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2024 (11) TMI 867 - AT - Income TaxTaxation of long-term capital gains arising on the development agreement u/s 153C r.w.s 144C(3) - assessee, being an NRI, was assessed to have no source of income in India and therefore, was taxable under the residual charge at Delhi, having a PAN number - As argued JDA, based on which the additions were made in the assessment for 2016-17, though registered, did not result in a transfer of possession Jurisdiction of the AO u/s 153C r.w.s. 144C(3) - challenge the assessment made by the AO without a transfer order u/s 127 - HELD THAT - In the present case, the documents were found during the course of search belonging to the assessee and notice u/s 153C was issued by the Assessing Officer having the territorial jurisdiction where the property is situated. The contention of the assessee that the notice should have been issued by the AO at Delhi will lead to lot of complications as there is no record available at the AO of Delhi nor the documents were available at the AO of the Delhi. The law is fairly settled that the forum in whose jurisdiction the situs is situated and where the necessary documents / information is available should be the appropriate forum for adjudication. Section 127 of the Act will only come into play when there is some transfer of jurisdiction from one authority / office to the other. In the present case, the assessee has not filed the return of income and has not assessed at the Delhi ITO / Assessing Officer and therefore, there is no question of transfer of jurisdiction of the Assessing Officer from ITO, Delhi to ITO, Hyderabad. In view of the above, we are of the considered opinion that the jurisdiction invoked by the Assessing Officer at Hyderabad is in accordance with law - this ground is decided against the assessee. Whether the transfer took place on account of JDA entered on 30.12.2015 or not? - Undoubtedly, as per the JDA, both parties agreed to raise the construction and share the built-up area - CIT(A) had captured the various clauses of the JDA which clearly shows the respective transfer of rights by one party to the other in respect of land share. Assessee before us, pursuant to the construction was also entitled to receive the built-up flats as per the Annexure to the JDA. We are unable to comprehend as to how the assessee will receive the possession of built-up flats when the assessee has not allegedly transfer the possession. In fact, the ld.CIT(A) has categorically mentioned that no document has been produced by the assessee to separate transfer of possession to the developer. No error in the decision of ld.CIT(A) on this aspect as the fact speaks for itself. The Developer was under obligation to construct the property after receiving due sanctions from various authorities as per the specification and cost of construction agreed between it and the assessee. For all purposes, there is a transfer of land / capital asset within the meaning of law and for the above said purposes, we may rely upon the decision of Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT In the light of the above, this ground of the assessee is dismissed. Year of assessment - assessee has disclosed his capital gains in the assessment year 2019-20 and therefore, it should not have been assessed in A.Y. 2016-17 - The law is settled that the tax has to be levied in the year when it is due and payable. In the present case, the taxable event as per the judgment in the case of Potla Nageswara Rao 2014 (6) TMI 494 - ITAT HYDERABAD and Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT .happened in the year 2016-17 and therefore, it is to be charged in the said assessment year only. In case, as claimed by the assessee, the income has been offered in 2019-20, then the Assessing Officer may verify and pass rectification order, otherwise, it amounts to double taxation. In view of the above, the argument of the assessee is unsustainable. Valuation of property - value of Rs. 5,000/- per sq.yd taken by the AO as against Rs. 8,000/- per sq.ft adopted by the registered valuer - The valuation report was required to be given of the property as on the date of its transfer i.e., in the assessment year 2016-17 and not on a the subsequent occasion. The inspection of the property on 08.06.2019 had not thrown the light on the extent and nature of construction. Furthermore, the valuation report cannot be considered as it does not inspire confidence and is therefore required to be rejected. In this regard, the Assessing Officer has relied upon the guidance value of the area in which the property is situated, we do not find any reason to interfere with the same as the assessee failed to point out the peculiarity of the location, status and construction of the property for fetching more price in comparison to the guidance value. In view of the above, this ground of the assessee is dismissed. Accordingly, the appeal of the assessee is dismissed.
Issues Involved:
1. Jurisdiction of the Assessing Officer under Section 153C read with Section 144C(3) of the Income Tax Act, 1961. 2. Transfer of possession under the Joint Development Agreement (JDA) and taxation of capital gains. 3. Timing of capital gains recognition for tax purposes. 4. Valuation of property for capital gains calculation. Detailed Analysis: 1. Jurisdiction of the Assessing Officer: The assessee contended that the jurisdiction assumed by the Assistant Director of Income Tax (International Taxation) at Hyderabad was invalid as there was no compliance with Section 127 of the Income Tax Act, which mandates a transfer order when jurisdiction is shifted from one authority to another. The argument was based on the fact that the assessee, being a non-resident, had a PAN issued in Delhi, and the jurisdiction should have remained there. However, the tribunal held that since the assessee had not filed a return of income in Delhi and the incriminating material was found in Hyderabad, the jurisdiction was correctly assumed by the Hyderabad officer. The tribunal clarified that Section 127 was not applicable as there was no existing assessment order in Delhi to transfer. 2. Transfer of Possession Under JDA and Taxation of Capital Gains: The assessee argued that no transfer of possession occurred under the JDA executed on 30.12.2015, and hence, no capital gains should be recognized for the assessment year 2016-17. The tribunal, however, found that the JDA contained clauses indicating a transfer of rights and obligations, which implied a transfer of possession necessary for the developer to commence construction. The tribunal relied on the Supreme Court's decision in Balbir Singh Maini, which clarified that for a transfer to be recognized under Section 2(47)(v), there must be an enforceable contract. In this case, the tribunal concluded that the JDA did result in a transfer of possession, thus attracting capital gains tax. 3. Timing of Capital Gains Recognition: The assessee claimed that the capital gains were disclosed in the assessment year 2019-20 when the developer handed over possession of the flats. The tribunal rejected this argument, emphasizing that tax must be levied in the year the taxable event occurs. Since the JDA was executed in 2015, the taxable event occurred in the assessment year 2016-17. The tribunal directed the Assessing Officer to verify if the income was offered in 2019-20 to avoid double taxation but maintained that the tax liability arose in 2016-17. 4. Valuation of Property for Capital Gains Calculation: The assessee challenged the valuation of Rs. 5,000 per square yard adopted by the Assessing Officer, arguing that the registered valuer's report suggested a higher value of Rs. 8,000 per square yard. The tribunal found that the valuer's report lacked substantiation and did not provide comparable sales data to justify the higher valuation. Consequently, the tribunal upheld the valuation based on the guidance value used by the Assessing Officer, as the assessee failed to demonstrate any peculiarities that would warrant a higher valuation. Conclusion: The tribunal dismissed the appeal of the assessee, upholding the jurisdiction of the Hyderabad Assessing Officer, the recognition of capital gains in the assessment year 2016-17, and the valuation adopted by the Assessing Officer. The tribunal's decision emphasized the importance of adhering to statutory provisions regarding jurisdiction and the timing of income recognition for taxation purposes.
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