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TMI Blog2014 (9) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) in (i) holding that profit on sale of land amounting to Rs. 6,72,792/- is assessable under the head 'capital gains' instead of ''profits and gains of business or profession' (ii) deleting the addition of Rs. 2,95,99,571/- made on account of suppression of sale consideration of the land, and (iii) deleting the disallowance of Rs. 1,59,70,089/- u/s 40(a)(ia) of the Income-tax Act, 1961[hereinafter referred to as 'the Act'] 3. The assessee has filed cross-objection against the order of the CIT(A) in disallowing the expenditure incurred by the assessee towards the cost of construction of compound wall and also payment towards development fee to the concerned department. 4. Brief facts of the case are that the assessee, an indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In reply thereto, the assessee's legal representative filed a letter requesting to treat the return filed on 31-3-2009 declaring a total income of Rs. 6,06,32,187/- as the return in response to notice u/s 148 of the Act. During the assessment proceedings u/s 143(3) r.w. sec.147 of the Act, the AO required the assessee to furnish details of the transaction. As regards the transaction of sale of land to M/s.Chamundi Gold Hills Estate, the assessee's LR had filed a letter dated 26-3-2009 stating as follows: i Rs. 35,00,000/- paid to Jawahar Gopal and Rami Reddy towards cancellation of Original Agreement ii Rs. 3,01,00,000/- paid to Prakruthi Infrastructure and Development Company cancellation of subsequent Agreement. iii Rs. 17,59,322/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly relied upon the contents of the letter allegedly written by the assessee to his partner in which he has stated that he was dealing with properties with a view to convey them i.e. to partners by making them absolute owners thereof. The contents of the letter have been reproduced at page 12 of the assessment order. From the recitals in the letter, it is not clear as to whether the assessee was really carrying on the activity of adventure in the nature of trade or that these properties were considered as trading assets by the assessee. The CIT(A) has clearly held that these lands were held by the assessee as agricultural land for a period of more than 3 years. Further the Tribunal by order dated 7-3-2011 in ITA No.816/Bang/2010 in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities as adventure in the nature of trade. Only for the reason that the agricultural land previously purchased by the assessee were developed and plotted and sold at a huge price, does not mean that the assessee was carrying on the activities in an organized manner in the nature of business. As a prudent investor, the assessee started saving his investments in land in anticipation of good price on sale. This prudence of the late assessee cannot be equated with an object of indulging in adventure in the nature of trade. Because of the development of Bangalore city, like many other persons, the assessee also might have benefited by a windfall. The rise in price of the land surrounding big cities is a natural thing with which alone the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties set out in para.13 of the assessment order. We find that the CIT(A) has also recorded a finding that no TDS has been deducted while making payment but that the genuineness of the expenditure has not been doubted by the AO and that there is no evidence on record to suggest that this expenditure was not incurred. However, since we have already held that income from sale of land is to be taxed as 'capital gains' and not as 'income from business or profession', the provisions of sec.40(a)(ia) are not applicable. Therefore, this ground of appeal of the Revenue is also rejected. 6.3 In the result, the Revenue's appeal is dismissed. 7. As regards the cross-objection filed by the assessee, we find that the AO has disallowed the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheques. As rightly held by the CIT(A) and argued by the learned Departmental Representative, just because certain account payee cheques have been made to one person, it does not mean that these are attributable to construction of compound wall or that they are relatable to the improvement of land. The assessee has to explain with necessary evidence as to the reasons why payments were made much later to the sale of land. No details were furnished either before the AO or the CIT(A), nor did the authorities below examine as to whether there was a compound wall constructed by GK Associates during the relevant period and whether the payment to GK Associates as claimed by the assessee was towards such construction of the compound wall. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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