ACIT, New Delhi V. M/s. Delhi Apartment Pvt. Ltd, New Delhi

ITA 2320/DEL/2010

• Counselvise Citation: 232020114 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT MISHRA
• Assessee Lawyers: ANOOP SHARMA; M K GIRI
• Keywords: Capital asset; Business income; Principle of natural justice; Rule of consistency; Additional evidence; Cost of acquisition; Capital receipt; Reason to believe
• Section: 54; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SMT. DIVA SINGH AND SHRI K.G. BANSAL ITA NO. 2320(DEL)/2010 ASSESSMENT YEAR: 2006-07 ADDITIONAL COMMISSIONER OF M/S DELHI APARTMENT PVT. LTD., INCOME TAX, CIRCLE 10(1), VS. WZ-6 , LAJWANTI GARDEN, NEW DELHI. JAIL ROAD, NEW DELHI. PAN: AAACD0325J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAYANT MISHRA, CIT , D.R. RESPONDENT BY : SHRI ANOOP SHARMA, ADVOCATE & SHRI M.K. GIRI, ADVOCATE DATE OF HEARIN G: 29.11.2011 DATE OF PRONOU NCEMENT: 23 .12.2011. ORDER PER K.G. BANSAL : AM THE REVENUE HAS TAKEN UP FOUR GROUNDS IN THIS APP EAL. GROUND NOS. 1 AND 4 ARE GENERAL AND RESIDUARY IN NATURE. I N PARTICULARS, GROUND NO. 1 IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(APPEALS) IS WRONG, PERVERSE, ILLEGAL A ND AGAINST PROVISIONS OF LAW, WHICH IS LIABLE TO BE SET ASIDE. THE REAL GRIEVANCE IS PROJECTED IN GROUND NOS. 2 AND 3. THESE GROUNDS ARE THAT O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN (I) DELETING THE ADDITION OF RS. 16,93,42,000/- MADE B Y THE AO ON ACCOUNT OF ITA NO. 2320(DEL)/2010 2 INCOME ACCRUED BY WAY OF ADVANCE RECEIVED ON SALE OF LAND; AND (II) ASSESSING THE INCOME OF RS. 3,07,82,342/- UNDER TH E HEAD CAPITAL GAINS INSTEAD OF ASSESSING IT UNDER THE HEAD PROFITS A ND GAINS OF BUSINESS OR PROFESSION. 2. BRIEFLY SPEAKING, THE FACTS ARE THAT THE ASS ESSEE-COMPANY FILED ITS RETURN ON 18.12.2006 DECLARING TOTAL INCOME OF RS . 2,99,20,345/-. THE RETURN WAS PROCESSED U/S 143(1) ON 27.10.2007. S UBSEQUENTLY, ASSESSMENT PROCEEDINGS WERE STARTED BY SERVING NOTICE U/S 1 43(2) DATED 29.9.2007 ON THE ASSESSEE. THE OBJECTS OF THE ASSESSEE-COMPA NY ARE IN RESPECT OF CARRYING ON THE BUSINESS OF BUILDERS, BUILDING CON TRACTORS, ARCHITECTS, CONSTRUCTION ENGINEERS, ESTATE AGENTS, DEALERS IN REAL ESTATE, BROKERS IN REAL ESTATE, AND BROKERS OF COMMERCIAL AND RESIDENTIAL BUILDINGS ETC. FOUR MAIN OBJECT CLAUSES HAVE BEEN NARRATED ON PAGE NO . 2 OF THE ASSESSMENT ORDER. 2.1 COMING TO THE SPECIFICS, THE ASSESSEE HAD PU RCHASED CERTAIN LANDS BETWEEN 08.02.2005 AND 31.03.2006 FOR A TOTAL CON SIDERATION OF RS. 1,06,58,000/-. THE DETAILS ARE FURNISHED IN A TAB ULAR FORM ON PAGE NOS. 2 AND 3 OF THE ASSESSMENT ORDER. THESE LANDS WERE SOLD TO A.B. TOWERS ITA NO. 2320(DEL)/2010 3 PVT. LTD. ON 04.09.2006, THE SUCCEEDING YEAR, FOR A SUM OF RS. 18.00 CRORE. IN THIS YEAR, A SUM OF RS. 5.00 CRORE WA S RECEIVED AS ADVANCE. THE ASSESSEE DID NOT OFFER ANY AMOUNT FOR TAXA TION IN RESPECT OF THIS SALE TRANSACTION. HOWEVER, THE AO BROUGHT THE P ROFIT ON SALE OF LAND TO TAX IN THIS YEAR. THE PROFIT HAS BEEN COMPUTED AT RS. 16,93,42,000/-. THIS ADDITION HAS BEEN DELETED BY THE LD. CIT(APPEAL S) IN THE IMPUGNED ORDER. 2.2 FURTHER, THE ASSESSEE HAD SOLD TWO PIECES OF LAND IN THIS YEAR. THE GAINS ARISING FROM THE SALE WERE SHOWN AS LONG -TERM CAPITAL GAIN (LTCG FOR SHORT). THE LTCG WAS COMPUTED AT RS . 3,01,65,287/-. THE AO CONSIDERED THE TRANSACTION TO BE IN THE NATURE OF BUSINESS. THEREFORE, THE INCOME WAS TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE INCOME WAS COMPUTED UNDER THIS HEAD AT RS. 3,07,82,342/-. IN THE IMPUGNED ORDER, THIS FINDING HAS ALSO BEEN REVERSED AND THE AO HAS BEEN DIRECTED TO COMPUTE THE PROFIT UNDER THE HEAD CAPITAL GAINS. 2.3 AGGRIEVED BY THESE FINDINGS, THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 2320(DEL)/2010 4 3. THE CASE OF THE LD. CIT, DR IN RESPECT OF GRO UND NO. 1 IS THAT THE ORDER HAS BEEN PASSED WITHOUT APPLICATION OF MIND. IN THIS CONNECTION, IT IS SUBMITTED THAT THE LD. CIT(A) HAS REPRODUCED THE FINDINGS OF THE AO, THE GROUNDS TAKEN BY THE ASSESSEE IN APPEAL, THE SUBM ISSIONS OF THE ASSESSEE, THE OBSERVATIONS OF THE AO IN THE REMAND REPORT AN D REJOINDER THERETO ON PAGE NOS. 1 TO 25 OF THE IMPUGNED ORDER. THERE AFTER, VARIOUS GROUNDS HAVE BEEN DECIDED SUMMARILY IN PARAGRAPH NO. 4 ON PAGE NOS. 25 AND 26. THE ADDITION OF RS. 16,93,42,000/- HAS BEEN DELE TED BY STATING THAT NO SALE AGREEMENT OR MOU WAS DRAWN IN THIS YEAR. THE SALE DEED WAS EXECUTED ON 04.09.2006, A DATE WHICH FALLS IN ASSESSMENT YEAR 2007-08. THE PROFIT ON SALE HAS BEEN DISCLOSED IN THE RETUR N FOR ASSESSMENT YEAR 2007-08 AND SUCH PROFIT HAS ACCORDINGLY BEEN TAXED BY THE AO. THEREAFTER, IT HAS BEEN CONCLUDED THAT THE ADVANCE MONEY RECE IVED BY THE ASSESSEE CANNOT BE TAXED AS REVENUE RECEIPT IN THIS YEAR . IN RESPECT OF EXCESS INCOME OF RS. 6,17,055/- (NOT IN DISPUTE BEFORE US) , IT HAS BEEN MENTIONED THAT THE AMOUNT HAS BEEN ASSESSED IN EXCESS AS CAPITAL GAIN. THEREAFTER, THE AO HAS BEEN DIRECTED TO VERIFY AND GIVE EF FECT TO THE RECTIFICATION OF THE FIGURE OF CAPITAL GAIN. IN THIS MATTER ALS O, THERE HAS BEEN NO APPLICATION OF MIND. ACTUALLY, THE ASSESSEE HAD DECLARED THE TRANSACTION ON CAPITAL ACCOUNT, WHICH WAS TAXED AS BUSINESS INCO ME BY THE AO. THE ITA NO. 2320(DEL)/2010 5 DIFFERENCE IN RETURNED AND ASSESSED AMOUNTS IS O N ACCOUNT OF INDEXATION OF COST OF ACQUISITION. IT IS ALSO SUBMITTED THAT SUFFICIENT OPPORTUNITIES HAD BEEN GRANTED TO THE ASSESSEE IN THE COURSE OF ASS ESSMENT PROCEEDINGS TO FILE ALL RELEVANT AND NECESSARY EVIDENCES FOR DISPOSAL OF VARIOUS GROUNDS, ESPECIALLY THE GROUND RELATING TO TAXATION OF T HE SUM OF RS.16,93,42,000/-. THE ASSESSEE MOVED ADDITIONAL EVIDENCE BEFORE TH E LD. CIT(A) IN LETTER DATED 26.10.2009. THE AO OBJECTED TO THE ADMISSIO N OF THE EVIDENCE. IT WAS SPECIFICALLY POINTED OUT THAT NONE OF THE C ONDITIONS MENTIONED IN RULE 46A(1) OF THE INCOME TAX RULES, 1962, STANDS SATIS FIED. IN VIEW THEREOF, THE AO DID NOT REPORT FURTHER ON THE MATTER ON MER ITS. THE LD. CIT(A) ADMITTED ADDITIONAL EVIDENCE BY MAKING SUMMARY R EMARKS THAT NO SUCH OPPORTUNITIES WERE PROVIDED BY THE AO. THEREAFTER , IT WAS OPINED THAT THE EVIDENCES ARE MATERIAL IN DECIDING THE PRESENT A PPEAL AND THE ASSESSEE WAS PREVENTED FROM FILING THE SAME BEFORE THE AO ON ACCOUNT OF SUFFICIENT CAUSE. THE ORDER IS NON-SPEAKING IN THIS MATTER A ND DOES NOT MENTION THE CLAUSE(S) OF RULE 46A, UNDER WHICH THE EVIDENCE HAS BEEN ADMITTED. AFTER ADMITTING EVIDENCE, THE LD. CIT(A) DID NOT GRANT ANY FURTHER OPPORTUNITY TO THE AO TO REBUT THE EVIDENCES FILED BY THE ASSESSEE. IT IS ARGUED THAT THE FINDING OF NO OPPORTUNITY GRANTE D BY THE AO IS FACTUALLY ITA NO. 2320(DEL)/2010 6 INCORRECT. IN ANY CASE, HAVING ADMITTED THE EVID ENCE, HE OUGHT TO HAVE GRANTED A FURTHER OPPORTUNITY TO THE AO FOR REBUT TING THE EVIDENCE. 3.1 IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THIS CASE IS NOT A CASE OF TAX EVASION AS BUSINESS INCOME FRO M SALE OF LAND HAS BEEN OFFERED FOR TAXATION IN THE IMMEDIATELY SUCCEE DING YEAR. THERE IS NO DISPUTE ABOUT COMPUTATION OF SUCH INCOME ALSO. T HE ASSESSEE HAD ONLY RECEIVED ADVANCE OF RS. 5.00 CRORE IN THIS YEAR F OR SALE OF LAND, WHICH WAS HELD AS STOCK-IN-TRADE. THE REVENUE HAS NOT TA KEN UP ANY SPECIFIC GROUND AGAINST ADMISSION OF ADDITIONAL EVIDENCE. THE ADDITIONAL EVIDENCE WAS NOT REQUIRED AS SUCH TO DECIDE THE ISSUE AT HA ND. IT WAS FILED ON THE DIRECTIONS OF LD. CIT(A) IN SUPPORT OF THE STAN D OF THE ASSESSEE THAT INCOME AROSE IN THE IMMEDIATELY SUCCEEDING YEAR AS THE TRANSFER OF LAND TOOK PLACE IN THAT YEAR. THE LD. CIT(A) HAD CAL LED FOR THE REMAND REPORT, IN WHICH APART FROM OBJECTING TO THE ADMISSION, NO SUBMISSION WAS MADE ON MERITS. THE AO MERELY REITERATED THE FINDINGS GIVEN IN THE ASSESSMENT ORDER. THEREFORE, IT IS ARGUED THAT THE ORDER OF THE LD. CIT(APPEALS) CANNOT BE SAID TO BE ILLEGAL OR PERVERSE. ITA NO. 2320(DEL)/2010 7 3.2 IN THE REJOINDER, THE LD. CIT, DR SUBMITTED THAT A GROUND SHOULD BE READ WIDELY. THE REVENUE HAS TAKEN THE P LEA OF ILLEGALITY AND PERVERSITY. IN ORDER TO DEFEND THIS GROUND, IT WI LL BE RIGHTFUL TO ARGUE THAT PRINCIPLE OF VIOLATION OF NATURAL JUSTICE IN ADMI TTING ADDITIONAL EVIDENCE AMOUNTS TO AN ILLEGALITY AND PERVERSITY. FURTHER , DECISION IN RESPECT OF TAXATION OF EXCESS AMOUNT HAS BEEN ARRIVED AT W ITHOUT CONSIDERING ANY FACT IN REGARD THERETO. THIS IS A CLEAR PERVERS ITY IN THE ORDER. THE ORDER ON ALL THE GROUNDS DOES NOT REVEAL THE PROCESS OF RE ASONING THROUGH WHICH THE CONCLUSIONS HAVE BEEN ARRIVED AT. 3.3 AT THIS STAGE, BOTH THE PARTIES WERE QUESTIO NED THAT IF THE ORDER IS OTHERWISE FOUND TO BE IN CONFORMITY WITH LAW BUT SUFFERING FROM THE VIRES OF FAILURE TO OBSERVE PRINCIPLES OF NATURAL JUST ICE BEFORE ADMISSION OF ADDITIONAL EVIDENCE AND LACK OF STATING DETAILED REASONS, WHETHER IT SHOULD BE RESTORED TO THE FILE OF CIT(A) OR THE MATTER S MAY BE DECIDED AS PER LAW. THE CASE OF THE LD. CIT, DR IS THAT IN SUCH A CASE THE ORDER SHOULD BE SET ASIDE. HOWEVER, THE LD. COUNSEL TOOK A DIA METRICALLY OPPOSITE VIEW THAT THE DEFICIENCIES POINTED OUT ARE MINOR AND T HE BENCH MAY GO AHEAD WITH THE DECISION EVEN AT THE PAIN OF IGNORING ADDITIONAL EVIDENCE. ITA NO. 2320(DEL)/2010 8 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE ASSESSEE HAD FILED ADDITIONAL EV IDENCE VIDE LETTER DATED 26.10.2009 IT WOULD BE APPROPRIATE FOR US TO REPR ODUCE THE CONTENTS OF THIS LETTER, WHICH WILL ALSO REVEAL THE ADDITIONAL EV IDENCE FILED BY THE ASSESSEE:- A. 1. THAT BEFORE SANCTION OF BUILDING PLANS BY MCD, THE COMPANY HAD TO OBTAIN NOC FROM AIRPORT AUTHORITY O F INDIA, CERTIFICATE FOR AMSL HEIGHT FROM SURVEY OF INDI A, NOC FROM DELHI FIRE SERVICES, NOC FROM AREA TEHSILDAR THAT THE SAID LAND IS FREE FROM ACQUISITION/NOTIFICATION E TC. & NOC FROM THE STATE STATUTORY AUTHORITY WHICH WERE/CO ULD BE OBTAINED DURING A.Y. 2006-07 (A.Y. 2007-08) AS P ER COPIES ENCLOSED FROM PAGE NO. 03 TO 24. 2. THAT, THE COMPANY HAD APPLIED FOR SANCTION OF B UILDING PLANS FOR THE CONSTRUCTION OF MOTEL ON THE LAND LAND VIDE KHASRA NO. 30/18, 30/19/1, 30/23, 30/14/2, 30/19/ 2, & 30/20 OF VILLAGE KAPASHERA, DELHI ON ITS OWN ACCOUNT ON 28/10/2005 MUCH BEFORE AN UNDERSTANDING WAS REACHED WITH M/ S A.B. TOWERS LTD. FOR ITS SALE. 3. COPY OF SANCTIONED BUILDING PLAN DATED 11.08.2 006 ISSUED BY MCD IS ENCLOSED AT PAGE NO. 20 TO 2 0. 4. COPY OF RECEIPT NO. 198016 DT. 04.08.06 FOR PA YMENT OF RS. 34,93,500/- AS CONVERSION/PERMISSION CHARGES TO MCD IS ENCLOSED AT PAGE NO. 19 TO 19. THERE IS NO OFFICI AL CORRESPONDENCE WITH THE COMPANY BUT THE CHARGES H AVE BEEN PAID AS PER RATES NOTIFIED BY THE DELHI GOVERNMENT VIDE PAGES ENCLOSED AT PAGE NO. 21 TO 22 AND THE WHOLE PRO CESS WAS COMPLETED THROUGH THE SERVICES OF M/S GROUP INTER IORS ARCHITECTS & TOWN PLANNERS, E-40, GREATER KAILASH E NCLAVE-I, NEW DELHI, NEW DELHI-110048. ITA NO. 2320(DEL)/2010 9 B. THAT, WE DRAW YOUR KIND ATTENTION TO THE F OLLOWING JUDGMENT OF DELHI HIGH COURT IN THE CASE OF COMMI SSIONER OF INCOME-TAX VS. MEATLES LTD. (1992) 84 ITR 37 WHE REIN IT HAS BEEN HELD THAT SALE OF IMMOVABLE PROPERTY HAS T O BE EFFECTED WITHIN THE MEANING OF SECTION 54 OF TRANSFER OF PROPERTY ACT, 1882 BY WAY OF REGISTERED INSTRUMENT OF DEED. C. THAT, WE ENCLOSE TWO COPIES OF SALE DEEDS AT PAGE NO. 25 TO 52, THE SALE PROCEEDS WERE TREATED AS BUS INESS RECEIPTS INSTEAD OF CAPITAL RECEIPTS. DETAILED FACTS AND SUBMISSION HAVE ALREADY BEEN MADE VIDE PAGE NO. 17 TO 23 OF PAPER BOOK DATED 12.10.09 BUT STILL WE BRING TO YOUR KIND NOT ICE AS UNDER:- THAT AS PER NOTING IN THE SALE DEED, LAND SOLD ARE AGRICULTURAL LANDS & EVEN AT THE TIME OF SALE, THE SAID LANDS WERE USED FOR AGRICULTURAL OPERATIONS (UNDERLIN ING ON THE SALE DEED HAS BEEN MADE WITH MARKET) 4.1 HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE IMPUGNED ORDER IS RATHER CRISP IN RESPECT OF ADMI SSION OF ADDITIONAL EVIDENCE, TAXATION OF THE SUM OF RS. 16,93,42,000 /-, TAXATION OF PROFIT ON SALE OF LAND UNDER THE HEAD CAPITAL GAINS, AND EXCESS INCOME OF RS. 6,17,055/-. THE LD. CIT(APPEALS) HAS NOT CONSIDERE D RULE 46A IN DETAIL WITH A VIEW TO EXAMINE WHICH OF THE CLAUSE(S) IS A PPLICABLE IN THE CASE OF THE ASSESSEE. HOWEVER, THIS ISSUE BECOMES INCON SEQUENTIAL BECAUSE THE CASE OF THE LD. COUNSEL IS THAT ADDITIONAL EVIDE NCE MAY EVEN BE IGNORED. IN CASE OF ADDITION OF RS. 16,93,42,000/-, IN THE EL EVEN-LINE ORDER, IT HAS BEEN MENTIONED THAT NO AGREEMENT OR MOU HAS BEEN DRAW N IN THIS YEAR. THE SALE DEED HAS BEEN EXECUTED ON 04.09.2006 IN THE NE XT YEAR, IN WHICH THE ITA NO. 2320(DEL)/2010 10 INCOME HAS BEEN DISCLOSED FOR TAXATION. OTHER ISSU ES HAVE ALSO BEEN DECIDED SUMMARILY. ALTHOUGH IT WOULD HAVE BEEN MORE APPR OPRIATE TO DEAL WITH THE ISSUES IN DETAIL, WHERE ABOUT 25 PAGES WERE DEV OTED ONLY TO REPRODUCTION OF ASSESSMENT ORDER, GROUNDS OF APPEAL, REMAND R EPORT ETC. ISSUES ON MERIT HAVE BEEN DECIDED IN TWO PAGES WITHOUT DISCLO SING PROPERLY THE PROCESS OF REASONING. HOWEVER, IT IS ALSO A FAC T THAT BARE ESSENTIAL INGREDIENTS FOR COMING TO THE CONCLUSION HAVE BEEN MENTIONED IN THIS PART OF THE ORDER. IN REGARD TO THE EXCESS INCOME, NO FACT HAS BEEN NARRATED, BUT THE MATTER HAS BEEN RESTORED TO THE FILE OF THE A O FOR VERIFICATION AND FOR GIVING EFFECT TO THE RECTIFICATION IN THE FIGURE OF CAPITAL GAIN. THE QUESTION IS WHETHER THE ORDER IS ILLEGAL AND PERVERSE, AND IF SO, SHOULD THE MATTER BE RESTORED TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION? 4.2 WE MAY AT THIS STAGE DISCUSS VARIOUS CASES RELIED UPON BY THE LD. CIT, DR. IN THE CASE OF MRS. JYOTSNA SURI VS. D CIT, (1997) 61 ITD 139 (DEL), PARAGRAPH NO. 9.7 OF THE DECISION WILL BE R ELEVANT FOR OUR PURPOSE, IN WHICH IT IS MENTIONED THAT THE DISCRETION IS TO B E EXERCISED TO ADVANCE SUBSTANTIAL JUSTICE ONLY, WHEN NO NEGLIGENCE, INAC TION OR WANT OF BONA FIDE IS IMPUTABLE TO THE ASSESSEE. THIS PARAGRAPH IS REPRODUCED OVERLEAF:- ITA NO. 2320(DEL)/2010 11 9.7. THIS APART, AN ASSESSEE CANNOT ADDUCE ADDIT IONAL EVIDENCE AS OF RIGHT. RULE 46A MERELY ENABLES ADMITTANCE OF EVI DENCE SUBJECT TO FULFILLMENT OF ITS PRE-CONDITIONS, WHICH EMBODY THE RULE OF EQUITY THAT A PERSON SHOULD NOT SUFFER IF HE WAS PREVENTED BY 'SU FFICIENT CAUSE' FOR MAKING A COMPLIANCE. NO DOUBT THE WORD 'SUFFICIENT' SHOULD RECEIVE A LIBERAL CONSTRUCTION SO AS TO ADVANCE SUBSTANTIAL J USTICE, BUT AS OBSERVED BY THE HON'BLE SUPREME COURT IN AIR 1968 S C 222 IN THE CASE OF SARPANCH, LONAND GRAM PANCHAYAT VS. RAM GIR I GOSAVI & ANR. (SUPRA), THE DISCRETION IS TO BE EXERCISED TO ADVANCE SUBSTANTIAL JUSTICE ONLY 'WHEN NO NEGLIGENCE, NOR INACTION NOR WANT OF BONA FIDE IS IMPUTABLE TO THE APPELLANT'. WE FIND THAT THE CL AIM OF THE APPELLANT FOR ADMISSION OF ADDITIONAL EVIDENCE IS NOT ADVANCE D ON ANY JUDICIAL PRINCIPLES, AS LAID DOWN BY THE HON'BLE SUPREME COU RT IN THE CASE CITED ABOVE. FURTHER, A CONSTITUTION BENCH OF THE S UPREME COURT IN STATE OF U.P. VS. MANBODHAN LAL SRIVASTAVA 1958 SCR 533 AT P. 540 OBSERVED, 'IT IS WELL SETTLED THAT ADDITIONAL EVIDE NCE SHOULD NOT BE PERMITTED AT THE APPELLATE STAGE IN ORDER TO ENABLE ONE OF THE PARTIES TO REMOVE CERTAIN LACUNAE IN PRESENTING ITS CASE AT THE PROPER STAGE TO FILL IN GAPS'. 4.3 IN THE CASE OF CIT VS. RANJIT KUMAR CHOUDHARY, (2007) 288 ITR 179 (GAUHATI), IT HAS BEEN MENTIONED THAT WITHOUT RECORDING ANY VALID OR PLAUSIBLE REASON, THE CIT(APPEALS) ALLOWED THE ASSESSEE TO PRODUCE ADDITIONAL EVIDENCE. NO OPPORTUNITY OF HEARING W AS EVER GIVEN TO THE REVENUE. THE ASSESSEE PRODUCED XEROX COPY OF S ALE BILLS AND RECEIPTS ONLY BEFORE THE CIT(APPEALS) AND NO SUCH DOCUMENT WAS PLACED BEFORE THE AO. IT WAS CATEGORICALLY MENTIONED THAT SALE TRANSACTIONS OF UTENSILS WERE NOT PROVED IN SPITE OF OPPORTUNITIES OFFERE D. ON THE FACTS, IT HAS BEEN HELD THAT IT IS A FIT CASE FOR REMAND FO R PROPER ADJUDICATION OF THE ITA NO. 2320(DEL)/2010 12 CASE BY FOLLOWING THE ESTABLISHED PROCEDURE LAID DOWN UNDER RULE 46A(1). 4.4 IN ORDER TO SUPPORT THE CONTENTION THAT THE RE VENUE CAN RAISE THE PLEA OF VIOLATION OF RULE 46A AT THIS STAGE, RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF D.M. NETRAWALLA VS. CIT, (1980) 122 ITR 880. IN THIS CASE, THE ASSESSEE HAD RECEIVED 60 SH ARES OF CFM (PVT.) LTD. THE VALUE OF SHARES, BEING RS. 60,000/-, WAS B ROUGHT TO TAX IN HIS HAND. THE AAC HELD THAT THE AMOUNT IS NOT TAXABLE. THE APPELLATE TRIBUNAL ALLOWED THE REVENUE TO RAISE A NEW CONTENTION TH AT ASSESSMENT OF THE AMOUNT WOULD BE JUSTIFIED U/S 2(6C)(III) OF THE 1922 ACT. THE TRIBUNAL CAME TO THE CONCLUSION THAT SHARES OF THE VALUE OF RS. 60,000/- WERE ACQUIRED WITHOUT PAYING ANY CONSIDERATION, WHICH IS A BENEFIT RECEIVED BY HIM AS A DIRECTOR FROM THE EMPLOYER-COMPANY, THEREFORE, THE SAME IS ASSESSABLE AS INCOME. BEFORE THE HONBLE BOMBAY HIGH COURT, IT WAS ARGUED THAT THE SHARES WERE ALLOTTED ON AN AGR EEMENT NOT TO CARRY OUT COMPETITIVE BUSINESS. THE BENEFIT WAS NOT RECEI VED FROM THE EMPLOYER- COMPANY BUT ON ACCOUNT OF ARRANGEMENT BETWEEN P ROMOTERS OF THE COMPANY. THE HONBLE COURT HELD THAT THE TRIBUNA L WAS JUSTIFIED IN ALLOWING THE REVENUE TO RAISE THE CONTENTION THAT THE AMOUNT IS TAXABLE ITA NO. 2320(DEL)/2010 13 UNDER THE AFORESAID PROVISION. FURTHER, RELIANC E HAS BEEN PLACED ON THE DECISION IN THE CASE OF CIT VS. EDWARD KEVENTER (SUCCESSORS) P. LTD., (1980) 123 ITR 200. IT HAS BEEN HELD THAT IN A CASE WHERE THE APPEAL INVOLVES INTER-CONNECTED GROUNDS HAVING IMPACT ON ONE ANOTHER, THE MATTER SHOULD BE CONSIDERED IN A BROAD PERSPECTI VE. IT IS TRUE THAT THE APPELLANT SHOULD NOT BE MADE TO SUFFER ON ACCOUNT OF FAILURE OF RESPONDENT TO FILE THE APPEAL, BUT EQUALLY THE PROCEDURAL R ULE SHOULD NOT BE INTERPRETED IN A MANNER SO AS TO CONFER A RELIEF ON THE APPELLANT TO WHICH HE IS NOT ENTITLED. IN THE CASE OF NATIONAL THERM AL POWER CO. LTD. VS. CIT, (1998) 229 ITR 383, IT HAS HELD THAT TRIBUNAL H AS NO DOUBT POWERS TO ALLOW OR NOT TO ALLOW THE PARTIES TO RAISE A NE W GROUND. HOWEVER, WHERE ALL THE FACTS ARE ON RECORD AND THE QUESTION IS PURELY OF LAW, THERE IS NO REASON WHY SUCH A GROUND SHOULD NOT BE ALLOWED T O BE RAISED. 4.5 COMING TO THE FACTS OF THIS CASE, THE NEW GR OUND REGARDING ADMISSION OF ADDITIONAL EVIDENCE IS NOT REALLY MATERIAL IN THE FACE OF THE SUBMISSION OF THE LD. COUNSEL THAT THE SAME MAY, IF THE BENCH THINKS FIT, BE IGNORED FOR DECIDING THE APPEAL, HOWEVER, WE ARE OF THE VIEW THAT THE LD. CIT(APPEALS) OUGHT TO HAVE CONSIDERED THE FACTS OF THE CASE AND RULE 46A IN DETAIL BEFORE ADMITTING THE ADDITIONAL E VIDENCE. BUT THE FAILURE ITA NO. 2320(DEL)/2010 14 DOES NOT IMPACT THE REVENUES CASE IN THE LIGHT OF THE SUBMISSION OF THE LD. COUNSEL. THE LD. CIT(A) HAS STATED ESSENTIAL FACTS ABOUT THE BUSINESS INCOME DELETED BY HIM FROM THE ASSESSMENT. IN SO FAR AS EXCESS INCOME OF RS. 6,17,055/- IS CONCERNED, THE MATTER HAS ON LY BEEN SET ASIDE TO THE FILE OF THE AO. ACCORDING TO US, THIS DOES NOT AM OUNT TO PERVERSITY. WE DO FIND THAT THE LD. CIT(APPEALS) OUGHT TO HAVE PASS ED A MORE DETAILED ORDER IN RESPECT OF DELETING THE ADDITION OF RS . 16,93,42,000/-. HOWEVER, AS MENTIONED ABOVE, THE ESSENTIAL ARGUMENT IS AVAI LABLE IN THE ORDER. THEREFORE, WE DO NOT THINK THAT THIS IS A CASE O F ILLEGALITY OR PERVERSITY. 4.6 THUS, GROUND NO. 1 IS DISMISSED. 5. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERR ED IN DELETING THE ADDITION OF RS. 16,93,42,000/-, MADE BY THE AO ON ACCOUNT OF INCOME ACCRUED ON ADVANCE RECEIVED FOR SALE OF LAND. 5.1 IN THIS CONNECTION, IT IS MENTIONED IN THE AS SESSMENT ORDER THAT THE ASSESSEE HAD PURCHASED THE LAND FROM DIFFERENT PE RSONS ON DIFFERENT DATES BETWEEN 08.02.2005 TO 31.03.2006 FOR A CONSIDERA TION OF RS. 1,06,58,000/-. THE ASSESSEE SOLD THE LAND TO A.B. TOWER PVT. LTD. FOR A SUM OF RS. 18.00 ITA NO. 2320(DEL)/2010 15 CRORE VIDE SALE DEED DATED 04.09.2006. AN ADVAN CE OF RS. 5.00 CRORE WAS RECEIVED DURING THIS YEAR. ON PERUSAL OF SALE D EED IT IS FOUND THAT (I) PERMISSION FOR CONVERSION OF LAND USER WAS RECEIV ED IN VIEW OF NOTIFICATION NO. 350 OF 17.06.1995 ISSUED BY DEL HI DEVELOPMENT AUTHORITY, UNDER WHICH CONSTRUCTION OF MOTELS WAS PERMITTED IN RURAL ZONES/GREEN BELTS, COMMERCIAL ZONES, NATIONAL HIGH WAYS AND INTER-STATE ROADS. THUS, IT BECOMES CLEAR THAT SUCH CONVERSI ON OF LAND USER WAS BOUND TO BE GRANTED TO THE ASSESSEE; AND (II) THE BUYER DEPOSITED LAND CONVERSION CHARGES OF RS. 34,93,500/- ON 04.08.2 006 TO THE CREDIT OF MCD, WHO HAD SANCTIONED THE MOTEL PLAN ON 11.08.20 06. (THE LD. COUNSEL HAS DISPUTED THE FINDING THAT THE BUYER DEPOSIT ED THE LAND CONVERSION CHARGES WITH MCD. IT IS STATED THAT THE FACTU AL POSITION IS THAT THE ASSESSEE DEPOSITED SUCH CHARGES WITH THE MCD). THE AO ALSO CONSIDERED ACCOUNTING STANDARDS 7 AND 9 ISSUED BY THE INSTITU TE OF CHARTERED ACCOUNTANTS OF INDIA. IT IS MENTIONED THAT IN CAS E OF REAL ESTATE SALES, ALL SIGNIFICANT RISKS AND REWARDS OF OWNERSHIP ARE N ORMALLY CONSIDERED TO BE TRANSFERRED WHEN LEGAL TITLE PASSES TO THE BUYER (FOR EXAMPLE, AT THE TIME OF REGISTRATION WITH THE RELEVANT AUTHORITIES OF THE REAL ESTATE IN THE NAME OF BUYER) OR WHEN THE SELLER ENTER INTO AN AGREE MENT FOR SALE AND GIVES POSSESSION OF REAL ESTATE TO THE BUYER UNDER TH E AGREEMENT. ALL SIGNIFICANT ITA NO. 2320(DEL)/2010 16 RISKS AND REWARDS OF OWNERSHIP ARE ALSO CONSIDE RED TO BE TRANSFERRED, IF THE SELLER HAS ENTERED INTO LEGALLY ENFORCEABLE AGREEMENT FOR SALE WITH THE BUYER AND VARIOUS OTHER CONDITIONS MENTIONED I N AS-9 ARE SATISFIED EVEN THOUGH LEGAL TITLE HAS NOT PASSED. THE CA SE OF THE AO IS THAT THE TRANSACTION OF SALE OF LAND DOES NOT INVOLVE ANY ACTIVITY TO BE DONE BY THE OWNER. THEREFORE, THE RISKS IN THE PROPERTY PA SS TO THE BUYER AT THE TIME OF AGREEMENT OF SALE, WHETHER IT IS WRITTEN OR ORAL. IT IS HIS CASE THAT THE RISKS PASSED TO THE BUYER WHEN THE ADVANCE OF RS . 5.00 CRORE WAS RECEIVED. THEREFORE, THE WHOLE OF THE AMOUNT OF SALE CONSIDERATION, RS. 16,93,42,000/-, BECOMES TAXABLE IN THIS YEAR ON ACCRUAL BASIS. AS MENTIONED EARLIER, THE CRISP FINDING OF THE LD. CIT(APPEALS) IS THAT THERE IS NO AGREEMENT OF SALE OR MOU. THE SALE DEED H AS BEEN REGISTERED ON 04.09.2006, A DATE FALLING IN THE IMMEDIATELY S UCCEEDING YEAR. THE TRANSACTION HAS BEEN DISCLOSED IN THAT YEAR AND T HE AO HAS ALSO TAXED THE AMOUNT OF INCOME IN THAT YEAR. THEREFORE, THE AM OUNT CANNOT BE TAXED IN THIS YEAR. 5.2 BEFORE US, THE CIT, DR SUBMITS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE VERBAL AGREEMENT TO SELL THE LAND CONFERS RIGHT OF OWNERSHIP ON THE PURCHASER. THE WRITING OF DEED AND ITS ITA NO. 2320(DEL)/2010 17 REGISTRATION WERE ONLY FORMALITIES. THE PRICE RI SK DID NOT EXIST AS CONSIDERATION HAD BEEN FIXED. THE BUYER COULD GET THE LAND USE CHANGED AS PER THE FINDING OF THE AO. THERE WAS NO HURDLE IN THIS MATTER AS PER THE POLICY. THE BUYER HAS MADE VARIOUS APPLICATIO NS FOR CONVERSION OF LAND USE AND APPROVAL OF PLANS FOR CONSTRUCTING A MOTE L. THESE FACTORS LEAD TO A STRONG REASON TO BELIEVE THAT AN AGREEMENT T O SELL HAD BEEN SIGNED IN THIS YEAR BEFORE GETTING THE ADVANCE OF RS. 5 .00 CRORE, WHICH IS BEING KEPT AWAY FROM THE DEPARTMENT BY THE ASSESSEE. IN ANY CASE, THE TRANSACTION IS COVERED U/S 53A OF THE TRANSFER OF PROPERTY ACT AS THE CONDUCT OF THE BUYER SHOWS THAT POSSESSION HAD BEEN GIVEN TO IT. THE FACT THAT THE AMOUNT HAS ALSO BEEN TAXED IN ASSESSMEN T YEAR 2007-08 IS NOT RELEVANT AS THE TRIBUNAL HAS TO DETERMINE THE C ORRECT YEAR OF TAXATION AS PER LAW. IF IT IS FOUND THAT THE AMOUNT IS TAXABL E IN THIS YEAR, THE ASSESSEE MAY APPROACH THE AO FOR DELETION OF THE SAME A MOUNT ASSESSED IN ASSESSMENT YEAR 2007-08. IT IS HIS CASE THAT INSTEAD OF GOING INTO FORMALITIES, THE TRUE NATURE OF TRANSACTION SHOUL D BE LOOKED INTO. THUS, IT IS ARGUED THAT THE AMOUNT OF INCOME ACCRUING FR OM THE TRANSACTION IS TAXABLE IN THIS YEAR. ITA NO. 2320(DEL)/2010 18 5.3 IN REPLY, THE LD. COUNSEL SUBMITS THAT NO DOC UMENT HAS BEEN WRITTEN IN REGARD TO THIS TRANSACTION IN THIS YEAR. THE ONLY DOCUMENT WRITTEN AND EXECUTED IS THE SALE DEED. IN THIS YEAR, THE RE WAS ONLY AN ORAL UNDERSTANDING BETWEEN THE BUYER AND SELLER AND A SUM OF RS. 5.00 CRORE WAS RECEIVED AS ADVANCE. THE SALE DEED WAS AD MITTEDLY REGISTERED IN THE NEXT YEAR. POSSESSION HAS NOT BEEN GIVEN IN THIS YEAR. ALL ACTIONS REGARDING CHANGE OF USE, PAYMENTS ETC. HAVE BEEN TAKEN BY THE ASSESSEE AND NOT THE BUYER. IT IS FURTHER SUBMITTED THA T IN CASE OF SALE OF AN IMMOVABLE PROPERTY, THE INCOME ACCRUES WHEN SALE DEED IS REGISTERED. HOWEVER, IN VIEW OF THE PROVISION CONTAINED IN SE CTION 53A OF THE TRANSFER OF PROPERTY ACT, READ WITH SECTION 2(47)(V) OF THE INCOME-TAX ACT, THE TRANSFER CAN ALSO TAKE PLACE IN CASE WHERE A WR ITTEN DOCUMENT FOR AGREEMENT TO SELL IS EXECUTED AND THE POSSESSION IS GIVEN TO THE BUYER OR IF HE IS IN POSSESSION ALREADY, SUCH POSSESSION IS ALLOWED TO BE RETAINED. NO AGREEMENT FOR SALE HAS BEEN SIGNED IN THIS YEAR. POSSESSION HAS ALSO NOT BEEN HANDED OVER TO THE BUYER IN THIS YEAR. THE REFORE, NO INCOME ACCRUES MERELY ON ACCOUNT OF RECEIPT OF THE ADVANCE. IT IS ALSO SUBMITTED THAT THE ACCOUNTING STANDARDS HAVE BEEN MISREAD BY THE AO . THESE STANDARDS MERELY REITERATE THE POSITION OF LAW MENTIONE D ABOVE. THEREFORE, IT IS ITA NO. 2320(DEL)/2010 19 ARGUED THAT NO AMOUNT CAN BE BROUGHT TO TAX IN RESPECT OF THIS TRANSACTION IN THE ASSESSMENT OF THIS YEAR. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE RE CEIVED ADVANCE OF RS. 5.00 CRORE IN RESPECT OF THE SALE OF LAND TO BE MADE TO A.B. TOWERS PVT. LTD. NO AGREEMENT FOR SALE IS ON RECORD. NO EVIDENCE REGARDING HANDING OVER THE POSSESSION IS ALSO ON RECORD. THE SALE DEED HA S BEEN REGISTERED IN THE NEXT YEAR. THE CASE OF THE LD. CIT, DR IS THAT C IRCUMSTANCES SHOW THAT THE AGREEMENT FOR SALE MUST HAVE BEEN EXECUTED AND POSSESSION HANDED OVER TO THE BUYER. THE ARGUMENTS ARE THAT NOBODY WILL PART WITH HUGE SUM OF RS. 5.00 CRORE WITHOUT ANY WRITTEN AGREEMENT. THEREFORE, THE ASSESSEE IS HIDING THE AGREEMENT FROM THE REVENUE. THE BUYER HAS PAID MONEY TO THE MCD AND OBTAINED VARIOUS APPROVALS. THIS ALSO L EADS TO AN INFERENCE THAT POSSESSION HAS BEEN GIVEN TO THE BUYER. TH ESE SUBMISSIONS HAVE BEEN REBUTTED BY THE LD. COUNSEL. IT IS SUBMITT ED THAT ONLY DOCUMENT IN RESPECT OF THE PROPERTY IS THE SALE DEED EXECUTED AND REGISTERED IN THE IMMEDIATELY SUCCEEDING YEAR. THE ADDITIONAL EVI DENCE FILED BEFORE THE LD. CIT(APPEALS) SHOWS THAT THE PAYMENT WAS MADE B Y THE ASSESSEE AND APPROVALS WERE ALSO TAKEN BY IT. HOWEVER, EVE N IF SUCH ADDITIONAL ITA NO. 2320(DEL)/2010 20 EVIDENCE IS IGNORED, THE FACT REMAINS THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT ANY AGREEMENT OF SALE HAS BEEN SIGNE D OR POSSESSION WAS HANDED OVER TO THE BUYER IN THIS YEAR. 6.1 AT THIS STAGE, WE MAY DISCUSS THE CASES REL IED UPON BY THE LD. CIT, DR IT HAS BEEN SUBMITTED THAT THE PRINCIPLE OF RE S-JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS, THEREFORE, OFFERING AND TAXATION OF THIS VERY INCOME IN ASSESSMENT YEAR 2007-08 DOES NOT PREJ UDICE THE CASE OF THE REVENUE FOR THIS YEAR AS THE CORRECT YEAR OF TAX ATION HAS TO BE DECIDED. IN THIS CONNECTION, RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF NEW JEHANGIR VAKIL MILLS CO. LTD. VS. CIT, (1 963) 49 ITR 137. IT HAS BEEN HELD THAT IN DETERMINING PROFITS EARNE D ON SALE OF SHARES IN 1944, THE ASSESSING AUTHORITY HAD TO DECIDE WHETHE R THE SHARE DEALING WERE STARTED ON 01.01.1944 OR AT AN EARLIER DATE. THUS, THE TAX AUTHORITIES WERE COMPETENT TO CONSIDER THE POSITION OF THE A SSESSEE IN 1943. HOWEVER, THE FACT THAT IN THE YEAR 1943 THE ASSESS EE WAS TREATED AS INVESTOR DOES NOT STOP THE ASSESSING OFFICER FOR CONSIDER ING AS TO WHEN THE TRADING ACTIVITIES IN SHARES STARTED. IN THE MATTER OF TAXATION, THERE IS NO QUESTION OF APPLICATION OF THE PRINCIPLE OF RES-JUDICATA. THE FINDING GIVEN IN ONE YEAR CANNOT BIND THE REVENUE IN ANOTHER YEAR. ITA NO. 2320(DEL)/2010 21 6.2 IN ORDER TO SHOW THAT THE PROFIT ACCRUES ON THE DATE OF TRANSACTION, RELIANCE HAS BEEN PLACED ON THE DECISION IN THE C ASE OF KESHAV MILLS LTD. VS. CIT, (1953) 23 ITR 230 (SC). IT HAS BEEN HE LD THAT UNDER MERCANTILE SYSTEM OF ACCOUNTING PROFITS AND GAINS ACCRUE O R ARISE ON THE DATE OF THE TRANSACTION NOTWITHSTANDING THE FACT THAT THEY A RE NOT RECEIVED ON THAT DATE. IN THE CASE OF SUTLEJ COTTON MILLS LTD. VS. CIT, (1979) 116 ITR 1 (SC). AT PAGE 5, IT IS MENTIONED THAT IT IS NO W WELL SETTLED THAT THE WAY IN WHICH ENTRIES ARE MADE BY AN ASSESSEE IN ITS BOO KS OF ACCOUNT IS NOT DETERMINATIVE OF QUESTION WHETHER THE ASSESSEE HAS EARNED ANY PROFIT OR SUFFERED ANY LOSS. THE ASSESSEE MAY, BY MAKING ENTRIES, WHICH ARE NOT INCONFORMITY WITH PROPER ACCOUNTANCY PRINCIPLES, CONCEAL PROFIT OR SHOW LOSS AND THE ENTRIES MADE BY HIM CANNOT, THEREFOR E, BE REGARDED AS CONCLUSIVE ONE WAY OR THE OTHER. WHAT IS NECESS ARY TO BE CONSIDERED IS THE TRUE NATURE OF THE TRANSACTION AND WHETHER, IN FACT, IT HAS RESULTED IN PROFIT OR LOSS TO THE ASSESSEE. 6.3 IN THE CASE OF M. SYAMALA RAO VS. CIT, (1998) 234 ITR 140. IN THIS CASE, THE VENDOR HAD ALREADY GIVEN POSSESSION OF TH E AGRICULTURAL LAND AT THE TIME OF AGREEMENT OF SALE IN THE YEAR 1962 TO TH E VENDEE BUT NO FORMAL ITA NO. 2320(DEL)/2010 22 TRANSFER OF TITLE WAS MADE BY THE VENDOR IN FAVOUR OF THE VENDEE DUE TO SOME UNAVOIDABLE CIRCUMSTANCES. THE DOCUMENT WAS REG ISTERED ON 8.6.1979. THE HONBLE COURT CAME TO THE CONCLUSION THAT THE REGISTRATION OF THE DOCUMENT RELATES BACK TO THE DATE ON WHICH THE AG REEMENT OF SALE WAS EXECUTED IN FAVOUR OF THE ASSESSEE BY THE OWNER. THEREFORE, THE ASSESSEE HAS TO BE DEEMED TO BE THE OWNER OF THE PROPERTY WI TH EFFECT FROM 01.05.1962, WHEN THE AGREEMENT WAS EXECUTED. TH E LD. CIT, DR ALSO CITED THE CASE REPORTED IN 332 ITR 40. IT IS FO UND THAT THE DECISION IS IN THE CASE OF OLAM EXPORTS (INDIA) LTD., DECIDED BY KERALA HIGH COURT, IN RESPECT OF HARMONIOUS INTERPRETATION OF SECTIONS 80IB AND 80HHC. IT DOES NOT DEAL WITH THE ISSUE AT HAND. 6.4 AT THIS STAGE, WE MAY REFER TO THE DEFINITI ON OF THE TERM TRANSFER IN SECTION 2(47) OF THE ACT GIVEN IN RELATION TO A CAPITAL ASSET. IT READS AS UNDER:- (47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET, I NCLUDES, (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASS ET; OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR (III) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR ITA NO. 2320(DEL)/2010 23 (IV) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK-IN TRADE OF A BUSINE SS CARRIED ON BY HIM, SUCH CONVERSION OR TREATMENT ;OR (IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON B OND; OR (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A COOPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHIC H HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. EXPLANATION : FOR THE PURPOSES OF SUB-CLAUSES (V) AND (VI), 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA; 6.5 WE MAY ALSO REFER TO THE PROVISION CONTAINED IN SECTION 53-A OF THE TRANSFER OF PROPERTY ACT, 1882, WHICH READS AS U NDER:- 53A. PART PERFORMANCE - WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIG NED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTI TUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREO F, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT, ITA NO. 2320(DEL)/2010 24 AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT, THEN, NOTWITHSTANDING THAT THE CONTRACT, THOUGH REQ UIRED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR, WHERE THER E IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING I N FORCE, THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL B E DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMI NG UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANS FEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESS LY PROVIDED BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. 6.6 THE CASE OF THE LD. COUNSEL IS BASED UPON THES E TWO PROVISIONS. FOR OUR PURPOSE, CLAUSES (I) AND (V) OF SUB-SECTION ( 47) OF SECTION 2 ARE RELEVANT. UNDER CLAUSE (I), A TRANSACTION OF SA LE, EXCHANGE OR RELINQUISHMENT OF THE ASSET AMOUNTS TO TRANSFER . THE INSTANT TRANSACTION IS ONE OF SALE. THE TRANSACTION IN IMMOVABLE PROP ERTY OF THE VALUE OF RS. 16,93,42,000/- CAN ONLY BE MADE BY WAY OF A REGI STERED DEED. SUCH DEED HAS BEEN SIGNED IN THE IMMEDIATELY SUCCEEDING YE AR. THEREFORE, THE TRANSACTION IS NOT COVERED UNDER AFORESAID CL AUSE (I). THIS APART, THE TRANSFER CAN ALSO TAKE PLACE BY WAY OF A TRANSA CTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROP ERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN ITA NO. 2320(DEL)/2010 25 SECTION 53-A. AS SEEN EARLIER, SECTION 53A OF THE TRANSFER OF PROPERTY ACT ENVISAGES A WRITING SIGNED BY THE VENDOR FR OM WHICH TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE AS CERTAINED WITH REASONABLE CERTAINTY. IN SUCH A SITUATION, THE ACT PROVIDES THAT HANDING OVER THE POSSESSION TO THE VENDEE OR ALLOWING HIM TO RETAIN THE POSSESSION IF HE IS ALREADY IN POSSESSION OF THE PROPERTY SHALL ALSO AMOUNT TO TRANSFER. IN THIS CASE, THERE IS NO WRITING BY THE VENDOR FROM WHI CH THE TERMS OF THE CONTRACT OF TRANSFER CAN BE ASCERTAINED WITH REA SONABLE AMOUNT OF CERTAINTY. THERE IS NO EVIDENCE OF HANDING OVER TH E POSSESSION TO THE VENDEE ALSO. THEREFORE, CLAUSE (V) IS ALSO NOT A PPLICABLE TO THE FACTS OF THE CASE. AS THE TRANSACTION OF TRANSFER HAS NOT TA KEN PLACE AT ALL, THE QUESTION OF ACCOUNTING THE SAME IN THE BOOKS OF ACCOUNT BECOMES IMMATERIAL. THE NATURAL COROLLARY IS THAT ACCOU NTING STANDARDS BECOME OF NO CONSEQUENCE IN SO FAR AS MAKING ENTRIES IN BOOK S IS CONCERNED. NONETHELESS, EVEN ACCOUNTING STANDARD-9 CONTEMPLAT ES THE EXECUTION AND REGISTRATION OF THE SALE DEED OR AN AGREEMENT IN WRITING FOLLOWED BY HANDING OVER THE POSSESSION. OF VARIOUS CASES RELIED UPON BY THE LD. CIT, DR, WE FIND THAT THE ONE IN THE CASE OF M. SYAM LA RAO (SUPRA) NEEDS DISCUSSION. IN THIS CASE, A WRITTEN AGREEMENT WAS EXECUTED ON 01.05.1962. THE POSSESSION WAS DELIVERED ON THI S DATE AND THE SALE ITA NO. 2320(DEL)/2010 26 CONSIDERATION WAS ALSO PAID. THIS DOCUMENT WAS REGISTERED ON 08.06.1979. LOOKING TO THE FACTS, IT IS CLEAR T HAT THE TRANSFER TOOK PLACE ON 01.05.1962 WHEN THE AGREEMENT WAS SIGNED A ND THE POSSESSION WAS HANDED OVER. THE CAPITAL GAINS AND THE QUESTION WHETHER IT WAS SHORT-TERM OR LONG-TERM WAS TO BE DECIDED WITH REFERENCE T O THE DATE OF TRANSFER, BEING 01.05.1962. THE COURT HELD THAT REGISTRAT ION OF THE DOCUMENT ON 08.06.1979 RELATES BACK TO 01.05.1962. THE FAC TS OF THIS CASE ARE CLEARLY DISTINGUISHABLE. NO AGREEMENT HAS BEEN SIGNED IN T HIS YEAR. THE POSSESSION HAS ALSO NOT BEEN DELIVERED IN THIS YEAR. THE TW IN CONDITIONS OF EXECUTION OF WRITTEN AGREEMENT AND HANDING OVER OF THE POSSESSION HAVE TO BE CUMULATIVELY SATISFIED IN ORDER TO BRING THE CASE WITHIN THE AMBIT OF SECTION 2(47)(V) READ WITH SECTION 53A OF THE T RANSFER OF PROPERTY ACT. NONE OF THESE CONDITIONS ARE SATISFIED. THEREFO RE, IT IS HELD THAT THE PROPERTY HAS NOT BEEN TRANSFERRED IN THIS YEAR. IT HAS ALSO NOT BEEN SOLD IN THIS YEAR. SINCE THE TRANSACTION OF TRANSFER HAS NOT TAKEN PLACE IN THIS YEAR, NOTHING CAN BE BROUGHT TO TAX AS BUSINESS INCOME IN THIS YEAR. IN THIS VIEW OF THE MATTER, THE MONEY RECEIVED IS ONL Y AN ADVANCE, WHICH WILL GET TAXED AS AND WHEN THE TRANSACTION ACTUALLY TAKES PLACE. THIS HAPPENED IN THE IMMEDIATELY SUCCEEDING YEAR. THUS, GROUND NO. 2 IS DISMISSED. ITA NO. 2320(DEL)/2010 27 7. GROUND NO. 3 IS THAT THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ASSESS THE INCOME OF RS. 3,07,82,342/- UNDER THE HE AD CAPITAL GAINS INSTEAD OF TREATING THE SAME AS BUSINESS INCOME. 7.1 IN THE YEAR UNDER CONSIDERATION THE ASSESSEE SOLD TWO PIECES OF LAND SITUATED AT VILLAGE SAMALKA ON WHICH LTCGS OF RS. 2,88,37,792/- AND RS. 13,27,495/- WERE COMPUTED AND OFFERED FOR TAX UN DER THE HEAD CAPITAL GAINS. IN THIS CONNECTION, THE AO MENTIONED THAT AS PER MEMORANDUM OF ASSOCIATION, THE ASSESSEE IS AUTHORIZED TO CARRY ON THE BUSINESS OF PURCHASE AND SALE OF LAND. THEREFORE, THE INSTAN T SALES ARE IN THE LINE OF MAIN BUSINESS OF THE ASSESSEE. ALTHOUGH THE LANDS ARE SHOWN AS FIXED ASSETS IN THE ACCOUNT, THIS FACT IS NOT DETERMIN ATIVE OF THE ISSUE. THE ASSESSEE-COMPANY HAS BEEN FORMED WITH THE MAIN OBJ ECT OF BUYING, DEVELOPING AND SELLINF LANDS. THEREFORE, THE TRAN SACTION IS SHOWN ON CAPITAL ACCOUNT WITH A VIEW TO DEFRAUD THE REVENUE BY UT ILIZING COLOURABLE DISCRETION BY SHOWING THE LAND AS CAPITAL ASSET. THE PROFIT ON SALE OF LAND WAS WORKED OUT AT RS. 3,07,82,342/- AND BROUGHT TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. VA RIOUS SUBMISSIONS WERE MADE BEFORE THE LD. CIT(A). AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS, IT IS MENTIONED THAT THE LAND H AD BEEN SHOWN AS FIXED ITA NO. 2320(DEL)/2010 28 ASSETS SINCE ASSESSMENT YEAR 1995-96. THE LAND WAS USED FOR AGRICULTURAL PURPOSES BY THE ASSESSEE. IT WAS NEVER CONVER TED INTO STOCK-IN-TRADE. IN ASSESSMENT YEAR 2005-06, THE ASSESSEE HAD SOLD SIMILAR LAND AND THE PROFIT ACCRUING THEREON WAS DECLARED AND TAXED UNDER THE HEAD CAPITAL GAINS. THEREFORE, IT HAS BEEN HELD THAT PROFIT ON SALE O F THE LAND ALSO CONSTITUTE INCOME LIABLE TO BE TAXED UNDER THE HEAD CAPITA L GAINS. 7.2 BEFORE US, THE LD. CIT, DR SUBMITTED THAT TH E LD. CIT(APPEALS) HAS PASSED A NON-SPEAKING ORDER. HE HAS NOT CONSIDE RED ANY CRITERION FOR CLASSIFYING SUCH INCOME UNDER EITHER OF THE TWO H EADS OF INCOME. THE MAIN PLANK OF HIS FINDING IS THAT THE ASSESSEE HAD SHO WN THE ASSET AS FIXED ASSET SINCE ASSESSMENT YEAR 1995-96 AND IT HAS NOT BEEN CONVERTED INTO STOCK-IN-TRADE. HE HAD ALSO REFERRED TO THE PROCEE DINGS OF ASSESSMENT YEAR 2005-06 IN WHICH INCOME ON SALE OF LAND WAS SHOWN AND TAXED AS CAPITAL GAINS. IT IS SUBMITTED THAT THE PRINCIPLE OF RES- JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. FOR THIS PURPOSE, RELIANC E IS PLACED ON THE DECISION IN THE CASE OF NEW JEHANGIR VAKIL MILLS CO. LTD. (SUPRA). IT IS FURTHER SUBMITTED THAT ENTRIES IN THE BOOKS OF AC COUNT ARE NOT CONCLUSIVE FOR THE PURPOSE OF TAXATION. FOR THIS PURPOSE, RELIANCE IS PLACED ON THE DECISION IN THE CASE OF SUTLEJ COTTON MILLS LTD. (SUPRA). ITA NO. 2320(DEL)/2010 29 7.3 IN ORDER TO SUPPORT THE ASSESSMENT ORDER THA T THE INCOME SHOULD HAVE BEEN RIGHTLY TAXED AS BUSINESS INCOME, RELIANCE H AS BEEN PLACED ON THE DECISION IN THE CASE OF G. VENKATASWAMY NAIDU & CO . VS. CIT, (1959) 35 ITR 594 (SC). SOME OTHER CASES WERE ALSO RELIE D UPON, WHICH SHALL BE DISCUSSED ALONG WITH THIS CASE AT APPROPRIATE PLA CE (INFRA). THEREFORE, IT IS ARGUED THAT NOT ONLY THE IMPUGNED ORDER IS INCOR RECT ON THE FACTS OF THE CASE BUT IT IS ALSO PERVERSE. 7.4 IN REPLY, THE LD. COUNSEL SUBMITTED THAT THE P RIME CRITERION FOR CLASSIFYING AN ASSET AS A FIXED ASSET OR STOC K-IN-TRADE HAS TO BE GATHERED FROM THE INTENTION OF THE ASSESSEE AT THE TIME OF ITS ACQUISITION. THE ASSESSEE HAS BEEN SHOWING THE ASSET AS INVEST MENT FOR LAST 10 YEARS OR SO. THIS FACT REMAINS UNDISPUTED. IN THE INTERV ENING PERIOD, THE LAND HAS BEEN USED FOR AGRICULTURAL PURPOSES. SIMILAR FAC TS WERE OBTAINED IN THE PROCEEDINGS OF ASSESSMENT YEAR 2005-06 FOR ANOTHE R PIECE OF LAND, IN WHICH PROFIT ON SALE OF LAND WAS OFFERED FOR TAXATION AND TAXED UNDER THE HEAD CAPITAL GAINS. THE LD. CIT(APPEALS) HAS RELIED ON THIS ORDER. THEREFORE, IT IS ARGUED THAT HE RIGHTLY CAME TO THE CONCLUSIO N THAT THE IMPUGNED PROFITS ARE LIABLE TO BE TAXED UNDER THE HEAD CAPITAL GAINS ONLY. ITA NO. 2320(DEL)/2010 30 8. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS OWNING TWO PIECES OF AGRICULTURAL LAND IN VILLAGE SAMALKA, WH ICH WERE SOLD TO UMRAO HOTELS PVT. LTD. AND RAJESH BHARDWAJ ON 27.01.20 06 AND 10.06.2005. THESE LANDS HAD BEEN SHOWN AS FIXED ASSETS IN TH E BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE HAS WORKED OUT LTCG OF RS . 3,07,82,342/- IN RESPECT OF SALE OF THESE LANDS. THE ASSESSEE IS INTER-ALIA ENTITLED TO CARRY ON THE BUSINESS OF PURCHASE AND SALE OF LANDS AS PER MAIN OBJECT NO. 4. THE QUESTION IS- WHETHER, SURPLUS REALIZED ON THESE SALES IS TAXABLE AS BUSINESS PROFITS OR CAPITAL GAINS? 8.1 WE AGREE WITH THE LD. CIT, DR THAT ENTRY IN T HE BOOKS OF ACCOUNT IS NOT CONCLUSIVE IN DECIDING THE APPROPRIATE HEAD OF INCOME. WE ALSO AGREE WITH HIM THAT PRINCIPLE OF RES-JUDICATA DO NOT AP PLY TO INCOME-TAX PROCEEDINGS AS EACH YEAR IS A SEPARATE PERIOD FOR ASSESSMENT OF INCOME. HOWEVER, THE PRINCIPLE OF CONSISTENCY CAN ALSO NOT BE LOST SIGHT OF. IN THE LIGHT OF THESE OBSERVATIONS, WE NOW EXAMIN E THE DECIDED CASES RELIED UPON BY THE LD. CIT, DR. ITA NO. 2320(DEL)/2010 31 8.2 THE FACTS IN THE CASE OF G. VENKATASWAMY NAI DU & CO. (SUPRA) ARE THAT THE ASSESSEE-FIRM HAD BEEN ACTING A MANAGIN G AGENT OF JANARDANA MILLS LTD. IT PURCHASED FOUR CONTIGUOUS PLOTS O F LAND UNDER FOUR SALE DEEDS. AFTER HOLDING THE LANDS FOR ABOUT FIVE YEARS, THEY WERE SOLD IN TWO LOTS TO JANARDANA MILLS LTD. IN THE FIRST SA LE, SURPLUS OF RS. 52,600/- WAS REALIZED. THE ITO ASSESSED THE SURPLUS AS BUSINESS INCOME. THE AAC CAME TO THE CONCLUSION THAT THE AMOUNT WAS NO T ASSESSABLE AS IT CANNOT BE HELD TO BE THE PROFIT RESULTING FROM THE PROFIT-MAKING SCHEME. THE TRIBUNAL AGREED WITH THE VIEW OF THE ITO THAT THE AMOUNT WAS NOT A CAPITAL ACCRETION BUT A GAIN MADE IN AN ADVENTU RE IN THE NATURE OF BUSINESS. IT WAS HELD THAT THE PURCHASE HAD BEEN MADE SOLELY WITH A VIEW TO SELL THE LAND AT A PROFIT TO JANARDANA MILL S LTD. THE HONBLE MADRAS HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL. THE QUESTION REFERRED TO IT WAS WHETHER THERE WAS MATERIAL FOR THE AS SESSMENT OF SUM OF RS. 43,887/- BEING THE DIFFERENCE BETWEEN THE PURCHAS E AND SALE PRICE OF THE LAND AS INCOME FROM AN ADVENTURE IN THE NATURE OF TRADE? THE MATTER THEREAFTER TRAVELED TO THE APEX COURT. IT CO NSIDERED A NUMBER OF DECISIONS IN THE MATTER. THE HONBLE COURT MENTIONE D THAT THE RELEVANT FACTS ARE THAT THE PROPERTY WHICH WAS PURCHASED A ND SOLD IS LAND AND GENERALLY SUCH PROPERTY IS SUBJECT MATTER OF INVES TMENT. HOWEVER, THE ITA NO. 2320(DEL)/2010 32 ASSESSEE IS A FIRM AND IT IS NOT PART OF ITS O RDINARY BUSINESS TO MAKE INVESTMENT IN LAND. BESIDES, WHEN THE FIRST PUR CHASE WAS MADE IT WAS DIFFICULT TO TREAT IT AS INVESTMENT BECAUSE IT W AS A VERY SMALL PIECE OF LAND AND IT COULD YIELD NO RETURN WHATSOEVER. THIS G IVES THE CLUE THAT THE PURCHASE WAS THE FIRST STEP TAKEN BY THE ASSES SEE IN EXECUTION OF A WELL- CONSIDERED PLAN TO ACQUIRE OPEN PLOTS NEAR THE M ILLS WITH A VIEW TO SELL THEM TO THE MILLS AT A PROFIT. IT IS FURTHER M ENTIONED THAT JUST AS THE CONDUCT OF THE PURCHASER SUBSEQUENT TO THE PURCHAS E OF A COMMODITY IN IMPROVING OR CONVERTING IT SO AS TO MAKE IT READIL Y RESALABLE IS A RELEVANT FACTOR, SO WOULD HIS CONDUCT PRIOR TO THE PURCHASE WILL BE RELEVANT IF IT IS SHOWN AS A DESIGN AND A PURPOSE. AS AND WHEN P LOTS ADJOINING THE MILLS WERE AVAILABLE FOR SALE, THE ASSESSEE CARRIED OUT HIS PLAN AND CONSOLIDATED HIS HOLDINGS OF PLOTS. THE ASSESSEE IS A MANAGI NG THE JANARDANA MILLS LTD. AND SO PROBABLY IT WAS THOUGHT FIT TO PURC HASE THE FIRST PIECE OF LAND IN THE NAME OF BENAMIDAR SO THAT THERE WOULD BE NO CRITICISM OF SUBSEQUENT SALE TO THE MILLS. HOWEVER, IN SUBSE QUENT PURCHASES, IT CHANGED ITS MIND AND BOUGHT THE LAND IN ITS OWN NAME. THE CONDUCT OF THE ASSESSEE ALSO SHOWS THAT IT WAS NOT INTERESTED IN GETTING ANY RETURN FROM THE LANDS. IT HAD NOT TAKEN ANY STEP TO IMPROVE THE LAND. IT WOULD ALSO NOT BE EASY TO ASSUME THAT IN CASE OF THE FIRM L IKE THE ASSESSEE, THE ITA NO. 2320(DEL)/2010 33 ACQUISITION OF OPEN PLOTS COULD INVOLVE ANY PRID E OF POSSESSION. IT IS ALSO NOT A CASE OF ONE TRANSACTION OF PURCHASE AND SALE BUT ONE OF A SERIES OF TRANSACTIONS. THE TRIBUNAL HAS GIVEN A FINDING THAT THE ASSESSEE WAS IN A POSITION TO INFLUENCE THE MILLS AND SUCH VIEW CANNOT BE CHALLENGED AS UNREASONABLE. IF THE PROPERTY HAD BEEN PURCHAS ED AS A MATTER OF INVESTMENT, IT WOULD HAVE CULTIVATED THE SAME. T HEREFORE, THE ONLY PURPOSE WAS TO PURCHASE LAND AND SELL TO THE MILL S AT PROFIT. ACCORDINGLY, IT HAS BEEN HELD THAT THE HIGH COURT WAS RIGHT IN UPHO LDING THE FINDING OF THE TRIBUNAL. 8.3 IN THE CASE OF KHAN BAHADUR AHMED ALLADIN & SO NS VS. CIT, (1968) 68 ITR 573 (SC), THE FACTS ARE THAT THE ASSES SEE-FIRM PURCHASED BRENGUN FACTORY AND PROPERTIES ATTACHED TO IT CONSISTIN G OF 403 ACRES OF LAND, 14 FACTORY BUILDINGS, 100 RESIDENTIAL QUARTERS, RAILW AY SIDINGS, FURNITURE ETC., IN ADDITION TO THE STORES FROM THE GOVERNMENT OF INDIA. THE PRICE OF BRENGUN FACTORY AND THE PROPERTIES TOGETHER WIT H FURNITURE ETC. WAS FIXED AT RS. 27.00 LAKH, WHILE THE PRICE OF STORES WAS FIXED AT RS. 8.00 LAKH. THE ASSESSEE SOLD A PART OF THE STORES FOR RS. 9,53,918/- AND 46 ACRES OF LAND, 14 FACTORY BUILDINGS, FURNITURE, RAILWAY S IDINGS ETC. FOR RS. 26,48,215/-. THE UNDISPUTED FACT IS THAT EXCE SS REALIZATIONS IN RESPECT OF ITA NO. 2320(DEL)/2010 34 THESE TWO TRANSACTIONS ARE RS. 2,26,484- AND RS . 10,46,834/-. THE SURPLUS REALIZED ON STORES WAS ADMITTED TO BE AN ADVENTU RE IN THE NATURE OF TRADE. HOWEVER, WITH REGARD TO THE FACTORY IT WAS ARGUE D THAT IT WAS AN INVESTMENT AND NOT AN ADVENTURE IN THE NATURE OF TRADE. THIS CONTENTION WAS REJECTED BY THE ITO, AAC AND THE APPELLATE TRIBUNAL. THE VIEW TAKEN BY THE TRIBUNAL WAS THAT THE ASSESSEE EXECU TED A WELL CALCULATED SCHEME OF EARNING PROFIT AND, THEREFORE, THE TRA NSACTIONS CONSTITUTED AN ADVENTURE IN THE NATURE OF TRADE. THE QUESTION P OSED BEFORE THE HIGH COURT WAS-WHETHER, THE PURCHASE OF SITE AND BUILDINGS K NOWN AS BRENGUN FACTORY WAS IN THE COURSE OF A PROFIT MAKING SCHEME OR AN ADVENTURE IN THE NATURE OF TRADE? THE HIGH COURT ANSWERED THE QUE STION AGAINST THE ASSESSEE. THUS, THE MATTER REACHED TO THE APEX C OURT. AFTER EXAMINING VARIOUS CASES, THE HONBLE COURT MENTIONED THAT IT IS NOT POSSIBLE TO EVOLVE ANY LEGAL TEST OR FORMULA WHICH CAN BE APPLIED TO ALL CASES IN DETERMINING WHETHER A TRANSACTION IS AN ADVENTUR E IN THE NATURE OF TRADE OR NOT. THE FACTS OF THE CASE ARE THAT THE ASSE SSEE-COMPANY WAS A MANAGING AGENT OF SEVERAL JOINT STOCK COMPANIES. IT STARTED AN ASBESTOS COMPANY IN 1946 AND LAMINATED PRODUCTS IN 1947 . THE GOVERNMENT OF HYDERABAD HAD 50% SHARE HOLDINGS IN BOTH THESE CO MPANIES. NEGOTIATION FOR PURCHASE OF BRENGUN FACTORY IN THE OUTSKIRTS OF HYDERABAD COMMENCED ITA NO. 2320(DEL)/2010 35 IN DECEMBER, 1946. THE ADDITIONAL FINANCIAL ADVI SOR TO THE GOVERNMENT OF INDIA INFORMED ALLADIN BROTHERS THAT GOVERNMEN T OF INDIA HAD DECIDED TO SELL THE FACTORY AS THE WAR HAD ENDED AND IT W AS GOING CHEAP. IT WAS AGREED THAT THE FACTORY-PRICE SHOULD BE FIXED AT RS. 27.00 LAKH AND STORES- PRICE AT RS. 9.00 LAKH. THE ASSESSEE ASKED FOR SOME TIME FOR MAKING THE PAYMENT AND IT WAS AGREED THAT THE PRICE SHOULD BE PAID IN FOUR MONTHLY INSTALLMENTS. THE AGREEMENT OF SALE WAS MADE S UBJECT TO THE CONDITION THAT HYDERABAD GOVERNMENT WAS NO LONGER INTEREST ED IN THE FACTORY. THE BALANCE-SHEET OF THE ASSESSEE SHOWED THAT ON 30. 09.1948 IT STILL OWED RS. 7.00 LAKH TO THE GOVERNMENT THOUGH BY THIS TI ME IT HAD SOLD OVER RS. 30.00 LAKH WORTH OF PROPERTY. THUS, IT WAS DIS CHARGING THE DEBT BY SELLING FRACTIONS OF THE PROPERTY. THESE FACTS ESTABLISH THAT THE ASSESSEE FIRM DID NOT HAVE SUFFICIENT FUNDS TO DISCHARGE THE DEBTS INCURRED ON ACCOUNT OF PURCHASE OF PROPERTY. HAVING REGARD TO THE TOTAL EFFECT, THE HONBLE COURT UPHELD THE DECISION OF THE HIGH COU RT BY MENTIONING THAT IT HAD COME TO THE RIGHT CONCLUSION THAT THE PURCHAS E OF SITE AND BUILDINGS OF BRENGUN FACTORY WAS AN ADVENTURE IN THE NATURE OF TRADE AND IT WAS IN THE COURSE OF PROFIT MAKING SCHEME. ITA NO. 2320(DEL)/2010 36 8.4 IN THE CASE OF SMT. INDRAMANI BAI & ANOTHER V S. CIT, (1993) 200 ITR 594 (SC), THE TRANSACTIONS OF PURCHASE OF L AND, CARVING OUT FOUR PLOTS OUT OF IT AND SELLING THEM INDIVIDUALLY WERE HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE. IN THE CASE OF HEMA CHAND HIR A CHAND SHAH VS. CIT, (1994) 206 ITR 55, A SERIES OF TRANSACTIONS OF PURCHASE AND SALE OF LAND BY AN ASSESSEE WHO CLAIMED TO BE AN AGRICULTURIS T WERE HELD TO BE ADVENTURE IN THE NATURE OF TRADE ON THE GROUNDS THA T AN AGRICULTURIST WOULD PURCHASE LAND FOR AGRICULTURAL PURPOSE AND IT CA NNOT BE ACCEPTED THAT SOON AFTER PURCHASE HE CAME TO THE CONCLUSION THAT CARRYING ON AGRICULTURAL OPERATIONS WOULD BE UNECONOMIC. 8.5 WHEN WE EXAMINE THE FACTS OF THE CASE WITH THE FACTS OF AFORESAID CASES RELIED UPON BY THE REVENUE, IT CAN BE SAID THAT THE FACTS OF THE CASE OF G.VENKATASWAMY NAIDU & CO. ARE DISTINGUISHABLE. IN THIS CASE, THE ASSESSEE HAD AN INTIMATE BUSINESS RELATIONSHIP WITH JANARADANA MILLS LTD. AND PRIME OBJECTIVE WAS TO PURCHASE LANDS WITH A VIEW TO SELL THEM TO THE MILLS. THE FACTS OF THE CASE OF KHAN BAHADUR A LLADIN & SONS (SUPRA) ARE ALSO DISTINGUISHABLE BECAUSE THIS CASE INVOLVED P URCHASE OF PROPERTIES WHICH WERE GOING CHEAP ON ACCOUNT OF END OF THE WAR, AND THE TRANSACTION WAS UNDERTAKEN WITH A VIEW TO SELL THEM AT PROFI T LATER ON. IT MAY ALSO BE ITA NO. 2320(DEL)/2010 37 MENTIONED THAT THE LD. CIT(A) HAS GIVEN A FINDIN G THAT THE LAND WAS USED BY THE ASSESSEE FOR AGRICULTURAL PURPOSES BEFORE ITS SALE. THEREFORE, IT CANNOT BE SAID THAT RIGHT FROM INCEPTION THE INTENTION WAS TO SELL THE LAND. IN THE CASE OF SMT. INDRAMANI BAI & ANOTH ER (SUPRA), THE CONDUCT OF THE ASSESSEE OF CARVING FOUR PLOTS OUT OF THE LA ND AND SELLING THEM INDIVIDUALLY LEADS TO A CLEAR INFERENCE THAT TH E INTENTION WAS TO DEVELOP THE LAND AND SELL THE SAME. THERE IS NO INTENTI ON OF DEVELOPMENT OF THE LAND IN THIS CASE. IN THE CASE OF HEMA CHAND HIR A CHAND SHAH (SUPRA), THE LANDS WERE SOLD SOON AFTER PURCHASE OSTENSIBLY BECAUSE AFTER PURCHASE IT WAS OBSERVED THAT CARRYING ON AGRICULTURAL OPERA TIONS WILL NOT BE ECONOMICAL. THE FACTS OF THIS CASE ARE ALSO D ISTINGUISHABLE. THE ASSESSEE HAS CARRIED ON AGRICULTURAL OPERATIONS ON THE LA NDS AND HELD IT FOR MORE THAN 10 YEARS. IT IS NO DOUBT TRUE THAT THE MOA PERMITS THE ASSESSEE TO CARRY ON THE BUSINESS OF PURCHASE AND SALE OF LAND . IT HAD, IN FACT, CARRIED ON SUCH BUSINESS ALSO. HOWEVER, THERE IS NO BAR ON A N INVESTOR IN LAND TO DEAL IN LAND AND VICE-VERSA. THUS, AN ASSESSEE COULD BE TRADER AS WELL AS INVESTOR IN LAND SIMULTANEOUSLY, DEPENDING UPON WHAT HIS INTENTION IS AND HOW HE TREATS THE ASSET IN QUESTION. IN THIS C ASE, THE LAND WAS PURCHASED AND SHOWN AS ASSET IN THE BALANCE-SHEET. THE LAN D WAS USED FOR AGRICULTURAL PURPOSES. IT WAS HELD FOR A LON G PERIOD OF TIME. THERE IS NO ITA NO. 2320(DEL)/2010 38 EVIDENCE THAT BORROWED CAPITAL WAS USED FOR TH E PURCHASE. THEREFORE, THE FACTS ON RECORD LEAD TO AN INFERENCE THAT THE LA ND WAS HELD AS AN ASSET. SURPLUS REALIZED ON SUCH AN ASSET HAS TO BE TAXE D UNDER THE HEAD CAPITAL GAIN. THUS, THIS GROUND IS ALSO DISMISSED. 9. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- (DIVA SINGH) (K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S DELHI APARTMENT PVT. LTD., NEW DELHI. ACIT, CIRCLE 10(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.