Shri Lakkanna Durgappa vs The Assistant Commissioner of Income Tax, Central Circle

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 11680

INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
Prashant Maharishi, VP, Keshav Dubey, JM
Shri Lakkanna Durgappa – Appellant
Versus
The Assistant Commissioner of Income Tax, Central Circle – 2(4) – Respondent
ITA Nos. 2858-2859, 3032 & 3125/Bang/2025

Advocates:
For the Appellants/Petitioners: Deepak Padmanabhan, Namishree KA
For the Respondents: Shivanad Kalakeri

Headnote:(A) Income-tax Act, 1961 - Sections 2(47)(v), 45, 45(5A), 131, 132, 143(3), 147/148, 153A, 153C - Transfer of Property Act, 1882 - Section 53A - Finance Act, 2017 - Headnote under section 153A/153C - Validity of assessment in absence of incriminating material - A search under section 132 of the Act was conducted. The assessments for concluded years were reopened under section 153A of the Act. The additions were based on documents such as Joint Development Agreements (JDAs) and occupancy certificates. It was held that no incriminating material was found during the search as these documents were already disclosed by the assessee in a sworn statement recorded under section 131 of the Act prior to the search. Consequently, following the Supreme Court decision in PCIT vs. Abhisar Buildwell (P.) Ltd. (2023) 149 taxmann.com 399, the additions made in the assessment orders for the concluded years cannot be sustained and the assessments are void ab initio. (Paras 17-18)

(B) Income-tax Act, 1961 - Sections 2(47)(v), 45, and 45(5A) - Taxation of capital gains from Joint Development Agreement (JDA) - Section 45(5A) of the Act, which deems capital gains from a JDA to be taxable in the year the completion certificate is received, was inserted by the Finance Act, 2017 with effect from 01.04.2018. This provision is prospective in nature. Where a JDA was executed and possession was handed over prior to the said date, the transfer is deemed to have occurred in the year of handing over possession. The capital gains are chargeable to tax in that year under the law then in force, and not in the year the completion certificate is received. The principle that capital gains under a development agreement are taxable either in the year of possession or when consideration is crystallized, as laid down in Chaturbhuj Dwarkadas Kapadia v. CIT (2003) 129 Taxman 497 (Bom.) and CIT v. Dr. T.K. Dayalu (2011) 202 Taxman 531 (Kar.), applies. (Paras 26, 30-32)

Facts of the case:
A search under section 132 of the Act was conducted on the assessee, an individual, on 19.02.2020. The assessee had entered into a Joint Development Agreement (JDA) on 17.12.2012 for developing a residential property. The Assessing Officer (AO) made additions to the assessee's income for Assessment Years (AYs) 2017-18 to 2020-21 based on documents like the JDA and occupancy certificate found during the search, and on the ground that capital gains from the JDA were taxable in AY 2020-21. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions for all four years, relying on the ITAT's decision in the case of the assessee's wife. The Revenue appealed.

Findings of Court:
The ITAT dismissed the Revenue's appeals. For AYs 2017-18 to 2019-20, the ITAT held that no incriminating material was found during the search, as the JDAs and occupancy certificates were already disclosed by the assessee in a statement under section 131 of the Act before the search. Therefore, the assessments under section 153A of the Act were invalid following the Abhisar Buildwell principle. For AY 2020-21, the ITAT held that since the JDA was executed and possession was handed over in FY 2012-13 (prior to 01.04.2018), the provisions of section 45(5A) of the Act were not applicable. The capital gain was taxable in the year of transfer (AY 2013-14), not in AY 2020-21. The Revenue was directed to take appropriate action for the correct assessment year.

Issues: The main issues were whether the documents (JDAs and occupancy certificates) constituted incriminating material for invoking section 153A of the Act for the concluded years, and whether capital gains from a JDA executed before the introduction of section 45(5A) of the Act could be taxed in the year of receipt of the completion certificate.

Ratio Decidendi: The court ruled that documents already disclosed before the search cannot be considered incriminating material for reopening concluded assessments under section 153A of the Act. Further, for JDAs executed prior to 01.04.2018, the capital gains are taxable in the year of transfer, not in the year of receiving the completion certificate, as section 45(5A) of the Act is prospective. Result : Appeals dismissed for all four years.

ORDER

PER PRASHANT MAHARISHI, VICE – PRESIDENT

1. The Assistant Commissioner of Income Tax, Central Circle – 2(4), Bangalore (the Ld. Assessing Officer) has filed four appeals in the matter of Shri Lakkanna Durgappa (the Assessee) for Assessment Years 2017-18 to 2020- 21. These appeals challenge the consolidated order issued by the Commissioner of Income Tax, Appeals – 15, Bangalore (the Ld. CIT(A)), dated 24.10.2025, which addressed all four years collectively. The Assessee's appeals against the Assessment Orders passed by the Ld. Assessing Officer under Section 153A of the Income Tax Act, 1961 for Assessment Years 2017- 18 to 2019-20, and under Section 143(3) for Assessment Year 2020-21, were decided in favour of the Assessee. In arriving at this decision, the Ld. CIT(A) relied on the ITAT order in ITA No. 465/Bang/2025 for Assessment Year 2020-21, dated 04.09.2025, concerning Smt. Shantha Alias Shanthamma v/s. DCIT (wife of the Assessee). The ITAT held that no incriminating material was found during the search, rendering the additions made by the Ld. Assessing Officer in the concluded Assessment Orders invalid. Furthermore, it held that even on merits, the additions could not be sustained.

2. Smt. Shanthamma is the spouse of the Assessee. The Learned Assessing Officer has raised a single ground of appeal for Assessment Years 2017-18 to 2019-20, questioning whether, given the facts and circumstances of the case, the Learned CIT(A) was justified in deleting the additions by stating that no incriminating material was found during the search—relying on the decision in PCIT vs. Abhisar Build well Pvt. Ltd.—even when various forms of evidence, such as the seized occupation certificate, the Assessee‘s sworn statement recorded during the search, and newly uncovered details regarding the built- up area and capital gain events, arguably constitute genuine incriminating material within the meaning of section 153A of the Act. Accordingly, the issue is whether the Learned CIT(A) acted appropriately in deleting the addition made by the Learned Assessing Officer.

3. The following succinctly outlines the pertinent facts: The Assessee is an individual, and a search was conducted under section 132 of the Act on 19.02.2020. During this proceeding, it was discovered that the Assessee and his spouse entered into a Joint Development Agreement (JDA) with SJR Prime Corporation Pvt. Ltd. on 17.12.2012, pertaining to the development of a residential property as part of the SJR Plaza City Project. Ownership of the property was held by the Assessee, his wife, and his brother; subsequently, the brother gifted his share to the Assessee. Accordingly, the property was apportioned such that the wife held a 72.2% share, while the Assessee held 27.8%. Pursuant to the JDA, the property was transferred to SJR Prime Corporation, and the Assessee and his wife were entitled to receive 37% of the super built-up area. Additionally, the Assessee has obtained the occupancy certificate for the developed flat. Further, additional Joint Development Agreements were also identified during the search.

4. The Assessee submitted his return ofIncome [ROI] for Assessment Year 2017-18 on 27 October 2017, declaring a total income of Rs. 13,33,70,540/-. This return was processed under Section 143(1) of the Act on 27 March 2019, determining a total income of Rs. 14,09,61,390/-. Following a search conducted on 19 February 2020, a notice under Section 153A of the Act was issued. The Assessee complied with filing the return of income on 22 December 2020, and a notice under Section 143(2) was issued on 29 December 2020.

5. The Learned Assessing Officer observed that, pursuant to Statement under Section 132(4) of the Act and in response to question no. 22, the Assessee disclosed that construction expenses had not been incurred and agreed to pay the applicable tax. Consequently, Rs. 14.48 crores were added to the Assessee‘s total income. Additionally, Rs. 2,20,20,000/- was included as una

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2026 Supreme(Online)(ITAT) 11680

INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)Prashant Maharishi, VP, Keshav Dubey, JMShri Lakkanna Durgappa – AppellantVersusThe Assistant Commissioner of Income Tax, Central Circle – 2(4) – RespondentITA Nos. 2858-2859, 3032 & 3125/Bang/2025

INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
Prashant Maharishi, VP, Keshav Dubey, JM
Shri Lakkanna Durgappa – Appellant
Versus
The Assistant Commissioner of Income Tax, Central Circle – 2(4) – Respondent
ITA Nos. 2858-2859, 3032 & 3125/Bang/2025