Late Bharat Jayantilal Patel v. Deputy Commissioner of Income Tax Central Circle, Pr. Commissioner of Income Tax (Central)-2, Mumbai, The Union of India

1. Deputy Commissioner of Income Tax Central Cirle, 3(4), Mumbai 1915, 19th Floor, Air India Building, Nariman Point, Mumbai-400 021. Maharashtra, India

2. Pr. Commissioner of Income Tax (Central)-2, Mumbai, 1920, 19th floor, Air India Building, Nariman Point, Mumbai-400 021. Maharashtra, India.

3. The Union of India Through the Secretary, Ministry of Finance, Government of India, North Block, New Delhi-110 001. … Respondents *** Mr. Vasudev Ginde a/w Mr. Kumar U. Kale for the Petitioner. Mr. Suresh Kumar for the Respondents. *** CORAM: DHIRAJ SINGH THAKUR & KAMAL KHATA, JJ.

RESERVED ON: 17 JANUARY 2023 PRONOUNCED ON: 10 FEBRUARY 2023 J U D G E M E N T (Per DHIRAJ SINGH THAKUR, J.). The Petitioner in the present Petition challenges inter alia the notice issued under Section 148 of the Income Tax Act, 1961 (“the Act”) dated 22 March 2021 relevant to the assessment year 2013-

14. By virtue of the said notice, assessment for the year 2013-14 is sought to be reopened, on the ground that the assessing offcer had reason to believe that income chargeable to tax for the assessment year 2013-14 had escaped assessment within the meaning of Section 147 of the Act.

1. Brief details of the assessee: The assessee is an individual.

2. Brief details of the information collected/received by the AO: Information has been received from ADIT (Inv.) Unit-IV(2), Thane about assessee that assessee has given his land at Chikhloli for development to Sai Ashray Developers Pvt. Ltd. During the year, assessee Mr. Bharat J. Patel and two other co-owners have granted development rights in respect of their Land at Village Chikhloli located within Municipal Limits of Ambernath of SaiAshray Developers Pvt. Ltd., vide agreement dated 15.06.2012. As per Index II of the development agreement, the sale consideration is Rs.[3] crore and the market value is 9.5994 crore. They have also executed a power of attorney dated 15-06.2012 authorizing the Builder to enter upon the said property for development. Further,

1. As per the development agreement, developer shall develop the said properties at its own cost and shall give directly to the owners 36 % of the total constructed saleable area admeasuring 541556 sq. ft. total consideration for grant of development rights.

2. As per the development agreement, developer paid 40 crore to land owners as refundable interest free deposit as on 15..06.2012 out of which 21 core has been paid to co-owners Darshana Anand Damle and Ashish Anand Damle. From facts mentioned above, it is clear that assessee transferred, as defned u/s 2(47) of the Act, land to the builder during FY 2012-13. Reliance is also placed on judgment by Honourable Bombay High Court in case of Dwarkadas Chaturbhujdas Kapadia & Others Vs. CIT 260 ITR 491 wherein it was held that transfer of property u/s 2(47)(v) of the Act is complete in the year in which builder is given irrevocable license by the land owner to enter upon the land to carry out construction. Further, it is also stated that the land in question is situated within municipal limits of Ambernath Municipality hence constitutes capital assets as per section 2(14) of the Act. Further, as per order dated 9 April 2012, issued by the O/o District Collector, Thane the said land has been granted the status of Non-agricultural land. In view of facts mentioned above, it is clear that proft arising from transfer of the land is taxable in hands of assessee during FY 2012-13. Market value of Rs.9.5994 corore or the market value of constructed saleable area of 541556 sq. ft. constitutes the consideration received by land owners.

3. Analysis of information collected/received: Records of assessee available in the offce has been perused. It is found that as on 31.03.2014, assessee has received loan/deposit of Rs.24,60,00,000/- from Sai Ashray Developers Pvt. Ltd. Further, assessee has land plots in Chikhloli as per his details of immovable properties. Moreover, it is also seen that assessee has not offered capital gain during the year under consideration. Since assessee transferred, as defned u/s 2(47) of the Act, land to the builder during FY 2012-13, assessee should have offered capital gain on transfer of land during the year. On perusal of these facts and information received, prima facie, it is clear that proft arising from the said land transfer is chargeable to tax under capital gain during FY 2012-13. Thus, by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment of income which resulted into understatement of his income by more than 1 lakh.

4. Enquiries made by the AO as sequel to information collected/received: As mentioned above.

5. Basis of forming reasons to believe and details of escapement of income. As mentioned above.

6. Escapement of income chargeable to tax in relation to any asset located outside India: N/A

7. Applicability of the provisions of Section 147/151 to the facts of the case: As mentioned above, the provisions of Section 147 are applicable to facts of the case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.”

3 Objections to the reopening were fled by the Petitioner. One of the objections raised by the Petitioner before the assessing offcer was that Section 2(47)(v), which was invoked for the purpose of reopening had no application inasmuch as granting a license to the developer, who entered into the assessee’s land for the purpose of development did not amount to ‘allowing the possession of the land’ as contemplated under Section 53A of the Transfer of Property Act, 1882, and, therefore, Section 2(47)(v) would not apply. Reliance was also placed upon the Apex Court judgment rendered in the case of Seshasayee Steels (P.) Ltd. Vs. Assistant Commissioner of Income Tax Vs. Company Circle VI(2), Chennai[1].