SUNIL KUMAR,PATNA V. ITO, WARD- 6 (1), PATNA

ITA 168/PAT/2025

AI Insights

The case involves Sunil Kumar, the appellant, who entered into a Joint Development Agreement (JDA) with M/s Sri Ravi Homes Pvt. Ltd., Patna, for the development of land. The Income Tax Department reopened his assessment for the Assessment Year 2016-17 based on information that he had not reported capital gains from this agreement. The AO assessed long-term capital gains and the CIT(A) upheld this assessment. Sunil Kumar appealed to the Income Tax Appellate Tribunal, which found that while capital gains were applicable, the AO had incorrectly not allowed the indexed cost of acquisition and the cost of improvement in the computation of capital gains.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785077 (ITAT-PATNA)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 07-04-2025
• Other Referred Cases: Pankaj Kumar, Mohamid Abdul Hal, Hasmat Hai & Ors. V CIT, ITO v. Bharat Raojibhai Patel, Shrimant Shamrao Suryavanshi & anr. V Prahlad Bhairoba Suryavanshi, Seshasayee Steels P Ltd v ACIT, Chaturbhuj Dwarkadas Kapadia v. CIT, Potia Nageshwara Rao v. DCIT, CIT v. Dr. T.K. Dayalu
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Condonation of delay; Capital asset; Cost of acquisition; Capital Gains
• Section: 144; 133(6); 2(14)

Judgement Text

" Page | 1 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. IN THE INCOME TAX APPELLATE TRIBUNAL PATNA ‘DB’ BENCH, KOLKATA Before SHRI SONJOY SARMA, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar Vs. ITO, Ward-6(1), Patna (Appellant) (Respondent) PAN: BIUPK7714A Appearances: Assessee represented by : Bhagwan Jha, ITP. Department represented by : Himanshu Kumar, JCIT. Date of concluding the hearing : 17-September-2025 Date of pronouncing the order : 12-November-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as ‘the Ld. CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 19.02.2024. 1.1. The Registry has informed that the appeal is barred by limitation by 342 days. The assessee has filed a petition for condonation of delay explaining the reasons. After perusing the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication. Printed from counselvise.com Page | 2 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. For that the grounds of appeal hereto are without prejudice to each other. 2 For that in the facts and circumstances of the case the learned CIT(A) has erred in calculation of assessed income without considering the facts of case. 3. For that the assessee has neither concealed the particulars of income nor furnished inaccurate particulars thereof. 4. For that Assessee Don't get any possession of Property and neither Sold Any Property. 5. For that there is no guilt alleged to have been committed. 6. For that the income of Rs. 478870/- is disclosed in the return of income. At no stretch of imagination the amount of Rs. 6289418/- can constitute the concealed income. 7. For that in cash or Bank mode No Consideration has been received by the assessee. 8. That in view of the above it is respectfully submitted that the assessed amount as sustained by the learned CIT(A) is arbitrary, unjustified, void ab- initio and bad in law. 9. For that the appellant reserves his right to file detailed submission at the time of hearing. 10. For that the appellant craves leave to urge, add or alter any other ground or grounds at the time of hearing.” 3. Brief facts of the case are that the assessee is an individual and had filed the return of income for the A.Y. 2016-17 belatedly disclosing only Income from House Property at Rs.3,67,610/-. The case was reopened on the basis of information available with the Revenue, which was received from the office of the Registrar of Properties in Patna District and was obtained under section 133(6) of the Act. As per the information received, the assessee had entered into a registered Land Development Agreement (“JDA”) with M/s Sri Ravi Homes Pvt. Ltd., Patna (the Developer) for the relevant assessment year. As per the Printed from counselvise.com Page | 3 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. agreement, in exchange for land rights, the assessee was entitled to a share in the constructed area on the land. In view of the capital gain arising on the land relinquished to the developer, which was not charged to tax, the case was reopened with the approval of the Range Head. The Ld. AO completed the assessment u/s 144 of the Act and computed the long-term capital gains of Rs. 62,89,418/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who upheld the order of the Ld. AO and dismissed the appeal. 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. 6. The Ld. AR submitted that the capital gains liability does not arise as the property has not been constructed. Vide written submission filed on 13/08/2025, the assessee has submitted that the property is still under construction and no possession of the constructed area was received. Since the property is still under construction and the possession of the constructed area has not been handed over to the assessee, therefore, no effective transfer has taken place during the relevant assessment year, it is argued. It is further stated that the taxability shall arise only on possession and subsequent transfer. It is submitted that capital gains will be chargeable to tax only when both the conditions are satisfied, i.e. the assessee obtains possession of the constructed property from the developer; and the assessee subsequently transfers the said property to a third party in future and until such future transfer occurs, no capital gains can be said to have accrued or arisen since the consideration in a development agreement Printed from counselvise.com Page | 4 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. becomes real only upon receipt of possession and eventual alienation of the asset. It was also submitted that the Ld. AO has not allowed any cost of acquisition which was requested to be allowed. The Ld. DR relied upon the order of the appellate authority and requested that the same may be confirmed. 7. We have noted that the Ld. CIT(A) considered the observations made by the Ld. AO, the facts of the case, the judicial pronouncements and decided the appeal by giving his findings as under: “4.3 DECISION: 4.3.1. The current provisions to with regard to taxability of capital gains on entering into JDA is governed by the provisions of section 45(5A) introduced by the Finance Act 2018 with effect from A.Y. 2018-19. The same has been held to be prospective in nature and not retrospective by the jurisdictional HC of Patna in Pankaj Kumar, Mohamid Abdul Hal, Hasmat Hai & Ors. V CIT (455 ITR 583). Before the A.Y. 2018-19, there is thus, no specific provision in the IT Act for this purpose and it is governed by the general provisions related to capital gains. To constitute capital gains, the following are required, as per section 45: (a) a capital asset (b) transfer of such capital asset (c) transfer for a consideration (d) profits and gains arise as a result of such transfer 4.3.2. In the current case, the ingredients are fulfilled as discussed underneath:- a. Land is capital assets and so are the development rights in land. The sale of development rights over property are capital in nature and come within the scope of definition of capital asset u/s 2(14) as held by Mumbai HC in case of ITO v. Bharat Raojibhai Patel (2016) 70 taxmann.com 401. b. As pointed out by the AO, there is transfer of the said development rights as per the provisions of section 2(47)(v) wherein the section 53A of Transfer of Property Act apply. As discussed by the AO, in case of Shrimant Shamrao Suryavanshi & anr. V Prahlad Bhairoba Suryavanshi (D) by LRs. & Ors., (2002) 3 SCC 676 at 682, the following conditions are necessary to invoke section 53A of Transfer of Property Act: Printed from counselvise.com Page | 5 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. • There must be a contract to transfer for consideration • The contract must be in writing and duly registered • The writing must be in terms necessary to ascertain the transfer • The transferee in part-performance of the contact take possession of the property • The transferee must have done some act in furtherance of the contract. The appellant before the AO raised the issue of builder not taking possession. However, no details of when and how the possession was taken is given by the appellant. Moreover, as the Honourable Apex Court held in case of Seshasayee Steels P Ltd v ACIT (2020) 115 taxmann.com 5, the term 'possession' in section 53A of the Transfer of Property Act, 1882 is a legal concept that denotes control over the land and not the actual physical occupation of the land. The legal control over the land is with the developer as per the terms in the agreement as discussed by the AO in para 4 of the assessment order - the developer being authorised to carry out various acts, deeds such (as) all legal compliances and paper works relating to the building, applying for various utilities from respective authorities, sale and mortgage of builder's share of constructed property etc. Thus, with the rights devolved to the developer, the legal possession of the property can be said to be with the developer itself. c. The consideration is 50% of the constructed area and not the value of land foregone in the agreement. That the cost of construction of the building to the extent of the appellant's share forms part of consideration is upheld by various judicial pronouncements in this respect. Some of them are: ITO v N.S Nagaraj (2014) 52 taxmann.com 55 by Bangalore ITAT, DDIT v. G. Raghuram (2010) 39 SOT 406 and Prabhandam Prakash v ITO (2008) 22 SOT 58 by the Hyderabad ITAT, Smt Binder Khokher v ACIT (2013) 36 taxmann.com 503 by the Chandigarh Tribunal, Smt. Vasavi Pratap Chand v. DCIT (2004) 89 ITD 73 by the Delhi Tribunal d. The profits and gains as a result of the transfer of development rights over land is calculated by the AO in the assessment order 4.3.3. In view of the above, the appellant is liable for the capital gains on the transfer of the capital asset of land development rights and the consideration of not just money but the constructed area of the building that is being received for the development rights is also to be considered in calculation of the capital gains. For this, the date of execution of the joint development agreement is the year in which the said transfer of asset and consequently capital gains computation arises, is also laid out by various high courts as under:- Printed from counselvise.com Page | 6 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. 1. Chaturbhuj Dwarkadas Kapadia v. CIT (2003) 129 taxmann 497 (Bombay HC) 2. Potia Nageshwara Rao v. DCIT (2014) 365 ITR 249 (AP HC) 3. CIT v. Dr. T.K. Dayalu (2011) 14 taxmann.com 120 (Karnataka HC) 4.3.4. Hence, the AO's calculation of capital gains on consideration of the value of the constructed area being received by the appellant is correct in the concerned year when the JDA is executed and registered. Therefore, the addition of the AO is upheld. 5. Ground No.5 is general in nature and need no specific adjudication. In the result, the appeal is treated as Dismissed.” 8. We have considered the rival submissions and have also gone through the facts of the case, the submission made and the documents filed. Having gone through the assessment order, the order of the Ld. CIT(A) as well as the facts of the case, since there was a Joint Development Agreement (JDA), the consideration being the share of constructed super built-up area, the assessee was liable for payment of tax on Capital Gains and there is no reason to disagree with the findings of the Ld. CIT(Appeals) that capital gains was chargeable on the transaction carried out. The Ld. AR submitted in the course of the appeal before us that the Ld. AO had not allowed the indexed cost of acquisition and requested as an alternative argument that the same may be allowed. The Ld. AO has taken the estimated cost of construction of the super built-up area of 4192.945 sq. ft. at ₹62,89,418/-, which is under the ownership of the land owner as per the agreement. However, on page 14 of the assessment order, the indexed cost of acquisition has been taken as zero or NIL, as the assessee had been given several opportunities to comply with the notices issued from his office for the JDA but the assessee, at no point of time, could furnish the same during the course of the assessment proceedings. This view of the Ld. AO of not Printed from counselvise.com Page | 7 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. allowing any cost of acquisition is not in consonance with the provisions of the Act for computation of capital gains as the indexed cost of acquisition has to be allowed along with the cost of improvement, if any. The assessee shall furnish evidence for the cost of acquisition of the land transferred to the share of the builder as per the agreement and other details to the Ld. AO, who shall deduct the indexed cost of acquisition and the cost of improvement, if any from the sale consideration worked out and thereafter, recompute the capital gains with consequential relief to the assessee. Thus, the grounds of appeal are partly allowed. 9. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 12th November, 2025. Sd/- Sd/- [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 12.11.2025 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 8 ITA No.: 168/PAT/2025 Assessment Year: 2016-17 Sunil Kumar. Copy of the order forwarded to: 1. Sunil Kumar, Naya Tola, Kumharar Near Kirti Petrol Pump, Patna, Bihar, 800026. 2. ITO, Ward-6(1), Patna. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Patna Benches, Patna. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "