Ganesh Housing Corporation Ltd., Ahmedabad V. The Dy.CIT, Circle-2(1)(1), Ahmedabad

CO 216/AHD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5262 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C DANDAY
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Search and seizure; Cost of acquisition; Tangible material; Fair market value; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80IB; 148; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO.3034/AHD/2015 / ASSTT. YEAR: 2009-2010 GANESH HOUSING CORPORATION LTD. GANESH CORPORATE HOUSE 100 FT. HEBATPUR-THALTEJ ROAD NR. SOLA BRIDGE OFF. S.G. HIGHWAY AHMEDABAD 380 015. PAN : AAACG 5590 Q VS. DCIT, CIR.2(1)(1) NAVJIVAN TRUST BLDG. AHMEDABAD. ITA NO.3083/AHD/2015 WITH CO NO.216/AHD/2015 / ASSTT. YEAR: 2009-2010 DCIT, CIR.2(1)(1) NAVJIVAN TRUST BLDG. AHMEDABAD. VS. GANESH HOUSING CORPORATION LTD. GANESH CORPORATE HOUSE 100 FT. HEBATPUR-THALTEJ ROAD NR. SOLA BRIDGE OFF. S.G. HIGHWAY AHMEDABAD 380 015. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI DHIREN SHAH, AR REVENUE BY : SHRI C. DANDAY, CIT-DR / DATE OF HEARING : 19/09/2018 / DATE OF PRONOUNCEMENT: 23/10/2018 &'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE AND THE REVENUE ARE IN CROSS-APPEALS AGAIN ST ORDER OF LD.CIT(A)-2, AHMEDABAD DATED 26.8.2015 PASSED FOR T HE ASSTT.YEAR 2009-10. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, THE A SSESSEE HAS ALSO FILED CROSS- ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 2 OBJECTION BEARING NO.216/AHD/2015. SINCE ISSUES ARE INTER-CONNECTED, WE PROCEED TO DISPOSE OF ALL THESE APPEALS BY THIS CON SOLIDATED ORDER. 2. GROUNDS OF APPEAL TAKEN BY THE REVENUE AS WELL A S ASSESSEE READ AS UNDER: REVENUES APPEAL: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE INCOME OF RS.34,47,78,585/- UNDER THE HEAD CAPITAL GAIN INSTE AD OF INCOME UNDER THE HEAD BUSINESS/PROFESSION, WITHOUT PROPERLY APPRECIA TING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DISALLOWANCE OF RS.1,08,14,730/- MADE U/S.40A(2)(B) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)'OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED T O THE ABOVE EXTENT. 5. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR AD D A NEW GROUND, WHICH MAY BE NECESSARY. ASSESSEES APPEAL: CHALLENGING THE VALIDITY OF ISSUANCE OF NOTICE ISSU ED U/S. 148 OF THE ACT AND ASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S. 147 OF THE ACT. 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. A.O IN ISSUING THE NOTICE U/S. 148 OF THE ACT A ND REASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S. M7 OF THE ACT. 2.. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO PROPERLY CONSIDER THE CONTENTION OF THE APPELLANT COMPANY AN D VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON IF TIE APPELLANT COMPANY IN THE REASSESSMENT PROCEEDINGS BEFORE THE A.O AS WELL AS IN W APPELLA TE PROCEEDINGS BEFORE THE LD. CIT(A). THE APPELLANT RESERVES ITS RIGHT TO ADD, AMEND, ALT ER OR MODIFY ANY OF THE GROUNDS STATED HEREINABOVE EITHER BEFORE OR AT THE TIME OF HEARING. ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 3 3. AS FAR AS CO FILED BY THE ASSESSEE IN REVENUES APPEAL IS CONCERNED, THE ASSESSEE HAS JUST MADE PLEADING IN SUPPORT OF F INDING RECORDED BY THE LD.CIT(A) ON THE ISSUE THAT PROFIT EARNED ON TRANSF ER OF LAND HAS RIGHTLY BEEN ASSESSED UNDER THE HEAD CAPITAL GAINS BY THE LD.C IT(A) INSTEAD UNDER THE HEAD BUSINESS OR PROFESSION ASSESSED BY THE AO. SIMILARLY, THE LD.CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE UNDER SEC TION 40A(2)(B) OF THE INCOME TAX ACT, 1961. 4. SUB-SECTION 4 OF SECTION 253 AUTHORIZES THE RESPOND ENT TO FILE CO ON RECEIPT OF NOTICE IN AN APPEAL AGAINST ANY PART OF ORDER IMPUGNED IN THE APPEAL. PERUSAL OF GROUNDS TAKEN IN THE CO WOU LD INDICATE THAT THE ASSESSEE HAS NOT SHOWN ANY GRIEVANCE ON THESE TWO I SSUES AGAINST THE ORDER OF THE LD.CIT(A). IN OTHER WORDS, THE CO HAS BEEN FILED IN SUPPORT OF FINDING RECORDED BY THE LD.CIT(A) ON THE ISSUE O N MERIT. THESE HAVE DECIDED AGAINST THE REVENUE AND THE REVENUE IS IN A PPEAL ON THOSE ISSUES, AS SUCH CO FILED BY THE ASSESSEE IS NOT MAI NTAINABLE. IT IS REJECTED. 5. THE ASSESSEE IN ITS APPEAL HAS TAKEN JURISDICTIO NAL ISSUE VIDE WHICH IT HAS CHALLENGED UPHOLDING OF RE-OPENING OF THE AS SESSMENT BY THE CIT(A). 6. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF REAL-E STATE DEVELOPMENT AND CONSTRUCTION ACTIVITIES. IT HAS FILED ITS RETU RN OF INCOME ON 30.9.2009 DECLARING TOTAL INCOME AT RS.31,17,28,740/-. THE A SSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT ON15.12. 2011 WHEREBY THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.63,55,4 4,890/-. THE AO ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 4 THEREAFTER RECORDED REASONS AND ISSUED NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. ON RECEIPT OF NOTICE, THE ASSESSEE FILED OBJECTIONS AGAINST REOPENING OF THE ASSESSMENT VIDE LETTER DAT ED 23.5.2014. THESE OBJECTIONS HAVE BEEN DISPOSED BY THE LD.AO VIDE ORD ER DATED 16.9.2014. COPY OF THE REASONS FOR REOPENING OF THE ASSESSMENT HAS BEEN PLACED ON PAGE NO.184 OF THE PAPER BOOK. SIMILARLY, COPY OF OBJECTIONS FILED BY THE ASSESSEE AGAINST REOPENING OF THE ASSESSMENT HA S BEEN PLACED ON PAGE NO.194 AND ORDER OF THE AO DISPOSING SUCH OBJE CTION IS AVAILABLE AT PAGE NO.363 OF THE PAPER BOOK. THE LD.COUNSEL FOR THE ASSESSEE WHILE IMPUGNING ORDERS OF THE LD.REVENUE AUTHORITIES CONT ENDED THAT BASICALLY THE AO HAS ASSIGNED THREE REASONS FOR REOPENING OF THE ASSESSMENT. IN THIS FIRST FOLD OF REASONS, HE OBSERVED THAT THE AS SESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.34,17,28,740/- RECEIVED FRO M TRANSFER OF NON- AGRICULTURE LAND. IN THE OPINION OF THE AO, THE GA IN RECEIVED BY THE ASSESSEE ON TRANSFER OF THIS NON-AGRICULTURE LAND O UGHT TO BE ASSESSED AS BUSINESS INCOME INSTEAD OF CAPITAL GAIN ACCEPTED BY THE AO. IN OTHER WORDS, THE AO IN THE REASONS HAS OBSERVED THE LAND ACQUIRED BY THE ASSESSEE ON AMALGAMATION OF ERSTWHILE COMPANY VIZ. NACHIKET PROPERTIES P.LTD. (NPPL FOR SHORT) OUGHT TO BE CO NSTRUED AS STOCK-IN- TRADE AND FAILURE OF THE AO TO ASSESS IT UNDER THE BUSINESS INCOME HAS LEAD TO ESCAPEMENT OF INCOME. 7. WITH REGARD TO SECOND ISSUE, IT WAS CONTENDED TH AT THE ASSESSEE HAD MADE PROVISION FOR GRATUITY IN EARLIER YEAR, AND AS PER LEDGER, OPENING BALANCE AS ON 1.4.2008 WAS OF RS.1.06 CRORES. DURI NG F.Y.2008-09, THE COMPANY DECIDED TO GO FOR GRATUITY SCHEME WITH LIC AND WORKED OUT GRATUITY PROVISIONS OF RS.41.09 LAKHS. THE ASSESSE E CREDITED AN AMOUNT ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 5 OF RS.68.99 LAKHS IN THE PROFIT & LOSS ACCOUNT BEIN G EXCESS PROVISION CREATED IN EARLIER YEARS, AND BALANCE OF RS.37,78,4 83/- WAS ADJUSTED TOWARDS CONTRIBUTION FOR THE YEAR. THE AO WAS OF T HE VIEW THAT AMOUNT OF RS.37,78,483/- WAS REQUIRED TO BE CREDITED TO TH E PROFIT & LOSS ACCOUNT AND DEBITING OF RS.3,31,353/- WAS REQUIRED TO BE DI SALLOWED AS WRONGLY CLAIMED BY THE ASSESSEE, AND IN VIEW OF THE ABOVE, AN INCOME TO THE EXTENT OF RS.41,09,796/- HAS ESCAPED ASSESSMENT. 8. NEXT REASON ASSIGNED BY THE AO IS THAT THE COMPA NY HAS MADE PAYMENT OF RS.1,08,14,730/- TO SHRI GOVIND C. PATEL WHICH OUGHT TO HAVE BEEN DISALLOWED UNDER SECTION 40A(2)(B) OF THE ACT. ON THE STRENGTH OF THESE THREE REASONS, THE LD.AO SOUGHT T O REOPEN THE ASSESSMENT. THE LD.COUNEL FOR THE ASSESSEE CONTEND ED THAT AS FAR AS SECOND ISSUE IS CONCERNED NO ADDITION WAS MADE BY T HE AO. THEREFORE, IT IS NO LONGER IN DISPUTE. 9. WITH REGARD TO FIRST AND THIRD ISSUE, HE TOOK US THROUGH THE FINDING OF THE LD.CIT(A) AND CONTENDED THAT THE LD.CIT(A) H AS AGREED THAT RE- OPENING OF THE ASSESSMENT OF INCOME OF RS.34,17,28, 704/- UNDER THE HEAD CAPITAL GAIN OR BUSINESS INCOME THE SAME W AS BASED ON CHANGE OF OPINION. THE LD.CIT(A) AGREED THAT IN THE FIRST ROUND OF LITIGATION THIS ISSUE HAS SPECIFICALLY EXAMINED BY THE AO IN THE SC RUTINY ASSESSMENT. NO FRESH MATERIAL WAS COME TO THE POSSESSION OF THE AO, ON THE BASIS OF WHICH REOPENING COULD BE JUSTIFIED. HE SPECIFICALL Y TOOK US THROUGH THE OBSERVATION OF THE LD.CIT(A) OF PAGE NO.20 OF THE I MPUGNED ORDER. SUCH OBSERVATION RECORDED IN PARA 2.7 READS AS UNDER: ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 6 2.7 THE APPELLANT ALSO ARGUED THAT WHILE REOPENING , THE AO HAS REVIEWED THE REGULAR ASSESSMENT COMPLETED U/S.143(3 ) OF THE I.T.ACT, 1961 AND THE ASSESSMENT RECORDS OF THE AP PELLANT COMPANY FOR RECORDING THE REASONS FOR INITIATING PR OCEEDINGS U/S. 147 OF THE I. T. ACT, 1961. THE AO DOES NOT HAVE AN Y POWER TO REVIEW OR TO MAKE REVISION OF THE REGULAR ASSESSMEN T ORDER PASSED EARLIER. IT WAS ALSO CONTENDED THAT THE AO HAS REOP ENED THE ASSESSMENT ON THE BASIS OF THE AUDIT QUERY OF THE A UDIT PARTY AND THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE ID. AO. FURTHER, IT WAS ALSO SUBMITTED THAT BY REOPENING TH E AO HAS CHANGED HIS OPINION TO HOLD THE OPINION DIFFERENT F ROM THAT OF HIS PREDECESSOR ON THE SAME SET OF FACTS WHICH WERE AVA ILABLE BEFORE HIM DURING REGULAR ASSESSMENT PROCEEDINGS. THUS, TH E REOPENING PROCEEDINGS INITIATED BY THE AO WERE NOT VALID AS P ER THE PROVISIONS OF LAW. THE DETAILED SUBMISSION HAS BEEN REPRODUCED IN THE PRECEDING PARAS OF THIS ORDER. 10. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT WITH REGARD TO THIRD ISSUE, THE LD.CIT(A) HAS UPHELD REOPENING OF THE ASSESSMENT. THE LD.CIT(A) WAS OF THE OPINION THAT ON THIRD ISSU E NO INVESTIGATION WAS MADE BY THE AO IN THE FIRST ROUND OF LITIGATION , AND THEREFORE, THERE COULD NOT BE ANY ALLEGATION OF CHANGE OF OPINION. THE LD.CIT(A) REFERRED TO DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES VS. ACIT, 99 ITR 375 WHEREIN THE HONBL E HIGH COURT HAS PROPOUNDED THE ROLE REQUIRED TO BE PLAYED BY THE AO AS AN ADJUDICATOR AS WELL AS INVESTIGATOR. THE LD.AO WAS DUTY BOUND TO INVESTIGATE EACH AND VERY ISSUE WITHOUT GETTING INFLUENCED, WHETHER IT WILL GO AGAINST OR IN FAVOUR OF THE ASSESSEE/REVENUE. THE MOMENT THE AO FAILED TO MAKE INQUIRY QUA ANY ISSUE, HIS ACTION FOR TAKING RECOURSE UNDER SE CTION 147 WOULD BE JUSTIFIED. THE LD.COUNSEL FOR THE ASSESSE E TOOK US THROUGH THE EXPLANATION OF THE ASSESSEE SUBMITTED IN THE OBJECT ION AGAINST REOPENING, AND THEREAFTER HE RELIED UPON THE JUDGMENT OF THE H ONBLE SUPREME ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 7 COURT IN THE CASE OF CIT VS. M/S.KELVINATOR OF INDI A LD., 320 ITR 561 (SC). HE MADE REFERENCE TO OTHER LARGE NUMBER OF D ECISIONS RELIED UPON BEFORE THE LD.CIT(A). AT THIS STAGE, WE WOULD LIKE TO TAKE NOTE OF SPECIFIC OBJECTION RAISED BY THE ASSESSEE BEFORE TH E AO AGAINST REOPENING QUA THIS ISSUE. IT READS AS UNDER: (C) PAYMENTS TO DIRECTOR FOR CANCELLAT ION OF BOOKING BEING LAND PURCHASED AMOUNTING TO RS.1,08,14,7 30/-. (I) YOUR HONOUR HAS RECORDED THE REASON FOR ISSUANCE OF NOTICE U/S.148 OF THE ACT ON THE BASIS OF AUDIT REPORT IN FORM NO.SCD WHEREIN IN ANNEXURE-9 OF COLUMN 18 THERE IS DETAILS OF PAYMENT TO PERSONS COVERED U/S.40A(2)(B) OF THE ACT. WHEREIN T HERE IS CANCELLATION OF BOOKING OF LAND PURCHASE AMOUNTING TO RS.1,08,14,730/- TO A DIRECTOR GOVIND C. PATEL. Y OUR HONOUR HAS FURTHER OBSERVED THAT THE DIRECTOR WHO RECEIVES SUC H HEFTY AMOUNT AS REMUNERATION IS SOLELY RESPONSIBLE FOR THE COMPA NY'S PROFIT AND HE CANNOT ENTERED INTO SUCH A CONTRACT TO REDUCE CO MPANY'S PROFIT BY WAY OF SUCH VAGUE CLAIMS AS THE CONTRACT WAS MAD E BETWEEN SHRI GOVINDBHAI C PATEL AND THE COMPANY ASSESS EE AND THE INTERESTING THING IS THAT SHRI GOVINDBHAI IS A COMMON MAN TO SIGN THE AGREEMENT ON BEHALF BOTH THE PARTIES, BEIN G AS A DIRECTOR AND ON THE OTHER SIDE AS INDIVIDUAL CAPACITY. SUCH TYPE OF AGREEMENTS COULD NOT BE CONSIDERED AS GENUINE AND L EGAL. (II) THE OBSERVATION OF YOUR HONOUR AND RECORDED TH E REASONS FOR ISSUANCE OF NOTICE U/S.148 OF THE ACT IS BASELESS, BECAUSE THE 'AMOUNT DEBITED BEING CANCELLATION OF PLOT WHICH WA S SOLD TO THE DIRECTOR IN EARLIER YEARS AND SAID AMOUNT OF RS.1,0 8,14,730/- WAS ALREADY BEEN OFFERED AS SALES AMOUNT IN EARLIER YEA R. DURING THE YEAR THE PLOT NO.6 WHICH WAS BEEN CANCELLED. HENCE SAID AMOUNT WAS BOOKED AS A CANCELLATION AMOUNT AND DURING THE YEAR THE SAID PLOT IS SOLD TO CELESTIAL BIOLOGICAL LTD. FOR AN AM OUNT OF RS.3,25,00,000/- AND ASSESSEE COMPANY HAS EARNED PR OFIT OF RS.2,16,85,270/- WHICH IS OFFERED FOR TAXATION. COP Y OF ACCOUNT OF PLOT NO.6 IS ATTACHED HEREWITH AS PER EXHIBIT-IX. I N THE ABOVE TRANSACTION, IN FACT THE ASSESSEE COMPANY HAS MADE HUGE PROFIT ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 8 AND OFFERED FOR TAXATION IN THE RETURN OF INCOME AN D THERE IS NO AN ESCAPEMENT OF INCOME. (III) YOUR HONOUR HAS RECORDED THE REASON AS ESCAPE MENT OF INCOME FOR AN AMOUNT OF RS. 1,08,14,730/- ON THE BA SIS OF MATERIAL AVAILABLE ON RECORD. THE THEN A.O. HAD VERIFIED THE SAME DURING THE SCRUTINY ASSESSMENT AND HAS PASSED THE ORDER U/ S. 143(3) OF THE ACT. COPY OF THE SAID ORDER IS ATTACHED HEREWITH AS PER EXHIBIT-V. NOW, YOUR HONOUR HAS NOT BROUGHT ON RECORD ANY TANG IBLE MATERIAL AND IT IS MERELY A CHANGE OF OPINION ON WH ICH REOPENING IS NOT PERMISSIBLE. IN VIEW OF THE ABOVE FACTS, THERE IS NO ESCAPEMENT OF INCOME AND FACTS HAS BEEN DULY EXAMINED BY THE A.O WHILE PASSI NG ORDER U/S. 143(3) OF THE ACT. 11. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT HAD THE AO APPRECIATED COMPLETE FACTS, THEN HE WOULD HAVE IMME DIATELY REALIZED THAT THERE IS NO ESCAPEMENT OF INCOME ON THIS ISSUE , BUT INSTEAD OF THAT HE SIMPLY BRUSHED ASIDE ALL OBJECTIONS BY MAKING REFER ENCE TO VARIOUS CASE LAWS. THERE IS NO LIVE NEXUS BETWEEN INFORMATION A VAILABLE WITH THE AO VIS--VIS FORMATION OF BELIEF THAT INCOME HAS ESCAP ED ASSESSMENT. SIMILARLY, THE LD.CIT(A) FAILED TO EXAMINE THIS ASP ECT. IT SIMPLY PROCEEDED ON THE GROUND THAT IF AN ISSUE WAS NOT EX AMINED BY THE AO IN THE ORIGINAL SCRUTINY ASSESSMENT, THEN ON THAT VERY ISSUE, HE WOULD BE JUSTIFIED TO REOPEN THE ASSESSMENT. SUCH CONCLUSIO N IS DIRECTLY IN CONTRADICTION WITH THE RATIO LAID DOWN BY THE HONB LE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA). IT T O BE ASSUMED THAT THE AO MUST HAVE GONE THROUGH ALL DETAILS, ONCE HE HAS PASSED A SCRUTINY ASSESSMENT. THE LD.DR RELIED UPON ORDERS OF THE AO . HE CONTENDED THAT ALL OBJECTIONS OF THE ASSESSEE HAVE BEEN CONSIDERED . THESE HAVE BEEN REJECTED. NOTICE UNDER SECTION 148 HAS ISSUED WITH IN FOUR YEARS FROM THE ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 9 END OF RELEVANT ASSESSMENT YEAR. HENCE, BENEFIT OF PROVISO APPENDED TO SECTION 147 IS NOT AVAILABLE TO THE ASSESSEE IN THE PRESENT CASE. SINCE THERE WAS NO OPINION FORMED BY THE AO ON THIS ISSUE IN EARLIER ORIGINAL ASSESSMENT ORDER, THEREFORE, THERE CANNOT BE ANY AL LEGATION OF CHANGE OF OPINION. 12. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. AS OBSERVED EARLIER, ASSESSMENT WAS SOUGHT TO BE REOPENED ON THREE ISSUES VIZ. (A) LONG TERM CAPITAL GAIN ON SALE OF LAND OF RS.34,17,28,740/- DISCLOSED IN THE RETURN OF INCOME WAS TO BE TREATED AS BUSINESS INCOME; (B) TO DISALLOW CONTRIBUTION TO AP PROVED GRATUITY FUND OF RS.41,09,796/-, AND (C) PAYMENT TO DIRECTOR WHO IS COVERED UNDER SECTION 40A(2)(B) OF THE ACT FOR CANCELLATION OF BO OKING OF LAND PURCHASED AMOUNTING TO RS.1,08,14,730/- OUGHT TO BE DISALLOWED. 13. AS FAR AS FIRST ISSUE IS CONCERNED, WE HAVE NOT ICED THE FINDING OF THE LD.CIT(A) THAT REOPENING WAS NOT VALID. ACCORD ING TO THE LD.CIT(A) THE ASSESSMENT WAS SOUGHT TO BE REOPENED ON CHANGE OF OPINION. THIS FINDING OF THE LD.CIT(A) HAS NOT BEEN CHALLENGED BY THE REVENUE IN ITS GROUNDS OF APPEAL, WHICH WE HAVE EXTRACTED ABOVE. THUS, WE ARE NOT REQUIRED TO DEVOTE ENERGY ON THE FIRST ISSUE. AS F AR AS SECOND POINT IS CONCERNED NO ADDITION WAS MADE. HENCE, IT IS ALSO IRRELEVANT FOR DISCUSSION. 14. ON THE LAST ISSUE, THE LD.CIT(A) HAS UPHELD REO PENING OF THE ASSESSMENT. SHORT DISPUTE FOR OUR CONSIDERATION IS , WHETHER AO WAS ABLE TO LAY HIS HAND ON ANY NEW INFORMATION AFTER PASSIN G OF 143(3)-ORDER ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 10 WHICH CAN GOAD HIM TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. BEFORE EMBARKING UPON AN INQUIRY ON TH E FACTS OF THE PRESENT CASE, WE WOULD LIKE TO TAKE NOTE OF LAW LAI D DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LTD. (SUPRA). THE FINDING OF THE HONBLE SUPREME COURT DESERVES TO BE NOTED A S UNDER: 3.2 AFTER THE AMENDING ACT, 1989 , SECTION 147 REA DS AS UNDER : '147. INCOME ESCAPING ASSESSMENT.IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR R EASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, O R RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALL OWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HER EAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS T HE RELEVANT ASSESSMENT YEAR).' [ EMPHASIS SUPPLIED] 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , RE- OPENING COULD BE DONE UNDER ABOVE TWO CO NDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED J URISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT [WITH EFFECT FROM 1-4-1989], THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE AS SESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSES SMENT, CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. THEREFORE, POST 1-4-1989 , POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS T O GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITR ARY POWERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSMENTS ON THE BAS IS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON T O REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BE TWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSING OFFICE R HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSE SSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 11 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASS ESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CH ANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1-4-1989 , ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIE W GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOT ED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , P ARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSERTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RE CEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT RE-INTRODUCED THE S AID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT I T WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBELOW THE RELEVANT PORTION OF CIRCULAR NO. 549 , DATED 31-10- 1989, WHICH READS AS FOLLOWS : '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION 'REASON TO BELIEVE' IN S ECTION 147. A NUMBER OF REPRESENTATIONS WERE RECEIVED AGA INST THE OMISSION OF THE WORDS 'REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE 'OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, 'REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SE TTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDI NG ACT, 1989 , HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION 'HAS REASON TO BELIEVE' IN PLACE OF THE WORDS 'FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION'. OTHER PROVISIONS OF THE NEW SECTION 147, HOWEVER, R EMAIN THE SAME.' [EMPHASIS SUPPLIED] 5. FOR THE AFORESTATED REASONS, WE SEE NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT, HENCE, DISMISSED W ITH NO ORDER AS TO COSTS. ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 12 15. WE DO NOT DEEM IT NECESSARY TO RECITE AND RECAP ITULATE RATIO LAID DOWN IN OTHER JUDGMENTS BECAUSE FOR RE-OPENING OF A SSESSMENT WITHIN FOUR YEARS BEFORE THE END OF RELEVANT ASSESSMENT AN D EVEN A SCRUTINY ASSESSMENT WAS MADE, THE AO HAS TO DEMONSTRATE A LI VE-LINK BETWEEN ESCAPEMENT OF INCOME VIS--VIS INFORMATION AVAILABL E TO HIM FOR FORMING SUCH BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. TH E ASSESSMENT CANNOT BE REOPENED ON CHANGE OF OPINION. LET US TAKE INTO CONSIDERATION OBJECTIONS SUBMITTED AGAINST REOPENING OF THE ASSES SMENT EXTRACTED ABOVE. IT EMERGES OUT FROM THE RECORD THAT IN THE F.Y.2006-07, THE DIRECTOR HAS BOOKED A PLOT WITH PAYMENT OF RS.1,08, 14,730/-. ACCORDING TO THE ASSESSEE THIS PLOT WAS SOLD TO THE DIRECTOR IN EARLIER YEAR AND SALE CONSIDERATION WAS OFFERED FOR TAXATION IN THE YEAR UNDER CONSIDERATION. THAT EARLIER SALE WAS CANCELLED. DIRECTOR WAS PAID A SUM OF RS.1,08,14,730/- AND THE PLOT WAS SOLD TO CELESTIAL BIOLOGICAL LTD. FOR CONSIDERATION OF RS.3.25 CRORES. THE COMPANY IN TH IS TRANSACTION HAD EARNED PROFIT OF RS.2,16,85,270/-. THIS PROFIT HAS BEEN OFFERED FOR TAXATION. IN OTHER WORDS, IN EARLIER YEARS, PLOT W AS SOLD TO DIRECTOR, SALE CONSIDERATION WAS OFFERED BY THE COMPANY FOR TAXATI ON. THIS YEAR THE COMPANY CANCELLED EARLIER SALE, REPAID THE CONSIDER ATION TO THE DIRECTOR, WHICH WAS RECEIVED FROM HIM IN EARLIER YEAR, AND TH E SAME WAS SOLD FOR HIGHER CONSIDERATION, WHICH HAS RESULTED A PROFIT O F RS.2.16 CRORES TO THE COMPANY. 16. SECTION 40A(2)(B) OF THE INCOME TAX ACT CONTEMP LATES THAT IF A PERSON COVERED BY CLAUSE (B) PROVIDE ANY SERVICE OR GOODS TO THE ASSESSEE AND THE ASSESSEE MAKES PAYMENT OVER AND AB OVE MARKET RATE, THEN COST OF SUCH SERVICES OR GOODS SUCH PAYMENT, W HICH IS CONSIDERED TO ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 13 BE EXCESSIVE OR UNREASONABLE WILL NOT BE ALLOWED AS DEDUCTION TO THE ASSESSEE, BECAUSE IT WILL AMOUNT TO UNDUE BENEFIT T O PERSONS COVERED UNDER SECTION 40A(2)(B) OF THE CASE, BECAUSE OF ITS POSITION/ASSOCIATION WITH THE ASSESSEE. NOW QUESTION ARISE IN THIS CASE IS, WHETHER THE ASSESSEE HAS MADE PAYMENT ? IT HAS ONLY REPAID THE SALE CONSIDERATION EARLIER RECEIVED FROM THE DIRECTOR FOR SALE OF PLOT AND THAT CONSIDERATION WAS OFFERED FOR TAXATION. THIS YEAR, IT CANCELLED THE SALE OF EARLIER YEAR, AND REPAID SALE CONSIDERATION. THE PLOT HAS BEEN S OLD AT HIGHER RATE. THE COMPANY HAS EARNED HIGHER PROFIT. THERE IS NO PAYM ENT WHICH IS COVERED UNDER SECTION 40A(2)(B) FOR HARBOURING A BE LIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE LD.AO HAS SIMPLY PERUSED T HE BALANCE SHEET AND AUDITED ACCOUNTS AS DISCERNIBLE FROM THE REASON S RECORDED BY HIM FOR REOPENING OF THE ASSESSMENT ON THIS ISSUE. IN THE AUDITED ACCOUNTS, THE DETAIL MENTIONED FOR THIS ISSUE IS, CANCELLATION O F BOOKING OF LAND PURCHASE. THE MOMENT THE ASSESSEE HAS GIVEN DETAI LS SHOWING THAT THERE IS NO LOSS TO THE COMPANY, THE BOOKING WAS CA NCELLED AT THE COST PRICE TO THE DIRECTOR, HE OUGHT TO HAVE DROPPED THE REOPENING OF ASSESSMENT ON THIS ISSUE. THUS, A PERUSAL OF RECOR D WOULD INDICATE THAT THERE WAS NO INFORMATION MUCH LESS FRESH INFORMATIO N WHICH CAN AUTHORISE HIM TO FORM AN OPINION OR RECORD REASONS SHOWING ESCAPEMENT OF INCOME. WE ARE SATISFIED THAT NO INFORMATION WA S AVAILABLE WITH THE AO TO HARBOR A BELIEF THAT INCOME HAS ESCAPED ASSES SMENT ON THIS ISSUE. WE ALLOW THIS GROUND OF APPEAL, AND QUASH THE REOPE NING OF THE ASSESSMENT. APPEAL OF THE ASSESSEE IS ALLOWED. 17. WE NOW TAKE APPEAL OF THE REVENUE. THE LD.CIT( A) HAS DELETED BOTH THE ADDITIONS SOUGHT TO BE MADE BY THE AO IN T HE REOPENED OF THE ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 14 ASSESSMENT. WE HAVE ALREADY QUASHED THE RE-ASSESSM ENT ORDER AND NOT REQUIRED TO GO INTO MERITS OF THE ISSUE, BUT CONSID ERING THE QUANTUM OF REVENUE INVOLVED IN THE APPEAL OF THE REVENUE, WE A RE OF THE OPINION THAT THE ISSUE MAY FURTHER TRAVEL TO HIGHER APPELLA TE AUTHORITY, THEREFORE, IT IS APPROPRIATE TO ADJUDICATE THE ISSUE ON MERIT ALSO. 18. FIRST WE TAKE THE GROUND NO.2. IN THIS GROUND, THE REVENUE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN DELETING TH E DISALLOWANCE OF RS.1,08,14,730/- WHICH WAS ADDED BY THE AO UNDER SE CTION 40A(2)(B) OF THE ACT. 19. WE HAVE ALREADY NOTICED THE FACTS LEADING TO TH IS ADDITION. IT IS PERTINENT OBSERVE THAT IN THE AUDIT REPORT SUBMITTE D BY THE ASSESSEE IN FORM NO.3CD, IT HAS NARRATED DETAILS OF PAYMENT MAD E UNDER SECTION 40A(2)(B) OF THE ACT AT COLUMN NO.18 ANNEXURE-9. F ROM SUCH DETAILS, THE LD.AO NOTICED THAT A SUM OF RS.1,08,14,730/- WA S PAID TO GOVIND C. PATEL, DIRECTOR TOWARDS CANCELLATION OF BOOKING LAN D PURCHASE. THE CASE OF THE ASSESSEE IS THAT IN F.Y.2006-07, DIRECTOR HA S PAID A SUM OF RS.1,08,14,730/- AND BOOKED A PLOT. SALE TO THE DI RECTOR WAS OFFERED TAXATION. THIS YEAR, BOOKING OF PLOT BEARING NO.6 WAS CANCELLED AND THE AMOUNT PAID BY THE DIRECTOR WAS REFUNDED. THE COMP ANY HAS SOLD THIS PLOT TO CELESTIAL BIOLOGICAL LTD. FOR A CONSIDERATI ON OF RS.3.25 CRORES AND EARNED PROFIT OF RS.2,16,85,270/-. THE LD.AO WITHO UT UNDERSTANDING THE ISSUE DISALLOWED THIS PAYMENT. ON APPEAL, THE LD.C IT(A) HAS RE- APPRECIATED ALL THESE FACTS AND DELETED DISALLOWANC E. DISCUSSION MADE BY THE LD.CIT(A) READS AS UNDER: ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 15 25/09/2008 SOLD TO CELESTIAL BIOLOGICAL LTD. 21629.46 500 10814730 31/03/2010 SOLD TO CELESTIAL BIOLOGICAL LTD. 335.42 500 167710 31/03/2010 SOLD TO CELESTIAL BIOLOGICAL LTD. 491.56 500 245780 31/03/2010 SOLD TO INTAS BIOPHARMACEUTICALS LTD. 7087.21 500 3543605 31/03/2010 LESS: REMAINING BALANCE GIVEN BACK TO GANESH HOUSING CORPORATION LTD. 3143.35 500 1571678 BALANCE AREA 0.00 4.6. IN OTHER WORDS, THE PLOT NO. 6 ADMEASURING 326 87 SQ. YDS. BOOKED BY SHRI GOVIND C. PATEL IN F. Y. 2006-07 FOR THE CONSIDERATION OF RS.16343500/- WAS CANCELLED BY HIM IN F. Y. 2009-10 AND THE LAND WAS SOLD IN PART BY THE APPELL ANT IN F. Y. 2009-10 AND 2010-11. THUS, THE ORIGINAL AMOUNT RECE IVED FROM SHRI GOVIND C. PATEL OF RS.16343500/- ON 24/03/2008 VIDE CHEQUE NO. 947658 OF TAMILNADU MERCANTILE BANK LTD. WAS RE TURNED BACK TO HIM IN F. Y. 2008-09 AND 2009-10. IN OTHER WORDS , ON BOOKING OF THE PLOT AND CANCELLATION THEREOF, SHRI GOVIND C . PATEL HAS NOT EARNED ANY INCOME, RATHER THE APPELLANT COMPANY HAS DERIVED THE INCOME AS MENTIONED EARLIER IN THE YEAR UNDER CONSI DERATION AT RS.2,16,85,270/- FOR 21629.46 SQ. YDS OF LAND AND I N F. Y. 2009-10 FOR THE REMAINING LAND SOLD. THROUGH THIS TRANSACTI ON, THE APPELLANT COMPANY HAS DERIVED THE INCOME WHICH HAS BEEN SHOWN IN THE P & L ACCOUNT AND OFFERED FOR TAXATION. IT I S NOT A CASE WHERE ANY COMPENSATION TO SHRI GOVIND C. PATEL IN L IEU OF CANCELLATION OF THE PLOT HAS BEEN PAID. DURING THE YEAR UNDER CONSIDERATION, THE CANCELLATION AMOUNT OF RFS.1,08, 14,730/-WAS THE REFUND MADE OUT OF HIS TOTAL BOOKING AMOUNT OF RS.1 ,63,43,500/ AND THE BALANCE OF RS.55,28,770/- WAS RETURNED BACK ON 01/04/2009 RELEVANT TO F. Y. 2009-10. THEREFORE, TH E QUESTION OF ANY EXCESS PAYMENT TO SHRI GOVIND C. PATEL DOES NOT ARISE AT ALL AS THE SAME WAS THE REFUND OF THE BOOKING AMOUNT AND N OT ANY COMPENSATION OF CANCELLATION OF THE PLOT. THUS, THE ADDITION MADE ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 16 BY THE AO IN THIS REGARD IS WITHOUT ANY BASE, AND T HEREFORE, THE SAME IS DELETED. IN RESULT, THE GROUNDS OF THE APPE LLANT ARE ALLOWED. 20. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. DISALLOWANCE UNDER S ECTION 40A(2)(B) OF THE ACT CAN BE MADE, IF THE ASSESSEE INCURS ANY EXP ENDITURE FOR THE SERVICES AND GOODS PROVIDED BY PERSONS COVERED UNDE R SUB-CLAUSE (B) AND MAKE PAYMENT TO SUCH PERSON, WHICH IN THE OPINI ON OF THE ASSESSING OFFICER IS EXCESSIVE AND UNREASONABLE AS COMPARED T O FAIR MARKET VALUE, THEN SO MUCH OF SUCH PAYMENT, WHICH IN THE OPINION OF THE ASSESSING OFFICER IS EXCESSIVE AND UNREASONABLE WILL NOT BE A LLOWED AS DEDUCTION. IN THE PRESENT CASE, THE AO FAILED TO MAKE ANY CASE UNDER SECTION 40A(2)(B). THE COMPANY HAS EARLIER MADE BOOKING/SOL D THE PLOT IN FAVOUR OF THE DIRECTOR AND RECEIVED PAYMENT. THIS YEAR IT HAS CANCELLED THE BOOKING AND REFUNDED THE PAYMENT. THE PLOT WAS THEREAFTER SOLD TO THIRD CONCERN AND EARNED HUGE PROFIT OF RS.2.16 COR ES. THUS, THERE IS NO EXTRA BENEFIT TO THE DIRECTOR WHICH DESERVES TO BE DISALLOWED UNDER SECTION 40A(2)(B) OF THE ACT. THE LD.CIT(A) HAS DI SCUSSED THIS ISSUE ELABORATELY AND WE DO NOT SEE ANY REASONS TO INTERF ERE IN THE ORDER OF THE CIT(A). THIS GROUND OF APPEAL IS REJECTED. 21. NOW WE TAKE FIRST GROUND OF APPEAL. THE GRIEVA NCE OF THE REVENUE IS THAT THE GAIN ARISEN TO THE ASSESSEE ON SALE OF LAND OUGHT TO BE ASSESSED AS BUSINESS INCOME INSTEAD OF CAPITAL GAIN OFFERED BY THE ASSESSEE AND ACCEPTED BY THE LD.CIT(A). ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 17 22. BRIEF FACTS OF THE CASE ARE THAT THE LAND IN QU ESTION WAS ORIGINALLY PURCHASED BY NPPL IN ASSTT.YEAR 2002-03 FOR A CON SIDERATION OF RS.7,74,400/-. ACCORDING TO THE ASSESSEE, THIS PRO PERTY WAS UNDER SOME DISPUTE AND NPPL HAD FURTHER INCURRED A SUM OF RS .24,36,000/- ON 29.10.2005. IT HAS MADE PAYMENT OF THIS AMOUNT TO ONE SHRI GANDALAL KESHAVLAL TO SETTLE THE DISPUTE ON THE LAND. THUS NPPL HAD INCURRED TOTAL AMOUNT OF RS.33,36,855/- FOR ACQUISITION OF T HIS LAND. NPPL SHOWN PURCHASE OF THIS LAND AS FIXED ASSETS UNDER T HE HEAD INVESTMENT. THIS COMPANY GOT AMALGAMATED WITH THE ASSESSEE-COMP ANY ON 1.10.2006, AND CONSEQUENTLY, THE ASSESSEE-COMPANY C ONVERTED THE LAND INTO AN NA LAND BY PAYING CONVERSION CHARGES AND ST AMP DUTY. IT SHOWN COST OF ACQUISITION AT RS.37,23,615/-. DURING THE ACCOUNTING PERIOD RELEVANT TO THE ASSESSMENT YEAR, THIS LAND WAS SOLD THROUGH TWO AGREEMENTS DATED 31.12.2008 AND 28.1.2009 FOR A CON SIDERATION OF RS.34,85,02,200/-. THE ASSESSEE TREATED THE DIFFER ENCE BETWEEN THE SALE CONSIDERATION AND COST OF ACQUISITION OF LAND WITH RELATED EXPENDITURE AFTER INDEXATION AS LONG TERM CAPITAL GAIN. DISPUT E BEFORE US IS, WHETHER IT IS TO BE ASSESSED AS A LONG CAPITAL GAIN OR IT I S TO BE TREATED BUSINESS INCOME. CASE OF THE AO IS THAT THE ASSESSEE IS IN THE BUSINESS OF REAL- ESTATE. IT HAS ACQUIRED PLOT OF LAND WITH AN INTEN TION OF EARNING PROFIT. IT HAS EARNED HUGE PROFIT, AND THEREFORE, IT IS TO BE ASSESSED AS BUSINESS INCOME. ON THE OTHER HAND, THE LD.CIT(A) DID NOT C ONCUR WITH THE AO AND ACCEPTED THE CONTENTIONS OF THE ASSESSEE BY TRE ATING IT AS A LONG TERM CAPITAL GAIN. RELEVANT DISCUSSION MADE BY THE LD.C IT(A) READS AS UNDER: 3.4.3. AFTER PURCHASE OF THE AFORESAID LAND BY THE EARLIER COMPANY NAMELY; NACHKET PROPERTIES PVT. LTD. IN 200 2-03, EXCEPT ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 18 TO CONVERT THE USE OF THE LAND AS NA LAND BY THE AP PELLANT COMPANY, THERE WAS NO DEVELOPMENT ACTIVITY CARRIED OUT ON THE AFORESAID LAND. IT IS WORTH HERE TO MENTION THAT HA D THERE BEEN THE PROFIT MOTIVE ON THE AFORESAID LAND THEN THE LAND C OULD HAVE BEEN DEVELOPED AND THE SAME SHOULD HAVE BEEN SOLD AFTER CARRYING OUT THE CONSTRUCTION ACTIVITIES THEREUPON. SO BY DOING NOT SO, THE INTENTION OF THE APPELLANT WAS ONLY TO MAKE THE INV ESTMENT FOR LONG TERM PURPOSES AND ACCORDINGLY HE KEPT HOLDING THE L AND FOR ALMOST MORE THAN 6 YEARS. 3.4.4. IT HAS ALSO BEEN PLEADED THAT IN APPELLANT'S OWN CASE, THE SCRUTINY ASSESSMENTS HAVE BEEN COMPLETED IN THE PAS T AND ASSESSMENT ORDERS HAVE BEEN RENDERED U/S. 143(3) OF THE I. T. ACT BUT IN NO ASSESSMENT THE AO HAS NEGATED THE HOLDING OF THE LAND AS FIXED ASSETS, AS INVESTMENTS. THUS, IT HAS BEEN ACC EPTED AS THE INVESTMENT IN THE SAID LAND BEING CAPITAL ASSET. EV EN IN APPELLANT'S OWN CASE FOR A.Y. 2009-10 I.E. THE YEAR UNDER CONSI DERATION IN THE ORIGINAL SCRUTINY ASSESSMENT COMPLETED, THE APPELLA NT HAS GIVEN THE COMPLETE DETAILS AND COPIES OF DOCUMENTS OF THE LAND TRANSACTION VIDE ITS LETTER DATED 21/11/2011 AND 14 /12/2011 WITH NECESSARY DETAILS AND EVIDENCES AND THE SAME HAD BE EN ACCEPTED AFTER NECESSARY VERIFICATIONS BY THE AO. THUS, THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS HIMSELF WAS SATISFI ED ABOUT THE TREATMENT OF THE INCOME DERIVED UPON SALE OF LAND A S LONG TERM CAPITAL GAIN AND NOT THE BUSINESS PROFITS. SUBSEQUE NT TO ORIGINAL ASSESSMENT COMPLETION, NO NEW EVIDENCES HAVE COME O N RECORD TO TAKE A DIFFERENT VIEW. IT HAS ALSO BEEN NOTICED THA T AS PER THE PROVISIONS OF I. T. ACT, THERE IS NO PROHIBITION TH AT REAL ESTATE DEVELOPER CANNOT HAVE A SEPARATE PORTFOLIO OF INVES TMENT IN CAPITAL ASSETS. IN THE YEAR UNDER CONSIDERATION, THE APPELL ANT COMPANY OR AMALGAMATING COMPANY SINCE PURCHASE OF LAND IN 2002 -03, DID NOT INCUR ANY EXPENDITURE ON THE LAND TO CARRY OUT ANY DEVELOPMENT / CONSTRUCTION WORK. THEREFORE, THE PROFIT ON SALE OF LAND WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ONLY. EVEN THIS CA NNOT BE SAID TO BE THE BUSINESS PROFIT OR ADVENTURE IN THE NATURE O F TRADE FOR THE REASON THAT THE APPELLANT COMPANY'S BUSINESS WAS MA INLY BUILDING AND CONSTRUCTION OF THE REAL ESTATES AND NOT TRADIN G IN THE LANDS. ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 19 3.4.5. HAVING CONSIDERED THE FACTS AND SUBMISSION, IT IS APPARENT THAT THE INVESTMENT IN LAND INITIALLY WHEN ACQUIRED IN F. Y. 2002- 03 BY M/S. NACHKET PROPERTIES PVT. LTD. AND AFTER A MALGAMATION OF THE AFORESAID COMPANY IN THE APPELLANT COMPANY IN F . Y. 2006-07, HAS NOT BEEN SHOWN AS STOCK IN TRADE IN THEIR BALAN CE SHEETS IN ANY OF THE YEARS. AT ALL THE TIMES IT HAD BEEN SHOWN AS FIXED ASSETS IN THE BALANCE SHEETS. MERELY THAT THE APPELLANT COMPA NY IS ENGAGED IN DEVELOPMENT AND CONSTRUCTION OF REAL ESTATE PROJ ECTS COULD NOT BE SUFFICIENT TO HOLD THAT THE TRANSACTION IN LAND WOULD BE .AMOUNTING TO THE BUSINESS TRANSACTION AND NOT THE INVESTMENT TRANSACTION AS THESE TWO ACTIVITIES ARE DIFFERENT F ROM EACH OTHER. EVEN, IN THE SAME TYPE OF BUSINESS, A PERSON CAN HA VE TWO DIFFERENT PORTFOLIOS; ONE IN THE NATURE OF STOCK IN TRADE AND ANOTHER IN THE NATURE OF INVESTMENT. RATHER IN THE APPELLANT'S CAS E, THE APPELLANT'S BUSINESS WAS DIFFERENT FROM THE LAND TR ANSACTION AND IT HAS NEVER BEEN FORMING PART OF THE BUSINESS SINCE I TS ACQUISITION IN F. Y. 2002-03. THEREFORE, THE APPELLANT'S PLEA WITH TREATING THE SAME AS INVESTMENT IS FOUND CORRECT AND JUSTIFIED. THE AO HAS CHANGED THE BASIS OF TAXATION AND TREATED UNDER BUS INESS HEAD WITHOUT BRINGING ANYTHING ON RECORD TO DO SO. EVEN THE APPELLANT OR THE AMALGAMATING COMPANY HAD NOT CARRIED OUT ANY DEVELOPMENTAL ACTIVITIES ON THE AFORESAID LAND EXCE PT TO CONVERSION OF THE LAND USE. THEREFORE, THE PROFIT D ERIVED FROM SALE OF LAND IS HELD TO BE LONG TERM CAPITAL GAIN AS OFF ERED BY THE APPELLANT. THIS VIEW IS SUPPORTED BY VARIOUS DECISI ONS / JUDGMENTS AS BRIEFLY DISCUSSED HEREUNDER: 23. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH RECORD CAREFULLY. 24. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE T HROUGH THE RECORD CAREFULLY. THE DISPUTE BEFORE US RELATES TO , WHETHER THE ASSESSEE WAS INVESTOR OR TRADER IN LAND. WHETHER AN ASS ESSEE IS AN INVESTOR OR TRADER IS AN OBJECTIVE CONSIDERATION TAKING IN TO ACCOUNT VARIOUS ASPECTS. ACCORDING TO THE ASSESSEE, IT WAS MAINTAIN ING TWO PORTFOLIOS I.E. STOCK-IN-TRADE BEING DEVELOPER IN REAL-ESTATE AS WELL AS INVESTMENT. ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 20 BOTH ARE IDENTIFIABLE IN ACCOUNTS. EXPENDITURE INC URRED THEREOF HAS BEEN DEBITED SEPARATELY AND WHATEVER PROFIT EARNED OR LOSS SUFFERED HAS BEEN GIVEN EFFECT IN THE CAPITAL ACCOUNT OF THE ASSESSEE. MEANING THEREBY, WHATEVER INCOME EARNED AND EXPENDITURE INC URRED HAS BEEN CAPITALIZED IN INVESTMENT ACCOUNTS OF THE ASSESSEE, WHICH ESTABLISH THE INVESTMENT ATTITUDE OF THE ASSESSEE. 25. IT IS PERTINENT TO OBSERVE THAT ITAT LUCKNOW BE NCH IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD. V. ACIT (2009) 120 TTJ 216 HAS ALSO CONSIDERED ISSUE WHETHER AN ASSESSEE DESERVES TO BE TREATED AS A TRADER OR INVESTOR. THOUGH THE ISSUE INVOLVED IN THAT CASE RELATES TO INVESTMENT/TRADING IN SHARES, BUT BROAD PRINCIPL E CARVED OUT BY THE ITAT IS APPLICABLE ON ALL SORTS OF TRANSACTIONS, WH ERE ADJUDICATOR IS REQUIRED TO FIND OUT WHETHER TRANSACTION WAS ENTERE D INTO BY THE ASSESSEE WITH A PRE-DOMINANT INTENTION OF TRADING O R INVESTMENT. THE FOLLOWING TESTS ARE WORTH TO NOTE: 13. AFTER CONSIDERING ABOVE RULINGS WE CULL OUT FO LLOWING PRINCIPLES, WHICH CAN BE APPLIED ON THE FACTS OF A CASE TO FIND OUT WHETHER TRANSACTION(S) IN QUESTION ARE IN THE NATURE OF TRA DE OR ARE MERELY FOR INVESTMENT PURPOSES: (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN BE FOUND OUT FROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHETHER IT IS TREATED STOCK-IN-TRADE OR INVESTMENT. WHETHE R SHOWN IN OPENING/CLOSING STOCK OR SHOWN SEPARATELY AS INVEST MENT OR NON- TRADING ASSET. (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON? NORMALLY, MONEY IS BORROWED TO P URCHASE GOODS FOR THE PURPOSE OF TRADE AND NOT FOR INVESTING IN AN AS SET FOR RETAINING. ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 21 (3) WHAT IS THE FREQUENCY OF SUCH PURCHASE AND DISP OSAL IN THAT PARTICULAR ITEM? IF PURCHASE AND SALE ARE FREQUENT , OR THERE ARE SUBSTANTIAL TRANSACTION IN THAT ITEM, IF WOULD INDI CATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICATIVE OF IN TENTION OF TRADE. SIMILARLY, RATIO BETWEEN THE PURCHASES AND SALES AN D THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTI NG (HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREA S LOW TRANSACTIONS AND HIGH HOLDINGS INDICATE INVESTMENT). (4) WHETHER PURCHASE AND SALE IS FOR REALIZING PROF IT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION ITS VALUE? FORMER WILL INDICATE INTENTION OF TRADES AND LATTER, AN INVESTM ENT. IN THE CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MERELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIA L MOTIVE IS AN ESSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN TH E BALANCE SHEET? IF THE ITEMS IN QUESTION ARE VALUED AT COST , IT WOULD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY ARE VALUED AT COST OR MARKET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS), IT WILL INDICATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEM ORANDUM OF ASSOCIATION/ARTICLES OF ASSOCIATION? WHETHER FOR TR ADE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE, THEN WHE THER THERE ARE SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO C ARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSE. 7. IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHO W THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT D ISTINCTION HE HAS KEPT IN THE RECORDS OR OTHERWISE, BETWEEN TWO TYPES OF HOLDINGS. IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT (OR SAY, STOCK-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPA RENT IS NOT REAL. 8. THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHAR ES ( OR FOR THAT MATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR NOT SO MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY THAT ASSESSEE WAS HOLDING THE SHARES (OR THE ITEMS IN QUESTION) FOR INVESTMENT. 9. ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISITE S FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WHETHER THE A SSESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSESSEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF IT IS CLAIMED THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHER IT HAD SUCH AN I NTENTION (TO CARRY ON ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 22 ILLEGAL BUSINESS IN THAT ITEM) SINCE BEGINNING OR W HEN PURCHASES WERE MADE? 10. IT IS PERMISSIBLE AS PER CBDTS CIRCULAR NO. 4 OF 2007 OF 15 TH JUNE, 2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIO S, ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT IS MAINTAINING SEPARATE ACCOUNT FOR EACH TYPE, THERE ARE DISTINCTIVE FEATURES FOR B OTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. 11. NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO COME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EF FECT OF SEVERAL FACTORS HAS TO BE SEEN. 26. THE HONBLE GUJARAT HIGH COURT HAD ALSO AN OCCA SION TO CONSIDER THIS ISSUE IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RIVA SHARKAR A KOTHARI REPORTED IN 283 ITR 338. HONBLE COURT HAS MADE REFERENCE TO THE TEST LAID BY IT IN ITS EARLIER DEC ISION RENDERED IN THE CASE OF PARI MANGALDAS GIRDHARDAS VS. CIT REPORTED IN 19 77 CTR 647. THESE TESTS READ AS UNDER: AFTER ANALYZING VARIOUS DECISIONS OF THE APEX COUR T, THIS COURT HAS FORMULATED CERTAIN TESTS TO DETERMINE AS TO WHETHER AN ASSESSEE CAN BE SAID TO BE CARRYING ON BUSINESS. (A) THE FIRST TEST IS WHETHER THE INITIAL ACQUISITION O F THE SUBJECT- MATTER OF TRANSACTION WAS WITH THE INTENTION OF DEA LING IN THE ITEM, OR WITH A VIEW TO FINDING AN INVESTMENT. IF THE TRANSACTION, SINCE THE INCEPTION, APPEARS TO BE IMPRESSED WITH T HE CHARACTER OF A COMMERCIAL TRANSACTION ENTERED INTO WITH A VIEW T O EARN PROFIT, IT WOULD FURNISH A VALUABLE GUIDELINE. (B) THE SECOND TEST THAT IS OFTEN APPLIED IS AS TO WHY AND HOW AND FOR WHAT PURPOSE THE SALE WAS EFFECTED SUBSEQUENTLY. (C) THE THIRD TEST, WHICH IS FREQUENTLY APPLIED, IS AS TO HOW THE ASSESSEE DEALT WITH THE SUBJECT-MATTER OF TRANSACTI ON DURING THE TIME THE ASSET WAS THE ASSESSEE. HAS IT BEEN TREAT ED AS STOCK-IN- TRADE, OR HAS IT BEEN SHOWN IN THE BOOKS OF ACCOUNT AND BALANCE SHEET AS AN INVESTMENT. THIS INQUIRY, THOUGH RELEV ANT, IS NOT CONCLUSIVE. ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 23 (D) THE FOURTH TEST IS AS TO HOW THE ASSESSEE HIMSELF H AS RETURNED THE INCOME FROM SUCH ACTIVITIES AND HOW THE DEPARTMENT HAS DEALT WITH THE SAME IN THE COURSE OF PRECEDING AND SUCCEE DING ASSESSMENTS. THIS FACTOR, THOUGH NOT CONCLUSIVE, C AN AFFORD GOOD AND COGENT EVIDENCE TO JUDGE THE NATURE OF THE TRAN SACTION AND WOULD BE A RELEVANT CIRCUMSTANCE TO BE CONSIDERED I N THE ABSENCE OF ANY SATISFACTORY EXPLANATION. (E) THE FIFTH TEST, NORMALLY APPLIED IN CASE OF PARTNER SHIP FIRMS AND COMPANIES, IS WHETHER THE DEED OF PARTNERSHIP OR TH E MEMORANDUM OF ASSOCIATION, AS THE CASE MAY BE, AUTH ORIZES SUCH AN ACTIVITY. (F) THE LAST BUT NOT THE LEAST, RATHER THE MOST IMPORTA NT TEST, IS AS TO THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRANSACTION OF PURCHASE AND SALE OF THE GOODS CONCERNED. IN A CAS E WHERE THERE IS REPETITION AND CONTINUITY, COUPLED WITH THE MAGN ITUDE OF THE TRANSACTION, BEARING REASONABLE PROPOSITION TO THE STRENGTH OF HOLDING THEN AN INFERENCE CAN READILY BE DRAWN THAT THE ACTIVITY IS IN THE NATURE OF BUSINESS. 27. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. 28. A PERUSAL OF THE ASSESSMENT ORDER WOULD REVEAL THAT THE LD.AO HAS OBSERVED THAT AS PER SECTION 28 OF THE INCOME TAX A CT, PROFITS AND GAINS OF ANY BUSINESS OR PROFESSION, WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR SHALL BE CHARGEAB LE TO INCOME TAX UNDER THE HEAD PROFITS & GAIN OF BUSINESS OR PROFE SSION. ACCORDING TO HIM, SINCE ASSESSEE IS IN THE BUSINESS OF DEVELOPME NT OF REAL-ESTATE, IT HAS BEEN SHOWING THE LAND UNDER THE HEAD FIXED ASS ETS, AND NOT UNDER THE HEAD INVESTMENT. SIMILARLY, IN THE BALANCE S HEET, IT USED TO ADD OR DEDUCT THE LAND IN THE FIXED ASSETS ACCOUNT, ACCORD ING TO THE TRANSACTION TAKEN PLACE DURING A YEAR THROUGH. THEREFORE, THE LAND COULD NOT BE CONSIDERED AS AN ASSET HELD UNDER INVESTMENT. TH E AO THEREAFTER ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 24 MADE REFERENCE TO THE MEMORANDUM OF ASSOCIATION AND OBSERVED THAT THE LAND WOULD BE CONSIDERED AS STOCK-IN-TRADE. HE F URTHER OBSERVED THAT ASSESSEE HAS BEEN CLAIMING DEDUCTION UNDER SECTION 80IB FROM PROFITS SO DERIVED FROM SUCH ACTIVITIES, THEREFORE, THE LAND S HOULD BE CONSIDERED AS FIXED ASSET EQUIVALENT TO THE MACHINERY OR STOCK, A ND PROFIT DERIVED THROUGH TRANSFER OF SUCH LAND, SHOULD INVARIABLY BE TREATED AS INCOME FROM BUSINESS OR PROFESSION. THE AO THEREAFTER NAR RATED THE TRANSACTION QUA THIS LAND, AND OBSERVED THAT NPPL WAS ALSO ENGAGED IN THE BUSINESS OF REAL-ESTATE DEVELOPMENT AND CONSTRUCTION ACTIVIT IES BEFORE ITS AMALGAMATION. THUS, IT IS TO BE INFERRED THAT INTE NTION OF ERSTWHILE COMPANY AB-INITO WAS FOR ACQUIRING INVESTMENT IN STOCK AND NOT INVESTMENT IN LAND. THE AO MADE REFERENCE TO THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF V. VENKATASWAMI NAIDU & CO. VS. CIT, , 35 ITR 594 AND IN THE CASE OF DALMIA CEMENT LTD. VS . CIT, 105 ITR 633. ON THE STRENGTH OF THESE DECISIONS, HE OBSERV ED THAT EVEN A SINGLE TRANSACTION OF PURCHASE AND SALE MAY BE TREATED AS BUSINESS TRANSACTION. 29. THE LD.CIT(A), ON THE OTHER HAND, MADE RE-ANALY SIS OF ALL THE FACTS AND CIRCUMSTANCES AND DID NOT CONCUR WITH THE AO AS PER THE FINDING EXTRACTED (SUPRA). ON ANALYSIS OF BOTH ORDERS, IT WOULD REVEAL THAT EMPHASIS OF THE AO IS THAT THE SINCE AMALGAMATING C OMPANY AS WELL AS AMALGAMATED COMPANY I.E. NPPL AND THE ASSESSEE BOTH WERE ENGAGED IN THE BUSINESS OF REAL-ESTATE DEVELOPMENT AND CONSTRU CTION ACTIVITIES, THEREFORE, IT SHOULD BE CONSTRUED THAT INTENTION OF BOTH THE ASSESSEE WAS FOR EARNING PROFIT FROM SALE OF LAND WITH OR WITHOU T FURTHER DEVELOPMENT. THIS INTENTION WAS THERE FROM AB-INITIO . IT IS PERTINENT TO OBSERVE THAT WHETHER GAIN FROM SALE OF AGRICULTURE LAND/NON-AGRI CULTURE LAND IS TO BE ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 25 ASSESSED AS A BUSINESS INCOME OR SHORT TERM CAPITAL GAIN/LONG TERM GAIN, IS HIGHLY DEBATABLE ISSUE. IT ALWAYS PUZZLED THE A DJUDICATOR EVEN AFTER AVAILABILITY OF LARGE NUMBERS OF AUTHORITATIVE PRON OUNCEMENTS BY THE HONBLE SUPREME COURT/HONBLE HIGH COURT. THE REASO N FOR THE PUZZLE IS, ONE HAS TO GATHER THE INTENTION OF AN ASSESSEE WHILE HE ENTERED INTO THE TRANSACTION. THE EXPRESSION INTENTION AS DEFINED IN MERIAM WEBSTER DICTIONARY MEANS, WHAT ONE INTENDS TO ACCOMPLISH OR ATTAIN, IT IMPLIES LITTLE MORE THAN WHAT ONE HAS IN MIND TO DO OR BRIN G OUT. IT SUGGESTS CLEAR FOR MULATION OR DELIBERATIO N. THUS, IT IS ALWAYS DIFFICULT TO ENTER INTO THE RECESS OF THE MIND OF AN ASSESSEE TO FIND OUT THE O PERATIVE FORCES EXHIBITING THE INTENTION FOR ENTERING INTO THE TRAN SACTION. ACCORDING TO THE AO, SINCE BOTH THE COMPANIES WERE IN THE BUSINE SS OF REAL-ESTATE DEVELOPMENT, THEREFORE, THEIR INTENTION IS TO BE CO NSTRUED AS ENTERING INTO A TRANSACTION FOR GIVING RISE TO BUSINESS PROF IT. ON THE OTHER HAND, THE LD.CIT(A) DID NOT CONCUR WITH THE CONCLUSIONS O F THE AO. TO OUR MIND, THE LD.CIT(A) HAS RIGHTLY NOT CONCURRED WITH THE AO BECAUSE ERSTWHILE COMPANY HAD PURCHASED THIS LAND IN ASSTT. YEAR 2002-03. IT HAD SHOWN IT AS AN INVESTMENT. IT WAS NEVER TREATE D AS STOCK-IN-TRADE. THIS HAS BEEN SOLD BY THE ASSESSEE DURING THE ASSTT .YAR 2009-10 AFTER AMALGAMATION. IT MEANS, CONTINUOUSLY FOR FEW YEARS , THE LAND WAS TREATED AS INVESTMENT IN THE ACCOUNTS BY THE ERSTWH ILE COMPANY. THEN, HOW THE AO HAS INFERRED INTENTION OF NPPL FOR ENTER ING INTO TRANSACTIONS LEADING TO BUSINESS ? IT IS ALSO PERT INENT TO MENTION THAT IT WAS AN AGRICULTURE LAND. IT CAME TO THE ASSESSEE O N AMALGAMATION OF ERSTWHILE COMPANY, MEANING THEREBY, IT COULD NOT BE A PIECE OF LAND ON WHICH 80IB COULD BE CLAIMED ON DEVELOPMENT. ITS CH ARACTER AS NON- ITA NO.3083/AHD/2015 WITH CO AND ITA NO.3034/AHD/2015 26 AGRICULTURE LAND WAS GOT CHANGED DURING THE YEAR. THIS CONDUCT OF BOTH THE ASSESSEES, AMALGAMATING COMPANY AS WELL TH E ASSESSEE WOULD INDICATE THAT FROM THE BEGINNING THIS PIECE OF LAND WAS TREATED AS AN INVESTMENT IN THE LAND. THE AO HAS NOT GIVEN ANY O THER CIRCUMSTANCES WHICH CAN GOAD HIM TO THE CONCLUSION THAT THIS TRAN SACTION IS TO BE TREATED AS A BUSINESS TRANSACTION. HIS CONCLUSIONS ARE BASED ON ASSUMPTION, RATHER NOT ON EVIDENCE. IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT AND OTHER TESTS, WE HAVE EXAMINED THIS ASPECT, AND WE DO NOT SEE ANY REASONS TO DIFFE R WITH THE CONCLUSIONS OF LD.CIT(A). THEREFORE, THIS GROUND O F APPEAL IS REJECTED. 30. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. CO OF THE ASSESSEE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 23 RD OCTOBER, 2018 AT AHMEDABAD. S D / - (AMARJIT SINGH) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER