Sandesh Vasantrao Pawar Vs ITO (ITAT Pune)
Income Tax Appellate Tribunal (ITAT), Pune, has allowed the appeal of Sandesh Vasantrao Pawar against the order of the National Faceless Appeal Centre (NFAC), Delhi, pertaining to the assessment year 2013-14. The NFAC’s order, dated July 3, 2024, had upheld the Assessment Order passed by the Income Tax Officer (ITO) under Section 143(3) read with Section 147 of the Income-tax Act, 1961, dated December 27, 2018.
Initially, the appeal was found to be delayed by 76 days. However, the assessee submitted an affidavit stating his lack of awareness of legal procedures and the time taken to consult a legal consultant as the reason for the delay. Considering the averments in the affidavit and the absence of any contradictory information, the Tribunal found “reasonable cause” for the delay and condoned it in the interest of justice, proceeding to adjudicate the appeal on its merits.
The assessee had raised several grounds of appeal, primarily contesting the applicability of Section 2(47)(v) read with Section 53A of the Transfer of Property Act, 1882, arguing that the developer had not undertaken substantial construction work to constitute “part performance.” The assessee also contended that Section 2(47) read with Section 45 was inapplicable, citing Section 45(5A) which stipulates that capital gains arise only upon the issuance of a completion certificate. Further grounds included the challenge to the validity of the reassessment notice under Section 149(1)(a) and the assertion that filing an income tax return is mandatory only when the total income exceeds the taxable limit.
The case’s background involves the assessee and seven co-owners entering into a Development Agreement with M/s. Shri Nath Builders Promoters P. Ltd. The Assessing Officer (AO) reopened the assessment based on information that the assessee was to receive a share of ₹46,03,414 from the developed property and had not filed an income tax return. In response to the reassessment notice, the assessee filed a return declaring an income of ₹60,800. The assessee submitted that the developer had not commenced work even after five years, leading to disputes and a public notice for the cancellation of the Joint Development Agreement in March 2016. A civil suit filed by the developer was dismissed by the Civil Court, Satara, in December 2016, as the developer failed to prove possession of the property as per the agreement.
During the assessment proceedings, the AO concluded that the registered Development Agreement, the handing over of vacant possession, and the issuance of an irrevocable power of attorney constituted a valid transfer under Section 53A of the Transfer of Property Act, making the assessee liable for capital gains tax under Section 2(47) read with Section 45 of the Income-tax Act. The NFAC dismissed the assessee’s appeal for non-compliance with a notice under Section 142(1) to submit a valuation report, confirming the AO’s computation of long-term capital gains based on a circular from the Inspector General of Registration and Stamps.
Before the ITAT, the assessee’s counsel argued that the dismissal of the developer’s civil suit indicated that no transfer of property had occurred under Section 2(47) of the Act, and therefore, no capital gains arose as no consideration had passed. The counsel cited judicial precedents, including M/s. Agnus Holding Pvt. Ltd. vs. DCIT and Union of India & Others Vs. Ashish Agarwal and others. The Departmental Representative (DR) supported the AO’s findings, asserting that the transfer and possession had been given to the developer.
The ITAT observed that the NFAC had not passed a speaking order on the merits but had dismissed the appeal for non-compliance. The Tribunal noted that the AO’s primary basis for the addition was the alleged transfer of possession against consideration in the form of saleable built-up area. However, the assessee claimed that possession had not been transferred and that they still held it, presenting documents as proof. Given these circumstances and the assessee’s claim that ownership and possession were not transferred, the Tribunal deemed it appropriate to restore the matter to the file of the Jurisdictional Assessing Officer. The AO is directed to either depute an inspector for verification or seek a remand report from the ITO, Satara, where the land is located. If it is found that the assessee and co-owners still possess the land, no construction has taken place, and no consideration has been passed, the addition for long-term capital gains would be unwarranted. If the findings are otherwise, the AO is instructed to decide in accordance with the law after providing the assessee with an opportunity to be heard. Consequently, the effective grounds of appeal raised by the assessee were allowed for statistical purposes, and the assessee’s appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT PUNE
