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12-06-2019, Susheela N. Reddy, Section 148, 147, 2(47)(v), Tribunal Bangalore
These are a bunch of six appeals by three assessees and cross appeals by Revenue, directed against separate orders of the CIT(A)-4, Bangalore, dated 30.11.2017 for Assessment Year 2008-09. The grounds and issues raised by both parties being similar, these appeals were heard together and we deem it appropriate to dispose them off by way of this consolidated order.
2. Briefly stated, the facts of these cases are as under:
2.1 The three assessees are co-owners of an inherited property admeasuring 2 acres 29.42 guntas (1,19,161 sq. ft.) at No.424/376/487, Survey No.63 situated at Bannerghatta Main Road, Hulimavu Ward, Arekere Sub division, Bangalore. The three co-owners (namely Smt. Susheela Reddy, Shri Swaroop Kumar and Shri Shashank Kumar) entered into a joint development agreement (JDA) on 15.02.2008 with M/s. Vishala India Commercial Developers Pvt. Ltd., for construction of a commercial complex. For this purpose, the assessee executed a general power of attorney in favour of the Developer on 15.02.008. As per the JDA, the built up area was to be shared in the ratio 42% to the assessee and 58% to the developers. Apart from this, the assessees (i.e., coowners) had received an amount of Rs.1 crore. The construction was completed and the possession of the property was handed over in the previous year relevant to Assessment Year 2011-12 and the assessees had declared capital gains thereon in Assessment Year 2011-12.
2.2 The Assessing Officer (AO), however, on observing the above facts of the matter, was of the opinion that capital gains arising on account of the JDA dated 15.02.2008 had escaped assessment for Assessment Year 2008-09 and therefore issued notices under section 148 of the Act dated 30.09.2013 to the assessees which were served on 03.10.2013. In response thereto, the three assessees filed returns of income for Assessment Year 2008-09 on 08.02.2014; each declaring capital gains of Rs.33,33,330/- and the date of transfer was mentioned as 15.10.2007, i.e., the date of receipt of the first cheque of the deposit received. As the assessees had received Rs.1 crore as deposit during the period relevant to Assessment Year 2008-09, one-third of the amount was shown as capital gains in each of the co-owners account. According to the AO, the capital gain arising on part performance of the contract, i.e., JDA, is to be assessed in the previous year relevant to the Assessment Year in which the JDA was executed. In support of this proposition, the AO, inter alia, cited the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Dr. T. K. Dayalu (2011) 14 taxmann.com 120 (Kar) wherein it was held that the capital gains is to be assessed in the year in which possession was allowed to the developer for development of the property.
2.3 The gist of the contentions of the assessee in this regard were that;
(i) No amount is assessable to tax in Assessment Year 2008-09 as there is no transfer of any capital asset by the assessee since the possession given by the assessee to the developer is permissive and not conclusive.
(ii) The general power of attorney (GPA) executed in favour of the developer did not involve the right to property and therefore there is no transfer.
(iii) Till date, the assessee has not transferred the undivided share of land to the developer and therefore no amount is assessable to tax as capital gains in Assessment Year 2008-09.
2.4.1 The assessee’s contentions did not find favour with the AO and he proceeded to hold that capital gain was payable by the assessees at the time of execution of the JDA and therefore the income from capital gain was assessable in the period relevant to Assessment Year 2008-09 only.
2.4.2 As regards the computation of capital gain; the AO considered the land value admitted by the developer as the selling price for the assessee and since the amount of selling price was shown by the developer in Assessment Year 2012-13 at Rs.58,75,14,825/-, the AO allowed it to be discounted at a certain rate and adopted an amount of Rs.34,98,49,940/- and 1/3rd of the same was considered in the hands of each of the 3 co-owners. In this manner, the capital gain was computed at Rs.10,74,15,585/- for each coowner. The orders of assessment of these three assessees was accordingly concluded under section 143(3) r.w.s. 147 of the Act vide orders dated 10.02.2015.
3. Aggrieved by the orders of assessment dated 10.02.2015 for Assessment Year 2008-09 in the case of these three assessees, the matter was carried in appeal before the CIT(A)-4, Bangalore. Before the CIT(A), the assessee, inter alia, contended that since the AO did not furnish the reasons recorded for initiation of proceedings for assumption of jurisdiction under section 147 and issue of notices under section 148 of the Act, therefore the orders of assessment dated 10.02.2015 for Assessment Year 2008-09 were, ab initio, void / invalid. The assessee also raised grounds on the merits of the substantive additions made. The CIT(A) disposed off the appeal vide order dated 30.11.2017