The assessee entered into an agreement with a Mr. N to construct 52 flats on a sharing ratio of 65:35. He failed to file his return of income for A.Y. of 2012-13 in respect of the 52 flats. In addition to the 29 flats that were already sold in the assessment year 2014-15, the assessee sold and transferred 23 of his 52 apartments to developer N under new agreements of sale with an irrevocable general power of attorney with possession in the A.Y. 2015-16. He did not file his return for this assessment year as well. Finally, a notice u/s 148 was issued the assessee filed his return of income. The AO assessed the income from the flats in the A.Y. 2016-17 to which the assessee objected saying that the same should be added to the A.Y. 2015-16. After the AO rejected the said objects, the same was referred to a dispute resolution panel who partly allowed the assessee’s objection and also upheld the additions by the AO. The AO calculated the assessee’s total income after deducting short-term capital gains from the sale of 23 apartments before the end of the three-year period and adding back the deduction the assessee was given under section 54F for this sale. The assessee challenged the said order contending that there was double taxation.

The tribunal held that since the proceeds from the sale of the apartments were subject to tax in the assessment year 2014-2015, adding the same amount in the year under examination would have resulted in an illegitimate double addition. The AO was also directed to verify if the said amount had been brought to tax in the A.Y. 2014-15 and if yes then delete it from the A.Y. 2015-16. The tribunal further observed that the AO, while passing the final order, ignored the direction of the panel to take into account the cost of acquisition to the assessee. The Assessing Officer reversed the deduction that had been given to the assessee under section 54F for the sale of 23 apartments during the assessment year 2012-2013 on the grounds that the assessee had sold the apartments within three years. However, the transfer was made only after a period of three years—on March 24, 2015 and the joint development agreement was signed on January 13, 2012; as a result, the Assessing Officer was not justified in proposing to revoke the deduction under section 54F. (AY.2015-16)