Capital gains are recognized in the year possession is handed over, not at the execution of the Joint Development Agreement.

ORDER

Per Bench :

ITA No.1774/Bang/2024 is filed by the Revenue and C.O.No.39/Bang/2024 is filed by the assessee on the following grounds:

Grounds raised in ITA No.1774/Bang/2024:

Grounds raised in C.O. No.39/Bang/2024 :

2. Briefly stated the facts of the case are that assessee is engaged in the manufacturing, trading of printing and stationery and allied products and trading of tendu leaves. In addition, the assessee has rental income from letting of immovable property, income from dividends and interest income. Assessee filed return of income on 30.09.2015 declaring total loss of Rs.57,88,186/- and claimed refund of Rs.34,23,503/- towards payment of advance tax and TDS. A search was conducted in the case of Bharath Beedi Works Pvt. Ltd., on 26.02.2020. During the course of search, a Joint Development Agreement (JDA) was found. In the said JDA, the assessee is one of the co-owners of land under joint development. In the JDA, there were seven co-owners of the land measuring 4.7732 acres of which the assessee had a share of 25.93%. The assessee had declared capital gain in the Assessment Year 207-18 and possession of land handed over to the developer on 12.10.2016. Pursuant to the search, notice under section 153C of the Act dated 24.06.2021 was served on the assessee. In pursuance to the notice, assessee filed return under section 153C of the Act manually on 29.07.2021 before the AO due to the glitches in the IT portal. Thereafter, again the return of income was filed on 11.08.2021 vide acknowledgement No.268962080110821 declaring therein total loss of Rs.57,88,186/-. The AO noted that the assessee did not file return of income as time allowed for filing return under section 153C of the Act. Therefore, the return was treated as invalid return and proceedings were completed under section 144 of the Act after issuing notice under section 142(1) of the Act. The notice under section 129 of the Act was also issued. The AO noted that the year of incidents of capital gains has to be considered in the Assessment Year 2015-16 as per important clause mentioned in JDA and AO has also noted that out of 7 co-owners Sapthagiri Enterprises has declared the capital gain in the Assessment Year 2015-16. As per the opinion of the AO, there was a transfer as per section 2(47) of the I. T. Act 1961. However, the assessee contested that the position was given in the Assessment Year 2017-18 resultantly the capital gain has been offered in the year 2017-18. After considering the written submissions, the AO computed the long term capital gain of Rs.3,20,76,359/- .

3. Aggrieved from the above Order, assessee filed appeal before the CIT(A)-2, Panaji. Before the CIT(A), assessee filed detailed written synopsis relying on the various case laws which has been considered by the CIT(A) and allowed the appeal of the assessee.

4. Aggrieved from the above Order, Revenue filed appeal and assessee has filed Cross Objection (C.O.). In the case of appeal filed by the Revenue, learned DR relied on the Order of the AO and submitted that as per the JDA, entire rights were transferred to the builder and builder has started construction after obtaining requisite approvals from the concerned authorities and the Saptagiri Enterprises has also offered capital gain in the Assessment Year 2015-16. There was incriminating document found during the course of search in the case of Bharath Beedi Work (P) Ltd. Therefore, after recording satisfaction, notice under section 153C of the Act was issued. The JDA was found during the course of search and the assessee was a co-owner of the 7 landlords. Assessee has also not filed valid return. Therefore, the return filed is to be treated as an invalid return and in case of invalid return, notice under section 143(2) of the act is not required to be issued to the assessee. The assessee was allowed time as per notice issued under section 153C of the Act, assessee did not file its return of income as per time granted. The time granted to file retu