TaxTMI 
TaxTMI 
2022 (9) TMI 879
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....acts and circumstances in the case and in law, the Ld. CIT(A) erred in determining the income from the sale of two lands as business income without appreciating the fact that the same was shown in the balance sheet as fixed assets instead of 'stock in trade' in the return of income filed for previous years. iii) On the facts and circumstances in the case and in law, the Ld. CIT(A) erred in holding the sale of land at Survey No.550, Vesu as invalid and hence the income is not capital gain without appreciating the fact that the assessee purchased land admeasuring 20,700 sq.Mtrs. through registry dated 04/12/2006 out of which he sold only 13,800 sq mtrs. Vide satakhat which he himself had admitted of having possession before the Civil Court vide appeal No.59/07, which clearly follows that the title was clear and hence the transfer of property was valid. iv) On the facts and circumstances in the case and in law, the Ld. CIT(A) erred in holding the sale of land at Survey No.547, Vesu as invalid and hence the income is not capital gain without appreciating the fact that the assessee had sold the land vide Dastavej No.8552 which contained the compromise agreement between....
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....sing an assessment order on under section 143(3) of the Act on 30.03.2014. The assessing officer held that assessee has neither sold the land as part of AOP (Association of Persons) nor he has done any business of land trading. Therefore, assessing officer was of the view that it is the capital gain in the hands of the assessee. Besides, assessee has not disclosed this LTCG in the original return of income, hence it is undisclosed capital gain of the assessee. During the assessment proceedings, the assessee submitted its reply dated 17.02.2014 and other submissions. However, assessing officer rejected the contention of the assessee and made two additions under the head Long Term Capital Gain (LTCG) in respect of two properties one at Rs No. 547 Vesu and another property at R S no. 550 at Vesu, as follows: (i) Undisclosed LTCG on the sale of land at Vesu-547: Rs.39,60,335 (ii) Undisclosed LTCG on the sale of land at Vesu-550: Rs.14,38,98115 Therefore, Assessing Officer made total addition to the tune of Rs.14,78,58,450/- (Rs.39,60,335 + Rs.14,38,98,115). 4. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the Ld. C....
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....come, as the original return itself was belated return filed after due date given u/s 139(1) of the Act. Therefore, assessing officer made addition in respect of two properties at Rs. 14,78,58,450/- (Rs.39,60,335 + Rs.14,38,98,115). 8. During the appellate proceedings, ld CIT(A) observed that main dispute in assessee`s case, is regarding the nature of transactions of these two properties. That is, whether income from sale of these two properties should be taxable under the head "Capital Gain" or under the head "Business Income". During the appellate proceedings, the assessee contended that income should be assessed under the head "Business Income". Therefore, ld CIT(A), during the appellate proceedings, after going through the submission of the assessee, summarized the claim of assessee as follows: (i) Though the transactions were done by the assessee, the real investment in the transaction was carried out by Shri. Dharmeshbhai Patel (in short SDP). The assessee and SDP entered into an arrangement wherein, SDP provided the money required to buy such property, physical possession of which, is not possible in the name of assessee. These properties would be later sold for ....
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....d in Rajkot Nagari Bank, Surat branch a/c no. 38/2463. The sale proceeds of the two lands are deposited in this account and then distributed to the assessee and SDP in same manner given in the MOU as under :- Sale consideration of R S No. 547 21.05.2010 Rs.24,01,000 Transferred to SDP 08.07.2010 Rs 22,40,460 Transferred to assessee 23.07.2010 Rs.1,60,540 Sale consideration of R S No. 550 01.01.2011 Rs 33,00,000 Transferred to SDP 10.03.2011 Rs 30,82,063 Transferred to assessee 11 .03.20 11 Rs 2,17,993 11. From the above sequence of events, the ld CIT(A) observed that there is no hint of making of an AOP appears in MOU and also it does not appear to be intention of the assessee and SDP. Hence, the existence of AOP or filing of return of AOP is irrelevant here. The assessee submitted that unless some overriding and irrefutable evidence is found, things need to be presumed to exist as they appear. The Assessing Officer ought of have given evidence and cogent reasoning to say that MOU is not a genuine document or that it is an afterthought. No such claim is made in the assessment order. However, this argument is redundant as the ....
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....has disclosed the profit made from these two transactions in his return of income under the head "Business Income' which is accepted u/s 143(3) vide order dated 26.03.2013. The 90% of the profit arising from these transactions has already been taxed as "Business Income" by the department. Principles of uniformity demands that the balance 10% also to be taxed as 'Business Income'. During the appellate proceedings, the assessee submitted that when the immovable property is bought and sold with an intention to earning profit, then the transaction takes the nature of adventure in nature of trade. Therefore, ld CIT(A) noted that there is a clear element of business planning, risk taking and intention to re-sell for profit. The profit earned from the above two transactions hence, has to be taxed under the head 'Business income' and not as LTCG. Therefore, ld CIT(A) considering the facts of the assessee and legal position applicable to the facts, held as follows: "9. As already stated above, it is clear that the lands located at Survey Nos 547 and 550, at Vesu, Surat are disputed lands and physical possession was not possible. The two lands were agricultural lands and original ow....
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....arat and got a favorable order dated 14.03.2000. The State Government filed an appeal before the Division Bench in the same year. Meanwhile, during the year 2006, apparently with full knowledge in the face of risk of adverse order in appeal, the assessee entered into Satakhat (sale agreement) to buy the land at the cost of Rs.10.35 lakhs. Subsequently, the Division Bench of the Hon'ble Gujarat High Court pronounced an order on 31.08.2010 quashing the said purchase of land by the 15 companies. Subsequently, the Mamlatdhai issued an order dated 28.06.2013 vesting the ownership of the said lands, in the Government of Gujarat. This made the Satakhat as null and void and non - executable. 9.3 In the circumstances, the assessee on 29.12.2010 entered into an agreement with Shri Arvindbhai Tejani, wherein he has transferred all his right in the said land to him, for Rs.33,00,000/- This sale agreement is not registered with the Sub Registrar of Surar, as the assessee does not have any title in the land as the ownership of land vests with State Government. 9.4 The case laws cited / argued by the AR are considered .and the legal position w.r.t transfer in case of immovab....
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....ale-deed and not on the date of execution of agreement [Hail & Andersen Pvt, Ltd. vs. CH (1963) 47 ITR 790 (Cal): TC20R, 990A, K.C. Pal Chowdhury vs. CIT (1962) 46 ITR 1 (Cal) : TC20R.991, CIT vs. Meetles Ltd. (1972) 84 ITR 37 (Del)]. Mere agreement of sale is not a transfer [CIT vs. jayaiakshmi Rajendran (1985) 152 ITR 744 (Mad); M.D. Joseph vs, CIT (1990) 90 CTR (Ker) 6 : (1990) 187 ITR 112 (Ker) : TC20R.996] [See also Alapati Venkatararnaiah vs, CIT (1965) 57 ITR 185 (SC) : TC20R.154]. In CIT vs. Minerva Talkies (1996) 133 CTR (AP) 10 : (1996) 217 ITR 591 (AP) it was held that things permanently attached to that which is embedded in the earth is immovable property and such things (cinema hall in the instance case) not having been conveyed by way of registered document, no transfer took to give rise to capital gains. Sale transaction of land being declared null and void by the Collector, no capital gains accrued to assessee on null and void transfer of such land, [CIT vs. Vithaibhai P Patel) (1998) 148 CTR (Guj) 601] 9.5 In case of land at survey no. 550, there is no sale or transfer of land from the 15 companies to the assessee and further fro....