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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 ..... r opportunity as the Appellant had submitted only partial response to the Notice in order to place further documents on records. 4. That the Learned Assessing Officer erred in re-opening the proceedings on mere change of opinion based on audit objection and material already available on records. That the Learned CIT(A) grossly erred in contending that the rulings relied upon by the Appellant cannot be followed merely because they are not passed by the jurisdictional authorities. 6. That the Learned CIT(A) ought not have alleged that the Appellant colluded with the builder to construct illegal portion and that the gains are through deceit and illegality. 7. That the Revenue Authorities mis-construed the provisions of Section 48 of the Act which clearly provided that the cost to be considered is the cost at which the previous owner had incurred to purchase the asset and the indexation benefit to be considered is from the date of purchase of such asset. 8. That the Learned Revenue Authorities ought to have appreciated that indexed cost of acquisition as defined in Section 48 of the Act is referring to the "Asset" and not Capital Asset. Accordingly, the Appellant is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of section 2(14) of the Act and section 48 is applicable only to capital asset. Therefore indexed cost of acquisition has to be allowed from the previous year in which the land was converted to residential purpose. From the JDA, it was noted that the said apartment P2 Block I bearing municipal No. New 52/20 (old no.) located at 7th Main Road, Shakambi Nagar, Bengaluru, BBMP PID No.57-274-52/202 is not in the schedule of Apartments and thus it is outside the purview of JDA and the sanctioned plan. The confirmation received from the developer, M/s. BSR Developers is reproduced as under:- "The Joint venture between BSR Developers and Shri Vashishta Jayanti bearing registered document number BNC(U)- KNGR/32167/2003-04 for the project Jayanti Gardens Block 1 was completed in the year 2006. The Penthouse portion, P2 block 1 bearing Municipal No. 52/20 (old No.) located at 7th Main road Shakambi Nagar, Bengaluru, BBMP PID No.57-274-52/202. The said apartment was additional built and is outside the sanction plan. Therefore the land owner was require to pay basic cost of construction for the unit measuring 2505 sft super built area, at the rate of Rs. 750 per sq.ft. The la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the sanctioned plan. M/s. BSR Developers has categorically accepted that the property was measuring 2505 sq.ft. and cost of construction is Rs. 750/ sq.ft. which amount has been paid by the owner. Therefore, it cannot be said that the assessee has not paid the said amount to the Developer. She further submitted that the necessary facts have been disclosed and the said property was regularized in the municipal records and subsequently in the sale deed before the selling to the capital asset. Hence it satisfies all the conditions of becoming a capital asset and the AO has also assessed it under the head capital gain. Therefore, the assessee is eligible to claim cost of construction with indexation benefit. She relied on Vodafone West Ltd. vs ACIT 354 ITR 572 (Gujrat) and CIT v. M. Ramaiah Reddy [1986] 158 ITR 611 (Kar) and other judgments which are placed on the paper book filed by the AR of the assessee. 9. The ld. Dr relied on the order of the lower authorities. He submitted that the assessee is eligible for cost of acquisition when the property got converted from agriculture to non- agriculture purpose in 1988-89 and not from 01.04.1981 and in the in-between period the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng which was constructed through JDA by the Appellant. The order was passed by the Joint Commissioner of BBMP and has been notified. Item No. 21 in the list refers to P2 flat and is assessed in the name of the Appellant. The Appellant seeks a week's time to submit the translated and notarized copy of the above document. 3. Note on Legality of the property - We would like to bring to your kind attention that the Appellant has submitted various documents which substantiate the legality of the building. The Revenue Authorities have framed their opinion based on the statement that the property was outside the sanction plan. The Revenue authorities have not brought any material evidence on records to state jute the constructed property is illegal and poses a threat to the lives of the inhabitants. On the other hand, the Appellant has submitted that it has obtained all the required approvals from the competent authorities for all the units constructed including the penthouse under consideration. The ownership of the property was established right from 2007 when the construction was completed. The tax assessment order, Khatha, EC and the property tax paid receipts clearly establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of transfer, the subject of transfer must be a capital asset and thereby assessed to capital gains taxation. The said view is also upheld by the Courts, and we would like to place reliance on the following- The High Court of Madras in the case of M. Venkatesan v. Commissioner of Income-tax 119841 16 Taxman 240 (Madras) held that 'Under this charging section, the crucial requirements are that there must be a transfer and the transfer must be of a capital asset. The implication is that at the time of the transfer, the subject-of the transfer must be a capital asset. There is no further implication. The section does not say that the subject of the transfer must have been a capital asset at any other point of time'. Based on the above ruling and multiple documents submitted on records, by the Appellant. it should be held that the asset under consideration is legal and thus eligible for benefits of capital gains provisions of the Act. 4. Rebuttal to the Case Law relied upon by the Learned DR. - The Learned DR during the course of proceedings relied upon the ruling of the Mumbai Tribunal in the case of ITO vs Bhagwan Fatnani [2015] 58 taxmann.com 227 (Mumbai - Trib.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced by the ld. AR and note that there was no specific query raised by the AO in the original assessment proceedings and there was no submission on the part of assessee. The Hon'ble Allahabad High Court in the case of Subodh Agarwal v. State of U.P. [2023] 149 taxmann.com 448 (Allahabad) has held that Explanation 1, clause (ii) to second proviso of section 148 clearly provides that any audit objection to effect that assessment in case of assessee 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. 13. It is the belief of the AO on the basis of facts available before him leading to the reopening of the case. It was 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 character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (v)] 20[or clause (vi)] 21[or clause (via)] 22[or clause (viaa)] 23[or clause (vica) or 24[clause (vicb)] or 25[clause (xiii) or clause (xiiib) or clause (xiv) of section 47]]; 26[(iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969,] the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. 27[Explanation.-In this [sub-section] the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) 29[or clause (iv)] of this 30[sub-section].]" 18. It is clear from the above section that the cost of acquisition of the asset shall be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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