Sachin Ramesh Pawar Vs ITO (ITAT Pune)
Conclusion: Since assessee’s claims regarding possession and consideration were supported by documents that were not presented before AO or CIT(A), Tribunal directed AO to verify the facts by deputing an inspector or obtaining a remand report from the ITO, Satara. If it was confirmed that possession remained with assessee and no consideration was received, LTCG addition would be invalid.
Held: Assessee was running a computer center. Assessee and seven co-owners entered a Development Agreement with Shri Nath Builders Promoters P. Ltd to receive a built-up area of 1189.59 square meters valued at Rs. 2,31,95,500 as consideration. Based on Clause 13 of the agreement, AO observed that the property rights and possession were transferred to the developer. So, AO made LTCG an addition of Rs. 25,53,628 to assessee’s income. CIT(A) upheld the AO’s decision. On appeal before ITAT, assessee’s argued that disputes over the Development Agreement led to its cancellation via a public notice issued on April 7, 2014. An amendment to the agreement on September 24, 2014, revised the terms of consideration. Assessee argued that possession of the property was never transferred as evidenced by ownership documents like the 7/12 extract and electricity bills. Since no transfer had taken place as per provisions of section 2(47), no capital rain could arise in the hands of assessee as no consideration had been passed. It was held that the main premise of the impugned addition by AO was that the possession had been given to the Developer against the consideration finalized in the form of giving saleable rights for built-up area of 1189.59 sq.mtrs. For the transfer of the property, two ingredients were to be fulfilled, (1) Possession was handed over from the sellers to the buyer and (2) Consideration was received by the seller. However, in the instant case, the claim of the assessee was that possession had not been given to the Developer since assessee and co-owners as on date still enjoyed possession of the immovable property. Certain documents had been placed as proof of the possession of the immovable property by the assessee and co-owners which were not placed before the lower authorities. Since assessee was claiming that ownership of the property in question not been transferred and possession had not been given to Developer, it was deemed appropriate to restore the matter to the file of Jurisdictional Assessing Officer who should depute an inspector to cause necessary verification or in the alternate ask ITO, Satara where the land in question was situated and get a remand report therefrom and if it was found that the possession of the land in question was still with the assessee and the other co-owners, there being no construction of immovable property on the said land as agreed under the Development Agreement and no consideration had been passed to Land owners. Therefore, addition on account of long term capital gain would be uncalled for in the hands of assessee and if found otherwise, then AO should decide in accordance with law after providing opportunity of being heard to assessee.
