TaxTMI 
TaxTMI 
2016 (8) TMI 1038
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....y for his assessment for the year and after due consideration the then assessing officer, had passed the order u/s 143(3) of the Act dated 30.12.2010. (ii) the predecessor assessing officer had in the original assessment proceedings issued a letter dt 30.12.2010 seeking clarification regarding sale of the agricultural land and after considering the appellant's reply dt 612.2010 did not deem it fit to bring any capital gains to charge and (iii) that the reopening of the assessments clearly based on a change of opinion impermissible under law and the reassessment order passed is per se invalid. 3.1 In the Assessment Order at page number 1 and 2 the Assessing Officer gave the following reasons for reopening the assessment: "It was learnt that the assessee had along with Shri Nishank Sakaria (vendor 4), Shri T Anoop Bora and Shri Pallavarajha (jointly called as the vendor No 1), Shri V Rarna Naidu, (vendor No 2) and Shri Raju,(vendor No 3) had jointly sold 30 Acres and 93 cents of land to V. G. Panneerdas & Co (P) Ltd a company registered under the companies Act 1961, who is a property developer, vide document No 3136/07 having 12 pages registered with Sub- registrar of Assurance....
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....at he along with Shri Nishank Sakaria Shri T Anoop Bora and Shri Pallavarajha purchased lands from various persons and aggregated such lands purchased and then jointly sold them to M/S V.G. Panneerdas & Co (P) Ltd. 3.3 On verifying the reasons mentioned above, the AO concluded that the income chargeable to tax has escaped assessment and that reopening was done as per section 147 of the IT Act. Aggrieved with the order of AO, the assessee carried the appeal before the Ld.CIT(A). 3.4. On appeal, the Ld.CIT(A) observed that the income chargeable to tax has escaped assessment within the meaning of the section 147 of the Act and CIT(A) confirmed the order of the ld. Assessing Officer on this issue. Against this, the assessee is in appeal before us. 4. ld.A.R reiterated the submissions what he made before the lower authorities. 5. On the other hand, ld.D.R relied on the orders of lower authorities. 6. After hearing both the parties and going through the order passed by the lower authorities, we do not find any ground to interfere with the findings of the CIT(A) on the following reasons. The reassessment proceedings have rightly been initiated after forming opinion that som....
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....the lands thus purchased and sold those aggregated land to M/s.VG Paneerdas and Co. P Ltd. who is a land developer. The letter of settlement dt.30.05.2007 confirming the payment of Rs. 10,74,81,750/- was issued by M/s.VG Pannerdas and Co. P Ltd towards the arrears payable to the assessee, Shri Nishank Sakaria, Shri Anoop T.Bora and Shri Palavarajah prove that the transaction is only between the real estate company and the above mentioned four persons only and no other persons were paid any part of the sale consideration. Accordingly, the lower authorities treated the income from sale of land as income from business. Against this, the assessee is in appeal before us. 9. We have carefully considered the rival submissions and perused the record. It is well-known that the expression "adventure in the nature of trade" has not been defined in the Act and it is rather an impossible task to give exact and precise meaning and therefore the apex Court in the case of G. Venkataswami Naidu & Co. (35 ITR 594(SC)) considered the question as a mixed question of law and fact, and broadly laid down the principles with a caution that it is not a matter of merely counting the number of facts and c....
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....partake of the character of an adventure in the nature of trade. This statement may be true; but in its application due regard must be shown to the requirement that the single plunge must be in the waters of trade. In other words, at least some of the essential features of trade must be present in the isolated or single transaction. On the other hand, it is sometimes said that the appearance of one swallow does not make a summer. This may be true if, in the metaphor, summer represents trade; but it may not be true if summer represents an adventure in the nature of trade because, when the section refers to an adventure in the nature of trade it is obviously referring to transactions which individually cannot themselves be described as trade or business but are essentially of such a similar character that they are treated as in the nature of trade. It was faintly argued for the appellant that it would be difficult to regard a single or an isolated transaction as one in the nature of trade because income resulting from it would inevitably lack the characteristics attributed to it by Sir George Lowndes in CIT vs. Shaw Wallace & Company (1932) 59 IA 206 : 'Income, their Lordships th....
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....or determining the character of the transaction. What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold ? If the commodity purchased is generally the subject-matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resaleable ? What were the incidents associated with the purchase and resale ? Were they similar to the operations usually associated with trade or business? Are the transactions of purchase and sale repeated? In regard to the purchase of the commodity and its subsequent possession by the purchaser, does the element of pride of possession come into the picture ? A person may purchase a piece of art, hold it for some time and if a profitable offer is received may sell it. During the time that the purchaser had its possession he may be able to claim pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a factor against the contention that the tr....
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....e to elucidate what that background was. The fact that soon after the purchase, the assessees carved out the land into plots and sold them within a few months, coupled with the other circumstances of the case, is consistent more with the theory of adventure in the nature of trade than with the other theory accepted by the Tribunal." 10.3 In the case of M. Krishna Rao (120 ITR101 (A.P.) ), the assessee purchased Acs. 16 and 14 Guntas of land along with another person and three years later he purchased the share of other owner and thereafter obtained permission to convert the land into building sites and sold the same. The jurisdictional High Court while coming to the conclusion that it was an adventure in the nature of trade, took note of the decision of the apex Court in the case of Raja J. Rameshwar Rao vs. CIT (1961) 42 ITR 179(SC), wherein it was held that whether the assessee intended to deal in real property or not has to be judged not from the fact that there was a time lag between the first transaction and second transaction, but from the fact whether he sought to convert the land which was originally agricultural land into building sites. Since the assessee had not sold ....
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....urchase of a commodity in improving or converting it so as to make it more readily resalable is a relevant factor in determining the character of the transaction, so would his conduct prior to the purchase be relevant if it shows a design and a purpose. As and when plots adjoining the mills were available for sale, the appellant carried out his plan and consolidated his holding of the said plots. The appellant is the managing agent of the Janardana Mills and probably it was first thought that purchasing the plots in its own name and selling them to the mills may invite criticism and so the first purchase was made by the appellant in the name of its Benamidar, V.G. Raja. Apparently, the appellant changed its mind and took the subsequent sale deeds in its own name. The conduct of the appellant in regard to these plots subsequent to their purchase clearly shows that it was not interested in obtaining any return from them. No doubt, the appellant sought to explain its purpose on the ground that it wanted to build tenements for the employees of the mills; but it had taken no steps in that behalf for the whole of the period during which the plots remained in its possession. Besides, it w....