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NC: 2026:KHC:7442-DB

ITA No. 637 of 2016

HC-KAR

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 5^TH DAY OF FEBRUARY, 2026

PRESENT

THE HON'BLE MR. JUSTICE S.G.PANDIT

AND

THE HON'BLE MR. JUSTICE K. V. ARAVIND

INCOME TAX APPEAL No. 637 OF 2016

BETWEEN:

1. SHRI N. G. CHANDRA REDDY (HUF),

REP. BY ITS KARTA,

SHRI N.G.CHANDRA REDDY,

#222/222, ASHIRVAD,

DODDANEKKUNDI,

BANGALORE-560 037.

…APPELLANT

(BY SRI A. SHANKAR, SENIOR ADVOCATE FOR

SRI M. LAVA, ADVOCATE)

AND:

Digitally signed

by VINUTHA B

S 1. THE DEPUTY COMMISSIONER OF

Location: H igh INCOME TAX, CIRCLE -7(1),

Court of

BMTC BUILDING, 80 FEET ROAD,

Karnataka

KORAMANGALA, 6^TH BLOCK,

BANGALORE-560 095.

…RESPONDENT

(BY SRI E.I. SANMATHI, SENIOR STANDING COUNSEL)

THIS ITA / INCOME TAX APPEAL UNDER SECTION 260-A

OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED

20/07/2016 PASSED IN ITA No.390/BANG/2015, FOR THE

ASSESSMENT YEAR 2005-06 PRAYING TO FORMULATE THE

SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND

ANSWER THE SAME IN FAVOUR OF THE APPELLANT. TO ALLOW

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ITA No. 637 of 2016

HC-KAR

THE APPEAL AND SET ASIDE THE FINDINGS THEREIN TO THE

EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY

THE ITAT IN ITA No.390/BANG/2015 DATED 20/07/2016

REFERRED TO AS ANNEXURE-A FOR THE ASSESSMENT YEAR

2005-06.

THIS APPEAL, COMING ON FOR HEARING, THIS DAY,

JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S.G.PANDIT

and

HON'BLE MR. JUSTICE K. V. ARAVIND

ORAL JUDGMENT

(PER: HON'BLE MR. JUSTICE K. V ARAVIND)

This appeal is filed by the assessee challenging the order

passed in ITA No.390/Bang/2015 dated 20.07.2016 for the

Assessment Year 2005–06.

2. The above appeal is admitted to consider the

following substantial questions of law:

"35. Whether the Tribunal was justified in law in

holding that there has been transfer within the

meaning of section 2(47) of the Income Tax act

read with section 53A of the Transfer of Property

Act, 1882 on the facts of the case.

36. Whether the Tribunal was justified in law in

not holding that the mandatory conditions for

reopening the assessment did not exist and

consequently the entire assessment is bad in

law and liable to be set aside on the facts of the

case.

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HC-KAR

37. Whether the Tribunal failed to appreciate

that the notice under section 148 issued is bad

in law and not in accordance with law and

consequently the entire proceedings are

unsustainable in law on the facts and

circumstance of the case.

38. Whether the Tribunal erred in law in not

holding that no capital gains can be quantified

as the very computation provision fails on the

facts of the case.

39. Whether the Tribunal erred in law in not

following the co ordinate bench decision in

regard to quantification of consideration on the

facts and circumstance of the case.

40. Whether the Tribunal is justified in law in

directing the Assessing Officer to take the

market value of the asset to be received by the

assessee as consideration for transfer on the

facts and circumstance of the case.

41. Whether the Tribunal was justified in law in

not adjudicating the issue of levy of interest

under section 234A, 234B and 234C of the Act,

1961 on the facts and circumstance of the

case."

3. The brief facts are that the assessee, a Hindu

Undivided Family (HUF), filed its return of income for the

Assessment Year 2005–06. In the said return, the assessee did

not disclose the capital gains arising from the transfer of an

asset pursuant to a Joint Development Agreement (for short,

“JDA”) dated 12.05.2004.

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3.1 The Assessing Officer was of the view that under

the JDA there was a transfer of land, which constituted a

“transfer” within the meaning of Section 2(47)(v) of the

Income-tax Act, 1961 (for short, “the IT Act”). As possession of

the property had been handed over to the developer in part

performance of a contract of the nature referred to in Section

53A of the Transfer of Property Act, 1882 (for short, “the TP

Act”), the Assessing Offic