2012 (6) TMI 80 - AT - Income Tax

Capital gains - Transfer of property - joint development agreement - Validity of reassessment order passed under section 143(3) r.w.s. 147 of the Act. - held that - It is seen that the learned CIT(A) found that the Assessing Officer issued the notice under section 148 only after obtaining the sanction of the appropriate authority mentioned in section 2(28C) as laid out in section 151 of the Act. We also find that all the objections raised by the assessee, pointing out so called infirmities in the said notices, have been addressed in accordance with the provisions of section 292(b) and the judicial decisions cited were distinguished by the learned CIT(A) - Decided against the assessee. Capital gains - Transfer of property - joint development agreement - held that - the assessee transferred all control and interest in the land to the developer at the time of agreement dt.30.6.1994 when the assessee gave the developer exclusive rights over the property. The assessee has not been able to produce any contrary evidence to show that the property was handed over on any subsequent date and more so in the period relevant to Assessment Year 2003-04. - in accordance with the provisions of section 2(47) of the Act r.w.s. 53A of the Transfer Property Act, 1882, we hold that the capital gains on the assessee s land at Kayathamaranahalli, Mysore has been correctly brought to tax in Assessment Year 1995-96 by the Assessing Officer. - Decided against the assessee.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the assumption of jurisdiction under Section 147 and the issuance of notice under Section 148.
3. Determination of capital gains tax liability for the Assessment Year 1995-96.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed with an 8-day delay. The assessee provided an affidavit explaining the delay, which was accepted by the Tribunal. The delay was condoned in the interest of justice, and the appeal was admitted for hearing.

2. Validity of the Assumption of Jurisdiction under Section 147 and the Issuance of Notice under Section 148:
The assessee challenged the validity of the Assessing Officer's (AO) assumption of jurisdiction under Section 147, the issuance of notice under Section 148, and the subsequent assessment order under Section 143(3) r.w.s. 147.

Arguments by the Assessee:
- The essential ingredients for forming satisfaction before initiating proceedings under Section 147 were missing.
- The initiation of proceedings under Section 147 was invalid, making the notice under Section 148 and the subsequent assessment order void ab initio.

Arguments by the Department:
- The AO had recorded reasons for the belief that income had escaped assessment, based on material available on record.
- The AO sought and obtained the sanction of the concerned Addl.CIT before issuing the notice under Section 148.
- The CIT(A) upheld the AO's findings after addressing all objections raised by the assessee.

Tribunal's Findings:
- The AO had material indicating that the assessee had not filed a return for AY 1995-96 and had entered into a development agreement, leading to the belief that income chargeable to tax had escaped assessment.
- The AO followed due procedure, including obtaining necessary sanctions and addressing the assessee's objections.
- The Tribunal found the AO's initiation of proceedings under Section 147 and the issuance of notice under Section 148 valid.

3. Determination of Capital Gains Tax Liability for the Assessment Year 1995-96:
The assessee contended that there was no transfer of property during the accounting year ending 31.3.1995, and hence, no capital gains were liable for that period.

Arguments by the Assessee:
- The development agreement did not constitute a transfer of possession of the property.
- Various approvals were required before possession could be handed over.
- The capital gains should be taxed in AY 2003-04 when the project was completed by a different developer.

Arguments by the Department:
- The development agreement dated 30.6.1994 transferred rights and interests in the property to the developer.
- The developer was given the right to enter the property, apply for permissions, and carry out construction activities.
- The supplementary agreements and subsequent actions by the developer indicated that possession was handed over pursuant to the original agreement.

Tribunal's Findings:
- The agreement dated 30.6.1994 transferred control and interest in the property to the developer, constituting a transfer under Section 2(47) of the Act r.w.s. 53A of the Transfer of Property Act.
- The developer's actions, including obtaining approvals, securing loans, and carrying out construction, evidenced that possession was transferred in the period relevant to AY 1995-96.
- The Tribunal upheld the findings of the AO and CIT(A) that the capital gains were correctly brought to tax in AY 1995-96.

Interest under Section 234B:
The assessee challenged the charging of interest under Section 234B. The Tribunal held that the charging of interest is consequential and mandatory, directing the AO to recompute the interest while giving effect to its order.

Conclusion:
The appeal by the assessee was dismissed, upholding the validity of the AO's actions under Sections 147 and 148 and confirming the tax liability for capital gains in AY 1995-96.

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