TaxTMI 
TaxTMI 
2023 (7) TMI 272
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....s of the case and in law, the Ld. CIT (A) erred in upholding the action of the Assistant Commissioner of Income Tax, Central Circle -8(4), Mumbai ("the Ld. AO") assessing the capital gain from sale of investment property by the Appellant under the head "Profit and Gains of Business or Profession" instead of "Income from Capital Gain". (ii) The Appellant, therefore, prays that the action of the Ld. CIT (A) confirming action of the Ld. AO in treating the gain from sale of investment property as "Profit and Gain from Business or Profession" instead of "Income from Capital Gain" be held as ab inito or otherwise bad in law. For A.Y. 2018-19: (i) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in upholding the action of the Assistant Commissioner of Income Tax, Central Circle -8(4), Mumbai ("the Ld. AO") assessing the capital gain from sale of investment property by the Appellant under the head "Profit and Gains of Business or Profession" instead of "Income from Capital Gain". (ii) The Appellant, therefore, prays that the action of the Ld. CIT(A) confirming action of the Ld. AO in treating the gain from sale of investment property as "Profit and....
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....are incriminating in nature. For A.Y. 2016-17: (i) On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-50, Mumbai, has erred in treating the proceeds received on sale of flats under consideration as capital gain, without appreciating the facts that the Investigation Wing has carried out thorough investigation to determine the actual object of the assessee company and the information unearthed by the Investigation Wing during the course search leads to the finding that intention of the assessee was never to lease out the property but merely work as a builder and developer. (ii) On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-50, Mumbai, has erred in not appreciating that on similar grounds in the assessee's own case, he has confirmed the action of the AO in treating the capital gain as business income and deleted the disallowance of interest u/s 36(1)(iii) in the order u/s 153A r.w.s. 143(3) dated 30.12.2019 for A.Y. 2017-18 and in the order u/s 143(3) dated 30.12.2019 for A.Y. 2018-19. (iii) On the facts and circumstances of the case and in law, the learned Commissione....
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....ure for A.Y. 2018-19. (ii) Restriction of disallowance u/s. 14A of the Act r.w.r. Rule 8D of the Income Tax Rules, 1962 to Rs. 18,25,272/- being the amount of exempt income earned by the assessee for A.Y. 2018-19. 08. Lead appeal is appeal filed by the ld AO in ITA No. 2300& 2301/MUM/2021 for A.Y. 2015-16 and A.Y. 2016-17 respectively for unabated years: ITA No. 2300/MUM/2021 [A.Y. 2015-16] [By the ld AO] 09. Brief facts of the case are that the assessee filed its return of income [ ROI] for AY 2015-16 on 30.10.2015 at income of Rs. 5,47,45,408/-. ROI was picked up for scrutiny and resulted in to assessment u/s 143(3) of the Income tax Act [The Act] on 23.12.2017 at returned income. 10. Search and seizure action u/s. 132(1) of the Act was carried out in case of the Aurum group and other related entities and persons on 22.03.2018 by The DDIT(Investigation) Unit-6(1), Mumbai. Consequently, notice u/s 153A of the Act was issued. In pursuance to the same, the assessee filed ROI on 17.07.2019 at Rs. 5, 47, 45,408/-. 11. The LD AO made additions pertaining to income on sale of flats under the head 'Income from Business & Profession' which was offered by assessee under the head '....
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.... target a larger segment. Common areas of the building were fully designed as per the good standards and the assessee company would furnish the common areas as per rational standards whereas the specific units would be furnished in accordance with the preferences of prospective lessees. h. Assessee started to look for the prospective tenants like High Net-worth Individuals (HNIs), Diplomats etc. to enter into a long-term lease agreement after the construction of building was substantially completed but before the receipt of completion certificate. For this purpose, the assessee appointed broker -'M/s. Reflex Realty' and availed its marketing services to invite prospective lessees. However, even after substantial amount of time and efforts, broker was unable to procure a single tenant which was informed by the broker to the assessee. To substantiate this claim, the assessee submitted copy of correspondence letters with the broker before LD AO per submission dated 23.12.2019. In the meantime, the assessee started getting inquiries from people who were interested in buying the property and since there was no prospect of a lessee in sight, assessee sold one of the apartments vide the....
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.... warehousing Corporation [ 58 taxman .com 78] and various other judicial precedents without going into the merits of the case. 15. At the time of hearing, the Ld. DR, to substantiate that the addition/disallowance made by the AO were on the basis of incriminating material found and seized during the course of search action filed an application on 04.10.2022 under Rule 27 of the ITAT Rules to admit 'Additional Evidence' citing the reason that due to a major fire incident at Level IV Scindia House on 01.06.2018 all the material/documents including digital data was destroyed and only certain copies of seized documents were handed over to AO. The documents submitted through this application comprised of Board Resolution passed by the Board of Directors of the assessee company, copy of escrow account agreement entered with and undertaking given to IFCI Ltd. and copy of communication with the holding company of the assessee namely Aurum Ventures Pvt. Ltd. and IFCI Ltd. Later on, letter dated 22.12.2022 was filed by the Ld. DR wherein it was stated that in the application filed on 04.10.2022 Rule 29 of the ITAT Rules was inadvertently mentioned as Rule 27 and accordingly the same may be ....
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....material found and seized during the course of search and the earlier proceeding which has attained finality cannot be disturbed. 18. In the present case, the assessment proceeding for the year under consideration, was completed vide order dated 23.12.2017 u/s 143(3) of the Act i.e. before the date on which search was conducted. The addition made by the AO by treating the proceeds from sale of flats as income under the head 'Profits and Gains from Business and Profession' and disallowance of interest expenditure u/s 36(1)(iii) was not based on any 'incriminating material' seized during the course of search proceedings. This is evident from the fact that there is absolutely no reference of any incriminating material by the Assessing Officer in his assessment order. The documents relied upon by the AO were part of regular books of accounts maintained by the assessee and did not pertain to any undisclosed income earned by the assessee company. 19. It is the grievance of Ld CIT DR that ld CIT (A) had decided the appeal in favour of the assessee without appreciating that the Investigation Wing had carried out thorough investigation to determine the actual object of the assessee compan....
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....ng company, and did not relate to any undisclosed income earned by the assessee. Even if such documents are admitted as additional evidence, it did not have any bearing on the issue since these documents were executed during the period after which the assessee had decided to sell the apartments as there was no prospective tenant in sight. Thus, these documents cannot be a deciding factor to determine whether the intention of the assessee was to sell the apartments or hold it as an investment from the time of its incorporation. 24. Thus, we do not find any infirmity in the order of the LD CIT (A) in holding that there is no incriminating material found during the course of search to treat the income offered as capital gain on sale of flats as business income of the assessee. In our view, such additions made without any reference to incriminating material, cannot be permitted as it is against the provisions of the Act and also the decisions rendered by Hon'ble Bombay High Court and confirmed by Hon'ble supreme court in [2023] 149 taxmann.com 399 (SC). 25. As regards issue of disallowance made u/s 36(1) (iii) of the Act by the Assessing Officer, we find that there is no incriminatin....
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....he Ld. AR is that i. The primary objects of the assessee company was 'to own and let out' apartments in the building at the specified location and 'earn rental income' out of the said activity which is evident from the main object clause of the company enunciated in its Memorandum of Association. ii. That the assessee made conscious efforts to LEASE the flats by invoking services of a broker which is evident from the correspondence made with the broker. However, due to non-availability of the tenant the assessee could not lease out the apartments and had to sell the flats to recoup a part of the huge investment made by it in the project. iii. as evident from facts on record, the assessee company did not sell the apartments within a period of one or two years from the date of commencement of construction or from the date of receipt of occupancy certificate, but it continued to hold the properties for long term i.e. for a period spanning from 5 to 13 years with respect to different apartments, hoping that they would find tenants for the property. iv. That these apartments were not sold in a short span of time i.e. within a year or two as it is in the case of a typical builder....
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....10 months after receipt of the occupancy certificate and 4 years and 5 months from date of commencement of construction and it still continues to hold the 7th flat which is leased out and against which it is earning rental income. xii. It did not have any booking advances from the parties at all after start of construction or on completion thereof. xiii. Assessee also did not enter in any other similar venture with a view to make profits by engaging in the activity of trading of properties. xiv. Act of selling the apartments by the assessee did not have the essential elements of 'adventure in the nature of trade' i.e. there was no bulk purchase, no advertisement for sale of its properties, no similar venture was entered by the assessee and the properties were held for long span of time and thus the income on sale of flats was not chargeable under the head 'Profits and Gains of Business or Profession'. In support of this contention, the Ld. AR relied on the decision of Hon'ble Bombay High Court in the case of Ashok Kumar Jalan vs. CIT reported at 187 ITR 316 (Bom.), Hon'ble Delhi High Court in the case of CIT vs. Dr. Indu Bala Chhabra 132 taxman 45 wherein the Hon'ble Court ob....
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.... the course of proceedings before us. The Ld. DR contended that A.O. has given specific findings in his assessment order and has justified the addition made by him by treating the income from sale of apartments as business income. She categorically summarized findings of the lower authorities and supported them : i. That the assessee company had in its 'other objects' activity of carrying on business of construction of buildings, houses etc. ii. That the assessee company has sold the flats in '7, Marine Drive' without basic furnishing which meant that there was no possibility of leasing out the flats, i.e. bear shell sale of flats iii. That the first flat was sold on 11.07.2014 and from perusal of the sale agreement, it can be seen that a declaration dated 10.06.2014 was filed by the assessee-company under the Maharashtra Apartment Ownership Act, 1970 through which the purchasers were granted proportionate share in common areas of the building apart from proportionate undivided interest in land. iv. That the work of elevators and windows were completed in 2015, thus the assessee company cannot claim that the units at '7, Marine Drive' were meant to be leased out when the bu....
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....as a part of Memorandum of Association so as to keep an avenue open for the assessee company to enter into such business if at all such opportunity presents itself in the future which has not been done by the assessee till date. The inclusion of the business of construction as 'other object' in the MOA does not in any way undermine or overshadow the 'main object' of the assessee company. In fact, the specific purpose of formation of the assessee company which is included in its main object will always prevail over the general nature of 'other objects'. Therefore, the stand of the department that construction activity included in the other object clause will cover the sale of flats of the project specified under the main object clause is devoid of merit and is not sustainable. Even otherwise, for the sake of argument if it is assumed that the assessee had entered into other construction activity even in that case it would not affect the main purpose of the assessee company which was to own and lease out the flats in the building named '7, Marine Drive'. It is important to understand that there is no restriction on an assessee to engage in investment as well as business of the same....
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....) deserved to be upheld." B. Submission with respect to the point of basic furnishing of the flats in the building: It is alleged by the department that the flats could not be leased out since the basic furnishing of the flats was not provided. It is submitted that, as already explained in Para 23 and 24 above, the flats constructed by the assessee were high end residential units intended to be leased out bare shell. Since each lessee may have different preferences, a standard furnishing would have restricted the ability to target a larger segment. The common areas of the building were fully designed as per the highest standards carrying a clear intention that as an investor, the Assessee Company would furnish the common areas as per rational standards whereas the specific units would be furnished in accordance with the preferences of prospective lessee. Thus, the flats in the apartment were not fully furnished in order to accommodate the choice and preference of prospective lessees. If a standard furnishing was provided in the apartments then it would have restricted the prospective lessees, since in such high end flats the per month rent payments run into lakhs of rupees wh....
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....ce was pressurizing the assessee for registration, the assessee filed the declaration. The conduct of the assessee clearly proves that it had acted as an investor right from the beginning and accordingly gains arising on sale of flats was correctly offered to tax under the head 'Capital Gains'. Further, it is submitted that the declaration filed by the assessee under the Maharashtra Apartment Ownership Act, 1970 is a necessary legal requirement in case a flat is sold to another person wherein various details are required to be submitted with respect to the flat being sold. The relevant provisions of the Maharashtra Apartment Ownership Act, 1970 are reproduced below for ready reference: Section 13 of the Maharashtra Apartment Ownership Act, 1970 - Declarations, Deeds of Apartments and copies of floor plans to be registered. "13. (1) The Declaration and all amendments thereto and the Deed of Apartment in respect of each apartment and the floor plans of the buildings referred to in subsection (2) shall all be registered under the [Registration Act, 1908]. (2) Simultaneously with the registration of the Declaration there shall be filed along with it a set of the floor plans of ....
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....tration Act, 1908], shall mutatis mutandis apply to the registration of such Declaration and Deeds of Apartments and the words and expressions used in this section but not defined in this Act, shall have the meanings assigned to them in the [Registration Act, 1908]." Section 11 of the Maharashtra Apartment Ownership Act, 1970 - Contents of Declaration. "11. (1) The Declaration shall contain the following particulars, namely :- (a) Description of the land on which the building and improvements are or are to be located; and whether the land is freehold or leasehold 1[and whether any lease of the land is to be granted in accordance with the second proviso to section 2 of this Act]; (b) Description of the building stating the number of storeys and basements, the number of apartments and the principal materials of which it is or is to be constructed; (c) The apartment number of each apartment, and a statement of its location, approximate area, number of rooms, and immediate common area to which it has access, and any other data necessary for its proper identification; (d) Description of the common areas and facilities; (e) Description of the limited common areas and facili....
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....ing and Alfa Façade Systems Pvt Ltd was tasked with providing and fixing of aluminum windows in the building. It was also stated by the Ld. AO that from the details submitted by Mitsubishi Elevators Pvt Ltd, P1 elevator was completed in 2013 itself whereas the work of the P2 elevator continued well into 2015. It was also stated by the Ld. AO that from the details submitted by Alfa Façade Systems Pvt Ltd, it was observed that the work of fixing aluminum windows in the building was majorly done in 2015. With respect to the above, it is submitted that the building was supposed to be owned by the Assessee Company and flats were to be leased out based on the likings and preferences of prospective lessees and therefore it first installed one elevator and basic windows structure in each of the flats. Also, as stated above the Ld. A.O. had himself accepted the fact that one lift was installed in 2013 i.e. before the receipt of occupancy certificate and only the second lift i.e. 'P2' was completed in 2015. A building can very well function with one lift and there is no such mandate that all the lifts in the building should be always in perfect working condition so as to leas....
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....rovide any basis or did not give any reference to the source from where such figures were collated by him. Further, the Ld. A.O. chose to conveniently ignore the figures for F.Y. 2008-09 in which land was purchased by the assessee for a consideration of Rs. 13.21 Crores and also skipped the payments made in F.Y. 2009-10 and 2011-12. If these payments would have been considered then the percentage of payments made after the receipt of occupancy certificate would have been significantly reduced. The Ld. A.O. cannot pick and choose the figures as per his convenience to suit his case and ignoring the complete picture. The Actual Expenditure incurred by the assessee over the years from the time the land was first acquired which was capitalized in the books of accounts is given in the table below which was also reproduced by the Ld. A.O. in Para 6.12 of his assessment order: F.Y. Nature of Expenditure Amount (Rs.) 2008-09 Land Purchase 13,21,53,000 2009-10 Construction Cost 2,05,000 2010-11 Construction Cost 2,06,51,632 2011-12 Construction Cost 2,60,74,804 2012-13 Construction Cost 4,45,42,406 2013-14 Construction Cost 10,83,38,478 2014-15 Construction Cost 7,7....
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..... F. Submission with respect to the application and receipt of water connection in the building after the receipt of occupancy certificate: It is submitted that the assessee had applied for permission of the water connection in the building on 30.10.2013 (Copy of the application letter is attached at Page Nos. 127-128 of the Paper book-I). The approval for water connection was received by the assessee vide letter signed by the local authority on 31.01.2014 (Copy of the said letter is attached at Page No. 129-130 of the Paper book-I). These documents in relation to the application and approval of water connection were submitted during the course of assessment proceedings. The Ld. A.O. without appreciating the evidence submitted before him, solely based on the fact that the approval was received after the date of occupancy certificate concluded that the assessee had no intention to lease the flats since according to him 'no person who has the intention to put building on rent will offer it for sale prior to water connection being made'. In this regard it is submitted that, the Ld. A.O. overlooked a crucial fact that the occupancy certificate is a mandatory document which is req....
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....been put by the time the lessee would have come to live there. Thus, it is submitted that this contention of the Ld. A.O. does not have any bearing on the treatment of flats and consequent treatment of gains arising on sale of such flats. Moreover, the pipeline fittings and connection for the purpose of water supply to each and every flat was already completed at the time of construction of the building and before the receipt of occupancy certificate since it is a part of structure of the building and cannot be done separately after the construction of building is completed. In fact, the occupancy certificate of the building would not have been granted without it. The only thing pending was the permission from the local authority so that the water supply to the building could be started which was received on 31.01.2014. The intention of the assessee was always to lease out the flats bare shell and as explained in Para 67 to 70 above the date of receipt of water connection from the local authority does not affect this intention of the assessee and therefore, this contention of the Ld. A.O. is devoid of merits and does not have any legs to stand. G. Submission with respect to the....
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....ying on business. In the case of Pari Mangaldas Girdhardas v. CIT reported at 1977 CTR (Guj.) 647 (Copy attached at Page Nos. 171-192 of the Paper book-II), the Hon'ble Gujarat High Court has formulated certain tests to determine as to whether an assessee can be said to be carrying on business, as under: "... a) The first test is whether the initial acquisition of the subject- matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. b) The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. c) The third test, which is frequently applied, is as to how the assessee dealt with the subject-matter of transaction during the time the asset was with the assessee. Has it been treated as stock-in-trade or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. d)The fourth test is as to how the assessee himself ....
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....o, due to the prime location of the property the assessee received inquiries from prospective buyers. Thus, the initial sale of flat was done to recoup the investment which does not change the fact that the main object of the assessee was still to lease out the flats in the building. Therefore, the assessee has satisfied the criteria laid down in this test. c. Third Test- Treatment of asset by the assessee: It is an undisputed fact that the assessee from the very beginning i.e. from the time when the land was purchased till date when the last of the flats is held by the assessee has classified it as an investment in its financial statements and no departure with respect to treatment and classification of property has been done by the assessee till date. In fact, as stated earlier, the department has also accepted this stand of the assessee in the orders passed u/s 143(3) of the Act for A.Y. 2014-15 and A.Y. 2015-16. Therefore, the assessee has satisfied the criteria laid down in this test. d. Fourth Test- Disclosure of Income from such asset and subsequent treatment by the Department: It is an undisputed fact that the assessee has consistently offered gains arising from sal....
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....f time before selling each of the flats to see if any of these flats can be leased out. Moreover, as discussed earlier the last apartment is still held by the assessee as an investment from which the assesee is earning a rental income of Rs. 3,00,000/- per month from October, 2018 (A.Y. 2019-20) till date. The above facts clearly show that there was no volume, frequency, continuity or regularity with respect to purchase and sale as the time gap between the first purchase and first sale is a substantial gap of 6.5 years which is in complete contradiction to a normal behavior of typical businessmen. No prudent businessman would wait for a period of 6.5 years to make a sale. Further, the remaining 5 flats were sold over a period of 3 years from A.Y. 2016-17 to A.Y. 2018-19. This conduct of the assessee proves that it was an investor from the very beginning. Moreover, the assessee never engaged in any other construction project nor had bought any land/building for resale purpose which clearly shows that the assessee had a mindset of an investor and not a businessman. Therefore, it is submitted that there was no volume, frequency, continuity or regularity to conclude that it was an ....
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.... said to indulge in several transactions of purchase and sale every year." 10. It has further been held that total fact of relevant factors and circumstances determining the character of the transaction and the volume, frequency continued and regularity of transactions of parties and sale on goods has also be taken into account. It has been held that the aforesaid question is a question of fact it has to be determined in the fact situation of the case. 11. In the light of aforesaid settled legal principles, the facts of the case may be examined. Admittedly, the properties were acquired by the assessee in the year 1992 and assessee had entered into an agreement for sale on 13.05.2002. Thereafter in the accounts up to the year 2004, the property was mentioned as an asset........ 12. Thus, from perusal of the aforesaid entries it is evident that the assessee has not conducted any other activity other than holding the land as investment. It is also pertinent to mention here that the revenue has not come up with any documentary evidence to suggest that assessee had earned income from the transaction to the land in question during the year 2003-04. The Tribunal thereafter on the ba....
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....ness and then, it must depend upon the facts and circumstances of each case whether the transaction is in the nature of trade". Thus, while neither continuity of similar transactions is necessary to constitute such a transaction as "adventure in the nature of trade" it will depend on the facts and circumstances of every case whether the assessee has been able to demonstrate, by placing relevant materials that the transaction undertaken by it was, in fact, in the nature of trade. 35. We also find that Honourable Karnataka High court in Commissioner of Income Tax (Central) Vs Bagmane Developers (P.) Ltd.* [2017] 88 taxmann.com 486 (Karnataka)/has held that :- 13. We may also record that whether particular property can be considered as a 'stock-in-trade' or a part of 'inventory' or whether it can be treated as capital asset though a question may be touching to law but would essentially depend upon consideration of so many factual aspects germane to record the conclusion. At this stage, we may usefully refer to decision of the Division Bench of High Court of Gujarat in case of CIT v. Rewashanker A. Kothari [2006] 283 ITR 338/155 Taxman 214 wherein the question arose ....
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....termine as to whether an assessee can be said to be carrying on business. (a) The first test is whether the initial acquisition of the subject- matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, since the inception, appears to be impressed with the character of a commercial transaction entered into with a view to earn profit, it would furnish a valuable guideline. (b) The second test that is often applied is as to why and how and for what purpose the sale was effected subsequently. (c) The third test, which is frequently applied, is as to how the assessee dealt with the subject-matter of transaction during the time the asset was with the assessee. Has it been treated as stock-in-trade or has it been shown in the books of account and balance sheet as an investment. This inquiry, though relevant, is not conclusive. (d) The fourth test is as to how the assessee himself has returned the income from such activities and how the Department has dealt with the same in the course of preceding and succeeding assessments. This factor, though not conclusive, can afford good and cogent evidence to judge the na....
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....ciation of the assessee company, correspondence letters with the broker, audited financial statements of the company wherein the land & building are capitalized and treated as investment and also the fact that the said asset was held by the assessee for a very long duration. With respect to the conduct of the assessee company i.e. the question whether the act of sale of apartments by the assessee is 'an adventure in the nature of trade' or 'income from capital gains' can be decided in light of the tests laid down by various judicial precedents. These tests act as a yardstick for determination and taxability of income. 38. As on the date of acquisition of land, the intention of the assessee was to hold that land, construct the apartment and lease them out which is evident from the MOA formed at the time of its incorporation. Even on initial acquisition of the building i.e. at the time of receipt of occupancy certificate on 05.09.2013, the intention of the assessee was to lease the apartments which are evident from the altered MOA. 39. As is clear from the records, the first sale post initial acquisition of land was made after a lapse of approximately 6.5 years from that date and 1....
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....ngage in any other such real estate project and therefore there is no volume, frequency, continuity or regularity with respect to purchase and sale. Only because the assessee company has sold apartments does not mean that they are engaged in business activities. There is only one time purchase of land and only one project was conducted on such land which was sold apartment by apartment spanning over a number of years and out of which even today one apartment remains unsold. 44. Even the Hon'ble Bombay High Court in the case of Ashok Kumar Jalan (supra) held that the transaction, must have some trappings of a business nature before it can be considered as an adventure in the nature of trade, such as bulk purchase, advertising for its sale, similar other profitable ventures, no likelihood of retaining purchased item for one's own use, etc. In the present case, none of these features have been established by the Department and are further demonstrated by the assessee in light of the decision of Hon'ble Gujarat High Court. There is no such evidence which proves that assessee acted as a businessman and not as an investor. 45. On perusal of documents submitted by the LD CIT DR it i....
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....ary to the main object clause of the said memorandum. The relevant paras are: Main Object Clause: "2. To carry on the business of owners of lands, flats maisonattes, dwelling houses, shops, offices, industrial estates, lessees of lands, flats and other immovable properties and for these purposes to purchase, take on lease or otherwise acquire and hold any lands or Buildings of any tenure or description wherever situated, or rights or interests therein or connected therewith, to prepare building sites, and to construct, re-construct, pull down, renovate, alter, improve, decorate and furnish and maintain flats, maisonettes, dwelling houses, shops, offices, blocks, buildings, industrial estates, works and conveniences of all kinds, and sell the same on ownership basis, installment basis, hire purchase basis or lease basis and transfer such building to cooperative society, limited companies or association of persons or individual as the case may be, to lay out roads, pleasure garden, recreation, grounds, auditoriums, theatres, and sports pavilion, to plant, Drain or otherwise Improve land Building or any part thereof." Other Incidental or Ancillary Objects to the Main Object Clau....
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....um of Association and conduct of the assessee shown from the accounting treatment and period of holding of the apartments are also another factor showing as investor looking to earn income from rental and appreciation in the value of assets held by it. In view of above facts we hold that conduct of the assessee is more like to earn the lease rent from the property and not to exploit these properties as business assets. Assessee has not undertaken any other projects of similar nature which could even remotely indicate that the assessee had intention and mindset of a businessman looking to earn profits by taking risks and engaging in multiple activities at once. 47. Moreover, the position that the assessee's activities are in the nature of an investor and it is not acting as a builder and developer was accepted by the revenue in the course of regular assessment proceedings u/s 143(3) of the Act for A.Y. 2014-15 and A.Y. 2015-16. It is true that the principle of res judicata does not apply to income tax proceedings as each assessment year is treated as a distinct unit, but that does not mean consistency in manner in which assessment proceedings are conducted should be ignored especia....
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....g holding duration between which the assessee took possession of the property and the date when the land was finally sold after making construction thereon. The entire purchase was funded by the members of the AOP. No interest-bearing loan was taken for the purpose of purchase of said property and construction thereon. No change in land user of the property was affected in order sell the aforementioned property. It is not the case of the Department that when initially the assessee AOP purchased the land and took possession thereof on 19-01-1994, the buyers were identifiable and thus the whole purpose of purchase and subsequent construction was for the purpose of selling the same and not earning any rental income. Accordingly, in view of the facts and circumstances cited above, in our considered view, the said sale of property would be taxable as capital gains and not business income, and we find no infirmity in the order of ld. CIT(A)." [Underline supplied by us] 49. Based on the facts of the case discussed above, evidences produced before us , we reversing the order of the ld CIT (A) direct the AO to treat the proceeds received on sale of properties as income from 'Capital Gain....
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....ee was asked to explain why an addition u/s 69C of the Act should not be made based on the findings of the search and the statement of Mr. Vishal Singh wherein he had explained the said transaction. Against this, the assessee vide submission dated 23.12.2019 explained that Mr. Vishal's statement was taken under duress and cannot be relied upon in absence of any other corroborative evidence. In support of this claim, the assessee furnished an affidavit of Mr. Vishal Singh dated 30.12.2019 wherein he had retracted his statement recorded u/s 132(4) of the search proceedings. 54. However, the Assessing Officer rejected this explanation of the assessee and made an addition of Rs. 20,00,000/- u/s 69C of the Act based on the word document found and seized during the course of search proceedings and the statement of Mr. Vishal Singh recorded u/s 132(4) of the Act, the Assessing Officer and rejecting the affidavit filed by the assessee stating it as an afterthought and self-serving document. 55. The assessee, aggrieved by the action of the Assessing Officer, challenged the said addition before the Commissioner ld CIT [A] who , decided the appeal against the assessee and upheld the additio....
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....gth of admission of one party which was subsequently retracted when the conditions u/s 69C of the Act were not fulfilled and there was nothing on record to show that huge amounts of cash revealed from seized documents had actually exchanged hands. 57. Ld. CIT DR strongly relied on the order of Ld CIT (A) and AO and submitted that there was sufficient evidence on record in the form of word document seized during the course of search in case of the assessee and the statement of Mr. Vishal Singh explaining the said word document. She also submitted that the affidavit of Mr. Vishal Singh retracting his statement filed by the assessee was nothing but an afterthought and self serving as the same was not filed immediately after the search but during the course of assessment proceedings. 58. We have heard the rival submissions and perused the material on record. The sole matrix of the disputed issue is that whether addition under provisions of section 69C of the Act can be made based on a word document found during the course of search proceedings and statement recorded u/s 132(4) of the Act in relation to such word document. It is an undisputed fact that the word document found on the c....
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....e of Rs. 2,11,997/- u/s 14A r.w.r. 8D of the Act. During the course of assessment proceedings, the Assessing Officer called for details of investments made by the assessee and working of the disallowance made by it u/s 14A of the Act. The said working was submitted by the assessee at the time of assessment proceedings. However, the Assessing Officer rejected the working and disallowance made by the assessee and re-computed the disallowance under Rule 8D of the Income Tax Rules, 1962 at Rs. 1,99,02,871/-. Accordingly, he made and addition of Rs. 1,96,90,874/- after deducting the disallowance already made by the assessee in the return of income. Aggrieved by the action of the Assessing Officer, the assessee challenged the disallowance made u/s 14A of the Act before The ld CIT [A] . The Commissioner (Appeals) on the basis of various decisions of the Hon'ble Courts gave partial relief to the assessee and restricted the disallowance to Rs. 18,25,272/- i.e. to the extent of exempt income earned by the assessee during the year. Now, both the assessees as well as the revenue are in appeal before us i.e. the assessee has challenged the decision of Commissioner (Appeals)- to the extent of ad....
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....ugh to cover the investment made by it. Similarly, reliance was also placed by the Ld. AR on the decision of Hon'ble Bombay High Court in the case of HDFC Bank Ltd. (2014) 366 ITR 505 (Bom.) wherein the Hon'ble Court held that where the assessee had sufficient interest free funds, then it could not be presumed that it utilized borrowed funds for making investments. 62. The Ld. CIT DR relied on the order passed by the Assessing Officer and contented that the disallowance had to be computed by invoking the provisions of Rule 8D of the Act as the assessee did not compute the disallowance correctly which is evident from the substantial difference in the amount of disallowance made by the assessee and made by the Assessing Officer. It was also contented on behalf of the revenue that even if there is no exempt income earned by the assessee then also a disallowance was under section 14A r.w.r. 8D was warranted as the assessee had made investment in securities which had the potential of earning exempt income. In support of this contention, reliance was placed on the Circular No. 5/2014 issued by CBDT which clarifies that disallowance is warranted even in cases where assessee did not earn ....