TMI Blog2007 (4) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... the process of urbanization. The only intention of the holder of such agricultural land under the circumstance is to maximize his realization from sale of such land. All along the holder of such lands looks upon the gain only as a capital accretion. The intention at the time of acquiring the land ( i.e., inheritance) and holding it thereafter is not to deal in real estate. In any case, the subsequent sale cannot represent adventure in the nature of trade. In the instant case, clearly, it cannot be said that when the assessee inherited the land in 1980, it had intention to undertake adventure in the nature of trade by becoming a dealer in lands. Similarly, at the time of getting the lands converted into non-agricultural lands also the only intention of the assessee to maximize his realization from disposal of a capital asset. To reiterate, the character of land firstly is ancestral and secondly there is no material to hold that prior to such sale transaction undertaken the assessee had undertaken any such dealing in sale and purchase of land. Therefore, there is nothing to infer that the assessee ever acquired the land to deal in the same as a businessman. Thus, in our view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of trade. The CIT(A) has since upheld the stand of the Assessing Officer and hence the present appeal before us. 4. Before us, the first and foremost grievance of the assessee is that the income-tax authorities have erred in holding that the impugned sale of land was in the nature of trade and not a transaction assessable under the head Capital gain . Needless to point out, if the activity of sale of land undertaken by the assessee is held to be adventure in the nature of trade, the income therefrom is assessable under the head Income from business , whereas if it is held as a sale of a capital asset simpliciter, the income therefrom is assessable under the head Income from capital gain . 5. The ld. Counsel for the assessee has drawn our attention to the paper book filed on behalf of the assessee wherein is placed the copies of returns of income for various assessment years starting from assessment years 1994-95 to 2001-02 to demonstrate that in the past in the case of this assessee, the income has been treated as falling under the head Capital gains . The ld. Counsel for the assessee submitted that the assessee inherited the impugned agricultural lands in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction possessing attributes of an adventure in the nature of trade. Reliance was placed on the reasoning articulated by the lower authorities in their respective orders in support of the case of the revenue. 8. We have carefully considered the issue in question with respect to the orders of the lower authorities, facts and circumstances of the case and rival contentions. The crux of the issue is as to whether the assessee could be said to be carrying on business of dealing in land. The factual contours relating to the controversy can be briefly understood as follows. The assessee by way of inheritance acquired certain agricultural lands in the year 1980. A portion of such agricultural lands was converted into non- agricultural lands by payment of development charges to the local Municipal Committee, Rewari. The land was thereafter sold by cutting it into smaller pieces of plots. The said activity has resulted in surplus in the hands of the assessee. The assessee contends that the surplus is assessable as a capital gain since it results from the sale of a capital asset. The revenue, on the other hand, contends that the surplus is assessable as business income for the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 and Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 (SC) and Saroj Kumar Mazumdar v. CIT [1959] 37 ITR 242 (SC), clearly brings out that what is of relevance is to cull out the dominant intention of the assessee in the transaction undertaken which resulted in the surplus sought to be taxed. We find it appropriate to extract a portion of the head note from the judgment of Hon ble Apex Court in the case of G. Venkataswami Naidu Co. ( supra ) as under : If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade. Cases of realization of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventure in the nature of trade. In deciding the character of such transactions several factors are relevant, such as, e.g., either the purchaser was a trader and the purchase of the commodity and its resale were allied to his usual trade or business or incidental to it; the nature and quantity of the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the assessment year 1969-70, the assessee had profits on sale of land, as in the past. The revenue treated the gain as income from business as against its stand of accepting the gain as capital gain in the past. The revenue contended so on the ground that the assessee, having sold the two plots originally in 1961, repurchased them in 1964 and ultimately again sold the plots in the previous year relevant to the assessment year 1969-70. The Hon ble High Court held that the amount of gain was to be treated as capital gain and not as business profits. The features which were noted with approval by the Hon ble High Court were, namely, ( i ) that the land was ancestral agricultural land of the assessee, ( ii ) that the repurchase of the plot only showed that the assessee was not a dealer in the past and was only disposing of its capital asset, and ( iii ) that the land was repurchased merely because it was adjacent to the land in which the existing plot of the assessee was standing. For all these reasons and the circumstances of the case, the Court held that the revenue did not discharge the burden of establishing that repurchase and the sale of two plots was adventure in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee converted his agricultural land into non-agricultural land and thereafter sold it, also demonstrate the desire to maximize his realization from the disposal of capital asset. The intention has to be gauged from the manner of acquisition of an asset. In the instant case, clearly, it cannot be said that when the assessee inherited the land in 1980, it had intention to undertake adventure in the nature of trade by becoming a dealer in lands. Similarly, at the time of getting the lands converted into non-agricultural lands also the only intention of the assessee to maximize his realization from disposal of a capital asset. To reiterate, the character of land firstly is ancestral and secondly there is no material to hold that prior to such sale transaction undertaken the assessee had undertaken any such dealing in sale and purchase of land. Therefore, there is nothing to infer that the assessee ever acquired the land to deal in the same as a businessman. 13. In view of the above discussion, in our view, the revenue has not discharged its onus to categorically prove that the dominant intention of the assessee was to embark on adventure in the nature of trade when the assessee sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the additions made by the Assessing Officer on account of under statement of sale price. The Assessing Officer after conducting certain verification exercise in the assessment year 2001-02 concluded that the assessee had sold the plots and executed sale deeds showing lesser amount of sale consideration than the actual sale consideration receipt. The difference has been assessed as income of the assessee from undisclosed sources. The additions have since been deleted by the CIT (Appeals) and therefore the revenue is in appeal before us. 17. Since the background facts and dispute leading to the aforesaid controversy is identical in the case of the three assessees, we, therefore consider it appropriate to take up for consideration the controversy by adverting to the fact position in relation to ITA No. 1347/Delhi/2005 in the case of Ram Saroop Saini, HUF pertaining to assessment year 2001-02. In this case the Assessing Officer has adopted the sale rate of the plots sold by assessee at Rs. 1,750 as against the sale rates declared in the sale deeds executed between the assessee seller and the purchasers. The Assessing Officer did so on the strength of the statements recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer in his assessment order. 20. On the other hand, the learned counsel for the assessee has defended the order of the CIT (Appeals) by placing reliance on the same. According to the learned counsel the entire evidence available with the Assessing Officer has been correctly appreciated by the CIT (Appeals) and that such evidence was not enough to justify the impugned addition. The learned counsel pointed out that the Assessing Officer did not allow any opportunity to the assessee to cross examine Shri R.D. Kataria, the property agent. The Assessing Officer was, therefore, not justified in relying upon the statement of property agent to infer that the assessee has received sale consideration over and above the amounts stated in the sale deeds ultimately executed. The learned counsel for the assessee also submitted at Bar that insofar as the assessments of the purchasers are concerned, the Revenue has not taken any action so as to bring to tax the consideration that has allegedly changed hands. On the aforesaid basis, it is therefore prayed that the decision of the CIT (Appeals) be affirmed. 21. On this aspect we have carefully considered the rival submissions. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld. We hold so. 23. Now we may consider the remaining five transactions in relation to which the Assessing Officer had in his possession copies of the alleged agreement to sell which showed higher sale rate than the sale rate recorded in the sale deeds ultimately executed. 24. To appreciate the factual contours in each of the five cases, we deem it proper to re-produce below the pleas of the assessee relating to the aforesaid as noted by the CIT (Appeals) in his order : 3.2 In the cases (viz. at Sr. Nos. 7, 10, 11, 12 13, ibid), where original/photocopies of Agreement to sell were in the possession of the Assessing Officer (wherefrom he came to the conclusion that though the rates as per Agreement to sell were Rs. 1,750, Rs. 1,880, Rs. 1,880, Rs. 1,750, Rs. 1,750 per square yard respectively, the sale deeds were executed at Rs. 1,100. The copies of such agreements to sell were obtained from the Assessing Officer in the form of remand report and were confronted to the appellant s counsel. In reply (Sr. Nos. 7,10,11,12 13, ibid), the appellant s version has been obtained and reproduces as under: Sr. No.7 : Sham Sunder Manoj Kumar : The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.5 of his order and the relevant portion is extracted hereinafter : The appellant s version in respect of Sr. Nos. 7, 10, 11, 12 13 reproduced above, is seen and discussed as under: Sr. No. 7 : Sham Sunder : The appellant s objection that first page of agreement is not signed by any of the parties to the transaction, wherein the alleged rate is quoted, is quite valid. The agreement deed is not affixed by any Court Fee stamp, and written on a simple paper. When the first page of agreement where the rate is quoted, is not signed by the parties, if makes the agreement meaningless and hence invalid. Such a document is not capable of being enforced. In his statement before the Assessing Officer, he refused having executed any agreement to purchase with the appellant and denied that signature on such agreement to sell was his. Sr. No. 10 : Yash Pal : Similarly, in respect of photocopy of agreement at Sr. No. 10, the document is on a simple paper and suffers from the same disqualification on its first page, where the alleged amount (rate) is written, viz, without a signature of any of the parties. This also loses the validity and hence is unenforceable. In statement b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (Appeals), namely ( i ) ultimate purchasers have not signed on the first page of the documents; ( ii ) that the documents have not been affixed with the requisite court fee stamp; ( iii ) the Assessing Officer did not possess the originals; and ( iv ) neither the Assessing Officer reported as to how the copies of agreements to sell came to his possession; all these factors have been considered by the CIT (Appeals) to hold that the evidence was not reliable. We are inclined to affirm the conclusion of the CIT (Appeals) on this aspects. Firstly it is a well-settled trite law that a mere photo copy of a document cannot be said to be reliable unless the originals of the documents are brought on record. For this proposition reliance can be placed on the case of Ms. Arati Bhargava v. Kavi Kumar Bhargava, 1999 (3) Civil Court Cases 377 (Delhi), Ramesh Verma v. Smt. Lajesh Saxena 1998 (2) Civil Court Cases 67 (MP) and Sachindra Kumar Ghos v. Prativa Devi 1983 (1) Rent Control Reporter 215 (Cal.). Moreover such documents have not been owned up by the respective purchasers and the assessee and therefore the CIT (Appeals) rightly held the same to be unreliable. Now inso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the assessment year 1996-97 to infer under statement of sale consideration. In order to appreciate the manner in which the CIT (Appeals) has decided the issue, we may refer to the following discussion made by him in the case of ITA 1344/Delhi/05 pertaining to assessment year 1996-97 by way of paras 3 to 5 of his order : 3. The Assessing Officer attended the appellate proceedings and was asked to let me have the evidence, which was being relied upon in support of the fact that the rate as per agreement to sell was higher. The Assessing Officer could not furnish any evidence relating to accounting year (assessment year) in appeal whereupon one could conclude that the rates as per sale deed were lower than the rates mentioned in the Agreement to sell if any. The Assessing Officer submitted that there were agreements to sell in view of its mention in the sale deed and a few were in the possession of the Assessing Officer. 4. The reliance by the Assessing Officer of an instance/instances of under-statement of sale consideration in assessment year 2001-02 in the assessment year 1996-97, would not help the Assessing Officer in proving the case in question on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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