TaxTMI 
TaxTMI 
2025 (8) TMI 1247
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.... to justify the reason for accumulation of cash from July, 16 to Nov, 16 as the cash purchase of property was prohibited by law w.e.f. 01.06.2015. 2. Whether on the facts and in the circumstances of the case the Ld. CIT(A)was justified in not treating the sale transaction of property as business income of Rs. 66,99,427/- but as a Capital Gain, thereby ignoring the facts that nature of business of the assessee is 'builder/property developer' as declared in column 10(a) of the 3CD form. 3. Whether on the facts and in the circumstances of the case the Ld. CIT(A)was justified in allowing the deduction u/s 24(b) on rental income from plots of land ignoring the fact that there is no constructed house or building on these plots. 4. The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appellant proceeding. 3. Succinctly, the fact as culled out from the records is that the assessee has e-filed his return of income on 04.10.2017 declaring total income of Rs. 36,64,810/-. The return was processed u/s 143(1) of Act. Subsequently, the case was selected for scrutiny through CASS and notice u/s 143(2) of Income....
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....nd lack any substance. 2. The closing cash balance at the end of the month of July was Rs. 11,17,717. As evident from the break-up of the sales and purchase, all the purchases have been made at credit. In such a scenario why assessee will need additional cash in hand balance. Thus it is out of common understanding that assessee kept on accumulating cash balance by withdrawing another 27lacs in the month of August, 54 lacs in the month of September and Rs. 18,00,000/- in October 2016. 3. Even if the claim of the assessee is accepted as far as planning to start a real estate project is concerned, the same do not lend any substance to the holding of such a huge cash balance as even the property purchase in cash has been prohibited by law w.e.f 01.06.2015. In fact, had he really planned such a project he would have needed amount in the bank rather than cash to invest in the purchase of the property. 4. Such claims of accumulating cash balance for investment in the project under Mukyamantri Jan Awas Yojana have been made by the Id. Chartered Accountant despite knowing the fact that the property purchase in cash has been prohibited by law w.e.f 01.06.2015. This....
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....ck till date. Assessee failed to establish that why those plots acquired prior to Central Circle 2010 were kept as stock without doing any development activities and kept certain other plots as capital investment. 4. It is an attempt on the part of the assessee to evade tax by reducing tax-liabilities on account of claim of indexation benefit. 3.4 ld. AO further went on observing that the sale of plot was business income as the assessee is engaged in the business activities of sale / purchase / developing of properties. Thus, the transactions fall in the category of adventure in the nature of trade or business transactions. It is pertinent to mention here that in order to constitute a transaction as adventure in the nature of trade, it is essential that the transaction should be akin to the main activity carried on by the assessee. The assessee is engaged in the business of real estate developer. Hon'ble Supreme Court in the case of G. Venkataswami Naidu & Co. v. CIT (1959) 35 ITR 594 (SC) has laid down test for coming to a conclusion whether a particular transaction is adventure in the nature of trade or not. Hon'ble Bombay High Court in the case of CIT v. Hima....
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....parties in consideration of money or money's worth where there is a risk of loss as well as chance of gain and these activities may be quite similar to the ordinary business. Hon'ble Courts in the cases Khan Bahadm Ahmed Alladin& Sons v. CIT (1968) 68 ITR 573 (SC), P. Mohd. Meera Khan v. CIT (1969) 73 ITR 735 (SC). Premji Bhimji. v. CIT (1971) 81 ITR 179 (Cal), CIT v. H. Holck Larsen (1986) 160 1TR 67 (SC) and CIT v. VA. Trivedi (1988) 172 ITR 95 (Bom) have held that it was not possible to evolve any single test or formula which can be applied in determining whether a transaction is adventure in the nature of trade or not. The answer to question must necessarily depend in each case as the total impression and effect of all the relevant factors and circumstances which determine the character of the transaction. The expression 'adventure in the nature of trade clearly suggests that the transaction cannot properly be regarded as a trade or business. It is allied to transaction that constitutes trade or business but may not be trade or business itself. It is characterized by some of the essential features that make up trade or business but not by all of them and so even an ....
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....see is engaged in the business of real estate thus, this condition is directly applicable as the plots were purchased with a sole intention of selling them on a profit instead of keeping the same for the long term. Since, the property was located in a well developed locality of the Jaipur city arid duly converted for residential purposes there is no need to incur any improvement expenses. What were the incidences associated with the purchase and sale and whether they are akin to the operations usually associated with trade or business? The sale of the plots is directly related to the business activities of the assessee. Are the transactions of the purchase and sale repeated? Yes, the assessee is regularly selling and buying properties. Ld. AO based on the above discussion and considering the parameters set by the Hon'ble Supreme Court in the afore mentioned case, the sequence of events leading to the eventual sale of the plots do not seem to help the cause of the assessee. The assessee purchased the plots under reference in 2012-13, 2014-15 & 2016-17 and sold the same in the year under reference. As the assessee is engaged in the business of real estate and prope....
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....erred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: Finding on cash deposit "4.3 I have considered the facts of the case gone through the submission and the paper book. It is seen that the assessee has maintained day to day books of accounts which are duly audited and has been accepted by the AO. The cash deposit is made in the regular bank account of the assessee. The assessee has explained the source of cash deposit as withdrawals made from the regular bank account in the month of August 2016 to September 2016. The appellant had submitted the cash balance position as under :- Month Opening Balance Cash Realization Cash Withdrawal from Bank Cash utilized Cash deposit in Bank Closing Balance Aug-16 11,17,717 - 27,00,000 6,55,210 - 31,62,507 Sep-16 31,62,507 - 54,00,000 2,45,175 - 83,17,332 Oct-16 83,17,332 12,500 27,00,000 5,25,538 18,25,000 86,79,294 Nov-16 86,79,294 - - 45,700 80,00,000 6,33,594 Total 32,500 1,08,00,000 16,64,513 1,16,25,000 &nb....
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....e AO in treating the profit on sale of the plots as business profit is rejected and the AO is directed to assess the gain on sale of these plots under the head capital gains as declared by the assessee. In the result this ground of appeal is allowed. Finding on deduction of house property 6.3 I have considered the facts of the case gone through the submission and the paper book. I find that in respect of rent from plot no. T-03, T-03A, T-04A, the assessee has agreed that the same should be taxed under the head income from other sources as this is rent from open land only. Therefore, the disallowance to the extent of Rs. 6,750/- u/s 24(a) in respect of rent from these plots is confirmed. So far as rent from property Sl. -05, 9,10 is concerned, I find that this rent is from building given on rent as evident from the rent agreement, water and electricity bills filed before the AO. Therefore the same has correctly been offered by the assessee under the head income from house property. Accordingly the disallowance of Rs. 30,000/- made u/s 24(a) is deleted. In the result, this ground of appeal is partly allowed. 5. Feeling aggrieved from the finding so recor....
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....r the cash book the position of opening balance, cash withdrawal from bank, cash deposited in the bank and the cash utilized by the assessee is as under :- Month Opening Balance Cash Realization Cash Withdrawal from Bank Cash utilized Cash deposit in Bank Closing Balance Aug-16 11,17,717 - 27,00,000 6,55,210 - 31,62,507 Sep-16 31,62,507 - 54,00,000 2,45,175 - 83,17,332 Oct-16 83,17,332 12,500 27,00,000 5,25,538 18,25,000 86,79,294 Nov-16 86,79,294 - - 45,700 80,00,000 6,33,594 Total 32,500 1,08,00,000 16,64,513 1,16,25,000 The AO has accepted the books of accounts of assessee maintained in the normal course of business. On the basis of these audited books of accounts he has assessed the income of the assessee. He has not disputed the cash withdrawals from the bank account. After considering this cash withdrawals the cash balance as per cash book is much more than the amount of cash deposited in the bank account. The AO has not brought any evidence to indicate that the cash withdrawal from the bank account has been utilized somewhere el....
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....rest is being charged, then there was no need to keep such huge cash in hand at home. Such reasoning dehors any contrary material on record that the cash disclosed in the books of accounts has been invested somewhere else, then on mere surmise assessee's explanation cannot be discarded. If assessees have genuine sources of income which are received through banking channels, out of which cash has been withdrawn and have been disclosed in the income tax return and in the balance sheet as cash-in-hand, then I am unable to apprehend how the provision of section 69A is applicable. Because the section can only be invoked where in any financial year the assessee is found to be the owner of any money, etc., which has not been recorded in the books of accounts and assessee offers no explanation. Here in these cases, Assessee's cash in hand duly stands recorded and source has been explained from the income deposited in the bank account and withdrawal, then in my opinion deeming provision of section 69A cannot be invoked. The reasoning given by the AO and Ld. CIT(A) is vague and based on surmise as to what a prudent person should have done. Once assessee has explained that being of se....
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.... non-fulfillment of purpose for which the cash was withdrawn, it was again re-deposited in the bank account during the year under consideration. In this regard, it is noted that the assessee in her return of income for A. Y 2016-17 has disclosed sale consideration on sale of plot of land for Rs. 1,31,45,200/- and offered capital gains to tax. The plot has been sold through a registered deed and the valuation has been determined at Rs. 1,31,45,200/- by the stamp duty authority. Thus, the sale consideration equivalent to stamp duty value has been duly disclosed by the assessee and there is no finding that the assessee has received any amount over and above the declared sale consideration. Therefore, given that the sale consideration has been received directly in the assessee's bank account, the source of cash withdrawals in the earlier two years has been clearly demonstrated by the assessee and we see no reason but to accept the said explanation which is clearly demonstrated through the sale documentation and tax filings by the assessee". Neeta Breja, New Delhi vs ITO ITA No. 524/Del/2017 order dt.25.11.2019 :- The Hon'ble bench at Para 12 of its order held as under ....
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....fferent dates during the assessment year under consideration. We have also examined the order of ld. CIT(A) and we find that his decision is based on facts on record and is supported by adequate reasoning and, therefore, we do not want to interfere with the order of ld. CIT(A) and accordingly we uphold the findings of the Id. CIT(A) sustaining relief granted to the assessee." 3. It is submitted that assessee has withdrawal the cash from the bank account as he was planning to start the project under 'Mukhya Mantri Jan Awas Yojna' but since the deal did not materialized, the cash was deposited back in the bank account. This explanation has not been accepted by the A.O on suspicion without bringing on record any material to show that cash so withdrawn has been utilized somewhere else. The department in its ground has taken an objection that when cash purchase of property was prohibited by law w.e.f. 01.06.2015, the explanation given by the assessee is not justified by ignoring the fact that assessee has nowhere stated that he has withdrawn the money for purchase of land. Further AO ignored the fact that when out of such cash withdrawal Rs. 18,25,000/- deposited in the....
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....g to certain decisions and thus treated the profit on sale of plots offered as Capital Gain as business income and made addition of Rs. 66,99,427/-. 3. The Ld. CIT(A) at Para 5.3, Page 19 of the order observed that the land shown as stock in trade are mainly big chunk of land whereas plots classified in capital assets are mainly small plots. The plots sold during the year are consistently sold under the head fixed assets in earlier years. This fact has not been disputed by the A.O. Whether plots sold represent stock in trade or capital asset is to be seen from the intention of the assessee at the time of purchase of the plot. The intention of the assessee is clear from the fact that same is regularly shown under the head fixed asset. The various cases relied by the assessee also supports his case. Accordingly he directed the A.O to assess the gain on sale of plots under the head Capital Gains. Submission: 1. It is submitted that whether the plot sold by the assessee represents stock in trade or capital assets is to be seen from the intention of the assessee at the time of the purchase of the plot. If the intention of the assessee at the time of the purcha....
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....- "Merely for the reason that assessee was into real estate business and involved in buying and selling of lands for profits, profit derived from sale of agricultural land cannot be brought to tax under the head 'income from business or profession". Further Hon'ble ITAT Ahmedabad Bench in case of Hitesh Kumar Ashok Kumar Vaswani Vs. JCIT 2017 157 DTR 167 held as under :- "Assessee having sold few plots during the relevant year out of the large land portfolio which was held for considerable time and shown as capital investment all along and has been subjected to wealth-tax, the land/property was held by the assessee as capital asset. Act of usage of borrowed funds by itself is not sufficient to substitute the declared intention of the assessee and alter the character of the asset substantially. Allegation of the revenue that land has been converted into non-agricultural land prior to its sale is of no effect. Such act can only be with a view to maximize the gain on sale of property by a prudent investor for which he cannot be faulted. No adverse inference is permissible on account of the land was made to a developer. What is relevant to determine t....
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....ing and buying properties Two separate portfolios have been made by the assessee. The properties situated in Jaipur is held for investment purpose whereas property mainly situated in Ganganagar is held as Stock in Trade. The properties situated in Jaipur was purchased in the FY 12-13 and the same is sold during the year and thus it is a separate transaction and the same cannot be linked with the business of the assessee. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resaleable The assessee is Engaged in the business of real estate thus this condition is directly applicable as the plots were purchased with the sole intention of selling them on profit instead of keeping the same for the long term. since the property was located in a well developed locality of the Jaipur city and duly converted for residential purpose there is no need to incur any improvement expenses The properties held as investments were acquired in the year FY 12-13 and the same is shown in the Fixed Assets at cost. No improvement has been subsequently done to improve the quality of these properties. What were ....
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....ead Income from Other Sources and thereby confirm the disallowance to the extent of Rs. 6,750/-. However, in respect of property at SI-05, 9 & 10, he held that from the rent agreement and water electricity bills filed before the A.O it is evident that the rent is form the building and thereby the disallowance of Rs. 30,000/- made u/s 24(a) is deleted. 4. It is submitted that during the year under consideration the assessee has earned rental income of Rs. 1,00,000/- in respect of constructed building at SI-05, 09, 10. This building is given on rent to Gurdeep Singh and Kulvinder Singh. Copy of the rent agreement in support of the same was filed to the A.O. In the return the same has been wrongly mentioned as plot rent instead of building rent. The Ld. CIT(A) after pursuing the rent agreement has rightly deleted the disallowance of Rs. 30,000/- made u/s 24(a) of the Act and therefore the order of CIT(A) be upheld by dismissing the grounds of the department. " 7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S. No. PARTICULARS Page No. Filed before AO/ CIT(A) 1. Copy of s....
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....the assessee to support the view of the ld. CIT(A). Thus, we do not find any merits in the ground no. 1 raised by the revenue and thereby the same is dismissed. 12. Ground no. 2 raised by the revenue challenges the action of the ld. CIT(A) in treating the sale transaction of property as business income of Rs. 66,99,427/- but as a Capital Gain, thereby ignoring the facts that nature of business of the assessee is 'builder/property developer' as declared in column 10(a) of the 3CD form. Here also that the ground of appeal of the revenue is merely raised based on the nature of business shown at column 10(a) of tax audit report filed wherein the assessee declared the nature of the business as builder / property developer and therefore, revenue pressing that whatever capital gain shown by the assessee also required to be taxed under the head business and profession since the assessee builder / developer of property. On careful perusal of the finding of the AO, submission of the assessee before the ld. CIT(A) and that of the finding of the ld. CIT(A) who has categorically given finding that the assessee has filed the details of the lands which are held as stock in trade and th....