TMI Blog2017 (9) TMI 1696X X X X Extracts X X X X X X X X Extracts X X X X ..... alwant Kumar whose statements were recorded later on and are on record. All the 7 persons have confirmed to have purchased the land ₹ 200/- per sq. yard and no defect in the same has been pointed out by any of the authorities below. We appreciate the submissions of the assessee Shri L.K. Gupta, that other purchasers of the land have not been examined by the AO and no step has been taken in this regard by any of the authorities below. Therefore, in such circumstances and facts of the case, the AO is not justified in taking the value of the land at ₹ 900/-per sq. yard. CIT(A) who has gone a step ahead to invoke the Provisions of Section 145(3) of the Act which was not even invoked by the AO and valuing the rate of sale of land at ₹ 600/- per sq. yard is without any material on record and purely on surmises and conjectures. Rate of sale of land adopted by the assessee is directed to be accepted. Therefore, capital gain as declared by the assessee is directed to be accepted. - Decided in favour of assessee - D.B. Income Tax Appeal No. 690/2008, D.B. Income Tax Appeal No. 830/2008 And D.B. Income Tax Appeal No. 123/2009 - - - Dated:- 5-9-2017 - Mr. K.S. Jhaveri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased has never declared the same as capital asset in its return and therefore treating it as capital asset is erroneous by the tribunal? 4. The facts of the case are that the appellant is an individual and filed his return of income for the relevant period declaring income at ₹ 15,37,334/- on 30.10.2001. During the relevant period the appellant disclosed capital gains to the tune of ₹ 14,52,490/-on sale of land known as Rose Villa scheme. The land in question was purchased in the year 1987 for ₹ 7.00 lacs in co-ownership by the appellant with his sons. This amount was reflected in the balance sheet of the firm for the relevant period. Subsequently the land was divided between the six co-owners on 31.3.1991. 4.1 The AO noted that prior to its division the co-owners had received a sum of ₹ 10.00 lacs on account of advance against agreement of sale of aforesaid land which was allegedly forfeited. In view of this the AO treated the value of land as Nil and brought to tax the entire sale consideration received by the appellant during the relevant period. The appellant claimed that the land was capital asset whereas the AO on the basis of surrounding ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed/accepted for purchase of aforesaid plot for ₹ 280000/- @Rs.1100/- per sq. yards. From the U.I.T., Bharatpur information regarding the rate of sale of land has also been gathered in respect of land situated in the vicinity of the Rose Villa Scheme i.e. Jawahar Nagar who has vide his letter no. 964 dt. 30.01.2004 and letter no. 2216 dt. 27.03.2004 addressed to ITO, Ward-1, BPR has confirmed the rates of sale of land for residential purposes was @Rs.1244/- per sq. yards and for commercial purposes its rate was @Rs.4110/- per sq. yards. These rates were for the F.Y. relevant to the A.Y. 2001-02. Though the rate of land is ₹ 1100/- per sq. yard as per statement recorded and Subregistrar, Bharatpur and more as per U.I.T., Bharatpur rates for adjourning land, considering the facts that the rates of plots may vary from situation to situation i.e. rates of land of plots located on roadside is greater than the rates of plots of inner side, the average rate of sale of land is taken @Rs.900/- per sq. yards as against @ ₹ 200/- declared by the assessee. Thus, total sale value of land will be worked out as under:- a.Total land area sold out 10051.40 sq. yard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediate effect. 6.2 As per records of the appellant no sale transaction of land situated at Rose Villa, Bharatpur was effected during the peirod 20.7.90 to 31.3.92. Though the appellant claimed that the date of sale of plots was extended and the advance of ₹ 10.00 lacs was not forfeited, yet documentary proof with regard to these claims weere not produced during the assessment proceedings. 6.3 The Total land at rose Villa area was 79,376 sq. Yards which was divided into plots of different sizes. The land of 34,376 sq. Yards was provided for space for road, park, school etc. As per the note submitted during the assessment proceedings for thge A.Y. 1996-67. Thus the net saleable land with the appellant and the co-owners was 45,000 sq. Yard. This land was later on divided among six co-owners wherein each co-owner was having the area of 7500 sq. Yard. It may be seen that right from beginning when the land was purchased by the appellant alongwith coowners their intention was to exploit it for the business purposes only. Their long term plan for using the land for entered into on 20.7.90 with Sh. Narendra Singh S/o Sh. Munshi Singh and others. In the said agreement the sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing sites supports the view that his intention was not to sell the land without conversion. In the circumstances, the Tribunal was not correct in holding that the assessee has not carried on an adventure in the nature of trade. 6.61 The Hon'ble Punjab Haryana High court in the case of Harbans Singh v/s CIT, Amritsar-l 132 ITR 77 on the identical facts has held as under:- Even a single venture may be regarded as a trade or business. When a person acquires land with a view to selling it later after developing it, he is carrying on an activity resulting in profit and the activity can be described only as a business venture. Where the person goes further and divides the land into plots, develops the area to make it more attraction and sells the land not as a single unit, as he bought it, but in parcels, he is dealing with land as his stock-intrade, he is carrying on business and making a profit. Held, that the transaction of the assessee amounted to an adventure in the nature of trade because soon after purchasing the land he developed it into residential sites and started selling the plots within two years of its purchase and the profit earned by the sale of the agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to get registered the entire land upto 31-3-92 the advance so rcceived of ₹ 10.00 lacs would be forfeited by the seller of the land. The sale agreement would stand cancelled with immediate effect. 7.2 As per records of the appellant no sale transaction of land situated at Rose Villa, Bharatpur was effected during the period 20-7- 90 to 3 l-3- 92. Though the appellant claimed that the date of sale of plots was extended and the advance of ₹ 10.00 lacs was not forfeited, yet documentary proof with regard to these claims were not produccd during the assessment proceedings. Shri Narendra Singh in his statement dated 25-3-2004 reiterated the fact that the ₹ 10,00,000/- were not returned to him by the appellant till date. 7.3 The copy of the statement was given to the appellant. The AR of the appellant during the appellate proceedings has filed a copy of undated letter (page 11 of the paper book dated 22.11.2004) from Sh. Narendra Singh. In this letter Shri Narendra Singh i stated that the money under reference was not forfeited. 7.4 The AR has not controverted the condition regarding forfeiture of the amount in the agreement dated 20-7-90. There is also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of CIT v/s Karm Chand Thapar Others reported in 222 ITR 112 wherein the Hon'ble Court as held that the amount initially not received as trading receipt can become a trading receipt subsequently . I have already held that the land under reference is stock-in-trade of the appellant. Therefore, in view of aforesaid circumstances the AO may examine the taxability of forfeited amount in the relevant assessment year when it was finally forfeited by the appellant and the coowners He must follow due procedure of law in this regard. 8. The 3rd grievance under this ground is against adoption of sale consideration of ₹ 900/- per sq. yard as against the amount shown by the appellant. During the assessment proceedings the AO noted that the appellant sold total area of Rose Vila land measuring 10051.4 sq. yard and the documents were executed showing value at ₹ 200/- per sq. yard. The Sub-Registrar (Stamp Duty) had taken the value of land at ₹ 1100/- per sq. yard and additional stamp duty was charged from the purchaser of the plot. The AO recorded the statement of Smt. Mithlesh Gupta who had purchased the Plot No. 21 in Ros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon ble ITAT Hyderabad in the case of Smt. K.Narasamma vs ITO 32 ITD 494 and quoted extensively from the said judgement in his submissions. 8.2 During the appellate proceedings the AR of the appellant filed affidavits from the following persons:- (i) Sh. Balwant Kumar S/o Sh. Om Prakash dated 26.6.2004 (ii) Sh. Gauri Shankar S/o Sh. Om Prakash dated 26.6.2004 (iii) Smt. Sandhya Bansal W/o Sh. Vijay Kumar Bansal dated 18.6.2004 (iv) Smt. Kusum Tiwari W/o Sh. Baijnath Tiwari dated 18.6.2004 (v) Sh. Baijnath Tiwari S/o Sh. Soni Lal Tiwari dated 18.6.2004 (vi) Smt. Mohini Bansal W/o Sh. Suresh Bansal dated 18.6.2004 (vii) Sh. Vijay Bansal S/o Sh. Kedarnath Bansal dated 18.6.2004 Since these were the additional evidences filed at the appellate stage, the copy of all the affidavits were sent to the AO for his examination i.e. this office letter No. 996 dated 3-1-2005 in terms of Rule 46A of the IT Rules 1962. The report of the AO in this regard was received vide his letter No. 3756 dated 24-3- 2005. The AO inter-alia reported that Smt. Sandhya Bansal, Kusum Tiwari, Baijnath Tiwari, Vijay Bansal and Smt. Mohini Bansal confirmed that they had purchased the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old at least to the rate of inferior quality plots sold by the UIT, Bharatpur. Hence, it is well established that market rate in Rose Vila colony is approximately ₹ 1100/- per sq yard. (iv) Assessee purchased 79376 sq. yard land for ₹ 7,00,000 in 1987. the land also includes one big kothi. From these facts assessee purchased above land ₹ 8.81 per sq. yard in 1987. (v) Assessee himself made an agreement of 79376 sq. yard land of Rose Vila with Sh. Narendra singh and others on 22-7-90 for ₹ 90.00 lacs. According to which rate of the land comes to ₹ 113.38 per sq. yard in the year 1990. this way value of the land inflated 12 to 13 times in 3 years. It is worthwhile to mention here that during the period 1990 no 2001 prices of the urban land has inflated substantially whereas the assessee claimed that there was no increase in the value of the land during the long span of 10 to 11 years. It s also surprise to note that in 10 years of the time value of the land not increased to twice whereas in three years value of the land has increased 12 to 13 times. (vi) Assessee filed affidavits from 7 purchasers which are all business men and are regularly fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down by the ld. AO that stamp paper was not purchased by the deponent is concerned, probably the ld. AO has little awareness of the fact, that firstly there is no strict requirement under the law that an affidavit has to be made on a stamp paper, it could well be on a plain paper. Moreover, simply because entries in the registers of the stamp vendor on respective pages were found signed by other persons in the name of executor, the affidavit would not become suspicious or forged. Your honour must not loose sight of the fact that the signatures have been attested by the notary public and it is only the ld. AO who can dare to adversely comment on a legal authority. In view of the above discussions and issue in hand, there is hardly any requirement to comment upon the further remakes given in the remand report, however, in fitness of the circumstances, we shall take this opportunity to further support our contentions placed in our written submissions as under:- (a) Regarding statement of Smt. Mithlesh Gupta your honour would note that we have made detailed arguments in our written submissions both on veracity of her statement and prejudicial attitude of the ld. AO who has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to the rate of land sold by the appellant during the relevant period. In order to arrive at any conclusion in this regard it would be necessary to appraise the surrounding circumstances, location of the land and related factors having effect on its rate. There is no denial of fact that the land under reference belong to the Royal Family of Bharatpur Riyasat. This is situated at National Highway near the city and close to Ghana Bird Sanctuary. The Circuit House and Bungalows of IAS and RAS officers are located in the vicinity of this land. The UIT, Bharatpur has developed a colony called Jawahar Nagar colony far away from this location where it has sold the plots of land @ ₹ 1240 per sq. yard during the relevant period. The appellant alongwith his sons purchased this land in 1987 and made agreement to sell it on 22-7-90 for a sum of ₹ 90.00 lacs. The rate per sq. yard was worked out at 113.38 in that condition. As per record the appellant divided the land in residential plots of various sizes provided space for road, school and other amenities. After such allocation naturally the total saleable area reduced from 79376 sq. yard to 45000 sq. yard. Yet the appellant alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Dhakeshwari Cotton Mills v/s CIT 26 ITR 775 (SC) pointed out that the AO is not fettered by technical rules of evidence and pleading and that he is entitled to act on material, which may not be accepted as evidence in court of law, subject, however, to the limitation that assessment cannot be made at pure guess work without evidence or material. The Hon'ble Apex court in the case of CIT v/s Durga Prasad (1971) 82 ITR 540 (SC) has pointed out that:- Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive by law . Hence, the test of human probability is applicable even to the courts. The probabilities in the surrounding circumstances regarding rate of land sold by the appellant during the relevant period are quite clear and apparent. The testimony of Smt. Mithlesh Gupta establishes the fact that the appellant had not sold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered in the case of Ranchi club, is far fetched. The AO has clearly made the direction for charging of interest. Therefore, the ratio of Hon'ble Supreme is not applicable in this case. This ground of appeal is hereby rejected. 7. The CIT(A) while considering the issue has confirmed the order of AO, however, tribunal while considering the ground observed as under:- 8. We have appreciated the facts of the case. The assessee with his five sons as co-owners has purchased the land measuring 42 bighas and 7 biswas situated at Bharatpur on 31-3- 1987. The assessee with co-owners entered into sale agreement dated 20-7-1990 with few persons i.e. Shri Narender Singh and others at a sale consideration of ₹ 90.00 lacs against which the assessee and the co-owners received an advance of ₹ 10.00 lacs which was to be forfeited in case the entire land is not registered within the stipulated period between 20-7-90 to 31-3-92. The land was not registered upto 31- 3-92 and the observation of the AO was that the said amount forfeited and accordingly the cost of the land of ₹ 7.00 lacs comes to Nil if the said ₹ 10.00 lacs credited to the cost of the land. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, was also observed by the AO. The Ao further observed that the impugned land was mortgaged from Smt. Pamila Singh earlier which was taken into possession by way of mort and later on purchased from smt. Pamila Singh on 31-3-87. The assessee has not filed the return ealth tax and therefore, the assessee had the intention to earn the profits. The agreement with Shri Narender Kumar etc. on 20-7-90 an thereafter the forfeiture was a tactic of the assessee to avoid the tax, was observed by the AO and in view of the decision of Hon'ble Supreme court of India in the case of Rajarameshawar vs. CIT 42 ITR 179, the AO considered the said activity as business activity of the assessee. 10, . Now the dispute before us is whether the land sold by the assessee has to be treated as stock in trade us 45(2) of the Act or a capital asset for the purpose of calculating the long term capital gain. In this regard, the assessee has brought on record that the said land was a disputed land on which there had been unauthorized encroachment by some person and it was a case of distress sale of the land and no real income over and above the consideration declared in the registered sale deed has been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be correct finding and are contrary to the facts of the case. The assessee can sell the trees, well etc. as mentioned hereinbefore to make the land in saleable lot and the intention of the assessee cannot be said to be of a business venture. The findings of the Ao that the assessee has not filed of the wealth tax return prior to 1995-96 and therefore, the said land is a stock in trade are against the facts of the case. Since the assessee has filed the wealth tax return from the assessment year 1995-96 and has been accepted by the Department and therefore, the findings of the Ao are not correct that the filing of the wealth tax return w.e.f assessment year 1995-96 was a transaction to divert the nature of the transaction. The AO has given the findings that the land mortgaged was taken into possession and then purchased and such lands are normally treated as stock in trade. This finding of the Ao is not accepted since such type of transaction does not prove the intention of the assessee at least in the present circumstances and facts of the case. The Ao has also given the findings that the assessee was having main source of income from sale of land, does not prove the intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information from UIT whose land is situated in the vicinity of the impugned land and as per the information from UIT i..e, a government body, the rate of the sale of the land was ₹ 1244/- per sq. yard and as per Sub-registrar, Bharatpur, it was ₹ 1100/- per sq. yard and the Ao has opted for ₹ 900/- per sq. yard and the ld. CIT(A) has treated the same at ₹ 600/- per sq. Yard. 13. The submission of the ld Counsel for the assessee Shri L.K. Gupta, Chartered Accountant that Shri Vijay Bansal has never stated that the land had been sold at a rate more than 200/- per sq. yard. The findings of the ld CIT(A) that as per statement of Shri Vijay Bansal, he has not mediated Smt. Mithlesh Gupta and the assessee, cannot be said to be correct findings since smt. Mithlesh Gupta herself had stated (page 8 9 of AO's order) that the transaction has bee mediatd through Shri Vijay Bansal. We have peursed the statement of Shri Vijay Bansal, who has submitted an affidavit of the transaction which has been entered as per the registration deed (PB 34). The statement of Shri Vijay Bansal by the Department at PB 35 to 38 clearly indicates that the transaction has been entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that other purchasers of the land have not been examined by the AO and no step has been taken in this regard by any of the authorities below. Therefore, in such circumstances and facts of the case, the AO is not justified in taking the value of the land at ₹ 900/-per sq. yard. The ld. CIT(A) who has gone a step ahead to invoke the Provisions of Section 145(3) of the Act which was not even invoked by the AO and valuing the rate of sale of land at ₹ 600/- per sq. yard is without any material on record and purely on surmises and conjectures. The ld. AR has relied upon decision of various Courts of law before the ld. CIT(A) and before us which has been taken into consideration and in such circumstances and facts of the case, the rate of sale of land adopted by the assessee is directed to be accepted. Therefore, capital gain as declared by the assessee is directed to be accepted. Thus Ground No. 1 to 5 of the assessee are allowed and the solitary ground of the Revenue is dismissed. 8. We have heard both the sides. 9. The transaction which has taken place and land which was sold ultimately was in the name of the assessee. However, this is always prerogative of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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