TMI Blog2015 (3) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... inion that this is a sale transaction entered into by the assessee in her individual capacity. Therefore, there is no presumption that the assessee purchased the property with an intention to sell the same. The very fact that the assessee retained the property for eight years before construction shows that the assessee intended to possess the property as a pride owner. Therefore this Tribunal is of the considered opinion that the judgment of the apex court in the case of G. Venkataswami Naidu and Co. [1958 (11) TMI 5 - SUPREME Court] may not be applicable to the facts of the case. Hence, the Commissioner of Income-tax (Appeals) has rightly found that what is to be assessed is only capital gain and not any business profit. Hence, the order of the Commissioner of Income-tax (Appeals) on this issue is confirmed. - decided in favour of assessee. Profit on sale of agricultural land - no capital gain arose to the assessee on sale of such land as has been found by the Commissioner of Income-tax (Appeals) - Held that:- This Tribunal is of the considered opinion that when the land was maintained as agricultural land and coconut trees were cultivated on it, the land has to be treated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the profit on sale of the property. The assessee, however, claims that it is an anticipated sale profit and not the actual profit. When the assessee claims that it is only an anticipated sale profit, the Assessing Officer ought to have found out what was the actual sale consideration received on sale of villas.Therefore, this Tribunal is of the considered opinion the Assessing Officer has to examine the matter afresh. Since the Assessing Officer placed reliance on the appraisal report of the Department, the copy of the same shall be furnished to the assessee so as to enable the assessee to offer his comments on the appraisal report. Accordingly, the orders of the lower authorities are set aside and the issue of computation of profit on sale of villas at Irinjalakuda is remitted back to the file of the Assessing Officer. The Assessing Officer shall examine the matter afresh - Decided in favour of revenue for statistical purposes. Profit on sale of agricultural land - Commissioner of Income-tax (Appeals) has deleted the addition - Held that:- It is not in dispute that during the course of the assessment proceedings, the Inspector of Income-tax inspected the land on the instruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. Baskaran , JJ. For the Appellant : Shri M Anil Kumar, CIT DR For the Respondent : Shri Vishnu Prasad B Menon ORDER N. R. S. Ganesan (Judicial Member)- All the appeals of the Revenue relate to three independent assessees. The respective assessees have filed cross-objections. Since common issues arise for consideration, all the appeals and the cross-objections were heard together and are disposed of by this common order. 2. Let us first take appeal in I. T. A. No. 775/Coch/2013 in the case of Smt.Thankamma Simon. 3. Shri M. Anil Kumar, the learned Departmental representative submitted that the first issue that arises for consideration is profit on sale of villas at Irinjalakuda. According to the learned Departmental representative, there was a search and seizure operation at the residence of Shri Simon Varghese, husband of the assessee. Simultaneously, survey operation under section 133A was conducted at the business premises of M/s. Sion Land Developers and Builders, Chalakkudy and Irinjalakuda in which the assessee is a partner. According to the learned Departmental representative, during the course of search and survey operations several incrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain. 4. On the contrary, Shri Vishnuprasad B. Menon, the learned representative for the assessee submitted that admittedly, the assessee, has independent source of income. The assessee purchased the land on August 22, 1999, from Shri T. V. Johnson. The assessee constructed 2,210 sq.ft area of building on it in the year 2007. The assessee was forced to sell the property on September 5, 2008, for a sale consideration of ₹ 54,04,000. According to the learned representative, the cost of construction was ₹ 48 lakhs. However, the approved valuer estimated the cost of construction only at ₹ 43,52,000. According to the learned representative, merely because the assessee was a partner in Sion Land Developers and Builders it does not mean that the property purchased in her individual name also was for business purpose. The very fact that the land was purchased in the year 1999 and the same was sold only in the year 2008 after putting up construction in the year 2007 shows, according to the learned representative, that there was no intention to deal in real estate business at the time of purchase of the property. The subsequent sale of property, according to the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not purchased in the name of firm. The property was purchased in the individual name even though the assessee was a partner in a firm by name, Sion Land Developers and Builders. If the intention of the assessee was to trade in the land, then, the property would have been purchased in the name of the partnership firm. The very fact that the land was purchased in the individual name clearly shows that the intention was to keep the land as a pride owner of the property. After retaining the property for about eight years there was a capital accretion to the assessee and thereafter she constructed a residence on it by investing ₹ 48 lakhs. In the year 2008, the building along with the land was sold to one Shri E. B. Anilkumar. In these facts and circumstances of the case, this Tribunal is of the considered opinion that this is a sale transaction entered into by the assessee in her individual capacity. Therefore, there is no presumption that the assessee purchased the property with an intention to sell the same. The very fact that the assessee retained the property for eight years before construction shows that the assessee intended to possess the property as a pride owner. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the rival submissions on either side and also perused the material available on record. From the report of the Inspector of Income-tax it appears that coconut trees and teak wood trees were grown and there was also evidence of cultivation of other crops on the land. Moreover, the land was classified as wetland in the State Government records. The contention of the Revenue is that the assessee sold the land for developing the same as residential plot and in fact the purchaser had demarcated the land as residential plots. This Tribunal is of the considered opinion that when the land was maintained as agricultural land and coconut trees were cultivated on it, the land has to be treated as agricultural land. The mere fact that the purchaser has developed the plot into residential plots cannot be a ground for treating the land as non-agricultural land in the hands of the assessee. In other words, for all practical purpose, the land should be treated as agricultural land in the hands of the assessee. Therefore, no capital gain arose to the assessee on sale of such land as has been found by the Commissioner of Income-tax (Appeals). 12. The issue does not rests here in this case. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative, the assessee is not maintaining any books of account for construction. The cost of construction was referred to the District Valuation Officer. The District Valuation Officer estimated the cost of construction at ₹ 1,10,84,000. However, as per the seized material it was found that the assessee has spent about ₹ 1,94,00,000. The assessee has also confirmed the payment of ₹ 1,94,00,000. Therefore, the Assessing Officer has not placed any reliance on the valuation report filed by the District Valuation Officer. The assessee has constructed almost ten villas in Irinjalakuda. Construction of 10 villas cannot be for personal occupation of the assessee. Therefore, the Assessing Officer, by placing reliance on G. Venkataswami Naidu and Co. [1959] 35 ITR 594 (SC) found that the assessee engaged himself in the business of construction of villas and sale of the same and accordingly assessed the profit on villas was treated as business profit. However, the Commissioner of Income-tax (Appeals), without any reason, deleted the addition. When the assessee accepted that he paid ₹ 1,94,00,000 according to the learned Departmental representative, the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y finding as to whether the transaction has to be treated as business transaction or the gain is a capital gain. 19. The claim of the assessee before the Assessing Officer is that the profit arising out of sale of villas at Irinjalakuda is a capital gain. The Assessing Officer taking into consideration the number of villas constructed by the assessee and the number of transactions found that the assessee engaged himself in purchase and sale of properties. Therefore, the profit has to be treated as income from business. The Commissioner of Income-tax (Appeals) failed to consider whether the transaction is a business transaction or not ? Had the Commissioner of Income-tax (Appeals) found that further enquiry was required, he should have called for a remand report asking the Assessing Officer to examine further. The Commissioner of Income-tax (Appeals) being an officer having jurisdiction co-terminus with that of the Assessing Officer has to rectify the procedural error committed by the Assessing Officer by calling for the remand report. Merely because the Assessing Officer has not made further enquiry, this Tribunal is of the considered opinion that deleting the entire addition by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee cultivated plantain, pineapple, tapioca, etc. In fact, the Inspector of Income-tax inspected the land on the instruction of the Assessing Officer and found that the property was used for cultivation of pineapple. Moreover, the land was classified as wetland in the Revenue records. Therefore, according to the learned representative, the Commissioner of Income-tax (Appeals) found that it is an agricultural land; hence, the profit on sale of such land is exempt from taxation. 23. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that during the course of the assessment proceedings, the Inspector of Income-tax inspected the land on the instructions of the Assessing Officer and found that pineapple was cultivated on the land which is not disputed at any quarter. It is also not in dispute that the assessee has disclosed agricultural income from the above property. Though the amount shown as agricultural income is very paltry, the fact remains is that agricultural income has been disclosed. When the report of the Inspector of Income-tax discloses that the land was cultivated with pineapple and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the money should be assessed only in the hands of Shri T. V. Johnson and not in the hands of the assessee. According to the learned Departmental representative, when the materials available on record clearly show that the money was received by Shri T. V. Johnson on behalf of the present assessee and it was kept in the locker for the purpose of handing over the same to the assessee, the Commissioner of Income-tax (Appeals) is not correct in deleting the addition. 26. On the contrary, Shri Vishnuprasad B. Menon, the learned representative for the assessee submitted that out of three unsold villas at Kidangoor property, one villas was booked by E. P. Jose, Erumakkattuparambil House, Kalpparambu. An agreement was executed on January 8, 2010 between the assessee and the said Shri E. P. Jose. The assessee received ₹ 4 lakhs on the date of the agreement from Shri E. P. Jose and the said amount was handed over to Shri T. V. Johnson for meeting the unexpected expenditure in connection with the villa project. According to the learned representative, on February 6, 2010, Shri E. P. Jose paid another sum of ₹ 14 lakhs to Shri T. V. Johnson on behalf of the assessee. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s factual material and claim of the assessee, the Commissioner of Income-tax (Appeals) simply deleted the addition on the ground that it has to be assessed only in the hands of Shri T. V. Johnson. When the assessee specifically claims that there was an agreement and the amounts were received by Shri T. V. Johnson on behalf of the assessee in pursuance to the agreement, it is not known why this amount should be assessed in the hands of Shri T. V. Johnson. It is an amount received by Shri T. V. Johnson on behalf of the assessee and it was kept in the bank locker of Shri T. V. Johnson only for the purpose of handing over the same to the present assessee. Therefore, this Tribunal is of the considered opinion that in the absence of any satisfactory explanation for the earning of the amount or receipt of advance in pursuance to the agreement it has to be treated as income from unaccounted source. The very fact that the cash was received and kept in the locker would go to show that it is an unaccounted transaction between E. P. Jose and the assessee. No person would keep ₹ 20 lakhs in the bank locker nowadays if it is a real transaction. Therefore, it is for the assessee to explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental representative, the assessee has no independent source of income. However, he gave accommodation entries by giving cheques to make the transactions genuine to Shri T. J. Rajan and his wife Smt. Pushpa Rajan. Referring to the assessment order, more particularly pages 4 and 5, the learned Departmental representative submitted that the Assessing Officer extracted the money received from Shri Simon Varghese. According to the learned Departmental representative, the entire money received by the assessee is for construction of villas at Irinjalakuda. 32. The learned Departmental representative further submitted that from the funds provided by Shri Simon Varghese, the assessee provided an accommodation to Shri T. J. Rajan and Smt. Pushpa Rajan. The learned Departmental representative further submitted that on verification of the accounts it was found that the funds received by the assessee is not even sufficient to meet the cost of construction. Therefore, the assessee could not have given any loan to Shri T. J. Rajan and Smt. Pushpa Rajan. However, the payments were made by cheque to give a colour to the transaction as genuine one. When the assessee has no su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced by Shri Simon Varghese, through banking channel and the same were used for advancing to Shri T. J. Rajan and Smt. Pushpa Rajan, according to the learned representative, the Assessing Officer has no reason to doubt the genuineness of the transaction. The learned representative submitted that when the payments were received through banking channels, the assessee could not have made the payments without having any bank account. Therefore, according to the learned Departmental representative, the Commissioner of Income-tax (Appeals) has rightly found that there is no occasion for the Assessing Officer to treat the loan given to Shri T. J. Rajan and Smt. Pushpa Rajan as bogus ; hence he has rightly deleted the addition. 34. We have considered the rival submissions on either side and also perused the material available on record. The Assessing Officer treated a sum of ₹ 15 lakhs as bogus transaction out of the loans given to the assessee's cousin brother Shri T. J. Rajan and his wife Smt. Pushpa Rajan. It is an admitted fact that the funds were transferred through banking channel. From the assessment order it appears that Shri Simon Varghese, the brother-in-law of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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