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TMI Blog2023 (11) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... ties constructed apart from cash consideration. In such a case taxability of the income which the assessee has credited on accrual basis and offered for taxation in the relevant assessment years requires to be worked out under the provisions of section 45(2) r.w.s. 48, i.e. long-term capital gain for the sale of the land as well as profit from the sale of the developed property would be computed in accordance with the provisions of s. 45(2) r.w.s. 48 of the Act and under the head Income from business respectively. Thus, the reasons recorded by the Ld AO u/s 148(2) treating the income to chargeable under the head Business and Profession are found to be under wrong appreciation of facts and erroneous application of law, which is not permissible. This aspect is covered by the judgment relied upon by the assessee, in the case of Prakriya Pharmacem [ 2016 (1) TMI 946 - GUJARAT HIGH COURT] wherein as categorically held that, under the circumstances, the reasons recorded by the Assessing Officer to form belief that the income chargeable to tax had escaped assessment lack validity for the simple reason that an attempt was as made by the AO to apply certain provisions of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share in the common areas respectively. It is observed by the Ld. AO that, however, no specific details of flats/villas/lands were earmarked in the agreement which could ascertain the fact that the two properties pertain to M/s Biltech Engineering Pvt. Ltd. During the previous year, the assessee has shown cash receipt of Rs. 2,70,00,000/-, seven villas valued at Rs. 2,25,75,000/-, two flats valued at Rs. 53,87,200/- and two shops valued at Rs. 5,54,400/- totaling to Rs. 5,55,16,600/- as sale consideration and after deducting indexed acquisition cost of land at Rs. 1,58,39,316/- has computed Rs. 3,96,77,284/- as LTCG. According to the Ld. AO, since, the assessee had entered into joint venture with M/s Biltech Engineering Pvt. Ltd. On 28.12.2006 and the impugned land was converted into tock-in-trade, the entire amount of Rs. 5,55,16,600/- is business receipt instead of sale consideration of asset. Hence, the assessee was not entitled to claim LTCG and could not compute the receipt of Rs. 5,55,16,600/- under the head LTCG. Accordingly, income of Rs. 1,92,42,016/- [Rs. 5,55,16,600- (Rs.3,96,77,284 - Rs. 34,02,700)] escaped assessment for the relevant A.Y. 2011-12. 4.1 After recordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack undelivered is available on the record. The proof of dispatch of the notice may also be tracked from consignment No. RC22538585IN . The assessee has grievance that the registered pot bears current address of the assessee T. C. Buildcon Pvt. Ltd., Vasudev, Raipur 492009 (Chhattisgarh) instead of old address of the assessee T.C. Buildcon Pvt. Ltd., Tiwari Niwas, Naharpara, Raipur 492009 Chhattisgarh) . The contention of the assessee is not accepted by the Ld. AO. Both the notices are valid within the provisions of Section 282 of the I. T. Act, 1961. As per above discussion, it was the view of the Ld. AO that the assessee is unnecessarily challenging the validity of the notice u/s 148 of the Act dated 30.03.2018 instead of complying the notices. A final opportunity notice u/s 144 issued on 05/11/2018 through e-mail and dak, giving an opportunity to the assessee to appear on 09/11/2018. But again, no compliance by the assessee. Hence, Ld. AO has decided to assess the income of the assessee u/s 144 of the I. T. Act, 1961. Considering the facts and circumstances of the case, the income of the assessee is assessed as under: - Income from Business and Profession: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enclosure thereto, which were already part of record, reopening was not justified. 2. Tupperware India Pvt. Ltd. vs CIT(2016) 60 taxmann.com 350 (Del HC). In this case Hon ble Delhi HC has delt with the aspect pertaining to contract manufacturing agreements entered into by the assessee with two companies for manufacturer of plastic products, the relevant extract of the decision is culled out as under: Where contract manufacturers were carried out manufacturing activity for assessee and it was in assessee s business interest that all tax liabilities of manufacturer were duly satisfied payments towards tax liabilities of contract manufacturer was to be regarded as business expenditure. 3. Prakriya Pharmacem vs ITO (2016) 66 taxmann.com 149(Guj HC), wherein Hon ble High Court has held that, Where AO merely mentioned about transactions in notice for reassessment and nothing more and thus he read not stated how he had come to reason to believe that income has escaped that assessment, such notice lacked validity . 4. CIT vs Orient Craft Ltd (2013) 354 ITR 536 (Del HC). In this judgment Hon ble Delhi HC has held that: In absence of any tangible material avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e developer shall be entitled to 29% and 71% of flats and constructed areas including the Undivided proportionate share in the common areas/ facilities. The Developer shall be responsible for keeping and holding possession of the said land and to construct the building or buildings and to do the development work. According to the said agreement the Developer has agreed to develop the said property and to employ its own funds and resources for the development of the property and construction of the building/s. In case of a joint development agreements, how to decide the taxability of the income received by the owner of the land, there are specific provisions available in the Act, which under the similar facts of the case, have been discussed and decided by the coordinate bench of ITAT, Hyderabad A Bench in the case of DCIT Vs. Nagam Suguna, reported in (2022) 193 ITD 436 (Hyd), wherein it is observed that:- 8. We have heard the rival submissions through video conference and carefully perused the material on record. From the facts of the case, it is apparent that the assessee has only entered into a joint development agreement with the promoter of the project. As a result, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business and Profession , since the same are treated into stock-in-trade by the assessee and therefore benefit of indexation claimed by the assessee is not available. Though, Ld AR has submitted before us that factually the consideration received by the assessee as per its entitlement under Joint Development Agreement dated 28.12.2006, in the form of monetary consideration of Rs. 2.70/- Crore and in kind has received 11 properties (7 Villas + 2 Apartments + 2 Shops), only the monetary consideration received is taxable in the relevant year and the properties which are sold in the AY 2015-16 and 2018-19 should have been taxed in the year in which such transaction of sale has been materialized. Since the assessee himself has treated and accepted the accrual/receipt of the value of the said properties in the year under consideration, the year of taxing the same is not in dispute and thus such contention is only academic in the nature in present appeal. 6.2 For Extract of provisions of section 45(2) applicable in the present case is reproduced for better understanding: 45(2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer for issuing the impugned notice. We may recall that in the reasons provided it is stated that the assessee has transferred 5,30,410 shares during year under consideration whose market value on the date of transfer was Rs. 7.63 crores (rounded off). This transfer had taken place in favour of M/s Nerka Chemicals Pvt Ltd without consideration under transfer deed dated 26.02.2010. In view of such facts, the Assessing Officer has reason to believe that the income chargeable to tax in excess of Rs. 1,00,000/- had escaped assessment. 10. For multiple reasons we are convinced that these reasons lack validity. The first and foremost, reasons themselves record merely the transaction and nothing more. Quite apart from there not being live link between the first portion of the reasons recorded, namely, by merely duplicating the recording of transaction of transfer of sizable number of shares having considerable market value without consideration and second portion of the reasons where he concluded that the income chargeable to tax had escaped assessment. 11. Quite apart from this, even on greater scrutiny of the statutory provisions, we find that the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely, expenditure incurred wholly and exclusively in connection with such transfer, and the cost of acquisition of the asset and the cost of any improvement. Further proviso to section 48 of the Act which the respondents want to press into service reads as under: Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section. 13. For the simple reason this proviso would not apply in the case on hand. Firstly section 48 of the Act itself provides for mode of computation of income chargeable as capital gain. Sub-clause (iii) of section 47 of the Act excludes application of section 45 of the Act in case of certain transfers. By no application of section 48 of the Act, such exclusion can be ignored. Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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