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TMI Blog2013 (2) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 40(A)(3) of the Act. 3. On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in directing the A.O. to treat the amount of Rs.9,38,176/- as income from long term capital gain instead of business income without appreciating the fact that the assessee was found to have been regularly engaged in the business of sale/purchase of lands, plots of lands and other immovable properties." 3. Ground No.1 relates to addition of Rs.1,00,000/- and Rs.10,10,000/- made u/s 68 of the Act by the A.O. which has been deleted by ld. CIT(A). During the assessment proceedings, the A.O., on verification of books account of the assessee, found that assessee had taken deposits of Rs.1,00,000/- on 07.05.2007 from Bharat Gautambhai Patel of Bandhani and further deposit Rs.10,10,000/- was taken on 27.03.2008 from Shri Jigar Ajitbhai Patel. The A.O. further noticed that these deposits were shown by the assessee under the head Schedule 'B' to the balance sheet under the head 'sundry creditors' which should have been shown under the Schedule 'A' to the balance sheet under the head 'unsecured loans'. The assessee was requested by the A.O. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s examination it was found that the depositor had income of about Rs.3,00,000/- from agricultural and animal husbandry and he confirmed to have given the deposit of Rs.1,00,000/- to the assessee out of amounts given to him by Mr. Dhurubhai V. Patel of USA who is son of his uncle. Thus in his remand report the A.O. was of the view that though the identity and genuineness of the depositor is established but the creditworthiness was not found to be established. This remand report, however, was not acceptable to ld. CIT(A) as according to him the A.O. himself has stated that deposit of Rs.1,00,000/- was given by Shri B.G. Patel to the assessee out of the money which was received by him from Dhirubhai V. Patel of USA who is son of his uncle. The A.O. has not put any queries so far as this amount of Rs.1,00,000/- received by Shri B.G. Patel from Dhirubhai V. Patel of USA is concerned. The A.O. has not established that this amount given by Sri B.G. Patel to the assessee was not out of the money received by him from Dhirubhai V. Patel of USA. Ld. CIT(A) further found that the A.O. himself has stated in the remand report that on examination of Mr. Patel he found to have earned income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e copy of the sale deed dated 3rd June, 2009 in respect of plot sold to Shri Jigar A. Patel. The copy of the sale deed duly executed, confirmation of Shri Jigar A. Patel dated 08.08.2011, confirmation of Shri Balendra A. Patel and detail of earlier payments of Rs.10,10,000/- and final payment of Rs.2,00,000/- as made to the assessee through account payee cheques for purchase of above plot cannot be ignored while deciding the issue was the opinion of ld. CIT(A). The payment of Rs.10,10,000/- was made to the assessee vide cheque No.481971 drawn on ICICI bank dated 27.03.2008. This amount was from NRI account No.008501014581 of ICICI bank at Vallabh Vidyanagar. Ld. CIT(A) further found that balance amount of Rs.2,00,000/- was also paid to the assessee through cheque No.506361 subsequently. Thus, according to ld. CIT(A) in this case the transactions were made through cheques and hence genuineness of transactions cannot be doubted. Identification of the person was also there as the payment of Rs.10,10,000/- were made by Shri Jigar A. Patel to the assessee and thereby creditworthiness of the payer were also not doubtful. Ld. CIT(A) further found that assessee has filed confirmation lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. the assessee also used to sale the agricultural land and other immovable property etc. already purchased in normal course of business. Thus, as per the A.O., the assessee used to derive income from business of land development, purchase and sale of land and other immovable property etc. In the light of these instances, the assessee, during the course of assessment proceedings was requested by the A.O. to show cause as to why the purchase of land should not be treated as regular business purchase. The assessee was also specifically requested by the A.O. to show cause as to why the amount of Rs.21,80,000/- as referred to above and paid in cash for purchase of land should not be added to the total income u/s 40A(3) of the Act. However, as per the A.O. the assessee did not furnish explanation on this point inspite of sufficient opportunities being provided to him. In view of these facts and circumstances of the case, the A.O. held the purchase of above lands as regular business purchase of the assessee at par with the regular purchase of goods for trading by a trader and not investment in the land. Thus the A.O. held that in this case the payment of Rs.21,80,000/- as made in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsimiyaguda has not been debited by the appellant in the P&L A/C for the year under consideration. The A.O. has not brought out any specific findings on record which could establish that above land purchased was in the nature of business transaction except making some general remarks that the appellant was engaged in purchasing and selling of agricultural and non agricultural lands and hence the above purchase was in the nature of business transaction. The A.O. has not negated the claim of the appellant that above land purchased was not the asset as shown as per Schedule "E" of the "Balance Sheet". The A.O. has not been able to prove that the above particular land was as such stock in trade of the appellant and purchase of such land amount to business transactions. Thus disallowance of above amount of Rs.21,80,000/- u/s 40A(3) IT Act as made by the A.O. on the mere basis that the appellant is engaged in purchase and sale of plots is not correct. Even if it is considered that the purchase of above plot as made by the appellant is business transaction, in that case also the disallowance of above amount of Rs.21,80,000/- is not required u/s 40A(3) IT Act. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As the assessee did not reply, the A.O. treated this amount as business income. During the appellate proceedings before ld. CIT(A) when remand report was asked from the A.O. on this issue, the A.O. stated that the assessee was found to be regularly engaged in the purchase of agricultural as well as nonagricultural land and other immovable properties. As per the A.O. the assessee used to get the agricultural land converted in the non-agricultural land and small pieces of plots of land and then used to sale the plots to the customers. Thus, the assessee was deriving income from land development and converting the agricultural land into non-agricultural land. In the remand report the A.O. also observed as under:- "In the remand proceedings and on verification of the copies of sale deeds, copy of balance sheet as on 31.3.2003, statement of income and copy of receipt of return of A.Y. 2003-04 produced, it was found that the land under reference was purchased in March 1994 and the same was shown under the head fixed assets- sub head agricultural and non-agricultural land. Also the assessee had income from other sources only in A.Y. 2003-04. In view of the above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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