The Bombay High Court in the case Late Bharat Jayantilal Patel Versus Deputy Commissioner of Income Tax observed and has held that the development agreement permitted construction on the land only as a licensee, which did not have any effect for transmitting of the possession in favour of the licensee as per Section 53A of the Transfer of Property Act, 1882.
The division bench comprising of Justice Dhiraj Singh Thakur and Justice Kamal Khata in the case observed that there being neither any tangible material nor any reason for the assessing officer to believe that, any income which is chargeable to tax had escaped assessment. Therefore, the action of the assessing officer would be without jurisdiction.
In the present case, the petitioner has challenged the notice issued under Section 148 of the Income Tax Act, 1961. However, the assessment for the year 2013-2014 was being sought to be reopened on the ground that the Assessing Officer had reason to believe that the income chargeable to tax had been an escaped assessment.
It has also been stated by the petitioner that as stated under Section 2(47)(v), which was being invoked for the purpose of reopening, had no application. Granting a license to the developer, who entered the land of the assessee for the purpose of development and the same did not amount to allow the possession of the land as stated under Section 53A of the Transfer of Property Act, 1882. The court stated that Section 2(47)(v) would not be applied.
The petitioner before the court argued that the agreement between the petitioner and other owners and developers was a development agreement, thus, as per which the the developer was given rights only as a licensee.
Further, the court stated that a licensee could not be said to be in “possession” within the meaning of Section 53A of the Transfer of Property Act, 1882 and that the possession was otherwise necessary and it being an integral ingredient for purposes of bringing a transaction within the purview of Section 2(47)(v) of the Act.
Accordingly, the court allowed the petition and has set aside the notice issued under Section 148 and the order.