TaxTMI 
TaxTMI 
TaxTMI 
2007 (4) TMI 387
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....o I.T.A. No. 1409/Delhi/05 pertaining to Ram Saroop Saini, HUF. The return of income was filed declaring income of Rs. 2,36,790 plus agricultural income of Rs. 55,400 for the assessment year 2001-02. The Assessing Officer noticed that the assessee HUF along with other two assessees had got approved their common agricultural land situated near Swami Uma Bharti Public School, Rewari into a Town Planning Scheme No. 9 (in short TPS) by paying development charges to the Municipal Committee, Rewari. After converting the agricultural land into non-agricultural land, the assessee started selling plots in smaller denomination starting from the assessment year 1994-95 onwards. In the return of income filed for the assessment year starting from 1994-95, the assessee has declared income from the sale of land as income assessable under the head 'Capital gain'. Similarly, in the instant case also, the assessee declared its income from sale of land under the head 'Capital gain'. The Assessing Officer, however, has treated the transactions as adventure in the nature of trade. The CIT(A) has since upheld the stand of the Assessing Officer and hence the present appeal before us. 4. Before us, the f....
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....ase of one of the co-owners, the Assessing Officer with respect to similar sale transactions has accepted the income declared under the head 'Capital gain' in an assessment proceeding finalized under section 143(3) of the Act. In this regard our attention was invited to the assessment order dated 22-3-2002 at pages 49 and 50 of the paper book in the case of Madan Lal Saini (HUF) for the assessment year 1999-2000. The revenue in the present year was, therefore, not justified in deviating from its earlier stand on the principle of consistency. In support, reliance was placed on various decisions viz. CIT v. Neo Poly Pack (P.) Ltd. [2000] 245 ITR 492 (Delhi), and CIT v. Dalmia Promoters Developers (P.) Ltd. [2006] 281 ITR 346 (Delhi). 7. The ld. D.R. on the other hand, has supported the orders of the lower authorities. The ld. D.R. pointed out that the activity of selling land in small pieces was carried out over an extended period of time and, therefore, the same has been rightly held to be a transaction possessing attributes of an adventure in the nature of trade. Reliance was placed on the reasoning articulated by the lower authorities in their respective orders in sup....
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....nus was, therefore, on the revenue to prove that the transaction was an adventure in the nature of trade. For this proposition, we rely upon the judgment of the Hon'ble Supreme Court in the case of Saroj Kumar Mazumdar v. CIT [1959] 37 ITR 242 . 10. Apart from the aforesaid, we may also briefly touch upon the meaning of the expression "in the nature of trade" appearing in the definition of business in section 2(13) of the Act. The Hon'ble Supreme Court in the case of G. Venkataswami Naidu & Co. v. CIT [1959] 35 ITR 594 and Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 (SC), held that the aforesaid expression postulates the existence of certain elements in the nature of adventure which, in law, imbibes it with the character of trade or business. It was the presence or absence of such element in the particular transac-tion in question that would decide as to whether the transaction is in the nature of trade or not. A reading of the decisions of the Hon'ble Supreme Court in the cases of G. Venkataswami Naidu & Co. v. CIT [1959] 35 ITR 594 and Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 (SC) and Saroj Kumar Mazumdar v. CIT [1959] 37 ITR 242 (SC), clearly brings out that what....
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....nce of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted." 11. Before we proceed to analyze the import of the transactions in question, we may gainfully refer to the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Premji Gopalji [1978] 113 ITR 785 . In the said case, the assessee owned agricultural land which was inherited from his ancestors. In 1957-58, it was converted into non-agricultural land, divided into small plots and such plots were sold as and when purchaser was available. The revenue noticed that in the assessment year 1969-70, the assessee had profits on sale of land, as in the past. The revenue treated the gain as income from business as against its stand of accepting the gain as capital gain in the past. The reven....
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.... assessee continued to hold the land as agricultural land and deriving income therefrom as such. Notably, there was no intention manifested in assessee to acquire and hold the land so as to realize profits or for an adventure in the nature of trade. It is not uncommon to find that due to rapid growth of urban areas, more and more rural agricultural lands are being converted into cities. The holder of such agricultural lands ostensibly does not have a control over the process of urbanization. The only intention of the holder of such agricultural land under the circumstance is to maximize his realization from sale of such land. All along the holder of such lands looks upon the gain only as a capital accretion. The intention at the time of acquiring the land (i.e., inheritance) and holding it thereafter is not to deal in real estate. In any case, the subsequent sale cannot represent adventure in the nature of trade. The factor that the assessee converted his agricultural land into non-agricultural land and thereafter sold it, also demonstrate the desire to maximize his realization from the disposal of capital asset. The intention has to be gauged from the manner of acquisition of an a....
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....nt of Hon'ble Apex Court in the case of Radhasoamy Satsang v. CIT [1992] 193 ITR 321, clearly supports the aforesaid proposition. No new facts have emerged which would justify a departure in this regard. We, therefore, find no justification to uphold the order of the CIT(A) on this count as well. Resultantly, the assessee succeeds. 15. Since the facts and circumstances and the issue involved in the cases of the other HUFs are identical to the facts of Ram Saroop Saini, HUF (I.T.A. No. 1409/Delhi/2005), our decision in the case of said Ram Saroop Saini shall apply mutatis mutandis in their cases as well. Accordingly, the assessees therein also succeed on this issue. 16. Now we take up for consideration the appeals of the revenue pertaining to respective assessment year as shown in the caption of this order. The solitary common issue which is raised by the revenue in its appeal is action of the CIT (Appeals) in deleting the additions made by the Assessing Officer on account of under statement of sale price. The Assessing Officer after conducting certain verification exercise in the assessment year 2001-02 concluded that the assessee had sold the plots and executed sale deeds showin....
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.... 1,100 per sq.yd. In five cases, the Assessing Officer had copies of agreements to sell which showed higher sale rate. On the basis of such agreements, the Assessing Officer was right in concluding that in all the cases of sales the assessee would have transacted for sale of land at a consideration more than the consideration stated in the final sale deeds executed ultimately. In this context the CIT (Appeals) was unjustified in deleting the addition in relation to eight sale transactions ignoring the existence of 'agreements to sell' in five cases. Even in relation to those five cases the evidence has been disregarded for the reason that the purchasers in their statements made before the Assessing Officer had disowned such agreements, which is unjustified. In sum and substance the learned DR has assailed the order of the CIT (Appeals) by placing reliance on the reasoning given by the Assessing Officer in his assessment order. 20. On the other hand, the learned counsel for the assessee has defended the order of the CIT (Appeals) by placing reliance on the same. According to the learned counsel the entire evidence available with the Assessing Officer has been correctly appreciated ....
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....ls) has not been negated by the Revenue before us on the basis of any cogent material or evidence. The learned DR has not pointed out the existence of any material which would enable us to take a view contrary to that of the CIT (Appeals). The only basis with the Assessing Officer to make an addition with respect to the 8 cases is the alleged statement of the property agent Shri R.D. Kataria in relation to the modus operandi of sale undertaken by the assessee and the copies of agreements to sale with respect to the balance of the five transactions. Factually speaking the aforesaid evidence cannot be used to imply that the assessee understated the sale consideration in respect of 8 transactions in question. Thus the inference of the CIT (Appeals) that in respect of such 8 transactions there is no evidence with the Assessing Officer to negate the stand of the assessee is liable to be upheld. We hold so. 23. Now we may consider the remaining five transactions in relation to which the Assessing Officer had in his possession copies of the alleged 'agreement to sell' which showed higher sale rate than the sale rate recorded in the sale deeds ultimately executed. 24. To appreciate the f....
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.... as per version of the Assessing Officer that he is in possession of photocopy which is not relevant nor a valid document in law when original is not available. Sir, during the course of statement Shri Subhash Chand clearly stated that no any agreement was even executed nor I ever signed which is quite evidence as per pages 21-22 of ours paper books. Sr. No. 13 : Nand Lal : The alleged agreement is of 160 sq.yd. is ever executed hence not valid in law. As per Shri Nand Lal's statement dated 19-2-2004 at pages 15 to 17 of ours paper book he clearly stated that the agreement shown to me does not relate to "me" nor "I" signed the same. Further he stated that no purchase of 160 sq.yds. is ever held by 'me' as per alleged agreement." On the basis of the aforesaid the CIT (Appeals) has further examined each of the transaction and records his finding in para 3.5 of his order and the relevant portion is extracted hereinafter : "The appellant's version in respect of Sr. Nos. 7, 10, 11, 12 & 13 reproduced above, is seen and discussed as under:- Sr. No. 7 : Sham Sunder : The appellant's objection that first page of agreement is not signed by any of the parties to the transaction, wher....
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....chaser namely Shri Inder Arora (in the case of the other co-owner M/s. Suraj Bhan Saini - HUF) wherein the said person admits to the signatures found in the 'agreement to sell'. The learned DR also pointed out that in the statement of one of the purchasers namely Smt. Sudershan Kumari recorded on 26-2-2004 (in the case of Suraj Bhan Saini - HUF). She has admitted that the signature on the agreement to sale was hers. Similarly the learned Dr. referred to the statement of Shri R.D. Kataria, property agent in support of the case of the revenue. 26. In this connection, we are of the opinion that insofar as the under- statement of sale consideration by assessee is concerned, the same cannot be clinchingly inferred from the material and evidence on record. We have perused the documents in question and also notice the defects noted by the CIT (Appeals), namely (i) ultimate purchasers have not signed on the first page of the documents; (ii) that the documents have not been affixed with the requisite court fee stamp; (iii) the Assessing Officer did not possess the originals; and (iv) neither the Assessing Officer reported as to how the copies of 'agreements to sell' came to his possession;....
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....e Assessing Officer. Before us also it was a common ground between the parties that the issue involved is identical to that in ITA 1347/Delhi/05 which has been considered by us in the earlier paragraphs. Therefore, following the reasoning in ITA 1347/Delhi/05, the appeals of the revenue for assessment year 2001-02 in the case of other assessees vide ITA No. 1346/Delhi/05, ITA 1413/Delhi/05 and ITA 1343/Delhi/05 are also dismissed. 29. Now we are remaining with the appeals of the revenue pertaining to the assessment year 1996-97. In all these appeals, similar addition has been made on the plea that the assessee has under-stated the sale consideration recorded in the sale deeds executed. The additions made have been deleted by the CIT (Appeals) on the plea that there was no evidence relating to the assessment year 1996-97 to infer under statement of sale consideration. In order to appreciate the manner in which the CIT (Appeals) has decided the issue, we may refer to the following discussion made by him in the case of ITA 1344/Delhi/05 pertaining to assessment year 1996-97 by way of paras 3 to 5 of his order : "3. The Assessing Officer attended the appellate proceedings and was as....