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2014 Supreme(All) 2556
ALLAHABAD HIGH COURT
Tarun Agarwala, Dr. Satish Chandra, JJ.
Commissioner of Income Tax - Appellant
Versus
Ziauddin Ahmad - Respondent
Income Tax Appeal Nos. 242 and 467 of 2010
Decided On : 18-12-2014
For the Petitioner: Shambhu Chopra, Senior Counsel and R.K. Upadhyay.
For the Respondents: A. Bansal and S.K. Garg.
The main legal point established in the judgment is that the transfer of possession and completion agreement are crucial in determining the accrual of capital gain for the assessment year, and the date of transfer is essential for computing capital gain.
Headnote:
Capital Gain - Income Tax - Income Tax Act, 1961, Section 143(3), Section 147, Section 148 - The judgment discussed the provisions of Section 143(3), Section 147, and Section 148 of the Income Tax Act, 1961, and their interpretation in the context of assessing capital gains. The court analyzed the validity of the notice under Section 143(2) and the determination of capital gain for the assessment year 2006-07. The court's decision was influenced by the interpretation of the transfer of possession and the completion agreement, as well as the legal principles established in the cases of Jasbir Singh Sarkaria and Chaturbhuj Dwarkadas Kapadia.
Fact of the Case:
The case involved an individual running a hospital who was assessed for capital gain. The assessee contested the assessment order, and the Tribunal granted relief by observing that capital gain is not chargeable for the assessment year under consideration. The Department and the assessee both filed appeals against the assessment order.
Finding of the Court:
The court found that the transfer of the land did not take place on the date claimed by the revenue and did not accrue during the assessment year 2006-07. The court sustained the Tribunal's order, concluding that no reason existed to interfere with it.
Issues: The issues included the validity of the notice under Section 143(2), the determination of capital gain for the assessment year 2006-07, and the interpretation of the transfer of possession and completion agreement.
Ratio Decidendi: The court held that the capital gain was to be computed on the basis of transfer and in the year of the transfer. It concluded that the transfer of the land did not take place on the date claimed by the revenue and did not accrue during the assessment year 2006-07.
Final Decision: Both the appeals filed by the revenue and the assessee were dismissed.
Tarun Agarwala and Dr. Satish Chandra, JJ.
1. Both the cross appeals have been filed against the order dated 5 March 2010 passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A. No. 499/LUC/2094 for the assessment year 2006-07.
2. On 22.01.2013, a coordinate Bench has admitted the appeal filed by the Department-appellant (ITA 467 of 2010) on the following substantial questions of law:
"(a) Whether the ITAT was correct in law in canceling the assessment framed u/s. 143(3)/147 on account of validity of notice u/s. 143(2) in absence of any return, ignoring the fact that the assessee himself had offered in writing for treating one of its earlier returns to be in response to notice u/s. 148 of the Income Tax Act, 1961?
(b) Whether the ITAT was correct in law in holding that no capital gain accrued or arose to the assessee in A.Y. 2006-07 as the transfer did not take place on 30.04.2005 without properly appreciating the facts narrated by the A.O. which wee clearly born out from records?"
3. The brief facts of the case are that the assessee is an individual and running Excel Hospital Limited. On 13.09.2007, a survey, under Section 133(A)was carried out at the business premises of the assessee. The assessee was examined under Section 131 of the Act as per notice dated 22.09.2007 and his submissions were recorded on 03.08.2007. The assessee was served with a notice under Section 148 on 20.03.2008. In response, the assessee has furnished the necessary documents. On 11.7.2008, the A.O. has intimated the assessee about the reasons recorded for initiating the proceedings under Section 148 of the Act. Finally, on 22.12.2008, the assessment was completed under Section 143(3)/147 of the Act where the capital gain was levied.
4. The assessee has assailed the assessment order pertaining to the capital gain in an appeal before the CIT(A), which was dismissed. Being aggrieved, the assessee filed an appeal before the Tribunal, who has granted the relief by observing that capital gain is not chargeable for the assessment year under consideration. Being not satisfied, the Department has filed the appeal. The assessee has also filed the cross appeal to assail the validity of the proceedings under Section 147 of the Act.
5. With this background Shri Shambhu Chopra, the learned counsel for the revenue-appellant relied on the order of the A.O. He submits that assessee was the owner of the Plot Nos. 14/138 and 14/143 Chunniganj, Kanpur measuring 3569 sq. yards and 277 sq. yards. The assessee had entered into an agreement with M/s. Shilpi Builders Limited for the development/construction of a Nursing Home/residential complex and commercial complex without forfeiting his title rights. The land of his brother was also included in the development of entire project called Ratan Esquire and Excel Nursing Hospital. The agreement was entered in the year 1999, while supplementary agreement was also entered in the year 2002 with the brother. He further submits that since, on the basis of the said agreements, the conditions of chargeability of capital gains tax were found to be attracted on the basis of completion agreement dated 30.04.2005, so the capital gain was charged during the assessment year under consideration. He further submits that the proceedings under Section 147 was rightly initiated for the assessment year 2006-07, as completion agreement is dated 30.04.2005 and falling within the assessment year 2006-07.
6. The learned counsel for the Department has read over the following passage from the assessment order:
"The assessee had entered into an agreement on 24.06.1999 with M/s. Shilpi builders for development of his land. Subsequently, after obtaining the sanctioned map from KDA, the parties entered into supplementary agreement dated 29.04.2002 and possession of the land was also handed over to M/s. Shilpi Builders on 01.05.2002 for development of residential cum commercial complex. The perusal of agreement dated 24.06.1999 and 29.04.2002 makes
