2013 (11) TMI 1240 - AT - Income Tax

Reassessment u/s 147 read with 148 - held that - Since originally no assessment was framed u/s 143(3) of the Act and information also came to the Revenue, therefore, revenue had right to reopen the assessment Chargeability of capital gain on the transfer of plot - joint development agreement - taxable in the hands of assessee or society - Held that - following the decision in Shri Charanjit Singh Atwal 2013 (8) TMI 364 - ITAT CHANDIGARH the capital gain is taxable in the hands of assessee - decided against the assessee.

Issues Involved:
1. Validity of reopening the assessment under sections 147 and 148 of the Income-tax Act, 1961.
2. Taxability of Long Term Capital Gains (LTCG) on the transfer of property.
3. Determination of the amount of LTCG and the year of its taxability.
4. Estimation of the value of the property and the furnished flat.
5. Identification of the real owner for assessing LTCG.

Issue-wise Analysis:

1. Validity of Reopening the Assessment:
The assessee challenged the reopening of the assessment under sections 147 and 148 of the Income-tax Act, 1961. The Tribunal found that the original return was processed under section 143(1), and later information indicated a transfer of land by The Defence Services Cooperative House Building Society to M/s Tata Housing Development Company Ltd. This justified the issuance of notice under section 148, in line with the Supreme Court's decision in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. Thus, the reopening of the assessment was upheld.

2. Taxability of Long Term Capital Gains (LTCG):
The assessee contended that there was no transfer of property during the year under consideration, and the addition of Rs. 78,63,408/- was based on estimation. The Tribunal referred to the case of Charanjit Singh Atwal, where it was established that for charging capital gains under section 45, three ingredients are necessary: profit, arising from transfer, and a capital asset. The Tribunal found that the assessee had transferred the property under clauses (v) and (vi) of section 2(47), which includes transactions involving the allowing of possession of immovable property in part performance of a contract. The Tribunal concluded that the transfer took place in the year under consideration, making the LTCG taxable.

3. Determination of the Amount of LTCG and the Year of its Taxability:
The assessee argued that only a part of the property was transferred, and thus only a part of the capital gains should be taxed. The Tribunal emphasized that under section 45, the entire consideration received or accruing as a result of the transfer should be taxed in the year of transfer. The Tribunal noted that the possession of the property was handed over to the developer, and irrevocable special power of attorney was executed, which constituted a transfer under section 2(47)(v). The Tribunal held that the entire consideration, including the value of the furnished flat, should be taxed in the year of transfer.

4. Estimation of the Value of the Property and the Furnished Flat:
The assessee contested the valuation of the furnished flat at Rs. 60,75,000/-. The Tribunal referred to the agreement between the society and the developers, which specified the value of the flat at Rs. 4,500 per sqft. The Tribunal found this estimation reasonable, considering market rates and the agreement's terms. The Tribunal rejected the assessee's contention and upheld the valuation.

5. Identification of the Real Owner for Assessing LTCG:
The assessee argued that the capital gains should be assessed in the hands of the Defence Service Cooperative Housing Society Ltd., Mohali, and not the individual member. The Tribunal found that the society acted as a facilitator, and the members were the real owners of the plots. The consideration was paid directly to the members, and the members were liable for the capital gains tax. The Tribunal upheld the CIT(A)'s decision that the LTCG should be assessed in the hands of the individual members.

Conclusion:
The Tribunal dismissed the appeal, upholding the reopening of the assessment, the taxability of the entire LTCG in the year of transfer, the valuation of the furnished flat, and the assessment of LTCG in the hands of the individual members.

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