2023 (2) TMI 428 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to belive - LTCG - Transfer of a capital asset within the meaning of Section 2(47) - whether granting a license to the developer, who entered into the assessee s land for the purpose of development did not amount to allowing the possession of the land as contemplated under Section 53A of the Transfer of Property Act, 1882, and, therefore, Section 2(47)(v) would not apply? - HELD THAT - The Apex Court in Seshasayee Steels (P.) Ltd. 2019 (12) TMI 702 - SUPREME COURT held that Section 53A of the Transfer of Property Act, 1882 would not be attracted in a case where a license was given to another for purposes of development of the flats and selling the same and that granting such a license could not be said to be granting possession within the meaning of Section 53A. Thus it can be seen that the development agreement permitted construction on the land in question only as a licensee which did not have the effect of transmitting possession in favour of the licensee within the meaning and spirit of Section 53A of T.P. Act. If that is so, then there would be neither any tangible material nor any reason for the assessing officer to believe that any income chargeable to tax had escaped assessment and the action of the assessing officer, therefore, would be without jurisdiction. Reopening of assessment u/s 147 quasshed - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act for reopening assessment year 2013-14 based on income escaping assessment.

Detailed Analysis:

1. Reasons for Reopening:
The notice under Section 148 was issued to reopen the assessment for the year 2013-14 based on information received regarding the transfer of land to a developer, indicating potential undisclosed income chargeable to tax. The assessing officer believed that the petitioner had not fully disclosed material facts leading to an understatement of income.

2. Objections Raised:
The petitioner objected to the reopening, arguing that the provisions invoked did not apply as the transaction with the developer did not constitute 'allowing possession of land' under Section 53A of the Transfer of Property Act. Reference was made to relevant case law to support this argument.

3. Assessing Officer's Decision:
The objections were rejected by the assessing officer, relying on a judgment that established the completion of property transfer when the developer received an irrevocable license from the landowner. The officer deemed the Apex Court judgment cited by the petitioner as inapplicable to the case.

4. Legal Interpretation:
The petitioner contended that the agreement with the developer only granted rights as a licensee, not possession as required by the law. The legal definitions of 'transfer' and 'possession' under the Income Tax Act and Transfer of Property Act were analyzed to determine the applicability of the provisions invoked for reopening.

5. Court Decision:
The court allowed the petition, setting aside the notice and order for reopening the assessment. It was concluded that the development agreement permitted construction on the land only as a licensee, not transferring possession as required by law. Therefore, there was no basis for the assessing officer to believe income had escaped assessment, rendering the action without jurisdiction.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented, and the legal interpretations leading to the court's decision to set aside the notice for reopening the assessment year.