Shri S.Harinath Chowdary, Hyderabad v. ITO, Ward 6(4), Hyderabad

ITA 853/HYD/2013 | misc
Pronouncement Date: 04-04-2014

Appeal Details

RSA Number 85322514 RSA 2013
Assessee PAN AGQPS1831H
Bench Hyderabad
Appeal Number ITA 853/HYD/2013
Duration Of Justice 44 year(s) 3 month(s) 3 day(s)
Appellant Shri S.Harinath Chowdary, Hyderabad
Respondent ITO, Ward 6(4), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 04-04-2014
Appeal Filed By Assessee
Assessment Year misc
Appeal Filed On 01-01-1970
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER ITA NO.1356/HYD/12 : ASSESSMENT YEAR 2004 - 05 ITA NO.896/HYD/13 : ASSESSMENT YEAR 2007 - 08 INCOME TAX OFFICER WARD 8(1) HYDERABAD V/S. SHRI HARINATH CHOUDARY HYDERABAD ( PAN - AGQPS 1831 H) (APP ELLANT ) (RESPONDENT) ITA NO.853/HYD/13 : ASSESSMENT YEAR 2007 - 08 SHRI HARINAT H CHOUDARY HYDERABAD ( PAN - AGQPS 1831 H) V/S. INCOME TAX OFFICER WARD 6(4) HYDERABAD (APP ELLANT ) (RESPONDENT) ASSESSEE BY : SHRI P.MURALI MOHAN RAO RE VENUE BY : SHRI B.YADAGIRI DR DATE OF HEARING 18.3.2014 DAT E OF PRONOUNCEMENT 04.04.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER: THERE ARE THREE APPEALS IN THIS BUNCH. THERE ARE CROSS - APPEALS FOR THE ASSESSMENT YEAR 2007 - 08 WHICH ARE FILED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEAL S) III HYDERABAD DATED 5.3.2013 BESIDES THE APPEAL OF THE REVENUE ALONE FOR THE ASSESSMENT YEAR 2004 - 05 WHICH IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) III HYDERABAD DATED 29 TH JUNE 2012. SINCE FACTUAL BACKGROUND AND TH E ISSUES INVOLVED IN THESE APPEALS ARE COMMON THEY ARE BEING DISPOSED OF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 2 2. LET US FIRST TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2004 - 05 VIZ. ITA NO.1356/HYD/2012. THE ONLY EFFECT IVE GRIEVANCE OF THE REVENUE IN THIS APPEAL RELATES TO THE YEAR OF ASSESSABI LI TY OF CAPITAL GAINS IN RESPECT OF A PROPERTY WHICH HAS BEEN SUBJECT MATTER OF A DEVELOPMENT AGREEMENT. 3. F A CTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE FIL E D RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004 - 05 ON 20.11.20 0 4 ADMITTING TOTAL INCOME OF RS.76 200. THE ASSESSMENT WAS ULTIMATELY COMPL E TED ON 24.12.2010 UN D ER S.143(3) READ WITH S.147 OF THE ACT ON A TOTAL INCOME OF R S .45 23 400 AFTER BRINGING T O TAX THE SHO R T TERM CAPITAL GAIN S OF RS.44 47 200. IN THE COU R SE O F THE SAID ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS GIVEN HIS LAND TO THE EXTENT OF 1 184 SQ. YARDS FOR DEVELOPMENT TO M/S. YASHODA BUILDERS AND DEVELOPERS VIDE DEVELO PMENT AGRE E M E NT DATED 24.7.2003. IT WAS FURTHER NOTED THAT THE ASSESSEE HAS H ANDED O V ER THE POSSESSION O F TH E PROPERTY WITHIN ONE WEEK O F THE DEVELOPMENT AGR E EMENT AND THE DEVELOPER WAS AUTHORISED TO CONSTRUCT AND HAS GOT THE RIGHT OVER THE 50% BUILT UP AREA IN EXCHANGE FOR THE 50% BUILT UP AREA TO BE CONSTRUCTED AND HANDED OVER BY THE DEVELOPER TO THE ASSESSEE . CON S I DE RING THIS FACTUAL BACKGROUND THE ASSESSING OFFICER ARRIVED AT THE CAPITAL GAINS AT THE FIRST STAGE RELYING UPON THE D E CI S ION OF HYDERA BAD BENCH A OF THE TRIBUNAL IN TH E CASE OF DR.MAYA SHENOY S E CUN D ERABAD (2 3 DTR ( HYD ) 140 ) AND BROU G H T TO TAX SHO R T TERM CAPITAL GAIN S AMOUN T ING TO RS.44 47 200. 5. ON APPEAL BEFORE THE CIT(A) THE ASSESSEE CONTESTED THE ACTION OF THE ASSESSING OFFIC ER IN B R IN G ING TO TAX THE SHO R T TERM CAPITAL GAINS OF R S .44 47 200 IN THE Y E AR UN D ER APPEAL AND RELIANCE IN THAT BEHALF WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CA S E OF SMT.K.R A DHIKA AND OTHERS DATED 9.8.2011 IN ITA NO.208/HYD/2011 FOR ASSESSMENT YEAR 2006 - 07 AND OTHERS. THE CIT(A) FOLLOWING THE SAID DECISION OF THE TRIBUNAL IN THE CA S E OF SMT. K.R A DHIKA AND OTHERS (SUPRA) DULY EXTRACTING RELEVANT PORTION THEREOF IN THE ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 3 IMPUGNED ORDER DELETED ADDITION MADE BY THE ASSESSING OFFICER BY WAY OF SH O R T TERM CAPITAL GAINS IN THE YEAR UNDER APPEAL. 5. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A) REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(APPEALS) - III HY DERABAD IS ERRONEOUS ON FACTS AND IS BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEALS) III HYDERABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER SINCE THE ASSESSMENT WAS FINALIZED ON THE BASIS OF RELE VANT CLAUES IN THE DEVELOPMENT AGREEMENT. 3. THE LEARNED CIT(A) III HYDERABAD OUGHT TO HAVE NOT RELIED ON THE ITATS DECISION IN THE CASE OF K.RADHIKA & OTHERS AS THEY ARE DIFFERENTIATE TO THE FACTS OF THE PRESENT CASE. 4. THE LEARNED CIT(A) III HYDERA BAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER FOLLOWING DECISIONS OF THE IN THE CASES OF 1) CIT V/S. A.RAM REDDY(2012) 23 AND 2) KRISHNA KUMAR D.SHAH(HUF ) V. DEPUTY COMMISSIONER OF INCOME - TAX CENTRAL CIRCL3 2 HYDERABAD. 5. . . (SIC) 6. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL ON RECORD. THE SHORT DISPUTE ARISING FOR CONSIDERATION IN THIS CASE RELATES TO THE YEAR OF ASSESSABILITY OF CAPITAL GAINS ARISING ON THE PROPERTY WHI CH WAS SUBJECT MATTER OF A DEVELOPMENT AGREEMENT I.E. WHETHER IT IS ASSESSABLE IN THE YEAR IN WHICH THE DEVELOPMENT AGREEMENT WAS ENTERED INTO AS DONE BY THE ASSESSING OFFICER OR IN THE RELEVANT SUBSEQUENT YEAR IN WHICH THE AREA DULY DEVELOPED AND CONST RUCTED COMING TO THE SHARE OF THE ASSESSEE - OWNER HAS BEEN HANDED OVER TO THE ASSESSEE. THOUGH IT WAS INITIALLY HELD BY VARIOUS BENCHES OF THE TRIBUNAL THAT CAPITAL GAINS ARE TO BE ASSESSED IN THE YEAR IN WHICH DEVELOPMENT AGREEMENT HAS BEEN ENTERED INTO B ETWEEN THE OWNER AND THE DEVELOPER CONSIDERING THE FACT THAT IN MANY CASES THE DEVELOPMENT AGREEMENT WAS NOT ACTED UPON BY ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 4 THE DEVELOPER DIFFERENT VIEWS HAVE TO BE EXPRESSED AS TO THE YEAR OF ASSESSABILITY BASED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. THIS POSITION HAS BEEN EXAMINED AT LENGTH IN THE LIGHT OF CASE - LAW ON THE POINT IN THE CASE OF SMT. K.RADHIKA AND OTHER S (SUPRA) AND IT WAS ULTIMATELY HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL AS FOLLOWS - 48. WE ARE IN CONSIDERE D AGREEMENT WITH THE VIEWS SO EXPRESSED IN THIS COMMENTARY ON THE PROVISIONS OF THE TRANSFER OF PROPERTY ACT. IT IS THUS CLEAR THAT 'WILLINGNESS TO PERFORM' FOR THE PURPOSES OF SECTION 53A IS SOMETHING MORE THAN A STATEMENT OF INTENT; IT IS THE UNQUALIFIED AND UNCONDITIONAL WILLINGNESS ON THE PART OF THE VENDEE TO PERFORM ITS OBLIGATIONS. UNLESS THE PARTY HAS PERFORMED OR IS WILLING TO PERFORM ITS OBLIGATIONS UNDER THE CONTRACT AND IN THE SAME SEQUENCE IN WHICH THESE ARE TO BE PERFORMED IT CANNOT BE SAID THAT THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT WILL COME INTO PLAY ON THE FACTS OF THAT CASE. IT IS ONLY ELEMENTARY THAT UNLESS PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED ON THE FACTS OF A CASE THE TRANSAC TION IN QUESTION CANNOT FALL WITHIN THE SCOPE OF DEEMED TRANSFER UNDER SECTION 2(47)(V) OF THE IT ACT. LET US THEREFORE CONSIDER WHETHER THE TRANSFEREE ON THE FACTS OF THE PRESENT CASE CAN BE SAID TO HAVE 'PERFORMED OR IS WILLING TO PERFORM' ITS OBLIGATI ONS UNDER THE AGREEMENT. 49. EVEN A CURSORY LOOK AT THE ADMITTED FACTS OF THE CASE WOULD SHOW THAT THE TRANSFEREE HAD NEITHER PERFORMED NOR WAS IT WILLING TO PERFORM ITS OBLIGATION UNDER THE AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AGREEM ENT BASED ON WHICH CAPITAL GAINS ARE SOUGHT TO BE TAXED IN THE PRESENT CASE IS AGREEMENT DATED 11.05.2005 BUT THIS AGREEMENT WAS NOT ADHERED TO BY THE TRANSFEREE. THE TRANSFEREE ORIGINALLY MADE A PAYMENT OF RS.10 LAKHS ON 11.5.2005 AND ANOTHER PAYMENT OF R S.90 LAKHS ON THE SAME DAY AS REFUNDABLE SECURITY DEPOSIT. HOWEVER OUT OF THIS A SUM OF RS.50 LAKHS WAS SAID TO BE REFUNDED BY THE LANDLORD TO THE DEVELOPER ON 5.3.2009. AS SUCH THE ASSESSEE HAS RECEIVED ONLY A MEAGER AMOUNT AS REFUNDABLE SECURITY DEPOSI T WHICH CANNOT BE CONSTRUED AS RECEIPT OF PART OF SALE CONSIDERATION. ADMITTEDLY THERE IS NO PROGRESS IN THE DEVELOPMENT AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE MUNICIPAL SANCTION FOR DEVELOPMENT WAS OBTAINED NOT IN THIS ASSESSMENT YEAR AND IT WAS OBTAINED ONLY ON 17.09.2006 FROM THE HYDERABAD URBAN DEVELOPMENT AUTHORITY. THE SANCTION OF THE BUILDING PLAN IS UTMOST IMPORTANT FOR THE IMPLEMENTATION OF THE AGREEMENT ENTERED BETWEEN THE PARTIES. WITHOUT SANCTION OF THE BUILDING PLAN THE VER Y GENESIS OF THE AGREEMENT FAILS. TO ENABLE THE EXECUTION OF THE AGREEMENT FIRSTLY PLAN IS TO BE APPROVED BY THE COMPETENT AUTHORITY. IN FACT THE BUILDING PLAN WAS NOT GOT APPROVED BY THE BUILDER IN THE ASSESSMENT YEAR UNDER CONSIDERATION. UNTIL PERMISS ION IS GRANTED A DEVELOPER CANNOT UNDERTAKE CONSTRUCTION. AS A RESULT OF THIS LAPSE BY THE TRANSFEREE THE CONSTRUCTION WAS NOT TAKEN PLACE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE IS A BREACH AND BREAK DOWN OF DEVELOPMENT AGREEMENT IN THE ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 5 ASSESS MENT YEAR UNDER CONSIDERATION. NOTHING IS BROUGHT ON RECORD BY AUTHORITIES TO SHOW THAT THERE WAS DEVELOPMENT ACTIVITY IN THE PROJECT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND COST OF CONSTRUCTION WAS INCURRED BY THE BUILDER/DEVELOPER. HENCE IT IS TO BE INFERRED THAT NO AMOUNT OF INVESTMENT BY THE DEVELOPER IN THE CONSTRUCTION ACTIVITY DURING THE ASSESSMENT YEAR IN THIS PROJECT AND IT WOULD AMOUNT TO NON - INCURRING OF REQUIRED COST OF ACQUISITION BY THE DEVELOPER. IN THE ASSESSMENT YEAR UNDER CONSID ERATION IT IS NOT POSSIBLE TO SAY WHETHER THE DEVELOPER PREPARED TO CARRY OUT THOSE PARTS OF THE AGREEMENT TO THEIR LOGICAL END. THE DEVELOPER IN THIS ASSESSMENT YEAR HAD NOT SHOWN ITS READINESS OR HAVING MADE PREPARATION FOR THE COMPLIANCE OF THE AGREEME NT. THE DEVELOPER HAS NOT TAKEN STEPS TO MAKE IT ELIGIBLE TO UNDERTAKE THE PERFORMANCE OF THE AGREEMENT WHICH ARE THE PRIMARY INGREDIENT THAT MAKE A PERSON ELIGIBLE AND ENTITLED TO MAKE THE CONSTRUCTION. THE ACT AND CONDUCT OF THE DEVELOPER IN THIS ASSESSM ENT YEAR SHOWS THAT IT HAD VIOLATED ESSENTIAL TERMS OF THE AGREEMENT WHICH TEND TO SUBVERT THE RELATIONSHIP ESTABLISHED BY THE DEVELOPMENT AGREEMENT. BEING SO IT WAS CLEAR THAT IN THE YEAR UNDER CONSIDERATION THERE WAS NO TRANSFER OF NOT ONLY THE FLATS A S SUPERSTRUCTURE BUT ALSO THE PROPORTIONATE LAND BY THE ASSESSEE UNDER THE JOINT DEVELOPMENT AGREEMENT. AS PER CLAUSE NO. 12.11 AND 19.1 OF DEVELOPMENT AGREEMENT - CUM POWER OF ATTORNEY TIME IS THE ESSENCE OF THE CONTRACT AND AS PER CLAUSE NO.12.11 THE SAID PROPERTY IS TO BE DEVELOPED AND HAND OVER THE POSSESSION OF THE OWNERS ALLOCATION TO THE OWNERS AND OR THEIR NOMINEES WITHIN 24 MONTHS FROM THE DATE OF RECEIVING THE SANCTION OF THE PLAN FROM HUDA AND MUNICIPALITY/GRAM PANCHAYAT WITH A FURTHER GRACE PER IOD OF 3 MONTHS. BUT THE FACT REMAINS THAT THE TRANSFEREE WAS NOT ONLY FAILED TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT BUT ALSO UNWILLING TO PERFORM ITS OBLIGATIONS IN THE ASSESSMENT YEAR UNDER CONSIDERATION. EVEN OTHERWISE THE ASSESSING AUTHORITIE S HAS NOT BROUGHT ON RECORD THE ACTUAL POSITION OF THE PROJECT EVEN AS ON THE DATE OF ASSESSMENT OR HE HAS NOT RECORDED THE FINDINGS WHETHER THE DEVELOPER STARTED THE CONSTRUCTION WORK AT ANY TIME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY DEVEL OPMENT HAS TAKEN PLACE IN THE PROJECT IN THE RELEVANT PERIOD. HE WENT ON TO PROCEED ON THE SOLE ISSUE WITH REGARD TO HANDING OVER THE POSSESSION OF THE PROPERTY TO THE DEVELOPER IN PART PERFORMANCE OF THE DEVELOPMENT AGREEMENT - CUM - GENERAL POWER OF ATTORNEY . IN OUR OPINION THE HANDING OVER OF THE POSSESSION OF THE PROPERTY IS ONLY ONE OF THE CONDITION U/S 53A OF THE TRANSFER OF PROPERTY ACT BUT IT IS NOT THE SOLE AND ISOLATED CONDITION. IT IS NECESSARY TO GO INTO WHETHER OR NOT THE TRANSFEREE WAS 'WILLING T O PERFORM' ITS OBLIGATION UNDER THESE CONSENT TERMS. WHEN TRANSFEREE BY ITS CONDUCT AND BY ITS DEEDS DEMONSTRATES THAT IT IS UNWILLING TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT IN THIS ASSESSMENT YEAR THE DATE OF AGREEMENT CEASES TO BE RELEVANT. IN SUCH A SITUATION IT IS ONLY THE ACTUAL PERFORMANCE OF TRANSFEREE'S OBLIGATIONS WHICH CAN GIVE RISE TO THE SITUATION ENVISAGED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. ON THESE FACTS IT IS NOT POSSIBLE TO HOLD THAT THE TRANSFEREE WAS WILLING TO PE RFORM ITS OBLIGATIONS IN THE FINANCIAL YEAR IN WHICH THE CAPITAL GAINS ARE SOUGHT TO BE TAXED BY THE REVENUE. WE HOLD THAT THIS CONDITION LAID DOWN UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT WAS NOT SATISFIED IN THIS ASSESSMENT YEAR. ONCE WE COME TO THE CONCLUSION THAT THE TRANSFEREE WAS ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 6 NOT 'WILLING TO PERFORM' AS STIPULATED BY AND WITHIN MEANINGS ASSIGNED TO THIS EXPRESSION UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT ITS CONTRACTUAL OBLIGATIONS IN THIS PREVIOUS YEAR RELEVANT TO THE PRESENT ASSESSMENT YEAR IT IS ONLY A COROLLARY TO THIS FINDING THAT THE DEVELOPMENT AGREEMENT DT. 11.5.2005 BASED ON WHICH THE IMPUGNED TAXABILITY OF CAPITAL GAIN IS IMPOSED BY THE AO AND UPHELD BY THE CIT(A) CANNOT BE SAID TO BE A 'CONTRACT OF THE NATURE REFERR ED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT' AND ACCORDINGLY PROVISIONS OF SECTION 2(47)(V) CANNOT BE INVOKED ON THE FACTS OF THIS CASE CHATURBHUJ DWARKADAS KAPADIA V. CIT'S CASE (SUPRA) UNDOUBTEDLY LAYS DOWN A PROPOSITION WHICH MORE OFTEN THAN NOT FAVOURS THE REVENUE BUT ON THE FACTS OF THIS CASE THE SAID JUDGMENT SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS 'WILLINGNESS TO PERFORM' HAS BEEN SPECIFICALLY RECOGNIZED AS ONE OF THE ESSENTIAL INGREDIENTS TO COVER A TRANSACTION BY THE SCOPE OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT. REVENUE DOES NOT GET ANY ASSISTANCE FROM THIS JUDICIAL PRECEDENT. THE VERY FOUNDATION OF REVENUE'S CASE IS THUS DEVOID OF LEGALLY SUSTAINABLE BASIS. 50. THAT IS CLEARLY AN ERRONEOUS ASSUMPTION AND AN THE PROVI SIONS OF DEEMED TRANSFER UNDER SECTION 2(47)(V) COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THE PRESENT CASE AND FOR THE ASSESSMENT YEAR IN DISPUTE BEFORE US. IN THE PRESENT CASE THE SITUATION IS THAT THE ASSESSEE HAS RECEIVED ONLY A MEAGER AMOUNT' OUT O F TOTAL CONSIDERATION THE TRANSFEREE IS AVOIDING ADHERING TO THE AGREEMENT AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE AUTHORITIES TO SHOW THAT THERE WAS ACTUAL CONSTRUCTION HAS BEEN TAKEN PLACE AT THE IMPUGNED PROPERTY IN THE ASSESSMENT YEA R UNDER CONSIDERATION AND ALSO THERE IS NO EVIDENCE TO SHOW THAT THE RIGHT TO RECEIVE THE SALE CONSIDERATION WAS ACTUALLY ACCRUED TO THE ASSESSEE. WITHOUT ACCRUAL OF THE CONSIDERATION TO THE ASSESSEE THE ASSESSEE IS NOT EXPECTED TO PAY CAPITAL GAINS ON TH E ENTIRE AGREED SALES CONSIDERATION. WHEN TIME IS ESSENCE OF THE CONTRACT AND THE TIME SCHEDULE IS NOT ADHERED TO IT CANNOT BE SAID THAT SUCH A CONTRACT CONFERS ANY RIGHTS ON THE VENDOR/LANDLORD TO SEEK REDRESSAL UNDER SECTION 53A OF THE TRANSFER OF PROP ERTY ACT. THIS AGREEMENT CANNOT THEREFORE BE SAID TO BE IN THE NATURE OF A CONTRACT REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. IT CANNOT THEREFORE BE SAID THAT THE PROVISIONS OF SECTION 2(47)(V) WILL APPLY IN THE SITUATION BEFORE US. C ONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS DISCUSSED ABOVE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE DESERVES TO SUCCEED ON REASON THAT THE CAPITAL GAINS COULD NOT HAVE BEEN TAXED IN THE IN THIS ASSESSMENT YEAR IN APPEAL BEFORE US . THE OTHER GROUNDS RAISED BY THE ASSESSEES IN THEIR APPEALS HAVE BECOME IRRELEVANT AT THIS POINT OF TIME AS WE HAVE HELD THAT PROVISIONS OF SECTION 2(47)(V) WILL NOT APPLY TO THE ASSESSEES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. . IN THE FACTS OF T HE PRESENT CASE AS WELL THOUGH IT HAS BEEN NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS HANDED OVER THE POSSESSION OF THE PROPERTY FOR DEVELOPMENT WITHIN A WEEK O F ENTERING INTO THE DEVELOPMENT AGREEMENT IT APPEARS FROM THE MATERIAL AVAILABLE ON RECORD THERE IS NO ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 7 ACTIVITY UNDERTAKEN BY THE DEVELOPER DURING THE YEAR UNDER APPEAL TO DISCHARGE THE OBLIGATIONS CAST UPON IT BY THE DEVELOPMENT AGREEMENT IN QUESTION. IN THAT VIEW OF THE MATTER NO DEEMED TRANSFERRED COULD BE INFERRED IN THE FACTS OF THE CASE ON HAND AND NO CAPI T AL GAINS COULD BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN THE YEAR UNDER APPEAL. W E ARE THEREFORE OF THE VIEW THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER IN TH AT BEHALF. WE AC CORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS O F THE REVENUE IN THIS APPEAL. CROSS APPEALS FOR ASSESSMENT YEAR 2007 - 08 ITA NO.896/HYD/13 OF THE REVENUE ITA NO.853/HYD/13 OF THE ASSESSEE 7 . FACTS OF THE CA S E IN BRIEF LEADING TO TH E FILING O F TH E PRESENT APPEALS ARE THAT THE ASSESSEE IN THE RETURN FILED FOR THE ASSESSMENT YEAR 2007 - 08 ON 14.8.2008 DECLARED INTER - ALIA SHO R T TERM CAPITAL GAINS OF R S .1 41 770. ASSESSEE HAD PURCHASED A PLOT O F LAND AT JUBILEE HILL S HYDERABAD AD ME A S U R ING 1184 SQ. YAR D S IN MAY 2 003. HE H A D 1/3 RD SHA R E O F THIS PLOT OF LAND WHICH WAS GIVEN TO M/S. YASHODA BUILDERS AND DEVELOPERS FOR THE CO N STRUC T ION OF A RE S IDENTIAL APARTMENTS IN JULY 2003 VIDE DEVELOPM E N T AGRE E MENT DATED 24.7.2003. AS PER THIS AGR E EM ENT 50% OF THE AREA WAS TO BE GIVEN TO THE DEVELOPER IN LI E U OF THE DEVELOPMEN T WORK WHILE TH E OTHER 50% OF THE AREA ALON G WITH THE DEVELOPED APARTMENTS WOULD BELONG TO THE ASSESSEE. THE ASSESSEES SHARE CON S I S TED O F A DEVELOPED AREA OF 12 155 SQ.FT CONSIST ING OF 6 APARTMENTS. FIVED OF THESE APARTM E N T S WERE HANDED O V ER TO THE ASSESSEE BETWEEN AUGUST 2005 TO FEBRUARY 2 0 06 WHIL E THE SIXT H ONE WAS HANDED OV E R IN SEPTEMBER 2006. DURIN G TH E FINANCIAL Y E AR IN QUESTION TH E ASSESSEE SOLD THE SIXTH APARTMENT AND DISCLO S ED THE FOL L OWIN G AMOUNT OF C APITAL GAINS - SALE CONSIDERATION OF ONE FLAT RS.22 68 000 (RECEIVED ON GIVING LAND FOR DEVELOPMENT - POSSESSION RECEIVED AND SOLD IN SEPTEMBER 2006) LESS: CO S T OF ACQU I SITION OF FLAT RS.21 26 230 (TOTAL COST OF LAND X UNDIVIDED LAND SOLD IN SQ. YARDS TOTAL SHARE OF LAND RECEIVED ON DEVELOPMENT ) ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 8 I.E. 99 29 500X 100/467 _____________ SHORT TERM CAPI T AL GAINS RS. 1 41 770 THE ASSESSING OFFICER HELD THAT THE CAPITAL GAIN S ARISES IN TWO STAGES I.E. THE 1 ST STAGE ARI S ES EITHER AT THE TIM E OF GIV ING THE L A N D FOR DEVELOPMENT OR WHEN THE DEVELOPED PO R TION IS RECEIVE D BACK. THE SECOND STAGE O F CAPI T AL GAIN ARISES ON THE SALE O F CONSTRUCTED SPACE BY TH E LANDLORD. THE ASSESSING OFFICER HELD T H A T THE 1 ST SAGE O F CAPITAL GAINS AROSE IN TH E ASSESSMENT YE AR 2004 - 05. THE SECOND STAGE O F CAPITAL GAINS PERTAINING TO THE APARTMENT IN QU E STION AROSE DURING THE ASSESSMENT YEAR 2007 - 08. THE DUPLEX APARTMENT BEARING N O .G - 3 MEASURING 2360 SQ. FT ALO N G WITH A SERVANT ROOM MEASURING 46 0 SQ. FT AND UN D I V I D ED SHARE O F LAND MEASURING HUN D R E D SQUARE YARDS WAS STATED TO HAVE BEEN SOLD AT RS.22 68 000 BY THE ASSESSEE ON 15.9.2006. EVEN THOUGH THE ASSESSEE STATED THAT THE FLAT WAS SOLD IN A SEMI - FINISHED CONDITION TH E ASSESSING OFFICER DID NOT AGREE WITH THE SAID CLAIM OF THE ASSESSEE ON THE BASIS OF ENQUIRIES MADE WITH THE BUYER OF THE FLAT AND ANALYZING THE INFORMATION COLLECTED IN THAT PROCESS HELD THAT THE TOTAL CONSIDERATION PAID FOR THE FLAT WAS R S .70 LAKH S . ACCORDINGLY THE ASSESSING OFFICER COMPUTED THE SHORT - TERM CAPITAL GAINS ASSESSABLE IN THE HANDS OF THE ASSESSEE IN THE YEAR UNDER APPEAL AT RS.51 19 683 CO M PUTIN G THE SAME AS FOLLOWS - SALE CONSIDERATION OF FLAT AS DISCUSSED ABOVE RS. 70 00 000 LESS: COST OF ACQUI SI TION 1 . COST OF LAND FOR 100 SQ. YARDS R S . 3 57 517 (42 33 000X100/1184) II. COST OF CONSTRUCTION (540 X 2820) RS. 15 22 800 RS.18 80 317 SHORT TERMS CAPITAL GAINS RS.51 19 683 8. ON APPEAL THE CIT(A) IN THE FIRST PLACE HELD THAT THE SALE CONSIDERATION FOR THE FLAT IN QUESTION HAS TO BE TAKEN AS PER THE SRO RATE OF RS.41 27 040. EXCLUDING THEREFROM AN AMOUNT OF RS.2.71 LAKHS ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 9 TOWARDS THE ONLY MINOR DEFICIENCY AS TO THE COMPLETENESS OF THE FLAT HE WORKED OUT THE SALE CONSIDERATION FOR THE FLAT AT RS.38 56 040. HE DID NOT FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE COST OF IMPROVEMENT CLAIMED AND ACCORDINGLY REJECTED THE CONTENT IONS OF THE ASSESSEE IN THAT BEHALF. THE CIT(A) THUS DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE CAPITAL GAINS ADOPTING THE SALE CONSIDERATION FOR THE FLAT AT RS.38 56 040 AND WITHOUT GIVING ANY SET OFF TOWARDS THE COST OF IMPROVEMENT CLAIMED. 9. WHILE REVENUE PREFERRED AGAINST THE ORDER OF THE CIT(A) CONTESTING THE RELIEF GRANTED THE ASSESSEE CONTESTED THE FINDINGS OF THE CIT(A) WITH REGARD TO THE DETERMINATION OF SALE CONSIDERATION AT RS.38 56 040 AND THE REJECTION OF THE CLAIM WITH REGARD TO COST OF IMPROVEMENT. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE SALE CONSIDERATION SHOULD BE TAKEN AT RS.70 LAKHS ONLY SINCE THE PURCHASER HAS CLEARLY STATED THAT RS.22 68 000 HAS BEEN PAID TO FLAT OWNER AND THE BALANCE AMOUNT OF RS.47 32 000 HAS BEEN PAID TO M/S. M. BHOOPAL REDDY AND CO. TOWARDS ADDITIONAL WORK DONE IN THE FLAT. HOWEVER IT IS TO BE SEEN THAT THE SUM OF R S .47 32 000 PAID TO M/S. M.BHOOPAL REDDY AND CO. HAS NOT BEEN SUBJECTED TO TDS WHICH WOULD PROVE THAT IT IS NOT PAYMENT TOWARDS A CONTRACT WORK FOR FURNISHING THE FLAT BUT PART OF SALE CONSIDERATION ONLY. HENCE THE ENTIRE SUM OF RS.70 LAKHS I.E RS.22 768 000PAUID TO FLAT OWNER AND RS.47 32 000 PAID TO BHOOPAL REDDY AND CO. SHOULD BE TAKEN AS THE SALE CONSI DERATION FOR THE FLAT. EVEN OTHERWISE THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO POINTED OUT THAT THE CIT(A) HAD WRONGLY REDUCED THE ADDITIONAL EXPENDITURE CLAIMED OF RS.2 71 000 FROM THE SUB - REGISTRARS VALUE. THE CIT(A) OUGHT TO HAVE APPRECIATED THA T AS PER THE AGREEMENT THE APARTMENT WAS TO BE HANDED ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 10 OVER TO THE OWNER/LANDLORD IN A COMPLETED CONDITION AND HENCE REDUCTION OF RS.2 71 000 FROM THE SRO VALUE IS NOT JUSTIFIED. 11. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE CONTENTIONS U RGED BEFORE THE LOWER AUTHORITIES SUBMITTED THAT THE SALE CONSIDERATION FOR THE FLAT IN QUESTION WAS ONLY RS.22 68 000 POINTED OUT THAT HAVING RESORTED TO FIXATION OF THE SALE CONSIDERATION FOR THE FLAT AS PER SROS VALUE IN TERMS OF S.50C THE ASSESSING OFFICER WAS DUTY BOUND TO REFER THE MATTER TO THE VALUATION OFFICER IN CASE THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE SO ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSF ER. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAVING INVOKED THE PROVISIONS OF S.50C OF THE ACT SHOULD HAVE FOLLOWED THE SAID PROVISIONS COMPLETELY WHEREAS THE ASSESSING OFFICER HAS FOLLOWED ONLY SUBSECTION (1) OF S.50C OF THE ACT AND NOT FOLLOWED SUB - SECTION (2) OF THE ACT WHICH PRESCRIBES REFERENCE TO THE VALUATION OFFICER. 12. WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE IMPUGNED ORDERS OF THE REVENUE AUTHORITIES. THE MAIN ISSUE THAT ARISES FOR OUR CONSID ERATION IN THESE CROSS APPEALS RELATES TO THE DETERMINATION OF SALE PROCEEDS RECEIVED BY THE ASSESSEE ON THE SALE OF THE SIXTH APARTMENT I.E. WHETHER IT IS RS.22 68 000 AS DISCLOSED BY THE ASSESSEE AS AGAINST SRO RATE OF RS.38 56 040 TAKEN BY THE CIT(A) ON THE GROUND THAT WHAT IS SOLD BY HIM IS ONLY A SEMI - FINISHED FLAT; OR IT IS RS.70 00 000 AS TAKEN BY THE ASSESSING OFFICER. WE FIND THAT THE IMPUGNED ORDER OF THE CIT(A) CANNOT BE SUSTAINED AS THE CIT(A) HAS ADOPTED THE SALE CONSIDERATION TAKING THE SR O RATE AT RS.41 27 040. WHILE THE COURSE THUS ADOPTED BY THE CIT(A) IS PARTLY AS PER THE PROVISIONS OF S.50C SINCE THE ASSESSEE WAS DISPUTING THE ADOPTION OF ANYTHING OTHER THAN THE DISCLOSED SALE CONSIDERATION OF RS .22 68 000 FOR THE SEMI - FINISHED APAR TMENT SOLD AND THUS DISPUTING THE SRO RATE AS PER S.50C IN TERMS OF ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 11 SUB - SECTION (2) OF S.50C THE CIT(A) SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO REFER THE MATTER TO THE VALUATION OFFICER. HAVING FAILED TO DO SO THE ORDER OF THE CIT(A) CANNOT BE S USTAINED. WE DRAW SUPPORT IN RESPECT OF THIS PROPOSITION FROM THE DECISION OF THE COORDINATE BENCH DATED 29.1.2010 IN THE CASE OF DY. CIT CIRCLE 7(1) HYDERABAD V/S. KHAJA KUTUBUDDIN KHAN HYDERABAD IN ITA NO.1451 & 1452/HYD/2008 A COPY OF WHICH HAS BEEN FURNISHED BEFORE US BY THE LEARNED COUNSEL FOR THE ASSESSEE. WHILE DOING SO THE CIT(A) HAS NOT ADHERED TO THE PROCEDURE AS PER S.50C IN ITS TOTALITY WHICH MANDATED IN THE EVENT OF DISPUTE BY THE ASSESSEE AS TO THE ADOPTION OF VALUE AS PER SRO A REFER ENCE TO THE VALUATION CELL . THAT APART THERE IS A DISPUTE WITH REGARD TO THE NATURE AS TO THE CONDITION OF THE APARTMENT SOLD. WHILE IT IS THE CASE OF THE ASSESSEE THAT WHAT IS SOLD IS A SEMI - FINISHED ONE AND NOT A COMPLETED ONE THE CASE OF THE REVENU E IS THAT THE WORKS GOT DONE THROUGH BHOOPAL REDDY AND CO. CANNOT BE ACCEPTED AS GENUINE AND WHAT THE ASSESSEE GOT IN TERMS OF DEVELOPMENT AGREEMENT AND SOLD BY HIM IS ONLY AN APARTMENT CONSTRUCTION OF WHICH WAS COMPLETE IN ALL RESPECTS. W ITH REGARD TO THE WORKS GOT DONE THROUGH BHOOPAL REDDY AND CO. THE ASSESSEE HAS TO SUBSTANTIATE HIS CLAIM . 13. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE A SSESSING OFFICER WITH A DIRECTION TO RE - EXAMINE THE MATTER AFTER FOLLOWING THE PROCEDURE ENVISAGED IN S.50C OF THE ACT IN ITS ENTIRETY AND IF NEED BE BY MAKING REFERENCE ALL THE ASPECTS OF THE MATTER INCLUDING THE NATURE OF CONSTRUCTION VIZ. COMPLETEN ESS OR OTHERWISE OF THE CONSTRUCTION SOLD TO THE VALUATION CELL. THE ASSESSING OFFICER SHALL THEREAFTER REDECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW BASED ON SUCH REPORT THAT MAY BE RECEIVED FROM THE VALUATION CELL AFTER GIVING REASONABLE OPPOR TUNITY OF HEARING TO THE ASSESSEE. ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 12 14. AS FOR THE IMPROVEMENT TO THE ASSET CLAIMED TO HAVE BEEN DONE BY UNDERTAKING ROCK CUTTING ON THE LAND IN QUESTION INCURRING AN AMOUNT OF RS.30 85 000 WE FIND THAT THE ASSESSING OFFICER HAS IN HIS REMAND REPORT CLEARLY POINTED OUT THAT THE PARTNER OF THE FIRM TO WHOM THE LAND WAS GIVEN FOR DEVELOPMENT HAS STATED IN HIS SWORN STATEMENT THAT THERE WAS NO ROCK ON GROUND AT THE TIME OF TAKING THE SITE FOR DEVELOPMENT BY HIM. EVEN THOUGH CERTAIN PHOTOGRAPHS WERE PRO DUCED IN SUPPORT OF THE CLAIM THE CIT(A) OBSERVED THAT THEY EITHER SHOW THE DATE ON WHICH THEY WERE TAKEN NOR ARE INDICATIVE OF THE AREA. THE OBSERVATIONS OF THE CIT(A) ON THIS ASPECT ARE AS FOLLOWS - 4.15. REGARD I NG THE CO S T OF IMPROVEMENT THE APPE LLANT HAS NOT BEEN ABLE TO PROVIDE ANY EVIDENCE WHATSOEVER RE G A R DING HIS CLAIM. THE PHOTOGRAPHS OF THE SO - CALL E D ROCK NEITHER SHOW THE D A TE ON WH ICH THEY WERE TAKEN AND NOR ARE INDICATIVE OF TH E AREA. IN FACT AS RIGHTLY PO I NTED OUT BY TH E ASSESSING OFFIC ER IN THE REMAND REPORT THERE IS CLEAR IN D I C ATION THAT THERE WAS NO SUCH ROCK WHEN THE L A ND WAS HANDED OVER TO TH E APP E LL A NT BY THE GOVERNMENT AUTHO R ITI E S. MOREOVE R EVEN THE CASH FLOW SUBMITTED BY THE APPELLANT DOES NO T IN D I C ATE THE LEVEL OF PAYMENT WHI CH HE HAS CLAIMED AND NEITHER DOES THE BANK ACCOUNT OF THE APPELLANT. IT IS ALSO BEYOND HUMAN PROBABILITY THAT THE ASSESSEE WOULD UNDERTAKE SUCH AN ONEROUS TASK ON HIS OWN WHEN HE HAD NO EXPERTI SE IN DOING SO. ANY LOGICAL PERSON WOULD H A VE HANDED O V ER THIS TASK ALSO TO THE BUILDER WHO HAS EXPERTISE IN THIS FIE L D. MOREOVER WHEN A BIG ROCK IS BROKEN IT IS NO T SCRAP RATHER ROCKS ARE EXTENSIVELY USED IN C O NST R U C T I ON ALL OVER THE AREA. TH E APPELLANT HAS NO T SHOWN ANY REVENUE FROM THE SAL E O F THE ROCK. WHE N CONFRONTED WITH THE REMAND REPORT THE APPELL A N T COULD NO T PRODUCE ANY EVIDENCE TO COUN T ER THE SAME. THE CIT(A) ALSO EXTRACTED THE RELEVANT PORTIONS OF THE REMAND REPORT FROM WHICH I T IS APT TO EXTRACT THE FOLLOWING PARA - 5.6 T HE DOCUMENT (SALE DEED ) R EG IS TERED BY THE HUDA SPEAKS THAT THE LAND IS DEVELOPED BY TH E M AND HANDED OVER/SOLD TO THE ASSESSEE AND TWO OTH E RS AND THE STATEMENT OF TH E M ANAGING P ARTNER OF THE FIRM TO WHOM THE LAND WAS GIVEN FOR DEVE L OPMENT WHICH ST AT ES THAT TH E RE IS NO ROCK ON TH E GROUND AT THE TIME O F TAKIN G THE SITE FOR DEVELOPM E NT CLEARLY SHOWS THAT THE CONTENTION OF TH E ASSESSEE IS FALSE AND D EVOI D OF ANY MERIT AND REQUIRES TO B E DISMISSED. ITA NO. 1356/ HYD/20 12 & 2 ORS SHRI HARINATH CHOUDARY HYDERABAD 13 IN VIEW OF THE ABOVE DISCUSSION IN THE IMPUGNED ORDER OF THE CIT(A) AND THE REMAND REPORT OF THE ASSESSING OFFICER TO HIM WHICH DISCUSSED AT LENGTH THE OVERWHELMING EVIDENCE AGAINST THE ASSESSEE AND IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE EVEN BEFORE US TO COUNTER THE FINDINGS AND OBSERVATIONS OF THE REVENUE AUTHORITIES FOR DENYING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE INCURRED ON IMPROVEMENT I.E. ROCK CUTTING WE FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ASPECT. WE ACCORDINGLY UPHOLD THE VIEW TAKEN BY THE RE VENUE AUTHORITIES IN DENYING THE ASSESSEES CLAIM WITH REGARD TO EXPENDITURE INCURRED ON THE IMPROVEMENT OF THE ASSET REJECTING THE GROUNDS OF THE ASSESSEE ON THIS ASPECT. 13. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NO.1356 /HYD/2012 IS DISM I S SED. ORDER PRONOUNCED IN THE COURT ON 4.4.2014 SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 4 TH APRIL 2014 COPY FORWARDED TO: 1. SHRI HARINATH CHOUDARY C/O. M /S.P.MURALI & CO. CHARTERED ACCOUNTANTS 6 - 3 - 6755/2/3 1ST FLOOR SOMAJIGUDA HYDERABAD - 82 2 . INCOME TAX OFFICER WARD 6 (4) HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) II I HYDERABAD 4. COMMISSIONER OF INCOME - TAX II HYDERABAD 5 DEPARTMEN TAL REPRESENTATIVE ITAT HYDERABAD. B.V.S