Ingavale Digamber Balasaheb, Kolhapur V. ITO, Ward-1(1), Kolhapur

ITA 2085/PUN/2012

• Counselvise Citation: 208524514 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 25-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASEEM SHARMA
• Keywords: Business income; Cost of acquisition
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2085/PN/2012 ASSESSMENT YEAR: 2009-10 INGAVALE DIGAMBER BALASAHEB 25/26, C-WARD, GUJARI, KOLHAPUR . APPELLANT PAN: AAEPI8965J VS. THE INCOME TAX OFFICER, WARD 1(1), KOLHAPUR . RESPONDENT APPELLANT BY : DEEPA KHARE RESPONDENT BY : ASEEM SHARMA DATE OF HEARING : 31-12-2014 DATE OF PRONOUNCEMENT : 13-02-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), KOLHAPUR DATED 01.10.2012 RELATING TO ASSESSMENT YEAR 20 09-10 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR IS NOT J USTIFIED IN LAW AND FACTS IN UPHOLDING THE ORDER OF ASSESSING OF FICER IN RESPECT OF SALE OF PLOTS TREATING THE SAME AS ADVENTU RE IN THE NATURE OF TRADE. 2. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN DISMISSING THE CLAIM OF APPELLANT THAT I NCOME EARNED ON ACCOUNT OF SALE OF PLOTS BE TREATED AS CAPITAL GAIN. 3. APPELLANT CRAVES TO LEAVE, ADD, AMEND OR ALTER ANY OF T HE ABOVE GROUNDS OF APPEAL. ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 2 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION TO THE TREATMENT OF GAIN ARISING ON SALE OF PLOTS I.E. WHETHER THE SAME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAIN OR AS AN ADVENTURE IN THE NATURE OF TRADE. 4. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE WA S ENGAGED IN THE BUSINESS OF TRADING IN GOLD ORNAMENTS UNDER THE NAME AND STYLE AS M/S. GURUPRASAD JEWELLERS. DURING THE YEAR UNDER CON SIDERATION, THE ASSESSEE HAD DECLARED INCOME FROM LONG TERM CAPITAL G AIN AND INCOME FROM OTHER SOURCES. FROM THE PERUSAL OF THE DETA ILS PRODUCED/ FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER NOTED THAT THE ASSESSEE HAD SOLD LAND OF 13550 SQ . FT. FOR RS.23,80,000/- ON WHICH, THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN OF RS.17,06,841/-. THE ASSESSEE HAD FURTHER CLAIMED D EDUCTION UNDER SECTION 54 OF THE ACT ON ACCOUNT OF PURCHASE OF FLAT AMOUNTING TO RS.16,38,004/-. THE ASSESSEE HAD PURCHASED THE ORIG INAL ASSET I.E. AGRICULTURAL LAND ADMEASURING 1,69,000 SQ. FT. ON 26.08.1997 FOR RS.9,24,325/-. THE ASSESSING OFFICER VIDE PARA 4.2 OF THE ASS ESSMENT ORDER OBSERVED THAT THE ASSESSEE HAD STARTED DEVELOP ING ACTIVITIES ON THE SAID LAND BY MAKING PLOTS OF DIFFERENT SIZES. THE ASSESS EE FROM YEAR TO YEAR HAD INCURRED DEVELOPMENT EXPENSES WHICH A RE TABULATED UNDER PARA 4.2 OF THE ASSESSMENT ORDER. OUT OF THE TOT AL LANDHOLDING OF 1,69,000 SQ. FT., THE ASSESSEE DURING THE YEAR HAD SOLD 1 3,550 SQ. FT. OF LAND FOR A TOTAL CONSIDERATION OF RS.23,80,000/- TO DIFFEREN T PARTIES IN DIFFERENT SIZES OF PLOTS. THE ASSESSEE HAD PURCHASED T HE AGRICULTURAL LAND AND THEREAFTER, CONVERTED INTO NON-AGRICU LTURAL LAND AFTER OBTAINING PERMISSION FROM THE COLLECTOR OF KOLHAPUR, WHO VIDE ORDER DATED 31.12.2002 HAD GIVEN PERMISSION TO CONVERT T HE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND FOR RESIDENTIAL USE ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 3 PURPOSE. THE ASSESSEE PURSUANT TO THE PERMISSION RECE IVED, HAD STARTED THE DEVELOPMENT ACTIVITIES AND INCURRED DEVELOPM ENT EXPENSES INCLUDING PLUMBING CHARGES, LABOUR CHARGES, SUPERVISION CHARG ES, EXPENDITURE ON MURUM PURCHASES, SAND PURCHASES, M.S. PIPE PURCHASES, ROAD DEVELOPMENT EXPENSES, ETC. THE ASSESSE E IN VIEW OF THE SAID ACTIVITIES BEING CARRIED ON, WAS SHOW CAUSED TO E XPLAIN AS TO WHY THE INCOME ARISING THEREFROM SHOULD NOT BE ASSESSED AS BUSINESS INCOME AND NOT INCOME FROM CAPITAL GAIN. IN RESPONSE, THE ASSESSEE EXPLAINED THAT THE INTENTION TO TRADE SHOULD BE SEEN AT THE TIME OF PURCHASE. FURTHER, AS PER THE ASSESSEE, THE TRANSACTIO N WAS OF INVESTMENT IN ASSETS AND NOT IN THE COURSE OF TRADE CAR RIED ON BY THE ASSESSEE. IT WAS FURTHER EXPLAINED BY THE ASSESSEE THA T THE SAID LAND WAS PURCHASED WITH THE INTENTION TO CARRY OUT AGRICULTUR AL ACTIVITIES BUT DUE TO SCARCITY OF WATER, IT WAS DECIDED TO SELL THE S AME. SINCE THERE WERE NO BUYERS TO PURCHASE THE LAND AS SUCH, TH E SAME WAS CONVERTED INTO PLOTS AND SOLD TO DIFFERENT PARTIES. THE AS SESSING OFFICER DID NOT FIND FAVOUR WITH THE EXPLANATION OF THE ASSE SSEE AND IT WAS OBSERVED THAT MAY BE AT THE TIME OF PURCHASE, THERE WAS NO INTENTION TO TRADE, BUT WHEN THE ASSESSEE CONVERTED THE USAGE OF LAND FROM AGRICULTURAL INTO NON-AGRICULTURAL, AND STARTED T HE DEVELOPMENT ACTIVITIES OF THE SAID LAND FROM YEAR TO YEAR, ESTABLI SHED THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE AND THE PROFITS ARISING THEREFROM WERE TO BE ASSESSED AS INCOME FRO M BUSINESS . IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER AT PARA 4.8 OF THE ASSESSMENT ORDER, THAT THE TRANSACTION FORMS PART OF S ERIES OF TRANSACTIONS SHOWING THE TRANSACTIONS WERE IN THE NATUR E OF ADVENTURE OF TRADE. FURTHER, THE CLAIM OF THE ASSESSEE THAT THE INT ENTION BEHIND PURCHASE OF LAND WAS TO CARRY OUT AGRICULTURAL ACTIVITIES, W AS NOT ACCEPTED BY THE ASSESSING OFFICER IN THE ABSENCE OF ANY E VIDENCE ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 4 PRODUCED BY THE ASSESSEE TO ESTABLISH ITS CLAIM. IN THE ABSENCE OF ANY AGRICULTURAL ACTIVITY BEING CARRIED ON BY THE ASSESSEE AND BECAUSE OF THE DEVELOPMENT OF THE LAND AND ITS SALE IN PIECES, THE AS SESSING OFFICER HELD THAT THE ENTIRE INCOME FROM SALE OF PLOTS WAS T O BE ASSESSED AS INCOME FROM BUSINESS ACTIVITY. IN VIEW THEREO F, THE ASSESSING OFFICER ALLOWED PROPORTIONATE COST OF ACQUISITION A GAINST THE TOTAL SALE CONSIDERATION AND COMPUTED THE INCOME FROM TRA DING ACTIVITIES OF SALE OF PLOTS AT RS.19,37,186/-. 5. THE CIT(A) AFTER CONSIDERING THE RATIOS LAID DOWN IN VARI OUS DECISIONS AND AFTER CONSIDERING THE FACTS OF THE CASE I.E. TH E AMOUNT PAID FOR THE PURCHASE OF PROPERTY AND THE EXPENDITURE IN CURRED ON DEVELOPMENT ACTIVITIES FROM ASSESSMENT YEAR 2001-02 TO 2005-06 AGGREGATING TO RS.48,56,935/- AND ALSO THE PERMISSION OBT AINED FROM THE COLLECTOR, KOLHAPUR, WHEREBY THE LAND USE WAS CHANGED , OBSERVED THAT THE COST OF LAND INCLUDING DEVELOPMENT CHARGES WAS R S.28.74 PER SQ. FT. THE ASSESSEE ON SALE OF 13550 SQ. FT. OF LAND FOR CONS IDERATION OF RS.23,80,000/- RECEIVED THE VALUATION OF RS.175.65 PER SQ. FT . THE SAID INCREASE IN RETURN IN VALUATION COULD NOT BE ATTRIBUT ED ONLY TO THE CHANGE IN PRICE OF LAND OVER THE YEARS, WAS HELD BY THE C IT(A). IT WAS FURTHER OBSERVED BY THE CIT(A) THAT THE CHANGE IN USE W AS DUE TO THE EFFORTS OF THE ASSESSEE AND NOT BECAUSE OF THE DECISION O F THE ADMINISTRATION AND SUCH EFFORTS TO CHANGE AN ASSET INTO A MARKETABLE COMMODITY RESULTED IN THE BENEFITS. THE CIT(A) FURTHER OBSE RVED THAT IN THIS CASE AGRICULTURAL LAND WAS PURCHASED, SUB-DIVIDED, TH E FACE OF LAND ALTERED AND TREATED BY WAY OF LAYING OF ROAD, DRAINAGE , CARVING OUT OF SMALLER PLOTS, CONVERTED INTO A DIFFERENT COMMODITY BY ACQ UISITION OF NON-AGRICULTURAL STATUS BY THE ASSESSEE AND THEN SOLD FO R PROFITS. THIS WAS A CASE WHERE THE INTENTION OF THE ASSESSEE, IN THE W ORDS OF THE ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 5 HONBLE SUPREME COURT IN THE CASE OF JANKI RAM BAHADUR RAM VS. CIT (1965) 57 ITR 21 (SC), TO LAUNCH UPON AN ADVENTURE IN THE NATURE OF TRADE MAY READILY BE INFERRED. THE CIT(A) VIDE PARA 11 OBSERVED AS UNDER:- 11. IN THE END REFERENCE SHOULD ALSO BE MADE TO THE E FFORT ON THE PART OF THE APPELLANT TO MAKE A CASE THAT THE DEVELOP MENT AND SALE OF LAND WAS DUE TO A LATER REALISATION THAT THER E WAS SCARCITY OF LABOUR AND WATER, AND THEREFORE THE LAND WAS NOT C ULTIVABLE PROFITABLY. THIS CONTENTION CANNOT BE ACCEPTED. AS HE LD IN THE CASE OF JANAB ABUBUCKER SUIT V. CIT [1962] 45 ITR 37 (MAD. ), 'A PURCHASER OF AGRICULTURAL LANDS DOES NOT ALWAYS JUDGE TH E WISDOM OF THE TRANSACTION, BY THE RETURNS HE WOULD GET. OTH ER CONSIDERATIONS ALSO PREVAIL IN THE MATTER OF SUCH PUR CHASE, NAMELY, THE PRIDE OF POSSESSION OF AGRICULTURAL LANDS, SECURITY WHICH IS INHERENT IN THE INVESTMENT OF MONEY IN SUC H PROPERTY, ETC.' IT IS ALSO NOT THE CASE OF THE APPELLANT THAT HE WAS AN AGRICULTURIST. IN FACT HE IS A JEWELLER. FURTHER, NOTHIN G HAS BEEN BROUGHT ON RECORD BY THE APPELLANT IN SUPPORT OF THE STATEMENT ABOUT LATER REALISATION ABOUT LACK OF WATER AND LAB OUR. IT IS WELL KNOWN THAT KOLHAPUR DISTRICT IS FERTILE AND IRRIGATED AND SUGARCANE, ONE OF THE HIGHEST YIELD CASH CROPS IS GRO WN IN ABUNDANCE IN THIS AREA. IT APPEARS FROM THE FACTS EME RGING FROM ASSESSMENT ORDER AND IN APPELLATE PROCEEDINGS THAT A FTER PURCHASE OF LAND NOTHING WAS DONE ON THE LAND TILL THE APPELLANT INITIATED THE PROCESS OF DEVELOPMENT AND PLOTTING. THOU GH THE APPELLANT HAS STATED THAT HE WAS NOT RECEIVING GOOD PRICE FOR THE LAND OWNED BY HIM, NOTHING HAS BEEN BROUGHT ON RECOR D TO SUGGEST THAT ANY ACTION WAS TAKEN BY THE APPELLANT T O SELL THE LAND. THE APPELLANT HAS NOT DISCLOSED THE LOCATION OF L AND. NO EVIDENCE HAS BEEN ADDUCED TO PROVE THE INTENTION OF KEEPING THE LAND AS INVESTMENT. ON THE CONTRARY, THE ORGANISED A CTION OF CONVERSION OF AGRICULTURAL LAND INTO NON-AGRICULTURA L LAND, PLOTTING AND DEVELOPMENT AFTER INCURRING CONSIDERABLE EXPENSES OVER THE YEARS SHOWS THE URGE OF THE APPELLANT TO EARN SOMETH ING MORE THAN NORMAL APPRECIATION IN VALUE OF LAND. THERE CANNOT BE A PROPOSITION IN LAW THAT IT IS ONLY THE INTENTION AT THE INCEPTION THAT MUST BE TAKEN INTO ACCOUNT AND THE INTENTION AS DIS CLOSED BY THE SUBSEQUENT FACTS AND CIRCUMSTANCES SHOULD BE EXCLUDED IN DETERMINING THE NATURE OF TRANSACTION. THERE CAN BE ALSO NO DOUBT THAT IN THIS CASE WHATEVER HAS BEEN DONE TO THE PLOT HAS BEEN DONE WITH A VIEW TO MAKE IT FETCH MORE PROFITS THAN IT WOULD HAVE FETCHED HAD IT BEEN SOLD AS AN AGRICULTURAL LAND WITHO UT DEVELOPMENT. THE VALUE ADDITION TO AGRICULTURAL LAND BRO UGHT ABOUT BY CONTINUED ORGANISED EFFORTS IS SUFFICIENT P ROOF OF THE INTENTION OF THE APPELLANT TO VENTURE INTO TRADING A CTIVITY IN LAND. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE I S CONFIRMED AND THIS GROUND, OF APPEAL IS DISMISSED. SINCE THE ACTIVITY IS HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE, THE A SSESSING OFFICER IS DIRECTED TO INQUIRE INTO THE NATURE OF B ALANCE LAND HELD BY THE APPELLANT I.E. WHETHER IT IS A BUSINESS ASSET O R A PERSONAL ASSET. THE ISSUE OF ITS VALUATION AND ITS INCLUSION AS STOCK IN TRADE WILL ALSO BE REQUIRED TO BE LOOKED INTO. THE ASSESSING OFFICER IS DIRECTED TO TAKE APPROPRIATE STEPS M THIS REGARD. ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 6 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT AS THE AGRICULTURAL LAND PURCHASED BY THE ASS ESSEE WAS NOT CULTIVABLE, HE DEVELOPED LAND BY LEVELING IT AND CONVERTED INT O SMALLER PLOTS OF LAND. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSING OFFIC ER HAD HELD THE TRANSACTION TO BE AN ADVENTURE IN THE NATURE OF TRADE AS THE ASSESSEE HAD NOT FURNISHED ANY PROOF THAT IT HAD CARRIED ON AGRICU LTURAL ACTIVITIES AND ALSO BECAUSE THE LAND WAS DEVELOPED AND HE NCE, IT WAS AN ADVENTURE IN THE NATURE OF TRADE. IT WAS STRESSED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT INITIAL IN TENTION OF ENTERING INTO BUSINESS AT THE TIME OF PURCHASE OF THE SA ID LAND WAS MISSING AND THE ASSESSING OFFICER ALSO RECOGNIZED THE SAME IN PARA 4.6 OF THE ASSESSMENT ORDER. AS PER THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE ASSESSEE WAS NOT ENGAGED IN MULTIP LE ACTIVITIES AND WAS CARRYING ON THE BUSINESS OF JEWELER ONLY AND WA S NOT IN THE BUSINESS OF CONSTRUCTION AND HAD INVESTED ONLY IN ONE PIE CE OF LAND. THE ENTIRE EFFORT MADE BY THE ASSESSEE WAS TO GET THE MAXIMUM PRICE. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- I) CIT VS. A. MOHAMMED MOHIDEEN (1989) 176 ITR 393 (MAD); II) CIT VS. KASTURI ESTATES (P) LTD. (1966) 62 ITR 578 (MAD) III) CIT VS. SOHANKHAN & OTHERS (2008) 304 ITR 194 (RAJ) IV) CIT VS. SHASHI KUMAR AGRAWAL (1992) 195 ITR 767 (ALL) 80 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE ON THE OTHER HAND, POINTED OUT THAT THE ASSESSING OFFICER RECORD ED THE INTENTION OF THE ASSESSEE IN INDULGING IN THE ACTIVITIES IN THE NATURE OF TRADE AS THE ASSESSEE SINCE ASSESSMENT YEAR 2001-02 ONWARDS, HAD ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 7 INCURRED EXPENDITURE ON DEVELOPMENT ACTIVITIES. ANOTHER A SPECT WAS THE CONVERSION OF THE LAND FROM AGRICULTURAL USAGE TO NON- AGRICULTURAL USAGE AND ALSO THE ASSESSEE WAS NOT AN AGRICULTURIST BU T WAS A JEWELER. FURTHER, THE INCREASE IN THE PRICE OF LAND SOLD B Y THE ASSESSEE WAS BECAUSE OF THE DEVELOPMENT OF LAND AND THE ASSESSEE S INTENTION WAS TO MAKE PROFITS FROM THE SAID TRANSACTION. RELIANCE IN THIS REGARD WAS PLACED UPON 41 CTR 307. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE IN REJOINDER POINTED OUT THAT THE FACT OF NON-AGRICULTURAL AC TIVITY DOES NOT DEMONSTRATE ADVENTURE IN THE NATURE OF TRADE. HOWEVER , THE PERIOD OF HOLDING DEMONSTRATES THE INTENTION OF THE ASSESSEE TO MA KE THE SAID INVESTMENT AND THE SALE OF WHICH WOULD RESULT IN INCOME FROM CAPITAL GAINS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. BOTH THE AUTHORIZED REPRESENTATIVES AND ALSO THE CIT(A) HAVE REFERRED TO PLETHORA OF JUDICIAL RULINGS ON THE ISSUE WHETHER A PAR TICULAR TRANSACTION OF SALE OF ASSET IS TO BE TAXED UNDER THE HE AD CAPITAL GAIN OR AS SALE OF STOCK IN TRADE TO BE TAXED UNDER THE H EAD INCOME FROM BUSINESS. IN ORDER TO DECIDE WHETHER A PARTICULAR TRAN SACTION IS A SALE OF INVESTMENT OR AN ADVENTURE IN THE NATURE OF TRADE, TH E RELEVANT FACTS AND CIRCUMSTANCES OF EACH CASE HAVE TO BE LOOKED INTO FO R THE PURPOSE. THE CASE OF THE ASSESSEE WAS THAT IN ORDER TO DETERM INE WHETHER THE ASSET WAS BEING HELD AS INVESTMENT OR FOR THE PURPOSE O F TRADING ACTIVITY IS TO BE DETERMINED FROM THE INTENTION OF THE PERSON AT THE TIME OF PURCHASE. HOWEVER, THE CASE OF THE REVENUE BEFORE US WAS THAT BECAUSE OF SERIES OF STEPS TAKEN BY THE ASSESSEE IN A S YSTEMATIC MANNER ESTABLISHES THAT THOUGH INITIAL LANDHOLDING WAS AGRICU LTURAL ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 8 LAND, ON ITS CONVERSION AND DEVELOPMENT THEREAFTER, THE SURPLUS ARISIN G THEREFROM IS TO BE ASSESSED AS BUSINESS INCOME. 11. THE PLEA OF THE ASSESSEE BEFORE THE REVENUE AUTHOR ITIES WAS THAT IT HAD PURCHASED AGRICULTURAL LAND ON 26.08.1997 AND BECAU SE OF SCARCITY OF WATER AND MAN POWER, IT WAS REALIZED THAT THE AGRICULTURAL ACTIVITIES WOULD NOT RESULT INTO PROFITS. HENCE, THE ASSESSE E OBTAINED PERMISSION FROM THE COLLECTOR OF KOLHAPUR VIDE ORDER DATED 31.12.2002 TO CONVERT THE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND . THE ASSESSEE FROM FINANCIAL YEARS 2001-02 TO 2008-09 STARTED DEVELOPMENT ACTIVITIES ON THE SAID LAND AND INCURRED EXPENSES SUCH A S PLUMBING, ROAD DEVELOPMENT EXPENSES, GUTTER EXPENSES, CEMENT PIPE EXPENSES AND ALSO INCURRED EXPENDITURE ON LABOUR SUPERVISION, MURUM PURCHASES, SAND PURCHASES, ETC. THE LAND OF THE ASSESSE E WAS SITUATED IN KOLHAPUR AND OUT OF THIS BIG CHUNK OF LAND I.E. 1,69,000 SQ. FT. PURCHASED ON 26.08.1997 FOR RS.9,24,325/-, THE ASSESSEE SOLD 13,550 SQ. FT. DURING THE YEAR, FOR TOTAL CONSIDERATION OF RS.23,80,000/- TO DIFFERENT PARTIES IN DIFFERENT SIZES OF PLOTS. THE CIT(A) HAS WORKED OUT THAT THE COST OF LAND INCLUDING DEVE LOPMENT CHARGES WAS RS.28.74 PER SQ. FT., WHEREAS THE COST OF LAND SOLD WORKED OUT TO RS.175.65 PER SQ.FT. THE CASE OF THE ASSESSEE W AS THAT IT HAD PURCHASED AGRICULTURAL LAND AND SINCE IT WAS NOT GETTING T HE BUYERS FOR THE BIG CHUNK OF LAND, THE SAME WAS CONVERTED INTO SMALLER PIECES OF PLOTS AND AFTER LAYING OF ROADS, DRAINAGE, ETC., THE SAME WA S SOLD FOR GAINS. HOWEVER, THE SALE WAS OF AN INVESTMENT AND NOT AN ASSET WHICH COULD BE TERMED AS STOCK IN TRADE FOR THE ASSESSEE. TIM E AND AGAIN, THE CASE OF THE ASSESSEE WAS THAT AT THE TIME OF PURCH ASE OF LAND, THE INTENTION WAS TO MAKE AN INVESTMENT AND NOT TO TRADE IN THE SAID LAND. HOWEVER, DUE TO LATER REALIZATION THAT THERE WAS SCARCITY OF WATER AND ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 9 LABOUR AND THEREFORE, THE LAND WAS NOT CULTIVABLE PROFITABL Y, THE DEVELOPMENT AND SALE OF LAND WAS UNDERTAKEN BY THE ASSESSEE. 12. THE OBSERVATIONS OF THE HONBLE MADRAS HIGH COURT IN JANAB ABUBUCKER SUIT VS. CIT (1962) 45 ITR 37 (MAD.) WERE A PURCHASER OF AGRICULTURAL LANDS DOES NOT ALWAYS JUDGE THE WISDOM OF THE TRANSACTION BY THE RETURNS HE WOULD GET. OTHER CONSIDERATIONS ALS O PREVAIL IN THE MATTER OF SUCH PURCHASE, NAMELY, THE PRIDE OF POSSESS ION OF AGRICULTURAL LANDS, SECURITY WHICH IS INHERENT IN THE INVESTMENT O F MONEY IN SUCH PROPERTY, ETC. ADMITTEDLY, IT IS NOT THE CASE OF THE ASSESSEE THAT HE W AS AN AGRICULTURALIST BUT HE WAS CARRYING ON THE BUSINESS OF JEWELER. IT IS PARAMOUNT THAT AT THE TIME OF INVESTMENT IN AN AGRICULTUR AL LAND, THE FIRST FACT WHICH HAS TO BE LOOKED INTO IS WHETHER THE LAND IS FERTILE AND WHETHER THE SAME CAN BE PUT TO AGRICULTURAL ACTIVITY. I T IS THE CASE OF THE ASSESSEE THAT THERE WAS LATER REALIZATION ABOUT SCA RCITY OF WATER AND LABOUR, BUT IT IS THE CASE OF ASSESSING OFFICER AND CIT (A) THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE IN SUPPORT OF ITS CLAIM OF SCARCITY OF WATER AND LABOUR. FURTHER, IT IS UNDISPUTED T HAT KOLHAPUR DISTRICT IS FERTILE AND IRRIGATED LAND AND SUGAR CANE IS ONE OF THE HIGHEST YIELDING CASH CROPS GROWN IN ABUNDANCE IN THIS ARE A. THE CIT(A) HAS GIVEN A FINDING IN THIS REGARD WHICH HAS NOT BEE N REBUTTED BY THE ASSESSEE. THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE OF ANY AGRICULTURAL ACTIVITY BEING UNDERTAKEN BEFORE THE LAND WAS PUT TO DEVELOPMENT AND PLOTTING. BOTH BEFORE THE ASSESSING OFFICER OR THE CIT(A) AND EVEN BEFORE US, THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN THIS REGARD. FURTHER, THE ASSESSEE HAS NOT EVEN DISCLOSED THE LOCATION OF LAND. THOUGH THE CLAIM OF THE ASSESSEE WAS THAT IT WAS NOT RECEIVING A GOOD PRICE FOR THE AGRICULTURAL LAND, BUT TH E ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO SUGGEST TH AT THERE WAS ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 10 EVER ANY INTENTION TO SELL THE SAID AGRICULTURAL LAND AS SUC H. ON THE CONTRARY, THE ASSESSEE OBTAINED THE PERMISSION FROM THE COLLECTOR, KOLHAPUR FOR THE CONVERSION OF LANDHOLDING FROM AGRICULTURAL TO NON- AGRICULTURAL AND ALSO PLOTTING AND DEVELOPMENT ACTIVITIES WE RE CARRIED OUT OVER THE YEARS WHICH ESTABLISH THE INTENTION OF THE A SSESSEE TO ENTER INTO TRADING ACTIVITIES. IN THE ABSENCE OF THE ASSE SSEE HAVING FAILED TO SUBSTANTIATE ITS INTENTION TO CARRY OUT THE AGRIC ULTURAL ACTIVITIES ON THE SAID LAND AND / OR THE CIRCUMSTANCES W HICH PREVENTED HIM FROM CARRYING ON THE SAID ACTIVITY AND / OR THE CLAIM O F SCARCITY OF WATER AND LABOUR HAVING BEEN ESTABLISHED BY THE ASSESSE E, WE ARE IN AGREEMENT WITH THE INFERENCE DRAWN BY THE REVENUE AUTH ORITIES. THE AFORESAID CIRCUMSTANCES CLEARLY ESTABLISH THE MOTIVE OF TH E ASSESSEE TO ACQUIRE THE LAND IN QUESTION WAS NOT FOR CULTIVATION PURPOS ES. THE EXERCISE THEREOF UNDERTAKEN BY THE ASSESSEE, IN TURN PR OVES THE CASE OF LOWER AUTHORITIES THAT WHATEVER WAS DONE TO THE PLOT HA D BEEN CARRIED OUT WITH A VIEW TO MAKE MORE PROFITS THAN IT WOULD HAVE FE TCHED HAD IT BEEN SOLD AS AN AGRICULTURAL LAND WITHOUT ANY DEVELOPMENT. THE CONTINUED ORGANIZED EFFORTS OF THE ASSESSEE AND THE VALUE ADDITION TO THE AGRICULTURAL LAND IS SUFFICIENT PROOF OF THE INTENTION OF TH E ASSESSEE TO VENTURE INTO TRADING ACTIVITY IN LAND. 13. THE HONBLE SUPREME COURT IN KHAN BAHADUR AHMED A LLADIN & SONS V. CIT [1968] 68 ITR 573 (SC) OBSERVED AS UNDER:- '... IT IS NOT POSSIBLE TO EVOLVE ANY LEGAL TEST OR FORMUL A WHICH CAN BE APPLIED IN DETERMINING WHETHER A TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE OR NOT. THE ANSWER TO THE QUE STION MUST NECESSARILY DEPEND IN EACH CASE ON THE TOTAL IMPRESSI ON AND EFFECT OF ALL THE RELEVANT FACTORS AND CIRCUMSTANCES P ROVED THEREIN AND WHICH DETERMINE THE CHARACTER OF THE TRANSACTION ITA NO.2085/PN/2012 INGAVALE DIGAMBER BALASAHEB 11 14. WE FURTHER FIND SUPPORT FROM THE RATIO LAID DOWN BY TH E HONBLE SUPREME COURT IN JANKI RAM BAHADUR RAM V. CIT [1965] 57 ITR 21 (SC), WHEREIN IT WAS HELD AS UNDER:- 'IF, FOR INSTANCE A TRANSACTION IS RELATED TO THE BU SINESS WHICH IS NORMALLY CARRIED ON BY THE ASSESSEE, THOUGH NOT DIRE CTLY PART OF IT, AN INTENTION TO LAUNCH UPON AN ADVENTURE IN THE NAT URE OF TRADE MAY READILY BE INFERRED. A SIMILAR INFERENCE WOULD ARI SE WHERE A COMMODITY IS PURCHASED AND SUB-DIVIDED, ALTERED, TREATE D OR REPAIRED AND SOLD, OR IS CONVERTED INTO A DIFFERENT C OMMODITY AND THEN SOLD. MAGNITUDE OF THE TRANSACTION OF PURCHASE, TH E NATURE OF THE COMMODITY, SUBSEQUENT DEALINGS AND THE MANNER OF DISPOSAL MAY BE SUCH THAT THE TRANSACTION MAY BE STAMPED WITH THE CHARACTER OF A TRADING VENTURE...' 15. IN VIEW THEREOF, WE AFFIRM THE ORDERS OF LOWER AUTHORITIES AND THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 13 TH DAY OF FEBRUARY, 2015. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 13 TH FEBRUARY, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE