2022 (7) TMI 1085 - AT - Income Tax

Reopening of assessment u/s 147 - JD agreement entered - Exemption u/s 54F - provisions of section 2(47)v) and 2(47)(vi) are clearly attracted in this case and the capital gains are to be worked out in the impugned A.Y.- additional ground raised before him for the first-time claiming exemption u/s 54F - HELD THAT - It is an admitted fact that the assessee had not filed the return of income despite issuance and service of notice u/s 148 of the I.T. Act. As per provisions of section 54F the assessee is not entitled to deduction u/s 54F if he has more than one residential flat other than the new asset on the date of transfer of the capital asset. However it is not known as to whether the assessee owns more than one house other than the new asset since no return was filed and no enquiry was conducted either by the AO or the CIT(A). We find the learned CIT (A) without ascertaining the basic requirement was carried away by the arguments advanced by the assessee before him and allowed the additional ground raised by the assessee which is not a legal one but requires verification of fact. Neither she has verified the facts herself nor called for a remand report and for the reasons best known to her has allowed the claim of exemption u/s 54F of the I.T. Act in respect of 52 flats without addressing the various issues raised by the Assessing Officer in the assessment order. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. If required the learned CIT (A) shall call for a remand report from the Assessing Officer. The learned CIT (A) is also directed to consider as to how the assessee is entitled to the benefit of section 54F of the Act when as per the development agreement traced during the course of search and seizure operation in the case of SNR Nirman India Pvt. Ltd the assessee has received 52 constructed flats and whether that will amount to construction of a residential flat. The grounds raised by the Revenue are accordingly allowed for statistical purposes.

Summary

Issues:
1. Delay in filing appeal and cross objection
2. Assessment of capital gains from joint development agreement
3. Claim of exemption under section 54F

Issue 1: Delay in filing appeal and cross objection
The appeal filed by the assessee was against the order of the CIT (A) related to A.Y. 2012-13. There was a delay of 80 days in filing the appeal by the Revenue and one day in filing the cross objection by the assessee. Both sides filed condonation applications explaining the reasons for the delay. The Tribunal condoned the delay and admitted the appeal and cross objection for adjudication.

Issue 2: Assessment of capital gains from joint development agreement
The case involved a Non-Resident assessee who had entered into a joint development agreement (JDA) with a developer. The Assessing Officer reopened the assessment based on information that the assessee had earned income from the development project but had not declared it. The AO determined Long-Term Capital Gain (LTCG) in the hands of the assessee based on the JDA terms, noting that the developer had taken possession of the property and was willing to perform the contract. The CIT (A) upheld the reassessment proceedings and allowed exemption under section 54F for residential flats allotted to the assessee.

Issue 3: Claim of exemption under section 54F
The Revenue appealed the CIT (A) order, challenging the allowance of exemption under section 54F for all 52 residential flats. The Tribunal noted that the CIT (A) had not verified whether the assessee owned more than one house other than the new asset, as required by section 54F. The issue was restored to the CIT (A) for fresh consideration and verification of facts, directing a remand report if necessary. The cross objection raised by the assessee was also restored for adjudication.

In conclusion, the Tribunal allowed the appeal by the Revenue and the cross objection filed by the assessee for statistical purposes, emphasizing the need for a thorough examination of facts and legal provisions in determining the tax implications of the joint development agreement and the claim for exemption under section 54F.