No Incriminating Material, No 153A Addition: ITAT Bangalore Deletes Massive Additions in JDA Search Case

ACIT Vs Lakkanna Durgappa (ITAT Bangalore)

The Bangalore ITAT held that registered JDAs and Occupancy Certificates already disclosed to the Department prior to search cannot be treated as “incriminating material” for invoking section 153A/153C in concluded assessments. Relying on the Supreme Court ruling in PCIT v. Abhisar Buildwell Pvt. Ltd., the Tribunal ruled that where no fresh incriminating material is unearthed during search, additions in completed assessments are unsustainable.

The assessee had already disclosed the JDAs and project details during proceedings under section 131 much before the search. Hence, the Tribunal held that the Department merely relied on documents already available in its possession and not on any fresh search material. Consequently, additions running into several crores made under section 153A for AYs 2017-18 to 2019-20 were deleted.

On merits also, the Tribunal held that section 45(5A) applies only prospectively and cannot be invoked for JDAs executed prior to 01.04.2017/01.04.2018. Since the JDA in the present case was executed in FY 2012-13, the Tribunal held that capital gains, if taxable, had to be examined under the pre-amendment law applicable in AY 2013-14 and could not be shifted to AY 2020-21 merely because the Occupancy Certificate was received later.

The ITAT followed the principles laid down in Chaturbhuj Dwarkadas Kapadia v. CIT and CIT v. Dr. T.K. Dayalu and distinguished the Orissa High Court ruling in Kanak Bhanj Deo v. ITO on the ground that the jurisdictional Karnataka High Court decisions were binding. The Tribunal also observed that taxing the same gains again in AY 2020-21 would effectively result in double taxation.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

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 unallowable construction costs claimed by the Assessee, for which no explanation was provided. Regarding the capital gain arising from the Joint Development Agreement, an addition of Rs. 30.49 crores were made. Accordingly, the total income of the Assessee was assessed at Rs. 62,02,96,489/- by Assessment Order dated 30 September 2021.

6. Parties claimed that the facts for other assessment years are also identical.

7. The Assessee challenged the assessment before the Learned CIT(A), who was presented with identical Assessment Orders for the years 2018-19, 2019-20, and 2020-21. Accordingly, a consolidated Appellate Order was issued. Grounds 4 to 7 addressed the legality of the search conducted under section 132 of the Act, alleging it was improperly completed without providing the satisfaction note or copies of the seized material to the Assessee. In paragraph 7 of the order, the Learned CIT(A) dismissed these grounds, stating there were no procedural deficiencies in the actions of the Assessing Officer regarding completion of the assessment under section 153A of the Act.

8. Additional grounds were subsequently raised, specifically grounds 1 and 2 for Assessment Years 2017-18 to 2019-20, where the Assessee contended that no incriminating material was discovered or seized during the search on which the income additions were based. In paragraph 8, the Learned CIT(A) addressed this issue by referencing the Supreme Court’s decision in PCIT v. Abhisar Build well (P.) Ltd. [2023] 149 com399. To verify the Assessee‘s claim, the CIT(A) requested a remand report from the Assessing Officer, which was submitted on 24.09.2024 and reproduced at paragraph 8.4 of the Appellate Order.

9. The Assessee submitted a rejoinder dated 17.10.2025. According to paragraph 4 of the remand report, the primary assertion of the Learned Assessing Officer was that additions were made based on occupancy certificates found and seized during the search. Additionally, the Learned Assessing Officer referred to the statement recorded under Section 131 of the Act from the Assessee. In the rejoinder, the Assessee contended that the Learned Assessing Officer relied on both occupancy certificates and Joint Development Agreements for making the addition. The Assessee stated that prior to the search on 23.05.2019, a sworn statement had been executed during summons issued under Section 131, wherein the Assessee voluntarily disclosed the occupancy certificates and various Joint Development Agreements. Furthermore, the Assessee argued these documents are either public records or have already been submitted to the Income Tax Department; therefore, no new incriminating material was discovered by the Learned Assessing Officer during the search. At paragraph 12 on page 60 of 74 of the Appellate Order, the Assessee noted that the Bangalore bench previously held, in relation to the Assessee’s wife, that registered Joint Development Agreements and occupancy certificates cannot be deemed incriminating documents when they are registered with the sub-registrar and disclosed to the Income Tax Authorities during summons. The Learned CIT(A) reproduced the Assessee‘s rejoinder in its entirety.

10. In paragraph 8.5 of the Appellate order, the Learned CIT(A) observed that Smt. Shanthamma, who is the spouse of the Assessee, faced a similar circumstance. In this regard, the Coordinate Bench in ITA No. 465/Bang/2025 for Assessment Year 2020-21, dated 04.09.2025, stated in paragraph 34 that no incriminating material was found and, therefore, the addition had been erroneously made. The Learned CIT(A), in paragraphs 8.6 to 8.8, held as follows:

8.6 As seen from the above decision, the Hon’ble ITAT has given a finding that there is no incriminating material pertaining to the appellant’s wife as the documents relied upon by the AO namely the JDAs and Occupancy Certificates were already disclosed by the Smt. Shanthamma’s husband, i.e. appellant in the present case Shri. Lakkanna Durgappa in the sworn statement given by him u/s.131 of the Act dated 23.05.2019. The Hon’ble ITAT also has given a finding that no other fresh material was found during the search and hence held that the Supreme Court decision in the case of Abhisar Build well Pvt. Ltd. (2023) 149 taxmann.com 399 will apply in this case and notices under section153C lacks jurisdiction and is void ab initio The Hon’ble ITAT, thus set aside the assessment order of the appellant’s wife and allowed the appeal.

In the present case also where Smt. Shanthamma’s husband Shri. Lakkanna Durgappa is the appellant, the Assessing Officer has relied upon similar documents such as JDAs and Occupancy Certificates of the SJR Primeand Assetz East Point projects for making addition for the relevant assessment years. Similar to the above-mentioned decision of the Hon’ble ITAT in his wife’s case, in this case also the appellant himself has given all the information pertaining to the status of the projects and disclosed the above-mentioned documents during the course of proceedings u/s.131 of the Act on 23.05.2019 much before the date of search.

8.7 This implies that all the information pertaining w the JDA projects entered by the appellant are already available with the Investigation Wing of the Department. Hence, applying the ratio of the Hon’ble ITAT decision (mentioned supra) of his wife Smt. Shanthamma, there is no existence of incriminating material in the case of the appellant also for the relevant Assessment Years 2017-18 to 2019-20. As per the decision of the Hon’ble ITAT (mentioned supra) the Occupancy Certificates and JDAs, which formed the basis for making addition by the AO are not incriminating material at all and hence the assessments initiated u/s.153A of the Act are void-ab-initio for the relevant AYs 2017-18 to 2019.20.

8.8 Hence, respectfully following the decision of Hon’ble ITAT in the appellant wife’s case (mentioned supra), there is no incriminating material found in the case of appellant and hence the decision of Hon’ble Supreme Court in the case of Abhisar Build well Pvt. Ltd. (2023) 149 taxmann.com 399 will be squarelyapplicable in this case. Hon’ble Supreme Court has held that section 153A of the Act cannot be invoked without any incriminating material and hence the additionscannot be sustained. The AO is hereby directed to delete the additions made for the relevant assessment years 2017-18 to 2019-20. Accordingly, the additional grounds of appeal for the relevant AYs 2017-18 to 2019.20 filed by the appellant are allowed.

11. Accordingly, the Assessee’s appeal for Assessment Years 2017-18 to 2019-20 was allowed, as no incriminating material was discovered during the search process.

12. Regarding the Assessee’s appeal for Assessment Year 2020-21, it was argued that the Learned Assessing Officer incorrectly imposed tax on capital gains arising from the Joint Development Agreement executed in the year 2012-13 under section 45(5) of the Income Tax Act, which was introduced only with effect from 01.04.2018. Therefore, Joint Development Agreements executed on or after 01.04.2018 fall within the purview of section 45(5A) of the Act, whereas agreements concluded prior to this date are not governed by these provisions. The Learned CIT(A), in paragraph 12.1 and referencing paragraphs 34.9–34.18 of the ITAT order pertaining to Smt. Shanthamma (wife of the Assessee), determined that taxing income in the hands of the Assessee is not appropriate. It was further observed that Smt. Shanthaamma held a 72.2% share, while the Assessee’s share was only 27.8% in the same project. Consequently, the Learned CIT(A) also deleted the addition for Assessment Year 2020-21.

13. The Learned Assessing Officer has filed an appeal challenging the Appellate Order for Assessment Years 2017-18, 2018-19, and 2019-20, based on the presence of incriminating material.

14. For Assessment Year 2020-21, the Ld. Assessing Officer has raised the following grounds of appeal: –

a. Whether on the facts and in law, the Id. CIT(A) erred in deleting the addition of Rs. 42.85,12,536/- made on account of capital gains arising from the Joint Development Agreement dated 17.12.2012, despite the admitted fact that the assessee has not offered such capital gains to tax in any assessment year, resulting in complete escapement of income.

b. Whether on the facts and in law, the Id. CIT(A) erred in holding that capital gains could not be taxed in AY 2020-21 merely because Section 45(5A) is prospective in nature, without appreciating the legal intent behind introduction of section 45(5A) of the Act in the finance Act, 2017.

c. Whether on the facts and in law, the Id. CIT(A) erred in deleting the addition without considering the accrual of real income to the assessee upon completion of the project and receipt of Occupancy Certificate on 30.05.2019, whereby the assessee became entitled to a determinable share of 27.8% of the super built-up area measuring 1,18,930 sq. ft.

d. Whether on the facts and in law, the Id. CIT(A) erred in deleting the addition in the absence of any evidence produced by the assessee to establish that the capital gains arising from the Joint Development Agreement were either offered to tax in any earlier year or were otherwise not chargeable to tax under the Act.

e. Whether on the facts and in law, the Id. CIT(A) erred in not following the law laid down by Hon’ble Supreme Court dismissing the assessee’s SLP in the case of Kanak Bhanj Deo vs.Income-tax Officer [2025] 176 com963 (SC)[18-07-2025), wherein the judgment of Hon’ble High court in Kanak Bhanj Deo vs. Income-tax Officer [2025] 176 taxmann.com 738 (Orissa)[29-08-2024] was confirmed, wherein it was held that for A.Y. 2017-18 provisions of section 45(5A) are applicable and the facts of the present case are exactly the same as the present case.

f. Any other grounds which may be urged at the time of hearing.

15. The Ld. Departmental Representative vehemently referred to the order of the CIT(A) as well as the Coordinate Bench in case of the wife of the Assessee and submitted that the occupation certificate was found during the course of search and therefore there was incriminating material found during the course of search based on which the addition is made.

16. The Learned Authorized Representative cited paragraph 34 of the Appellate Order, specifically paragraph 34.2, in which the Coordinate Bench, under identical facts and circumstances, determined that no incriminating material was discovered during the search.

17. Upon careful consideration of the respective submissions and an examination of the orders issued by the Learned Lower Authorities, we are presented with the decision in ITA No. 465/Bang/2025 for Assessment Year 2020-21, concerning Smt. Shantha Alias Shanthamma v. DCIT, dated 04.09.2025 (before Shri Waseem Ahmed and Shri Keshav Dubey). Notably, one member of this quorum in the Coordinate Bench’s determination, which, in paragraph 34.2, expressly held as follows: –

34.2 At the outset, we find force in the contention of the assessee that the jurisdiction assumed under section 153C of the Act is invalid in the absence of incriminating material pertaining to the assessee. It is settled law, as held by the Hon’ble Supreme Court in Abhisar Buildwell Pvt. Ltd. (2023) 149 taxmann.com 399, that for invoking section 153C of the Act, the Revenue must possess incriminating materials belonging to or relating to the assessee which is unearthed during the search. In the present case, the documents relied upon by the AO, such as JDAs and occupancy certificates, were already disclosed in a sworn statement given by the assessee’s husband under section 131 of the Act on 13.05.2019, i.e., much before the date of search. There is no indication that any fresh material was found during the search that had not alreadybeen disclosed. Therefore, in our considered opinion the issuance of notice under section 153C lacks jurisdiction and is void ab initio.

18. The decision rendered by the other Coordinate Bench on the same set of facts on identical questionsremains binding unless the parties can demonstrate a change in the facts or circumstances of the case. The Learned CIT-DR was unable to provide any justification for deviating from this course of action, as no alteration in the relevant facts or circumstances was established. It is further noted that the search conducted on the Assessee involved material identical to that used in the assessment of Smt. Shanthamma, the Assessee‘s spouse.

Accordingly, we respectfully following the Coordinate Bench’s decision, which in paragraph 34.2 concluded that no incriminating material was discovered during the search, consistent with the ruling of the Hon‘ble Supreme Court in Abhisar Build well (P.) Ltd. [2023] 149 taxmann.com 399, also hold so that no incriminating material exits for making this addition in the concluded search assessment years.

19. For Assessment Years 2017-18 to 2019-20, no additional grounds of appeal have been raised by the Revenue. Furthermore, on the substantive merits, the Coordinate Bench in paragraphs 34.9 to 34.21 has also deleted the addition on merit.

20. In the result, Appeals filed by the Ld. Assessing Officer for Assessment Years 2017-18 to 2019-20 are dismissed.

21. In appeal by the Learned Assessing Officer for Assessment Year 2020-21, it is observed that the officer specifically questioned the absence of any capital gains offered for taxation by the Assessee in connection with the Joint Development Agreement dated 17.12.2012. Furthermore, he noted that capital gains cannot be considered non-chargeable to tax for Assessment Year 202021 solely on the basis that provisions under section 45(5A) are prospective. The officer also determined that the occupancy certificate was obtained on 30.05.2019, marking the completion of the project and conferring ownership of the Assessee’s share of super built-up area. Accordingly, real income accrual to the Assessee occurred on this date. Additionally, the officer contended that the Assessee failed to furnish evidence demonstrating either that the capital gains from the Joint Development Agreement were reported in earlier years or were not otherwise taxable. The Learned Assessing Officer cited the decision of the Hon‘ble Supreme Court in 176 com963 dated 18.07.2025 in support of his position.

22. The Ld. CIT-DR vehemently stated all the above arguments and submitted that the deletion of addition made by the Ld. CIT(A) is not in order.

23. The learned Authorized Representative respectfully submitted that the order issued by the learned CIT(A) is grounded in the findings of the ITAT. Specifically, the Coordinate Bench, in paragraph 34.10, definitively stated that all income derived from the referenced development agreements was duly disclosed by the Assessee in the relevant Assessment Year’s return of income. Further, reliance was placed on the judgment of the Hon‘ble Bombay High Court, which was also cited by the Coordinate Bench in Chaturbhuj Dwarkadas Kapadia v. CIT (2003) 129 com497 (Bombay), establishing that capital gains arising from Joint Development Agreements are taxable in the year the agreement is executed and possession is transferred. Additionally, reference was made to the decision of the Hon‘ble Karnataka High Court in CIT v. Dr. T. K. Dayalu (202 taxmann.com 531), confirming that capital gains accrue in the year of possession transfer under a development agreement. The Coordinate Bench, in paragraph 34.14, explicitly held that the deeming provision under section 45(5A)—which stipulates taxation of capital gains in the year the completion certificate is received—does not apply to the present case, as the Joint Development Agreements were executed before 01.04.2018. The arguments were further substantiated with references from paragraph 34.17 onwards.

24. We have carefully considered the rival contention. We have also perused Para no. 34.9 onwards of the decision of the ITAT in case of Smt. Shanthamma (supra). We find that the Joint Development Agreements entered by Smt. Shanthamma has 72% share and the Assessee has 27%. The issue has been decided for the impugned Assessment Year i.e., Assessment Year 2020-21 in case of the wife of the Assessee arising out of the same development agreements as well as from the same search wherein the Coordinate Bench has held that income is not chargeable to tax in the hands of the Assessee out of those development agreements for this year. The findings, reasons and decision of coordinate bench is as under: –

“34.9 Without prejudice to the above, we proceed to adjudicate the issue on the merit of the addition. In this regard, we note that the learned AR on merit before us submitted that the assessee, had duly filed her return of income for Assessment Year (AY) 2020-21 under section 139(1) of the Act, within the prescribed time limit. The CPC also processed the return under section 143(1) of the Act, and the intimation to that effect is also on record.

34.10 It was further submitted that the assessee had entered into a Joint Development Agreement (JDA) with M/s SJR Prime Corporation Pvt. Ltd. on 17.12.2012, which is much before the date whereas the provisions of section 45(5A) of the Act came into force, i.e. 01.04.2018. The copy of the JDA is already placed on record. Moreover, a Final Supplementary Sharing Agreement was also entered, clearly indicating the share in constructed area, a copy of which is also enclosed. In addition, the assessee entered another JDA with M/s Sunil Mantri Realty Ltd. on 20.03.2009, also prior to the applicability of Section 45(5A) of the Act. All income arising from these development agreements has been duly disclosed by the assessee in her returns of income filed for the relevant years.

34.11 The learned AR emphasized that section 45(5A) of the Act, introduced by the Finance Act, 2017, applies prospectively from 01.04.2018 and hence is not applicable to JDAs executed prior to that date. Since the assessee‘s JDAs were executed in 2009 and 2012 respectively, the income from capital gains has to be taxed in accordance with the law prevailing prior to the introduction of section 45(5A) of the Act.

34.12 To support this, the learned AR relied on judicial precedents. In the case of Chaturbhuj Dwarkadas Kapadia v. CIT [(2003) 129 Taxman 497 (Bom HC)], it was held that capital gains in case of JDAs are taxable in the year in which the agreement is executed and possession is handed over, and not in the year of construction. Similarly, in CIT v. Dr. T.K. Dayalu [(2011) 202 Taxman 531 (Kar HC)], it was held that once possession is transferred under a development agreement, capital gains accrue in the year of such transfer. 34.13 Accordingly, the AR contended that the assessee has complied with the provisions of law as applicable to her case and offered the capital gains in the correct assessment years. Therefore, no adverse inference should be drawn, and the addition made may kindly be deleted.

34.14 Considering the facts in totality, we find that the assessee had entered into two Joint Development Agreements (JDAs) one with M/sSJR Prime Corporation Pvt. Ltd. on 17.12.2012 for the “SJR Plaza City Project” and another with M/s Sunil Mantri Realty Ltd. on 20.03.2009 for the “Mantri Premero Project”. Both agreements were entered into prior to 01.04.2018, the effective date of the introduction of section 45(5A) of the Act. Thus, the deeming provision under section 45(5A), which provides for capital gain taxation in the year of receiving completion certificate, does not apply to the assessee‘s case.

34.15 The assessee‘s claim is that she has offered the capital gains to tax in the relevant assessment years in accordance with the prevailing law. The assessee filed her return of income under section 139 of the Act for A.Y. 2020– 21 declaring total income of ₹4,46,26,820/-, which included gain from the sale of flats. The return was duly processed under section 143(1) of the Act by the CPC, Bangalore, and no discrepancies or mismatches were reported at that stage.

These facts indicate that the income offered was consistent with the revenue‘s own database and processing systems.

34.16 We also note that the assessee had sold 15 flats from the “SJR Plaza City Project” and 14 flats from the “Mantri Premero Project” during A.Y. 2020–21 and offered the corresponding gains in that year. This is in line with the accepted principle that when flats developed under a JDA are later sold, the income from such sale can be assessed either as capital gains or business income, depending on the facts each case. In the present case, the assessee has treated the gains from the sale of flats as taxable in the year of sale and paid tax accordingly. No evidence has been brought on record by the AO to show that any part of this income remained unoffered to tax or was suppressed.

34.17 Moreover, it is a settled position of law, as held in Chaturbhuj Dwarkadas Kapadia v. CIT [(2003) 129 Taxman 497 (Bom.)] and CIT v. Dr. T.K. Dayalu [(2011) 202 Taxman 531 (Kar.)], that capital gains under a development agreement are taxable either in the year in which possession is handed over or when consideration is crystallized, depending on the facts and circumstances. The assessee‘s JDAs, being of earlier origin (2009 and 2012), were not governed by the deeming fiction of section 45(5A) of the Act, and the assessee had already disclosed the capital gains in accordance with the prevailing legal framework.

34.18 Therefore, in our considered view, the additions made by the Assessing Officer on account of estimated capital gains based on the cost of construction of flats rather than actual sale are unjustified. The AO failed to appreciate that the assessee had already offered the income in the year of actual sale and paid tax accordingly. Estimating capital gain based on construction cost and taxing it in A.Y. 2020–21, without any corresponding realization by the assessee in that year, results in double taxation and goes against the principles of real income. Accordingly, on merits also, we hold that the addition of ₹111.29 crore (in respect of SJR Project) and ₹37.56 crore (in respect of Mantri Project) towards capital gains is not sustainable.

34.19 Moving ahead, we note that the AO has added sales proceeds of Rs. 7,53,77,252/- Rs. 8,52,88,148/- from the sale of flats in ―SJR Plaza City Project” and ―Mantri Premero Project” by assigning the reason that advance tax was not paid. In this regard, we find that the assessee has already offered tax on sale 15 flats in the ―SJR Plaza City Project” and 14 flats in ―Mantri Premero Project”. Therefore, taxing the sale proceeds separately by the AO will amount to double taxation. Hence, we hereby direct the AO to delete the addition of receipt of sale proceeds.

34.20 Coming issue of taxing the non-refundable deposit of Rs. 1.5 crore as income under the head ‗other sources‘. The learned AR before us reiterated that the amount was received as refundable deposit and the assessee is liable to repay the same as per the term of the JDA. Therefore, the same has been treated as liability in the books of accounts. In this regard, we note that it is not disputed the amount was received under JDA as refundable deposit from the party namely Mantri Reality Ltd. The assessee continues to show the same as liability. Hence in our considered opinion as long as the assessee has not written off, the inclusion of refundable deposits as ―income from other sources” is not justifiable.

34.21 Furthermore, we note that the AO in the assessment order has disallowed the 50% amount of expenditure claimed by the assessee as incurred for completion of the project “Mantri Premero Project”. The learned CIT(A) also confirmed the impugned disallowances. However, we note that the assessee before us has not raised specific ground in this connection neither the learned AR made any argument or submission. Be that as maybe, we note that the assessment order itself has been set aside on technical grounds. Eventually, the impugned addition or disallowance is not maintainable. Accordingly, we delete the additions made by the authorities below and allow the ground of appeal on merits as well. Hence, the ground of appeal of the assessee is hereby allowed.”

25. The ld. CIT (A) following the decision of Ms. Shanthamma [supra] held as under: –

“12.3. As seen from the above, Hon’ble ITAT has held that on merits also, the addition made by the Assessing Officer (on Smt. Shanthamma’s share of land) on account of capital gains income in the hands of the appellant’s wife Smt. Shanthamma for the JDA of SJR Plazza City is not sustainable for AY 2020-21. The Hon’ble ITAT has given directions to delete the capital gains income addition made by the AO in the hands of appellant’s wife Smt. Shanthamma for her share of 72.2% of land. The appellant’s share is 27.8% on the same project. Hence, the capital gains income addition made by the AO in the hands of the appellant also needs to be deleted following the above decision of Hon’ble ITAT (mentioned supra) on account of the same JDA/Project.

12.4 To reiterate, the AO has made an addition on account of capital gains income for the same JDA of SJR Plaza City project in the hands of the appellant (for his share of land 27.8%) in this relevant AY 2020-21. The decision of the Hon’ble ITAT (mentioned supra) in  the appellant’s wife case is squarely applicable to the appellant’s  case, since the JDA/project entered by both of them is exactly the  same. Hence, respectfully following the decision of the Hon’ble ITAT (mentioned supra), the addition made by the AO cannot be sustained and is directed to be deleted for the relevant AY 2020-21. Accordingly, the additional grounds of appeal filed by the appellant for AY 2020-21 are allowed.‖

26. As the JDA was executed and possession was handed over in FY 2012-13, the ―transfer‖ within the meaning of section 2(47)(v) occurred in that year, and the resulting capital gains were chargeable to tax in AY 2013-14 under the law then in force. Section 45(5A), inserted with effect from 01.04.2018, is prospective and contains no express or implied retrospective operation; the Explanatory Memorandum also indicates that it applies only to agreements entered into after its commencement. Therefore, where the transfer was completed before the insertion of section 45(5A), the gains must be taxed in the year of transfer (AY 2013-14 here) and cannot be shifted to AY 2020-21 merely because the completion certificate was received in that year. Section 45(5A) applies only when the specified agreement is entered into on or after 01.04.2017 and the completion certificate is issued on or after that date. Any hardship in taxing the gains before receipt of the constructed area is a consequence of the pre-amendment regime; the remedy introduced by section 45(5A) operates prospectively and does not extend to transactions completed before its commencement.

27. The Ld. AO further observed that, if the capital gains for AY 2013-14 were neither assessed nor brought to tax in that year—whether because the assessee did not offer them or the Revenue did not detect the transfer—and the Revenue now seeks to tax them in AY 2020-21 by invoking section 45(5A), the question arises whether such income can be assessed in the impugned year under a provision that was not in force in the year of transfer, or whether the appropriate course is to reopen AY 2013-14 under sections 147/148 (subject to the limitation under section 149).

28. Accordingly, it is for the Revenue to decide the appropriate course. Since the Revenue did not tax the capital gains in the earlier year, we cannot permit the same gains to be taxed in the present year by disregarding the settled principles of interpretation and the statutory provisions then in force. In any event, the assessee asserts that the capital gains were offered in the correct year, and the Revenue has not rebutted this claim with any evidence.

29. Nothing was pointed out before us to state that decision of ld. CIT (A) relying on the decision of ITAT suffers from any infirmity. Therefore, the decision of the Coordinate Bench on the same set of facts binds us unless compelling reasons are shown to us to differ. Thus, we do not find any reason to upset the decision of the ld. CIT (A).

30. One of the ground raised by the ld. AO refers to the decision of /ITA 21/CTK/2024 Kanak Bhanj Deo dated 10/7/2024 rendered by the coordinate bench, on appeal by assessee confirmed by the Honourable Orissa High court in [2025] 176 taxmann.com738 (Orissa)[29-08-2024] and SLP dismissed by the Honourable Supreme court in Kanak Bhanj Deo vs. Income-tax Officer [2025] 176 taxmann.com 963 (SC)[18-07-2025]. We find that decision off the coordinate bench has neither referred to the decision of Honourable Bombay high court in Chaturbhuj Dwarkadas Kapadia of Bombay vs. Commissioner of Income-tax [2003] 129 Taxman 497 (Bombay)/[2003] 260 ITR 491 (Bombay)/[2003] 180 CTR 107 (Bombay)[13-02-2003]nor of The Jurisdictional Karnataka high court in Commissioner of Income-tax, Bangalore vs. DR. T.K. Dayalu [2011] 14 taxmann.com 120 (Karnataka)/[2011] 202 Taxman 531 (Karnataka)[20-06-2011]

31. Further, as the Coordinate Bench has decided the issue based on the decision of the Hon‘ble Karnataka High Court in case of Shri T. K. Dayalu as well as of the Hon‘ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia, the decision relied upon by the Ld. Department Representative of Hon‘ble Orissa High Court is not required to be considered as the relevant ITAT decision in 21 CTK 2024 has not considered these decisions of other high courts. The decision of the Hon‘ble jurisdictional High Courts binds us.

32. Further we also draw support from the decision of Honourable Patna high court in Pankaj Kumar vs Commissioner of Income Tax on 12 May 2023 civil Writ Jurisdiction Case No.20926 of 2019 [ sources indiakannoon.org and taxsutra.com] where in issue of whether section 45(5A) of the Act operates prospectively or retrospectively. The Division Bench of the Patna High Court, held in unequivocal terms that sub-section (5A), inserted by the Finance Act, 2017 and expressly stated to be effective from 01.04.2018, cannot be treated as retrospective — both by reason of the express words employed and because no intendment can be ferreted out so as to deem it impliedly retrospective.The Honourable Court observed that the consequences under section 45 for a person who transfers a capital asset as contemplated under section 2(47)(v) — insofar as having to compute the total income by including the capital gains accrued in the previous year in which the transfer was effected — when the JDA was entered into prior to 01.04.2018, was not an unintended consequence. This was substantially changed insofar as an individual and HUF, making the liability to include the capital gains only in the previous year of the completion certificate. The Court further found no discrimination visited upon individuals or HUFs, for whom the change was made in the manner and the previous year in which the computation of total income is made, as this was effective only for agreements entered into after 01.04.2018. The writ petitions claiming the benefit with retrospective effect were dismissed. It held that: –

33. Thus, indeed, the judicial precedents states that if the JDA is entered prior to the date of amendment,these provisions [section 45(5A)] will not apply to it for considering the year of taxation. Thus, we pause at conclude at holding that there is no application of section 45(5A) in case of assessee for this year at least as JDA is not entered into this year as well as the possession is also granted on the date of entering JDA. We have also not been shown whether the handing over of possession in FY 2012-13 was absolute possession within the meaning of section 53A or merely a limited license for construction. No specific terms of JDA were pointed out by the revenue, nor was it contested in the case of wife of the assessee, whose ITAT decision is relied upon.

34. We find that Honourable Telangana High court in income tax tribunal appeal no: 527 0f 2006Smt. Shantha Vidyasagar Annam Hon’bLe the Chief Justice[ as then lordship was] Alok Aradhe held that The developer has been handed over the possession for the limited purpose of carrying out the development work’ Therefore, in pursuance of the development agreement, the possession of the immovable property has not been handed over to the developer as contemplated under Section 53A of the Transfer of the Property Act, 1882. Therefore, the same does not fall within the definition of ‘transfer‘ under Section 2$71 of the Act. Though this decision does not directly deal with the retrospectivity of section 45(5A), it addresses the connected and critical issue of when transfer takes place under a JDA. The Telangana High Court held that where the developer was handed over possession only for the limited purpose of carrying out the development work, and the contract to transfer the immovable property had not been executed for consideration, the same does not fall within the definition of “transfer” under section 2(47) of the Act. It also considered the decision of honourable Karnataka High court in case of T K Dayalu [Supra]. This decision carves out a class of JDAs where, irrespective of section 45(5A), no “transfer” occurs in the year of execution of the agreement itself — thus rendering the question of retrospectivity of section 45(5A) academic in such cases. Whether this line of reasoning applies to a particular JDA would depend on the specific terms of the agreement and whether “possession” within the meaning of section 53A was actually parted with.Thus, it confirms the decision of Honourable Bombay high court in case of Chaturbhuj Dwarkadas Kapadia of Bombay vs. Commissioner of Income-tax [2003] 129 Taxman 497 (Bombay)/ [2003] 260 ITR 491 (Bombay)/ [2003] 180 CTR 107 (Bombay) [13-02-2003] provided there is an absolute transfer of possession of the land and not the limited possession.

35. Thus, respectfully following the decision of the Coordinate Bench in case of the wife of the Assessee for Assessment Year 2020-21, we do not find any merit in the Appeal of the Ld. Assessing Officer for the impugned Assessment Year i.e., Assessment Year 2020-21. Accordingly, all the grounds of Appeal for Assessment Year 2020-21 are dismissed.

36. Accordingly, all these four Appeals filed by the Ld. Assessing Officer are dismissed.

Order pronounced in the open court on 11^th May, 2026.