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TMI Blog2020 (5) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of sale of property are in the nature of business and the assessee purchased all property under consideration with business intention. Further out of expenditure of Rs. 43,90,029/- claimed by assessee toward construction, the A.O. allowed only Rs. 21,95,015/-. 4. By the impugned order, the Ld. CIT(A) did not find any merit in the submission of assessee that the AO enhanced the scope of assessment. For income earned from transfer of assets Ld. CIT(A) upheld the finding of the AO that same is taxable as business income but the alternative plea of assessee that till the date of conversion of capital assets into business asset gain has to treated as capital gain as per provisions of section 45(2). Disallowance of expenditure was restricted to 40% by CIT(A) as against disallowance of 50% so made by the AO. 5. Against the above order of the ld. CIT(A), the assessee is in further appeal before the ITAT. 6. It was argued by the ld AR of the assessee that the AO issued notice u/s 142(1) dated 07/07/2017. As per notice case has been selected for limited scrutiny for "Large deduction claimed u/s 54B, 54C, 54D, 54G, 54GA" [PB Pg 9-10]. Details of documents supporting purchase an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since last 20 years, the same held as investment therefore, eligible to claim benefit of long term capital gains and utilization of capital gains for purchase of house U/s 54F of the Act. 9. On the other hand, the ld DR has contended that the property on sale of land to a construction company were in the nature of business transaction, therefore, liable to tax as business income. 10. We have considered the rival contentions and carefully gone through the orders of the authorities below. We have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld AR and DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that during the year under consideration the assessee declared long term capital gain earned on following immovable properties under capital gain head while filing return of income: S. No. Property Description Sale Consideration Value taken by AO 1. Fateh Royal Residency Plot G-4 13,50,000 15,72,750 2. Fateh Royal Residency Plot A-5 10,00,000 10,41,554 3. Fateh Royal Residency Plot B-4 10,60,000 12,18,300 4. Fateh Royal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not merely realization of investment in capital assets. The basis of the conclusion drawn by Ld. CIT(A) is factually incorrect. Finding recorded by CIT(A) at page 13-14 in Para 6.3. 13. The intention of assessee at the time of purchase of property and Time period of holding of property not at all considered by the AO in determination of nature of transaction under consideration. Further to this AO observed that there was no urgency for the sale of the property under consideration. This fact again contrary to the facts on record. Assessee and his brother purchased different residential property at Bengulure and substantial amount has invested in this property out of sale proceed of property under consideration. It is pertinent to mention here that for the capital gain earned out of sale of these capital assets assessee claimed exemption u/s 54F for investment in residential property at Bengaluru. Further residential property purchased at Bengaluru was for personal use of assessee and not merely a capital investment. 14. In its order, the ld. CIT(A) after holding that purchase of property as capital asset, assigned only one reason in treating the plotting of land as 'Adventure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is being planned, and sold together, at no stage the huge property of the assessee or his family members was used for personal purposes, and the intention was to gain profit only. Inter alia with this, it was concluded, that the transaction was in the nature of trade. ... ... 11. Coming to the G. Venkataswami Naidu and Co.'s case [1959] 35 ITR 594 (SC), the facts of that case were telling, inasmuch as, the assessee was the managing agent of the company, the mill, to whom the land was sold, and the land was situated adjoining the mill, a total land measured 5 acres 26 cents, and was purchased by four sale deeds dated October 25, 1941, November 15, 1941, June 29, 1942 and November 19, 1942, and after about 5 years it was sold in two lots to the mill, on September 1, 1947 and November 10, 1947. By this transaction, the assessee earned the profit of Rs. 43,887 and odd. On these facts the Tribunal and High Court had found the transaction in question being an "adventure in the nature of trade", correctness of which view was challenged before the Hon'ble Supreme Court. The expression "adventure in the nature of trade" is defined in section 2(4) of the Act, and the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecemeal, by earmarking plots, but then nonetheless it would remain a disposal of the capital asset only, and not a transaction of any "stock-in-trade" so as to be described as "adventure in the nature of trade". Obviously therefore, it is liable to be taxed only, as the capital gain." 15. In the case of Ramswaroop Saudagar vs ITO [ITA No 329/JP/2017] relied on by the CIT(A) only factual similarity is that conversion of land into plots. Otherwise facts that holding period, intention of purchase and sale of property as fund were required for purchase of residential house property at Bengaluru were not at all considered by Ld. CIT(A). Further to this the Judgement in the case of Ramswaroop Saudagar vs ITO [ITA No 329/JP/2017] is contrary to the judgement of Jurisdictional High Court of Rajasthan in the case of CIT vs Sohan Khan (supra). On the similar facts as were in the case of Ramswaroop Saudagar (supra) Hon'ble Rajasthan High Court in the case of CIT vs Sohan Khan (supra) held transaction taxable as capital gain. 16. In view of the above discussion, we can safely conclude that the land was purchased by the assessee since long back as capita asset and was continuously hold by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Submission made had been reproduced by the Ld. AO in the assessment order (page 16 of assessment order). Therefore finding recorded with reference to non production of documentary evidences is grossly erroneous and contrary the material available on record. With reference to non reflecting of entries in bank statement on voucher to voucher and day to day basis was that for multiple invoices/ expenditure payment was made through single cheque. A detailed submission showing each payment from bank account towards nature of expenditure and documents detail thereof [PB 33-46 (36-38), 56-66] were produced/ submitted before Ld. AO. Going through such detail your good self will observe that all payment referred therein are not in next year. The submission of the assessee was that payment of multiple invoices was made through one cheque and at different date than of invoice. A detailed chart about the expenditure claimed and payment thereof through bank has been submitted during the assessment proceeding." 19. It is clear from the findings of the ld. CIT(A) that he has totally discarded the observed of the A.O. for non-production of documentary evidence in support of the expenditure. H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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