were sold and entire capital gains for other flats was also shown in the A.Y.2019-2020. 8.3. Thus the capital gains was disclosed in the Assessment Year 2019- 2020 when the capital gains is assessed in 2016-2017 and 2019- 2020 and the rate of tax being same the revenue effect is neutralReliance is placed on the following decisions that when the Tax Rates are the same the tax is neutral: - S.No: Name of the Case Citation Court Page No’s: of Precedents Paper Book 1. C.I.T vs. Nagri Mills Co. Ltd 33 ITR 681 Bombay High Court Please See Precedents P.B-III at Pages 48- 49 for copy of judgment 2. C.I.T vs. Gujarat State Forest Development 288 ITR 28 Gujarat High Court See Pages 50-51 of P.B-III 3. C.I.T vs. Excel Industries 358 ITR 245 Supreme Court See Pages 52-57 of P.B-III 4. Pr.C.I.T vs. Rajesh Prakash Timblo 415 ITR 334 Bombay High Court See Pages 58-64 of P.B-III 5. C.I.T vs. Triveni Engineering & Industries Ltd 336 ITR 374 Delhi High Court See Pages 66-71 of P.B-III 6. C.I.T vs. Aditya Builders 378 ITR 75 Bombay High Court See Pages 72-74 of P.B-III 7. Berger Paints India Ltd vs. C.I.T 266 ITR 99 Supreme Court See Pages 75-79 of P.B-III Reliance is placed on the decision of the Bombay High Court in C.I.T vs. Skyline Great Hills (23 Taxman 675). A copy of the judgment is placed at Sl.No.2 of the Precedents paper book filed on 24.10.2024(Green Plastic Cover Paper Book). The learned judges of the Bombay High Court at Paragraph 4 [4. Re question no: (B) (f) observed as under:- “Further, one must not overlook the impugned order of the Tribunal records fact “Since assessee stated that the assessee has already offered capital gains to tax on the aforesaid transfer in A.Y. 2019- ITA No.323/Hyd/2024 11 2020.We allow ground no.3 of appeal taken by the assessee in deleting the addition made by the CIT(A). [Please see pages 5 to 8 of precedents Paper Book-III or pages 12 to 17 of P.B-II filed on 24.10.2024]. 8.4. Since the Appellant before your honours has already offered the capital tax in the assessment year 2019-2020 the question by assessing the capital gains for A.Y. 2016-2017 does not arise as no possession was given and the basis of D.A of 30.12.2015. Please also see the judgement of Bombay High Court in C.I.T vs. Aditya Builders reported in 378 ITR 75 at Para 9 of the judgement at page no. 74 of precedents paper book-III. 9. Adopting of F.M.V of land as on 01.04.2001. The learned Assessing Officer adopted the S.R.O value which is the guideline value and not market value at Rs.5000/- per sq.yrd as against Rs.8000 per Sq.Yrd as per the valuation of Registered valuer which has been ignored on the ground that no comparable cases was cited by the Registered valuer. The Appellant adopted the value at Rs.7000 per sq.yrd as a via media. At any rate the Assessing Officer ought to have adopted the value of land as on 01.04.2001 at Rs.8000 per sq.yrd as adopted by the Regd. Valuer whose report has been ignored without any reasons.” 6. On the other hand, ld.DR for the Revenue has relied upon the orders of lower authorities. 6.1 Regarding the first ground, the ld.DR relied on Point No.6 in the show cause notice issued by the Assessing Officer placed at page 3 of the assessment order, wherein the AO addressed the transfer of jurisdiction. It was also submitted by the ld.DR that the jurisdiction of the departmental ITO in the case of non-residents is residual and applies only if the PAN was issued in the name of the assessee, having no dwelling unit in India. Furthermore, it was submitted that, according to the assessee, the JDA mentions that the assessee is the owner of a residential house bearing no.6-1-134, land measuring 3112.23 square yards, situated at Sy.No.29, Padma Rao Nagar, Secunderabad, by virtue of Will executed by her mother ITA No.323/Hyd/2024 12 Smt. M. Kamala Bai, who passed away on 13-10-2003, leaving the property to the assessee. 6.2 It was submitted that the assessee appears to be the natural successor of the property left by her mother, and therefore, the property was available to the assessee for dwelling and therefore, the residual jurisdiction was not attracted. Consequently, the assessee raised this issue before the ld.CIT(A) and in Para 6.5 at pages 36 and 37 of his order, the ld.CIT(A) dealt with this issue and decided the case against the assessee. The ld.DR further submitted that the AO has jurisdiction lies where the situs is situated or where the taxable income accrued. In this case, the chargeable income was arose / accrued in Hyderabad as the JDA in respect to the immovable property was entered and the income also accrued to the assessee in the jurisdiction of the Assessing Officer and hence, the AO had jurisdiction to decide the issue. Further, it was submitted that once the assessee participated in the assessment proceedings before the AO, by virtue of Section 124(3)(a) of the Income Tax Act, the assessee is precluded from raising objections about jurisdiction at a subsequent stage. 6.3. Regarding the second ground, it was submitted that the development agreement entered into between the parties on 30-12- 2015 laid down the terms of transfer. Upon reviewing the terms, it is clear that the agreement was based on the transfer of the land underneath the developed property. For this, attention was drawn to page 32 of the paper book, where the respective shares of the ITA No.323/Hyd/2024 13 property for the assessee and the developer are mentioned. The relevant clause reads as under : “AND WHEREAS the DEVELOPER / SECOND PARTY herein are the Builders and having come to know the intention of the OWNER / PRINCIPLE / FIRST PARTY have approached the OWNER / PRINCIPLE / FIRST PARTY and offered to render their services in getting necessary permissions from the competent authorities and to develop the schedule of property into residential apartments / multi storied building as per the scheme by investing and to share the developed area into 53:47 ratio, as the DEVELOPER / SECOND PARTY would retain 53% of the developed area and the remaining 47% developed area will be allotted to the plot OWNER / PRINCIPLE / FIRST PARTY. Both parties deem it expedient to reduce the terms and conditions governing the development of the schedule property into writing hence, this Development Agreement cum General Power of Attorney.” 6.4. The ld.DR further submitted that the sum and substance of the clauses reproduced by the ld.CIT(A) in the development agreement clearly show that there was a transfer of possession by the assessee to the developer. It was further submitted that it is not possible for the developer to construct the building unless possession of the property was transferred to him. The ld.DR referred to the law discussed and decided by the Hon'ble Supreme Court in the case of CIT Vs. Balbir Singh Maini reported in (2018) 12 SCC 354, wherein the Hon'ble Supreme Court held as follows : “20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a “transfer” of a capital asset under Section 2(47)(v) of the Act, there must be a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the ITA No.323/Hyd/2024 14 purpose specified in Section 53A. The ITAT was not correct in referring to the expression “of the nature referred to in Section 53A” in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression “of the nature referred to in Section 53A”. This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression “of the nature referred to in Section 53A” would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no “transfer” can be said to have taken place under the aforesaid document. Since we are deciding this case on this legal ground, it is unnecessary for us to go into the other questions decided by the High Court, namely, whether under the JDA possession was or was not taken; whether only a licence was granted to develop the property; and whether the developers were or were not ready and willing to carry out their part of the bargain. Since we are of the view that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question. 21. However, the High Court has held that Section 2(47)(vi) will not apply for the reason that there was no change in membership of the society, as contemplated. We are afraid that we cannot agree with the High Court on this score. Under Section 2(47)(vi), any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The High Court has not adverted to the expression “or in any other manner whatsoever” in sub-clause (vi), which would show that it is not necessary that the transaction refers to the membership of a cooperative society. We have, therefore, to see whether the impugned transaction can fall within this provision. 22. The object of Section 2(47)(vi) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression “enabling the enjoyment of” takes color from the earlier expression “transferring”, so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof. 1 The idea is to bring within the tax net, transactions, where, though title may not be transferred in law, there is, in substance, a transfer of title in fact. ITA No.323/Hyd/2024 15 23. A reading of the JDA in the present case would show that the owner continues to be the owner throughout the agreement, and has at no stage purported to transfer rights akin to The maxim “noscitur a sociis” has been repeatedly applied by this Court. A recent application of the maxim is contained in Coastal Paper Limited v. Commissioner of Central Excise, Visakhapatnam, (2015) 10 SCC 664 at 677, para 25. This maxim is best explained as birds of a feather flocking together. The maxim only means that a word is to be judged by the company it keeps ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a specific purpose -the purpose being to develop the property, as envisaged by all the parties. We are, therefore, of the view that this clause will also not rope in the present transaction. 24. The matter can also be viewed from a slightly different angle. Shri Vohra is right when he has referred to Sections 45 and 48 of the Income Tax Act and has then argued that some real income must “arise” on the assumption that there is transfer of a capital asset. This income must have been received or have “accrued” under Section 48 as a result of the transfer of the capital asset. 25. This Court in E.D. Sassoon & Co. Ltd. v. CIT, (1955) 1 SCR 313 at 343 held: “It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W.S. Try Ltd. v. Johnson (Inspector of Taxes) [(1946) 1 AER 532 at p. 539], and Webb v. Stenton, Garnishees [11 QBD 518 at p. 522 and 527]. Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him.” 26. This Court, in Commissioner of Income Tax v. Excel Industries, (2014) 13 SCC 459 at 463-464 referred to various judgments on the expression “accrues”, and then held: “14. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In CIT v. Shoorji Vallabhdas and Co. [CIT v. Shoorji Vallabhdas and Co., (1962) 46 ITR 144 (SC)] it was held as follows: (ITR p. 148) “… Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a ‘hypothetical income’, which does not ITA No.323/Hyd/2024 16 materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account.” 15. The above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 : (1971) 82 ITR 835] in which this Court also considered the dictionary meaning of the word “accrue” and held that income can be said to accrue when it becomes due. It was then observed that: (SCC p. 454, para 11) “11. … the date of payment … does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately.” 16. This Court further held, and in our opinion more importantly, that income accrues when there “arises a corresponding liability of the other party from whom the income becomes due to pay that amount”. 17. It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. 18. Insofar as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement passbook, there was no corresponding liability on the Customs Authorities to pass on the benefit of duty-free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is, therefore, not the income of the assessee.” 27. In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act. 28. In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessees by the developers and therefore, the ITA No.323/Hyd/2024 17 assessees have not acquired any right to receive income under the JDA. This being so, no profits or gains “arose” from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act. 29. We are, therefore, of the view that the High Court was correct in its conclusion, but for the reasons stated by us hereinabove. The appeals are dismissed with no order as to costs.” 6.5. It was submitted that the decision of the Hon'ble Karnataka High Court on this issue is not applicable to the facts of the case. On the valuation of the property, the ld.DR submitted that, as per law, the valuation report of the assessee does not inspire confidence, and the valuation report relied upon by the assessee is insufficient and do not support the argument of the assessee. For this purpose, attention was drawn to page 86 of the paper book. Furthermore, the ld.DR submitted that in the case of the JDA, the valuation of the transfer of land should be determined based on the cost of construction as reflected in the JDA agreement and its annexure. The ld.DR has drawn our attention to pages 72 and 74 of the paper book, where the distribution of shares between the owner and the developer was provided. The owner’s share is 25 square yards with an undivided share of land amounting to 1,426 square yards, while the developer is entitled to 28 flats with an undivided share of land totaling 1,574 square yards. It was submitted that a supplementary agreement, available from pages 66 to 76, was entered into on 29- 04-2016, in addition to the original agreement. Both the original and supplementary agreements clearly demonstrate the respective shares of land allocated. It was submitted that the demarcation of the land under the built-up area shows that 174 square yards were transferred by the assessee to the developer. Furthermore, the ld.DR has drawn our attention to page 56 of the paper book, where ITA No.323/Hyd/2024 18 Annexure-1A attached to the JDA dated 30-12-2015 reads as follows: 6.6. Based on the development agreement, the ld.DR submitted that the valuation report did not mention any neighboring property sold at Rs. 8000/- per sq. yd., as referred by the valuer. It was submitted that the valuation report is completely silent as to why Rs. 8000/- per sq. yd. should be taken as the value by the valuer. ITA No.323/Hyd/2024 19 7. We have heard the rival contentions of both the parties, perused the material available on record and also the orders passed by the lower authorities. First of all, we deal with the first argument of the assessee whereby the assessee sought to challenge the assessment made by the Assessing Officer without a transfer order u/s 127 of the Income Tax Act, 1961. In this regard, the Assessing Officer in Para 6 has dealt with the issue and decided the issue against the assessee. Similarly, the ld.CIT(A) had also dealt with the issue in the order. The assessee is an NRI, who has not filed the return for A.Y. 2016-17. A search was conducted on 26.04.2018 in the case of K. Indrasena Reddy and incriminating material was found. Based on the incriminating material, the Assessing Officer had issued notice u/s 153C of the Act. The contention of the assessee that he was having a PAN issued by Delhi Assessing Officer meant for non-resident, and therefore, the transfer of jurisdiction u/s 127 is essential, cannot be sustained for the reason that the assessee has not filed the return of income from the Delhi PAN and has also not disclosed that assessee was also having a dwelling house / property which is the subject matter of JDA falling within the territorial jurisdiction of the Assessing Officer. In the present case, the documents were found during the course of search belonging to the assessee and notice u/s 153C was issued by the Assessing Officer having the territorial jurisdiction where the property is situated. The contention of the assessee that the notice should have been issued by the Assessing Officer at Delhi will lead to lot of complications as there is no record available at the Assessing Officer of Delhi nor the documents were available at the Assessing Officer of the Delhi. The law is fairly settled that the forum in whose ITA No.323/Hyd/2024 20 jurisdiction the situs is situated and where the necessary documents / information is available should be the appropriate forum for adjudication. 7.1. Furthermore, Section 127 of the Act will only come into play when there is some transfer of jurisdiction from one authority / office to the other. In the present case, the assessee has not filed the return of income and has not assessed at the Delhi ITO / Assessing Officer and therefore, there is no question of transfer of jurisdiction of the Assessing Officer from ITO, Delhi to ITO, Hyderabad. In view of the above, we are of the considered opinion that the jurisdiction invoked by the Assessing Officer at Hyderabad is in accordance with law. The reliance of the ld.AR in the case of J. Keerthana Reddy, Mumbai Vs. ITO in ITA No.3224/Mum/2023 dt. 15.01.2024 is not applicable to the facts of the case as in that case, the said assessee was initially assessed from 2008 to 2012 at Mumbai and thereafter, the assessee was reallocated to Bangalore. Thereafter, the assessee was carrying out his profession at Bangalore. The question came up before the Hon’ble co-ordinate Bench of the Tribunal whether the assumption of the jurisdiction by the Assessing Officer of Mumbai was valid or not ? The co-ordinate Bench of the Tribunal replied to the same and held that since the assessee has migrated from Mumbai to Bangalore in 2015, therefore, the Assessing Officer of Bangalore is having the jurisdiction. Similarly, in the case of CIT Vs. Sunil Kumar Sharma, the decision of Hon’ble Karnataka High Court is not applicable, and the reading of the judgment clearly shows that the said case pertains to Centralization of jurisdiction. In our view, both the cases are not ITA No.323/Hyd/2024 21 applicable and hence, are required to be not considered and therefore, this ground is decided against the assessee. 8. Coming to the next ground i.e., whether the transfer took place on account of JDA entered on 30.12.2015 or not ? In this regard, it is the contention of the assessee that no transfer of possession took place pursuant to the JDA dt.30.12.2015 and therefore, no capital gain arose during the year under consideration. Quite contrary to the above, it was pointed by the ld.DR that merely omission of word ‘possession’ in the JDA will not change the character of the document as there are lot of rights and obligations embedded in the JDA. We have considered the rival contentions of the parties and perused the material on record. Undoubtedly, as per the JDA, both parties agreed to raise the construction and share the built-up area. The ld.CIT(A) at page 31 and 32 had captured the various clauses of the JDA which clearly shows the respective transfer of rights by one party to the other in respect of land share. The assessee before us, pursuant to the construction was also entitled to receive the built-up flats as per the Annexure to the JDA. We are unable to comprehend as to how the assessee will receive the possession of built-up flats when the assessee has not allegedly transfer the possession. In fact, the ld.CIT(A) in para 6.3.1. at page 33 of the order has categorically mentioned that no document has been produced by the assessee to separate transfer of possession to the developer. We do not find any error in the decision of ld.CIT(A) on this aspect as the fact speaks for itself. The Developer was under obligation to construct the property after receiving due sanctions from various authorities as per the specification and cost of ITA No.323/Hyd/2024 22 construction agreed between it and the assessee. For all purposes, there is a transfer of land / capital asset within the meaning of law and for the above said purposes, we may rely upon the decision of Hon'ble Supreme Court in the case of Balbir Singh Maini (supra). In the light of the above, this ground of the assessee is dismissed. 9. Now coming to the argument of the assessee that the assessee has disclosed his capital gains in the assessment year 2019-20 and therefore, it should not have been assessed in A.Y. 2016-17. In our view, the law is settled that the tax has to be levied in the year when it is due and payable. In the present case, the taxable event as per the judgment in the case of Potla Nageswara Rao and Balbir Singh Maini happened in the year 2016-17 and therefore, it is to be charged in the said assessment year only. In case, as claimed by the assessee, the income has been offered in 2019-20, then the Assessing Officer may verify and pass rectification order, otherwise, it amounts to double taxation. In view of the above, the argument of the assessee is unsustainable. 10. The last argument raised by the assessee was with respect to the value of Rs.5,000/- per sq.yd taken by the Assessing Officer as against Rs.8,000/- per sq.ft adopted by the registered valuer. The contention of the assessee that the assessee has taken Rs.7,000/- as against the valuation report of the valuer. We have considered the submission of the assessee and found that the ld.CIT(A) / Assessing Officer has given cogent reason for taking the valuation at Rs.5,000/- instead of Rs.7,000/-. The valuation report available at ITA No.323/Hyd/2024 23 pages 85 and 86 has not disclosed the basis of arriving at the value of Rs.8,000/- per sq.ft. The valuer had merely mentioned that the cost index as of 01.04.2001 was taken as basis for determining the fair market value. Though in the report it was mentioned that the valuation was based on the market value of the land sold in the vicinity. However, the valuer has not given any instance of the property sold in the vicinity of the property. Furthermore, the valuer has not given the details of the construction existing at the time of his inspection on 08.06.2019. In our considered opinion, the valuation report was required to be given of the property as on the date of its transfer i.e., in the assessment year 2016-17 and not on a the subsequent occasion. The inspection of the property on 08.06.2019 had not thrown the light on the extent and nature of construction. Furthermore, the valuation report cannot be considered as it does not inspire confidence and is therefore required to be rejected. In this regard, the Assessing Officer has relied upon the guidance value of the area in which the property is situated, we do not find any reason to interfere with the same as the assessee failed to point out the peculiarity of the location, status and construction of the property for fetching more price in comparison to the guidance value. In view of the above, this ground of the assessee is dismissed. Accordingly, the appeal of the assessee is dismissed. ITA No.323/Hyd/2024 24 11. In the result, the appeal of the assessee is dismissed. Order pronounced in the Open Court on 14th November, 2024. Sd/- Sd/- Sd/- Sd/- Sd/- Sd/- (G. MANJUNATHA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 14.11.2024. TYNM/sps Copy to: S.No Addresses 1 Naveen Kumar Musinipally, USA, C/o.133/4, R.P. Road, Secunderabad – 500003, Telangana. 2 ADIT (International Taxation) – 1, Hyderabad. 3 The Commissioner of Income Tax (IT & TP), Hyderabad. 4 The Chief Commissioner of Income Tax (IT) (SZ), Bengaluru. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order "