TMI Blog2010 (4) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of ₹ 70,000/- being unexplained investment in fencing. 3. The facts of the case are that search action under Section 132(1) of the Income Tax Act, 1961 had taken place at the residence of the assessee on 30-6- 1994. During the course of search, certain loose papers were found and seized. One of the loose papers showed the calculation of interest at the rate of 18% on an amount of ₹ 11 lakhs. During the course of search proceedings, in the statement, it was admitted by the assessee that the sum of ₹ 11 lakhs was paid in cash for the purchase of the land. The land was purchased for development. In the original assessment proceedings, the AO made the addition of the above amount of ₹ 11 lakhs as unexplained investment by the assessee. On appeal, the CIT(A) set aside the assessment order with the following directions: . I have perused the loose papers which were seized during the course of search and which form the basis of present addition. ON the loose papers the entry is from 1.4.1`994 to 30.3.1994, but the calculation shows that the interest has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 338 (Guj); ii) Krishna Textiles Vs. CIT, 310 ITR 227 (Guj) He stated that even if it is stated that the above plot of land was purchased by the assessee, but it was not in dispute that the purchase was made as stock-intrade. The assessee is in the business of development of real-estate. Therefore, any payment for the purchase of plot is revenue expenditure, and therefore, even if any addition is made, the deduction for the same would be allowed under Section 37. He also pointed out that the Amendment in Section 69C was w.e.f. 1-4-1999 and would applicable from Asstt.Year 1999-2000 onwards. The learned DR on the other hand relied upon the orders of the authorities below. 6. We have heard both the parties and perused material placed before us. We find that the Hon ble jurisdictional High Court in the case of Star Builders (supra) has held as under: Assuming but not accepting that some unexplained income has been invested in the construction, the fact remains that the business of the assessee is construction. If we add on account of unexplained income in the investment that will give rise to the cost of the construction and the result will remain the same i.e. zero . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the addition. He therefore submitted that the order of the CIT(A) should be reversed and that of the AO be restored. The learned counsel for the assessee, apart from relying upon the order of the CIT(A) has pointed out that the identical issue is considered by the ITAT in assessee s own case for A.Y.1996-97. In fact the AO also, while making the addition, on the basis of market value of the land has relied upon the findings of the AO for A.Y.1996-97. That in A.Y.1996-97, the addition made on similar basis has been deleted by the CIT(A) and the order of the CIT(A) has been sustained by the ITAT. He also submitted that at the relevant time, there was no provision for making the addition in respect of sale consideration on the sale of the property on the basis of prevailing market rate. The AO has not pointed out that anything over and above what was mentioned in the sale deed was received by the assessee. He therefore submitted that the order of the CIT(A) should be sustained. 9. We have carefully considered arguments of both the sides and perused the material placed before us. The CIT(A) has discussed the facts of the case in detail and after considering the entire facts delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/undeveloped, the explanation of the appellant cannot be disbelieved unless otherwise some contrary evidence are on record. The land sold at ₹ 4,50,000 for which the cost of Rws.3,25,985 has been worked out by the appellant cannot be said to be sold at undervalued price since profit retained comes to ₹ 1,24,0125 according to the calculation of the appellant. This profit margin of about 38% of cost cannot be treated as unreasonable. Further, the AO has accepted sale consideration in case of dr. Bharat Modi of ₹ 4,25,6000 for 1.68 Vigha developed land out of which ₹ 3,44,000 were towards development charges and ₹ 81,4000 as cost of undeveloped land. In the facts and circumstances of the case, I do not see any reason to deviate from the sale consideration received by the appellant of ₹ 4,50,000 in case of Shri Atul Dalmiya and the AO is directed to accept the same as declared. The addition made of ₹ 6,70,000 is therefore directed to be deleted. Thus, the CIT(A) has recorded the finding that the AO has made addition on the basis of guess work and there was no reason for deviating from the sale consideration actually received by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point and the ground no.1 of the Revenue s appeal is rejected. 10. Ground No.2 of the Revenue s appeal reads as under: 2. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of ₹ 7,11,330 being suppression of sale consideration of land sold to Smt.Ushaben Gandhi, after holding that the transaction in question had taken place only in the year relevant to AY 1998-99. While deleting the addition the ld.CIT(A) failed to appreciate the contents of agreement dated 28-6-1996 and ignored the contents of the letter dated 17-3-1997 of Smt.Ushaben Gandhi to the AO confirming that the possession of land in question was taken during the year under consideration. The transaction in question is clearly a transfer within the meaning of clause (v) of sub-section 47 of the section 2 of the I.T.Act. 11. We have heard both the parties and perused the material placed before us. The assessee had sold 2.65 vighas of developed land to Smt.Ushaben Gandhi. The possession of the land was handed over to her on 28-6-1996, but the sale deed was executed on 21-4-1997. The only dispute is whether the profit from such sale was assessable in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k-in-trade and not a capital asset. The Revenue has relied upon the definition of the Transfer within the meaning of section 2(47). However, this definition of Transfer is applicable in relation to capital asset and not stockin- trade. In view of the above, we respectfully following the above decisions of the Hon ble jurisdictional High Court, uphold the order of the CIT(A) and reject the ground no.2 of the Revenue s appeal. 13. Ground No.3 of the Revenue s appeal reads as under: On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the disallowance of interest expenditure of ₹ 1,48,204/- out of the development expenses claimed, eventhough the said interest expenditure was pertaining to the agricultural loan taken by the assessee for cultivation of land. 14. The AO has disallowed the interest on the ground that the assessee has borrowed the money for agricultural purpose. However, in this regard, the CIT(A) recorded the following findings: 4.2 . In the appellant s case, it is established that the borrowing has been used for the purpose of business and merely because of the fact that the amount was sanctioned for ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sale of the land on the basis of market value of the land. We have already considered the arguments of both the sides while considering Ground No.1 of the Revenue s appeal in A.Y.1997-98. For the detailed discussion in para-8 9, we uphold the order of the CIT(A) in this regard and reject Ground Nos.1 and 2 of the Revenue s appeal. 18. Ground No.3 of the Revenue s appeal reads as under: 3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the disallowance of interest expenditure of ₹ 2,17,245/- out of the development expenses claimed, even though the said interest expenditure was pertaining to the agricultural loan taken by the assessee for cultivation of land. 13. At the time of hearing before us, both the parties agreed that the Ground No.3 is similar to Ground No.3 in A.Y.1997-98. We have already considered the arguments of both the sides in this regard while adjudicating the assessee s appeal for A.Y.1997-98. For the detailed discussion in para-15, we uphold the order of the CIT(A) in this regard and reject the Ground No.3 of the Revenue. 14. In the result, the Revenue s appeals are dismissed. Order pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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