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TMI Blog2015 (5) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is required to examine assessee’s claim that he is no more owner of the property as it was sold to his wife by registered agreement of sale on 04/04/06. AO also is required to determine the year of taxability considering the claim of assessee that capital gain on transfer of land to the builder was offered by the land owners in A.Y. 2011-12 upon cancellation of development agreement and execution of sale deed. Thus we uphold the exercise of jurisdiction u/s 263 by ld. CIT, but, we modify his order by directing AO to examine the issue of accrual of capital gain in the impugned AY, independently, without being influenced by any of the observations of ld. CIT. AO must decide the issue considering all facts and materials on record as well as the submissions of assessee - Decided partly in favour of assessee for statistical purposes - ITA No. 673/Hyd/2012, ITA No. 674/Hyd/2012, ITA No. 675/Hyd/2012 - - - Dated:- 10-4-2015 - IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD Shri B. Ramakotaiah And Shri Saktijit Dey JJ. ITA No. 673/Hyd/2012, ITA No. 674/Hyd/2012, ITA No. 675/Hyd/2012 Kushal Kumar Kankaria, Dinesh Kumar Kankaria, Sanjay Kumar Kankaria Versu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the submissions of assessee, observed that after amendment of definition of transfer as envisaged u/s 2(47) of the Act, any transaction involving allowing of possession to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Properties Act would come within the ambit of section 2(47)(v). Thus, assessee having entered into a development agreement and delivered possession, there is transfer of capital asset within the meaning of section 2(47)(v) during the relevant PY. In this context, ld. CIT relied upon a decision of the ITAT, Hyderabad Bench in case of Dr. Maya Chenoy Vs. ACIT. Ld. CIT further observed that assessee along with other two coowners have executed a registered sale deed-cum-GPA on 07/06/10 with the same developer and the amount which was received by assessee along with coowners towards advance on 16/04/07 was declared as full and final sale consideration. From this, ld. CIT inferred that assessee s claim that he has entered into a development agreement and not a sale is proved to be incorrect. Ld. CIT observed, with an intention to postpone tax liability assessee has tried to give the transaction a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the obligations under the development agreement nor was he cooperating in relegating the parties to their original position. Therefore, property was sold by land owners for a consideration of ₹ 7.20 crore. It was submitted, as the property was finally sold during FY 2010-11, the capital gain was declared by land owners in AY 2011-12. Ld. AR submitted, in any case of the matter, whether there is transfer in pursuance to the development agreement is a debatable issue as more than one view is possible due to divergent views expressed by different high courts as well as different benches of the Tribunal. Therefore, if the view taken by AO is one of the possible view, then, power u/s 263 of the Act cannot be invoked to set aside such view of AO. Alternatively, it was contended by ld. AR, if ld. CIT felt that there was absence of enquiry and non-application of mind by AO, then, he should have directed AO to examine the issue instead of straightway directing him to compute capital gain. In support of such contention, ld. AR relied upon the following decisions: 1. Suraj Lamp Industries (P) Ltd., Vs. State of Haryana, 340 ITR 01 (SC) 2. Parvez Nazir Hussein Jafri Vs. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. on 16/04/07. As per terms of the said development agreement, assessee along with coowners is to receive built up area of 40% apart from refundable deposit of ₹ 5 crores. It is also not disputed that in pursuance to the development agreement assessee has handed over possession of land to the developer and the developer has started development activity. The main thrust of the argument of assessee is two fold. Firstly, assessee is not the owner of land as he has transferred it to his wife vide registered agreement of sale-cum-GPA executed on 04/04/06. Thus, it was submitted, when assessee is not at all owner of the property, capital gain cannot be assessed at his hand. Second argument of assessee is, the issue whether capital gain accrues on execution of development agreement is a debatable issue as there are divergent judicial opinion on the issue. Therefore, when the issue involved is a debatable issue, on which more than one view is possible, ld. CIT cannot exercise power u/s 263 by observing that the view taken by AO is not correct view. As far as the first argument of assessee is concerned, material on record indicate that assessee has entered into registered agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd by itself will not prove that AO has applied his mind to those materials and formed an opinion unless discussion in the assessment order or entries in the order sheet or communication made by AO indicate so. Whether a particular issue is debatable or more than one view is possible on the issue can be known only when there is a debate and dialogue between the AO and assessee on the issue. Material on record must indicate that AO has applied his mind to facts and materials on record through a process of enquiry and investigation and formed a view on the issue. However, when the facts and materials on record are so glaring to indicate that AO has not at all enquired into the matter or applied his mind to the issue on which the order is sought to be revised, then, it cannot be said that ld. CIT cannot invoke the power u/s 263 of the Act as two views are possible on that issue. In the present case, though, assessee along with other coowners has entered into a development agreement and handed over possession of property to developer, admittedly assessee has neither offered any capital gain in the return of income filed for the impugned AY nor disclosed the reasons for not doing so. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that developer was not wi lling to perform his part of the contract. Whereas, in the present case, AO has not at all examined the issue. As far as other decisions of the Hon ble High Courts relied upon by the ld. AR, there cannot be any dispute with regard to the principle decided therein to the effect that where two views are possible and AO has taken one of the view, jurisdiction u/s 263 will not arise. However, in the present case, AO has neither applied his mind nor examined the issue by making any enquiry, hence, formation of any view by AO does not arise. That being the case, these decisions will not be applicable. For the very same reason, the ratio laid down by the Hon ble jurisdictional High Court in case of Spectra Shares and Scrips, 354 ITR 35 will also not apply. Though, it may be a fact that there are divergent views whether there is transfer giving rise to capital gain on the date of development agreement, but, fact remains, the issue requires examination by the AO and has to be decided on the basis of facts involved. AO has to decide the issue of accrual of capital gain under a development agreement by examining various factors, like date of handing over of poss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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