Land Transferred Under Development Agreement Without Consideration: ITAT Remands Rs. 60 Lakh LTCG Addition for Reassessment [Read Order]

The tribunal observed that while the assessee was non-compliant earlier, the delay was minimal and substantive justice warranted a fresh hearing

8 May 2025 9:03 AM IST

The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) remanded a case involving Rs. 60.51 lakh addition under Long-Term Capital Gains ( LTCG ), observing that the land in question was transferred under a development agreement without actual receipt of sale consideration. Nikanth (Narol) Co-op. Shops & Off Society Ltd. ( assessee) was subjected to reassessment for...

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Nikanth (Narol) Co-op. Shops & Off Society Ltd. ( assessee) was subjected to reassessment for Assessment Year 2018–19. The Assessing Officer (AO) treated the entire consideration of Rs. 60.51 lakh which arising from transfer of immovable property as LTCG, based on third-party transaction reports.

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Due to Non-compliance to the notices, the AO passed an ex-parte order, adding the entire transaction value as taxable capital gains, and initiated penalty proceedings under Section 270A and fee under Section 234F for non-compliance.

Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)]. The CIT(A) rejected the appeal due to it being delayed by 18 days. The CIT(A) refused to condone the delay. The appeal was also dismissed for non-prosecution as the assessee failed to appear despite several hearing opportunities.

Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee contended that they were unaware of earlier proceedings due to non-receipt of notices and expressed willingness to now cooperate and furnish all necessary documents, including the development agreement.

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The assessee submitted that no consideration was actually received and that the transaction was merely part of a development arrangement where the developer accounted for the proceeds.

The Two-member bench comprising Siddhartha Nautiyal (Judicial Member) and Makarand V. MahaDeokar (Accountant Member) observed that both the assessment and the appellate order had been passed without proper opportunity to the assessee.

The tribunal observed that while the assessee was non-compliant earlier, the delay was minimal and substantive justice warranted a fresh hearing. However, the Tribunal also expressed disapproval of the assessee’s repeated non-compliance and imposed a cost of Rs. 5,000 payable to the Income Tax Department before any fresh proceedings.

The Tribunal directed the AO to reconsider the matter afresh after giving the assessee adequate opportunity to present evidence, particularly regarding the development agreement and the absence of actual monetary consideration. The AO is also directed to verify whether the sale proceeds were rightly taxed in the hands of the developer.

The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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