TMI Blog2022 (9) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... t from transactions involving lands. The income earned is towards his personal involvement and for time contributed. There is no transfer of capital asset by the assessee. For this reason too the income earned by the assessee cannot be said to be capital gains. It is evident from the bank account, the amounts invested by Shri. Dharmeshbhai Patel (SDP) and 90% the profit made on two transactions is remitted to his account. Shri. Dharmeshbhai Patel (SDP) has disclosed the profit made from these two transactions in his return of income under the head Business Income which is accepted u/s 143(3) - Since the 90% of the profit arising from these transactions has already been taxed as Business Income by the Department. Principles of uniformity demands that the balance 10% also to be taxed as Business Income in the hands of the assessee. - Decided against revenue. - ITA No.145/SRT/2017 - - - Dated:- 16-9-2022 - Shri Pawan Singh, JM And Dr. A.L. Saini, AM For the Assessee : Shri Aditya B Nemani, C.A For the Respondent : Shri H.P. Meena CIT-DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the fact that the both the lands were purchased vide registered documents on 04.12.2006 for Rs.7,79,000/- and Rs.10,35,000/- including stamp duty by the assessee himself vide cheques as clearly evidenced by the purchase deeds dated 04/12/2006. vi) The Hon'ble CIT(A) erred in not appreciating the fact that the assessee had deliberately not disclosed the sale of the two lands in the original return of income when the sale was effected before the filing of the return and reflected the same as business profit in the revised return after receiving notice u/s 143(2) to avoid capital gain tax and continuously changed his stand with regard to incidence of tax without providing supporting documentary evidences. vii) On the facts and circumstances in the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld. CIT(A)-3 Surat may be set-aside and that of the Assessing Officer s order may be restored. 3. Briefly stated, the relevant material facts are as follows. The assessee before us is an individual and has filed his return of income on 22.11.2011 declaring total income at Rs 62,16,890/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He further pointed out that assessee had deliberately not disclosed the sale of the two lands in the original return of income when the sale was effected before the filing of the return and reflected the same as business profit in the revised return after receiving notice u/s 143(2) to avoid capital gain tax and continuously changed his stand with regard to incidence of tax without providing supporting documentary evidences. Therefore, ld DR prays the Bench that order passed by the assessing officer may be upheld. 6. On the other hand, Ld. Counsel for the assessee defended the order passed by the Ld. CIT(A). 7. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. During the year, the assessee had entered into transactions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This MOU is not registered and not notarized. (iii) The assessee explained the entire sequence of transactions, evidenced in the bank accounts, sale agreement and the Memorandum of Undertaking. It can be seen that, the transactions have been carried out as laid down in the said MOU. 9. The ld CIT(A) has gone through the sequence of transactions, as evidenced by the bank accounts, sale deed, and sale agreement, etc, and noted that the transactions are being conducted in the manner as laid out in the MOU. The ld CIT(A) after reading of assessment order, observed that assessing officer was lead to believe that the assessee is claiming that transaction is made through AOP. The MOU, however, does not suggest creation of any AOP. The assessee argued before ld CIT(A) that said Memorandum of Undertaking is on stamp paper purchased on a particular date and contains the signature of the Stamp Vendor, advocate, parties to MOU and two witness. Hence, it should be presumed to be executed on that particular date. The assessee also relied on the Judgment of Hon'ble Supreme Court in case of Sreelekha Bannerjee (491 ITR 122), wherein it was held that ..... before the department rejects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was an arrangement and meeting of minds between the assessee and SDP to acquire such litigated lands and dispose of at a profit. This shows that assessee and SDP collaborated to sense an opportunity, take risk, plan their moves to reach their objective of earning profit. Both the lands were bought in the name of the assessee, but the money is invested by SDP being fully aware of litigation involved and that the money may be lost. By these facts, the transactions clearly appear to be business transactions or an adventure in nature of trade. Purchase of property with an intention to sell, it is Key ingredient of an adventure in nature of Trade, as held by the Hon'ble Supreme Court in case of Indramanibai 70 Taxmann. Com 67. The ld CIT(A) noted that assessing officer has not really examined this issue and given a reasoned fluid based on cogent analysis. 12. The ld CIT(A) observed that no investment is made by the assessee; the assessee has not incurred any cost of acquisition . Hence, the lands cannot be called as his Capital Assets. The assessee has only allowed his name to be used in the transactions and has personally involved in the making of these deals. The income e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not pass on good title to the assessee. It can be seen that the transactions with assessee have been made at a very low price. This explains the situation. The sellers did not have title so, they had to dispose of lands for whatever amount they would get to minimize losses. 9.1 In the case of survey no. 547 at Vesu, the original owner of land (Patel family) sued the 15 companies to whom it had allegedly sold the land saying that the sale made to them was bogus. The assessee has purchased the land from these 15 companies, so title is faulty. However, all the 3 parties involved appeared to have reached a compromise and the original owners (Patel Family) and the 15 companies and the assessee together sold the said property to one Jasmathbhai N Vidiya. The final sale deed of the property executed on 31.06.2010 at the Sub Registrar Office, Surat, mentions the names of all the original owners i.e. Members of the Patel family and the assessee appearing as sellers' and also give details of payments received by each of them. (page no. 4 of sale deed.). As evident therein, the assessee got a sum of rupees 24,01,000/-. Out of this, the assessee gave a sum of Rs.22,40,460/- to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee purchased from the owner a property during pendency of an appeal filed after dismissal of suit of specific performance filed by a purchaser to whom the owner had earlier agreed to sell and the appellate Court decreed the suit of specific performance in favour of prior purchaser and directed that the owner shall execute sale deed in favour of said prior purchaser and assessee as subsequent purchaser would join in the execution of said sale-deed, it was held that since the assessee did not get any title to the property, he was not liable for any tax on any supposed capital gain even though the assessee had shown in his accounts certain capital gain to have resulted to him [CIT vs. Provincial Farmer P. Ltd. (1977) 108 ITR 219 (Cal) : TC20R.946]. Effective conveyance- Mere delivery of possession not sufficient In Alapati Venkatramaiah vs. CIT (1965) 57 ITR 185 (SC) : TC20R.154 reversing CIT vs Alapati Venkataramiah (1962) 46 ITR 623 (AP) : TC20R.161, it has been observed that though the word transfer in section 12B is used in addition to sale yet, in the context, transfer must mean effective conveyance of the capital asset to the transferee and delivery of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid transfer of such land and hence, the Tribunal held correctly that no Capital Gain had accrued to the assessee. This decision is binding on the appellate authorities in Gujarat and hence, respectfully followed. 9.6 In view of the facts discussed and the binding decision of the jurisdictional Hon'ble High Court of Gujarat (supra), I am in agreement with the AR that there is no valid sale of land and hence the income is not a Capital Gain . However, this discussion is of only academic value as I have already held that the transactions fall within the meaning of adventure in the nature of trade and hence, Profit arising therefrom are taxable as 'Business Income (as declared by the assessee in return of income). It is also important to note here that; 90% of profit arising from above two transactions are already taxed in hands of SDP as 'business Income u/s 143 (3) of the Act. 10. In view of above discussion, the taxable income of assessee is computed as under: 1. Income declared original return dated 22.11.2011 Rs.62,16,890 2. Profit and gainis from business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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