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TMI Blog2019 (11) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... t appreciating that municipal value does not represent the fair rent which a property can fetch if let out. It is computed very mechanically by the corporation and is not revised periodically. 3. The order of Ld. CIT(A) may be vacated and that of the Assessing Officer be restored. 4. The appellant crave leave to add, alter, amend, and modify any of the above grounds of appeal." 3. During the proceedings before us, the Revenue filed the additional grounds and the same are extracted as follows:- "1. On the facts and the circumstances of the case, the Ld. CIT(A) was not justified in allowing the appeal of the assessee by ignoring the Explanation 2 of Section 2(47) of the Income-tax Act, 1961 wherein it was held that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of any agreement. 2. On the facts and the circumstances of the case, the Ld. CIT(A) was not justified in holding that the transaction of capital gain as declared by the assessee be accepted despite the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer made another addition on account of deemed income from let out properties at Rs. 5,35,641/-. Thus, the assessment was completed and the assessed income of Rs. 5,75,08,361/- against the returned income of Rs. 25,86,730/-. 7. The background facts relating to the above-said addition on account of 'Gevrai' land include that the assessee along with his wife purchased about 80 Acres 3 Guntha of land at Village Gevrai Taluka, Dist. Aurangabad. Out of that, the assessee purchased 32.15 Acres of land in the name his sons Shri Amit Jadhav and Shri Ajay Jadhav for a sum of Rs. 36,14,010/-. There is "Visar Pavati" (VP) found during search action in support of the sale. The relevant stamp paper was purchased on 01.02.2007. Bundle No.4, at pages 70 to 74 of the Paper Book contains the relevant Visar Pavati. The search resulted discovery of another agreement dated 02.06.2007 vide Bundle No.14 at pages 177 to 181 of the Paper Book. These agreements were registered between Shri Ajay Shivajirao Jadhav, Shri Amit Shivajirao Jadhav, and Smt. Meera Shivajirao Jadhav on one side and Shri Sanjeevkumar Harkchand Kankariyaon on the other side. Further, these parties sold the said land to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce amount was received in the year of registration i.e. assessment year 2011-12. The contents of para 2.8.1 to 2.8.8 are relevant in this regard. 10. In these paragraphs, the CIT(A) extracted the observation of the Assessing Officer as well as the written submissions of the assessee. The assessee defended that the transactions with regard to the sale of land that Gevrai is a capital gain transaction only and not the business transaction. Further, the assessee also submitted that the sale of transaction of the same is completed in the relevant year 2011-12. In para 2.8.3 of the CIT(A)'s order, the assessee narrated that he never offered any business income on account of sale of land in the past year or in the future. Therefore, as per the assessee, treating the transaction of sale of land as the adventure in the nature of trade, should not arise. Referring to Gevrai land in particular and the book entries thereof, assessee submitted that the said asset was originally shown in the books from the assessment year 2006-07 onwards as an item of "fixed assets" in the balance sheet. In support, the assessee furnished the 'balance sheet' for the assessment years 2006-07, 2007-08 etc. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing decision to sell. As against it, the Appellant has held the property in his balance sheet for a year and this is the Appellant's only transaction of the land trading. 2.8.8 In view of the above discussion, I do not find any material brought out by the learned A.O. to justify to hold that the transaction is 'adventure in nature of trade'. I hold that the transaction of capital gain be accepted as declared by the Appellant." 11. Regarding the other addition on account of deemed income from let out properties of Rs. 5,35,641/-, relevant facts include that the Assessing Officer noticed that the assessee lives in a row house 43/44, Himali Society, Erandwane, Pune. The Assessing Officer invoked the provisions relating to the Self Occupied Property and the ALV for other vacant properties and estimated ALV of the same at Rs. 5,62,892/-. Rejecting the assessee's offer of Rs. 27,251/- against the ALV, the Assessing Officer added the balance amount of Rs. 5,35,641/-. 12. In the first appellate proceedings, the CIT(A) confirmed the addition made by the Assessing Officer as per the discussion given in para 2.5.1 to 2.5.5 read with para 2.9.1 of the order of the CIT(A). For the sake o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Gains from Business or Profession on following points: a) GEORAI Land is held as Fixed Assets in the Books of Accounts. The audited accounts of various years are already placed on record, wherein, GEORAI land appears as Fixed Asset (and not as any stock-in-trade / Current asset). b) Real estate transactions executed in past and future years has been disclosed as Capital Gain by respondent assessee and the same is accepted by the I-T Authorities. (Details already submitted as Annexure-1 of Synopsis-1). c) Transaction by Mrs. Meerabai Jadhav (wife of respondent assessee, who was also the joint seller of GEORAI Land) has been disclosed as Capital Gain and the same has been accepted by the I-T Authorities. Copy of return of income and computation of income is attached herewith as Annexure-2. Respondent assessee in this regard is placing reliance on following judicial pronouncement (apart from one referred in earlier Synopsis) wherein it has been held that principal of consistency should be followed: i) CIT Vs. Quest Investment Advisors (P.) Ltd. - 409 ITR 545 (Bombay) Copy of above referred case is attached herewith as Annexure-4." 15. Regarding the rejoinder to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in the year under consideration. Therefore, relevant year for taxation of gains is A.Y. 2008-09 and not the A.Y. 2011-12 as admitted by the assessee. In the process, the Assessing Officer rejected the assessee's claim and the facts mentioned in the Visar Pavati that possession of land is not given to the buyer, the date of registration falls in the assessment year 2011-12 and the balance amount of Rs. 12,53,250/- was received in the assessment year 2011-12. 19. On the other hand, the case of the assessee is that 'Visar Pavati' clearly indicates that the possession of the land is with the assesseetransferor only. The date of registration is 23.04.2010 and it falls within the assessment year 2011-12. It is undisputed fact that the balance of Rs. 12,53,250/- is received by the assessee in the said assessment year only. The possession of the land is transferred to the transferee in that year after registration is done. 20. As per assessee, so long as the possession of the lands is with the assessee and not passed on to the buyer under 'Visar Pavati', the payment of 97.88% will not decide the year of taxation of the gains. With these divergent stands of the parties in the liti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2011-12 and paid the taxes as relevant to the said year. However, the Assessing Officer disturbed the year of taxation as well as the head of income. Stating that the assessee is a land trader, the Assessing Officer proceeded to treat these transactions on sale of land as an 'adventure in the nature of trade'. 24. Per contra, the case of the assessee is that the said land was consistently reflected in the books of account as fixed assets right from the assessment year 2006-07. The said claim of the assessee was undisturbed by the Assessing Officer over the years. As made out in para 2.8.3 of the CIT(A)'s order (extracted above), the assessee did not have the past history of trading in land. The Assessing Officer was also the wrong impression that holding period on the asset is only around 2 years and not above the 3 years. The principle of consistency was also relied upon by the assessee when it came to the taxation of the gains in the proper head of income. Thus, it is the claim of the assessee that the gains are taxable under the head capital gains only. 25. On hearing both the sides and examining the facts and the contents of para 2.8.6 of the order of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the character of such transactions several factors are treated as relevant. Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it ? Affirmative answers to these questions may furnish relevant data for determining the character of the transaction. What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold ? If the commodity purchased is generally the subject matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resaleable ? What were the incidents associated with the purchase and resale ? Were they similar to the operations usually associated with trade or business? Are the transactions of purchase and sale repeated ? In regard to the purchase of the commodity and its subsequent possession by the purchaser, does the element of pride of possession come into the picture ? A person may purchase a piece of art, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it. The presence of such an intention is no doubt a relevant factor and unless it is off set by the presence of other factors it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive ; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. We thus come back to the same position and that is that the decision about the character of a transaction in the context cannot be based solely on the application of any abstract rule, principle or test and must in every case depend upon all the relevant facts and circumstances." "2.8.7 The learned A.O. has not examined the fact, which would indicate the Appellant's intention at the time of purchase, whether he further developed the land, relevant factors affecting decision to sell. As against it, the Appellant has held the property in his balance sheet for a year and this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and not applicable to the case of the assessee. 18. On hearing both the parties and perusing the order of CIT(A), we find it relevant to extract the findings given by the CIT(A) at para Nos. 2.5.3 to 2.5.5 and the same reads as under : "Findings: 2.5.3 I have considered the facts and arguments of the Appellant. I find that the Appellant has total 9 properties. He has declared one property as self-occupied, two let out and six properties vacant. The Appellant has declared loss in the income from house property. The Appellant has adopted the municipal valuation as the NAV, however, the learned AO stated that according to the law, as amended by the Finance Act, 2002, the Appellant's case falls under section 23(1)(a) according to which, ALV should be the sum for which, the property might reasonable be expected to let from year to year. 2.5.4 Although I agree with the learned AO, however, I find that in Pune Municipal Area, property is levied u/s.127(1)A of the Maharashtra Municipal Corporation Act. The amount of the property tax payable is based on the Municipal Valuation Municipal valuation determines the Annual Rebatable Value (ARV) of the property on the basis of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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