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2013 (11) TMI 375
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.... at the residential premises as well as the business premises of the assessee on 21-09-2006. In response to notice us/.153A the assessee filed the return of income. During the course of assessment proceedings the Assessing Officer noted that in the scrutiny assessment for A.Y. 2006-07 in the case of M/s. Nancy Icon Builders and Developers situated at Bharati Vidyapeeth, Pune-Satara Road, Katraj, the following points have been observed : i. The above person is a joint venture commenced into existence on 03-02- 2006. It is a joint venture between Mr. Ali Akbar Jafari, residing at Bungalow No. 8, Napier Road, Pune -411001 i.e. the assessee, and M/s. Nikita Builders and Developers having its office at Kale Palace, Ground Floor, Block No. A-25, Room No. 145/146, Madhuban Hotel Road, Ulhasnagar-421 001. ii. The copy of the joint venture shows that Mr. Ali Akbar Jafari was having development rights of the land bearing S. No. 8, Hissa No. 1+2/1 to 65 totally admeasuring 6 Hectares, 15 R i.e. 60630.59 sq. mtrs. At Village Katraj within the limits of the PMC. Mr. Ali Akbar Jafari has agreed to bring in the rights....
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.... all a capital asset. 4. However, the Assessing Officer was not convinced with the explanation given by the assessee. He noted that section 50C being specific provision overrides the provisions of section 45(3) and section 48 with regard to the definition of full value of consideration. He referred to the sequence of provisions of section 45, 48 and 50 and observed that a plain interpretation of the above provisions show that when a person transfers a capital asset to a firm/AOP/BOI, then capital gain will arise and the full value of consideration received or accrued shall be the value recorded in the books of a firm or that adopted by stamp valuation authorities whichever is higher. He therefore was of the opinion that the value adopted or assessed by the authority of State Government for the purpose of payment of stamp duty has to be taken for computation of capital gain arising to the assessee. He observed that the full value of the consideration in this case comes at Rs.56,67,000. He further observed that there is no clear cut bifurcation in the balance sheet of the assessee as to which are the capital assets and which are the stock in trade. Further, according to the AO eve....
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....Rs.5,59,000 6. It was submitted that the Assessing Officer at Page 14 of the order has mentioned that the assessee was having development rights in the said land. However, while finalising the assessment he substituted the market value of the property for the purpose of stamp duty at Rs.56,67,000/- by invoking the provisions of section 50C which was subsequently rectified to Rs.5,66,70,000/-. It was submitted that provisions of section 45(3) can be invoked only if a capital asset is transferred by the assessee to the firm in which he has become a partner by way of capital contribution. However, the assessee in the instant case has held the development rights and had shown the same as stock in trade and had reflected the same under the head "current assets. Therefore, the development right in the property in the instant case cannot be a capital asset so as to attract the provisions of section 45(5). 7. Referring to provisions of section 2(14) it was submitted that capital asset means property of any kind held by an assessee whether or not connected with his business/profession but does not include any stock in trade, consumable stores or raw materials held for the pu....
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....rade shown in the balance sheet under the head 'Current Assets' which has been specifically excluded from the definition of 'Capital Asset1 given u/s.2(14) and therefore, according to the appellant, the sale transaction cannot be charged to tax u/s.45 r.w.s. 48. The AO on the other hand has discussed the above argument of the appellant in the assessment order and has stated "there is no clear-cut bifurcation in the balance sheet of the assessee as to which are capital assets and which are the stock-in-trade. Even if there was any bifurcation, it cannot be sacrosanct and every transaction has to be seen individually. The fact that the assessee has introduced his rights in the said land as capital asset itself exposes the hollowness of assessee's claim that it was stock-in-trade and not the capital asset. Therefore, assessee's contention in this regard is not acceptable." The appellant in this regard has submitted the copy of the audited balance sheet during appeal to show that the investment in development rights in land was shown as stock-in-trade under the heading 'Current Assets'. On examination of the same, it is noted that the above land is appearing in the balance-sheet under ....
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....in law, the learned CIT(A) has erred in not appreciating the fact that in the balance sheet annexed to the return of income, there is no clear cut bifurcation as to which are capital assets and which are the stock-in-trades. 4. In facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that Even if, there was any such bifurcation, it cannot be sacrosanct and every transfer has to be seen individually. 5. In facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the assessee has introduced his rights in the said land as capital asset itself exposes the hollowness of assessee's claim that it was stock-in-trade and not the capital asset. 6. In facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the Section 50C being specific provision overrides the provisions of Section 45(3) and Section 48 with regard to the definition of full value of consideration. 7. The appellant craves its right to add or alter the ground of appeal at any time before or during the course....
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....onsideration for the development rights of the properties through 4 different agreements. Thus, the total consideration so paid is Rs. 16,25,000/-. Referring to the balance sheet as on 31-03-2005 (a copy of which is placed at PB 102) he submitted that the assessee under the head "current assets" had shown the amount of Rs.16,25,000/-. Referring to provisions of section 50C he submitted that it comes to picture only when an assessee transfers a capital asset. However, in the instant case, the assessee has transferred the current assets/stock in trade. Since the assessee is engaged in real estate business, therefore, the land so purchased cannot be a capital asset and it has to be held as "current asset". Referring to Page 102 of the Paper Book he drew the attention of the Bench to the balance sheet as on 31-03-2005 and submitted that there is clear bifurcation of fixed assets & current assets and the amount so paid has been shown under the head "current assets". He submitted that if the land so held by the assessee is treated as capital asset the assessee would have paid wealth tax. Referring to the Pages 111 to 114 of the Paper Book the Ld. Counsel for the assessee drew the attenti....
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....the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee is engaged in the business of builders and promoters and manufacturing, trading of bakery and confectionary products and running franchise. There is also no dispute to the fact that the assessee has entered into 4 development agreements for development of the property at Katraj and for that purpose has paid an amount of Rs.16,25,000/- which was shown in the balance sheet under the head "current assets". There is also no dispute to the fact that the assessee has entered into a joint venture agreement with Nikita Builders and Developers, a partnership firm and has transferred the development rights to the said joint venture as his capital contribution and valued the same at Rs.25 lakhs. After deducting the cost of acquisition of land and development rights the assessee has declared profit of Rs.5,59,000/- as his business income. It the case of the revenue that since there is no clear cut bifurcation in the balance sheet as to which are capital assets and which are stock in trade, there....
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....or applicability of section 50C one of the essential requirements is that an asset should be capital asset. 13. From the ratio of the various judicial pronouncements referred to above, it can be culled out that whether sale of land is sale of capital asset or stock in trade is essentially a question of fact. There is no rule of thumb to address the said issue. Several principles have been evolved in the judicial decisions, but although are more in the nature of guidelines. The question has to be answered in each case having regard to the circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them in a process of evolution. The inference has to be drawn on a cumulative consideration. 14. Coming to the facts of the present case, the assessee is a builder. Construction of buildings is its business. The assessee has sold number of buildings referred to above, with regard to which there is no dispute. The dispute is with regard to the sale of plots. Investment in purchase and sale of plots by a builder who is indulged in selling buildings is ancill....
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....income, exempt under the Act, not involved in the case in hands. In this appeal the Court is required to address the: issue as to whether the sale transaction of land on the facts of the present case is capital receipt or revenue receipt. Therefore, the relied upon cases by the learned counsel for the department are distinguishable on facts and law as well. These decisions do not help the department any further. 16. The Commissioner of Income tax (Appeals) and the Tribunal on analysis of the facts of the case have reached to the conclusion that section 50C has no application as it was a case of transfer of plots which was stock in trade. An income earned from such Transaction is liable to be taxed as income from business activity. Alternatively, the finding recorded by the Tribunal which is last fact finding court, in this regard is essentially a finding of fact or at the most is a mixed question of fact, but if is not a substantial question of law to warrant the interference under section 260A of the Income Tax Act. 17. The view taken by the Tribunal is on terra-firma. The inference drawn by the Tribunal is based on relevant consideration. ....
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....s the proprietary project of the assessee. The amount of Rs.1,71,50,000 includes Rs.1.20 Crores of voluntary declaration on account of unexplained cash, Rs.2 lakhs seized from the office premises of the assessee and voluntary disclosure of Rs.49,50,000 as unaccounted investment in Icon Towers. The assessee arrived at the net profit of Rs.1,40,20,504 in Icon Towers. The assessee has set off carry forward losses of earlier years against the net profit shown in Icon Towers. Since the carried forward business losses were more than the net profit, the assessee computed his tax liability at NIL. The Assessing Officer, therefore, asked the assessee to explain as to why the amount of Rs.1,22,36,500 should not be treated as "income from other sources". The assessee in his submissions reproduced the statement recorded on 22-09-2006 and stated that on the basis of the said statement he had declared the additional income as "business income" for the A.Y. 2007-08. It was contended that the assessee by saying in his statement recorded on 22-09-06 that "This is not my business cash" he meant that it was not cash as per his business books of accounts. It was further submitted that out of Rs.1.20 c....
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....made before the Assessing Officer. Relying on the statement recorded from the assessee during the course of search u/s.132(4) and during the course of assessment proceedings u/s.131 and relying on various decisions it was submitted that the additional income declared by the assessee should be treated as "business income" and not "income from other sources". 21. Based on the arguments advanced by the assessee and relying on the decision of the Hon'ble Supreme Court in the case of Nalinikant Ambalal Mody Vs. Narayan Row reported in 61 ITR 428 the learned CIT(A) held that the money found during the course of search and declared by the assessee for the impugned year has to be assessed under the head "business and profession" and not under the head "Other sources". While doing so, he further noted that the Assessing Officer in the assessment order has analysed the cash found and seized on the basis of declaration made by the assessee to say that out of the total of approximately Rs.1.2 crores, Rs.40 lakhs admittedly has come for organising a land deal belonging to a firm in which the assessee is a partner with third party and therefore according to the AO the receipt of Rs. 40 lakhs ....
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.... circumstances of the case and in law, the learned CIT(A) has erred in treating the income of Rs.1,22,36,500- as income from 'Business and Professions' as against the 'Income from other Sources' held by the A.O. 2. In facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that while answering to Question No. 36, the assessee has clearly mentioned that the cash found was not his business cash. 3. In facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the assessee received cash of Rs.20 Lakh each from Sujay Builders, Pune and Mahanagar Housing which is in the nature of a sort of premium. 4. In facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the assessee has not discharged his liability in proving the source of remaining cash of Rs. 80 Lakhs. 5. The appellant craves its right to add or alter the ground of appeal at any time before or during the course of hearing of the case." 24. The learned Departmental Representative heavily relied on the order of....
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.... Officer accepts Rs.49 lakhs as business income without any corroborative evidence. However, for the amount of Rs. 1.20 Crores the Assessing Officer is of the opinion that the same is not business income which is not correct. Referring to the decision of the Pune Bench of the Tribunal in the case of Chander Mohan Mehta Vs. ACIT reported in 71 ITD 254 he submitted that statement recorded during the course of search has to be considered as a whole and revenue could not be permitted to use that part of the statement which was beneficial to it and reject other part of statement which was detrimental to the assessee. 26. Referring to various decisions he submitted that admission to be binding must be taken as a whole. The admissions must be clear if they are to be used against a person making them. There should be no doubt or ambiguity about the alleged admission. He accordingly submitted that the order of the CIT(A) be upheld. 27. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute that during....
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....is not my business cash. 31. We find the taxability of Rs.1,22,36,500/- is not in dispute. The dispute is only regarding to the head under which it has to be taxed. It is the case of the revenue that the same should be taxed as "income from other sources" since the assessee in Question No.36 has stated that the cash of Rs.1.20 crores is not his business cash. It is the case of the assessee that he had categorically stated in his reply to various other questions that an amount of Rs. 1.20 crores which has been offered as additional income is his business income. 32. We find the assessee in his reply to Question Nos.15, 16, 21, 25, 27, 28, 30, 31, 32 has replied as under : "Q.No.15 During the search action u/s.132 of the I.T. Act at your residence, cash of Rs.1.20 crore was found in the cupboard of the room, which is adjacent to the hall. Please explain the source of it and the cash belongs to whom? Ans. This cash of Rs.1.20 crore belongs to me. This is my income from business. Q.No.16 Please state whether this cash of Rs.1.20 crore has entered in your books of accounts of any business concern". Also this cash is in the denominati....
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....ave to see my books of accounts I do not remember right now." 33. From the above, we find that out of the amount of Rs.1.20 crores the assessee has already explained an amount of Rs.40 lakhs being the amount through land dealings which is unaccounted for. Therefore, the dispute is for the remaining Rs.80 lakhs. We find the assessee in his reply to Question No.15,16,21,27,28,30,31 and 32 had categorically stated that the additional income is from his business in land dealings etc. We, therefore, find merit in the finding given by the Ld. CIT(A) that the Assessing Officer has not acted correctly as per law. The assessee in his statement during the search as well as assessment proceedings has categorically stated all through that the money found related to his unaccounted business income. Out of the above, he could explain the exact transaction which resulted into collection of Rs.40 lakhs as brokerage for the land deals organised by him and for the remaining amount he stated that the money has been collected over a period of time and the exact transactions cannot be identified. However, he has accepted the cash found as his additional unaccounted income and the above fact has also....