Income Tax Appellate Tribunal - Bangalore
Prameela Krishna,, Mysore vs Assessee on 10 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH "B"
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND
SHRI JASON P. BOAZ, ACCOUNTANT MEMBER
I.T.A. No.1364/Bang/2010
(Assessment Year : 1995-96)
Smt. Prameela Krishna,
No.33, Shalivahana Road, Nazarbad, Mysore. .... Appellant.
PAN AJJPP 4456F
Vs.
Income Tax Officer,
Ward 1(2), Bangalore. ..... Respondent.
Appellant By : Shri Ashok A Kulkarni.
Respondent By : Smt. Susan Thomas Jose.
Date of Hearing : 10.04.2012.
Date of Pronouncement :
O R D E R
Per Shri Jason P. Boaz, A.M. :
Order on condonation of delay in filing appeal.
1. The petition in Form No.36 was filed on 2.12.2010. As per the details therein it was noted that there was delay of 8 days in filing the appeal and a defect memo was issued accordingly. In response thereto the assessee by letter dt.19.8.2011 filed an application enclosing an affidavit for condonation of delay of 8 days in filing the appeal. After careful perusal and consideration of the explanations put forth by the assessee in the application, we are of the opinion that the assessee was prevented by reasonable cause in filing the appeal belatedly and in the interest of justice condone the delay of 8 days and admit the appeal for hearing.
2ITA No.1364/Bang/10
O R D E R 2.1 This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Mysore dated 15.9.2010.
3.0 The chronology of events in this case is as under :
3.1 The original assessment for the Assessment Year 1995-96 was completed on 28.3.2003 determining the total income at Rs.84,73,546 which included capital gains of Rs.84,49,546. In appeal, the learned CIT(A) in his order dt.1.8.2005 allowed the assessee partial relief. In further appeal, the ITAT, Bangalore 'B' Bench by its order in ITA No.1448/Bang/2005 dt.23.12.2005 set aside the matter and restored it back to the file of the CIT(A), Mysore. The learned CIT(A) passed a fresh order on 11.1.2007 upholding the assessment order passed by the Assessing Officer on 28.3.2003. The assessee again carried the matter before the Tribunal who by its order in ITA 230/Bang/2007 dt.29.2.2008 restored the matter to the file of the Assessing Officer directing him to frame the reassessment in accordance with the provisions of law, more so by bringing on record the facts which permitted the Assessing Officer to assume jurisdiction under section 147/148 and to obtain the objections of the assessee so as to bring clarity in the facts to the extent that the assessee ought not to have admitted capital gains so enumerated by the assessee for Assessment Year 2003-04. The Assessing Officer in accordance with Tribunal's directions (supra) framed the reassessment order under section 143(3) r.w.s. 147 of the Act by order dt.31.12.2008 in which the total income of the assessee was determined at Rs.87,73,550. The assessee carried the matter in appeal before the learned CIT(A), Msore who disposed of the appeal allowing partial relief to the assessee. The assessee is now in appeal before the Tribunal for the third time.
3.2 The grounds of appeal raise by the assessee are as under :
" 1. The impugned order is opposed to law and facts of the case.
2. The necessary conditions for assumption of jurisdiction under section 147 and for the issue of notice under section 148 have not been fulfilled the notice under section 148 and the order under section 147 are not in accordance with law and liable to be quashed.3 ITA No.1364/Bang/10
3. During the accounting year ending 31.3.1995 there was no transfer in respect of the property at Kaytamaranahalli, Mysore and therefore there were no capital gains liable.
4. With prejudice and in the alternative the Tribunal have been already decided in its order dated 29.02.2008 that there was no transfer and the department have not contested the finding. It was not open to the income tax officer to bring to tax the alleged capital gains in respect of a non-existence transfer as held by the ITAT.
5. It should have been appreciated that having regard to the law laid down by this Tribunal and the provisions of the Act until and unless the developer is in a position to hand over the relevant portion of the super structure that is ready and meant for the owner of the land under the development agreement no capital gains could arise to the owner and such stage had not been reached by 31.3.1995 and therefore bringing to tax any capital gains as arising from the transaction was not in accordance with law.
6. It should have been appreciated that the original developer M/s. SI Property Development Ltd, abandoned the construction of the residential complex midway when the complex was in a wholly incomplete state and the project was taken over under a tripartite agreement dated 8.1.2003 by M/s. Shanti Niketan Housing Foundations and therefore there was no question of any capital gains arising in relation to the Assessment Year in question.
7. It should have been appreciated that there was no earlier assessment either under section 143 or 143(1)(a) in this case and the first assessment itself was under section 147 and there is no provision of law which bars the set off of long term capital loss against long term capital gains in an assessment under section 147.
8. Without prejudice and in the alternative if there are no chargeable capital gains in the current assessment year such long term capital losses ought to have been ordered to be carried forward to the subsequent assessment years to be dealt with in accordance with law.
9. Without prejudice the quantification of capital gains both as regards the amount of consideration receivable as well as the cost of acquisition should have been accepted as claimed by the assessee in the original return.
10. The appellant craves for leave to add to delete from or amend the grounds of appeal."4 ITA No.1364/Bang/10
4. The grounds of appeal at S.Nos.1 and 10 are general in nature and no adjudication is called for thereon.
5.1 In the grounds of appeal at S.No.2, the assessee has challenged the validity of the Assessing Officer's assumption of jurisdiction under section 147, validity of notice issued under section 148 and the order of assessment passed consequently under section 143(3) r.w.s. 147 of the Act.
5.1.1 At the outset, the learned Authorised Representative submitted that the essential ingredients for forming satisfaction before initiating proceedings under section 147 of the Act, such as; that there should be certain material on record; on which after application of mind thereto, the Assessing Officer should come to a belief that income liable to tax had escaped assessment, were missing in the instant case. In these circumstances, it was argued that the initiation of proceedings under section 147 being invalid, the consequent notice issued under section 148 and culminating in order of assessment passed under section 143(3) rws 147 was bad in law and void ab-initio and liable to be quashed. 5.1.2 On the other hand, the learned Departmental Representative supported the findings of the lower authorities stressing that the learned Assessing Officer had dealt with this issue elaborately and in accordance with law and his action and findings have been upheld by the learned CIT(A). It was submitted by the learned Departmental Representative that the learned CIT(A) too had dealt with the issue of validity of assumption of jurisdiction by the Assessing Officer in initiating proceedings under section 147, validity of issue of notice under section 148 etc at length in his order at pages 2 to 9 thereof and drew our attention thereto. It was contended by the learned Departmental Representative that since all arguments raised by the assessee have been addressed by the learned CIT(A), this ground deserves to be dismissed.
5.2 We have heard both the parties and carefully perused the material on record. The facts on record indicate that the Assessing Officer recorded in writing 'the reasons for the belief.' He found that the assessee had not filed her return of income for 5 ITA No.1364/Bang/10 Assessment Year 1995-96. It had also come to his knowledge that the assessee had entered into a development agreement dt.30.6.1994 with M/s. SI Property Development Ltd. for transfer of 92% of the property at Survey No.193/2, Kayathamaranahally, Mysore measuring 71874 sq. ft for a consideration of Rs.30 lakhs and 8% of the superstructure of the built up space for the construction of Kingsdale Apartments which was under progress. The Assessing Officer further recorded that considering the sale value of the property which includes Rs.30 lakhs in cash and 8% of the built up area and 8% of the car parking space, and the cost of acquisition for the assessee, he had reason to believe that the assessee would have derived income from capital gains in excess of Rs.25,000 being the limit under section 149(6)(ii). He therefore, recorded that he had reason to believe that income (capital gains) chargeable to tax had escaped assessment for Assessment Year 1995-96 within the meaning of section 147 of the Act. It is also seen that the Assessing Officer sought the sanction of the concerned Addl.CIT for issue of notice under section 148. In accordance with the direction of the Tribunal order dt.29.2.2008, the objections of the assessee thereto were sought vide letter dt.8.5.2008. The assessee's request for inspection of concerned records was provided on 18.8.2008 and objections of the assessee received vide letter dt.3.11.2008 were taken on record and disposed off by the Assessing Officer, rejecting them in writing. This finds mention at pages 2 to6 of the assessment order at paras 2 to 7 thereof. It is thus clear that the Assessing Officer did have material with him, the scrutiny of which led him to form the belief that the assessee had derived taxable income in the form of capital gains pursuant to the development agreement dt.30.6.1994 for transfer of her land at Kayathamanahally. The assessee has not been able to prove anything to the contrary. The reasons recorded are objective and relevant and the Assessing Officer had in his possession of the agreement dt.30.6.1994 executed by the assessee with S.I. Property Devp. Ltd. for her property, which terms and conditions indicated prima facie that the assessee had transferred possession of the property to the developer on 30.6.1994 on which there is no ambiguity. Here, we would also like to quote from the ITAT's order in assessee's own case 6 ITA No.1364/Bang/10 for the Assessment Years 1999-2000, 2002-03 to 2004-05, the Hon'ble Tribunal made the following observation on the assessee's approach :
" We are of the considered view that the assessee's grievance with respect to proceeding undertake under the provisions of section 147/148 appeared to be due to her own making. We have perused the various grounds which inter alia for the respective assessment years indicate that the assessee herself was not clear about the computation of capital gains in accordance with the provisions of the Act.... In other words, she has been sitting on the fence for the AO to make a mistake ....."
In these circumstances, as mentioned, we have no hesitation in holding that the Assessing Officer's initiation of proceedings under section 147 in the instant case is in order and therefore dismiss the assessee's ground of appeal on this issue. 5.3 The assessee has also challenged validity of the issue of notice under section 148 and the order of assessment passed subsequently for Assessment Year 1995-96. We have already held that the proceedings initiated by the Assessing Officer under section 147 was valid. In respect of the consequential notice issued under section 148, we find from the record that the learned CIT(A) held the notice issued under section 148 to be valid after examining the assessee's objections. It is seen that the learned CIT(A) found that the Assessing Officer issued the notice under section 148 only after obtaining the sanction of the appropriate authority [mentioned in section 2(28C)] as laid out in section 151 of the Act. We also find that all the objections raised by the assessee, pointing out so called infirmities in the said notices, have been addressed in accordance with the provisions of section 292(b) and the judicial decisions cited were distinguished by the learned CIT(A) and with which we find no reason to differ. It is therefore held that the notice issued under section 148 consequent to initiation of valid proceedings under section 147, is valid and consequently the order of assessment passed under section 143(2) rws 147 of the Act is valid. The assessee's ground accordingly stand dismissed. 6.1 The grounds raised at S.Nos.3 to 6 challenge the Assessing Officer's action in charging the assessee tax under the head 'capital gains' in respect of the transfer of possession of the property at Kayathamaranahalli, Mysore pursuant to agreement 7 ITA No.1364/Bang/10 dt.30.6.1994. The assessee's basic objections are that there was no transfer of property in the said period, and therefore there is no liability for her to be taxed for capital gains. 6.2 The facts of the case, as emanate from the record are that the assessee executed an agreement with M/s. S. I. Property Development Ltd., for joint development of her property situated at Kayathamaranahalli, Mysore. As per the agreement the assessee for a consideration of Rs.30 lakhs, plus 8% of the superstructure of the built up area and 8% of the car parking space agreed to sell to the developer or its nominees the balance 92% share in the property. It allowed the developers permission to enter the property, to apply for permission to construct, to amend, to alter and to rectify plans, to make minor alterations, to apply for civic amenities and electric power and to do any other acts for the development of the property. The agreement also witnessed the deposit of the original title deed of the land with the developers and the assessee also authorized the developers to sell, mortgage, lease or gift (without recourse of the owner) the undivided interest in the property. Subsequently by supplementary agreement dt.27.2.1996, the cash consideration was increased from Rs.30 lakhs to Rs.40 lakhs and the assessee's share in the built up area was also increased to 8.5%. It is stated therein that all other terms and conditions as per the original agreement dt.30.6.1994 remained unchanged. 6.3 In pursuance of the agreement dt.30.6.1994, the assessee executed a power of attorney dt.27.9.1994 in favour of the developer for applying for obtaining various government clearances for the housing project called 'Kingsdale' which consisted of 7 phases. The developer obtained a bank loan by surrendering the title deed of the property to the Bank. The developer after completion of 4 phases of the project backed out of the remaining portion of the project. The assessee then entered into an agreement on 8.1.2003 with M/s. Shanthi Niketan Housing Foundations to complete the remaining portion,; phases 4, 5 and 6 of the project. The original developer M/s. S.I. Property Development Ltd was a consenting party to this agreement and assigned all its rights and interest in the project to M/s. Shanthi Niketan Housing Foundations, who took it upon themselves to fulfill all the commitments that M/s. S.I. Property Development Ltd. had to 8 ITA No.1364/Bang/10 the flat owners/purchasers in the project. As per agreementdt.30.6.1994, the assessee received Rs. 10 lakhs on 30.6.1994. The remaining payments were received; Rs.10 lakhs on 27.2.1996, Rs.5 lakhs on 31.3.1996 and the balance Rs.14.5 lakhs by 22.1.1997. The assessee's share in the built up area of 8.5% thereof was to be handed over on the completion of the project.
6.4 The learned Authorised Representative, at the outset, laid down the main plank of the assessee's argument, that the development agreement dt.30.6.1994 could not be considered as transfer of possession of the Kayathanahally land for the Kingsdale project to the developer M/s. S.I. Property Development Ltd. The learned Authorised Representative argued that possession of the said property was not given to the developer until various approvals were received from the government as without those approvals no housing project could be put up on the land. He referred to various clauses in the said agreement claiming that nowhere is it mentioned that possession of the property had been made over and therefore the capital gains cannot be brought to tax in the period relevant to Assessment Year 1995-96 as only an amount of Rs.10 lakhs had been received by the assessee so far out of the total consideration of Rs.30 lakhs. It was also contended by the learned Authorised Representative that the agreement dt.27.2.1996 also did not hand over possession of the property to the developers but was supplementary to the agreement dt.30.6.1994 and merely revised the consideration the assessee was to received from Rs.30 lakhs to Rs.40 lakhs and the share in built up area from 8 to 8.5%. The learned Authorised Representative also referred to the General Power of Attorney dt.27.7.1994 by which the assessee enabled the developer to carry out the activities in furtherance of the Kingsdale project, such as; entry to the property; preparation of plans for construction of buildings; submission of building plan to MUDA, KEB, Vani Vilas Water Works and other statutory bodies for obtaining sanction for construction of the buildings; to amend, alter and rectify plans; to apply for permission to Urban Ceiling Authorities (Land); to make payments to statutory bodies in the assessee's name etc. The learned Authorised Representative also referred to the General Power of Attorney dt.18.12.1996 authorising the developer to sell, mortgage, lease to any person, to present and execute 9 ITA No.1364/Bang/10 documents to that effect. The learned Authorised Representative drew our attention to two orders dt.22.1.1996 and 21.6.1996 under the ULC Act in an attempt to demonstrate that the possession of the said property had not been made over to the developer as the approval for the housing project thereon was accorded only on 22.1.1996. The learned Authorised Representative then argued that the possession of the land could only have been said to have been given to the developers pursuant to agreement dt.8.1.2003 between the assessee and M/s. Shanti Niketan Housing Foundtions to complete the uncompleted portion of the project in phases 5,6 and 7 of Kingsdale which could not be constructed by M/s.S.I. Property Development Ltd. who became a consenting party to this agreement. The learned Authorised Representative concluded by claiming that the possession being made over only in 2003, the assessee has correctly offered capital gains in the Assessment Year 2006-04 and pleaded that the finding of the Assessing Officer and learned CIT(A) that the capital gains on this project pertained to Assessment Year 1995- 96 be reversed and the assessee's position that it be taxed in Assessment Year 2003-04 be accepted. In support of its stand the assessee placed reliance on the decision of the Hon'ble Karnataka HighCourt in the case of CIT Vs. Dr. T.K. Dayalu (ITA No.3209 of 2005) dt.20.6.2011.
6.5 The learned Departmental Representative strongly supported the orders of the learned CIT(A) and the Assessing Officer, contending that the assessee was liable to the charge of capital gains on transfer of the assessee's land at Kayathamaranahalli in Assessment Year 1995-96. It is submitted that the agreement dt.30.6.1994 shows that there was a transfer of rights and interests in the said property from the assessee to M/s. S.I. Property Development Ltd. She drew our attention particularly to clause 1 which gave the developers right of entry to the land property; Clause 2, thereof which evidenced that the assessee had received a sum of Rs.10 lakhs, as a portion of the consideration in lieu of the agreement. Clause 5, of the agreement was referred to which indicates that a Power of Attroney was to be executed in favour of the developers to apply to concerned statutory authorities for permission to construct buildings, amend, alter and rectify plans, apply for civic amenities, power, etc. and carry out any activity in order to execute 10 ITA No.1364/Bang/10 the joint development project. The learned Departmental Representative submitted that clause 10 irrevocably authorizes the developers to sell, mortgage, lease or gift (without recourse to the owner) the undivided extent in the said property for such consideration as the developer may fix. Clauses 14 and 15 of the agreement dt.30.4.1994 were also referred to, which allow the developer the exclusive right to display its signs on the building to be constructed and gave the developers sole control over the construction to be carried out which shall not be interrupted by the assessee. The learned Departmental Representative stressed that the agreement dt.30.6.1994 was never cancelled at any stage and therefore it is evident that all subsequent agreements dt.27.2.1996 and 8.1.2003 were only supplementary to the original agreement for development of the Kingsdale Project at Kayathamaranahally, Mysore. This was also the view of the learned CIT(A), the learned Departmental Representative submits which was brought out in para 24 on page 20 of his order. The learned Departmental Representative also invited our attention to paras 26 and 27 of the learned CIT(A)'s order stating that while the assessee contends that possession was not handed over pursuant to agreement dt.30.6.1994, the period relevant to Assessment Year 1995-96, the assessee has not been able to produce any evidence to show that the possession of the land was handed over or any subsequent date. In support of the proposition that possession of the property was handed over to the developer pursuant to agreement dt.30.6.1994, the ld. D. R. placed reliance on the decision of the Authority for Advanced Ruling (hereinafter referred to as AAR) in the case of Jasbir Singh Sarkaria reported in 294 ITR 196 (2007) wherein the meaning of the 'possession' as contemplated in clause (v) of section 2(47) was laid out. It is submitted that the Hon'ble authority held that 'possession' need not necessarily be sole and exclusive possession, and it is enough if the transferee has, by virtue of that transaction / contract / agreement, a right to enter upon the land and exercise acts of possession effectively, pursuant to the covenants in the agreement. It is submitted by the learned Departmental Representative that in the instant case of the assessee, it is clear from the AAR's ruling that possession of the land was handed over to the developer in the period relevant to Assessment Year 2005-06 pursuant to the joint development agreement dt.30.6.1994. 11 ITA No.1364/Bang/10 The learned Departmental Representative also pointed out that the learned CIT(A) observed that a major portion of the Kingsdale project was completed by S.I. Property Development Ltd. and it was inconceivable that 4 phases could be constructed and some flats sold without possession of the land being given to the developer. Therefore, the learned Departmental Representative contended that it is evident that the possession was not given pursuant to the agreement dt.8.1.2003 in the period relevant to Assessment Year 2003-04 as claimed by the assessee but much earlier. The learned Departmental Representative further added that the assessee's contention that possession of land was not given in the period relevant to Assessment Year 1996-97 and 1997-98 was accepted by the CIT(A), and in these years the matter attained finality as this position was accepted by the department also. It was also pointed out that the assessee has also not offered capital gains in the period from Assessment Years 1998-99 to 2002-03. In these circumstances, it was pleaded that the findings of the Assessing Officer and learned CIT(A) that the capital gains in this transaction is to be brought to tax in Assessment Year 1995-96 be accepted and confirmed.
6.6 We have heard both parties, carefully perused and considered the submissions made, details filed and the facts on record. There is no dispute that the assessee entered into an agreement on 30.6.1994 with M/s. S.I. Property Development Ltd for joint development of the property situated at Kayathamaranahalli, Mysore. A reading of the agreement makes it clear that the assessee agreed to hand over the property and rights therein to the developers for a total consideration of Rs.30 lakhs plus 8 % of the built up area in order that the developer can enter the premises, carry out all attendant activities to construct buildings thereon, to amend, alter and rectify plans, apply for civic amenities, electric power and to do any acts necessary for the development of the property. Clause 10 of this agreement authorize the developers to sell, mortgage, lease or gift (without recourse to the owner) their undivided interest in the property viz. 92% thereof. Clause 14 gives the developer the right to display their signs on the buildingto be constructed. Clause 15 gives the developer the unbridled control of construction of the building, to the exclusion of the assessee etc. The supplementary agreement dt.27.2.1996 was a virtual 12 ITA No.1364/Bang/10 repetition of the agreement dt.30.1.1994, only modified to the extent that the consideration to be received by the assessee was increased from Rs.30 lakhs to Rs.40 lakhs and its share in the built up area increased from 8% to 8.5%. There was no other change in the conditions of the agreement dt.30.6.1994. In fact, clause 5 of agreement dt.27.2.1996 states that, "this agreement shall hereinafter be deemed to be a part of the earlier agreement dt.30.6.1994 between the parties hereto for the purpose of all other terms as agreed earlier leave apart the revised terms agreed as per this deed of agreement." It is seen from the record and details filed that the assessee executed a power of attorney dt.27.7.1994 in favour of the developer to apply for government/statutory clearances from various bodies like MUDA, KEB, Municipal Corporation of City, Vani Vilas Water Works, etc for obtaining sanction for construction of the proposed building of the Kingsdale project. The developer accordingly initiated the housing project 'Kingsdale' in the said property and along with other works like getting statutory approvals and even surrendered the title deed of the said property to the Bank for loans. The housing project consisted 7 phases of which 4 phases were completed by the developer. The developer failed to complete construction of phases 5, 6 & 7 of the project and therefore the assessee entered into an agreement dt.8.1.2003 with M/s. Shanti Nikethan Housing Foundation to complete the remaining portion of the project. The original developer M/s. S.I. Property Development Ltd., was a consenting party to this agreement and agreed to assign all its rights and interest in the Kingsdale project to M/s. Shanti Niketan Housing Foundations, who on its part undertook to fulfill all the commitments made by the original developer to the flat owners / purchasers in the said project. By virtue of the agreement dt.8.1.2003, M/s. Shanti Nikethan Housing Foundation only stepped into the shoes of M/s. S.I. Property Development Ltd. to complete the unfinished project. As per the agreement dt.30.6.1994 and supplementary agreement dt.27.2.1996, the assessee received the entire cash consideration totaling Rs. 40 lakhs in instalments by 22.1.1997 and received its share in the built up area subsequently on completion of the project.
13ITA No.1364/Bang/10 6.7 The learned Authorised Representative had placed reliance on the decision of the Hon'ble High Court of Karnataka in the case of CIT Vs. Dr.T.K. Dayalu (ITA No.3209 of 2005 C/W ITA No.3165 of 2005) dt.20.6.2011 in support of its claim that the capital gains on the development of her Kayathamaranahalli property was not exigible to tax in Assessment Year 1995-96 but in 2003-04 as offered for tax by her. The cited case has been carefully perused and with due respect we find that the facts are slightly different. In the cited case possession of the land was admittedly handed over on 30.5.1996, as evidenced by an affidavit filed by assessee itself whereas in the instant case of the assessee, no such date of handover of possession of the property is given by the assessee. The attempt by the assessee, to demonstrate that the capital gains were exigible to tax in Assessment Year 2003-04, as possession had been given then is incorrect. It is also impossible as more than 50% of the Kingsdale project (i.e. 4 phases out of 7 phases) was completed before the agreement dt.8.1.2003 and some flats were already sold by the original developer. This evidences that possession of the property for joint development has been given much before the agreement dt.8.1.2003 relevant to Assessment Year 2003-04. The assessee has also denied that it handed over possession of the said land in the period relevant to the Assessment Year 1996-97 to 2002-03 which leaves us only with the period relevant to Assessment Year 1995-96 in which the joint development agreement dt.30.6.1994 was entered into. In these circumstances, with due respect, we are of the view that the facts of cited case would not come to the assessee's rescue in determining that the capital gains on transfer of the possession of the assessee's land would arise in Assessment Year 2003-04 pursuant to agreement dt.8.1.2003. 6.8 The learned Authorised Representative referred to orders under the ULC Act, in the instant case, dt.22.1.1996 and 21.6.1996 copies of which were filed along with translations thereof. The learned Authorised Representative attempted to show that, since the permission for construction of the project was received by virtue of the order, possession of the land was not handed over to the developer, M/s. S.I. Property Developers Ltd. in the period relevant to Assessment Year 1995-96. The order dt.21.6.1996 is only an amendment of order dt.22.1.1996. A perusal of order dt.22.1.1996 14 ITA No.1364/Bang/10 reveals that it has been passed pursuant to the assessee's representation dt.17.10.1994 and permitted the assessee to construct a housing or residential project on the said land which was prohibited from being sold as vacant land. The sanction by the ULC order dt.22.1.1996 is clearly pursuant to the joint development agreement dt.30.6.1994; are in furtherance of the terms of this agreement and to ensure performance thereof. The ULC order dt.22.1996, in our considered opinion, does not in any way decide the date of transfer of possession of the assessee's land, as not being in the period relevant to Assessment Year 1995-96. Rather, the sanction obtained, only goes to show that these actions are clearly in accordance and in furtherance of the joint development agreement dt.30.6.1994 to construct the Kingsdale project. In coming to this conclusion, we drew support from the decision of the Authority for Advanced Ruling in the case of Jasbir Singh Sarkaria (supra). In this case, the Hon'ble Authority held that the meaning of the word 'possession' as contemplated by clause (v) of section 2(47) of the Act, need not necessarily be sole or exclusive possession. So long as the transferee is enabled to exercise some control over the property so as to make use of it for the intended purpose, possession can be said to have been made over. The concurrent rights of the owner who can exercise possessory rights to some extent and that of the developer who has general control can be well reconciled. Possession given to the developer need not ripen into exclusive possession on payment of instalments in entirety for the purpose of determining the date of transfer. It is enough if the transferee has by virtue of the transaction / agreement, a right to enter upon and exercise acts of possession pursuant to the terms of the agreement. This, it was held, is legal possession. In the light of the above findings by the Hon'ble AAR, we are of the opinion that it is clear that in the instant case, the possession of the property in accordance with the provisions of section 2(47)(v) of the Act, has been given to the developer pursuant to the joint development agreement dt.30.6.1994 in the period relevant to Assessment Year 1995-96. 6.9 Rather, we are of the view that the facts of the assessee's case are quite similar to the case reported in 260 ITR 491 (Chaturbhuj Dwarkadas Kapadia Vs. CIT) (Bom) and applicable in the instant case. The judgement is reproduced hereunder : 15 ITA No.1364/Bang/10
" Facts:
The assessee is an individual. He had 44/192 undivided share in an immovable property at Gamdevi in Greater Bombay. The entire property consisted of land and ten buildings. However, a building bearing No. 10 was under requisition by the State Govt, which was later derequisitioned. That building was not occupied by tenants. By agreement dated August 18, 1994, the assessee herein agreed to sell to Floreat Investments Ltd. (hereinafter referred to, for the sake of brevity as "Floreat"), his share of the immovable property for total consideration of Rs. 1,85,63,220 with a right to the said Floreat to develop the property in accordance with the rules and regulations framed under the Maharashtra Housing and Area Development Act. For that purpose, the assessee agreed under clause 8 to execute a limited power of- attorney, authorising Floreat to deal with the property and also obtain permissions and approvals from the Urban Land Ceiling Authority, Bombay Municipal Corporation and CRZ authorities. Under clause 9 of the agreement it was, inter alia, provided that on Floreat obtaining all necessary permissions and approvals and approvals and upon receipt of NOC under Chapter XX-C of the Income-tax Act, the assessee shall grant an irrevocable licence to enter upon the assessee's share of the property. Under clause 11 of the agreement, it was provided that after Floreat was given an irrevocable licence to enter upon the assessee's share of the property and after Floreat having obtained all necessary approvals, Floreat was entitled to demolish buildings Nos. 1 to 3 and building No. 10 and any other buildings on the property, subject to Floreat settling the claims of the tenants. Under clause 14 of the agreement, the assessee was entitled to receive proportionate rent till the payment of the last instalment and till that time, the assessee was bound to pay all outgoings.
Under clause 20 of the agreement, it was agreed that the sale shall be completed by execution of conveyance. Till date, there is no conveyance. Pursuant to the agreement, Floreat obtained the following permissions: (i) Clearance from CRZ authority dated February 7, 1996; (ii) letter from ULC for redevelopment of the property dated April 26, 1995. These two permissions were amongst several other permissions obtained. These three permissions, however, are mentioned as they were obtained during the financial year ending March 31, 1996, relevant to the assessment year 1996-97. Similarly, by March 31, 1996, Floreat had paid almost the entire sale price of Rs. 1,85,63,220, except for the small amount of Rs. 9,98,000. However, the important point which is required to be noted is that BMC issued a commencement certificate permitting construction of a building up to the plinth level only on November 15, 1996. In the meantime, the plan came to be amended. Ultimately, the power of attorney was executed on March 12, 1999.
The narrow dispute which arises for determination in this appeal is whether the 16 ITA No.1364/Bang/10 liability of the assessee for capital gains accrued to the assessee during the assessment year 1996-97 or whether the assessee was liable to pay capital gains tax during the assessment year 1990-2000. According to the Department the transfer had taken place during the accounting year ending March 31, 1996, relevant to assessment year 1996-97, whereas according to the assessee, the transfer took place only when the assessee executed an irrevocable licence in favour of Floreat to enter upon the property and, therefore, according to the assessee the liability arose during the assessment year 1999-2000. Findings:
At the outset, we may point out that in this case, the assessee does not deny transfer. The only dispute in this case, is whether the transfer took place during the accounting year ending March 31, 1996, or whether it took place during the accounting year ending March 31, 1999. In other words, the dispute is confined to the year of chargeability.
Under section 2(47)(v), any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the transfer of Property Act would come within the ambit of section 2(47)(v). That, in order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration; it should be in writing; it should be Signed by the transferor; it should pertain to transfer of immovable property; the transferee should have taken possession of the property; lastly, the transferee should be ready and willing to perform his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under section 2 (47)(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance.
Consequently, the assessees used to enter into agreements for developing properties with the builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and .to plug that loophole, section 2(47)(v) came to be introduced in the Act. It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, the judgments of the Supreme Court were cited on behalf of the assessee, but all those judgments were prior to introduction of the concept of deemed transfer under section 2(47)(v). In this matter, the agreement in question is a development agreement. Such development agreements do not constitute transfer in general law. They are spread over a period of time. They contemplate various stages. The Bombay High Court in various judgments has taken the view in several matters that the object of entering into a development agreement is to enable a 17 ITA No.1364/Bang/10 professional builder/contractor to make profits by completing the building and selling the flats at a profit. That the aim of these professional contractors was only to make profits by completing the building and, therefore, no interest in the land stands created in their favour under such agreements. That such agreements are only a mode of remunerating the builder for his services of constructing the building. It is precisely for this reason that the Legislature has introduced section 2(47)(v) read with section 45 which indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law. In this case that test has not been applied by the Department. No reason has been given why that test has not been applied, particularly when the agreement in question, read as a whole, shows that it is a development agreement. There is a difference between the contract on the one hand and the performance on the other hand. In this case, the Tribunal as well as the Department have come to the conclusion that the transfer took place during the accounting year ending March 31, 1996, as substantial payments were effected during that year and substantial permissions were obtained. In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v) of the Act. Before us, it was argued on behalf of the assessee that the date on which possession is parted with by the transferor is the date which should be taken into account for determining the relevant accounting year in which the liability accrues. It was argued on behalf of the assessee that in this case, irrevocable licence was given in terms of the contract only during the financial year ending March 31, 1999, and, therefore, there was no transfer during the financial year ending March 31, 1996. On the other hand, it was argued on behalf of the Revenue that one has to go by the date on which the developer substantially performed the contract. It was argued on behalf of the Department that since substantial payments were made during the financial year ending March 31, 1996, and since majority of permissions were obtained during that year, the liability to pay capital gains tax accrued during the assessment year 199697. In this case, the agreement is a development agreement and in our view, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. We have taken this view for the reason that the development agreement does not transfer the interest in the property to the developer in general law and, therefore, section 2(47)(v) has been enacted and in such cases, even entering into such a contract could amount to transfer from the date of the agreement to itself. We have taken this view for a precise reason. Firstly, we find in numerous matters where the Assessing Officer and the Department generally proceed on the basis of substantial compliance of the contract. For example, in this very case, the Department has contended that 18 ITA No.1364/Bang/10 because of substantial compliance of the contract during the financial year ending March 31, 1996, the transfer is deemed to have taken place in that year. Such interpretation would result in anamoly because what is substantial compliance would differ from officer to officer. Therefore, if on a bare reading of a contract in its entirety, an Assessing Officer comes to the conclusion that in the guise of the agreement for sale, a development agreement is contemplated, under which the developer applies for permissions from various authorities, either under power of attorney or otherwise and in the name of the assessee, then the Assessing Officer is entitled to take the date of the contract as the date of transfer in view of section 2(47)(v). In this very case, the date on which the developer obtained a commencement certificate is not within the accounting year ending March 31, 1996. At the same time, if one reads the contract as a whole, it is clear that a dichotomy is contemplated between the limited power of attorney authorising the developer to deal with the property vide para. 8 and an irrevocable licence to enter upon the property after the developer obtains the requisite approvals of various authorities. In fact, the limited power of attorney may not be actually given, but once under clause 8 of the agreement a limited power of attorney is intended to be given to the developer to deal with the property, then we are of the view that the date of the contract, viz., August 18, 1994, would be the relevant date to decide the date of transfer under section 2(47)(v) and, in which event, the question of substantial performance of the contract thereafter does not arise. This point has not been considered by any of the authorities below. No judgment has been shown to us on this point. Therefore, although there is a concurrent finding of fact in this case, we have enunciated the principles for applicability of section 2(47)(v). We do not find merit in the argument of the assessee that the court should go only by the date of actual possession and that in this particular case, the court should go by the date on which Irrevocable licence was given. If the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability."
23. The Hon'ble High Court has held that if the agreement read as a whole indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability. In the appellant's case, the agreement dated 30.6.1994 had the effect of passing of total control over the property to the developer. The appellant has not brought on record any facts to distinguish the present appeal from the facts before the Hon'ble Bombay High Court.
24. A similar view was taken by the Delhi IT A T in the below mentioned decision (Assistant Commissioner Of Income- Tax. vs Smt. Pushpa Devi Jain) (93 ITD 289). The honorable Tribunal considered various aspects of the issue 19 ITA No.1364/Bang/10 as under:
" .... (iv) On going through various clauses of section 2(47) and in particulars clauses (v) and (vi), it is clear that the intention of Legislature is to cover all such cases ad transaction which may not strictly fall within the definition of transfer of immovable property under the Transfer of Property Act, but which have the effect of transferring rights or interest of ownership in such property. The object behind such a wide scheme is to cover all such cases in which the owner receives profit or gain on transferring capital asset by adopting any mode or by making any 'arrangement.' The term 'arrangement' encompasses various steps taken by the parties to transfer the asset. In such arrangement, there may not be requirement of any registered sale deed to convey the title to the property as envisaged under section 54 of Transfer of Property Act. Otherwise also in view of section 47 of the Registration Act, a registered document operates from the time from which it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. In the case of Arundhati Balkrishna V. CIT (1982) 138 ITR 245, the Hon'ble Gujarat High Court, taking this view, held that the transfer of capital asset becomes effective under section 45 of the Income Tax Act from the date on which the document was executed, in case its registration was subsequently admitted before the Registrar. Thus, the court came to the conclusion that the transfer was effected in the previous year in which the document was executed but was presented for registration and was registered in a subsequent year. A similar view was expressed by the Hon 'ble Supreme Court of India in the case of Ravi Saran Lall v. Mst. Domini Kuer AIR 1961 SC 1747. The Hon'ble Supreme Court explained the meaning of 'owner' for the purposes of section 22 of the Income-tax Act in the case of CIT v. Poddar Cement (P.) Ltd. {1997} 226 ITR 625 and observed as under:-
"Considering the provisions of the Act, English decisions, Jodha Mal Kuthiala's case (1971} 82 ITR 570 (SC) and passages from the G. W. Paton on Jurisprudence, Dias on Jurisprudence, Stroud's Judicial Dictionary and Pallock on Jurisprudence, the court expressed the view and pointed out as under:
'The juristic principle from the view-point of each one is to determine the true connotation of the term 'owner' within the meaning of section 22 of the Act in its practical sense, leaving the husk of the legal title beyond the domain of ownership for the purpose of this statutory provision. The reason is obvious. After all, who is to be taxed or assessed to be taxed more accurately - a person in receipt of money having actual control over the property with no person having better right to defeat his claim of possession or a person in legal parlance who may remain a remainderman, say, at the end or extinction of the period of occupation after, against say, a thousand years?'"20 ITA No.1364/Bang/10
(v) Thus, the contention that transfer will be complete only when the possession is delivered cannot be accepted in view of the provisions contained under clauses (v) and (vi) of section 2(47). Interpreting these two provisions, the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT [2003J 260 ITR 491has observed as under:
"The above two clauses were introduced with effect from April 1, 1988. They provide that "transfer" includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property [see section 269UA(d)). Therefore, in these two cases capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete under the general law. This test is important to decide the year of chargeability of the capital gains. "
(vi) In the case of Poddar Cement (P.) l.td., the Hon'ble Supreme Court of India has observed that in the context of section 2Z of Income-tax Act, owner is a person, who is entitled to receive income in his own right. According to Hon 'ble Supreme Court, section 22 does not require registration of sale deed. While considering the provisions of sections 22 to 27 of Income-tax Act, the Hon'ble Supreme Court has held that the owner must be that person who can exercise the rights of the owner, not on behalf of owner but in his own right. Thus, the liability of taxation is fixed on the person who receives and is entitled to receive the income from the property in his own right. Clarifying the concept of ownership for the purpose of Income-tax Act, the Hon'ble Supreme Court has held as under:
"From the memorandum explanation the Finance Bill, 1987, it is clear that the amendment to section 27 of the 1961 Act was intended to supply an obvious omission or to clear up doubts as to the meaning of the word "owner" in section
22. The amendmetit introduced by the Finance Bill, 1987, was declaratory/ clarificatory in nature so far as it related to section 27(iiO, (iiie) and (iiib). Consequently, these provisions are retrospective in operation.
Hence, though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, "owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted. "
(vii) In the case of CIT v. Mormasji Mancharji Vaid [2001j 250 ITR 21 ITA No.1364/Bang/10 542(Guj.)(FB), following the decision of the Hon'ble Supreme Court in the case of CIT v. Poddar Cement (P.) Ltd. [1997j 226 ITR 625the Hon'ble Gujarat High Court held as under:
"One should not forget that as pointed out by the Apex Court in the case of CIT v. Podar Cement Ltd [1997j 226 ITR 625the settled position under the common law is that owner means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But in the context of section 22 of the Income-tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, "to tax the income ". the owner is a person who is entitled to receive income from property in his own right. Thus while interpreting the provisions contained in the taxing statute, the objectives differ and, therefore, one will have to look to the provisions contained in the Income-tax Act. "
(viii) In the case of CIT v. Vishnu Trading & Investment Co. {2003j 259 ITR 724 (Raj.), also the Hon'ble Rajasthan High Court has held that for taxing the capital gains, registration of the sale deed is not necessary under the provisions of Income-tax Act.
(ix) In the present case, the assessees had transferred all the rights and entire interest in the property by the agreement dated 7-9-1991. As the property was transferred on the basis of "as is where is" basis and further as a part of sale consideration was left with the purchasers for settling all the disputes, the delivery of possession of the property was not a requirement for transferring the rights in the property in the present case. It may be pointed out that the transfer of immovable property can be completed even without delivery of possession of the property. What is to be transferred by the owners is the title in the property and their interests in such property? On scrutiny of the agreement, it is found that the owners agreed to sell the property and to transfer their rights to the purchasers under this agreement. The owners have accepted this agreement to be a final deal for the transaction of transfer as they never cancelled this agreement. Hence, this agreement is the sole basis of transferring the rights of ownership in the property. The owners received payment and continued to receive the balance payment only under this agreement. By virtue of this agreement, the transferee took further steps for the recovery of the possession. This was done on the basis of authority given under this agreement by the co-owners. Even in the arbitration proceedings though the co-owners were made party but they did not raise any objection. Had they still treated themselves to be the owners of the property, they would have certainly objected to the delivery of the possession by the 1974 purchases to the purchasers under the agreement of 1991.
(x) At the time of hearing of this appeal, the Bench enquired from the parties and in particular from the assessee, regarding any subsequent deal or document for the transfer of the disputed property. No such deal or transaction regarding sale or transfer of this property could be pointed out. It could also not be pointed out that M/s. Agarwal's Associates were not owners of the property on the basis of this agreement. Thus, this agreement is the only document on the basis of which the rights of ownership and interest in the property were transferred to M/s. Agarwal's Associates. There is no subsequent agreement, assignment or arrangement for transferring any right in 22 ITA No.1364/Bang/10 relation to this property by the owners. As the parties have acted on the basis of this agreement. it is a final document between them. To repeat, even the possession had been taken by virtue of the provisions and stipulations of this agreement. Thus, the transfer of the property by the co-owners to the purchasers has to be traced, connected and correlated with this agreement alone. It is true that there was delay in payment and also in obtaining permission from Ceiling Department etc. but on the basis of such delay neither the agreement was cancelled nor any claim was made by the co-owners by treating this agreement as revoked. The power of attorney was also executed on behalf of the co-owners for taking further steps and although this power of attorney was cancelled subsequently, the agreement was not cancelled or revoked. Thus, between the parties to this agreement, it remained a valid document. It may be pointed out that on the basis of this agreement, M/s. Agarwal's Associates even sold some shops in subsequent years and this act of M/s. Agarwal's Associates was not challenged by the assessees, which indicates that the assessee treated M/s. Agarwal's Associates as owners of the property by virtue of this agreement.
(xi) On perusal of the main para of the agreement, which has been reproduced above, it is found that the co-owners treated themselves to be absolute owners of the property irrespective of the possession being not with them and declared and represented that they had the right to transfer and saie and that there was no legal defect in this. In this para, it is also mentioned that the total consideration of Rs. 55 lakhs was received by the co-owners before the Sub-Registrar at the time of execution of the agreement. In para 2 of the agreement, it was mentioned that first party has received post-dated cheques and nothing is in balance. In para 4 of the agreement, it is stated that the first party will not return any amount to any type to the second party for the above property and in future second party shall be responsible to pay to all the persons, whatsoever amount payable or whatsoever compromise will be and second party shall be responsible to pay all the amounts received by the signatures of the first party. In paras 6 and 7 of the agreement the second party is made responsible for obtaining the requisite permissions for sale. In para 11, it is clearly mentioned that, 'if the first party object to execute and register the sale deed or agreement etc. as per direction of the second party then the second party have a right to sue for specific performance and get the registration through court, in this condition all the expenses of court will be the liability of the first party. '
(xii) In view of the various conditions and stipulations, in the above agreement and the agreement as a whole, it is found that the owners had done everything on their part to transfer the rights in the property. It may be pointed out again that this agreement has been treated to be binding by the parties and both the patties have acted upon the same. The owners do not deny that the property was not transferred to M/s. Agarwal's Associates. In fact, the version of the assessee is that the transfer took place in the year 1999 when delivery of possession was given to the purchaser, this contention is not acceptable because the only basis for transferring the rights of ownership by the owners is the deed of 1991 and not the delivery of possession and as the possession was not in their hands, it was not to be delivered by them. The owners had already made arrangements for delivery of the possession and for all other necessary acts under the agreement. Thus, the transfer of rights of 23 ITA No.1364/Bang/10 ownership by the owners stood concluded by this agreement. From the above, it is clear that the transferors i.e., the co-owners had done everything on their part to convey the title to the transferor. The intention of the parties to the agreement has also to be seen while construing the document. In the present case, clear intention of parties was to change hands over the property.
(xiii) So far as the present matter is concerned in view of clause (vi) of section 2(47) read with section 269UA(d) that capital gain would be taxable in the year in which the transaction is made in any manner which has the effect of transferring or enabling the enjoyment of any immovable property even if the transfer of property is not effected or completed under the general law. As the owners made arrangement by irrevocable agreement and gave the transferees complete control over the title to property to the purchasers, the date of contract between the owner of the purchaser becomes relevant and not the date of delivery of possession.
(xiv) The argument raised on behalf of the Id. Counsel for the assessee that the agreement was not sufficiently stamped and that no sale deed was registered on the basis of this agreement, do not carry force because in between the parties this agreement amounted to final arrangement and as provided in clause (vi) of section 2(47) read with clause (d) of section 269UA, there was no need for registration of sale deed in view of this arrangement. It has to be observed here that for the purposes of Income-tax Act and in particular for the transfer of capital assets, the definition of terms given in section 2(47) and clause (d) of section 2.69UA ho« to be applied and not the definition of 'sale' or 'transfer' as given in the Transfer of Property Act or in other statutes. The other arguments raised by the Id. Counsel for the assessee was that the possession was not delivered at the time of the agreement also does not carry force because as provided in clause (d) of section 269UA immovable property includes any rights with respect to any land or building etc. In the present case the owners did not have physical possession but they had the rights of ownership in the property and by transferring such rights to the purchasers by virtue of 1991 agreement, they transferred immovable property within the meaning of the above provision.
(xv) The learned CIT(A) has considered the provisions of section 2(47)(v) for holding that as at the time of execution of agreement dated 7.9.1991 the possession was not handed over, no transfer took place under the said agreement or by virtue of the said agreement. He has also considered section 53A of the Transfer of Property Act, which relates to part performance of the contract and possession taken under such contract. In our considered opinion, the learned CIT(A) has misdirected himself in invoking the provisions of section 2(47)(v) of the Income-tax Act because in the present case the possession was not delivered in pursuance of the agreement.
24ITA No.1364/Bang/10 (xvi) The Id. Counsel for the assessee painted out that in assessment year 1999- 2000, the assessee filed return disclosing the capital gain on transfer of the said Bungalow and the Department had accepted the returns. On perusal of the relevant documents, it is found that these are only acknowledgements and not scrutiny assessments. In any case, on the basis of these acknowledgements, it cannot be said that the Department has applied mind in accepting the return of the assessee.
Nextly, it may be pointed out that in the present case, we are examining the validity of the assessment made in assessment year 1992-93 and not the validity of assessments made in subsequent years.
7. Ld. Counsel placed heavy reliance on the wealth-tax assessments made in the case of the assessee in subsequent assessment years. His emphatic submission was that as the Department has charged wealth-tax in assessment years 1992- 93 to 1995-96 in respect of the same property by making under section 16(3)117 of the Wealth-tax Act, it has to be taken that the Department has treated the assessee's as owners of the property in subsequent assessment years and on this basis, the approach of the Department in charging capital gain tax in assessment year 1992-93 is self-contradictory and inconsistent. This contention can also not be accepted. It is for the assessee to challenge the legality or otherwise of the wealth-tax assessment and for this purpose, they may avail available legal remedies. If any assessment has been made incorrectly or illegally under any other act then the assessee may exercise his rights to challenge the same. The assessment correctly made cannot be held to be illegal merely on that basis. In the case of ITO v. Ch. Atchaiah 268 ITR 239 (sic) before the Hon'ble Supreme Court, it was argued on behalf of the revenue that merely because a wrong person is taxed, it does not operate as a bar to taxing the right person. According to the Hon'ble Court, the Income-tax Officer can and he must, tax the right person and the right person alone. The Hon'ble Court has observed 3S under:
"He can, and he must, tax the right person and the right person alone. But "right person ", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person ". Merely because a wrong person is taxed with regard to a particular income, the Assessinq Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. In our 25 ITA No.1364/Bang/10 opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Section 183 shows that where Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law, but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer [Income-tax Officer] has taxed the said income in the hands of another person contrary to law."
8. On the basis of the above, we are unable to accept the arguments of the Id. we uphold the view taken by the Assessing Officer.
9. In view of the above, we are unable to uphold the findings of the learned CIT(A) and after setting aside the same, we hold that the transfer of the capital asset i.e. Bungalow No.210-B, West End Road, Meerut, took place by virtue and under the agreement dated 7.9.1991 on the financial year 1991-92 (assessment year 1992-93) and as such, the Assessing Officer was fully justified in levying the capital gain in Assessment Year 1992-93. The Assessing Officer is directed to compute capital gain accordingly.
10. In view of the above, we allow ground Nos.1 to 3 taken by the Revenue in the above three appeals."
In the assessee's case also the developer M/s. SI Property Development Limited could construct and sell flats/apartments in phases 1 to 4 of Kingsdale project only by virtue of transfer of possession of the land pursuant to agreement dt.30.6.1994. Though this agreement was modified by agreements dt.27.2.1996 and 8.1.2003, they were in essence only supplementaries to the original agreement dt.30.6.1994 whereby the construction was completed partly by M/s. S.I. Property Devp. Ltd. and partly by M/s. Shantinikethan Housing Foundations. From the discussion of this issue from para 1 to para 6.8 of this order, we are of the clear view that the assessee transferred all control and interest in the land to the developer at the time of agreement dt.30.6.1994 when the assessee gave the developer exclusive rights over the property. The assessee has not been able to produce any contrary evidence to show that the property was handed over on any subsequent date and more so in the period relevant to Assessment Year 2003-04. 6.10 In a nutshell, the argument of the assessee is that the joint development agreement dt.30.6.1994 cannot be construed as transfer of land to the developer, as possession of the land was not given, since until various approvals were received from the 26 ITA No.1364/Bang/10 concerned statutory authorities, no housing project could be put up on the said land and therefore the capital gains on the said joint development agreement cannot be brought to tax in the period relevant to Assessment Year 1995-96. From the facts on record, as stated by the learned CIT(A) in para 27 of his order, the assessee had submitted that possession of the said land was not handed over to the developer during the period relevant to Assessment Year 1996-97 and 1997-98 and it is seen that the learned CIT(A) accepted the assessee's contention and the matter attained finality as the learned CIT(A)'s order for both these Assessment Years 1996-97 & 1997-98 was accepted by both Revenue and the assessee. The assessee did not offer capital gains, on this project for the Assessment Years 1998-99 to 2002-03 also.
6.11 Significantly the record reveals that even the return of income for Assessment Year 2003-04 in which period the assessee claims that capital gains arises was not filed within the due date under section 139(1) or under section 139(4) of the Act for belated returns. It is only after the Assessing Officer initiated proceedings under section 147 to bring to tax assessee's income from family pension, income from house property and capital gains on sale of assets and notice under section 148 was issued on 14.9.2005, that the assessee filed the return of income for Assessment Year 2003-04 on 29.3.2006 (after a delay of almost 2 1/2 years) declaring income which included capital gains of Rs.47,59,091 in respect of various properties including the Mysore property. This wishy washy approach of the assessee, in not committing when the capital gains on the joint development agreement dt.30.6.1994 is liable for tax, brought forth the following observations by the Tribunal in their order in the assessee's own case for Assessment Year 1999-2000, 2002-03 to 2004-05 in ITA Nos.764 to 767/Bang/08 dt.28.9.2009.
" We are of the considered view that the assessee's grievance with respect to proceeding undertake under the provisions of section 147/148 appear to be due to her own making. We have perused the various grounds which inter alia for the respective assessment years indicate that the assessee herself was not clear about the computation of capital gains in accordance with the provisions of the Act. In other words, she has been sitting on the fence for the Assessing Officer to make a mistake ....."27 ITA No.1364/Bang/10
The assessee in the return of income for Assessment Year 2003-04 has taken the stand that the said land was transferred in the financial year 2002-03 when she entered an agreement with M/s. Shanti Nikethan Housing Foundation on 8.1.2003. However, on going through this agreement we find that the assessee's stand/contention is factually not correct. The agreement dt.8.1.2003 between the assessee, M/s. Shanti Nikethan Housing Foundation with M/s. S.I. Property Development Ltd. as consenting party, mentions clearly that as M/s. S.I. Property Devp. Ltd. could not complete the project and failed to meet its commitments, M/s. Shanti Nikethan Housing Foundations has offered to take over the undeveloped portion of the scheduled property namely phases 5, 6 and 7 of the project 'Kingsdale'. The agreement also mentions that M/s. S.I. Property Devp. Ltd. had already completed phases 1 to 4 of the Kingsdale project, sold a number of apartments of this project to various customers and had also carried out the foundation work for phases 5, 6 and 7 prior to this agreement dt.8.1.2003. This is irrefutable evidence that the possession of the land at Kyathamanhally, Mysore was not with the assessee but was already in possession of M/s. S.I. Property Dev. Ltd. long before 8.1.2003 when M/s. Shanti Nikethan Housing Foundation merely stepped into the shoes of M/s. S.I. Property Devp. Ltd. for completion of the unfinished portion of the Kingsdale project. These facts clearly establish without a doubt that the agreement dt.8.1.2003 was also merely a continuation of the agreement dt.30.6.1994 and by which M/s. Shanti Nikethan Housing Foundation undertook to complete the Kingsdale project and deliver to the assessee the built up area as promised in the original agreement dt.30.6.1994. Considering the facts and circumstances of the case, we are of the firm opinion that the possession of the assessee's property at Kythamaranahalli, Mysore was handed over, not in the period relevant to Assessment Year 2003-04, but much before that to M/s. SI Property Devp Ltd . At this stage of the agreement dt.8.1.2003, M/s. S.I. Property Devp. Ltd. had built 4 out of 7 phases of the Kingsdale project, sold some apartments and had laid the foundation for phases 5, 6 and 7 and possession of the land. It is, therefore, certain that the assessee would have transferred or handed over constructive possession of the land to M/s. SI Property Development Limited along with assignment of all the privileges of the 28 ITA No.1364/Bang/10 owner of the said land much before 8.1.2003. By the assessee's own stand possession of the land was not handed over in the period relevant to the Assessment Year 1996-97 to 2002-03. Considering the factual situation as discussed in para 6.1 to 6.11 of this order, it is evident that the assessee transferred the possession or constructive possession of the land to M/s. SI Property Development Limited at the time of the original agreement dt.30.6.1994 and therefore in accordance with the provisions of section 2(47) of the Act r.w.s. 53A of the Transfer Property Act, 1882, we hold that the capital gains on the assessee's land at Kayathamaranahalli, Mysore has been correctly brought to tax in Assessment Year 1995-96 by the Assessing Officer. We find no reason to interfere with the findings of the learned CIT(A) and uphold the same. The assessee's appeal is therefore dismissed.
7. In the ground of appeal at S.No.7, the assessee challenged the charging of interest under section 234B of the Act and prays that the quantification should be in accordance with law. The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. The Assessing Officer is directed to recompute the interest chargeable if any while giving effect to this order.
8. In the result the assessee's appeal is dismissed.
Order pronounced in the open court on 4th May, 2012.
Sd/- Sd/-
(P. MADHAVI DEVI) (JASON P BOAZ)
Judicial Member Accountant Member
Bangalore,
Dated:04.05.2012.
*Reddy gp
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, - B Bench.
6. Guard File.