The Commissioner of Income-tax, Bangalore / The Dy. Commissioner of Income-tax, Circle-11(1), Bangalore v. Amco Batteries Ltd
[Citation -2020-LL-1118-34]

Citation 2020-LL-1118-34
Appellant Name The Commissioner of Income-tax, Bangalore / The Dy. Commissioner of Income-tax, Circle-11(1), Bangalore
Respondent Name Amco Batteries Ltd.
Court HIGH COURT OF KARNATAKA
Relevant Act Income-tax
Date of Order 18/11/2020
Assessment Year 2004-05
Judgment View Judgment
Keyword Tags joint venture agreement • delivery of possession • development agreement • application of mind • escaped assessment • possession of land • reason to believe • transfer of land • capital gain • advance • full and true disclosure


1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 18TH DAY OF NOVEMBER 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.572 OF 2013 BETWEEN: 1. COMMISSIONER OF INCOME-TAX C.R.BUILDING QUEENS ROAD BANGALORE. 2. DY. COMMMISSIONER OF INCOME-TAX CIRCLE - 11 (1) RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE. ... APPELLANTS (BY SRI.K.V.ARAVIND, ADV.,) AND: M/S AMCO BATTERIES LTD. 3RD FLOOR UNITY BUILDING N.R.SQUARE BANGALORE. ... RESPONDENT (BY SRI.S.PARTHASARATHI, ADV.) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 31.07.2013 PASSED IN ITA 2 NO.94/BANG/2013 FOR ASSESSMENT YEAR 2004-05, PRAYING TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (II) ALLOW APPEAL AND SET ASIDE ORDERS PASSED BY ITAT, BANGALORE IN ITA NO.94/BANG/2013 DATED 31.07.2013 AND CONFIRM ORDER OF APPELLATE COMMISSIONER CONFIRMING ORDER PASSED BY DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE11(1), BANGALORE. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 2004-05. appeal was admitted by bench of this Court vide order dated 16.12.2014 on following substantial questions of law: (i) Whether in fact and in circumstances and in law tribunal was correct in holding that there is no failure on assessee to disclose truly and fully all material facts necessary for computing its income due to which income has escaped tax, admittedly when assessee has not 3 disclosed fact regarding handing over of possession of property to developer pursuant to JVA and recorded perverse finding? (ii) Whether in fact and in circumstances and in law tribunal was correct in holding that disclosure of JVA and advance receipt from JVA amounts to disclosure, when crucial fact regarding handing over of possession which would amount to transfer under Section 2(47) of Act liable for capital gains was not disclosed by assessee and recorded perverse finding? 2. Facts leading to filing of this appeal briefly stated are that assessee is company engaged in manufacture and sale of automotive batteries. assessee filed its return of income for Assessment Year 2004-05. Assessing Officer by order dated 22.12.2006 completed assessment under Section 143(3) of Act. Assessing Officer noticed that assessee had entered into joint development 4 agreement and in consideration, assessee was to receive 28% of saleable constructed area and assessee had handed over possession of land in pursuance of joint venture agreement. It was further held that handing over possession of land would amount to transfer under Section 2(47) of Act. Assessing Officer therefore, reopened assessment and issued notice under Section 148 of Act. Assessing Officer by order dated 30.12.2011 completed re-assessment and brought to tax transaction relating to transfer of land at Hebbal under Long Term Capital Gains. 3. assessee thereupon filed appeal before Commissioner of Income Tax (Appeals) who by order dated 28.11.2012 held that re opening of assessment is in accordance with law. assessee thereupon approached Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short) by filing appeal. tribunal by order dated 5 30.07.2013 inter alia held that earlier order of assessment was made under Section 143(3) of Act on 22.12.2006 and assessment has been reopened after expiry of four years and therefore, proviso to Section 147 of Act applies. It was also held that Assessing Officer has not mentioned that assessee had failed to disclose truly and fully all material facts necessary for computing its income, due to which income had escaped tax. Accordingly, order of re assessment was set aside. In aforesaid factual background, this appeal has been filed. 4. Learned counsel for revenue submitted that assessee had not declared / disclosed factum of handing over possession through joint development agreement, which would constitute failure to disclose fully and truly all material facts necessary for assessment of income and same is reflected in reasons recorded by Assessing Officer. It is further submitted that notes to return only reflects receipts of 6 advance of Rs.180 Crores and not handing over possession / enjoyment of property in terms of Section 2(47)(V) and Section 2(47)(VI) of Act and therefore, it is case of non disclosure. 5. It is also argued that reasons recorded by Assessing Officer prima facie establish statement of tax and at stage of recording reasons, Assessing Officer is not required to establish statement of tax with evidence and finding of tribunal regarding reasons which has been recorded by Assessing Officer is contrary to factual position existing on record. It is further submitted that issue with regard to applicability of Section 2(47)(VI) of Act needs to be examined. Learned counsel for revenue has also invited our attention to Clauses 3, 4, 5, 6.4, 7.1, 7.4, 7.5, 7.7, 10.2 and 16 has submitted that risk and rewards in property have already been transferred in favour of developer and in fact, title has also been transferred. Therefore, 7 transaction is liable for capital gains under Section 45 of Act. It is also argued that since assessee failed to disclose transaction, same has escaped assessment. It is also urged that order of re opening of assessment be upheld and matter be remitted to tribunal for adjudication on merits. In support of aforesaid submissions, reliance has been placed on decision of Supreme Court in 'ASSISTANT COMMISSIONER OF INCOME TAX VS. RAJESH JHAVERI STOCK BROKERS (P) LTD.', 291 ITR 500 (SC). 6. On other hand, learned counsel for assessee submitted that agreement has to be contract in order to attract applicability of Section 2(45) of Act. While inviting attention to clauses 3.1, 3.2 as well as other clauses of agreement, it is contended that there is no delivery of possession under Section 53A of Transfer of Property Act, 1881 and development Agreement is not registered document. It is also submitted that assessee gave 8 Power of Attorney to developer on 07.03.2006 i.e., beyond accounting period and possession was not handed over. It is also urged that there is no material on record to show that possession of property in question was handed over and re opening of assessment is beyond four years, which is not permissible in law. In support of aforesaid submissions, reliance has been placed on decision of Supreme Court in 'COMMISSIONER OF INCOME TAX VS. BALBIR SINGH MAINI', 398 ITR 531 (SC) and decision of this court in 'VENKATESH POWER WORKS VS. COMMISSIONER OF INCOME TAX', 278 ITR 436. 7. We have considered submissions made by learned counsel for parties and have perused record. From perusal of reasons recorded by Assessing Officer while re opening assessment, it is evident that Assessing Officer has recorded finding that due to non disclosure of transaction of joint 9 development agreement entered into by assessee with M/s Godrej Properties Ltd. on 22.01.2004, towards transfer of land, income has escaped assessment. relevant extract of order reads as under: It is noticed that company M/s Amco Batteries Ltd had entered into Development Agreement with M/s Godrej Properties and Investments Ltd. (subsequently name change to M/s Godrej Properties Ltd.) for development of 20 acres of land near Hebbal flyover belonging to company on 22.01.2004. This Joint Venture Development entered into on 22.01.04 enables assessee to claim 28% of saleable constructed area. balance 72% of saleable constructed area belongs to developer. possession of land vests with developer on account of Joint Venture Agreement and on account of construction carried on as per JVA as such there is transfer of property of 72% of 20 acres of land from assessee company to M/s. Godrej Properties and Investments Ltd. to extent of value of land transferred, 10 assessee is liable to capital gains tax for year in which joint venture agreement is entered into and possession of land is handed over for construction i.e., for assessment year 2004-05. As assessee company failed to disclose fully contents of JVA entered into with M/s Godrej Properties Ltd. which took place on 22.01.2004 relevant to Assessment Year 2004-05, capital gain income, which exceeds more than One Lakh Rupees, arising on account of consideration received towards transfer of land, has escaped assessment within meaning of Section 147 of I.T.Act. In view of above, I am satisfied that it is fit case for issue of notice under Section 148 of Act for Assessment Year 2004- 05. 8. Thus, from perusal of above relevant extract, it is evident that Assessing Officer has recorded reasons for arriving at conclusion that income has escaped assessment. Once Assessing Officer records reasons that he has reason to believe 11 that income has escaped assessment, it confers jurisdiction to re open assessment. However, tribunal in cryptic and cavalier manner without adverting to reasons assigned by Assessing Officer has held in para 8, relevant extract of it reads as follows: As seen from reasons recoded and re opening of assessment, AO has not mentioned therein anywhere that assessee has failed to disclose truly and fully all material facts necessary for computing its income due to which income has escaped tax. 9. Thus, from perusal of order passed by tribunal, it is evident that order passed by tribunal suffers from vice of non application of mind and finding recorded by it referred to supra is perverse. In view of preceding analysis, substantial questions of law framed by bench of this court are 12 answered in favour of revenue and against assessee. In result, order passed by tribunal is therefore, quashed and matter is remitted to tribunal for decision afresh in accordance with law. Accordingly, appeal is allowed. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax, Bangalore / Dy. Commissioner of Income-tax, Circle-11(1), Bangalore v. Amco Batteries Ltd
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