2021 (9) TMI 188 - AT - Income Tax

Reopening of assessment u/s 147 - earning of capital gain by entering into JDA with the Developer - HELD THAT - There was no discussion whatsoever with regard to the earning of capital gain by entering into JDA with the Developer on 15.3.2006. The assessee has not disclosed anything about this transaction either in its return of income or in its computation. There is a total failure on the part of assessee to bring these facts to the notice of the assessing authority. Vide JDA dated 15.3.2006, the assessee being land owner with regard to 38 cents situated at 13/2A, 89, Kodialbail Village, Mangalore Taluk. As per JDA the assessee has to receive 24,000 sq.ft. of built-up area in the apartment for handing over the property. Since the capital gain arising out of this transaction has escaped from assessment and assessee has not disclosed fully and truly all material facts for the purpose of assessment, the case is attracted to the provisions of section 147. After necessary approval, notice u/s. 148 was issued on 20.3.2013. Being so, we do not find any infirmity in the reopening of assessment in this case. Transfer in terms of section 2(47)(v) of the Act when the JDA was entered with the Developer on 15.3.2006 - . The judgment in Chaturbhuj Dwarkadas Kapadia . 2003 (2) TMI 62 - BOMBAY HIGH COURT undoubtedly lays down a proposition, which more often than not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of assessee inasmuch as willingness to perform has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of section 53A of the T.P. Act. The Revenue does not get any assistance from this judicial precedent. As decided in BALBIR SINGH MAINI, CS ATWAL 2017 (10) TMI 323 - SUPREME COURT Under sub-clause (vi) of section 2(47) of the 1961 Act, any transaction which has the effect of transferring or enabling the enjoyment of any immovable property would come within its purview. The expression 'or in any other manner whatsoever' in sub-clause ( vi ) would show that it is not necessary that the transaction refers to the membership of a cooperative society. The object of section 2(47)( vi ) appears to be to bring within the tax net a de facto transfer of any immovable property. The expression 'enabling the enjoyment of' takes colour from the earlier expression 'transferring', so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof - Appeal by the assessee is partly allowed.

Summary

Issues Involved:
1. Reopening of assessment under Section 147/148.
2. Determination of transfer under Section 2(47)(v) of the Income-tax Act.
3. Computation of capital gains.
4. Applicability of interest under Sections 234B, 234C, and 234D of the Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147/148:
The assessee challenged the reopening of the assessment, arguing it was based on a mere change of opinion without new material evidence. The original assessment was completed under Section 143(3) on 15-02-2008, and the reassessment notice under Section 148 was issued on 20-03-2013, beyond the four-year limit. The Tribunal held that there was no disclosure of the Joint Development Agreement (JDA) in the original assessment, which led to income escaping assessment. Therefore, the reopening was justified under Section 147 due to the failure of the assessee to disclose all material facts.

2. Determination of Transfer under Section 2(47)(v):
The core issue was whether the JDA dated 15-03-2006 constituted a "transfer" under Section 2(47)(v) of the Act, which would attract capital gains tax. The assessee argued that no transfer occurred as no consideration was received, and no construction activity took place during the relevant financial year. The Tribunal examined the provisions of Section 53A of the Transfer of Property Act, noting that the developer had neither performed nor shown willingness to perform its obligations under the JDA in the assessment year under consideration. Thus, it was concluded that the conditions for a deemed transfer under Section 2(47)(v) were not satisfied, and no capital gains could be assessed for that year.

3. Computation of Capital Gains:
The Assessing Officer (AO) had computed short-term capital gains based on the JDA, considering the cost of construction as the sale value for the land. The Tribunal found that since the JDA was not acted upon and no development occurred in the assessment year, the computation of capital gains was premature. The Tribunal emphasized that the mere signing of the JDA without subsequent development activities did not result in a transfer, thus no capital gains accrued in the assessment year 2006-07.

4. Applicability of Interest under Sections 234B, 234C, and 234D:
The assessee contested the interest charged under Sections 234B, 234C, and 234D. Given the Tribunal's finding that no capital gains accrued in the assessment year under consideration, the interest charges under these sections were also deemed unsustainable.

Conclusion:
The Tribunal allowed the appeal partly, holding that the reopening of the assessment was valid but the computation of capital gains and the applicability of interest were not justified for the assessment year 2006-07 due to the lack of a deemed transfer under Section 2(47)(v). The judgment underscores the importance of actual performance and willingness to perform obligations under a JDA for taxability of capital gains.