SHRI. SATHYANARAYANA GOWDA M C V. THE INCOME TAX OFFICER

ITA/481/2018

AI Insights

The case involves an appeal by the assessee, Shri Sathyanarayana Gowda M.C L.R. Smt. Bindu Latha, against the orders related to the assessment of capital gains for the assessment year 2008-09. The primary contention revolves around the computation of short-term capital gains arising from the transfer of land to M/s. Adarsh Developers. The Assessing Officer initially added a short-term capital gain of Rs. 4,73,07,903, which was later confirmed and enhanced by the CIT(A). The ITAT upheld these decisions. The appellant argued that the agreements in question, dated 28.06.2000 and 01.06.2004, were not properly considered, and if they were, the gains should be classified as long-term. The Revenue contended that the initial agreement was not lawful as the property was not in existence at that time. The High Court found that the Supplementary Agreement, being a registered document, should have been considered and remanded the matter back to the AO for a detailed examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 758039 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 13-03-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-tax Vs H.Anil Kumar [2012] 20 taxmann.com 430 (Karnataka)
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: ASHOK KULKARNI
• Keywords: Agreement to sell; Assessment Year 2008-09; Capital Gains; Joint Development Agreement; Supplementary agreement
• Section: 260-A

Judgement Text

"- 1 - ITA No. 481 of 2018 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF MARCH, 2023 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR. JUSTICE C.M. POONACHA INCOME TAX APPEAL NO.481 OF 2018 BETWEEN: SHRI. SATHYANARAYANA GOWDA M.C L.R. SMT. BINDU LATHA (W/O SHRI. SATHYANARAYANA GOWDA) (LATE) NO.59, SUNKENAHALLI MAIN ROAD BULL TEMPLE ROAD BENGALURU-560 019 …APPELLANT (BY SHRI. ASHOK A. KULKARNI, ADVOCATE) AND: THE INCOME TAX OFFICER WARD-5 (4) BENGALURU …RESPONDENT (BY SHRI. E.I. SANMATHI, ADVOCATE) THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 26.02.2018 PASSED IN ITA NO.1057/BANG/2016 IN ANNEXURE-“A” AND THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) NO.ITA NO.305/18(A-II)/CIT(A)-V/2014-15 DATED 03.03.2016 (ANNEXURE-“C”) AND ALSO ASSESSMENT ORDER PAN: AGIPG5272G DATED 25.03.2013 FILED AS ANNEXURE-“B”, FOR THE ASSESSMENT YEAR 2008-2009 AND ETC., THIS ITA, COMING ON FOR HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING: Digitally signed by ANUSHA V Location: HIGH COURT OF KARNATAKA - 2 - ITA No. 481 of 2018 JUDGMENT This appeal by the assessee directed against order dated February 26, 2018 in ITA No.1057/Bang/2016 for the A.Y.2008-09 passed by the ITAT1, Bengaluru, has been admitted to consider following questions of law; “1. Whether on the facts and circumstances of the case any capital gains was liable in respect of property in question for the assessment year 2009-10? 2. Without prejudice, whether on the facts and in the circumstances of the case, in the event of there being taxable capital gains accruing, whether the quantification of short terms capital gains as done by the respondent is as per law? 3. Whether on the facts and in the circumstances of the case, order of the Appellate Tribunal suffers from perversity as the same is came to be passed without considering the material on record? 4. Whether on the facts and in the circumstances of the case, whether Appellate Tribunal was justified without giving any reasons by not deciding the ground of appeal raised before it?” 2. Heard Shri Ashok A.Kulkarni, learned advocate for the appellant and Shri E.I.Sanmathi, learned standing counsel for the Revenue. 1 Income Tax Appellate Tribunal - 3 - ITA No. 481 of 2018 3. Brief facts of the case are, assessee filed his returns for the A.Y.2008-09. The AO2 has recorded that assessee has not declared any income under the head ‘capital gains’ arising from transfer of land to M/s.Adarsh Developers and accordingly, added short term capital gain of Rs.4,73,07,903/-. The CIT(A)3 confirmed the said order on short term capital gains and enhanced quantum by directing the AO to compute short term capital gains by adopting the value of flat at Rs.1061.27/- per sq.ft instead of Rs.959/- per sq.ft. The ITAT4 has confirmed the order passed by the CIT(A). Hence, this appeal. 4. Shri Kulkarni for the assessee contended that  Assessee had entered into an ‘Agreement to Sell’ dated 28.06.2000 with the land owners and a Supplementary Agreement dated 01.06.2004;  Learned AO has not recorded any findings with regard to Agreement to Sell as also Supplementary Agreement; 2 Assessing Officer 3 Commissioner of Income Tax (Appeals) 4 Income Tax Appellate Tribunal - 4 - ITA No. 481 of 2018  The CIT(A), without any material on record, has increased value of the flat and directed the AO to adopt higher value of Rs.1061.27/- per sq.ft.; and  Though urged by the assessee, the ITAT has not considered any ground and dismissed the appeal. In substance, Shri Kulkarni’s argument is, the assessee has entered into a contract in the year 2000. He had entered into a Supplementary Agreement in the year 2004. If reckoned either from 2000 or 2004, the assessee shall be entitled for long term capital gain. He has placed reliance on Commissioner of Income-tax Vs H.Anil Kumar5 and submitted that the AO was duty bound to examine both the Agreement to Sell and the Supplementary Agreement while computing the capital gains. According to him, even if the date of Supplementary Agreement is considered, the assessee shall be entitled for long term capital gain. Therefore, impugned order is unsustainable. 5 [2012] 20 taxmann.com 430 (Karnataka) Para 16 and 23 - 5 - ITA No. 481 of 2018 5. Shri Sanmathi for the Revenue submitted that Agreement to Sell of the year 2000 cannot be looked into at all. As on that date, the property was not in existence and it was acquired by the Government. Therefore, entire premise on which capital gain is sought to be computed was not in existence. As per the assessee’s claim he has entered into an Agreement in the year 2000. Therefore, the ITAT has rightly doubted the genuineness of the Agreement as recorded in Para 6 of its order. He submitted that once the document relied upon by the assessee namely the ‘Agreement to Sell’ was not lawful, any claim made thereon is not sustainable in law. 6. We have carefully considered rival contentions and perused records. 7. Undisputed facts of the case are, parties have entered into a Supplementary Agreement dated 01.06.2004. It is a registered document. The contention urged on behalf of the Revenue that the ITAT has doubted genuineness of the Agreement can be at best attributed to Agreement to Sell - 6 - ITA No. 481 of 2018 dated 28.06.2000. Supplementary Agreement being a registered document ought to have been examined while computing the capital gains. We notice that all three authorities have missed this crucial point and have not carefully considered and recorded any finding with regard to Supplementary Agreement. We may also record that the CIT(A) has recorded in Para 6 of its order that the AO had filed a detailed remand report but stated that due to paucity of time, details were not verified. We have carefully perused the Supplementary Agreement. In Para 6 of the said Agreement, it is stated that the assessee has put in efforts to get the property in question converted from agricultural to non- agricultural land. In Para 11 of the agreement, it is stated that the land in question was de-notified. Thus, the assessee had put in its efforts and entered into an agreement duly registered and these facts have been considered. Admittedly, Vendors have executed Sale Deed dated 05.12.2005 in favour of the assessee. Subsequently, JDA6 has been entered on 14.06.2007. 6 Joint Development Agreement - 7 - ITA No. 481 of 2018 In Para 7 of the said agreement, it is stated that the assessee along with his vendors had entered into an earlier JDA dated 19.01.2004. Thereafter, subsequent JDA dated 14.06.2007 has been entered. Hence, all these transactions have to be examined to compute the capital gain and to determine whether the assessee is liable to pay short term or long term capital gain tax. 8. In view of the above, we are of the considered opinion that the matter requires reconsideration in the hands of the AO. Hence, following; ORDER (i) Appeal is allowed in part; (ii) Assessment order dated 25.03.2013 passed by the Assessing Officer, Bengaluru; Order dated 03.03.2016 in ITA No.305/18(A-II)/CIT(A)-5/2014-15 passed by the CIT(A), Bengaluru; and order dated 26.02.2018 in ITA - 8 - ITA No. 481 of 2018 No.1057/Bang/2016 passed by the ITAT, Bengaluru are set-aside; (iii) The matter is remitted to the file of the AO for reconsideration in accordance with law; and (iv) As matter has been remanded, questions of law are not answered in this appeal. All contentions of the parties are kept open. No costs. Sd/- JUDGE Sd/- JUDGE AV List No.: 1 Sl No.: 23 "