Bileshivale Muddanna Govardhana Murthy Vs DCIT (ITAT Bangalore)
No Capital Gains on JDA Amid Family Dispute; Additions Based on Statement Alone Unsustainable – ITAT Bangalore
In this case, the ITAT Bangalore delivered a detailed ruling covering multiple issues across two assessment years.
(1) Capital Gains on Joint Development Agreement (JDA):
The Tribunal held that no transfer occurred under Section 2(47) in the year of entering into the JDA. Although extensive rights and GPA were granted to the developer, subsequent family disputes and a civil court partition decree materially altered ownership rights. The original JDA never attained finality and was later replaced by a fresh agreement (2023). Hence, conditions of Section 53A of the Transfer of Property Act were not satisfied, and no real income accrued. Capital gains addition was deleted.
(2) Agricultural Income:
The Tribunal deleted the addition treating agricultural income as “income from other sources.” It held that mere non-production of documents for an old year is insufficient, especially when:
- Agricultural land ownership was not disputed
- Income was accepted in earlier years
- No contrary evidence was found
Applying the principle of consistency, the claim was allowed.
(3) Addition Based on Search Statement (Section 132(4)):
The Tribunal ruled that addition cannot be made solely on a third-party statement without corroborative evidence. The AO’s apportionment of ₹5 crore disclosure among entities was held to be purely ad hoc and unsupported by seized material. Relying on settled law, the Tribunal deleted the addition of ₹94.85 lakh.
Final Outcome:
