TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 185
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....vive 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 consideration (AY 2009-10) declaring a total income of Rs. 64,14,210/-. The AO completed the assessme....
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....ion 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 was not started the tenants have approached the Court of Law and the matter is now pending in the Court. Now Bangalore Party who....
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....ntial 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 business asset into capital asset and sold the same after three years. The AO rejected the said contentions of the assessee by observing that the assessee is coming out with new explanation with t....
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....sions 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 that the profit arising on sale of the Kadri Kamble land is assessable under the head Capital Gains by adopting the sale consideration as Rs. 3,21,00,000/-. The Ld CIT(A) also noticed that the AO has not given deduction towards cost of purchase of land amounting to Rs. 4,20,000/-, even though the same w....
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....dingly 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 business income. The assessee as well as the Ld CIT(A) has placed reliance on the statement given during the course of search. In our considered view, the statement given by the assessee u/s 132(4) of the Act and declaration/non-declaration of the land for wealth tax purposes are collateral facts and hence they cannot be considered as ....
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....le 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 of Ld CIT(A) in allowing deduction of cost of purchase of land. We notice that the first appellate authority has allowed indexed cost of acquisition, since he has held that the profit is assessable under the head Capital Gains. The indexation benefit will not be available to the assessee, since we have held that the land is a business asset ....
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....n 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 disallowance works out to 7,16,275/- (there is-an error to the extent of 13,500/- in their working sheet which has arisen in view of certain approximation and rounding offs which is ignored). Hence, out of the investment of Rs. 68,86,000/- since the appellant has accounted Rs. 61,83,225/-, the balance of Rs. 7,02,775/- was to be confirmed but in view of certain arithmetical e....