INCOME TAX ACT, 1961

Section 271AAA

Penalty under section 271AAA - Leviability - Accounting treatment of land transaction - Joint venture/development agreement vis-a-vis sale of land

The only dispute in this case was of accounting treatment of the transaction of the JV v. sale of land. The AO treated the transaction as sale of land whereas the assessee treated the same as development agreement/JV. Assessee treated this transaction as a JVA/Development agreement on the basis of registered development agreement which was duly accepted by the Stamp Duty Authorities/JDA and other Govt. Dept. In this regard, AO had merely raised his doubt without any basis or documentary evidences found during the search operation. It is pertinent to mention here that AR had explained all the objections raised by the AO on the terms and conditions mentioned in the development agreement. It was also a fact that assessee had given possession to Guru Pragya for construction only, not for sale of land as it was. AR had also submitted before the AO and appellate proceeding that even the sale deed with allotee/flat owner will be jointly executed by the developer and the land owner, i.e., the assessee. On treating above staged land transaction as sale of land, the penalty under section 271AAA was imposed by the AO. Both the lower appeallate authorities dismissed revenue's appeal and treated the land transaction as Development Agreement/JVA not as a sale of land.Held: Tribunal rightly held that assessee treated land same as Development Agreement/JVA. The assessee treated this transaction as a JVA/ Development Agreement on the basis of registered development agreement which was duly accepted by the Stamp Duty Authorities/JDA and other Govt. Dept. The AO treated it sales of the land by interpreting the certain clauses of Development Agreement. During the assessment stage, no show-cause notice was given to the assessee. However, at the penalty proceeding stage, the assessee submitted point to point explanation over the clauses of the Development Agreement which had not been controverted by the AO in penalty order. Therefore, the assessee's treatment as to land transaction as joint venture / development agreement was bona fide. The Development Agreement was dated 19-3-2008. Therefore, it was not understandable on what basis it can be treated as sales for assessment year 2011-12. Looking into all the facts and circumstances of the case, the findings of the CIT(A) was concurred on the issue in question. Thus, the appeal filed by the revenue was dismissed.

REFERRED :

FAVOUR : In assessee' favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 271AAA

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