TaxTMI 
TaxTMI 
2016 (5) TMI 534
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.... (in short "the Act"). 3. In this appeal, the assessee has raised multiple Grounds of Appeal as under :- "1. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in holding that the Income Tax Officer, Ward-1(3), Nashik was having valid jurisdiction over the case of the appellant at the time of issue of Notice u/s 148 of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case, the Assessment Order so passed please be quashed being without jurisdiction. 3. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in holding that the agricultural land in question was purchased by the appellant in December, 1993. 4. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in holding that the consideration of Rs. 13,96,000/- for the purchase of agricultural land in question was paid during the year under review. 5. On the basis of facts and in the circumstances of the case, whether the Commissioner....
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....ltural land in question is governed by the provision of section 69 of the I.T. Act, 1961. 14. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in assessing the investment in the agricultural land in question in the hands of AOP when the same investment was also taxed in the hands of respective co-owners in their individual capacity on protective basis but at later date. 15. Whether on the basis of facts and in the circumstances of the case, the charging of interest under section 234A & 234B is justified. 16. On the basis of facts and in the circumstances of the case, the cost of the appeal please be granted to the appellant. 17. The assessee craves for addition to, deletion, alteration, modification or change any of the grounds above mentioned." 4. The relevant facts, in brief, are that the appellant herein has been assessed by the Assessing Officer in the status of 'Association of Persons' (AOP) comprising of 16 persons of Khatib family as the members of AOP. In the course of survey action conducted under section 133A of the Act on 03.08.2000 in the case of one....
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....AOP had purchased parcel of land for Rs. 15,06,000/- in the period relevant to assessment year 1993-94. It was also observed that no specific share of respective members was found to be mentioned in the purchase deed dated 19.03.1993. The land has been sold in the immediate future as part of business deal. Therefore, the Assessing Officer concluded that an investment of Rs. 15,06,000/- in the assessment year 1993-94 was made in the capacity of AOP and no taxes were paid by the AOP. No return of income was filed either. He accordingly issued notice under section 148 of the Act dated 27.09.2000 addressed to Shri C. M. Khatib (AOP) together with a list of 16 members annexed thereto. In response to aforesaid notice under section 148 of the Act, the assessee filed return of income on 01.01.2001 declaring total income at Rs. Nil and with remark that no joint business has been carried out by the members of so-called AOP and hence, the income is shown at Nil. The return was signed by Shri C. M. Khatib. 4.1 The Assessing Officer observed that in response to query regarding source of investment of Rs. 15,06,000/- for acquiring the impugned land, the assessee firstly objected to a status o....
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....sessee per se. The land was purchased with the intention to commercially exploit the same which is vindicated by subsequent agreement with the developer in short span of time for development of property. 5. The Assessing Officer further observed that assessee has not given any documentary evidence in rebuttal to show that land has been purchased in earlier years and not on 19.03.1993. Moreover, the assessee has also not given any proof in support of its claim that amount of Rs. 9,61,000/- was not paid during the year under consideration and if so, when was it actually paid. The Assessing Officer also did not find the explanation towards source of payment of Rs. 3,39,000/- to be satisfactory in the light of the fact that no agricultural income was generated from the land as claimed to be the source thereof. He accordingly concluded that the impugned investment of Rs. 15,06,000/- remains unexplained. Accordingly, this sum of Rs. 15,06,000/- was brought to tax as unexplained investment under section 69 of the Act as undisclosed income of the AOP relevant to assessment year 1993-94. 6. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the CIT(A....
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....sment year 1993-94 in respect of all pieces of land. The CIT(A) next observed that the impugned land was acquired and transferred in the name of the assessee in assessment year 1993-94 and the said AOP surrendered their rights in the land by effecting Power of Attorney dated 25.05.1995 and the possession was also given to the developer. Therefore, the land was handed over to the developer/ builder for the purposes of development in a very short span of time. Prior thereto also, the assessee was found to be engaged in negotiations with many other builders for the sale of land and therefore the intention of the assessee to acquire the land in immediate future can be easily inferred. The Assessing Officer was right in holding that the land was acquired in the nature of stockin- trade or a business asset. However, the CIT(A) after examining the facts, granted partial relief in quantum of unexplained investment computed by the Assessing Officer and replaced addition of Rs. 15,06,000/- by a sum of Rs. 13,96,000/- as per para 25 - 26 of its order on the ground that balance amount does not belong to the current year when the registered deed was executed. In the result, the CIT(A) upheld th....
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....eral opportunities in the past. In the totality of circumstances, we do not find any plausible basis for admission of additional ground. Accordingly, the request of the Assessee stands dismissed. 9. The Ld. Authorized Representative for the assessee next contended that the entire re-assessment proceedings is bad in law owing to the fact that notice under section 148 of the Act dated 27.09.2000 has been addressed to one of the alleged members Shri C. M. Khatib (AOP) only. The Assessing Officer was required in law to issue notice to all the members of the purported AOP in order to assume jurisdiction for making assessment pursuant thereto. This issue also requires to be addressed at the threshold. We find that notice under section 148 of the Act was issued together with the list of all the members as integral part of the impugned notice. Thus, as per the record, all the members were made party to the statutory proceedings. In this scenario, the presumption is against the assessee that all the members of the AOP were not informed of the proceedings. Notably, none of the member of the assessee AOP has taken any objection in the regard in the course of the assessment proceedings. Thi....
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....made to 7/12 extracts as appearing at page 172 - 173 wherein name of all the 16 family members have been incorporated in the revenue records along with original owners who transferred the land in favour of the family members. The Ld. Authorized Representative for the assessee contended that this duplicate copy of 7/12 extracts dated 20.06.1995 would show that Khatib family was the rightful owner of the land. 9.2 The Ld. Authorized Representative for the assessee for the assessee thereafter contended with vehemence that shares of all the family members in the impugned land is clearly identifiable and specific in view of the affidavit executed in the month of March, 2002 filed by the family members. Therefore, the land so purchased was merely 'co-owned' by family members with respective specific shares with a view to cultivate the same for agricultural purposes and therefore the Assessing Officer was not correct in attributing the impugned transactions in the hands of the AOP. The share of co-ownership in land is assessable in the hands of the respective members in their individual capacity. 9.3 He next contended that the CIT(A) was not justified in holding the said investment ....
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....t has no definition , the meaning of Association of Person has to be understood from the meaning assigned to the term by Hon'ble Supreme Court which observed in the case of CIT v Indira Balkrishna (39 ITR 546) that an 'association of persons', must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section, which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains. 12.2 The Andhra Pradesh High Court, in the case of Deccan Wine and General Stores vs. CIT (106 ITR 111), laid down the principles governing an AOP by stating that it is clear that an association of persons does not mean any and every combination of persons; it is only when they associate themselves in income-producing activity that they become an association of persons. They must combine to engage in such an activity; the engagement must be pursuant to the combined will of the persons constituting the association; there must be a meeting of the minds, so to speak. In a nutshell, there must be a common design to produce income. If there is no common design, there is no association. Common interest is not ....
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....Rs. 15 lacs in the year 1993 were stated to be routed in 'cash' which is nondescript and without any trail. The amount of contribution of respective members, if any, is not known. Source of such cash payment for acquisition of land is found to be not ascertainable in the present case. Therefore, surrounding circumstances are required to be weighed. We notice from the orders of the authorities below that pursuant to survey under section 133A conducted in the premises of third party on 03.08.2000, certain undisclosed documents relating to sale of certain parcel of land between 16 persons of Khatib family and one M/s Pai Developers Pvt. Ltd. was found. As observed earlier, Khatib family has not declared the profit/loss arising from the transaction with M/s Pai Developers Pvt. Ltd. and no returns were filed either. We find that no specific share of individual members of the Khatib family is specified in the purchase agreement dated 19.03.1993. We also note that a case has been made out by the revenue that that the assessee was in contact with many builders for the development of the property immediately after acquisition of the land in March, 1993 for its resale. We also notice observa....
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....hout any substantive proof in this regard. The ownership did not pass to the members of the AOP till 1993-94 in respect of the pieces of land. The legal possession with Khatib family since F.Y. 1985-86 as claimed is without any corroborative value. As stated on behalf of the Assessee itself, the ownership of land itself was in legal dispute and not transferable. Except for some generic averments, no cogent evidence of payment towards purchase purportedly made in cash in earlier years is on record. Simultaneously, the averments made by the Advocate, Shri J.D. Jaybhawe in survey proceedings affirms that the assessee was making conscious efforts to negotiate sale of land with various builders during the immediate next year period in 1995-96 i.e. immediately after it got ownership of major piece of land. The situs of the land is within the municipal limits of Nasik and an urban land at the time of its sale. Therefore, it is clear in the prevailing circumstances that all the members of the AOP had combined together to purchase land with a pre-conceived idea to commercially exploit the property and make profits by immediate sale thereof as a business adventure. In totality, the circumsta....
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....sideration, only part of it was sold by the appellant/assessee. He accordingly directed the Assessing Officer to adopt the sale price of Rs. 28,85,000/- on proportionate basis instead of Rs. 43,06,413/-. In the result, CIT(A) extended partial relief to the assessee. The relevant paras dealing with the facts and findings of the CIT(A) thereon on the aforesaid objection is reproduced hereunder :- "9. The claim of appellant was considered with reference to the documents made available by the A.O. and the appellant. The notings of piece of paper on the basis of which addition was made by the A.O. states as under:- "Pai Developers Pvt. Ltd." Survey No.49/3A, 49/3B & 50/3/2 Year Payments made Date Amount 95-96 Name i) Amir Khatib 540191 (Bom) 15-10-95 Rs.5,00,000/- ii) Amir Khatib 540192 (Bom) 15-10-95 Rs.5,00,000/- 96-97 Total Rs.33,06,413/- Rs.43,06,413/- i) Amir S. Khatib ii) Aniruddin S. Khatib 9.1 The learned authorized representative has objected to the adoption of a....
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....-96. It was argued that as the sale price of the land during the year under consideration was only Rs. 28,85,000/- it was incorrect on the part of the A.O. to adopt the sale price at Rs. 43,06,413/-. The claim of breakup of 3 members of the family is supported by the observations of the A.O. in para-6 of the assessment order where he has stated that 3 members did not make sale. The A.O. therefore, has deducted the 10% of the price of land stated to be attributable to 3 members. However, while doing so, he has ignored to reduce the area of land sold by the share belonging to those 3 members. It is apparent from the facts mentioned above that whole area the piece of land as purchased vide registered deed dt: 13-1-93 was not sold & therefore, it was not correct on the part of the A.O. to adopt the sale price at Rs. 43,06,413/- figured which appears to have been computed with reference to all the land under S.No.49/3A, 49/3B & 50/3/2. 12. From the copy of "Sammati Patra" made on 18-9-95 it was observed that after purchase of land vide registered deed dt: 13-3-93, there was a split in the AOP constituted by 16 members. As a result of a split, 13 members formed a group who sold ....
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....payment of Rs. 32 lakhs to Khatib family members. The details for which have already been submitted to the department and which appears in balance sheet also. Q.No.5 : Please clarify the exact identification mark of the area in which the constructed bunglow in the said land stated earlier answer ? Ans : As per our joint visit with Income-tax Inspector on the site on today we have shown specific area of survey No. 49/3A + 3B and survey 50/3/2 where the bunglows are constructed and handed over so also the vacant land of survey No. 42/1 and 2 wherein we could not carry out any business due to the technical defect in the title of the land. Show also to produce the proof of cultivation in the said land the adjoining area in the central of this survey No. where developments not yet started and the cultivation of grapes and vegitables going on which is in possession of other partners." The clarification as above by the purchaser clearly shows that the negotiated price of Rs. 43 lakhs was applicable for the whole piece of land indicated in survey No.49/3A, 49/3B & 50/3/2. However, during the year under consideration only part of it as discussed above, was sold by....
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....at Anandwali Area, Village Nashik bearing Survey No.42 which is also allegedly transferred to M/s Pai Developers Pvt. Ltd. as per Development Agreement dated Nil in the year 1997 at Nashik. The appellant AOP led by Mr. Chiraguddin Mohd. Khatib along with other 16 family members stated to have jointly purchased land from one Shri Vilas Rasiklal Shah by making two sale deeds. First sale deed was dated 07.06.1987 and another sale deed was executed on 28.09.1988 for an aggregate total area admeasuring around 7 H 12 Are. The Assessing Officer observed that total investment in the purchase of land by assessee AOP (Khatib family of 17 members) was about Rs. 10,60,000/-. The rights in the aforesaid land were surrendered by the assessee AOP by executing Power of Attorney dated 20.09.1997 and possession in favour of M/s Pai Developers Pvt. Ltd. for development of land. The execution of development agreement was for a total consideration which was fixed at Rs. 1,50,00,000/-. The possession of land was stated to be given by possession receipt dated 22.09.1997. The developer was required to pay Rs. 1.35 crore in cash/ cheque to the assessee AOP. The developer was also required to construct two ....