2013 (4) TMI 950

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....Harni Sr.No.1327/2 6.4.93 1369 31.3.06 76650 73862 3 Harni 1228 12.10.99 313200 31.3.06 3158158 2758003 4 Sayajipura S. No. 118/119/121 9.7.99 163859 17.4.05 260000 50648 5 Makarpura S.No. 232, 233, 248, 391, 250 21.7.99 404478 31.3.06 2200337 1374980 6 Harni S.No.1280 1.7.92 6940 16.5.05 1334040 1318555   Total   898259   7500285 6030012 As per assessee's submission, the said land were sold to various members in small plots through partnership firms in which the assessee is a partner. The ld. A.O. gave the reasonable opportunity of being heard as to why the income arising out of sale of land should not be treated as business income. The assessee filed reply vide letter dated 16.12.2008 before the A.O., which was considered by the ld. A.O. After considering the assessee's reply, the ld. A.O. observed as under: (A) These lands were purchased by in the years 1992-93, 199394 and 1999-98.   (B) All these lands were agricultural lands.   (C) Development agreement was entered into with M/s. Sai Developers and with S....

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....s returns. (I) The assessee has placed reliance on the decision of the Bombay High Court in the case of Commissioner Of IncomeTax Vs Dhable, Bobde Parose, Kale, Lute And Choudhari (202 ITR 98). Here the facts of the case with that of case cited by the assessee are easily distinguishable. In the case cited supra, the transaction was an isolated transaction of purchase and sale of agricultural land by the assessee. While, here, the assessee is actively engaged in the purchase of land and this is not an isolated instance. Moreover, assessee in its balance sheet has shown "Advances received against land". This shows the magnitude of the trading in land. It is well settled law that if the commodity purchased is generally the subject Inaner 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. (J) Assessee' other contention that it is not holding land as stock-in-trade and has shown the same as fixed assets does not have any force. The consistent methods followed by the assessee have nothing to do with the chargeability of the correct income. Moreover, Income-tax....

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.... these lands are converted to NA land and these are sold to book profits. 4.3.1. In the case of G. Venkataswami Naidu & Co. Vs. CIT 35 ITR 594 (SC), it was held that when the Income-tax Act refers to an adventure in the nature of trade, it clearly suggests that the transaction in question cannot properly be regarded as trade or business. Instead, it is allied to transaction that constitutes trade or business but may not be trade or business itself. In a case where the purchases had been made solely and exclusively with the intention to resell at a profit and the purchaser had no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and Unless it is offset by the presence of other factors, it would raise a strong presumption that the transaction is an adventure in the nature of trade. In the present case, there is total absence of any factor which could offset this presumption. 4.3.2. In the following cases, the transaction was held to be adventure in the nature of trade on the facts of respective cases. (i) CIT Vs. B. Narasimha Reddy 150 ITR 347 (Kar): The assessee purchased....

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....02,026/- as business income." 4. Now the assessee is before us. Ld. Counsel for the appellant filed written submission which is reproduced as under: 1. The appellant is an agriculturist since more than 15 years. The appellant has been since then showing income from agriculture in his returns of income. The agricultural lands have been purchased primarily for purpose of carrying out agricultural activities thereon. From time to time the Agricultural lands were shown as investment in the balance sheet and also covered in the Wealth tax returns. Copy of Wealth tax return for earlier year i.e. A.Y. 2005-06 has been filed during course of hearing. 2. Later on with the development in the area in which agricultural land was situated, the appellant decided to sell some of the lands. First sale of agricultural land took place in the A.Y. 2004-05 of the lands which were purchased by the appellant as early as in C. Y. 1993. Such lands were in Village Harni and Village Sayajipura. It is pointed out that the magnitude of sale of agriculture lands is very small and that too not frequent as compared to lands held by the Appellant. 3. The Assessing Officer treated the....

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....e year and declared claimed capital gain of Rs. 60,30,012 from these sales [Reference - para 3(i) of assessment order]. (iii) The properties were sold to various persons (through various firms in which he is a partner, in small plots. [para 3(i) of assessment order]. (iv) Development agreement was entered into with various firms and agricultural land was converted into non agricultural land by the appropriate authority. [Page 6 para 4(i)(c) of assessment order]. (v) Assessee had purchased the land, converted it into non agricultural land, developed it and sold it in small pieces. The assessee was a well known builder carrying out this activity through its various firms or otherwise [Reference para 4 of the assessment order]. (vi) Agricultural land in the close vicinity of city was purchased solely with intention to resell at profit and purchaser had no intention of doing agricultural activity on it as the land was converted into non agricultural land and after doing some development was sold [Para 4(iv) of the assessment order]. [Here it may be further mentioned that if the sole intention of the assessee at the time of purchase, was to carry out ....

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.... i.e. held that income from transactions in land is business income. The Ld. CIT(A), in para 4.3 of his order has given detailed cogent reasons in support of his finding. Salient features of the finding are (a) assessee purchases agricultural land on a regular basis in the outskirts of the city, performs agricultural operations for few years and in due course of time land is plotted and sold, (b) This process continues year after year (c) As on 31.03.2006, there are around 87 pieces of land and 21 shops etc. indicated in balance sheet under the category of fixed asset, (d) the buying and selling of land is not a stray activity but a well thought out strategy to earn profit (e) the true facts were not brought to the kind notice of the Hon'ble TTAT for earlier year (f) The ratios in the case of G. Venkataswami Naidu & Co. Vs, CIT 35 ITR 594 (SC) and CIT Vs. B. Narasimha Reddy 150 ITR 347 (Kar) were relied upon by the Ld. CIT(A) [Reference page 4 & 5 of the CIT(A)'s order] and CIT Vs. R. Ramiah [146 ITR 39 (Kar.)]. The facts and circumstances of these cases were very similar and hence applied to case of assessee. (g) The Ld. CIT(A) has made it clear in para 4.3.5 of his order ....