TMI Blog2013 (6) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... he land belonging to Schedule Tribe and converted the same to the residential nature from agriculture nature is not acceptable as the land in question was purchased by Shri Rama Gameti and the purchased deed was not doubted. The conversion of land for non-agriculture purpose was got done by Shri Rama Gameti who sold this land to M/s. S.S. Education Trust which is a separate entity registered with Assistant Commisioner, Devasansthan Vibhag, Udaipur. The said trust also enjoy the benefit of registration u/s 12AA and 80G and is a separate entity from the assessee. So it cannot be said that the assessee got any benefit by purchasing the land in the name of M/s. S.S. Education Trust, a public charitable organisation. Although AO mentioned that Shri Rama Gameti was a benamidar of the assessee and had it been so then the transaction of the land which should have been purchased by a Schedule Tribe only, could easily be cancelled by the administrative authorities but no such action has been taken. Therefore, AO only presumed that Shri Rama Gameti was a benamidar of the assessee and the land purchased was actually benami property of the assessee. Shri Rama Gameti deposited the amounts re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed to add, amend, alter or raise additional grounds of appeal. 4.0 The assessee prays for justice.'' 2.1 The Ground Nos. 1, 3 and 4 are general in nature, so they do not require any comments on our part. 3.1 The only issue remains for adjudication is in Ground No. 2 which relates to profit from sale of agriculture land. 3.2 The facts related to this issue in brief are that the assessee is engaged in transportation business and a search and seizure action was carried out at his residential and business premises on 03-09-2008. Thereafter, notice u/s 153A of the Income Tax Act, 1961 (hereinafter referred to as ' the Act' in short ) was issued to the assessee on 27-01-2009. In response to said notice, the assessee filed return of income on 6-04-2009 declaring an income of Rs. 4,17,920/-. In this case, no original return was filed as on the date of search. The Assessing Officer framed the assessment at an income of Rs. 1,20,16,000/- by making the addition of Rs. 1,08,47,912/- on account of capital gain accruing to Shri Rama Gameti on the transfer of residential land to assess the education trust by invoking the provision of Section 50C of the Act. The relevant finding has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Rama Gameti as below:- Date of sale deed Sq. ft Sale consideration as per sale deed Value adopted by Sub- Registrar Difference u/s 50C 15-07-07 58000 4,65,000 23,20,000/- 18,55,000 15-07-07 57996 4,65,000 23,19,840 18,54,840 15-07-07 57996 4,65,000 23,19,840 18,54,840 13-09-07 156880.8 9,92,000 62,75,232/- 52,83,232/- Total 330872.8 23,87,000 1,32,34,912/- 1,08,47,912 8.4 It deserves a mention here that the whole story is crystal clear in so far as Shri Manmohan Raj Singhvi is the actual seller and Shri Rama Gameti and Smt. Laxmi Bai Bhil who are the domestic servants of the assessee are merely name lenders for the transaction. Hence, the provision of Section 50C in respect of capital gain are to be invoked in the case of the assessee as it is more than clear that Shri Rama Gameti and Smt. Laxmi Bai are persons of petty means having no financial capacity to purchase said land in question lest sale the same. Accordingly , in view of above, the assessee vide this of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name. 8.8 As a part of post search inquiry bank statements of these persons were called for from the Bank. The Bank statement revealed that these accounts were opened just to purchase the land for S.S. Engineering College in year 2007 and the introducer of both these account is Singhvi family. The accounts reflect the money credited by Singhvi Family and withdrawn for purchase of land for S.S. Engineering College 8.9 From the above, it is to be inferred that Shri Manmohan Raj Singhvi has used his domestic servants as a medium for purchase and conversion of land for construction of Engineering College. This was necessary to purchase/ transfer loans belonging to scheduled tribes. 8.10 On perusal of seized material,it is gatered that M/s. S.S. Education Trust has purchased a total land of 3,30,872.8 sq. ft (converted area) from Shri Rama Gameti . This land was purchased by Shri Rama Gameti from various scheduled tribes land holders at the instance and funds provided by Shri Manmohan Raj Singhvi as he neither has any inerest nor financial capacity to carry out such purchase. After purchase, this agriculture land was converted into a residential one by Shri Rama Gameti again at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes of tribal. As per policy prevailing in 2007-08, only tribal can purchase the tribal land. Therefore, it can be said that to complete the project of . S.S. Education Trust, the assessee Shri Manmohan Raj Singhvi has purchased land in the name of his employee Shri Rama Gameti (who had no financial capacity to purchase this land as he was getting only salary of Rs. 600/- pm at the time of transactions). This fact was admitted by Shri Rama Gameti as stated above. Thereafter, the land was converted by Shri Manmohan Raj Singhvi in residential status and then the land was transferred to his trust namely, S.S. Education Trust. From the above, it is crystal clear that for these transactions, Shri Manmohan Raj Singhvi is the key person who provided his funds for this transaction in the name of his employee Shri Rama Gameti 8.13 Further, the assessee vide this office letter dated 25-11-2010 was required to furnish his explanation on the statement of Shri Rama Gameti. dated 25- 11-2010, in this regard, the statement of Shri Rama Gameti has also been provided to the assessee. The assessee has been also required to explain as to why it should not be treated that all the transactions pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust and rejection of the recitals in the deed? No question of law arises out of the Tribunal's order. Tribunal was correct in holding that the property was not a trust property. Whether the principle of res judicata or the rule of estoppel would be applicable? Neither of these principles was applicable to assessment proceedings, but the fact that the assessee included the income of the premises in his returns for several years after objecting to its inclusion in earlier year was a circumstance which the revenue was entitled to consider in the absence of any satisfactory explanation. Whether Income-tax authorities are entitled to look into the surrounding circumstances to find out the reality? Yes, the department is entitled to do so. ......It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise, it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleged to prove that it is so, ignores the reality. The transaction about purchase of wining ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to other conduct of the appellant as disclosed in her sworn statement as well as other materials on record an inference would reasonably be drawn that the wining tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Rama Gameti but in reality Shri Manmohan Raj Singhvi is the real beneficiary. Therefore, the capital gain amounting to Rs. 1,08,47,912/- is brought to tax in the hands of Shri Manmohan Raj Singhvi for assessment year 2008-09 on substantive basis as his undisclosed investment from undisclosed sources and protective addition is being made in the hands of Shri Rama Gameti for assessment year 2008-09.'' The Assessing Officer also reproduced the part of the statement of Shri Rama Gameti in para 8.7 and 8.11 of assessment order, for the cost of repetition the same is not reproduced herein. 3.3 The assessee carried the matter to the ld. CIT(A) and submitted that Shri Rama Gameti purchase the agriculture land admeasuring 3,30,872.8 sq ft at village Umarda as a business venture and for this he borrowed the funds partly from the assessee's family members and partly by unsecured loans. It was further stated that said agriculture land was registered in the name of Shri Rama Gameti and entire purchase consideration was paid out of the bank account. The said land was converted into non-agriculture land immediately after acquiring by Shri Rama Gameti in his name and all the formalities were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain in the case of Shri Rama Gameti, following factors were relevant. (a) He purchased agriculture land out of borrowed funds, (b) He got the agriculture land converted into non-agriculture land and (c) He sold the impugned non-agriculture land immediately after its conversion. 3.5 The assessee submitted to the ld. CIT(A) that on consideration of above factors and conduct of Shri Rama Gameti, it clearly emerged that the intention of Shri Rama Gameti at the time of purchase of land was not to hold it as a matter of pride of possession and enjoy its return but to sell it and earn profit and so it was clearly an adventure in the nature of trade for business venture of Shri Rama Gameti and profit arising therefrom constituted his business income. It was further submitted that the decision regarding purchase of land, its conversion and sale were independent decisions of Shri Rama Gameti and the assessee merely guided and helped him wherever necessary. Therefore, it would be quite erroneous to treat the assessee as beneficiary of land transaction. It was also stated that Section 50C of the Act is applicable for computing the capital gains on transfer of capital asset and where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of Rs. 5564680/- which as per the AO was taxable u/s 50C of IT Act, Further as per pages no. 125 to 129 of Annex. A-49 which is copy of sale dated 13.9.2007 executed between Sh. Rama Bheel and M/s S.S. Education Trust, the sale value of 156880.8 sq. ft. residential land was declared at Rs. 992000/-. The sale deed did not contain the copy of back pages where transactions of stamp valuation is recorded by the Sub-Registrar but considering the above three sale deeds the AO adopted the DLC rate @ Rs. 40 per sq.ft. and accordingly determined the DLC price of the land at Rs. 6275232/-as against declared sale consideration of Rs. 992000/-. The difference of Rs. 5283232/- on sale of this land was also believed to be taxable u/s 50C of IT Act as per the AO. The exact detail of sale deed, area of the land, sale consideration as per sale deed etc. is as under:- Date of sale deed Sq. ft Sale consideration as per sale deed Value adopted by Sub- Registrar Difference u/s 50C 15-07-07 58000 4,65,000 23,20,000/- 18,55,000 15-07-07 57996 4,65,000 23,19,840 18,54,840 15-07-07 5799 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per AO the statement of Sh. Rama Gameti which is forming part of this appellate order clearly established that Sh. Rama Gameti is the person having no means and actual fund provider to him was the assessee Sh. Manmohan Raj Singhvi. The AO further mentioned that in the village where such land was purchased, the land owned by the tribal and as per policy of Govt. such land can be purchased only by the, members of the ST therefore for purchase of such land to complete the project of S.S. Education Trust the assessee utilized the name of his employee Sh. Rama Gameti and accordingly the land was purchased in his name. The status of the land from agriculture to residential was also got converted through Sh. Rama Gameti and subsequently the land was shown to be sold by Sh. Rama Gameti to M/s S.S Education Trust. As per AO the assessee was the key person to provide the funds and who actually carried out such transactions and therefore addition u/s 50C was to be made in the hands of the assessee. The AO has also observed that a copy of valuation report dated 7.11.2007 was found and seized from the business premises of the assessee as per pages 44 to 45 of AS-10. Another copy of valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a capital gain. Reference has been made to the term 'adventure in the nature of trade1 as explained in the commentary "Law on income tax by Sampat Iyangar at page 958 Vol. 5, Edition-2". It is stated that Sh. Rama Gameti purchased agricultural land out of borrowed fund, got the agriculture land converted into non-agriculture land and sold such converted land to M/s S.S. Education Trust. It is stated that on consideration of above facts and conduct of Sh. Rama Gameti it clearly emerged that the intention of Sh. Rama Gameti at the time of purchase of land was not holding it as a matter of pride possession and enjoy its return but to sale it to earn profit. The appellant has placed reliance for such proposition of law upon the following case laws: i) Jankiram Bahadur Ram vs CIT, 51 ITR 21 (Hon'ble Supreme Court ) ii) G. Venkataswami Naidu Co. vs CIT, 35 ITR 594 (Hon'ble Supreme Court ) iii) Mrs. D.M. Alexender vs CIT, 22 ITR 379 (Mad.)\ iv) Mohd. Meera Khan vs CIT, 63 ITR 729 (affirmed by Supreme Court in 73 ITR v) Sawandas Devaram vs CIT, 150 ITR 576 (MP) vi) Neerja Bali vs ACIT 66 ITD 148 (Mum.) The appellant further submitted that sec. 50C is applicable for comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sale of such land was admittedly done at the instance and directions of the appellant and Shri Rama Gameti simply put his signature as and where required by the appellant. As regards the source of purchase of such land admittedly the financial arrangement were also made by the appellant by way of showing loans etc. The statement of Sh. Rama Gameti recorded by the AO itself is an enough evidence indicating that such land transactions were definitely made by the appellant in the name of Sh.. Rama Gameti. Such statement have never been retracted or rebutted by Sh. Rama Gameti. Even the appellant has not disputed the contents of such statement. The inquiries made by the AO and fact brought on record prima facie proved that the appellant carried out such transactions in the name of Sh. Rama Gameti and the effective control over such transaction was always exercised by the appellant by way of transactions in bank account, control over the land and financial management. Such finding also find support from the corroborative and surrounding circumstances discussed by the AO. It may be noted that it is unbelievable that a person earning income of Rs. 600/- per month will embark upon busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The important point to be noted is that though technically there is transfer of land from individual to trust but essentially such transfer -was within the four corners of family concerns including M/s S.S. Education Trust. The originate and the final point for such transaction was M/s S.S. Education Trust which is directly and indirectly manned by the assessee group. In this back ground the contention of the appellant that the transactions were of business nature and that provisions of sec. 50C will not applicable cannot be accepted. In this background there is no dispute on transfer of asset, no dispute on the sale consideration and cost of acquisition the action of the AO treating such surplus amounting to Rs. 10847912/- is confirmed. As regards the case laws referred and relied upon by the appellant it may be stated that the same are in different context and based on different facts, in. all such cases issue of such benami transactions is not involved as also the transactions are not within the same family/ concern therefore such case laws are distinguishable with the appellant's case. The addition of Rs. 10847912/- made by the AO substantively in the hands of the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of agriculture land into non-agriculture land. 3. Sale of non-agriculture land immediately after its conversion. 4. Regularity in buying and selling of land as evidenced from the return of income of Shri Rama Gameti for the assessment years 2010-11 to 2012-13. 3.10 The ld. counsel for the assessee stated that the impugned transaction was an adventure in the nature of trade. Reliance was placed on following case laws. 1. Janki Ram Bahadur Ram vs CIT, 57 ITR 21 (SC) 2. G. Venkataswami Naidu Co. vs CIT, 35 ITR 594 (SC) 3. Mrs. D.M. Alexander vs CIT, 22 ITR 379 (Ker.) 4. Mohd. Meerakhan vs CIT, 63 ITR 729 (Ker) (affirmed by SC in 73 ITR 735) 5. Sawandas Devram vs CIT, 150 ITR 576 (MP) 6. Addl. CIT vs Chikka Veerayya Lingaihm, 164 ITR 41 (Kar.) 7. Smt. Neerja Bala vs ACIT, 66 ITD 148 (Mum.) 3.11 It was further submitted that the impugned transaction was purchase and sale of a business asset and therefore, Section 50C of the Act was not applicable for computing profit from transfer of land. Accordingly no addition should have been made on account of difference between the actual sale consideration and value of land as per stamp duty valuation. It was contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved public charitable trust. The original transferor and the ultimate buyer of the property are totally separate persons. Therefore, the inference that there was a transfer within four corners of the family concern is factually wrong. It was further submitted that the addition in the assesee's case was not warranted. 3.14 In his rival submissions, the Ld. D.R. for the Revenue reiterated the observations made by the Assessing Officer and ld. CIT(A) and strongly relied on the order passed by the ld. CIT(A). 3.15 We have considered the submissions of both the parties and gone through the materials available on record. In the present case, it is noticed that that Shri Rama Gameti, an employee of the assessee raised the loans amounting to Rs. 22.85 lacs from the following persons. S.N. Name of the party Amount (Rs.) Remark 1. Shri H.S. Ametha 18,000 Cash 2. Smt. Kamla Mehta 18,000 Cash 3. Shri Sunil Mehta 18,000 Cash 4. Shri P.R. Bhandari 18,000 Cash 5. Shri Veni Ram 18,000 Cash 6. Shri Mohan Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. S.S. Education Trust after converting it into non-agriculture land and the assessee did not get any benefit from the land sold to M/s. S.S. Education Trust, a public charitable organisation. We therefore, are of the view that the Assessing Officer was not justified in holding that the land in question was a benami asset of the assessee and capital gain., if any, was to be assessed in the hands of the assessee. In the present case, when it has been held that the land in question was not related to the assessee at all, we do not consider it necessary to discuss as to whether the profit on sale of land should be treated as business profit in the hands of the assessee or provisions of Section 50C were applicable because the said facts are to be considered in the hands of the original owner of the land i.e. Shri Rama Gameti who purchased the land by raising the loans and sold the land to M/s. S.S. Education Trust and earned profit. We therefore, by considering the totality of the facts of the case as discussed hereinabove delete the impugned addition made in the hands of the assessee by the Assessing Officer and sustained by the ld. CIT(A). 4.0. In the result, the appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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