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2018 (5) TMI 705 - AT - Income TaxCapital gain tax liability - unregistered development agreement for development of property - The power and control of land was conferred on the builder/developer under GPA - whether no transfer arise giving rise to any transfer of right u/s.53A of the Transfer of Property Act? - Held that - The undisputed facts are that the agreement dated 15.1.2007 with the builder M/s. Odyssa Home & Commercials (P) Ltd., for construction and sale of 9 dwelling units by the assessee on his land situated at Plot No.137/A, Surya Nagar, Bhubaneswar was not registered. In view of the decision of Hon ble Supreme Court in the case of CS Atwal 2017 (10) TMI 323 - SUPREME COURT OF INDIA the same would not amount to transfer u/s.53A of the Transfer of Property Act, 1882 and consequently cannot be a transfer within the meaning of section 2(47)(v) of the Act. Thus, there cannot be any capital gains in the hands of the assessee which can be brought to tax during the year under consideration - Addition to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Jurisdictional Error and Validity of Assessment Order 2. Assumption of Jurisdiction by the Assessing Officer 3. Computation of Capital Gains 4. Consideration Accrued or Received 5. Exemption under Section 54F of the I.T. Act, 1961 6. Opportunity of Being Heard and Natural Justice 7. Basis of Assessment 8. Perversity of Assessment 9. Pre and Post Expenditure towards Construction 10. Grounds for Quashing the Assessment Issue-Wise Detailed Analysis: 1. Jurisdictional Error and Validity of Assessment Order: The assessee contended that the assessment order dated 18.03.2013 and the CIT(A) order dated 23.02.2015 were void ab initio due to jurisdictional error. The assessee argued that no transfer arose at the time of the development agreement, thus invoking Section 53A of the Transfer of Property Act and Section 2(47) of the I.T. Act, 1961 was incorrect. Consequently, the notice issued under Section 147 was deemed illegal and without jurisdiction. 2. Assumption of Jurisdiction by the Assessing Officer: The assessee argued that the Assessing Officer wrongly assumed jurisdiction since the Developer Agreement was executed on 15.01.2007, but possession was delivered only on 01.07.2007, and the building plan was approved on 04.04.2009. Therefore, the notice under Section 148 for the assessment year 2007-08 was illegal and exceeded jurisdiction. 3. Computation of Capital Gains: The assessee contested that in the absence of any consideration accrued or received at the time of entering into the Development Agreement, Sections 45 and 48 of the I.T. Act were not complied with, making the computation of capital gains invalid. The assessment based on hypothetical values was contrary to the real income theory. 4. Consideration Accrued or Received: The assessee received its share in lieu of land from the developer, and the entire 1/3rd super built-up area towards the owner's share was available for residence. The assessee claimed entitlement to deductions/exemptions under Section 54F of the I.T. Act, 1961, which was partially allowed by the CIT(A). 5. Exemption under Section 54F of the I.T. Act, 1961: The CIT(A) allowed exemption for one residential unit under Section 54F, but the assessee argued that this allowance was contrary to the provisions of law and should be set aside. 6. Opportunity of Being Heard and Natural Justice: The assessee claimed deprivation of the benefit of reasonable opportunity of being heard and natural justice. 7. Basis of Assessment: The assessee argued that the assessment was neither based on facts and circumstances nor on points of law, rendering it liable to be quashed. 8. Perversity of Assessment: The assessee contended that the assessment was entirely perverse on facts and erroneous in law. 9. Pre and Post Expenditure towards Construction: The CIT(A) appreciated the pre and post expenditure towards construction but rejected part of it without a speaking order, which the assessee argued was erroneous and needed revision. 10. Grounds for Quashing the Assessment: The assessee sought to add, alter, or amend any grounds of appeal, praying for the assessment to be quashed and the demand annulled in the interest of justice and equity. Judgment Analysis: Jurisdictional Error and Validity of Assessment Order: The Tribunal found that the development agreement dated 15.01.2007 was not registered, and as per the Supreme Court decision in CS Atwal vs CIT, an unregistered agreement does not qualify as a transfer under Section 53A of the Transfer of Property Act. Consequently, Section 2(47)(v) of the I.T. Act does not apply, and the assessee is not liable for capital gains tax. Assumption of Jurisdiction by the Assessing Officer: The Tribunal agreed with the assessee that the notice under Section 148 for the assessment year 2007-08 was issued without proper jurisdiction since the possession was delivered on 01.07.2007, and the building plan was approved on 04.04.2009. Computation of Capital Gains: The Tribunal concluded that no capital gains could be computed as the development agreement was not registered, and there was no transfer under Section 53A of the Transfer of Property Act. Consideration Accrued or Received: The Tribunal did not address this issue in detail as the primary ground of jurisdiction and validity of the assessment order was decided in favor of the assessee. Exemption under Section 54F of the I.T. Act, 1961: The Tribunal did not need to adjudicate this issue as the primary ground was decided in favor of the assessee. Opportunity of Being Heard and Natural Justice: The Tribunal did not address this issue as the primary ground was decided in favor of the assessee. Basis of Assessment: The Tribunal found the assessment to be invalid due to jurisdictional errors and did not address this issue separately. Perversity of Assessment: The Tribunal did not address this issue as the primary ground was decided in favor of the assessee. Pre and Post Expenditure towards Construction: The Tribunal did not address this issue as the primary ground was decided in favor of the assessee. Grounds for Quashing the Assessment: The Tribunal quashed the assessment and annulled the demand based on the primary ground of jurisdictional error and invalidity of the assessment order. Revenue's Appeal: The revenue's grounds of appeal became infructuous due to the Tribunal's decision in favor of the assessee on the primary ground. The Tribunal dismissed the revenue's appeal. Conclusion: The Tribunal allowed the assessee's appeal, quashed the assessment order, and dismissed the revenue's appeal. The decision was pronounced on 07.05.2018.
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