TaxTMI 
TaxTMI 
2011 (12) TMI 380
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....ng it under the head "profits and gains of business or profession". 2. Briefly speaking, the facts are that the assessee-company filed its return on 18.12.2006 declaring total income of Rs. 2,99,20,345/-. The return was processed u/s 143(1) on 27.10.2007. Subsequently, assessment proceedings were started by serving notice u/s 143(2) dated 29.9.2007 on the assessee. The objects of the assessee-company are in respect of carrying on the business of builders, building contractors, architects, construction engineers, estate agents, dealers in real estate, brokers in real estate, and brokers of commercial and residential buildings etc. Four main object clauses have been narrated on page no. 2 of the assessment order. 2.1 Coming to the specifics, the assessee had purchased certain lands between 08.02.2005 and 31.03.2006 for a total consideration of Rs. 1,06,58,000/-. The details are furnished in a tabular form on page nos. 2 and 3 of the assessment order. These lands were sold to A.B. Towers Pvt. Ltd. on 04.09.2006, the succeeding year, for a sum of Rs. 18.00 crore. In this year, a sum of Rs. 5.00 crore was received as advance. The assessee did not offer any amount for taxation in r....
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....ition. It is also submitted that sufficient opportunities had been granted to the assessee in the course of assessment proceedings to file all relevant and necessary evidences for disposal of various grounds, especially the ground relating to taxation of the sum of Rs. 16,93,42,000/-. The assessee moved additional evidence before the ld. CIT(A) in letter dated 26.10.2009. The AO objected to the admission of the evidence. It was specifically pointed out that none of the conditions mentioned in rule 46A(1) of the Income Tax Rules, 1962, stands satisfied. In view thereof, the AO did not report further on the matter on merits. The ld. CIT(A) admitted additional evidence by making summary remarks that no such opportunities were provided by the AO. Thereafter, it was opined that the evidences are material in deciding the present appeal and the assessee was prevented from filing the same before the AO on account of sufficient cause. The order is non-speaking in this matter and does not mention the clause(s) of Rule 46A, under which the evidence has been admitted. After admitting evidence, the ld. CIT(A) did not grant any further opportunity to the AO to rebut the evidences filed by the as....
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....osite view that the deficiencies pointed out are minor and the Bench may go ahead with the decision even at the pain of ignoring additional evidence. 4. We have considered the facts of the case and submissions made before us. The assessee had filed additional evidence vide letter dated 26.10.2009 It would be appropriate for us to reproduce the contents of this letter, which will also reveal the additional evidence filed by the assessee: A. 1. "That before sanction of building plans by MCD, the Company had to obtain NOC from Airport Authority of India, Certificate for AMSL Height from Survey of India, NOC from Delhi Fire Services, NOC from Area Tehsildar that the said land is free from acquisition/notification etc. & NOC from the State statutory authority which were/could be obtained during A.Y. 2006-07 (A.Y. 2007-08) as per copies enclosed from page no. 03 to 24. 2. That, the Company had applied for sanction of Building Plans for the construction of motel on the land land vide Khasra No. 30/18, 30/19/1, 30/23, 30/14/2, 30/19/2, & 30/20 of village Kapashera, Delhi on its own account on 28/10/2005 much before an understanding was reached with M/s A.B. Towers Ltd. for its sal....
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.... deal with the issues in detail, where about 25 pages were devoted only to reproduction of assessment order, grounds of appeal, remand report etc. Issues on merit have been decided in two pages without disclosing properly the process of reasoning. However, it is also a fact that bare essential ingredients for coming to the conclusion have been mentioned in this part of the order. In regard to the excess income, no fact has been narrated, but the matter has been restored to the file of the AO for verification and for giving effect to the rectification in the figure of capital gain. The question is whether the order is illegal and perverse, and if so, should the matter be restored to the file of the ld. CIT(A) for fresh adjudication? 4.2 We may at this stage discuss various cases relied upon by the ld. CIT, DR. In the case of Mrs. Jyotsna Suri v. Dy. CIT, [1997] 61 ITD 139 (Delhi), paragraph no. 9.7 of the decision will be relevant for our purpose, in which it is mentioned that the discretion is to be exercised to advance substantial justice only, when no negligence, inaction or want of bona fide is imputable to the assessee. This paragraph is reproduced overleaf:- "9.7. This a....
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....he revenue to raise a new contention that assessment of the amount would be justified u/s 2(6C)(iii) of the 1922 Act. The Tribunal came to the conclusion that shares of the value of Rs. 60,000/- were acquired without paying any consideration, which is a benefit received by him as a director from the employer-company, therefore, the same is assessable as income. Before the Hon'ble Bombay High Court, it was argued that the shares were allotted on an agreement not to carry out competitive business. The benefit was not received from the employer-company but on account of arrangement between promoters of the company. The Hon'ble court held that the Tribunal was justified in allowing the revenue to raise the contention that the amount is taxable under the aforesaid provision. Further, reliance has been placed on the decision in the case of CIT v. Edward Keventer (Successors) (P.) Ltd., [1980] 123 ITR 200 (Delhi). It has been held that in a case where the appeal involves inter-connected grounds having impact on one another, the matter should be considered in a broad perspective. It is true that the appellant should not be made to suffer on account of failure of respondent to file the appe....
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....ls was permitted in rural zones/green belts, commercial zones, national highways and inter-state roads. Thus, it becomes clear that such conversion of land user was bound to be granted to the assessee; and (ii) the buyer deposited land conversion charges of Rs. 34,93,500/- on 04.08.2006 to the credit of MCD, who had sanctioned the motel plan on 11.08.2006. (The ld. counsel has disputed the finding that the buyer deposited the land conversion charges with MCD. It is stated that the factual position is that the assessee deposited such charges with the MCD). The AO also considered Accounting Standards 7 and 9 issued by the Institute of Chartered Accountants of India. It is mentioned that in case of real estate sales, all significant risks and rewards of ownership are normally considered to be transferred when legal title passes to the buyer (For example, at the time of registration with the relevant authorities of the real estate in the name of buyer) or when the seller enter into an agreement for sale and gives possession of real estate to the buyer under the agreement. All significant risks and rewards of ownership are also considered to be transferred, if the seller has entered int....
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....axable in this year. 5.3 In reply, the ld. counsel submits that no document has been written in regard to this transaction in this year. The only document written and executed is the sale deed. In this year, there was only an oral understanding between the buyer and seller and a sum of Rs. 5.00 crore was received as advance. The sale deed was admittedly registered in the next year. Possession has not been given in this year. All actions regarding change of use, payments etc. have been taken by the assessee and not the buyer. It is further submitted that in case of sale of an immovable property, the income accrues when sale deed is registered. However, in view of the provision contained in section 53A of the Transfer of Property Act, read with section 2(47)(v) of the Income-tax Act, the transfer can also take place in case where a written document for agreement to sell is executed and the possession is given to the buyer or if he is in possession already, such possession is allowed to be retained. No agreement for sale has been signed in this year. Possession has also not been handed over to the buyer in this year. Therefore, no income accrues merely on account of receipt of the ....
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....competent to consider the position of the assessee in 1943. However, the fact that in the year 1943 the assessee was treated as investor does not stop the assessing officer for considering as to when the trading activities in shares started. In the matter of taxation, there is no question of application of the principle of res-judicata. The finding given in one year cannot bind the revenue in another year. 6.2 In order to show that the profit accrues on the date of transaction, reliance has been placed on the decision in the case of Keshav Mills Ltd. v. CIT, [1953] 23 ITR 230 (SC). It has been held that under mercantile system of accounting profits and gains accrue or arise on the date of the transaction notwithstanding the fact that they are not received on that date. In the case of Sutlej Cotton Mills Ltd. v. CIT, [1979] 116 ITR 1 (SC). At page 5, it is mentioned that it is now well settled that the way in which entries are made by an assessee in its books of account is not determinative of question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries, which are not inconformity with proper accountancy principles, conceal profit ....
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....ny other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation: For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;" 6.5 We may also refer to the provision contained in section 53-A of the Transfer of Property Act, 1882, which reads as under:- "53A. Part performance- Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been com....
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....e deed or an agreement in writing followed by handing over the possession. Of various cases relied upon by the ld. CIT, DR, we find that the one in the case of M. Syama Rao (supra) needs discussion. In this case, a written agreement was executed on 01.05.1962. The possession was delivered on this date and the sale consideration was also paid. This document was registered on 08.06.1979. Looking to the facts, it is clear that the transfer took place on 01.05.1962 when the agreement was signed and the possession was handed over. The capital gains and the question whether it was short-term or long-term was to be decided with reference to the date of transfer, being 01.05.1962. The Court held that registration of the document on 08.06.1979 relates back to 01.05.1962. The facts of this case are clearly distinguishable. No agreement has been signed in this year. The possession has also not been delivered in this year. The twin conditions of execution of written agreement and handing over of the possession have to be cumulatively satisfied in order to bring the case within the ambit of section 2(47)(v) read with section 53A of the Transfer of Property Act. None of these conditions are sati....
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....come under either of the two heads of income. The main plank of his finding is that the assessee had shown the asset as fixed asset since assessment year 1995-96 and it has not been converted into stock-in-trade. He had also referred to the proceedings of assessment year 2005-06 in which income on sale of land was shown and taxed as capital gains. It is submitted that the principle of res-judicata does not apply to income-tax proceedings. For this purpose, reliance is placed on the decision in the case of New Jehangir Vakil Mills Co. Ltd. (supra). It is further submitted that entries in the books of account are not conclusive for the purpose of taxation. For this purpose, reliance is placed on the decision in the case of Sutlej Cotton Mills Ltd. (supra). 7.3 In order to support the assessment order that the income should have been rightly taxed as business income, reliance has been placed on the decision in the case of G. Venkataswamy Naidu & Co. v. CIT, [1959] 35 ITR 594 (SC). Some other cases were also relied upon, which shall be discussed along with this case at appropriate place (infra). Therefore, it is argued that not only the impugned order is incorrect on the facts of th....
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....lusion that the amount was not assessable as it cannot be held to be the profit resulting from the profit-making scheme. The Tribunal agreed with the view of the ITO that the amount was not a capital accretion but a gain made in an adventure in the nature of business. It was held that the purchase had been made solely with a view to sell the land at a profit to Janardana Mills Ltd. The Hon'ble Madras High Court upheld the decision of the Tribunal. The question referred to it was -"whether there was material for the assessment of sum of Rs. 43,887/- being the difference between the purchase and sale price of the land as income from an adventure in the nature of trade?" The matter thereafter traveled to the apex court. It considered a number of decisions in the matter. The Hon'ble Court mentioned that the relevant facts are that the property which was purchased and sold is land and generally such property is subject matter of investment. However, the assessee is a firm and it is not part of its ordinary business to make investment in land. Besides, when the first purchase was made it was difficult to treat it as investment because it was a very small piece of land and it could yield ....
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....ings, furniture, railway sidings etc. for Rs. 26,48,215/-. The undisputed fact is that excess realizations in respect of these two transactions are Rs. 2,26,484- and Rs. 10,46,834/-. The surplus realized on stores was admitted to be an adventure in the nature of trade. However, with regard to the factory it was argued that it was an investment and not an adventure in the nature of trade. This contention was rejected by the ITO, AAC and the Appellate Tribunal. The view taken by the Tribunal was that the assessee executed a well calculated scheme of earning profit and, therefore, the transactions constituted an adventure in the nature of trade. The question posed before the High Court was-whether, the purchase of site and buildings known as brengun factory was in the course of a profit making scheme or an adventure in the nature of trade? The High Court answered the question against the assessee. Thus, the matter reached to the apex court. After examining various cases, the Hon'ble Court mentioned that it is not possible to evolve any legal test or formula which can be applied to all cases in determining whether a transaction is an adventure in the nature of trade or not. The facts o....
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....revenue, it can be said that the facts of the case of G. Venkataswamy Naidu & Co's case (supra). are distinguishable. In this case, the assessee had an intimate business relationship with Janaradana Mills Ltd. and prime objective was to purchase lands with a view to sell them to the mills. The facts of the case of Khan Bahadur Alladin Ahmed & Sons (supra) are also distinguishable because this case involved purchase of properties which were going cheap on account of end of the war, and the transaction was undertaken with a view to sell them at profit later on. It may also be mentioned that the ld. CIT(A) has given a finding that the land was used by the assessee for agricultural purposes before its sale. Therefore, it cannot be said that right from inception the intention was to sell the land. In the case of Smt. Indramani Bai (supra), the conduct of the assessee of carving four plots out of the land and selling them individually leads to a clear inference that the intention was to develop the land and sell the same. There is no intention of development of the land in this case. In the case of Hema chand Hira chand Shah (supra), the lands were sold soon after purchase ostensibly bec....