PRAMEELA KRISHNA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) This appeal is preferred by the assessee, challenging the concurrent finding recorded by three authorities that the possession of the assessee's property at Kyathamaranahalli, Mysore, was handed over not in the period relevant to the assessment year 2003-04, but much before that, to M/s. S.I. Property Development Limited and therefore, the return filed by the assessee after a delay of almost 2 1/3 years, cannot be accepted. The assessee is the owner of the land bearing Sy. No. 193/2, Kyathamaranahalli, Mysore, measuring in all 71874 sq. ft. The assessee entered into a joint development agreement with one M/s. S.I. Property Development Limited, a Company incorporated under the Companies Act. Under the aforesaid agreement, she agreed to sell 92% of the undivided share in the land to the developer and retained 8% of the land for herself. The agreement was executed on 30th June 1994. The total consideration agreed upon was Rs. 30 lakh and 8% of the built area. Rs. 10 lakh was paid as advance. On 27.2.1996, a modified agreement came to be executed retaining the very same terms except the expenditure of enhancing the consideration from Rs. 30 lakh to Rs. 40 lakh and share in built-up area was also increased from 8% to 8.5%. On the date of said agreement, a sum of Rs. 10 lakh was paid. Subsequently, on 30.4.1996, a sum of Rs. 7,50,000/- was paid and on 31.5.1996, yet another sum of Rs. 7,50,000/- was paid. Thus, the assessee received Rs. 35 lakh out of Rs. 40 lakh payable. The assessee also executed a Power of Attorney on 18.12.1996 in favour of the representative of the builder agreeing to authorize him to execute the sale of the built area and delivery of possession to the purchasers. However, the said Power of Attorney came to be cancelled on 5.12.2002. The builder was unable to complete the construction as agreed though he had put up foundation for seven phases. He was able to construct superstructure only in respect of four phases and that too not completely. At that juncture, the said agreement was cancelled. Another builder was brought into complete the construction. An agreement came to be executed on 8.1.2003. The consideration payable was enhanced to Rs. 41 lakh. Subsequently, the said builder has completed the construction. Flats were sold; what is payable to the assessee has been paid; even the built area of 8.5% has been handed over to him along with one additional flat, as per the new agreement entered into. As is clear from paragraph-6.1.1 of the Tribunal's order, the return of income for assessment year 2003-04 in which period the assessee claims that capital gains' arise was not filed within the due date under Section 139(1) or under Section 139(4) of the Act. It is only after the Assessing Officer initiated proceedings under Section 147 to bring to tax assessee's income from family pension, income from house property and capital gains on sale of assets and notice under Section 148 was issued on 14.9.2005, that the assessee filed the return of income for assessment year 2003-04 on 29.3.2006 (after a delay of almost 21/2 years) declaring income which included capital gains of Rs. 47,59,091/- in respect of various properties including the aforesaid property. The assessee in the return of income for assessment year 2003-04, has taken the stand that the said land was transferred in the financial year 2002-03, when she entered into an agreement with M/s. Shanti Nikethan Housing Foundation on 8.1.2003. However, the said agreement clearly discloses the following:

(2.) The aforesaid' terms in the agreement makes it clear that on the date the agreement was entered into, the previous builder had put up foundation for constructing seven blocks. He had already completed construction in respect of four blocks and construction was yet to be commenced in blocks 5, 6 & 7. From the aforesaid facts, it is clear that, the assessee had parted with possession to the builder. The builder had put up the foundation and constructed four blocks. Because of the cancellation of the earlier agreement by mutual consent, the said project was handed over to the new builder. It is in these circumstances, the three authorities on careful examination of the entire material produced before them have concurrently held that the possession of the property was delivered by the assessee on execution of the agreement dated 30.6.1994 and therefore, in terms of the definition of the word "transfer" in Section 2(47) of the Income-tax Act, 1961, the transfer had taken place. Consequently, the assessee was liable to pay capital gain tax on such transfer.

(3.) Challenging the aforesaid 'finding, the learned Counsel for the assessee contended that, neither the agreement dated 30.6.1994 nor 27.2.1996 indicate that possession was delivered under those agreements. In fact, the terms of the said agreement show permission from the Urban Land Ceiling (ULC) was very much required; permission from the Government was required to implement the project and on the date of those agreements, the permissions had not been obtained. They were obtained subsequently. It is only after obtaining the permission, structures are put up and therefore, it cannot be said that the possession was delivered on 30.6.1994, which resulted in liability to pay capital gain tax by the assessee. No doubt, there is no term in the aforesaid agreements, which expressly says that possession has been delivered by the assessee to the builder, but reliance is placed on the Power of Attorney dated 18.12.1996 to show, if at all possession is delivered on that day. A careful examination of the Power of Attorney shows that it came to be executed only for the purpose of selling the apartments constructed on the land. Therefore, it presupposes that construction existed on the land in question on the date the Power of Attorney was executed. Having regard to the magnitude of the construction, it cannot be done overnight. If 96 apartments were ready for sale, it is quite possible that constructions had taken two years. 30.6.1994 is the date of agreement. If on 18.12.1996 they were ready for sale, the finding recorded by the authorities that possession delivered on the date of the agreement is probable. When the agreement does not specify the delivery of possession and in the absence of any material produced by the assessee to show that when the possession is delivered, in the facts of this case, having regard to the admitted facts and the recitals in the agreement dated 8.1.2003, which shows foundation had been laid for all the seven phases and constructions were almost complete in 4 phases, and it had to be finished. Coupled with the fact that in 1996, Power of Attorney was executed to sell the flats, an irresistible inference that can be drawn from the material on record is that possession has been delivered under the agreement; payment of Rs. 10 lakh was paid, that is the reason why roughly about Rs. 35 lakh has been paid between 30.6.1994 and 31.5.1996. It is a joint development agreement. Without possession of the property, no construction can be taken. Therefore, the finding recorded by the authorities that possession was taken on 30.6.1994 is probable one and that being a concurrent finding of fact, it is not open for the court, in the absence of clinching material to hold otherwise. No substantial question of law does arise for consideration in this appeal. Further, it was contended that, no reasons are recorded for reopening of the assessment. Facts set out above speak for itself. Here is a case where assessee wants to avoid payment of tax completely. It is only when the Assessing Authority issued notices, the assessee was forced to file a return showing the date of transfer as 2003 and therefore, in the facts of this case, we do not see any substance even in that contention.