HC Expounds: Agreement permitting construction as a licensee does not transmit possession

 

The Bombay High Court allowed a writ petition challenging the notice issued under Section 148 of the Income Tax Act, 1961, relevant to the assessment year 2013- 14. The Court observed that the development agreement did not have the effect of transmitting possession in favour of the licensee within the meaning and spirit of Section 53A of Transfer of Property Act.

Brief Facts:

A notice was issued under Section 148 of the Income Tax Act, 1961. By the notice, the assessment for the year 2013-14 was sought to be reopened, on the ground that the assessing officer had reason to believe that income chargeable to tax for the assessment year 2013-14 had escaped assessment within the meaning of Section 147 of the Act.

Objections to the reopening were filed by the Petitioner. One of the objections raised by the Petitioner before the assessing officer was that Section 2(47)(v), which was invoked for the purpose of reopening, had no application in as much as granting a license to the developer, who entered the assessee’s land for the purpose of development and there was no ‘allowing the possession of the land’ as contemplated under Section 53A of the Transfer of Property Act, 1882; and, therefore, Section 2(47)(v) would not apply.

Objections raised by the Petitioner were, however, rejected by the Assessing Officer. 

 

Contentions of the Petitioner:

The Learned Counsel for Petitioner argued that the agreement between the Petitioner along with other owners and developers was a development agreement – according to which the developer was given rights only as a licensee. Further, the counsel urged that such a licensee could not be said to be in ‘possession’ within the meaning of Section 53A of the T.P. Act and that ‘possession’ was otherwise necessary and an integral ingredient for purposes of bringing a transaction within the purview of Section 2(47)(v) of the Act.

Observations of the Court

The Court observed that the development agreement permitted construction on the land in question only as a licensee which did not have the effect of transmitting possession in favour of the licensee within the meaning and spirit of Section 53A of T.P. Act. Hence, there would be neither any tangible material nor any reason for the assessing officer to believe that ‘any income chargeable to tax had escaped assessment’ and the action of the assessing officer, therefore, would be without jurisdiction.

The decision of the Court:

The Bombay High Court, allowing the petition, held that the notice impugned dated 27 March 2021 issued under Section 148 of the Act as also the Order dated 27 January 2022 is set aside. 

 

Case Title:  Late Bharat Jayantilal Patel vs Deputy Commissioner of Income Tax & Ors.

Coram: Hon’ble Justice Dhiraj Singh Thakur and Hon’ble Justice Kamal Khata

Case no.: WRIT PETITION NO. 1612 OF 2022 

Advocate for the Petitioner: Mr. Vasudev Ginde

Advocate for the Respondent No.1: Mr. Suresh Kumar

Read Judgment ;

 

 

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