TaxTMI 
TaxTMI 
2020 (5) TMI 185
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....ssessee are either general or consequential. Hence only two issues survive in the appeal of the assessee. 3. The revenue is in appeal challenging the decision rendered by Ld CIT(A) on the following issues:- (a) Whether the Ld CIT(A) was justified in directing the AO to assess the profit arising on sale of Kadri Kamble property as Income from Capital gains as against the decision of the AO to assess the same as Income from Business. (b) Whether the Ld CIT(A) was justified in directing the AO to allow deduction u/s 54F of the Act. (c) Whether the Ld CIT(A) was justified in reducing the addition relating to unaccounted investment in the flats purchased in West Wind Project. All the issues urged by the revenue is interconnected with the issues urged by the assessee. 4. The facts relating to the above said additions are discussed in brief. The assessee is engaged in the business of property development. He is the proprietor of M/s Classic Promoters and Developers. The revenue carried out search and seizure operation u/s 132 of the Act on 13.02.2009 in the hands of the assessee. Subsequently, the assessee filed return of income for the year under co....
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....and? When was it acquired? When did you sell the land? Who is the buyer? And what is the total sale consideration received? Ans:- The land was purchased during the financial year 2005- 06. It consists of 42 cents. I do not remember the consideration paid to the vendors. However, the purchase of this property is reflected in my balance sheet. This property is now sold to one Mrs. A Latha, w/o K Ashoka residing at SB 242, Vijaya Enclave, Bilhakahalli, SRS Nagar, Bannerghatta Road, Bangalore-76 during December, 2008. The total agreed consideration was Rs. 3,55,00,000/-. I purchased the land from the land owners in the year 2006-07 with a understanding that I will settle the tenants demands. I entered into agreement with the tenants and offered them 8 flats out of the 24 flats that was proposed to be constructed in this land. I got the tenants vacated and they are living in rented premises. I am paying the rent for their residences now. In the meanwhile, I entered into agreement with the Bangalore Party for sale of the land. As per the agreement with the tenants, I was to complete the construction of the flat within a period of about 2 years. Since the construction wa....
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....hich is a business activity of the assessee. He also entered into an agreement with the sellers of land to allot/sell flats in the proposed residential condominium. (c) This activity is in the nature of adventure in the nature of trade. (d) The assessee has shown this property also along with other business assets under the head "investments" in the Balance Sheet. Other lands shown under this head is treated as business assets by the assessee. (e) The assessee has not filed any Wealth tax returns declaring the above said land as capital asset taxable under the Wealth tax Act. Even if the assessee files wealth tax return subsequently, its character as business asset will not change. (f) The assessee has sold another land located at Kodical during the AY 2007-08 and disclosed the profit arising therefrom as his business income. 11. The assessee submitted before the AO that he purchased the impugned land for business purposes only. Since there was change in licensing policy prescribed by the City Corporation, it came to know that the built-up area originally planned could not be constructed. Hence the assessee converted his busi....
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....cash 11,00,000 3,21,00,000 14. The Ld CIT(A) also took the view that the Kadri Kamble land should be considered as "Capital asset" in the hands of the assessee and hence the profit arising therefrom should be assessed as Capital gains. Based on the submissions made by the assessee before Ld CIT(A), the first appellate authority has given following reasoning in this regard:- (a) In the Balance Sheet, the assessee has shown both personal properties and business assets under the head "Investments". (b) The amount given to tenants towards compensation for rent for the alternative accommodation has not been claimed as expenditure, but the same has been capitalized. (c) In the statement taken u/s 132(4) of the Act, the assessee has stated that the capital gains shall be worked out and tax shall be paid. It shows that the intention of the assessee was to treat the land as capital asset, in view of the tenants' problem, licensing problem etc. (d) Since the assessee was collecting rent from tenants, the land has become income earning asset and hence the same was not shown under the Wealth tax Act. 15. Accordingly, the Ld CIT(A) held ....
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....ubmission of the assessee that there was change in licensing policy of the Municipal Corporation and hence there was reduction in the built-up area, which made the project unviable. Further there were problems with tenants also. Accordingly, it was stated that the assessee has converted the business asset into Capital asset and accordingly sold the same as Capital asset only. We notice that the assessee has not brought any material to substantiate the above said contentions. This property was purchased on 10-10-2005 and sold on 03- 12-2008. Thus the assessee has held the property for about 3 years and 2 months. The assessee has not explained as to when he has decided to convert the business asset into Capital asset. Without explaining the datewise sequence of events which persuaded the assessee to abandon the project, it would be difficult to appreciate and accept the explanations of the assessee. Further, upon abandoning of project, the land can also continue to be held as business asset and sold as business asset. We notice that the assessing officer has pointed out that the assessee has sold another land located at Kodical during the AY 2007-08 and disclosed the profit as his bu....
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....he letter written by the buyer of land Smt Latha to the assessing officer. A perusal of the said letter would also show that no credible explanation was given as to why the sale consideration was reduced from Rs. 3.55 crores to Rs. 1.07 crores. The letter only narrates the sequence of payments made. Hence, we are of the view that the sale consideration cannot be taken as Rs. 1.07 crores as contended by the assessee. 21. We notice that the Ld CIT(A) has given reduction of Rs. 45.00 lakhs from the sale consideration, since the buyer of the land Smt Latha, has confirmed that she has not honoured the cheques given for Rs. 45.00 lakhs. She has also given the reason as to why the said payments were not made, viz., difference in the size of plot, earmarking of four cents for road purposes, tenants problem etc. Hence we are of the view that the Ld CIT(A) was justified in giving reduction of Rs. 45.00 lakhs. Since there is no dispute that the assessee has taken cash of Rs. 11.00 lakhs, the ld CIT(A) has added the same. Accordingly, we are of the view that the Ld CIT(A) was justified in adopting the sale consideration as Rs. 3.21 crores. The parties are not also disputing the decision ....
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....of M/s Classic Promoters and Developers for the period from 01.04.2008 to 12.02.2009 which showed an investment of Rs. 61,83,225/-, the unexplained investment is to be computed with reference to this figure, as per the seized document quoted by the A.O. in page 33 which has been taken by him for computation at Rs. 68,86,000/-. Since the appellant has shown in their books a sum of Rs. 61,83,225/-, the difference works out to Rs. 7,02,775/-. Out of this sum, in the same seized material, it is shown that Rs. 3,29,415/- is paid and Rs. 3,86,860/- (total comes to Rs. 7,16,275/- being the difference between Rs. 68,66,500/- and Rs. 61,50,225/-) is outstanding. Neither the paid amount of Rs. 3,86,860/- is reflected in the accounts nor the balance outstanding of Rs. 3,29,415/-. Even, the balance sheet prepared as on 31.03.2009 has not incorporated the payment of the first sum and the liability of the balance. In view of the same, it is held that a sum of Rs. 3,86,860/- was paid outside the books and the liability of Rs. 3,29,415/- as on 12.02.2009 was discharged before 31.03.2009 but has not been taken into the books. Hence, these two amounts are confirmed and the total disallowanc....