TaxTMI 
TaxTMI 
1971 (8) TMI 84
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....rom one L. C. Jain for Rs. 1,50,000 in the joint names of Baijnath and Hari Shankor. The four purchasers contributed almost equally towards the purchase money. Thereafter, the plot of land was divided into about 95 plots of difterernt sizes. The plots were sold by auction on two occasions, one in 1947, and again inl 1950, and were sold to different parties resulting in a surplus being realised over the purchase price. The sale deeds were registered on various dates between 1947 and 1957, the first sale deed being registered or, October 6, 1947. It may be mentioned at this stage that in the year 1952, Ratan Lal died and his place in the group of joint purchasers was taken by his son, L. C. Jain. For the assessment year 1948-49, the Income-tax Officer taxed the surplus of Rs. 71,155 under the head "capital gains". But, subsequently, proceedings were initiated under section 34 of the Indian Income-tax Act for bringing to tax that surplus as business income. Proceedings were also initiated under section 34(1)(a) for the assessment years 1949-50 to 1951-52. These assessment proceedings were challenged by two writ petitions in this court, in respect of the assessment year 1948-49, on t....
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....o one or the other depending upon whether the conditions precedent exist upon which jurisdiction is founded. If he has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income for the year or to disclose fully and truly material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that assessment year or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, he should proceed with reference to clause (a). If notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act or that excessive loss or depreciation allowance have been computed he should proceed by reference to clause (b....
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....epartment for the assessment year 1954-55. Indeed, the final order was against the petitioner. A special appeal to a Division Bench lay against this order but having regard to the refusal of relief to the assessee it was not necessary for the department to appeal nor would it have been competent to do so. On this ground also, the plea of res judicata now raised before us must fail. The next contention on behalf of the assessee is that the notice under section 34(1) was in the form prescribed 'for the years before 1948 and, therefore, the notice was invalid. The submission is that the notice contained the words "definite information" according to the language of the section as it stood before it was amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948. Those words were dropped in section 34 consequent to the amendment. In our opinion, the argument proceeds upon a pure technicality without affecting the validity of the notice. It is said that the notice, for it to be taken as a valid notice under section 34(1)(a), should have contained a recital of the conditions contained in that clause; otherwise it cannot be known that those conditions were considered. That s....
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....r gains of any business, profession or vocation carried on by him. The expression "business" has been defined by section 2(4) to include "any adventure in the nature of trade". What is "an adventure in the nature of trade " has not been defined in the Act, but innumerable cases have arisen where the courts were called upon to decide whether the assessee had engaged in an adventure in the nature of trade. It has always been "a matter of impression" with the court whether a particular transaction is in the nature of trade or not. A host of considerations come into play, and they have been, if we may say so with respect, admirably set out by the Supreme Court in G. Venkataswami Naidu & Co. v. Commissioner of Income-tax. The case of the assessee before the Tribunal was that the land was purchased not with the intention of resale but in order to construct residential buildings for the members of the association of persons, that all the four persons agreed to contribute equally to the purchase price of the land and, therefore, each of them had equal rights in the land, that building plans were submitted to the Cantonment Board in respect of the construction of four residential bungalow....
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....ion, that the title of the land was doubtful and that difficulties in procuring material and undertaking the construction of the houses greatly discouraged the members from building houses for themselves and that there was no guarantee that the houses would be available for their personal residence. Apparently, the Tribunal found no material to support these allegations. Once the case set up by the assessee of a change in the circumstances is excluded, the matter acquires the merit of simplicity. Here, we have four persons coming together for the purpose of jointly purchasing land. It is a large tract of land, almost seven acres, situated within the cantonment limits of a town. They are men of disparate means whose annual income, according to the department and not disputed by the assessee before the Tribunal, was about Rs. 50,000 in the case of the most affluent among them and Rs. 5,000 in the case of two of them. Yet, according to the assessee each one of them must be taken to have intended to construct a residential building for himself over as much as about 1 3/4 acres of land. There is evidence that subsequently, Ratan Lal, whose annual income was said to be about Rs. 15,000, ....
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....s fixed at a nominal amount solely to facilitate division among the beneficiaries and was not determined by reference to the value of the land acquired. All the ordinary shares had been allotted in consideration of the conveyance of the land to the company and these shares had been continuously held by the original allottees or their representatives. Working capital had been provided by the issue to ordinary shareholders of preference shares for cash. Subsequently, the company created and allotted to persons other than the ordinary shareholders deferred shares in return for service which enhanced the value of the land. That eminent judge, Rowlatt J., held that the assessee-company had done no more than to provide the machinery by which the private land owners were enabled, under the peculiar circumstances of their divided title, to properly realise the capital of the property which they held in the lands in question and that, therefore, it was not income or the proceeds of trade. The decision turned on the consideration that the assessee-company had merely acted as a medium for enabling the owners of the land to dispose of their property. It could not be said that the assessee-comp....
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....at the transaction is an adventure in the nature of trade "would arise where a commodity is purchased and sub-divided, altered, treated or repaired and sold, or is converted into a different commodity and then sold. Magnitude of the transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture." In Saroj Kumar Majumdar which was also placed before us, the assessee, who was a prosperous businessman, agreed to purchase a plot of land with a view to building a residential house for himself and constructing a workshop. The land was under acquisition by the Government. After a year the assessee changed his mind and assigned his rights under the agreement to a third party at a profit. The Supreme Court held that in the absence of any evidence to show that the isolated transaction constituted an adventure in the nature of trade it should be regarded as on capital account. The facts make it clearly distinguishable. Another case to which we have been referred is Janab Abubucker Sait v. Commissioner of Income-tax. And that is also distinguishable. There, agricultur....