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2022 (12) TMI 1312 - AT - Income TaxReopening of assessment u/s 147 - assessee has opted for Vivad-se-Vishwas Scheme by filing Form No.3. Later, the assessee could not pay the balance tax arrears and hence pleaded for recalling the appeal filed by the assessee - HELD THAT - Objection for the issuance of notice U/s. 148 of the Act and pleaded that the reassessment proceedings are liable to be quashed as void ab initio. We find from the records that the assessee has failed to respond to the notices and the Ld. AO has rightly after seeking permission from the Additional Commissioner of Income Tax, Guntur found that the income has escaped assessment and hence notice U/s.148 was issued to the assessee. AO further observed that the assessee has failed to furnish the return of income for the relevant assessment year inspite of having capital gains. In these circumstances, we find that reopening of assessment proceedings U/s. 147 of the Act is valid in law and hence this ground raised by the assessee is dismissed. Year of taxability of capital gains - HELD THAT - Admitted facts are that the development agreement was originally entered into by the assessee on 14/3/2016 in the ratio of 46 54 with the Developer. Consequently, additional 209 sq yds acquired subsequent to execution of the development agreement by way of revocation deed dated 18/5/2016 and added in the supplementary deed dt 18/5/2016 during the AY 2017-18. We find that the supplementary deed is an extension of the original development agreement with the same terms and conditions only with an addition of 209 sq yds. Therefore, in our considered view since the possession of the land has already been granted to the Developer vide the original development agreement entered into on 14/3/2016, the year of chargeability of capital gains in the hands of the assessee shall be AY 2016-17 and not AY 2017-18. We are therefore inclined to uphold the order of the Ld. CIT(A) on this ground and needs no interference. Accordingly, the Grounds No. 3 and 4 raised by the assessee are dismissed. Consideration received for the relinquishment of 54% of the land to the Developer - HELD THAT - Admittedly the assessee has conveyed 54% of the land admeasuring 2579.04 sq yds to the Developer for the purpose of constructing multistoried residential complex at Mangalagiri. The consideration for the part conveyance of the land to the Developer is the receipt of the super built up area including the parking area. Admittedly both the Revenue and the assessee has not disputed the cost per square yard adopted by the Ld. AO. In these circumstances, we find that the consideration for the relinquishment of 54% of the land to the Developer shall be the cost of construction of super built up area including parking area (Rs. 4,59,62,970 Rs. 61,28,396 Rs. 5,20,91,366/-) shall be the deemed sale consideration for the purpose of computation of capital gains. We therefore direct the Ld. AO to compute the capital gains adopting the above deemed sale consideration. Accordingly, this ground no. 5 raised by the assessee is allowed for statistical purposes. Claim of expenses like NALA Charges, Property taxes and Deviation Charges - HELD THAT - The receipt shows that it is paid by the assessee and we find merit in the argument of the Ld. AR that the assessee has to bear the cost of conversion of the agricultural land which would entitle the Developer to construct the multistoried residential building and which was part of the development agreement. We therefore direct the Ld. AO to allow these expenses towards the cost of construction. Further, it is also noticed from the remand report of the Ld. AO that the AO has not objected to the property tax paid by the assessee and hence these expenses incurred by the assessee shall be allowed while computing the cost of construction. With respect to deviation charges, the Ld. AR has submitted in page 53 of the paper book the fine paid of Rs. 31,36,000/- is with respect to set back as per the sanctioned plan in comparison with the completed building plan. These expenses are incurred for the entire building and the claim made by the AR that they should be allowed in the hands of the assessee could not be accepted. We find the deviation has occurred in the construction of the entire building and does not belong exclusively to the assessee. In these circumstances, the cost of deviation charges pertaining to the assessee shall be in proportion to the ratio of the land agreed between the Developer and the assessee as per the development agreement. We therefore direct the Ld. AO to allow 46% of Rs. 31,36,000/- amounting to Rs. 14,42,560/- as deduction from the capital gains for the assessee. Accordingly, this ground No.6 raised by the assessee is partly allowed. Exemption claimed U/s. 54F - DR submitted that the assessee is having two houses and hence exemption U/s. 54F cannot be allowed in this scenario - HELD THAT - The assessee has claimed exemption U/s. 54F considering the entire built up area as one residential unit. In our view it cannot be considered as a single residential unit. AO is therefore directed to verify whether the assessee is owning more than one house to claim deduction u/s. 54F of the Act. Accordingly, we direct the Ld. AO to verify these facts and afford a reasonable opportunity of being heard to the assessee and the deduction U/s. 54F shall be allowed in accordance with law. Accordingly, this ground No.7 raised by the assessee is allowed for statistical purposes.
Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act. 2. Year of taxability of capital gains. 3. Inclusion of the value of land in the sale consideration for computing capital gains. 4. Deductibility of certain expenses (NALA charges, property taxes, deviation charges) from capital gains. 5. Eligibility for exemption under Section 54F of the Income Tax Act. 6. Charging of interest under Sections 234A and 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147: The assessee objected to the issuance of notice under Section 148, arguing that reassessment proceedings should be quashed as void ab initio. The tribunal found that the assessee failed to respond to notices and did not file a return of income despite having capital gains. The Assessing Officer (AO) had sought permission from the Additional Commissioner of Income Tax before issuing the notice under Section 148. Therefore, the tribunal upheld the validity of the reassessment proceedings under Section 147, dismissing this ground. 2. Year of Taxability of Capital Gains: The assessee contended that capital gains should be taxable in the Assessment Year (AY) 2017-18 due to a supplementary agreement entered into on 18/05/2016. However, the tribunal noted that the original development agreement was entered into on 14/03/2016, and possession of the land was granted to the developer at that time. The supplementary agreement was merely an extension of the original agreement. Therefore, the tribunal upheld the taxability of capital gains in AY 2016-17, dismissing the related grounds. 3. Inclusion of the Value of Land in Sale Consideration: The assessee argued that the cost of land should not be included in the sale consideration for computing capital gains. The tribunal found that the consideration for relinquishing 54% of the land to the developer should include the cost of construction of the super built-up area and parking area, totaling Rs. 5,20,91,366/-. The tribunal directed the AO to compute capital gains based on this deemed sale consideration, allowing this ground for statistical purposes. 4. Deductibility of Certain Expenses: The assessee claimed deductions for NALA charges, property taxes, and deviation charges. The tribunal allowed the NALA charges of Rs. 22,43,340/- and property taxes of Rs. 1,88,965/-, as these were incurred by the assessee as part of the development agreement. However, for deviation charges of Rs. 31,36,000/-, the tribunal directed that only 46% (proportional to the land share) should be allowed, amounting to Rs. 14,42,560/-. This ground was partly allowed. 5. Eligibility for Exemption under Section 54F: The assessee claimed exemption under Section 54F for the entire built-up area received. The tribunal noted that the exemption under Section 54F could not be considered for a single residential unit if the assessee owned more than one house. The AO was directed to verify the number of houses owned by the assessee and allow the deduction accordingly. This ground was allowed for statistical purposes. 6. Charging of Interest under Sections 234A and 234B: The tribunal noted that the charging of interest under Sections 234A and 234B is consequential to the tax computation. The AO was directed to recompute the interest based on the tribunal's directions. This ground was addressed accordingly. Conclusion: The appeal was partly allowed for statistical purposes, with specific directions given to the AO for recomputation and verification of certain claims. The tribunal upheld the validity of reassessment proceedings, confirmed the year of taxability of capital gains as AY 2016-17, and provided detailed instructions on the inclusion of land value, deductibility of expenses, and eligibility for exemption under Section 54F.
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