2018 (8) TMI 1061 - AT - Income Tax

Reopening of an assessment u/s 147 - Computation of Capital Gains - transfer of property u/s 2(47) - assessee has not offered the capital gains to tax - similar issues in the case of co-owners have been remanded back by the ITAT Held that - we find that the property under transfer is the same and the assessees therein are the co-owners of the property. The Tribunal in paras 9 to 18 has considered the issue at length and has held that the capital gain is taxable in the relevant assessment year. However, with regard to the sale consideration to be adopted, the matter has been set aside to the file of the Assessing Officer. Similarly, computation of cost of acquisition and also the claim of deduction u/s. 54F have also been set aside to the file of the Assessing Officer. Respectfully following the decision of the Co-ordinate Bench in the case of the co-owners under the similar facts and circumstances, we deem it fit and proper to remand this issue also to the file of Assessing Officer with similar directions. - Decided partly in favor of assessee.

Issues Involved:
1. Delay in filing the appeal.
2. Validity of transfer of land and capital gains tax applicability.
3. Determination of sale consideration.
4. Computation of cost of acquisition.
5. Claim of deduction under sections 54 and 54F of the Income Tax Act.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 310 days. The assessee explained that the delay was due to the death of the petitioner and lack of knowledge of the appellate order by the legal heirs. Considering these reasons, the Tribunal condoned the delay and proceeded with the appeal.

2. Validity of Transfer of Land and Capital Gains Tax Applicability:
The main issue was whether the transfer of land occurred in the assessment year 2004-05, making the capital gains taxable. The Tribunal referred to a similar case involving co-owners, where it was held that the development agreement constituted a transfer under Section 2(47)(v) of the Income Tax Act. The Tribunal upheld that the capital gains were correctly imposed in the relevant assessment year based on the agreement terms and the jurisdictional High Court’s judgment in Potla Nageswara Rao vs. DCIT.

3. Determination of Sale Consideration:
The Assessing Officer (AO) had considered both the refundable deposit and the value of the constructed area as sale consideration, leading to a double addition. The Tribunal set aside this issue to the AO, directing that only the value of the constructed area should be adopted after giving due opportunity to the assessee. The AO was instructed to consider the assessee’s contention that the cost of construction should be adopted rather than the market price.

4. Computation of Cost of Acquisition:
The AO had adopted a cost of acquisition of ?1,18,835, which the assessee contested, arguing that the cost of buildings and expenses for tenant settlements should be included. The Tribunal directed the AO to re-examine this issue, considering the cost of buildings at the time of the agreement and other related expenses. The AO was instructed to allow the indexed cost of acquisition based on the facts and law after verifying the necessary evidence.

5. Claim of Deduction under Sections 54 and 54F:
The assessee claimed deductions under sections 54 and 54F for the construction of residential properties. The Tribunal noted that the AO had not examined this aspect as the assessment was completed ex parte. The Tribunal directed the AO to examine the claim of deduction under these sections, considering judicial pronouncements and giving the assessee an opportunity to make necessary claims.

Conclusion:
The Tribunal remanded the issues of sale consideration, cost of acquisition, and deduction claims back to the AO for fresh consideration with specific directions. The appeal was partly allowed for statistical purposes.

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