TMI Blog2023 (4) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot be assessed under the head Business Income . Hence, these above facts prove, that intention of the assessee is to hold the land as Capital Assets, therefore, we direct the assessing officer to assess the assessee`s transaction under the head capital gain. Thus, ground No.1 raised by the assessee is allowed. Deduction u/s 54F - Since, we have allowed ground no.1 of the assessee, holding the assessee`s transaction falls under the head capital gain, therefore assessee is entitled to claim the deduction under section 54F - Since, all the conditions of section 54F of the Act are satisfied, the assessee is entitled for deduction under section 54F . Addition u/s 68 - unexplained cash credit - Onus to prove - HELD THAT:- Once the assessee had produced all documents establishing the identity and capacity of creditors and genuineness of transactions, the initial onus cast upon the assessee was discharged and the onus shifted to the assessing officer to bring material on record to the effect that in spite of identity and creditworthiness of the creditor being proved, the transaction was still not genuine. However, the Assessing Officer has not made any further inquiries an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us is an individual. A search action u/s 132 of the Act was carried out on 17.07.2012 in the group cases of Dalia (Badshah)-Babariya Group of Surat and assessee is one of the said group. A notice u/s 153A of the Act was issued on 22.01.2013 and served upon the assessee. In response thereto the assessee furnished return of income on 12.04.2013 declaring total income at Rs.3,65,74,570/-. Subsequently a notice u/s.143(2) was issued and served on 07.07.2014 on assessee. The assessee in his return of income filed for the year under consideration has shown long term capital gains of Rs.3,97,08,181/- and also claimed deduction u/s 54F of the Act at Rs.31,33,611/-. The assessee has shown profit on sale of land to M/s Gangotri Enterprise at Rs.2,36,82,767/- and profit on sale of plots of Rs.1,60,25,414/- under the head long term capital gains. Based on these facts, the assessing officer issued a show-cause notice dated 27.02.2015, wherein the assessee was asked to explain the transaction in respect of capital gain that why the income should not be taxed as business income instead of capital gain. 5. In response to the above show cause notice, the assessee has filed a reply vide letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee never intended to sell plots or to convert the land into partnership firm. The consideration of entire facts ipso facto prove the intention of the assessee to hold the land as capital assets. 3. This was the sole transaction of plotting in view of the decision of ITAT in M. Ramanamma vs. CIT reported at 255 ITR 467, Vesta Investment Trading Co. reported at 70 ITD 200 and Vinodkumar vs. Additional CIT reported at 91 TTJ 460. 6. However, the Assessing Officer rejected the contention of the assessee and held that intention of the assessee was to enter into trade of purchase and sale of land, therefore, the long term capital gain worked out by the assessee in computing his total income and deduction claimed u/s 54F were rejected by the Assessing Officer and income earned was computed by the Assessing Officer under the head income from business. 7. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A), who has confirmed the action of Assessing Officer. The ld CIT(A) has just reiterated the findings of the Assessing Officer and confirmed the addition made by the Assessing Officer. Therefore, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is own and converted part of the land into partnership firm since other plotting on his own and converted part of the land into partnership firm since other partners were ready to take only part of the land. The intention of the assessee was not in the nature of adventure in trade but was planning to construct a farm-house. Therefore, ld Counsel prays the Bench that income of the assessee should be assessed under the head capital gain and not under the head business income . 10. On the other hand, Learned DR for the Revenue argued that even a single transaction can be treated as business . No doubt, the assessee under consideration has been engaged in agricultural activities since last six years, however, the assessee has sold the agricultural land, in the assessment year under consideration to do the business, therefore, assessee`s income should be assessable under the head Business Income instead of under the head Capital Gain . Consequently, the deduction claimed by the assessee under section 54F of the Act, should not be allowed. 11. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal plots. So assessee cannot do agricultural activities on different plots, as it was inconvenient, therefore assessee made plan to sale these plots. 13. The assessee transferred Plot No. 61B as a Capital Assets to the firm M/s Gangotri Enterprise in which he is a partner by a Registered Partnership Deed executed on 15.04.2010. Copy of Registered Partnership Deed is enclosed. (vide paper book Page 23 to 39). We note that this transfer is squarely covered by the provisions of section 45(3) of the Act. After that, assessee has sold his remaining land. Therefore, Capital Gain from both the transactions cannot be covered as business income. We note that the word business has been defined under section 2(13) of the Income Tax Act, 1961, which includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. An isolated transaction or activity can also be part of business, but to consider the question of business, there must be regular activity of purchasing and selling, which is absent in the assessee`s case under consideration. In the assessee`s case, there is nothing on record to show that the land was purchased for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessee is a partnership firm engaged in the activity of construction and development of real estate. For this purpose, the Assessee acquired a parcel of land at Nagpur for a total consideration of Rs.25 crores as evidenced by Sale Deed executed on 31.12.2007. The Assessee could not develop the said land due to procedural and legal tangles as have been chronicled. There is no finding by Id AO nor there is any evidence to lead that the Assessee was engaged in any manner in trading of land. A copy of partnership deed was submitted which at para 5 enlists the activities for the purpose of which the Assessee firm was constituted. b. In this case, the Assessee had acquired the said land for the purpose of development and not for trading. The Assessee was also desirous of holding a large part of constructed premises for its own use and/ or leasing the constructed premises as per the object clause of the deed of partnership. Hence, it cannot be presumed that the Assessee would have disposed of the said land along with the construction thereon. This fact was also observed by the AO in his show cause notice dated 22.01.2014 which is appearing at pages 223 to 226 of the PB. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trary to the decision of Hon'ble Supreme Court in the case of CIT vs. Express Newspapers Ltd. (SC) [1964] 53 ITR 260. It has been held by Apex Court that: ....The fact that the capital gains are connected within the capital assets of the business cannot make them the profit of the business. They are only deemed to be income of the previous year and not the profits or gains rising from the business during that year . g. The stand of the AO is also contrary to the scheme of Income Tax Act, 1961. Section 50 of the Income Tax Act taxes gain on sale of business assets of the assessee under the head Capital Gain even though it is depreciable asset used for the purpose of business. Therefore, to say that the gain on sale of business asset is taxable under the head business income is contrary to provisions of section 50 and if accepted, it would render section 50 nugatory. h. The AO's contention that there is no connection between asset becoming sterile and capital gain. This is in contrast to decision of supreme court in the case of Universal radiators vs. CIT (1993) 201 ITR 800 (SC). i. Further, the AO has not appreciated the facts correctly. A perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee in the earlier years. The question is whether such classification in books is be all and end all of the matter. Supreme Court in the case of G. Venkataswami Naidu Co. vs. CIT (1959 35 ITR 594 (SC) held that all attendant facts and circumstances of the case is to be seen to determine whether the income is capital gain or business income No one test or formula can be applied as a thumb rule. The same sentiment has been echoed by the Mumbai High Court in the case of Fort Properties (P) Ltd vs. CIT (1994) 208 ITR 232 (Bom.) wherein the Hon'ble Mumbai High Court treated the loss on sale of property classified as stock in trade as capital loss instead of business loss . In the present case, the Department had taken a stand that even if the asset was classified as stock in trade yet the loss on its sale is not business loss but is a capital loss . The Department had contended that the Assessee was though a real estate company, yet it did not carry out the business on the said land and hence, mere classification in books of accounts as stock in trade is not final. In the impugned case, the AO has contended exactly the opposite which is against the law laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seen, then too the assessee never intended to sell the said land after development but retain the same for earning rental income Hence, the purpose of acquiring the said land was always to hold the said land as investment . She further relied upon the Resolution dated 01.06.2007 appearing on page 227 of the PB, passed by the partners of the Assessee detailing the reasons for acquiring the said land. 12. She further argued that since the facts remain undisputed by the Revenue, the decision on head of income as determined by CIT (A) cannot be interfered with. She also placed reliance on the decision of Bombay High Court in the case of Fort Properties (supra) wherein the hon'ble High Court has held that all attendant circumstances has to be seen before one can draw a conclusion whether the gain was assessable as business income or capital gain . Merely because the Assessee had shown the asset as stock in trade , it cannot be said that the gain was taxable under the head Income from Business . She further pointed out the decision of the Hon'ble Delhi High Court in the case of D.L.F. Hsg Constn. P.Ltd. v. GIT (1983) 141 ITR 815-824 (Delhi) as mentioned in the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business asset has to be a trading asset only which is not the correct position under the well established principles of accountancy. A business asset whether in the hands of the firm or an individual or a company or any other entity carrying on business can comprise of capital assets as well as trading assets. Where the transfer is of a capital asset it would give rise to income chargeable to tax under the head capital gain and where the transfer is of a trading asset such receipts are to be considered under the head Profits and gains of business or profession. What is, therefore, required to be determined in the instant case is not as to whether the land in question was a business asset of the firm but whether it was a capital asset or a trading asset in the hands of the firm. 13. She further relied upon the decision of Mumbai ITAT in the case of Rajesh Builders for AY 2004-05 which is mentioned in sub para (r) on page 17 of the CIT(A) order. The Id AR also referred to various judgments on the issues of capital asset vs. stock in trade and capital gain vs business income , specifically Bagmane Developers (P) Ltd. [2017] 392 ITR 379 (Karnataka). Decision 14. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the Id. DR has neither raised any additional argument other than what the AO has stated and already dealt with by the CIT (A) in an elaborate order nor stated as to why the findings and reasoning of CIT(A) is incorrect either on facts or in law. Hence, we uphold the order oi CIT(A) on this ground and hold that the Assessee has rightly offered the gain on sale of Nagpur land under the head Capital Gain 16. Thus, taking into account the entire facts, as narrated above, we note that assessee was farmer for six years and he sold the land due to compulsion and pressure since, government made a Road in the assessee`s land. The assessee was holding the land as an investment activity / portfolio. We observed that a Road was passed from the land, and the assessee was allotted two final plots being Final Plot No.61/A and Final Plot No.61/B. Since the government Road was passed from the assessee`s land and therefore assessee was allotted two final plots. So, assessee cannot do agricultural activities on different plots, as it was inconvenient for him, therefore assessee decided to sale the land, due to compulsion, hence assessee cannot be treated as a trader in land and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledgment of I.T. Return of depositors submitted by assessee. The addition of Rs.15,00,000/- should therefore be deleted. 20. Succinct facts qua the issue are that during the course of assessment proceedings, the Assessing Officer issued notices u/s 133(6) of the Act on 28.11.2016 to eight (8) parties from whom the assessee had taken unsecured loans. In response to the notice u/s 133(6) of the Act, one Shri Navneet Haribhai Pimpale attended the office of the assessing officer and denied the transaction with assessee. The Assessing Officer also noted that one Shri Madanbhai Bhagwanbhai Dangi, who had given the unsecured loan of Rs.5,00,000/- had not submitted any details before the Assessing Officer in response to the notice u/s. 133(6) of the Act. Therefore, Assessing Officer made the addition of Rs.15,00,000/- u/s 68 of the Act. 21. On appeal, Ld.CIT(A) confirmed the action of the Assessing Officer. 22. Aggrieved, the assessee is in appeal before us. Learned Counsel for the assessee submitted before us that assessee submitted before the Assessing Officer the name, address, PAN, confirmation, bank statement and the acknowledgment of IT return of the two depositors. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be produced, the time period elapsed since the event generating evidence took place, and the position and competence of the parties required to produce the evidence. Looking to this aspect of vulnerability of discharge of onus the law has given enough discretion to the Assessing Officer by putting the word May and not Shall before he draws any adverse inference against the assessee. Merely because an assessee is not able to discharge the onus shifted back on him should not make the Assessing Officer to jump to the conclusion that addition is required to be made. He has to give weightage to the underlying circumstances under which the assessee is not able to discharge the onus. Hon'ble Supreme Court in CIT v. Smt. P.K. Noorjahan [1999] 103 Taxman 382 held that word shall was substituted by the word 'may' on the recommendation of the Select Committee. This clearly indicates that the intention of the Parliament in enacting section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
