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TMI Blog2015 (3) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... izure 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 incriminating materials were found. The learned Departmental representative further submitted that the assessee has purchased 6.855 cents of land from Shri T. V. Johnson, who is the assessee in I. T. A. Nos. 779 to 781/Coch/2013 for a sale consideration of Rs. 2,50,389. The assessee constructed residential house on the land so purchased. Subsequently the assessee sold the same to one E. B. Anilkumar, who is a non-resident Indian for a sale consideration of Rs. 55,04,000. The assessee has offered short-term capital gain for taxation. According to the learned Departmental representative, the assessee and her husband Shri Simon Varghese are non-resident Indians living in Kuwait. Therefore, they had no intention to reside in the house constructed by the assessee. The intention of the assessee in purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 learned representative, by no stretch of imagination, can be seen as an adventure in the nature of trade. 5. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee purchased the land from Shri T. V. Johnson on August 22, 1999. After holding the land for almost eight years the assessee put up the construction in the year 2007 by investing a sum of Rs. 48 lakhs. Thereafter, the building along with the land was sold to one Shri E. B. Anilkumar on September 5, 2008, for a sale consideration of Rs. 54,04,000. The question arises for consideration is whether the profit arising out of the sale of property is to be treated as business income or capital gain ? 6. We have carefully gone through the judgment of the apex court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. [1959] 35 ITR 594 (SC) 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. 8. The next ground of appeal is with regard to profit on sale of agricultural land. 9. Shri M. Anil Kumar, the learned Departmental representative submitted that the assessee during the year under consideration sold 164.57 cents of land at Mangalassery to one M/s. Manhattan Enterprises (Private) Limited. The assessee claimed that the property was agricultural land, therefore, not liable for capital gain. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural 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 Assessing Officer found that the profit on sale of land is business income. The Commissioner of Income-tax (Appeals) has not addressed this issue in the impugned order. If the assessee is herself engaged in the business activity in purchase and sale of land, then this Tribunal is of the considered opinion that the profit has to be classified as business income. The intention of the assessee at the time of purchase of the property needs to be ascertained. Though the assessee claims that the land was purchased during the assessment year 1996-98 the intention of the assessee to purchase land to such an extent is also not known. It is also necessary to find out whether the assessee has purchased by way of one single sale deed or by means of several sale deeds. It also needs to be ascertained whether the assessee has also purchased property in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illas 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 Rs. 1,94,00,000 according to the learned Departmental representative, the Commissioner of Income-tax (Appeals) is not justified in deleting the addition made by the Assessing Officer. 17. On the contrary, Shri Vishnuprasad B. Menon, the learned representative for the assessee submitted that the Assessing Officer mainly placed reliance on the so-called appraisal report prepared by the search team for estimation of profit. According to the learned representative, the construction of villas was not completed. According to the learned representative, all the villas are on the open land with foundation, as is evident from the sale deed. Therefore, according to the learned representative, the Commissioner of Income-tax (Appeals) has rightly deleted the addition. 18. We have considered the rival submissions on either side and also perused the material available on record. The Assessing Officer found that the assessee is engaged in the business of constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 accepting the claim of the assessee may not be justified. The Assessing Officer, as rightly claimed by the assessee, has mainly placed reliance on the appraisal report of the Department and the seized material. The seized material discloses 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 assessee also claims that earlier the land was cultivated with plantain, tapioca and pineapple, we find no reason to reject the claim of the assessee. It is also a fact that the subject land was classified as wetland in the records of the State Government. When the assessee is using the land for cultivation, this Tribunal is of the considered opinion that it cannot be a capital asset within the meaning of section 2(14) of the Act. The main objection of the Department is that the purchaser, viz., Manhattan Enterprises (Pvt.) Ltd., divided the land into housing plots by demarcation, it should be treated as capital asset. This Tribunal is of the considered opinion that the usage by the purchaser will not determine the character of the land in the hands of the present assessee. What is required is-to see whether the assessee cultivated the land or not ? On the basis of the materials available on record, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Rs. 14 lakhs to Shri T. V. Johnson on behalf of the assessee. The assessee instructed Shri T.V. Johnson to keep this amount for meeting the unforeseen expenditure. According to the learned representative, Shri E. P. Jose is a non-resident Indian and for the purpose of convenience, Shri T. V. Johnson kept the money in the locker of the bank which is nearer to his residence. According to the learned representative, the amount was disclosed in the cash flow statement filed before the Department. Referring to the statement made by the Assessing Officer on page 22, the learned representative submitted that the assessee, in fact, purchased the material to prove the source of the amount seized from the bank locker. Therefore, the Commissioner of Income-tax (Appeals) has rightly deleted the addition. 27. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the amount of Rs. 20,50,000 was seized from the locker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept in the locker would go to show that it is an unaccounted transaction between E. P. Jose and the assessee. No person would keep Rs. 20 lakhs in the bank locker nowadays if it is a real transaction. Therefore, it is for the assessee to explain how he came to the possession of Rs. 20,50,000 in cash and the circumstances under which it was kept in the bank locker. The normal human conduct and behaviour cannot be ignored while deciding the ownership of the money in question. Therefore, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) is not justified in deleting the addition. Accordingly, the order of the Commissioner of Income-tax (Appeals) is set aside and the order of the Assessing Officer on this issue is restored. 28. Now coming to the cross-objections filed by the assessee, the cross- objections are filed only to support the orders of the Commissioner of Income-tax (Appeals). In view of the decision of this Tribunal on the appeals filed by the Revenue the cross-objections become infructuous. Therefore, the same are dismissed. 29. In the result, the appeals filed by the Department are partly allowed and the cross-objections filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 sufficient funds, he could not have advanced funds to Shri T. J. Rajan and Smt. Pushpa Rajan. The learned Departmental representative further submitted that when the assessee was examined on December 15, 2011 ; he admitted that he was fully dependent upon his brother-in-law Shri Simon Varghese. The material found during the course of search and survey operation shows that the assessee is actively engaged in the day-to-day business transaction of Shri Simon Varghese. Shri Simon Varghese also admitted in his statement that he agreed to give a share of profit from the sale of villas constructed at Irinjalakkuda. According to the learned Departmental representative, when the assessee has no source of income, he could not have advanced such a huge amount to Shri T. J. Rajan and Smt. Pushpa Rajan. The assessee confirmed that the loans said to be given to Shri T. J. Rajan and Smt.Pushpa Rajan were free of interest. Shri T. J. Rajan also confirmed that he has not paid any int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajan 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 the assessee was transferring funds at regular intervals from his non-resident (external) account to the assessee's bank account. It is also an admitted fact that the assessee is looking after the real estate business of Shri Simon Varghese in India. The assessee also claims that his household expenses are Rs. 20,000 per month and he almost got Rs. 50,000 per month from Shri Simon Varghese. The funds transferred from non-resident (external) account of Shri Simon Varghese was regularly credited to the assessee's bank account. Apart from this, the assessee was also authorised to receive the sale consideration on sale of properties on behalf of Shri Simon Varghese. Therefore, the assessee had sufficient funds at his disposal to provide interest-free loans to Shri T. J. Rajan and Smt. Pushpa Rajan. In the circumstances, this Tribunal is of the considered opinion that there is no occasion for the Assessing Officer to treat the loans as bogus. Therefore, this Tribunal do not find a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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