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2015 (4) TMI 100 - AT - Income TaxReopening of assessment - Chargeability of capital gain - transfer of ownership rights over the property - capital gains arising out of sale of the property as there is a transfer within the meaning of section 2(47) of the Act by virtue of the agreement of sale and joint development entered into by the assessee in the assessment year 2003-04 as per assessee - Held that - Following the decision of Asst. CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 2007 (5) TMI 197 - SUPREME Court we uphold the order of the Assessing Officer in invoking the provisions of section 147 of the Act as the return was processed only under section 143(1) and no assessment was made under section 143(3) of the Act and the Assessing Officer came to possession of information of escapement of income during the course of assessment proceedings for the assessment year 2006-07. - Decided against assessee. Whether procedure laid down under the proviso to section 151(1) for issue of notice has not been complied with? - Held that - Ongoing through the provisions of section 151(1) we find that the said provisions have no application to the facts and circumstances of the case as the said provisions of section 151(1) applies only to cases where assessments were completed either under section 143(3) or 147 of the Act. - Decided against assessee. Whether there is a transfer within the meaning of section 2(47) or not in respect of property given for development? - Held that - Ongoing through the order of the Commissioner of Income-tax (Appeals) and the clauses of the agreement of sale and joint development agreement dated December 30 2002 read with supplemental agreement dated February 15 2003 and power of attorney dated December 30 2002 executed by the assessee in favour of the builder authorising the builder to sell and register the flats in the name of prospective buyers we are of the view that there is a transfer within the meaning of section 2(47) by virtue of entering into an agreement of sale and joint development. Though the assessee submits that the possession was given at later point of time i.e. after March 31 2003 there is no evidence on record to suggest that possession was given at a later point of time even though the construction permit was given by the municipal authorities on July 11 2003 and planning permit was given on May 26 2003 and demolition certificate on February 19 2003. As per clause 21 of the agreement the promoter shall pay the owner i.e. the assessee a sum of 15, 000 per month from the date of getting vacant possession of the schedule C property till the date of completion of the flat for her alternate accommodation. Supplemental agreement was entered into on February 15 2003 by the assessee with the promoter wherein the assessee authorises the promoter to sell the other flats allotted to her share fully described in Schedule C . The promoter is also authorised to receive advance sale consideration etc. and other amounts and to sign sale deeds and other documents in respect of the flats mentioned in schedule C . The assessee also gave power of attorney to the promoter Mr. J. Rajkumar Balsingh on December 30 2002 registered in the office of the Sub-Registrar Anna Nagar vide document No. 1560/2002 empowering the promoter to sell the flats on behalf of the assessee. All these go to show that there is a transfer within the meaning of section 2(47) of the Act by virtue of entering into an agreement of sale and joint development by the assessee with Mr. J. Rajkumar Balsingh in the assessment year 2003-04. In the circumstances we uphold the order of the Commissioner of Income-tax (Appeals) in holding that there is a transfer within the meaning of section 2(47) of the Act in respect of the property. Decided against assessee. Invoking the provisions of section 50C and considering the guideline value of registration department for the purpose of computing capital gains - Held that - We are unable to endorse the view of the Commissioner of Income-tax (Appeals) in accepting the decision of the Assessing Officer in invoking the provisions of section 50C of the Act. AS decided in Navneet Kumar Thakkar v. ITO 2007 (3) TMI 317 - ITAT JODHPUR unless the property transferred has been registered by sale deed and for that purpose value has been assessed and stamp duty has been paid by the parties section 50C inserted by the Finance Act 2002 with effect from April 1 2003 cannot come into operation. Also when the agreement is not registered the provisions of section 50C have no application - Decided in favour of assessee. Deduction towards cost of building existing on the land with indexation benefit for the purpose of computation of long-term capital gains - CIT(A) allowed the claim - Held that - The Commissioner of Income-tax (Appeals) taking note of the principles of the decision of Dhun Dadabhoy Kapadia v. CIT 1966 (10) TMI 52 - SUPREME Court allowed the claim of the assessee in respect of indexation on building existed on land as on the date of entering into an agreement observing as per the agreement of sale and joint development what is transferred is only the land but the fact that on executing the said agreement the appellant also cedes right over the building located on the said land and hence for the purpose of working out capital gain the cost of the building and indexation of benefit thereon should also to be deducted to arrive at the cost for the purpose of computing taxable capital gain. Capital gain tax is assessed in the hands of the transferor and the transfer is to be seen from the point of view of transferor and statutory deductions are to be provided. - Decided against revenue. Reopen the assessment under section 147 - denying benefit under section 54F - Held that - In this case as the notices under section 148 were served on March 18 2009 assessments under section 143(3) read with section 147 should have been completed on or before March 31 2010. However the assessments were completed for both these assessment years on December 31 2010 which is beyond the time limit specified under section 153(2) of the Act. Therefore the assessments made for both these two assessment years under section 143(3) read with section 147 are barred by limitation and bad-in-law. Therefore the reassessments made for both these assessment years beyond the period of limitation are liable to quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening of assessment under section 147. 2. Whether there was a transfer of property within the meaning of section 2(47) of the Income-tax Act. 3. Applicability of section 50C for determining sale consideration. 4. Deduction towards cost of building with indexation benefit for computation of long-term capital gains. 5. Jurisdiction to reopen the assessment under section 147 for the assessment years 2004-05 and 2005-06. 6. Validity of assessment orders passed beyond the due date under section 153(2). Detailed Analysis: 1. Validity of Reopening of Assessment under Section 147: The assessee contested the reopening of assessment under section 147, arguing that primary facts were already disclosed in the original return. The Tribunal upheld the reopening, stating that the Assessing Officer (AO) had tangible material suggesting escapement of income while completing the assessment for the assessment year 2006-07. The Tribunal cited the Supreme Court decision in Asst. CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd., which held that reopening is valid even if the original return was processed under section 143(1) without scrutiny. Therefore, the reopening under section 147 was deemed valid. 2. Transfer of Property within the Meaning of Section 2(47): The assessee argued that no transfer occurred as possession was handed over to the builder only for project development, not as a transfer of ownership. The Tribunal, referencing the agreement of sale and joint development, concluded that there was a transfer within the meaning of section 2(47). The Tribunal cited the Bombay High Court decision in Chaturbhuj Dwarkadas Kapadia v. CIT, which held that the date of the contract is relevant for chargeability. The Tribunal found that the agreement and power of attorney executed by the assessee indicated a transfer of property rights. 3. Applicability of Section 50C: The Tribunal disagreed with the Commissioner of Income-tax (Appeals) and the AO's application of section 50C, which considers the guideline value of the property for computing capital gains. The Tribunal cited several cases, including the Jodhpur Bench decision in Navneet Kumar Thakkar v. ITO, which held that section 50C applies only if the property is registered by sale deed and stamp duty is paid. Since the agreement was not registered, section 50C was deemed inapplicable. 4. Deduction Towards Cost of Building with Indexation Benefit: The Revenue appealed against the Commissioner of Income-tax (Appeals) allowing indexation on the cost of the building. The Tribunal upheld the Commissioner's decision, referencing the Supreme Court decision in Dhun Dadabhoy Kapadia v. CIT, which allowed indexation benefits for the building existing on the land as on the date of entering into the agreement. The Tribunal confirmed that the assessee is entitled to indexation on the building for computing capital gains. 5. Jurisdiction to Reopen the Assessment under Section 147 for Assessment Years 2004-05 and 2005-06: The assessee challenged the jurisdiction to reopen the assessments for the years 2004-05 and 2005-06. The Tribunal admitted the additional grounds raised by the assessee, which were purely legal and went to the root of the matter concerning the validity of the assessment orders. 6. Validity of Assessment Orders Passed Beyond the Due Date under Section 153(2): The Tribunal found that the assessments for the years 2004-05 and 2005-06 were completed beyond the due date stipulated under section 153(2). Notices under section 148 were served on March 18, 2009, and the assessments should have been completed by March 31, 2010. However, the assessments were completed on December 31, 2010, making them invalid. The Tribunal quashed the reassessments for being barred by limitation. Conclusion: - The appeal of the assessee in I.T.A. No. 615/Mds/2012 was partly allowed. - The appeals of the assessee in I.T.A. Nos. 616 and 617/Mds/2012 were allowed. - The appeal of the Revenue in I.T.A. No. 972/Mds/2012 was dismissed. Order Pronounced: The order was pronounced in the open court on August 29, 2013, at Chennai.
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