K.R.Santha, CHENNAI V. DCIT, CHENNAI

ITA 1660/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8961 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 25-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 20-07-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: N ANUSH SHANKARC A
• Keywords: Capital asset; Business income; Document seized; Deemed dividend; Documents seized
• Section: 142(1); 153A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.1660 TO 1662/MDS./2015 / ASSESSMENT YEAR : 2009-10,2010-11 & 2011-12 SMT.K.R.SANTHA , NO.28, 19 TH AVENUE, 86 TH STREET, ASHOK NAGAR, CHENNAI-83. VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III(I), CHENNAI. [PAN AHYPS 2522 C ] ( () / APPELLANT) ( *+() /RESPONDENT) ./ I.T.A.NOS.1658 & 1659/MDS./2015 / ASSESSMENT YEAR : 2010-11 & 2011-12 SHRI N.R.MANIGANTAN , 28, 19 TH AVENUE, 86 TH STREET, ASHOK NAGAR, CHENNAI-83. VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III(I), CHENNAI [PAN AFLPM 3019 H ] ( () / APPELLANT) ( *+() /RESPONDENT) ASSESSEE BY : MR.N.ANUSH SHANKAR,C.A REVENUE BY : MR.A.V.SREEKANTH,JCIT, DR / DATE OF HEARING : 25 - 05 - 201 6 / DATE OF PRONOUNCEMENT : - 2016 , / O R D E R ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 2 -: PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE FIVE APPEALS FILED BY THE TWO DIFFERENT ASS ESSEES ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE LD.CIT (A)-18, CHENNAI FOR THE ABOVE MENTIONED ASSESSMENT YEARS PASSED CONSEQU ENT TO ASSESSMENT ORDER U/S.143(3) R.W.S. 153A OF THE INCO ME TAX ACT, 1961. SINCE ISSUES INVOLVED IN ALL THESE APPEALS ARE COMM ON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPO SED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP ITA NOS.1660 TO 1662/MDS./15.( ASSESSEES APPEAL) 3. THE COMMON GROUND IN THESE APPEALS IS WITH REGA RD TO TREATMENT OF AGRICULTURAL INCOME DECLARED BY THE AS SESSEE AS INCOME FROM OTHER SOURCES WHILE PASSING ASSESSMENT ORDER U /S.143(3) R.W.S.153C OF THE ACT. THE NOTICE U/S.153C WAS ISS UED ON 11.11.2011 CONSEQUENT TO SEARCH IN THE CASE OF ASSESSEE ON 02. 07.2010. CONSEQUENT O NOTIFICATION NO.14/2010-2011 IN C.NO.3 062/III/2010-11 DATED 07.12.2010, IN THE RETURN OF INCOME, ORIGINAL LY FILED BY THE ASSESSEE, WAS DISCLOSED AGRICULTURAL INCOME AT ` 2,22,500/-, ` 1,62,600/- & ` 1,73,000/- FOR ASSESSMENT YEARS 2009-10, 2010-11 & 2011-12 RESPECTIVELY. CONSEQUENT TO SEARCH ACTION, BY FRAMING ASSESSMENT U/S.143(3) R.W.S.153C OF THE ACT, THE AO TREATED THE SAME AS INCOME FROM OTHER SOURCES. ACCORDING TO THE AO, THE ASSESSEE HAS ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 3 -: NOT FILED ANY DETAILS OF SALES PROCEEDS RECEIVED, E XPENDITURE INCURRED AND COPY OF ADANGAL EXTRACT. ON APPEAL, LD.CIT(A) HAS CALLED FOR REMAND REPORT. DURING THE COURSE OF REMAND PROCEED INGS, THE ASSESSEE VIDE HER LETTER DATED 21.03.2013 INFORMED THE AO THAT THE DOCUMENTS OF SENGULAM VILLAGE WERE AVAILABLE WITH T HE AO. THE TOTAL PURCHASE OF LAND WAS DECLARED IN THE WEALTH TAX RET URNS FILED BY THE ASSESSEE. THE ADANGAL EXTRACT COULD NOT BE FURNISH ED AT THE TIME OF ASSESSMENT BECAUSE PRE-ASSESSMENT NOTICE WAS ISSUE D ON 14.03.2013 FOR WHICH THE REPLY WAS GIVEN ON 21.03.2013 AND THE ASSESSMENT WAS COMPLETED ON 31.03.2013. HOWEVER, THE AO HAS NOT C ONSIDERED THE ASSESSEES PLEA AT THE STAGE OF REMAND PROCEEDINGS, THOUGH THE ASSESSEE PRODUCED ADANGAL WHICH SHOWS THE ASSESSEE IS OWNING 6.93 ACRES OF LAND AND THE ASSESSEE HAS RAISED PADDY AN D MANGO GROOVES IN THAT LAND. THE CIT(A) CONFIRMED THE ORDER OF TH E AO OBSERVING THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE CLAIM O F AGRICULTURAL INCOME BEFORE THE AO DURING THE REMAND PROCEEDINGS ALSO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE THERE IS NO DOUBT REGARDING OW NING OF THE AGRICULTURAL LAND BY THE ASSESSEE AS THE ADANGAL PR ODUCED BY THE ASSESSEE SHOWS THAT THE ASSESSEE IS OWNING 6.93 ACR E OF LAND, GROWING PADDY AND MANGO GROOVES. THE ONLY REASON FOR DISALL OWANCE IS NON- ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 4 -: PRODUCTION OF CERTAIN DOCUMENTS REGARDING CARRYING OUT THE AGRICULTURAL OPERATIONS AND SALE OF AGRICULTURAL PRODUCE. THE A SSESSEE HAS PLACED EVIDENCE CONTAINING DETAILS OF ACRES OF AGRICULTURA L LAND, VILLAGE NAME, AND NATURE OF AGRICULTURAL PRODUCE RAISED BY THE AS SESSEE. FURTHER, IT IS ALSO STATED THAT THE ASSESSEE FILED HER RETURN O F INCOME U/S.139 OF THE ACT DISCLOSING HER AGRICULTURAL INCOME. NOW CON SEQUENT TO SEARCH ACTION, THE AO TREATING THE INCOME DECLARED IN HER RETURN OF INCOME FILED U/S.139 OF THE ACT AS INCOME FROM OTHER SOURC ES. IN OTHER WORDS, THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTION TO SUGGEST THAT THE ASSESSEE IS NOT CARRIED ON ANY AGR ICULTURAL OPERATION IN THE SAID LAND AND THE AGRICULTURAL INCOME DECLAR ED BY ASSESSEE IS BOGUS OR FALSE. THE LD. ASSESSING OFFICER AND LD.C IT(A) IN ARBITRARY MANNER OBSERVING THAT ASSESSEES AGRICULTURAL INCOM E CANNOT BE TREATED GENUINE ONE, THOUGH THERE IS EVIDENCE IN TH E FORM OF OWNING AGRICULTURAL LAND TO THE EXTENT OF 6.93 ACRES. THE RE IS NO ALLEGATION THAT THESE LANDS WERE KEPT IDLE AND NO AGRICULTURAL OPERATION WAS CARRIED ON BY THE ASSESSEE. CONSIDERING THE VAST A REA OF AGRICULTURAL LAND OWNED BY THE ASSESSEE AND AGRICULTURAL PRODUCE STATED IN THE ADANGAL, WE CANNOT RULE OUT THE POSSIBILITY OF EARN ING THE AGRICULTURAL INCOME, IN INDIA, USUALLY THE AGRICULTURISTS NOT MA INTAINING ANY BOOKS OF ACCOUNTS FOR RAISING THE AGRICULTURAL CROPS. EVE N DURING THE COURSE OF SEARCH U/S.153A, THERE WAS NO MATERIAL TO SUGGEST T HAT AGRICULTURAL ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 5 -: INCOME DECLARED BY THE ASSESSEE IS BOGUS. IN SUCH CIRCUMSTANCES, WHEN NO INCRIMINATING MATERIAL IS FOUND AT THE TIME OF SEARCH TO SUGGEST THAT THE ASSESSEE HAD SHOWN NON-AGRICULTURA L INCOME AS AGRICULTURAL INCOME AND ARBITRARILY DISALLOWING THE SAME BY THE LOWER AUTHORITIES BY TREATING IT AS INCOME FROM OTHER SOU RCES IS NOT APPROPRIATE. HENCE IN OUR VIEW, THE AGRICULTURAL I NCOME DECLARED BY THE ASSESSEE HAS TO BE ACCEPTED IN TOTO. THIS GROU ND IN THESE TWO ASSESSEES APPEALS IS ALLOWED. 5. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD T O TREATMENT OF INCOME FROM HOUSE AT PALAYAMKOTTAI. AT THE TIME OF HEARING, THE LD.A.R HAS NOT PRESSED THIS GROUND. ACCORDINGLY THIS GROU ND IS DISMISSED AS NOT PRESSED. 6. THE NEXT GROUND IS WITH REGARD TO TREATMENT OF RENTAL INCOME FROM HOUSE AT EVARPAGAI NAINA STREET, PALAYAMKOTTAI AT ` 42,000/-. 7. THE FACTS OF THE CASE ARE THAT THE AO TREATED T HE INCOME FROM ABOVE PROPERTY AT ` 42,000/- AS ANNUAL VALUE. THE CONTENTION OF LD.A.R IS THAT THIS IS ONLY RENT OF 2 CENTS OF LAND AND TH ERE IS NO BUILDING ON IT SO AS TO COMPUTE THE ANNUAL VALUE. IN OUR OPINION, THE FACTS BROUGHT ON RECORD DO NOT SUGGEST THAT THE PROPERTY IS ONLY LAND AND THERE IS NO BUILDING. HENCE, WE REMIT THIS ISSUE TO THE FILE OF AO TO CARRY OUT ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 6 -: NECESSARY ENQUIRY AND DECIDE THE ISSUE IN ACCORDANC E WITH LAW. THUS, THIS GROUND RAISED IN ALL THREE ASSESSEES APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE NEXT GROUND IN ITA NO.1662/MDS./15 FOR ASSE SSMENT YEAR 2011-12 IS WITH REGARD TO TREATMENT OF ` 10,800/- AS RENTAL INCOME FROM ALWARTHIRUNAGAR PROPERTY 9. THE LD.A.R SUBMITTED THAT THE ABOVE SAID PROPER TY BELONGS TO THE ASSESSEES HUSBAND MR.R.RAMACHANTHRAN. THAT IN COME FROM THAT PROPERTY CANNOT BE CONSIDERED IN THE HANDS OF ASSES SEE. IN OUR OPINION, THIS ISSUE REQUIRES TO BE EXAMINED BY THE AO REGARDING OWNERSHIP OF THE PROPERTY ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. 10. THE NEXT GROUND IN ITA NO.1661/MDS./2015 FOR A SSESSMENT YEAR 2010-11 IS WITH REGARD TO UNEXPLAINED PAYMENT TO AR CHITECT AT ` 10,26,125/-. 11. THE AO, WHILE MAKING THE ABOVE ADDITION, HAS OBSERV ED AS UNDER:- VIDE PRE-ASSESSMENT NOTICE DATED 14-3-2013 SERVED ON 15-3-2013 IT WAS PROPOSED TO MAKE THE FOLLOWING ADDITION/DISALLOWANC E VIDE QUESTIONHAIRE U/S 142(1) DATED 28-12-20 13 SERVED ON 1-1-20 13 YOU WE RE REQUESTED TO ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 7 -: FURNISH, IF ANY AMOUNT IS PAID/SPENT DURING THE YEA R FOR PURCHASE/CONSTRUCTION OF ANY OF THE PROPERTY OWNED BY YOU, EVIDENCE TO EXPLAIN THE SOURCE THEREOF ALONG WITH DETAILS OF CO NSTRUCTION (LOCATION, DESCRIPTION, EXTENT, AMOUNT SPENT, COPY OF APPROVED PLAN, ETC). IN YOUR RECEIPTS & PAYMENTS ACCOUNT FILED AFTER MORE THAN 2 MONTHS, I.E., ON 6-3- 2013, A SUM OF RS. 1158300 IS SHOWN IN THE PAYMENTS SIDE TOWARDS RENOVATION WORK AT ASHOK NAGAR BUT NO OTHER DETAI LS LIKE LOCATION, EXTENT, COPY OF APPROVED PLAN, OTC, HAVE BEEN FURNISHED. BY NOT FURNISHING THE DETAILS CALLED FOR, YOU ARE TRYING TO PREVENT THE D EPARTMENT FROM FINDING OUT THE ACTUAL COST OF CONSTRUCTION BY REFERRING THE PR OPERTY TO THE VALUATION CELL. NO AMOUNT WAS SHOWN TOWARDS RENOVATION WORK IN THE NEXT ASST. YEAR. HENCE IT IS CLEAR THAT THE RENOVATION HAS BEEN COMP LETED IN THIS ASST YEAR 2010-11 ITSELF AND THE TOTAL COST ADMITTED BY YOU I S ` 11,58,300 ONLY SINCE YOU HAVE NOT ADMITTED ANY COST IN THE EARLIER YEARS AS WELL. YOUR HUSBAND SHRI RAMACHANTHRAN HAS ADMITTED ` 12,55,800 TOWARDS THE COST OF RENOVATION AS PER HIS RECEIPTS & PAYMENTS ACCOUNT FOR THE ASST . YEAR 2010-11 FILED ON 6-3-2008. THUS THE TOTAL COST ADMITTED BY BOTH OF Y OU, THE JOINT-OWNERS OF THE PROPERTY, IS ` 24,14,100, ENTIRELY IN THE A.Y. 2010-11. BUT AS PER THE LEDGER A/C IN THE NAME OF ASHOK NAGA R HOUSE IN THE BOOKS OF MIS OMSHAKTHY AGENCIES (MADRAS) PVT. LTD. FOR THE PERIOD FROM 1-4-2007 TO 31-3-2008, SEIZED FROM YOUR RESIDE NCE VIDE ANN? VN/L S1S-13, THE AMOUNT SPENT FOR CONSTRUCTION ARE AS UNDER:- ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 8 -: F.Y. 2007-08 = 4407164 F. Y. 2008-09 (UPTO 26-7-2008) =1962734 TOTAL = 6369898 = 1240 TOTAL =638229 THE ABOVE ACCOUNTS ARE ALSO FORTIFIED BY THE FOLLOW ING OTHER SEIZED DOCUMENTS. SEIZED DOC. NO. PERIOD OF CONSTRUCTION AMOUNT SPENT ANN/RRC/LS/S-7(SHEET-12) UPTO 30.11.2007 3420675 -- UPTO FEBRUARY 2008 4017180 IMPOUNEDED DOC.6 AS ON 30.06.2008 5996816 AS PER THE BILL DATED 23-4-2010 FOR WARDROBE & CUPB OARD ISSUED BY MIS SOMA & DHARIA, SEIZED FROM THE OFFICE OF M/S. OSAL VIDE ANN/RRC/LS/S-12, THE COST IS RS. 10,26,125. AS PER 4 BILLS DATED 26- 7-2008 FOR PURCHASE OF HANDICRAFT ITEMS, SEIZED FROM YOUR RESIDENCE VIDE A NN/VN/LS-13, THE COST IS RS.39,660. HENCE THE DIFFERENCE IS PROPOSED TO BE A SSESSED IN THE RESPECTIVE ASST. YEARS. VIDE REPLY DATED 21.03.2013 THE ASSESSEE STATED AS UNDER:- THE TOTAL AMOUNT EXPENDED FOR RENOVATION AS PER THE ASSESSEES RECORDS IS RS. 11,58,300/- AND AS PER THE RECORDS O F MR. R. RAMACHANTHRAN THE SAME IS RA. 24,14,100/-. FURTHER THE AMOUNT EXPENDED FROM THE BOOKS OF OSSAL IS RS. 63,82,298/- . REGARDING THE BILL OF SOME & DHANA RS.10,26,125/- IS INCLUDED IN THE EXPENDITURE OF THE ASSESSEE AND HANDICRAFTS BILL OF RS.39,660/- HAS BEEN INCURRED BY MR. R. RAMACHANTHRAN. THEREFORE, C ONTRARY TO YOUR CLAIM ALL THE EXPENDITURE HAVE BEEN EXPLAINED WITH SOURCES AND HENCE WE OBJECT TO YOU MAKING ANY ADDITION ON THIS ACCOUNT. THE REPLY WAS CONSIDERED. THE BILL OF SOMA & DHANA IS DATED 23-4-2010 WAS NOT PAID BY YOU BEFORE 31-3-2010 TILL WHICH DATE YO U HAVE ACCOUNTED FOR ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 9 -: RS.11,58,300. THEREFORE THE PAYMENT OF RS.1026125 I S UNEXPLAINED. IT IS ASSESSED TO TAX. BEFORE CIT(A), THE APPELLANT FILED SUBMISSIONS WHIC H WERE FORWARDED TO THE AO FOR HIS COMMENTS. THE AO, IN THE REMAND REPORT H AS STATED THAT: THE AQ, IN THE ASSESSMENT ORDER HAS CLEARLY BROUGH T OUT THE FACT THAT AN AMOUNT OF RS. 10,26,125/- PAID AS CHARGES T O MIS SOMA & DHANA, IS CLEARLY UNACCOUNTED, SINCE .THE SAME HAS BEEN PAID BEFORE 31.03.2010, BUT NOT ACCOUNTED. WHILE ARRIVING AT TH IS CONCLUSION, THE AG HAS TAKEN INTO CONSIDERATION THE REPLY OF THE AS SESSEE DT. 21-03- 2013. HOW, THE ASSESSEE HAS SUBMITTED THAT THE PAYM ENT TO M/S.SOMA & DHANA WAS MADE IN ADVANCE AND THAT THE B ILL WAS RECEIVED LATER. THE ASSESSEES STAND IS NOT ACCEPTA BLE SINCE THE AG, IN THE ASSESSMENT STAGE HAS CLEARLY WORKED THE TOTA L INVESTMENT MADE IN THE ASHOKNAGAR HOUSE, AS ON 3 1.03.2010, AF TER GOING %THROUGH THE ASSESSEES STATEMENT AS WELL AS THE SE IZED MATERIAL INDICATING THE INVESTMENTS. THE ADDITION MAY BE UPH ELD. FURTHER THE AOS COMMENTS WERE FORWARDED TO THE AR FOR HIS COUNTER COMMENTS BY CIT(A). THE AUTHORISED REPRESENTATIVE O F ASSESSEE FURNISHED REPLY AS FOLLOWS:- A) THE REMAND REPORT MENTIONS VAGUELY THAT THE REP LY OF THE APPELLANT DATED 21.03.2013 HAS BEEN CONSIDERED BY THE LEARNED ASSESSING OFFICER. B) HE FURTHER STATES THAT THE AOPELLANT CLAIMED THA T THE PAYMENT WAS MADE IN ADVANCE. C) WHAT THE APPELLANT HAS MENTIONED IN THE LETTER O N 21.03.2013 IS THAT OUT OF THE TOTAL MONEY OF RS.11,58,300 EXPENDED BY THE APPELLANT THE AMOUNT RS.10,26,125/-. ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 10 - : D) IT IS ALSO MENTIONED IN TT.E WRITTEN SUBMISSION THAT THERE IS NO DISPUTE REGARDING THE AVAILABILITY OF FUNDS BUT THE DISPUTE OF THE LEARNED ASSESSING OFFICER IS REGARDING ONLY THE DATE OF THE BILL E) NEITHER THE LEARNED ASSESSING OFFICER NOR THE OF FICER WHO PREPARED THE REMAND REPORT HAS HELD A DETAILED INVESTIGATION INT O THIS MATTER BUT ONLY VAGUELY MENTIONS THAT THE SEIZED MATERIAL INDI CATES THE INVESTMENT. F) THEREFORE, IT IS EVIDENT THAT THE REPORT CONTRAR Y TO FACTS. G) THEREFORE, IT IS HUMBLY SUBMITTED THAT THIS ADDI TION MAY BE DELETED. THE CIT(A) OBSERVED THAT THE ASSESSEE HAS FAILED TO REBUT THE CONCLUSIONS DRAWN BY THE AO WITH ANY COGENT EXPLANATIONS/EVIDEN CE. AS THE AO HAS WORKED THE TOTAL INVESTMENT MADE IN THE ASHOKNAGAR HOUSE AS ON 31.03.2010, AFTER GOING THROUGH THE APPELLANTS STA TEMENT AS WELL AS THE SEIZED MATERIAL INDICATING THE INVESTMENTS, THE AO S ACTION IN MAKING THE SAID ADDITION OF ` 10,26125/- WAS HEREBY CONFIRMED. THE GROUNDS RAISED IN THIS REGARD ARE DISMISSED. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEES COUNSEL RELIED ON THE SAME SUBMISSIO NS MADE BEFORE THE LD.CIT(A). HOWEVER, THE LD.A.R FAILED TO SHOW THAT THE PAYMENT OF ` 10,26,125/- HAS BEEN DULY ACCOUNTED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND ALSO THERE IS NO EXPLANATION BY THE AS SESSEE REGARDING THE SOURCE OF THAT EXPENDITURE. BEING SO, WE DO NOT FIN D ANY INFIRMITY IN THE ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 11 - : ORDER OF THE LD.CIT(A) AND THE SAME IS CONFIRMED. T HIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 13. THE NEXT GROUND IN ITA NO.1661/MDS./15 IS WITH REGARD TO TREATMENT OF INCOME FROM SALE OF PLOTS AT ERODE SUBSTANTIVELY AS BUSINESS INCOME, PROTECTIVELY AS CAPITAL GAINS. 14. THE FACTS OF THE CASE ARE THAT THE AO, THOUGH SUBSTANTIVELY TREATED THE INCOME FROM THE SALE OF PLOTS AT ERODE AS BUSIN ESS INCOME. HOWEVER, HE OBSERVED THAT THE SAME MAY BE TREATED AS INCOME FRO M CAPITAL GAINS. THE CONTENTION OF THE AR IS THAT IT IS TO BE TREATED AS BUSINESS INCOME ONLY AS THE ASSESSEE NOT CARRIED OUT ANY DEVELOPMENT ACTIVITIES IN THE SAID LAND AND ONLY DIVIDED THE LAND INTO PLOTS FOR THE PURPOSE OF FETC HING BETTER PRICE. ACCORDING TO LD.A.R IT IS TO BE TREATED AS CAPITAL GAINS ONLY AS THE LAND IS CAPITAL ASSETS. HE RELIED ON THE JUDGMENT OF JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. KASTURI ESTATES (P.) LTD. REPORTED IN [1966] 62 ITR 578 (MAD) WHEREIN HELD THAT DEVELOPING LAND INTO BUILDI NG SITES WITH A VIEW TO REALISE THE BEST PRICE, WITHOUT ANYTHING MORE, IS C ONSISTENT WITH REALISATION OF A CAPITAL INVESTMENT. IF A LANDOWNER DEVELOPED HIS LAND INTO HOUSE SITES WITH A VIEW TO GET A BETTER PRICE, IT COULD HARDLY BE SAID THAT THE TRANSACTION IS ANYTHING MORE THAN A REALIZATION OF A CAPITAL IN VESTMENT OR CONVERSION OF ONE FORM OF ASSET INTO ANOTHER. THE SURPLUS IN SUCH A CASE WILL NOT BE TRADING OR BUSINESS PROFIT. HE ALSO RELIED ON THE JUDGMEN T OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. A. MOHAMMED MOHIDEEN R EPORTED IN [1989] 176 ITR 393 (MAD). ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 12 - : 15. ACCORDING TO THE LD.D.R, THE ASSESSEE PURCHASE D THE SMALL LAND FROM NUMBER OF PERSONS YEARS AGO IN SMALL PIECE AND FOR MED LAYOUT CALLED BANGARU NAGAR, THEREAFTER IT WAS SOLD. THE INTEN TION OF ASSESSEE IN THIS CASE WAS TO CARRY ON BUSINESS IN LAND AS REAL ESTAT E DEALER. IF THE ASSESSEE IS CONTINUOUSLY ACQUIRING SMALL PIECE OF LAND FROM VARIOUS PERSONS AND PUT TOGETHER INTO LARGER PIECE AND THEREAFTER ASSESSEE HAS MADE ROADS AND SANITARY CONNECTIONS AFTER GETTING APPROVAL OF THE RESIDENTIAL PLOTS, THEN THE INTENTION OF ASSESSEE IS SEEN AS BUSINESS. 15.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE QUESTION IS WHETHER THE AMOUNT REALIZED BY THE SALE OF PLOTS REPRESENTS ASSESSEES INCOME FROM BUSINESS OR CAPITAL GAINS. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE WAS NOT CARRYING ON ANY BUSINE SS; THE INCOME FROM WHICH COULD BE TAXED U/S.28 OF THE ACT CANNOT BE AP PLIED. U/S.28 OF THE ACT, THE ASSESSEE IS LIABLE TO BE TAXED TO INCOME-TAX UN DER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION, IN RESPECT OF P ROFITS AND GAINS OF ANY BUSINESS OR PROFESSION WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R. IN THE PRESENT CASE, THE ASSESSEE ACQUIRED LAND FROM VARIOUS PERSONS NAM ED AS BANGARU NAGAR AND SOLD THEM AS PLOTS. AFTER EXAMINING THE ACTIVI TIES, THE AO TREATED IT AN ADVENTURE IN NATURE OF TRADE AND BROUGHT THE SURPLU S INCOME UNDER THE HEAD INCOME FROM BUSINESS SUBSTANTIVELY AND PROTECTIVE LY AS LONG TERM CAPITAL GAINS. NOW THE CONTENTION OF THE LD.A.R IS THAT IT IS TO BE ASSESSED AS LONG TERM CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME OF THE ASSESSEE. THE TERM BUSINESS HAS BEEN DEFINED U/S.2(13) OF THE A CT TO INCLUDE ANY TRADE, ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 13 - : COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. NOT MUCH GUIDANCE IS AVAILABLE FROM THE DEFINITION UNDER INCOME TAX ACT, 1961 TO DETERMINE WHETHER THE AMOUNTS RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR WERE FROM ANY BUSINESS OR NOT. HENCE, WE HAVE TO TURN TO THE JUD ICIAL DECISIONS OF VARIOUS COURTS TO ASCERTAIN HOW THESE COURTS HAVE UNDERSTOO D THE CONCEPT OF BUSINESS. IN THE CASE OF NARAIN SWADESHI WEAVING M ILLS VS. COMMISSIONER OF EXCESS PROFITS TAX REPORTED IN [1954] 26 ITR 765 (SC) WHEREIN HELD THAT THE WORD 'BUSINESS' CONNOTES SOME REAL, SUBSTANTIAL AND SYSTEMATIC OR ORGANIZED COURSE OF ACTIVITY OR CONDUCT WITH A SET PURPOSE. IN THE CASE OF UPPER INDIA CHAMBER OF COMMERCE, CAWNPORE V. COMMIS SIONER OF INCOME- TAX, C. P. & U. P. REPORTED IN [1947] 15 ITR 263 (A LL), IT WAS HELD THAT BUSINESS CONNOTES ACTIVITIES IN WHICH A PERSON IS E NGAGED WITH A SET PURPOSE. THE FREQUENCY OR THE REPETITION OF THAT A CTIVITY, THOUGH AT TIMES A DECISIVE FACTOR, IS BY NO MEANS AN INFALLIBLE TEST. IN THE CASE OF LIQUIDATORS OF PURSA LTD. V. CIT (1954) 25 ITR 265, UNDERLYING THE EXPRESSION 'BUSINESS', IS THE FUNDAMENTAL IDEA OF CONTINUOUS EXERCISE OF A N ACTIVITY. IN TRADE AS WELL AS IN BUSINESS, THERE IS A CONTINUITY OF OPERATION. THE ACTIVITIES ORGANIZED ON NORMALLY ACCEPTED COMMERCIAL LINES CONSTITUTE THE E SSENCE OF ANY BUSINESS. IN CASE OF CIT V. MOTILAL HIRABHAI SPG. & WVG. CO. LTD. (1978) 113 ITR 173 (GUJ.), IT WAS HELD WHETHER A PERSON IS CARRYING ON BUSINESS IN A PARTICULAR COMMODITY WILL DEPEND UPON THE VOLUME, FREQUENCY, C ONTINUITY AND REGULARITY OF THE TRANSACTIONS, ON WHERE, ORDINARIL Y SPEAKING, THE PROFIT ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 14 - : MOTIVE PREVAILS ON THE WHOLE TRANSACTION AND ON WHE RE THE ASSESSEE'S ACTIVITY CAN BE SAID TO BE A SORT OF ORGANIZED ACTI VITY. 15.2 THUS, IN ORDER TO SAY THAT THE ASSESSEE CARRI ED ON THE BUSINESS, THERE HAS TO BE SOME BUSINESS ACTIVITIES ON THE PART OF T HE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE PURCHASED LAND FROM VARI OUS LAND OWNERS AND POOLED TOGETHER AND THEREAFTER DIVIDED INTO PLOTS A ND SOLD THE SAME WHICH COULD BE CALLED IN ORGANIZED ACTIVITY WITH AN INTEN TION TO EARN PROFIT BY SAID ACTIVITY, WHICH IS NOTHING, BUT BUSINESS ACTIVITY O F THE ASSESSEE. THUS, THE SURPLUS ARISING OUT OF SALE OF PLOTS TO BE CONSIDER ED AS INCOME FROM BUSINESS ONLY AND CANNOT BE CONSIDERED AS INCOME UNDER THE H EAD CAPITAL GAINS. ACCORDINGLY, THIS GROUND IS DISMISSED. 16. THE NEXT GROUND IN ITA NO.1662/MDS./15 FOR ASS ESSMENT YEAR 2011-12 IS WITH REGARD TO UNEXPLAINED JEWELLERY AND DIAMONDS. AT THE TIME OF HEARING, THE ASSESSEE HAS NOT PRESSED THIS GROUN D WITH REGARD TO TREATMENT OF DIAMONDS AS INCOME OF ASSESSEE AT ` 14,94,972/-. REGARDING THE JEWELLERY AT ` 22,87,753/-, THE LD.A.R SUBMITTED THAT THE ASSESSEE HAS BEEN FILING THE WEALTH TAX RETURN UPTO 2007-08 AND THEREAFTER, THE ASSESSEE IS HAVING HUGE INCOME AND OUT OF THAT ASSESSEE HAS ACQUIRED THIS JEWELLERY AND IT IS TO BE CONSIDERED AS EXPLAINED JEWELLERY. 17. ON THE OTHER HAND, THE LD.D.R SUBMITTED THAT T HE LOWER AUTHORITIES HAD GIVEN THE CREDIT TO THE EXTENT OF JEWELLERY DEC LARED IN WEALTH TAX AND OVER AND ABOVE, THERE IS NO EXPLANATION BY THE ASSE SSEE REGARDING SOURCE FOR ACQUISITION OF SUCH JEWELLERY. ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 15 - : 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ASSESSEE FAILED TO EXPLAIN THE JEWELLERY IS WITH REGARD TO DATE OF ACQUISITION AND SOURCE OF SUCH. THE DRAWIN G MADE BY THE ASSESSEE IN THESE ASSESSMENT YEARS IS VERY MEAGER DOES NOT S UFFICIENT TO MEET THE COST OF JEWELLERY ACQUIRED BY THE ASSESSEE AND IT W AS JUST ENOUGH TO MEET THE PERSONAL HOUSEHOLD EXPENSES. HENCE, IN OUR OPI NION THIS IS UNEXPLAINED JEWELLERY ONLY AND THE SAME IS TO BE TREATED AS INC OME OF ASSESSEE. THEREFORE, THIS GROUND OF IS REJECTED. 19. NOW WE TAKE UP REVENUES APPEAL: ITA NOS.1658 & 1659/MDS./15 FOR ASSESSMENT YEARS 2010-11 & 2011-12. 20. THE FIRST COMMON GROUND IN THESE APPEALS IS WI TH REGARD TO TREATMENT OF AGRICULTURAL INCOME DECLARED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES AT ` 1,15,400 & ` 1,75,000/- FOR ASSESSMENT YEARS 2010-11 & 2011-12 RESPECTIVELY. AS DISCUSSED IN EARLIER PARA, THE AS SESSEE FILED THE COPY OF ADANGAL BEFORE THE LOWER AUTHORITIES TO SHOW THAT THE ASSESSEE IS OWNING OF AGRICULTURAL LAND OF 13.6025 ACRES AT SENGULAM VILL AGE AND IT HAS ALSO CULTIVATED PADDY CROP AND OTHER AGRICULTURAL PRODUC E RAISED BY THE ASSESSEE AS DISCUSSED IN ITA NOS.1660/MDS./15 TO 1662/MDS./1 5 IN EARLIER PARS, THIS GROUND IS ALLOWED IN BOTH THE APPEALS. 21. THE NEXT GROUND IN ITA NO.1658/MDS./15 IS WITH REGARD TO TREATMENT OF TWO LAKHS RUPEES AS DEEMED DIVIDEND. AT THE TIME OF HEARING, THIS GROUND IS NOT PRESSED BY LD.A.R. ACCORDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSED. ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 16 - : 22. THE SECOND GROUND IN ITA NO.1659/MDS./15 IS W ITH REGARD TO TREATMENT OF DIAMOND AT ` 12,03,600/- AS UNEXPLAINED INCOME OF ASSESSEE. AT THE TIME OF HEARING, THIS GROUND IS NOT PRESSED BY THE LD.A.R. HENCE, THIS GROUND IS DISMISSED AS WITHDRAWN. 23. THE NEXT GROUND IN ITA NO.1659/MDS./15 IS WITH REGARD TO TREATMENT OF 22,55,283/- ON ACCOUNT OF EXCESS JEWELLERY. THE LD.A.R MADE AN ARGUMENT REGARDING THIS ISSUE AS IN THE CASE OF ASS ESSEE IN ITA NOS.1660 TO 1662/MDS./15 THAT THE ASSESSEE IS HAVING SUFFICIENT INCOME AND THE DRAWINGS OF OTHER FAMILY MEMBERS ALSO TO BE CONSIDERED FOR T HE PURPOSE OF SOURCE FOR ACQUIRING THIS JEWELLERY. WE ARE NOT IN A POSITION TO APPRECIATE THE ARGUMENT OF ASSESSEES COUNSEL AS THE ASSESSEE HAS NOT EXPLA INED THE SOURCE FOR ACQUISITION OF THIS JEWELLERY WITH CORRESPONDING BI LLS. IN THESE CIRCUMSTANCES AS DISCUSSED IN EARLIER PARAS OF THIS ARDER IN ITA NO.1660 TO 1662/MDS./15, THIS GROUND OF ASSESSEE IS DISMISSED. 24. THE NEXT GROUND IN ITA NO.1659/15 IS WITH REGA RD TO ADDITION OF ` 11,66,100/- ON ACCOUNT OF EXCESS GOLD AS PER WT RE TURN. 25. THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E FIRST APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED SUBMISSIONS, WH ICH WERE FORWARDED TO THE AO FOR HIS COMMENTS. IN RESPONSE, AO SUBMITTED THAT AS PER W.T RETURN FILED AFTER SEARCH BY THE ASSESSEE FOR ASSESSMENT Y EAR 2011-12, AN AMOUNT OF ` 11,66,100/- WAS SHOWN TO BE THE ADDITION DURING THE YEAR. FURTHER, AO STATED THAT THIS ADDITIONAL GOLD WAS ADDED BACK SI NCE THE SOURCE FOR THE SAME WAS NOT EXPLAINED BY THE ASSESSEE AND ALSO SIN CE THE SAME WAS SHOWN IN THE WT RETURN WHICH WAS FILED ONLY AFTER SEARCH. ACCORDING TO AO, THE ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 17 - : ASSESSEE TRIED TO EXPLAIN THE ACQUISITION OF THIS G OLD THROUGH SALARY RECEIVED FROM 1.4.07 TO 31.3.2011. THIS CHANGE IN STANCE SHO WS THAT THE ASSESSEE IS ACTUALLY TRYING TO SCOUT FOR POINTS OF SOURCES SO A S TO EXPLAIN THIS JEWELLERY ACQUISITION. AGAIN, THE ASSESSEE HAS FAILED TO EXPL AIN THE SOURCE OF THIS ADDITIONAL GOLD ADMITTED IN WT RETURN AND HAD NOT F ILED ANY EVIDENCE TO SUBSTANTIATE HIS CLAIM. THEREFORE, THE ADDITION HAS TO BE SUSTAINED BY THE AO. 26. IN RESPONSE TO AOS REMAND REPORT, THE LD.A.R HAS SUBMITTED AS UNDER:- A) THE ADDITION HAS COME BECAUSE THE LD. ASSESSING OFFICER HAS DEDUCTED THE GOLD AS PER WT RETURNS WITH THE SEIZED GOLD AND CONSIDERED THE SAME AS PURCHASED DURING THE YEAR. B) AS MENTIONED IN THE WRITTEN SUBMISSION THERE WAS SUFFICIENT TAXED SOURCE FOR THE PURCHASE OF JEWELLERY AND THE SAME W AS DISALLOWED BY THE LD. ASSESSING OFFICER AS PROOF OF PURCHASE COUL D NOT BE PRODUCED SINCE THE BILLS WERE MIS-PLACED DUE TO PASSAGE OF TIME. C) WHEN THE TAXED SOURCE HAS ALREADY BEEN FPROVED D ISALLOWING THE GOLD FILED IN THE WEALTH TAX RETURN IS INCORRECT AND GRA VE INJSUIVE TO THE APPELLANT. D) THEREFORE, IT IS HUMBLY SUBMITTED THAT THE ADDIT ION MADE MAY KINDLY BE DELETED. ON APPEAL, THE LD.CIT(A) OBSERVED THAT AS THE APPEL LANT FAILED TO REBUT THE FINDINGS OF THE AO WITH ANY COGENT EVIDENCE, THE AC TION OF THE AO IS JUSTIFIED IN MAKING THE ADDITION OF ` 11,66,100/-. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.1660 TO 1662/MDS./15 ITA NOS.1658,1659/MDS./15 :- 18 - : 27. AS DISCUSSED IN EARLIER PARA-18 IS WITH REGARD TO UNEXPLAINED JEWELLERY AND ASSESSEE HAS FILED TO SUBSTANTIATE THE CLAIM TH AT IS DULY EXPLAINED. THIS GROUND IS REJECTED. 28. THE NEXT GROUND IN ITA NO.1659/15 IS WITH REGA RD TO ADDITION TOWARDS INSUFFICIENT DRAWING AT ` 1 LAKHS. 29. THIS ASSESSMENT IS CONSEQUENT TO SEARCH U/S.13 2 OF THE ACT AND ASSESSMENT WAS FRAMED U/S.143(3) R.W.S.153C OF THE ACT AND THERE IS NO MATERIAL TO SUGGEST THAT THE EXPLAINED EXPENDITURE TO SUSTAIN THE ADDITION OF ` 1 LAKH. ACCORDINGLY THIS GROUND OF ASSESSEE IS AL LOWED. 30. IN THE RESULT, ALL THE THREE APPEALS OF THE AS SESSEE FOR ASSESSMENT YEARS 2009-10, 2010-11 & 2011-12 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND BOTH THE APPEALS OF THE A SSESSEE FOR ASSESSMENT YEARS 2010-11 & 2011-12 ARE PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY THE 24 TH OF JUNE, 2016, AT CHENNAI. SD/ - SD/ - ( . ! ) ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 24 TH JUNE, 2016 K S SUNDARAM &' ) *+ ,+ / COPY TO: 1 . -. / APPELLANT 3. / () / CIT(A) 5. +01 ) 2 / DR 2. )3-. / RESPONDENT 4. / / CIT 6. 1! 4 / GF