TMI Blog1961 (7) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the sale of oranges and gall-nuts is said to have approximated ₹ 3,000. The assessee says that he maintains no accounts. He did not file any return of income for the year 1948-49 within the prescribed time. After a number of reminders from the department he submitted on March 7, 1952, a nil return for that year. The assessee was then called upon by the Income-tax Officer to file his wealth statements; the response was a mere statement that he had no accounts and that he had given over his properties to his wife and children. His bank account, however, told a different tale. There were large deposits during the course of the year. On September 30, 1947, he withdrew a sum of ₹ 1,00,000, and he took this entire sum to Pakistan presumably to secrete it in that country. He himself admitted on one occasion that he deposited a sum ₹ 58,500 out of that sum in the Central Bank at Karachi and spent the rest on charities. With an assessee of that kind, whose strong point was neither strict regard for truth nor even consistency, the department was hard put to ascertain whether he had received any assessable income during the year of account. There was, however, one sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lands. The assessee's explanation that what he received was only ₹ 50,000 was neither cogent nor believable. Neither the officers of the department nor the Tribunal accepted the assessee's explanation. Before us, however, Mr. M.S. Venkatarama Aiyar, learned counsel for the assessee, contended that when the assessee stated before the Income-tax Officer on February 14, 1952, that he had received a sum of ₹ 50,000 from Narayana Pillai the statement was only partially true. According to learned counsel that amount was subsequently with drawn from the bank and paid over to Narayana Pillai who later paid the same amount back again on 10th and 12th May 1947. This explanation is too fanciful and thin to be accepted. We are of opinion that there were ample materials to justify the conclusion arrived at by the Tribunal and the department that the true price obtained by the assessee by the sale of the agricultural lands at Kichilipalayam was ₹ 1,07,500. The Income-tax Officer allowed a sum of ₹ 6,000 as having been spent for brokerage and other incidental charges; it is not contended that anything higher should be allowed. The result is that the assessee ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a matter to be regretted; but there is little doubt that they must have considered the matter and come to the conclusion that the transaction amounted to an adventure in the nature of trade. But whatever that may be having regard to the question referred to us, it is our duty to answer them. In coming to the conclusion that the profits made by the assessee were referable to an adventure in the nature of trade, the department relied on the following circumstances: 1. Even at the inception the assessee must have entertained the idea of selling the lands as the evidence of the broker and his letter to the assessee dated October 28, 1945, within two months of the date of the purchase would show; 2. The income received from the property being low when compared with the income received by the assessee from other properties it was not likely that he would have purchased the lands as an investment; 3. That the property had a potential value as house sites on account of its situation and subsequent events showed that it did have a value as building sites; 4. The assessee himself had indulged in the business of trade during the years 1943 and 1944 when he purchased gold and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the property even at the time of its purchase. 2. The second circumstance, namely, that the income from the lands was very low and it was unlikely at the assessee would have made the purchase as an investment has, however, some force; but one cannot say that circumstance is decisive of the question. Purchase of property in the shape of agricultural lands is ordinarily an investment. In the instant case the lands were situate very near the place of assessee's residence. A purchaser of agricultural lands does not always judge the wisdom of the transaction by the return he would get. Other considerations also prevail in the matter of such purchase, namely, the pride of possession of agricultural lands, security which is inherent in the investment of money in such property, etc. The fact that the income derived does not bear a proper proportion to the investment cannot, therefore, be taken as conclusive on the question. 3. The third of the circumstances relied on by the department is the potential value of the lands having regard to its location adjoining the town area. The Appellate Assistant Commissioner referred to the fact that subsequently the lands had been converte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the operations involved in the transaction are of the same character and carried on in the same way as those which characterise what is admittedly trade in the line of the business in question...It is the function of the Appellate Commissioners to decide on the facts proved or admitted before them, whether the evidence does or does not prove that there was an adventure in the nature of trade. It is a question of law, however, as to whether there was evidence to support their finding of fact. In making up their minds the Commissioners would consider such things as whether or not an organisation for carrying on the adventure was built up and whether steps were taken to mature the asset in question with a view to disposing of it and whether the transaction is associated with the kind of business which the person in question carries on and the nature of the asset in question. In dealing with this type of cases it is essential to bear in mind that either the transaction was an adventure in the nature of trade or else it was simply a sale and resale of an asset and therefore a capital transaction. In Saroj Kumar Mazumdar v. Commissioner of Income-tax [1959] 37 I.T.R. 242 (S.C.) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction amounted to an adventure in the nature of trade is the nature of the article purchased. As Lord Russel points out [1953] 34 Tax Cas. at 395: Among such features adverted to in previous cases reference may be made to such matters as these, viz., whether the article purchased, in kind and in quantity, is capable only of commercial disposal and not of retention as an investment or of use by the purchaser personally, e.g., aeroplane, linen, toilet paper, whisky, whether the transaction is in the line of business or trade carried on by the purchaser; whether the purchaser before resale has caused expense to be incurred in making the commodity more readily saleable, e.g., a ship converted before resale in to a trawler; whether the transaction is exactly of the kind that takes place in ordinary trade in which the resale requires a number of separate disposals: The property purchased by the assessee in the instant case is agricultural land which is a recognised form of investment. The circumstances to which we referred earlier do not conclusively show that the assessee had intended at the time of the purchase not to hold the property as owner but with the intention of selli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself did not produce any account books or vouchers to prove his income. In one year he admitted that he had received an income of ₹ 3,000. That would hardly justify an accumulated profit amounting to ₹ 40,000. The two sums of ₹ 1,000 and 4,000 which were deposited into the bank on March 17, 1948, were claimed by the assessee as the balance of the unspent money after his trip to Pakistan. At an earlier stage the assessee stated that he had spent the entire balance on charities. His evidence on this part of the case is prevaricating and unconvincing the Tribunal had ample materials to draw the inference that his agricultural income could not have been higher than ₹ 15,000. Deducting that amount from the deposit of ₹ 45,000 referred to above ₹ 30,000 would be income from other sources. There was ample justification for the Appellate Tribunal to sustain the addition. We answer the second question in the affirmative and against the assessee. Having regard to the fact that the assessee has failed in regard to his case as to the amount of consideration for the sale and that the second question has been answered against him we consider that he should be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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