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TMI Blog2024 (1) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for relevant assessment year has not been made in accordance with provisions of Act is included in term 'information regarding escaped assessment' . Therefore, it cannot be said that the reopening was on the basis of audit objection only. Legality of the property - As observed that the constructed property sold was different from the property received on gift in the opinion of the AO and the sale of the property did not arise out of the gifted property. The term reason to believe can be gathered and available from the information, leading the Assessing Officer to reopen the assessment. The term itself is suggestive of its prima facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer's prima facie belief, of course, derived from the some material/information, etc . leading him to reopen the assessment.. It is clear from the reasons recorded that the AO had the belief that there was escapement of income. Therefore, we reject the arguments advanced by the ld. AR on the legal issue and dismiss the same. Mode of computation of capital gain - As the donor of the gift obtained the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO vs. Bhagwan T. Fatnani [ 2015 (7) TMI 173 - ITAT MUMBAI] is not applicable to the present facts of the case since on the date of sale the property was regularised in the municipal/Govt. records and is covered under the definition of capital asset as defined in section 2(14) of the Act which is evident from the documents submitted by the ld. AR of the assessee. We therefore delete the disallowance of indexed cost of construction. Appeal of assessee partly allowed. - Shri Laxmi Prasad Sahu, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Appellant : Smt. Kavitha P. CA For the Respondent : Shri V. Parithivel, Jt.CIT(DR)(ITAT), Bengaluru. ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This appeal by the assessee is against the DIN Order No.ITBA/NFAC/S/250/2023-243/1054506398(1) dated 21.07.2023 of the CIT(Appeals)-1, National Faceless Appeal Centre, Delhi for the AY 2014-15 on the following grounds:- 1. That in any case and in view of the matter, the action of the Learned Officer in framing the impugned Assessment Order is bad in law and is opposed to the facts and circumstances of the case and thus liable to be set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal hearing, the Appellant prays that the Order be set aside and relief be granted by deleting the additions made by the Revenue Authorities. 2. The brief facts of the case are that the assessee filed return of income u/s. 139 declaring income of Rs. 33,23,480. The case was selected for scrutiny and assessment was completed u/s. 143(3) accepting the returned income. Later on, the case was reopened by issue of notice u/s. 148 dated 11.12.2017. Assessee was provided copy of reasons recorded on 03.07.2018 (which is placed at pages 33-34 of PB). In response, the assessee filed the return on 12.09.2018 declaring the same income of Rs. 33,23,480 as in the original return, computing the long term capital gains as under:- 3. The AO observed that the assessee was gifted the residential land (converted from agricultural to residential purpose during 1988- 89) in total measuring 2 acres 16 guntas bearing No.59 71/7, situated at Sarakki Village, Uttarahali Hobli, Bengaluru South Taluk during 2002-03. In 2003-04, the assessee entered into Joint Development Agreement (JDA) dated 27.12.2003 and one apartment built in that land has been sold during FY 2013-14 for a sale conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 claimed by the assessee for 2505 sq.ft. @ 750/sq.ft. Accordingly, the assessed income was Rs. 69,73,065. 6. On appeal, the CIT(Appeals) after considering the written submissions of the assessee dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Income Tax Appellate Tribunal. 7. The ld. AR vehemently argued on the reopening of the assessment based on audit objection and submitted that the AO has already taken into account the material available during the course of assessment proceedings and merely not mentioning the details or reasons in the assessment order is not a criterion for reopening the case. She submitted that the audit objection cannot be considered as a tangible material for reopening the assessment. 8. She further submitted that the property was obtained by the assessee by way of gift and the said land was obtained before 01.04.1981 and therefore cost of acquisition of the land should be considered as on 01.04.1981. The property got converted from agricultural to residential purpose in the year 1988-89 and assessee received the said property by way of gift in FY 2002-03. The assessee is eligible to get the cost of benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal creation in collusion with the developer and is not emanating from the gifted land, but crystallised from thin air through deceit and illegality, posting potential danger to the lives of future inhabitants and cannot be a capital asset eligible for deduction u/s. 48. He also relied on the decision in the case of ITO v. Bhagwan T. Fatnani [2015] 58 taxmann.com 227 (Mumbai). The submissions made by the ld. DR is placed on recorded. He therefore requested the order of the CIT(Appeals) has to be upheld. 11. In the rejoinder, the ld. AR submitted written submissions dated 10.01.2024 as under:- Timeline of Events Sl.No. Particulars Dates/Timeline 1 Conversion of agricultural land to residential land 1988-89 2 Gift of property 2002-03 3 Entering into JDA 27-12-2003 4 Date of completion of construction 2006-07 5 Completion of project handing over possession Oct-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale which is the subject matter of appeal. It may be noted that the Learned Assessing Officer has not made any such observation or comments that the property constructed was illegal and thus not a capital asset. The above allegations are arising out of the order passed by the CIT(A) who has not even bothered to grant the Appellant an opportunity for a personal hearing despite specific request. The assumptions by the Learned CIT(A) are not supported by any material evidence nor did he offer any opportunity to the Appellant to offer his explanations for the allegation that the property was illegal. Further, it is a well-settled fact that the municipal authorities issue an A-Khatha certificate only when the property under consideration is free from any illegal proceedings/actions thereby establishing the legal title of the Appellant. All the units constructed under JDA have received same approvals from the concerned authorities and therefore it shall not be appropriate to consider that only the Penthouse is not legal. In light of the above submissions, it is amply clear that there does not exist any dispute over the legality of the property. The contention of the Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a capital asset. It was also pointed out that the Assessee had not submitted any document on records to prove how title of property had passed upon. The plea of the Assessee was that the property was occupied for over 20 years and by virtue of occupancy, the same should be considered as a capital asset. However, in the present case of the Appellant, the flat under question came into existence under the JDA on a land which was already owned by the Appellant. The flat did not appear just like that. It is in a way conversion of the land into a building and the ownership of the underlying asset i.e. the undivided share of land was already in the name of the Appellant. The constructed area came into existence post the completion of construction and the same has been established through numerous documents such as Property tax assessment order, Khatha, EC etc. The property has been duly registered and Khatha certificate and Encumbrance certificate has been placed on records. Further, the transfer has taken place via a registered sale deed and law applicable stamp duty was determined and paid. Property tax can be assessed only for the properties. which exist and not for the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR on the legal issue and dismiss the same. 14. We note that the donor of the gift obtained the property in the year 1960 before 01.04.1981 which is not in dispute and it was gifted to the assessee in the FY 2002-03 after converting it from agricultural to residential purpose in the year 1988-89. The assessee has claimed cost of acquisition of the said land as on 01.04.1981 of 1,073 sq.ft. @ Rs. 84 / sq.ft. and after cost indexation the value has been arrived at Rs. 8,46,339 and claimed as cost of acquisition by the assessee. 15. Section 48 stipulates the mode of computation of capital gain as under:- 48. The income chargeable under the head 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 : (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 16. There is no dispute that before 1989 the property was not in the purview of definition of capital asset. It got the character of capital asset after conversion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 01.04.1981 and cost of indexation shall also be considered from 01.04.1981. In support of our view, we rely on the judgment of the Hon ble jurisdictional High Court in the case of CIT v. Ramaiah Reddy, (1986) 158 ITR 611 / 24 Taxman 764 (Karnataka) . Respectfully following the judgment of jurisdictional High Court, we delete the addition of Rs. 3,20,662. 19. The AO has further disallowed indexed cost of construction of penthouse of Rs. 35,49,490 for the reason that there was no proof of payment of cost of construction and the said apartment was outside the purview of sanctioned plan and holding that it is not a capital assets. However, as per the letter of M/s. BSR Developers which has been reproduced at para 4 above, which is part of the show cause notice issued by the AO. It is clear from the confirmation of the developer that the penthouse P2 construction was completed in the year 2006 and this portion was additionally built which was outside the sanctioned plan and the assessee was required to pay for 2505 sq.ft. @ 750/sq.ft and the owner has paid the same to the M/s. BSR Developers. The developer has acknowledged receipt of the same. Nowhere the lower authorities have di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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