TaxTMI 
TaxTMI 
2018 (5) TMI 2132
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.... Aggrieved by the order of Ld.CIT(A), assessee is now before us and has raised the following grounds: "1. The Commissioner of Income-tax (Appeals) 2, Nashik (hereinafter referred to as the CIT(A) erred in upholding the action of the Assistant Commissioner of Income-tax, Circle - 1, Jalgaon (hereinafter referred to as the Assessing Officer) in making an addition of a sum of Rs 2,41,14,550, being surplus/ profit on sale of rural agricultural land as income arising on adventure in the nature of trade. 2. The appellant contends that the CIT(A) and the AO have suo moto by assigning insufficient and invalid reasons, considered the rural agricultural land as a business asset which, in effect, is an investment in capital asset and shown as such by the appellant in the balance sheet as at 3151 March, 2011 and thereby bringing to tax the surplus/ profit on sale of such an asset to tax as adventure in the nature of trade. 3. The appellant further contends that the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition of Rs.2,41,14,550 alleged to be arising on an adventure in the nature of trade inasmuch as the surplus/ profit arising on sale....
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....y considered the facts of the case, remand report of the A.O. and rival contentions. On perusal of the same it has been noticed at the outset that the appellant has earned income of Rs.2,41,67,550/- in respect of his share in the land purchased of Rs.10,53,000/-, within a short period of 7 months and 12 months. At the outset it has been observed that the appellant had sold the impugned lands for a price which is 25 times of the purchase price of the impugned lands. The said exorbitant sale consideration claimed by the appellant appears to be impossible, as the Sub-Registrar had estimated the price of the lands at Rs.1,30,000/- per Hector, whereas the appellant had sold lands within short period @ about Rs.77,50,000/- per Hector within short span of time mentioned above. Therefore the transaction claimed by the appellant by claiming exemption of income of Rs.2,41,67,550/- appears to be suspicious. 8.1 The appellant had purchased the impugned lands alongwith other co-owners and sold the same. The details of purchases of land as per deeds submitted by the appellant are as under : Particulars of land Area of land Date of purchase Purchase consideration Remark 1) Agricultural la....
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....the above facts, it has been noticed that the 7 co-owners including the appellant have purchased agricultural lands at village Dahegaon on 16.12.2010 and 10.05.2011. The above mentioned lands are purchased by the above 7 co-owners with the intention to earn profit by making immediate sale. Once of the lands was purchased on 10.05.2011 and the same was sold within about 7 months. The other lands were sold after 12 months. 8.3. The appellant had contended that the said lands were purchased by the 7 co-owners with the intention of developing a fruit orchard. In this regard it has been noticed that the 7 co-owners are residing at different places, the 4 co-owners are residing at Aurangabad, 2 co-owners are residing at Jalgaon and 1 co-owners is residing at Nandurbar. All the above 3 places are located far away from each other. Therefore it is not likely that the said co-owners could have come together and have purchased agricultural lands at village Dahegaon, for carrying out agricultural activity. In support of the contention that the lands were purchased by 7 co-owners with the intention of developing a fruit orchard, the appellant had filed project report of 6 pages. The said proj....
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....for carrying out agricultural operations. It is also settled position of law that an assessee can hold some of the properties as stock in trade and some of the properties as investment. From the facts of the case it is evident that the impugned lands purchased at Dahegaon Tal. Gangapur Dist, Aurangabad, alongwith 6 co-owners by the appellant, residing at Jalgaon agricultural operations. Therefore the above contention of the appellant is rejected. 8.6 The appellant has also claimed that in the books of accounts and balance sheet, he had shown the impugned agricultural lands under the head 'fixed assets'. It is settled position of law that the entries made in the books of accounts and balance sheet are not decisive but the actual facts and transactions are to be considered for deciding the issue under Income Tax Act. This proposition of law is supported by following decisions. i. Kedarnath Jute Mfg. Co. Ltd., 82 ITR 363 (SC). ii. CIT Vs. Padmavati Raje Cotton Mills Ltd. (1993) 203 ITR 37 (Kol). iii. Star Paper Mills Vs. CIT (2001) 252 ITR 337 (Kol) iv. Associated Banking Corporation of India Vs. CIT (1965) 56 ITR-1 (SC) v. CIT Vs. Hiralal Mittal & Sons (1972) 86 ITR 463 (....
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..... iv) The lands were sold within 7 months and 12 months after purchasing the same. v) The appellant alongwith other co-owners have sold the impugned lands at a price which is 25 times of the purchase price of the said lands. Therefore it is evident that the facts of the case of the appellant are distinguishable from the facts of the cases relied on by the appellant. 8.10. From all the relevant facts and circumstances of the case as discussed above, I am of the considered view that the particular transactions entered into by the appellant in respect of impugned lands at Dahegaon, is adventure in the nature of trade." Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us. 5. Before us, Ld AR reiterated the submissions made before the lower authorities and further submitted that the assessee has declared agriculture income since last many years and the same has been accepted by the Revenue. He further submitted that the land at Dahegaon is situated beyond 8 kms from any Municipality. The land was purchased by the assessee with 6 other co-owners with the intention to develop fruit orchard and for which the assessee and the co-owners approached various Finan....
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....how that the intention was to trade at inception. He further relied on the decision of Hon'ble Bombay High Court in the case of Gopal C. Sharma Vs. CIT reported in (1994) 209 ITR 946 (Bom) for the proposition that the profit motive without anything more by itself can never be decisive for determination of the issue as to whether the transaction amounted to adventure in the nature of trade. He therefore submitted that the order of Ld.CIT(A) upholding the order of AO be set aside. Ld DR on the other hand took us through the findings of AO and Ld.CIT(A) and supported their order. He further submitted that assessee had not produced any evidence to demonstrate of having indulged into any agricultural activity on the land. He thus support the order of Ld.CIT(A). 6. We have heard the rival submissions and perused the material on record. The issue in the present case is about the taxability of profits earned on sale of land. It is assessee's contention that profits are exempt from tax as the land is agriculture land whereas the Revenue's stand is that the sale of land is adventure in the nature of trade and therefore business income. It is an undisputed fact that assessee along with 6 co-....