TMI Blog2016 (11) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... ant supporting evidences that the sale of agricultural land was an adventure in the nature of trade, therefore, we are not inclined to uphold the order of the Ld.CIT(A). - Decided in favour of assessee. - ITA No. 378/Rjt/2013 - - - Dated:- 28-11-2016 - Shri S.S. Godara, Judicial Member and Shri Amarjit Singh, Accountant Member Revenue by: Smt. Usha N. Shrote, Sr. D.R. Assessee by: Shri Vimal Desai, A.R. ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This assessee s appeal for A.Y. 2009-10, arises from order of the CIT(A)-II, Rajkot dated 27-08-2013 in appeal no. CIT(A)- II/Rjt/0226/11-12, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The assessee has raised following grounds of appeal:- 1.The order u/s. 143(3) is bad in law. 2. The Ld. Assessing Officer has erred in law as well as on facts in making addition of ₹ 40,60,707/- treating the gain from the sale of agricultural land as adventure in the nature of trade. The Ld. C.IT(A) has erred in confirming the said treatment. 3. The return of income declaring income of ₹ 21,55,337/- was filed on 18-10-2010. The assessee is an individual d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction made by the assessee are nothing but adventure in the nature of trade and the surplus arose as a result of this amount is a business profit. 4. Aggrieved against the order of the Assessing Officer, the assessee preferred appeal before the Ld. Commissioner of Income Tax(A). The Ld. Commissioner of Income Tax(A) has decided the appeal against the assessee and the decision of the Ld. Commissioner of Income Tax(A) is reproduced as under:- 6.12 After carefully reviewing the appellant's contentions, the assessment order and the other judicial decisions, I find that the principles laid down by the Hon'ble Supreme Court in the case of G. Venkatswamy Naidu Co. vs. (J1IT (supra) and P.M. Mohammed Meerakhan vs. CIT (supra) lay down the guiding principles for determining this issue. The other decisions are essentially, derived from the decision of the Hon'ble Apex Court. In this decision, the Hon'ble Supreme Court has stated as under:- As we have already observed it is impossible to evolve any formula which can be in determining the character of isolated transactions which come before the tax proceedings. It would besides be inexpedient to make any attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o lay down any general or universal test. The presence of all the relevant circumstances mentioned in any of them may help the court to draw a similar inference; but it is not a matter of merely counting the number of facts and circumstances pro and con; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction; and so, though we may attempt to derive some assistance from decisions bearing on this point we cannot seek to deduce any rule from them and mechanically apply it to the fact before us. In this connection it would be relevant to refer to another lest which is some limes applied in determining the character of the transaction. Was the purchase made with the intention to resell it at a profit? It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. There is no middle course and no half-way house. This statement may be broadly true and so some judicial decisions apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no intention whatsoever of enjoying this property as gricultural land. This points at the inescapable conclusion that the initial and only intention of the appellant was to sell this land and make a killing. 2. The appellant has been shown to be an agriculturist in the purchase deed. This may be true as per Government records. However, if the profile of the appellant is carefully scrutinized, by no iota of imagination can he be described to be an agriculturist. The appellant is essentially in the business of sale and purchase of land and finance. In fact, it has been mentioned by the A.O. in the assessment order that the appellant had never disclosed any agricultural income. Getting himself classified as an agriculturist is very similar to the famous case in Maharashtra of Shri Amitabh Bachchan declaring himself to be an agriculturist. 3. The appellant has sold the land after a short period often months. There has been a massive increase of about 800% in the price of the land within a very short span of time. There are two possibilities. Either the purchase price has been doctored or there are some exceptional circumstances leading to such an abnormal increase in price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he initial intention of the appellant and his subsequent conduct. Also, from the sale deed, it is obvious that the person to whom the land has been sold appears to be an agriculturist similar to the appellant, as discussed in para-3 above. The purchaser has purchased the land at ₹ 90 lakh, a staggering sum. The purchaser is also a resident of Ahmedabad of Vaishali Society, Satellite, Ahmedabad. In fact, the land has been jointly purchased by seven people in the same family out of which only two have been mentioned as agriculturist (Dhandho : Kheti). It is thus obvious that though the sale has been made to an agriculturist, it is only-a facade. 5. There has been a massive increase in the price of the land. The appellant purchased it for ₹ 11 lakhs and within a span often months the price shot up to ₹ 90 lakhs. There was no change in the productivity of the land, irrigation facilities and the crop patterns. In fact, as discussed earlier, hardly any significant agricultural operations were carried out on this land after purchase by the appellant. The only reason for this abnormal increase in rate is the shifting of TATAs and acquisition of land by GIDC for this pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tax planning may be legitimate provided it is within the framework of law (para 45). In the latter part of para 45, it held that colourable device cannot be a part of tax planning and it is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods . It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds on this aspect one of us, Chinnappa Reddy, J. has proposed a separate opinion with which we agree . The words this aspect express the majority's agreement with the judgment of Reddy, J. only in relation to tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges. Thus, it cannot be said that all tax planning is illegal/illegitimate/impermissible. ) Moreover, Reddy, J. himself says that he agrees with the majority. In the judgment of Reddy, J. there are repeated references to schemes and devices in contradistinction to legitimate avoidance of tax liability (paras 7-10, 17 18). In our view, although Chinnappa Reddy, J. makes a number of observations regarding the nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction is artificial or can be said to be a colourable device. Because there was a substantial gain in a relatively short period and the gain was shown to be exempt from taxation due to the asset sold being outside the purview of S.45, it cannot be said that this is a sham transaction. There are no attributes to label it as a colourable device or a sham transaction. The contention of the A.O. is therefore not held to be correct. 6.16 In light of the above discussion, the following conclusions emerge:- 1. The land sold is agricultural land as defined in s. 2(14). The gain on sale of this land is beyond the purview of capital gains. 2. The is an adventure in the nature of trade and the profits from the same are held to be business profits. 3. This is not a sham or colorable transaction. 5. During the course of appellate proceedings before us, Ld. A.R. contended that Ld. Commissioner of Income Tax(A) has erred in sustaining the addition made by the assessee on the reasoning that gain from sale of agricultural land is an adventure in the nature of trade. He also submitted paper book containing written submission, submission made before the Ld. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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