TMI Blog2012 (11) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... e has assailed the order of CIT(A) as above and submitted that qua Assessment Years 2006-07 2007- 08, the issue of validity of proceedings under section 153C r.w.s. 153A has been wrongly decided in favour of the Revenue. It has also been pleaded that qua all Assessment Years the CIT(A) should have treated the assessee s consideration received after disposing of its agricultural land as capital gains instead of limited relief granted qua A.Y. 2006-07 only. Further, levy of interest under section 234 A, 234B 234C has also been challenged in the assessee s appeals. 3. In Revenue s appeal for A.Y 2006-07, the case is that alike Assessment Years 2007-08 2008-09, the CIT(A) should also have treated the assessee s sale consideration returned as business income in stead of capital gains . 4. The Ld. Representatives for the party have reiterated the respective submissions raised in grounds. At the same time, the Revenue has defended the CIT(A) s order qua legality of Sec.153C proceedings initiated against the assessee. Since the parties are at variance in respective submissions, we frame the following two issues for our adjudication:- i) Whether the CIT(A) has erred in up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be an agricultural land till impugned Assessment Years. It had also filed returns declaring agricultural income as well in preceding assessment years. Vide notification dated 7th August, 2004, the land was converted to a prime residential zone by Urban Housing Development Board. These developments prompted the assessee to further develop the chunk of land above said, which was leveled and plots were carved out and sold through various sale deeds in the assessment years in question. The assessee chose to declare the consideration received in the returns . There is no strife between the parties that there was any over-statement or under statement by the assessee in disclosing the consideration money received from vendees. 7. In the assessment proceedings of all Assessment Years, the A.O. was of the opinion that the assessee s activity in developing the chunk of land, carving out plots and thereafter selling the same through various transactions had been wrongly treated as long term capital gains instead of business income . On the other hand, the assessee s contention after producing the details of land, its incorporation, extent of agricultural land and previous retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24th and 25th January, 2008(supra). We find that the assessee before us is M/s.Jeyachandran Industries Ltd. and search was conducted in the residential premises of Shri Jeyachandran (director) meanting thereby that the search was not conducted in assessee s premises, which culminated in S.153C proceedings in hand. Further, from the returns submitted and balance sheets available in the paper book for both Assessment Years, it is evident that the assessee had duly accounted in its current assets, the deposits made with scheduled banks which stood as ₹ 14,52,84,050/- as on 31st March, 2006 and ₹ 22,74,69,259/- as on 31st March, 2007 respectively. From panchnama prepared and documents seized, we find from the paper book that during the search , the department had found some receipts of fixed deposits (FD) deposited by the assessee in the scheduled banks to the tune of ₹ 22.70 crores, which resulted in issuance of S.153C notice to the assessee dt.15.5.08. The Revenue has not controverted the above said factual position. In the light thereof, it is evident that that the assessee s so called undisclosed income stood declared in the return accompanied by its ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment under section 153A merges into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the A.O.: (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search. There after, the conclusion of Hon ble Special Bench read as follows: 58. Thus question No.1 before us is answered as under: (a) In assessments that are abated, the A.O retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately; (b) (b) In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 304 ITR 194(Raj.) Baramathi Taluka S.D.P.S. Ltd Vs. ACIT 75 ITD 284(Trib-Pune) ITO Vs. Smt. Premlatha Manohar 69 ITD 248(Trib-Del.) ITO Vs. Remy Perfumes (P) Ltd. 32 ITD 398(Trib.-Mad..) ITO Vs. Botcha Guru Naidu 17 ITD 893 (Trib. Hyd.) ITO Vs. Omkarmal Ramhilas Ginning Pressing Factory 44 SOT 544 (Trib-Hyd) Rajesh Kumar Kabra Vs. ITO 93 TTJ 252(Trib. In the light thereof, A.R. prayed for acceptance of the appeal. 14. Opposing the submissions raised by the A.R, the D.R has strongly argued that for all the three impugned Assessment Years, consideration received by the assessee is liable to be treated as business income. In support, he also placed reliance on the following case laws: CIT vs. Khairagarh Timber Traders 137 ITR 346(MP)(1982) Hemchand Hirachand Shah Vs. CIT 206 ITR 55(Guj)(1995) D S Virani Vs. CIT 90 ITR 255 (Guj.)(1973) CIT Vs.R.Ramaiah 146 ITR 39(Kar)(1984) Smt Indramani Bai Vs. Add CIT 200 ITR 594 (SC)(1993) Raja J Rameshwar Rao Vs CIT 42 ITR 79(SC) 1961 Cherukuri Ramesh Vs. ACIT 132 TTJ 426(Visakha) 15. We have taken into consideration the rival contentions and also gone t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into such an agreement, the assessee had intended to sell that plot to the person who bought it ultimately or to any other person for a profit. It is obvious that at the time the agreement of purchase was entered into, the assessee had no definite idea as to whether the value of that land would go up in the near future. Whether there would be buyers of land at a higher price, and whether the land would be sold at the price agreeable to the assessee in the near future. It had however, committed itself to buy the land and made itself liable to an action of specific performance or in alternative for damages, by entering into commitments it made in the agreement. Though the managing partner of the assessee had stated that the assessee had intended to make profit if possible from the plot, the intention to earn profit by itself cannot be decisive as to whether a transaction is in the nature of an adventure which could be characterized as trade. A person may very well buy a plot or land with the idea of reselling the same a later point of time at a profit. When such a property is resold, the profit earned on that transaction is not to be regarded as business income solely on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority for a layout and after developing the land into laid out plots, the assessee sold the land through the City Lands Corporation. In this case it cannot be disputed, and it has not been disputed by the counsel for the petitioner-assessee that the land originally formed a capital asset, which was being used for the production of films and that the normal sale of such an asset can be treated only as a sale of capital asset or as a realization of an investment. However, Mr.K.Srinivasan, ld. Counsel for the assessee, would contend that the land in question did not continue as a capital asset, that it was transformed into a stock in trade when the assessee got the approval of the town planning authority for the layout, that the subsequent sale of the laidout plots will indicate that it was a sale of stock in trade and that, therefore, the sale proceeds can be treated only as income from an adventure in the nature of trade. The question is, whether there is any substance in the said contention put forward by the learned counsel for the assessee. We are not in a position to accept that the mere application for permission for the layout of the so-called surplus land and the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot by way of investment, but to trade in house sites. It is pointed out by learned counsel for the Revenue that the Tribunal has not considered all the aspects before holding that it was not established that the assessee intended to trade in house sites. We are of the view that this does not vitiate the conclusion reached by the Tribunal. In this context, it is worth while to notice the principle laid down by the Supreme Court that the Revenue should establish by positive evidence that the purchase and sale of the property by the assessee was with the view to earn profits through trading transaction. The circumstances relied on by the learned counsel for the Revenue only throw suspicion on the assessee s act of purchasing a property which did not immediately yield any income. But there are no materials to further prove that the assessee intended to indulge in a trading activity. Similarly, from the fact that the assessee converted the property into small house sites and after leaving space for roads sold the rest of the plots, the Revenue wanted to draw an inference that the assessee, even at the time of purchase of the property, had this idea of indulging in an adventure in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 199: (1988) 172 ITR 95(Bom.): TC12R 782. M/s.Jeyachandran 24 Industries Ltd. 13. This court in CIT Vs. Kasturi Estates (P) Ltd.(supra) explained the test to be applied to such cases thus: A sale of immovable property may possibly be a trading or commercial transaction, but need not necessarily be so if a landowner developed his land, expended money on it, laid roads, converted the land into house sites and with a view to get a better price for the land, eventually sold the plots for a consideration yielding a surplus, it could hardly be said that the transaction is anything more than a realization of a capital investment or conversion of one form of asset into another. Obviously, the surplus in such a case will not be trading or business profits because the transaction is one of realization of assets in investment rather than one in the course of trade carried on by the assessee or an adventure in the nature of trade. Coming to the case law cited by the Revenue (supra), we notice that in the case of Khairagarh Timber Traders; item was a lease and sub-lease leading to receipt of royalty income which was decided in favour of Revenue. In the case of Hemchand Hira ..... X X X X Extracts X X X X X X X X Extracts X X X X
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