TMI Blog1971 (8) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly brought to tax ? " The reference relates to the assessment year 1954-55, the relevant previous year being the financial year ending March 31, 1954. The assessee has been assessed in the status of an association of persons. On August 19, 1946, four persons, Baijnath, Hari Shanker, Panna Lal and Ratan Lal, jointly purchased a plot of land measuring 33,226 square yards from one L. C. Jain for Rs. 1,50,000 in the joint names of Baijnath and Hari Shankor. The four purchasers contributed almost equally towards the purchase money. Thereafter, the plot of land was divided into about 95 plots of difterernt sizes. The plots were sold by auction on two occasions, one in 1947, and again inl 1950, and were sold to different parties resulting in a surplus being realised over the purchase price. The sale deeds were registered on various dates between 1947 and 1957, the first sale deed being registered or, October 6, 1947. It may be mentioned at this stage that in the year 1952, Ratan Lal died and his place in the group of joint purchasers was taken by his son, L. C. Jain. For the assessment year 1948-49, the Income-tax Officer taxed the surplus of Rs. 71,155 under the head "capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether a case falls under clause (a) or clause (b) will not depend upon the point of time when the notice under section 34(1) is issued. It will depend upon whether the considerations leading to the issue of the notice are those mentioned in clause (a) or clause (b). The Income-tax Officer enjoys two distinct and mutually independent jurisdictions under section 34. He may resort to one or the other depending upon whether the conditions precedent exist upon which jurisdiction is founded. If he has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income for the year or to disclose fully and truly material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that assessment year or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, he should proceed with reference to clause (a). If notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain issue but to adopt the decision on that issue already rendered earlier by a court or competent jurisdiction. The contention which was raised before the Tribunal invited a fresh decision of the issue although on the same lines as that rendered in the writ petition. Moreover, Manchanda J. did not, while disposing of the writ petition, make any final order against the income-tax department for the assessment year 1954-55. Indeed, the final order was against the petitioner. A special appeal to a Division Bench lay against this order but having regard to the refusal of relief to the assessee it was not necessary for the department to appeal nor would it have been competent to do so. On this ground also, the plea of res judicata now raised before us must fail. The next contention on behalf of the assessee is that the notice under section 34(1) was in the form prescribed 'for the years before 1948 and, therefore, the notice was invalid. The submission is that the notice contained the words "definite information" according to the language of the section as it stood before it was amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948. Those words were dropped in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he affirmative. The second question referred by the Tribunal raised the point whether the surplus realised on the sale of land could be said to arise out of an adventure in the nature of trade. Section 10 of the Indian Income-tax Act, 1922, provides that tax shall be payable by an assessee under the head "profits and gains of business, profession or vocation" in respect of the profits or gains of any business, profession or vocation carried on by him. The expression "business" has been defined by section 2(4) to include "any adventure in the nature of trade". What is "an adventure in the nature of trade " has not been defined in the Act, but innumerable cases have arisen where the courts were called upon to decide whether the assessee had engaged in an adventure in the nature of trade. It has always been "a matter of impression" with the court whether a particular transaction is in the nature of trade or not. A host of considerations come into play, and they have been, if we may say so with respect, admirably set out by the Supreme Court in G. Venkataswami Naidu Co. v. Commissioner of Income-tax. The case of the assessee before the Tribunal was that the land was purchased no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly brought to tax. Now the Tribunal has found that after the purchase of the land no circumstances arose which could have compelled the assessee to part with the land. Evidently, it did not accept the case of the assessee that after purchasing the land the assessee found that it was cantonment land which the cantonment authorities could resume at any time without payment of compensation, that the title of the land was doubtful and that difficulties in procuring material and undertaking the construction of the houses greatly discouraged the members from building houses for themselves and that there was no guarantee that the houses would be available for their personal residence. Apparently, the Tribunal found no material to support these allegations. Once the case set up by the assessee of a change in the circumstances is excluded, the matter acquires the merit of simplicity. Here, we have four persons coming together for the purpose of jointly purchasing land. It is a large tract of land, almost seven acres, situated within the cantonment limits of a town. They are men of disparate means whose annual income, according to the department and not disputed by the assessee befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany was incorporated with the primary object of acquiring, managing and developing with a view to ultimately selling certain lands, in British Columbia which were held in trust for various persons who were interested therein as owners, joint owners or as trustees. The company had power to deal in other land, but it had not at any time exercised that power. The share capital of the company was fixed at a nominal amount solely to facilitate division among the beneficiaries and was not determined by reference to the value of the land acquired. All the ordinary shares had been allotted in consideration of the conveyance of the land to the company and these shares had been continuously held by the original allottees or their representatives. Working capital had been provided by the issue to ordinary shareholders of preference shares for cash. Subsequently, the company created and allotted to persons other than the ordinary shareholders deferred shares in return for service which enhanced the value of the land. That eminent judge, Rowlatt J., held that the assessee-company had done no more than to provide the machinery by which the private land owners were enabled, under the peculiar ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he incidental sale of uneconomical or inconvenient plots of land could not convert what was essentially an investment into a business transaction in real estate. And in Janki Ram Bahadur Ram our attention has been invited to the observation that a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. But it was also observed that an inference that the transaction is an adventure in the nature of trade "would arise where a commodity is purchased and sub-divided, altered, treated or repaired and sold, or is converted into a different commodity and then sold. Magnitude of the transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture." In Saroj Kumar Majumdar which was also placed before us, the assessee, who was a prosperous businessman, agreed to purchase a plot of land with a view to building a residential house for himself and constructing a workshop. The land was under acquisition by the Government. After a year the assessee changed his mind and assigned his rights under the agreement to a third part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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