Smt S.Chinatalli, Visakhapatnam V. The ITO, Ward-1 Palakol, Palakol

ITA 24/VIZ/2012

• Counselvise Citation: 2425314 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Capital asset; Business income; Source of fund; Cost of acquisition; Bad and doubtful debts
• Section: 40A(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 24/VIZAG/2012 ASSESSMENT YEAR: 2008-09 SMT. S. CHINATALLI, VISAKHAPATNAM PAN AGRPC1150E INCOME-TAX OFFICER, WARD 1, PALAKOL (APPELLANT) (RESPONDENT) ITA NO. 25/VIZAG/2012 ASSESSMENT YEAR: 2008-09 SHRI K.V.V. PRASAD, VISAKHAPATNAM PAN AFNPV7912C INCOME-TAX OFFICER, WARD 1, PALAKOL (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI G.V.N. HARI REVENUE BY SHRI K.V.N. CHARYA DATE OF HEARING 11-07-2014 DATE OF PRONOUNCEMENT 19-09-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE TWO APPEALS BY TWO DIFFERENT ASSESSEES ARE AG AINST COMMON ORDER DATED 30/11/2011 PASSED BY THE CIT(A), VISAKHAPATNAM FOR THE AY 2008-09. SINCE FACTS ARE I DENTICAL AND ISSUES ARE COMMON BOTH THE APPEALS ARE CLUBBED TOGE THER AND DISPOSED OF IN THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ITA NO. 24/V/2012 IN CASE OF SMT. S. CHINATALLI 2. ASSESSEE HAS RAISED FOUR GROUNDS. GROUND NO.1 & 2 RELATE TO THE COMMON ISSUE OF ADDITION OF AN AMOUNT OF RS. 2, 90,00,000 AS INCOME UNDER THE HEAD PROFIT AND GAINS FROM BUSINES S AND PROFESSION. 3. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISSU E ARE, ASSESSEE IS AN INDIVIDUAL. SHE DERIVES INCOME FROM FAMILY PENSI ON. FOR THE AY UNDER DISPUTE, ASSESSEE ORIGINALLY FILED A RETURN O F INCOME ON 30/07/08 DECLARING TOTAL INCOME OF RS. 52,773/-. IN THE COMPUTATION OF INCOME, THE SOURCES OF INCOME SHOWN WERE FAMILY PEN SION OF RS. 52,773/- AND AGRICULTURAL INCOME OF RS. 66,000/-. S UBSEQUENTLY, DURING THE ASSESSMENT PROCEEDING ASSESSEE FILED A R EVISED RETURN DECLARING NIL INCOME. IN BOTH THE RETURNS ASSESSE E APPENDED NOTES RELATING TO AMOUNT RECEIVED BY HER IN PROPERTY TRAN SACTION AND STATED REASONS WHY IT IS NOT TAXABLE. THE AO ON THE BASIS OF FACTS AND INFORMATIONS AVAILABLE ON RECORD NOTICED THAT ASSES SEE HAS ENTERED INTO AN AGREEMENT OF SALE-CUM-GPA ON 10/10/02 WITH SHRI R.K. MITTAL FOR PURCHASE OF 9507 SQ.YDS. OF LAND AT SOMAJIGUDA , HYDERABAD WHICH IS UNDER LITIGATION SINCE 1996. AO NOTICED T HAT THOUGH SHRI R.K. MITTAL HAS DECRETAL RIGHT OVER THE PROPERTY BY VIRT UE OF A COURT ORDER, HOWEVER, HE WAS NOT IN POSSESSION OF THE PROPERTY. TO ENFORCE HIS DECRETAL RIGHT OVER THE PROPERTY, SHRI R.K. MITTAL HAS ALSO FILED A PETITION IN THE COURT FOR EXECUTION OF DECREE IN H IS FAVOR. AO NOTICED THAT SHRI R.K. MITTAL HAS ALSO ENTERED INTO A SIMIL AR AND SEPARATE AGREEMENT WITH SHRI K.V.V. PRASAD. AS PER THE TERM S OF THE SAID AGREEMENT, ASSESSEE AND SHRI KVV PRASAD WERE TO BE NOMINATED AS PARTIES TO THE DISPUTE BY SHRI R.K. MITTAL IN THE E XECUTION PETITION PENDING IN CIVIL COURT. THUS, IN A SENSE WHILE ENTE RING INTO AGREEMENT OF SALE DATED 10/10/02 BOTH ASSESSEE AS WELL AS SHR I KVV PRASAD KNEW FULLY WELL THAT WHAT THEY INTENDED TO PURCHASE IS ONLY DECRETAL RIGHTS IN THE PROPERTY WHICH WERE HELD BY SHRI R.K. MITTAL. SUBSEQUENTLY, ASSESSEE, SHRI KVV PRASAD AND SHRI R. K. MITTAL 3 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ENTERED INTO A TRIPARTITE AGREEMENT ON 12/11/07 AS PER WHICH THEY SOLD THEIR DECRETAL RIGHTS TO M/S FORTUNA INFRASTRUCTURE PVT. LTD. UNDER THE TERMS OF THE AGREEMENT DATED 12/11/07, SHRI R.K. MI TTAL IS TO RECEIVE RS. 53,42,65,300 @ RS. 28,100 PER SQ.YD. WHILE ASSE SSEE AND SHRI KVV PRASAD WERE TO RECEIVE 33,30,23,06,700 @ RS. 15 ,900 PER SQ.YD. AO NOTICED THAT AS PER THE AGREEMENT DATED 12/11/0 7 ASSESSEE IS ENTITLED FOR RS. 15,11,45,400 WHEREAS SHRI KVV PRAS AD IS ENTITLED TO RS. 15,11,61,300. IT WAS NOTICED BY THE AO THAT OU T OF THE SAID AMOUNT RS. 11,30,00,000 WAS ALREADY PAID TO ASSESSE E AND SHRI KVV PRASAD BY THE TIME OF AGREEMENT DATED 12/11/07 WAS EXECUTED IN THE PROPORTION OF RS. 5,40,00,000 AND RS. 5,90,00,000 R ESPECTIVELY. AS PER THE SAID AGREEMENT, THE BALANCE AMOUNT WAS TO B E PAID IN TWO MORE INSTALMENTS I.E. FIRST INSTALMENT TO BE PAID A FTER 120 DAYS OF REGISTRATION OF SALE DEED BY THE COURT AND THE SECO ND INSTALMENT WILL BE AFTER NINE MONTHS OF THE DELIVERY OF THE POSSESS ION BY THE COURT. IT WAS NOTED BY THE AO ON RECEIPT OF THE AMOUNT OF RS. 11,30,00,000, BOTH ASSESSEE AS WELL AS SHRI KVV PRASAD ALSO PAID ADVANCE TAX OF RS. 36,30,000 AND RS. 21,20,000 RESPECTIVELY FOR TH E AY UNDER CONSIDERATION THOUGH SUBSEQUENTLY THEY FILED THEIR RESPECTIVE RETURN OF INCOMES DECLARING NIL INCOME AND CLAIMING REFUND OF ADVANCE TAX PAID. ON ANALYZING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, THE AO OBSERVED THAT THE ASSESSEE HAD ENTERED INTO THE AGREEMENT OF SALE WITH SHRI R.K. M ITTAL KNOWING FULLY WELL THAT THE PROPERTY IS UNDER LITIGATION AND PAID AN AMOUNT OF RS. 50,000 TO SHRI R.K. MITTAL. THE ASSESSEE ALSO KNEW THAT SHRI R.K. MITTAL WAS ONLY HAVING DECRETAL RIGHTS OVER PROPERT Y AND NOT PHYSICAL POSSESSION OF THE SAME. THE VALUE OF THE PROPERTY INTENDED TO BE PURCHASED IS ALSO VERY HIGH COMPARED TO THE AVAILAB LE MEANS OF THE ASSESSEE AS THE PROPOSED SALE CONSIDERATION SUPPOSE D TO BE PAID BY THE ASSESSEE TO SHRI R.K. MITTAL IS TO THE TUNE OF RS. 53 CRORES WHEREAS THE ASSESSEE DID NOT HAVE THE SOURCES TO PA Y SUCH HUGE AMOUNT. FROM THE STATEMENT RECORDED FROM THE ASSES SEE, THE AO FOUND THAT THE ASSESSEE HAD CATEGORICALLY ADMITTED THAT ONLY BECAUSE 4 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD THERE IS MORE PROFIT IN THE DISPUTED PROPERTIES SHE HAS KNOWINGLY ENTERED INTO SUCH TRANSACTION. IT WAS STATED BY TH E ASSESSEE THAT SHE TOOK THE RISK IN DEALING WITH DISPUTED PROPERTY BY KEEPING THE PROFIT MOTTO. IT WAS STATED BY HER THAT LOOKING AT THE HIG H MARGIN OF PROFIT IN SUCH NATURE OF TRANSACTION INVOLVING DISPUTED PROPE RTY, ASSESSEE HAS ENTERED INTO MORE SUCH TRANSACTIONS. FROM THE AFORE SAID STATEMENT OF ASSESSEE, AO CONCLUDED THAT ANY PRUDENT PERSON WHO INTENDS TO INVEST IN A PROPERTY FOR INVESTMENT PURPOSE WOULD O NLY INVEST IN A PROPERTY FREE FROM LITIGATION. UNLIKE THE ASSESSEE WHO ONLY ENTERS INTO TRANSACTION WITH DISPUTED PROPERTIES WHICH SHOWS TH E PROFIT MOTTO OF THE ASSESSEE. THEREFORE, THE AO CAME TO A CONCLUSIO N THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE IS AN ADVE NTURE IN THE NATURE OF TRADE. DISPELLING THE ASSESSEES CONTENTION THAT THIS IS ONLY A SOLITARY TRANSACTION, AO HELD THAT EVEN A SOLITARY TRANSACTION CAN BE CHARACTERIZED AS AN ADVENTURE IN THE NATURE OF TRAD E. AS THE INTENTIONS OF ASSESSEE WAS TO PURCHASE PROPERTY WIT H AN IDEA TO RESELL WITH A HUGE PROFIT MARGIN, FOR THIS PURPOSE THE AO RELIED UPON A NUMBER OF DECISIONS OF HONBLE SUPREME COURT AS WEL L AS DIFFERENT HIGH COURTS. SO FAR AS YEAR OF TAXABILITY IS CONCE RNED, AO CONCLUDED THAT SINCE THE ASSESSEE HAS TRANSFERRED HER RIGHT F OR A CONSIDERATION DURING PREVIOUS YEAR RELEVANT TO AY UNDER DISPUTE T HE AMOUNT RECEIVED IS TAXABLE IN THE IMPUGNED ASSESSMENT YEAR . HAVING COME TO SUCH CONCLUSION, THE AO PROCEEDED TO COMPUTE THE AM OUNT RECEIVED AS INCOME UNDER THE HEAD BUSINESS AND PROFESSION. OUT OF THE AMOUNT OF RS. 5,40,00,000 RECEIVED BY THE ASSESSEE, AO ALLOWED DEDUCTION OF AN AMOUNT OF RS. 2,00,00,000 PAID TO S HRI R.K. MITTAL AND AMOUNT OF RS. 50,00,000 RETURNED BACK TO SHRI T .C. ASHOK AND BROUGHT TO TAX THE BALANCE AMOUNT OF RS. 2,90,00,00 0. FURTHER, THE AO ALSO REJECTED ASSESSEES CLAIM OF COMPENSATION P AYMENT OF RS. 25 LAKHS TO ONE SHRI KUMARASWAMY. THE AO ALSO MADE ADDITION OF RS. 40,600/- BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. BEING AGGRIEVED OF ASSESSMENT ORDER, SO PASSED, ASS ESSEE FILED APPEAL BEFORE THE CIT(A). 5 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD 4. BEFORE THE CIT(A), ASSESSEE CHALLENGED THE ASSES SMENT ORDER ON TWO ISSUES, FIRSTLY, THE YEAR OF TAXABILITY AND SECONDLY, THE HEAD OF INCOME UNDER WHICH THE AMOUNT, IF AT ALL TAXABLE, N EEDS TO BE ASSESSED. 5. IN COURSE OF HEARING OF APPEAL BEFORE THE CIT (A ), ASSESSEE ADVANCED ELABORATE ARGUMENT ON BOTH THE ISSUES. TH E CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF THE FACTS AND MATERIALS ON RECORD AND GOING THROUGH THE AGREEMENT OF SALE-CUM-GPA DATED 10/10/02 AND THE TRIPARTITE AGRE EMENT DATED 12/11/07 OBSERVED THAT AT THE TIME OF ENTERING INTO AGREEMENT OF SALE WITH SHRI R.K. MITTAL ASSESSEE WAS WELL AWARE OF TH E FACT THAT THE PROPERTY IS UNDER LITIGATION AND SHE WILL COME INTO POSSESSION OF THE PROPERTY ONLY THROUGH THE PROCESS OF COURT. THAT IS WHY ASSESSEE IN THE NOTE ATTACHED TO THE RETURN CLAIMED THAT THE RI GHTS ACQUIRED BY HER DID NOT HAVE ANY COST OF ACQUISITION, HENCE, COMPUT ATION OF CAPITAL GAIN FAILS. FROM THIS, THE CIT(A) INFERRED THAT THE ASSESSEE BY ADOPTING SUCH APPROACH HAD ADMITTED THAT WHAT WAS A CQUIRED BY HER IS ONLY A RIGHT TO SPECIFIC PERFORMANCE. THE CIT(A) OBSERVED THAT AFTER ENTERING INTO AGREEMENT OF SALE-CUM-GPA WITH SHRI R .K. MITTAL AND AFTER GETTING HER NAME ENTERED AS A PARTY TO DISPUT E IN COURT, THE ASSESSEE WENT ON TO SELL HER RIGHTS TO M/S FORTUNA INFRASTRUCTURE PVT. LTD. THROUGH A TRIPARTITE AGREEMENT ENTERED ON 12/1 1/07. EVEN M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. WHILE ENTERI NG INTO SAID AGREEMENT WITH THE ASSESSEE KNEW THAT THE ASSESSEE DID NOT HAVE ANY RIGHTS AND TITLE TO THE PROPERTY IN QUESTION. F OR THAT REASON ALONE, THE ORIGINAL DECREE HOLDER SHRI R.K. MITTAL WAS ALS O MADE A PARTY TO THAT AGREEMENT. THE CIT(A) INFERRED THAT RIGHTS OF SHRI R.K. MITTAL IS DIFFERENT FROM THE ASSESSEE IS ALSO EVIDENT FROM TH E FACT THAT THEY WERE TREATED DIFFERENTLY WITH REGARD TO THE PRICE O FFERED UNDER THE TRIPARTITE AGREEMENT. WHILE THE PRICE OFFERED TO S HRI R.K. MITTAL IS AT RS. 28,100/- PER SQ.YD., PRICE OFFERED TO ASSESSEE AND KVV PRASAD IS AT RS. 15,100 PER SQ.YD. THIS ITSELF SHOWS THAT SH RI R.K. MITTAL IS 6 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD OWNER OF THE DISPUTED PROPERTY. ASSESSEE AND SHRI KVV PRASAD ENTERED INTO A TRIPARTITE AGREEMENT ONLY AS PARTIES WITH CERTAIN RIGHTS. THE CIT(A) OBSERVED THAT AS PER THE TRIPARTITE AGRE EMENT PURCHASER M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. APPROACH ED THE PARTIES I.E. ASSESSEE AND KVV PRASAD AS WELL AS SHRI R.K. MITTAL TO TRANSFER THEIR RIGHT AND INTEREST UNDER THE DECREE PASSED IN OS NO . 1402/1996 AND TRANSFER THE NOMINATION RIGHTS IN EXECUTION PETITIO N EP NO. 155/2002. THE VENDORS WERE OFFERED TOTAL CONSIDERATION OF RS. 53.4 CRORES FOR NOMINATING M/S FORTUNA INFRASTRUCTURE INDIA PVT. LT D. IN E.P. NO. 155/02 AND TO CAUSE SALE DEED FINALISED AND SENT FO R REGISTRATION THROUGH PROCESS OF COURT. THE CIT(A) ALSO NOTED THA T AS PER THE TRIPARTITE AGREEMENT, THE PURCHASERS ARE TO TAKE AL L STEPS FOR TAKING POSSESSION OF THE PROPERTY THROUGH THE COURT AND SH RI R.K. MITTAL HAS NOTHING TO DO WITH DELIVERY OF POSSESSION. THE CIT (A) ON EXAMINING RELEVANT CLAUSES OF THE AGREEMENT DREW THE FOLLOWIN G CONCLUSION: A) M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. APPRO ACHED THE ASSESSEE AND R.K. MITTAL FOR TRANSFER OF RIGHTS AND INTEREST UNDER AGREEMENT DTD. 27/11/96 AND TRANSFER OF NOMIN ATION RIGHTS UNDER EP NO. 155/2002. THIS CLEARLY SHOES THAT THE AGREEMENT IS NOT FOR TRANSFER OF LAND AS SUCH. THIS IS IN CON TRA DISTINCTION TO THE GENERAL SALE AGREEMENTS WHEREIN THE SUBJECT PRO PERTY IS GENERALLY TRANSFERRED AND NOT DECRETAL RIGHTS. B) M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. IS CO NSCIOUS OF THE FACTS THAT SRI R.K. MITTAL DOES NOT HAVE POSSESSION OF PROPERTY AND HENCE IT IS WRITTEN THAT HE HAS NOTHING TO DO W ITH DELIVERY OF POSSESSION OF PROPERTY; C) PURCHASER (M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD.) IS ALSO CLEAR AS TO WHY THE ASSESSEE S ARE TO BE PAID RS. 3 0.23 CRORES I.E. FOR TRANSFERRING THEIR NOMINEE RIGHTS IN THE P ROPERTY. D) THE PURCHASER IS ALSO CLEAR ABOUT THE NATURE OF RIGHTS OF BOTH SRI R.K. MITTAL AND THE ASSESSEES THAT IS WHY R.K. MITTAL IS OFFERED AN AMOUNT OF RS. 28,100/- PER SQ.YD WHEREAS ASSESSEE ARE OFFERED RS. 15,900/- PER SQ.YD ONLY. THIS SHOWS THAT THE RIGHTS POSSESSED BY ASSESSEES ARE NOT EQUIVALENT TO THE RIGHTS POSSESSED BY SHRI R.K. MITTAL. E) ONE MORE ISSUE THAT CLEARLY EMERGES FROM THE ABO VE AGREEMENT IS THAT THE ASSESSEES (THIRD PARTY) HAVE ONLY NOMINEE RIGHTS IN THE PROPERTY. THUS WHAT IS AGREED TO BE PAID TO ASSESSEE IS FOR TRANSFER OF RIGHTS AND IT HAS NO THING TO DO WITH THE ACTUAL DISPUTE IN THE PROPERTY. THIS ISSUE IS O NCE AGAIN 7 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD CLARIFIED IN ANOTHER PART OF THE AGREEMENT. THE REL EVANT PORTION IS REPRODUCED AS UNDER: NOW THEREFORE THIS AGREEMENT OF SALE WITNESSETH AS FOLLOWS: A) IN CONSIDERATION OF A SUM OF CONSIDERATION OF RS . 28,100 PER SQ.YD (TWENTY EIGHT THOUSAND ONE HUNDRED ONLY PER S Q.YD.) TOTALING TO RS. 53,42,65,300/- (FIFTY THREE CRORES FORTY TWO LAKHS SIXTY FIVE THOUSAND AND THREE HUNDRED ONLY) TO THE SECOND PART FOR RECOGNIZING THE THIRD PART AS HIS NOMINEE IN TH E ABOVE SAID E.P. NO. 155/2002 AND FOR GETTING THE SALE DEED FIN ALIZED AND SENT FOR REGISTRATION THROUGH COURT AND THAT THE TH IRD PART SHALL PAY RS. 15,900/- (FIFTEEN THOUSAND NINE HUNDRED ONL Y PER SQ.YD) TO THE FIRST PART AMOUNTING TO RS. 30,23,06,700/- ( RUPEES THIRTY CRORES TWENTY THREE LAKHS SIX THOUSAND SEVEN HUNDRE D ONLY), FOR TRANSFERRING THEIR NOMINEE RIGHTS IN FAVOUR OF THE THIRD PART IN THE AFORESAID PROCEEDINGS IN THEIR PLACE, THUS IN ALL AN AMOUNT OF RS. 83,65,72,000/- IS TO BE PAID TO THE PARTIES OF THE FIRST PART AND THE PARTY OF THE SECOND PART WHICH HAS BEEN ACC EPTED BY THE PARTIES OF THE FIRST PART AND SECOND PART. THE PARTIES OF THE FIRST PART AND THE SECOND PART HAVE AGREED TO SELL CONVEY, TRANSFER, RECOGNIZE THE RIGHTS UNDER THE SAID DECRE E PASSED IN THE OS NO. 1402/1996 AND IN THE PROCEEDINGS EP NO. 155 OF 2002 OF THE SCHEDULE PROPERTY BEING AN EXTENT OF 19103 SQ.YDS OF LAND IN OLD SURVEY NO. 277 EQUIVALENT TO NEW SY. NOS. 20/1 TO 20/4, 23, 24 AND 25 AND TO TS NOS. 20/1A AND 20/2 A ND 20/3 SITUATED AT SOMAJIGUDA, HYDERABAD (EMPHASIS SUPPLI ED) 6. THE CIT(A) OBSERVED THAT THE TERMS OF THE AGREEM ENT MADE IT CLEAR THAT THE ASSESSEE AND SHRI KVV PRASAD ARE GET TING THE MONEY ONLY FOR TRANSFERRING THEIR NOMINEE RIGHTS IN FAVOU R OF THE PURCHASER. IN OTHER WORDS, WHAT IS TRANSFERRED BY ASSESSEE IS ONLY THE DECRETAL RIGHTS AND NOMINEE RIGHTS ACQUIRED BY ASSESSEE IN C ONSEQUENCE OF E.P. NO. 155/02. THE CIT(A) NOTED THAT AS PER CLAU SE 16 OF THE TRIPARTITE AGREEMENT, THE AMOUNTS PAYABLE TO SHRI R .K. MITTAL AND ASSESSEE ARE INDEPENDENT AND SEPARATE FROM EACH OT HER AND EITHER OF THE PARTIES IS NO WAY CONCERNED TO THE PAYMENTS TO BE MADE TO OTHER. HE OBSERVED THAT THE AGREEMENT ALSO INDICAT E THAT THE PAYMENT TERMS ARE FINALIZED AND ONLY THE SCHEDULE OF PAYMEN T IS DEPENDENT ON CERTAIN EVENTS. THE CIT(A) NOTED THAT THE AGREEMENT ALSO REVEALED THAT IN CASE SHRI R.K. MITTAL RESILES FROM THE AGRE EMENT HE WILL HAVE TO REFUND THE AMOUNT PAID TO HIM BY M/S FORTUNA INF RASTRUCTURE INDIA 8 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD PVT. LTD. HOWEVER, THERE IS NO SUCH CONDITION IMPOS ED IN CASE OF PAYMENTS MADE TO THE ASSESSEE BY M/S FORTUNA INFRAS TRUCTURE INDIA PVT. LTD. AS SUCH, THE ASSESSEE IS UNDER NO OBLIGAT ION TO REFUND THE AMOUNT PAID TO HER UNDER ANY CIRCUMSTANCES. FROM T HESE, THE CIT(A) CONCLUDED, THE ONLY DUTY OF THE ASSESSEE IS TO MAKE M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. AS NOMINEE TO THE DI SPUTE IN HER PLACE. ANOTHER OBLIGATION WHICH THE ASSESSEE IS NEEDED TO PERFORM AS PER THE TRIPARTITE AGREEMENT IS TO CAUSE THE EXECUTION OF SALE DEED UNDER REGISTRATION BY THE COURT. THESE TERMS OF THE TRIP ARTITE AGREEMENT MADE IT CLEAR THAT THE PURCHASER KNEW THAT GETTING SALE DEED REGISTERED IN ITS NAME AND TAKING OVER THE POSSESSI ON ARE TWO DIFFERENT ASPECTS AND NEITHER THE ASSESSEES NOR THE ORIGINAL DECREE HOLDER SHRI R.K. MITTAL CAN HANDOVER THE PEACEFUL P OSSESSION OF THE PROPERTY TO THE PURCHASER THAT IS WHY THE TRIPARTIT E AGREEMENT ONLY SPEAKS OF THE REGISTERING THE SALE DEED THROUGH COU RT AND NOT TAKING OVER THE POSSESSION OF THE PROPERTY. ON ANALYZING D IFFERENT CLAUSES OF THE AGREEMENT, THE CIT(A) WAS OF THE OPINION THAT W HAT THE ASSESSEE POSSESSED IS ONLY NOMINEE RIGHTS WHICH ARE DULY TR ANSFERRED TO THE PURCHASER ON EXECUTION OF TRIPARTITE AGREEMENT. AP ART FROM FULFILLING THE TERMS OF THE TRIPARTITE AGREEMENT THERE ARE NO FURTHER CONTRACTUAL OBLIGATIONS ON THE ASSESSEES, HENCE, AS FAR AS THE ASSESSEE IS CONCERNED, ALL CONTRACTUAL OBLIGATIONS ARE DISCHARG ED ON EXECUTION OF TRIPARTITE AGREEMENT AND BY TRANSFERRING THE NOMINE E RIGHTS TO THE PURCHASERS. THAT BEING THE CASE, ACCORDING TO THE C IT(A) THE GAINS ACCRUED TO THE ASSESSEE AS SOON AS THE TRIPARTITE A GREEMENT IS COMPLETED. DEALING WITH ASSESSEES ARGUMENT THAT TH ERE ARE SOME MORE OBLIGATIONS TO BE COMPLIED BY THE ASSESSEE AN D UNLESS THOSE CONDITIONS ARE COMPLIED THE GAINS FROM TRANSACTION WOULD NOT ACCRUE TO THE ASSESSEE, THE CIT(A) REFERRING TO CLAUSES 6, 7,9 & 10 OF THE TRIPARTITE AGREEMENT ON WHICH ASSESSEE RELIED UPON, OBSERVED THAT READING OF CLAUSE 6 SHOWS THAT WHAT THE ASSESSEE IS TO INDEMNIFY THE PURCHASER IS ONLY REGARDING ASSESSEES RIGHTS IN THE SCHEDULED PROPERTY AND THERE ARE NO CLAIMANTS THROUGH OR UNDE R THE ASSESSEE 9 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD FOR THE SAID RIGHTS. THE CIT(A) NOTED THAT WHAT THE ASSESSEE HAD IS PART OF DECREE RIGHTS AND THE CLAUSE REFERRED TO ON LY STATES THAT ASSESSEE WILL INDEMNIFY THE PURCHASER IF THERE ARE CLAIMANTS TO ASSESSEES DECREE RIGHTS. THE CIT(A) OBSERVED THAT A PERSON CAN ONLY TRANSFER WHAT HE HAS THUS WHAT IS TRANSFERRED BY THE ASSESSEE IS ONLY PART OF DECRETAL RIGHTS. THEREFORE, ONLY IN C ASE THERE IS ANY FURTHER CLAIM ON THE DECRETAL RIGHTS OF THE ASSESSE E IN THAT EVENT ALONE ASSESSEE NEEDS TO INDEMNIFY THE PURCHASER. WH EREAS SHRI R.K. MITTAL HAS ORIGINAL RIGHTS TO THE PROPERTY WHICH AR E SUBJECT TO FURTHER CLAIMS. THE PURCHASER BEING WELL AWARE OF THIS FAC T HAS MADE DISTINCTION BETWEEN THE RIGHTS OF THE ASSESSEE AND RIGHTS OF SHRI R.K. MITTAL BY DEFERENTIALLY PRICING THEM. REFERRING TO CLAUSE 7, THE CIT(A) OBSERVED THAT IN THE SAID CLAUSE THE PARTIES HAVE ONLY DECLARED THAT THERE ARE NO RIVAL CLAIMS IN RESPECT OF THE SCHEDUL ED PROPERTY. AS FAR AS CLAUSE 9 IS CONCERNED, THE CIT(A) OBSERVED THAT AS PER THE SAID CLAUSE SHRI R.K. MITTAL ONLY DECLARES THAT THE PROP ERTY IS NOT COVERED UNDER TELENGANA AREA TENANCY ACT. THIS CLAUSE DOES NOT APPLY TO THE ASSESSEE. REFERRING TO CLAUSE 10, IT WAS OBSERVED BY THE CIT(A) AS PER THE SAID CLAUSE THE PARTIES HAVE TO ONLY COOPER ATE WITH THE PURCHASER TO GET THE POSSESSION THROUGH COURT AND S HRI R.K. MITTAL HAS NO OBLIGATION IN GIVING THE POSSESSION. THE CI T(A) OBSERVED THAT THE AGREEMENT READ AS A WHOLE WOULD REVEAL THAT THE RE IS NO CONTRACTUAL OBLIGATION ON THE PART OF THE ASSESSEE WHICH IS NOT DISCHARGED BY HER. HENCE, THERE IS NO PENDING ACTIO N WHICH STOPS THE PROCESS OF ACCRUAL OF GAINS TO THE ASSESSEE TILL SU PPLEMENTARY AGREEMENT IS SIGNED. AS THE ASSESSEE HAS DISCHARGED ALL THE OBLIGATIONS AS PER THE TRIPARTITE AGREEMENT THE TRA NSACTION IS COMPLETE AS FAR AS THE ASSESSEE IS CONCERNED. THE ONLY THING THAT IS DEFERRED IS PAYMENT OF THE BALANCE AMOUNT. HOWEVER, THE DEFERM ENT OF PAYMENT TO A SUBSEQUENT DATE WOULD NOT LEAD TO THE CONCLUSI ON THAT THE TRANSACTION IS NOT COMPLETE. FURTHER, AS THERE IS N O CONDITION IMPOSED ON THE ASSESSEE TO REFUND THE AMOUNT ALREADY PAID T O HER, THE PAYMENT SO MADE IS ABSOLUTE AND THERE CANNOT BE ANY UNCERTAINTY 10 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD OVER THE SAME. THE CIT(A) EXAMINING THE TERMS OF T HE SUPPLEMENTARY AGREEMENT DATED 10/04/10 OBSERVED THAT AS PER TERMS OF THE SAID AGREEMENT NO FURTHER AMOUNT WAS PAID TO THE ASSESSE E BECAUSE OF TWO EVENTS, A) NON-TRANSFER OF ALL RIGHTS AND INTER EST UNDER THE DECREE PASSED BY THE COURT AND B) POSSESSION OF THE PROPER TY WAS NOT YET GIVEN TO SHRI R.K. MITTAL. HOWEVER, THERE IS NO OBL IGATIONS ON THE ASSESSEES TO EITHER DELIVER POSSESSION OR TO TRANSF ER ALL RIGHTS UNDER THE DECREE TO THE PURCHASER. THE CIT(A) OBSERVED T HAT SINCE THE ASSESSEE PERFORMED HER PART OF AGREEMENT IN TOTO FO R WHICH SHE IS ENTITLED FOR THE PAYMENT AS PER THE TERMS OF THE AG REEMENT BUT SINCE THE ASSESSEE CHOSE TO FORGO HER RIGHT TO RECEIVE TH E REMAINING PORTION OF THE MONEY AS PER THE TERMS OF THE SUPPLEMENTARY AGREEMENT THAT DOES NOT MEAN THAT THE TRANSACTION IS NOT COMPLETE. ON THE CONTRARY, IT IMPLIES THAT ASSESSEE CHOSE TO WRITE OFF THE AMO UNTS AS BAD DEBTS. SUCH VOLUNTARY RELINQUISHMENT OF RIGHTS TO RECEIVE MONEY FROM M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. CANNOT BE EQ UATED TO NON- SETTLEMENT OF DISPUTE. ON THE AFORESAID BASIS, THE CIT(A) CONCLUDED THAT THE AMOUNT RECEIVED BY THE ASSESSEE IN THE FY 2007-08 IS ASSESSABLE AS INCOME OF THE ASSESSEE IN THE IMPUGNE D ASSESSMENT YEAR ITSELF. FURTHER, THE CIT(A) OBSERVED THAT THE FACT THAT ASSESSEE DID NOT GET PART OF THE MONEY AND VIDE A SEPARATE S UPPLEMENTARY AGREEMENT AGREED TO FORGO HER RIGHT TO GET FURTHER MONEY IS NOT RELEVANT FOR THE PURPOSE OF ASSESSING THE INCOME IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THIS CONTEXT, THE CIT( A) OBSERVED THAT THE AO HAS ALSO NOT ASSESSED THE ENTIRE AMOUNT WHIC H WAS RECEIVABLE BY THE ASSESSEE AS PER THE TRIPARTITE AGREEMENT BUT HAS ASSESSED ONLY THAT PORTION OF THE MONEY WHICH WAS RECEIVED B Y THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND WAS NOT REFUN DED BY THE ASSESSEE. ULTIMATELY, THE CIT(A) UPHELD THE TAXABIL ITY OF AMOUNT IN THE IMPUGNED ASSESSMENT YEAR. 7. COMING BACK TO THE ISSUE OF THE HEAD OF INCOME U NDER WHICH THE INCOME IS TO BE ASSESSED, THE CIT(A) HELD THAT WHET HER A PARTICULAR 11 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD INCOME IS TO BE TREATED AS INCOME FROM BUSINESS OR CAPITAL GAIN HAS TO BE DECIDED ON THE BASIS OF THE FACT INVOLVED IN EAC H CASE. IT WAS OBSERVED BY THE CIT(A) THOUGH THE ASSESSEE HAS ARGU ED THAT IT IS ONLY A SOLITARY TRANSACTION AND THE ASSESSEE HAD NOT BOR ROWED ANY FUNDS AND FURTHER THE LAND WAS HELD FOR A LONG TIME BUT T HE INVESTMENT MADE BY THE ASSESSEE IN A DISPUTED PROPERTY ITSELF REVEA LS THE INTENTION OF THE ASSESSEE THAT SHE IS TRYING TO DERIVE MAXIMUM P ROFIT BY INVESTING A NOMINAL AMOUNT. THE CIT(A) OBSERVED THAT NO PRUD ENT INVESTOR WOULD INVEST HIS SAVINGS IN A DISPUTED PROPERTY. F URTHER, THE MOST DISTINGUISHING FEATURE WHICH SEPARATES THE TRANSACT ION OF THE ASSESSEE FROM NORMAL INVESTMENT ACTIVITY IS ASSESSE E INTENDS TO BUY A PROPERTY WORTH 50 CORES BY PAYING RS. 50000 THAT TOO WHEN THE ASSESSEES NET WORTH IS OF FEW LAKH RUPEES ONLY. TH E CIT(A) OBSERVED THAT NO NORMAL INVESTOR IN REAL ESTATE CAN VENTURE INTO SUCH A TRANSACTION. WHAT IS ACTUALLY PURCHASED BY THE ASSE SSEE ARE DECREE RIGHTS AND NOT THE PROPERTY AS SUCH. THE INTENTION OF THE ASSESSEE AS WOULD BE EVIDENT FROM THE STATEMENTS RECORDED IS, A SSESSEE ENTERS INTO TRANSACTION FOR PURCHASING DISPUTED PROPERTY B Y PAYING SOME NOMINAL AMOUNT AS IN THE PRESENT CASE AN AMOUNT OF RS. 50000 ONLY, THEN, ASSESSEE SCOUTS FOR VARIOUS OTHER INVESTORS B Y PAYING BROKERAGE WHO ARE WILLING AND READY TO BUY THE DISPUTED PROPE RTY AT A MUCH HIGHER PRICE. HE OBSERVED THAT ASSESSEES DAUGHTER BEING A CIVIL ADVOCATE, ASSESSEE HAD THE ADVANTAGE OF MANAGING TH E LITIGATION AND THEREBY SELLING THE RIGHTS ACQUIRED BY HER ON A PAY MENT OF NOMINAL SUM AT A MUCH HIGHER PRICE. THE CIT(A), THEREFORE, CONCLUDED THAT ENTERING INTO TRANSACTION IN PURCHASING DISPUTED PR OPERTY AND TRYING TO GET IT CLEARED AND ULTIMATELY SELLING IT OFF AT A V ERY HIGH PRICE IS NOTHING BUT ADVENTURE IN THE NATURE OF TRADE WHICH HAS BEEN RIGHTLY ASSESSED AS INCOME UNDER THE HEAD BUSINESS. 8. THE LEARNED AR SHRI G.V.N. HARI, ADVOCATE APPEAR ING FOR THE ASSESSEE MADE SUBMISSIONS, WHICH ARE COMMON FOR BOT H THE APPEALS. HE ALSO FILED A WRITTEN SUBMISSION WITH ELABORATE A RGUMENTS. BROADLY 12 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD THE CONTENTION OF THE LEARNED AR, ARE, THE DEPARTME NTAL AUTHORITIES HAVE COME TO A WRONGFUL CONCLUSION WHILE INFERRING THAT THE ASSESSEE HAS ACQUIRED ONLY DECRETAL RIGHT. THE LEARNED AR RE FERRING TO THE AGREEMENT OF SALE-CUM-GP DATED 10/10/02 ENTERED INT O WITH SHRI R.K. MITTAL SUBMITTED, THE CONTENTS OF THE AGREEMENT REA D AS A WHOLE WOULD CLEARLY INDICATE THAT THE ASSESSEE INTENDED T O ACQUIRE ONE LANDED PROPERTY IN RESPECT OF WHICH THE VENDOR SHRI R.K. MITTAL WAS HAVING A DECREE TO GET THE SALE DEED REGISTERED IN HIS FAVOUR OR IN FAVOUR OF HIS NOMINEES. THE VENDOR, SHRI R.K. MITTA L AGREED TO SELL HIS RIGHTS OVER THE PROPERTY AT AN AGREED CONSIDERATION OF RS. 28,100 PER SQ.YD AND FURTHER SHRI R.K. MITTAL AGREED TO GET TH E SALE DEED EXECUTED IN FAVOUR OF THE ASSESSEE AND HAND OVER TH E VACANT POSSESSION OF THE PROPERTY TO THE ASSESSEE. IT WAS SUBMITTED THAT THE PROPERTY INTENDED TO BE SOLD UNDER THE AGREEMENT OF SALE-CUM-GPA WAS LAND ADMEASURING ACRE 1.96 GUNTAS OUT OF TOTAL LAND OF ACRES 14.39 GUNTAS. AS THE TOTAL LAND WAS COVERED BY VARI OUS SURVEY NOS. AND SINCE THERE WAS AN ELEMENT OF UNCERTAINTY ABOUT THE EXACT EXTENT OF LAND THAT COULD BE ULTIMATELY HANDED OVER IT WAS MUTUALLY AGREED THAT THE CONSIDERATIONS WILL FINALLY BE SETTLED ON THE BASIS OF ACTUAL EXTENT OF LAND EXISTING ON THE GROUND AND TO BE FOU ND ON MEASUREMENT. THE LEARNED AR SUBMITTED, WHILE THE FULFILLMENT OF THE AGREEMENT OF SALE-CUM-GPA WAS PENDING M/S FORTUNA I NFRASTRUCTURE INDIA PVT. LTD. APPROACHED THE ASSESSEE AND AGREED TO PURCHASE THE PROPERTY FOR A CONSIDERATION OF RS. 44000 PER SQ.YD OUT OF WHICH RS. 28100 PER SQ.YD. IS TO BE PAID TO SHRI R.K. MITTAL AND THE BALANCE TO THE ASSESSEE. AFTER NEGOTIATION A TRIPARTITE AGREEM ENT WAS ENTERED INTO BETWEEN THE ASSESSEE, SHRI R.K. MITTAL AND M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. ON 12/11/07 ONLY FOR THE PURPOSE OF ENSURING EXECUTION OF SALE DEED IN FAVOUR OF M/S FO RTUNA INFRASTRUCTURE INDIA PVT. LTD. AND TO HAND OVER VAC ANT POSSESSION OF THE LAND. THE LEARNED AR ANALYISNG VARIOUS CLAUSES OF THE AGREEMENT OF SALE-CUM-GPA DATED 10/10/02 AS WELL AS THE TRIPA RTITE AGREEMENT DATED 12/11/07 GIVEN IN A TABULAR FORM, SUBMITTED T HAT THE TERMS AND 13 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD CONDITIONS CONTAINED THEREIN WOULD CLEARLY REVEAL T HAT THE TRANSACTION IS NOT COMPLETE UNTIL THE ASSESSEE AS WELL AS SHRI R.K. MITALL FULFILL ALL THE CONDITIONS OF THE TRIPARTITE AGREEMENT. IT WAS SUBMITTED, THOUGH ON GOOD FAITH M/S FORTUNA INFRASTRUCTURE INDIA PVT. LT D. HAS PAID AN AMOUNT OF RS. 5.4 CRORES TO THE ASSESSEE BUT WHAT T HE ASSESSEE ULTIMATELY RECEIVED IS ONLY 20% OF THE TOTAL PRICE AGREED TO BE PAID TO THE ASSESSEE AMOUNTING TO RS. 15 CRORES HENCE THE A MOUNT RECEIVED BY THE ASSESSEE CAN ONLY BE CONSIDERED AS AN ADVANC E RECEIVED AS THE TRANSACTION CANNOT BE TREATED TO BE CONCLUDED. THE LEARNED AR SUBMITTED THAT AS PER CLAUSE 10 OF THE TRIPARTITE A GREEMENT THE ASSESSEE IS ALSO UNDER AN OBLIGATION TO NOT ONLY HA ND OVER POSSESSION BUT ALSO GOOD TITLE IN FAVOUR OF M/S FORTUNA INFRAS TRUCTURE INDIA PVT. LTD. IT WAS SUBMITTED THAT THE AGREEMENT WOULD ALSO REVEAL THAT THE UNDERLYING ASSET OF THE DECREE IS A LANDED PROPERTY . THE LEARNED AR SUBMITTED THAT THOUGH THE SALE DEED GOT EXECUTED IN FAVOUR OF M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. BUT THERE WE RE A NUMBER OF DECLARATION SUITS BY VARIOUS PERSONS CLAIMING TITLE TO THE SAID PROPERTY. CONSEQUENTLY, THE HANDING OVER OF VACANT POSSESSION WITH THE AID OF THE COURT COULD NOT TAKE PLACE. THIS DE VELOPMENT PROMPTED THE ASSESSEE TO ENTER INTO A SUPPLEMENTARY AGREEMEN T WITH M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. ON 10/04/10 AS PER WHICH THE ASSESSEE AGREED NOT TO CLAIM THE BALANCE CONSIDERAT ION AND ALSO AGREED TO FULFILL HER OBLIGATIONS ARISING OUT OF TH E TRIPARTITE AGREEMENT. THE LEARNED AR SUBMITTED THAT AS PER THE TERMS OF T HE TRIPARTITE AGREEMENT THE ASSESSEE IS OBLIGED TO HAND OVER THE VACANT POSSESSION OF THE PROPERTY TO M/S FORTUNA INFRASTRU CTURE INDIA PVT. LTD. HOWEVER, ON ACCOUNT OF VARIOUS DEVELOPMENTS SU BSEQUENT TO TRIPARTITE AGREEMENT THE ASSESSEE COULD NOT FULFILL HER OBLIGATION. THAT BEING THE CASE, THE ASSESSEE WAS LIABLE TO REFUND T HE AMOUNT RECEIVED IN PURSUANCE OF THE TRIPARTITE AGREEMENT I N THE ULTIMATE EVENT OF INABILITY TO PERFORM ITS OBLIGATION AND IN THE E VENT OF SUCH A CLAIM BEING PRESSED INTO ACTION BY M/S FORTUNA INFRASTRUC TURE INDIA PVT. LTD. IT WAS SUBMITTED, THE AMOUNT RECEIVED IN PURSUANCE OF THE TRIPARTITE 14 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD AGREEMENT CANNOT BE TREATED AS INCOME OF THE ASSESS EE IS ALSO EVIDENCED FROM THE FACT THAT ASSESSEE PAID BACK RS. 50 LAKHS SUBSEQUENT TO THE AGREEMENT TO THE REPRESENTATIVE O F M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. TO MEET THE COST OF LITIGATION. IN THIS CONTEXT, IT WAS SUBMITTED THAT IF THE EXECUTION OF SALE DEED IS THE END OF ASSESSEES OBLIGATION THERE WAS NO NEED TO INCUR SUCH A HUGE SUM OF RS. 50 LAKH TO ENABLE M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. TO MEET A PART OF LITIGATION EXPENSES THAT WERE NECESS ITATED TO SUBSEQUENT TO REGISTRATION OF SALE DEED. IT WAS SUB MITTED, EVEN IN THE SUPPLEMENTARY AGREEMENT DATED 10/04/10, IT WAS SPEC IFICALLY MENTIONED THAT M/S FORTUNA INFRASTRUCTURE INDIA PVT . LTD. COULD NOT BE GIVEN POSSESSION OF THE LAND EVEN TILL THAT DATE TH EREFORE ASSESSEE WOULD LIKE TO FORGO HER CLAIM TOWARDS BALANCE CONSI DERATION. FURTHER THE ASSESSEE ALSO AGREED TO FULFILL THE TERMS AND C ONDITIONS AGREED UPON AS PER TRIPARTITE AGREEMENT. THUS, IT WAS SUBM ITTED BY THE LEARNED AR IF THE EXECUTION OF SALE DEED WAS THE EN D OF THE TOTAL OBLIGATIONS ARISING OUT OF TRIPARTITE AGREEMENT, IT WAS NOT AT ALL NECESSARY FOR M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. TO TAKE AN UNDERTAKING FROM THE ASSESSEE FOR FULFILLING HER OB LIGATIONS WITHOUT FURTHER MONETARY CLAIM. 9. THE LEARNED AR REFERRING TO THE DEPOSITION OF SH RI R.K. MITTAL AS WELL AS ASSESSEES SON SUBMITTED, THE STATEMENTS WO ULD CLEARLY REVEAL THAT THE TRANSACTION IS NOT COMPLETE AS BOTH SHRI R .K. MITTAL WAS LIVING WITH A HOPE THAT HE WOULD BE ABLE TO FULFILL THE TE RMS OF THE TRIPARTITE AGREEMENT AND COLLECT THE BALANCE CONSIDERATION AND THE ASSESSEE LOST HER HOPES AND WAS NOT IN A POSITION TO MEET FU RTHER EXPENSES ON LITIGATION. HENCE, SHE THOUGHT FIT NOT TO PRESS FOR THE BALANCE CONSIDERATION SO THAT THERE COULD BE NO REQUIREMENT OF SPENDING FURTHER. AS THE ASSESSEE WAS CONTINUING TO HAVE THE RISK OF REFUNDING THE ADVANCE RECEIVED BY HER SHE ENTERED INTO THE SU PPLEMENTARY AGREEMENT BY ENSURING THAT SHE DOES NOT HAVE TO REF UND THE AMOUNT ALREADY RECEIVED BY HER. FROM THE AFORESAID ATTENDI NG FACTS THE 15 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD PICTURE WHICH CAN BE VISUALIZED IS THAT THE TRANSAC TION IS NOT YET COMPLETE AND THE OBLIGATIONS ARISING OUT OF THE TRI PARTITE AGREEMENT IS STILL CONTINUING. THE LEARNED AR IN SUPPORT OF THE CONTENTION, RELIED ON A DECISION OF THE HONBLE SUPREME COURT IN CASE OF KALIA PERUMAL VS. RAJAGOPAL AND ANR. CIVIL APPEAL NO. 5800 OF 2002 WH EREIN IT WAS HELD THAT IN THE EVENT OF NON-PAYMENT OF PRICE THE REMED Y OF VENDOR IS ONLY TO SUE FOR THE BALANCE PRICE. HE CANNOT AVOID THE S ALE. HE IS ENTITLED TO CHARGE UPON THE PROPERTY FOR THE UNPAID PART OF THE SALE PRICE WHERE THE OWNERSHIP OF THE PROPERTY IS PASSED TO TH E BUYER BEFORE THE PAYMENT OF THE PRICE U/S 55(4)(B) OF THE T.P. ACT. THE COURT FURTHER HELD THAT TITLE IN FACT DID NOT PASS EITHER ON EXEC UTION OR REGISTRATION OF THE SALE DEED. RELYING ON THE SAID OBSERVATION OF T HE HONBLE SUPREME COURT, THE LEARNED AR SUBMITTED THAT MERE R EGISTRATION OF THE SALE DEED ALWAYS DO NOT CONTEMPLATE A COMPLETIO N OF SALE. SOMETIMES THE PARTIES MAY INTEND THAT SALE IS COMPL ETE ONLY ON PAYMENT OF FULL PRICE AND SOMETIMES THE PARTIES MAY INTEND THAT SALE IS COMPLETE ONLY ON HANDING OVER OF VACANT POSSESSI ON. IN THE CASE OF THE ASSESSEE AS PER THE TERMS OF THE TRIPARTITE AGR EEMENT HANDING OVER THE VACANT POSSESSION OF THE LAND IS THE LAST STEP WHEN THE SALE WOULD BE TREATED AS COMPLETE AND FINAL CONSIDERATIO N IS TO BE DETERMINED ON THE BASIS OF THE LAND FOUND ON THE GR OUND. THEREFORE, UNDER NO CIRCUMSTANCES, THE TRANSACTION IS TREATED TO BE COMPLETE IN ALL RESPECT SO AS TO ASSESS THE INCOME IN THE IMPUG NED THE AY. THE LEARNED AR SUBMITTED THAT WHEN THE SALE IS INCOMPLE TE AND THE POSSESSION COULD NOT BE DELIVERED, THERE IS A STATU TORY LIABILITY TO REFUND THE ADVANCE RECEIVED, THUS, THE ADVANCE RECE IVED TAKES THE CHARACTER OF A LIABILITY AND FOR THIS LOAN THE BUYE R WOULD HAVE EVEN A CHARGE OVER THE PROPERTY. IN CASE OF THE ASSESSEE, IT WAS OBLIGATORY ON HER PART TO HAND OVER THE VACANT POSSESSION TO M /S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. HOWEVER, AS THE ASS ESSEE FAILED TO DO SO THE SALE REMAINED INCOMPLETE AND ASSESSEE WAS UN DER LEGAL OBLIGATION TO REFUND THE ADVANCE RECEIVED TO M/S FO RTUNA INFRASTRUCTURE INDIA PVT. LTD. ALTERNATIVELY, IT W AS CONTENDED BY THE 16 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD LEARNED AR THAT EVEN ASSUMING THAT A FINAL SETTLEME NT HAS TO BE INFERRED FROM THE SUPPLEMENTARY DEED, INCOME IF ANY ACCRUES ONLY ON THE DATE OF ARRIVING AT SUCH SETTLEMENT AND NOT BEF ORE. THEREFORE, THE QUESTION OF ACCRUAL OF INCOME TO THE ASSESSEE WILL NOT ARISE TILL AY 2011-12. SO FAR AS THE ASSESSMENT OF THE INCOME UND ER THE HEAD BUSINESS, THE LEARNED AR SUBMITTED, ASSESSEE IS A LADY OF 65 YEARS AND HER ONLY SOURCES OF INCOME ARE FAMILY PENSION A ND AGRICULTURAL INCOME. ASSESSEE NEVER CARRIED OUT ANY BUSINESS TRA NSACTION IN HER LIFE. IT WAS SUBMITTED, THOUGH, THE ASSESSEE ACQUIR ED FEW PROPERTIES FROM TIME TO TIME BUT NEVER SOLD ANY PROPERTY EXCEP T LAND TO THE EXTENT OF 1000 SQ.YDS SOLD IN 2004-05. THE ONLY INT ENTION FOR PURCHASING THE DISPUTED PROPERTY IS WHEN THE LITIGA TION OVER THE PROPERTY IS CLEARED A PART OF THE PROPERTY CAN BE S OLD FOR A HIGHER PRICE AND A PART OF THE PROPERTY CAN BE SETTLED FOR HER GRAND CHILDREN. FURTHER, IT WAS SUBMITTED THE ASSESSEE AFTER ENTERI NG INTO THE AGREEMENT OF SALE-CUM-GPA IN THE YEAR 2002, HAS HEL D ON TO THE SAME FOR A PERIOD OF FIVE YEARS TILL SHE ENTERED IN TO THE TRIPARTITE AGREEMENT IN OCTOBER, 2007. THEREFORE, THE TRANSACT ION CANNOT BE TERMED AS AN ADVENTURE IN THE NATURE OF TRADE. IN S UPPORT OF SUCH CONTENTION, THE LEARNED AR RELIED UPON THE FOLLOWIN G DECISIONS: 1. CIT VS. SAIRAM 242 ITR 104 2. DEEP CHANDRA AND CO. VS. CIT 107 ITR 716 10. DEVELOPING HIS ARGUMENT FURTHER, THE LEARNED AR SUBMITTED THAT IN THE EVENT THE TRANSACTION IS NOT TO BE CONSIDERE D AS ADVENTURE IN THE NATURE OF TRADE, THE NEXT ISSUE WHICH WILL ARIS E FOR CONSIDERATION IS WHETHER THERE IS ANY CAPITAL ASSET. THE LEARNED AR SUBMITTED THAT THE ASSESSEE NEVER ACQUIRED ANY CAPITAL ASSET. THOUGH S HE INTENDED TO ACQUIRE A PIECE OF LAND BUT WHAT SHE REALLY POSSESS ED ON THE DATE OF TRIPARTITE AGREEMENT WAS ONLY A RIGHT TO SUE FOR SP ECIFIC PERFORMANCE. THIS RIGHT TO SUE FOR SPECIFIC PERFORMANCE IS NOT A CAPITAL ASSET, HENCE, THE PROFIT IF ANY THAT CAN BE SAID TO HAVE A CCRUED ON SUCH RIGHT, CANNOT BE CONSIDERED AS INCOME. FURTHER, IT WAS SUBMITTED THAT 17 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ASSESSEE DID NOT INCUR ANY COST TO ACQUIRE ANY RIGH T TO SUE FOR SPECIFIC PERFORMANCE. WHAT SHE HAS PAID IS ONLY AN ADVANCE F OR PURCHASE OF PROPERTY WHICH WOULD HAVE GOT ADJUSTED AGAINST THE SALE PRICE IF THE PROPERTY WAS ULTIMATELY PURCHASED. AS NO SEPARATE CONSIDERATION WAS PAID BY THE ASSESSEE TO ACQUIRE CAPITAL ASSET THERE IS NO COST OF ACQUISITION TO THE ASSESSEE. THERE BEING NO COST OF ACQUISITION COMPUTATION OF CAPITAL GAIN WOULD FAIL. IN SUPPORT OF SUCH CONTENTION THE LEARNED AR RELIED UPON IN CASE OF B.C. SRINVAS SHETTY 194 ITR 294 (SC). 11. THE LEARNED DR SHRI K.V.N. CHARYA ON THE OTHER HAND STRONGLY RELYING UPON THE CONCLUSION OF THE AO AS WELL AS CI T(A) SUBMITTED THAT SHRI R.K. MITTAL WAS NEITHER THE OWNER NOR WAS IN POSSESSION OF THE LAND. HE IS ONLY HAVING A DECRETAL RIGHT OVER T HE SUBJECT PROPERTY. IT WAS SUBMITTED THAT AS PER THE TERMS OF THE TRIPA RTITE AGREEMENT SHRI R.K. MITTALS OBLIGATION REMAINS WHEREAS ASSESSEE W HO ENTERED AS A NOMINEE IN PLACE OF SHRI R.K. MITTAL UNDER THE AGRE EMENT OF SALE-CUM- GPA DATED 10/10/02 HAS EXITED BY TRANSFERRING HER N OMINEE RIGHTS TO M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. AFTER RE CEIPT OF CERTAIN CONSIDERATION. ONCE THE ASSESSEE IS OUT OF THE TRAN SACTION THERE IS NO OBLIGATION ON THE ASSESSEE. WHATEVER OBLIGATION IS THERE REMAINS WITH SHRI R.K. MITTAL AS HE WAS HOLDING THE DECRETAL RIG HTS. IT WAS SUBMITTED THAT THE ASSESSEE WAS HAVING LIMITED ROLE TO PLAY AS SHE ENTERED INTO THE TRANSACTION WITH SHRI R.K. MITTAL AS A NOMINEE AND IN THE TRIPARTITE AGREEMENT M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. SUBSTITUTED THE ASSESSEE AS A NOMINEE FOR A CONSIDE RATION. THEREFORE, SO FAR AS ASSESSEE IS CONCERNED, THE TRANSACTION IS COMPLETE IN ALL RESPECTS AFTER ENTERING INTO THE TRIPARTITE AGREEME NT DATED 12/11/07 AND THE REGISTERED SALE DEED DATED 17/11/07. THERE FORE, THE MONEY RECEIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR 2 007-08 RELEVANT TO THE AY UNDER DISPUTE ACCRUES AS INCOME. SO FAR A S TREATING THE INCOME AS ADVENTURE IN NATURE OF TRADE, THE LEARNED DR REFERRING TO THE DEPOSITIONS OF ASSESSEE AND HER SON AT PAGE 192 AND 198 OF THE 18 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD PAPER BOOK, SUBMITTED THAT THE INTENTIONS OF THE AS SESSEE FROM THE STATEMENT IS CLEAR. THE MODUS OPERANDI OF THE ASSES SEE IS SHE ENTERS INTO TRANSACTION FOR PURCHASE OF DISPUTED PROPERTIE S BY PAYING VERY NOMINAL SUM AND THEREAFTER SCOUTS FOR INTENDING PUR CHASERS TO SELL THEM AT HECTIC PRICE BY CLEARING LITIGATIONS THROUG H COURT FOR DERIVING MAXIMUM PROFIT BY TAKING ADVANTAGE OF THE PROFESSIO NAL ACUMEN/ASSISTANCE OF HER DAUGHTER WHO IS A PRACTICI NG CIVIL ADVOCATE. THE LEARNED DR SUBMITTED THAT NO PRUDENT PERSON HAV ING AN INTENTION TO INVEST IN PROPERTY COULD TAKE THE RISK OF ENTERI NG INTO TRANSACTION IN RESPECT OF DISPUTED/LITIGATED PROPERTY. IT WAS THUS SUBMITTED THAT THE INTENTION OF THE ASSESSEE IN PURCHASING DISPUTED PR OPERTY BY INVESTING A NOMINAL AMOUNT AND DERIVING MAXIMUM PROFIT ON SEL LING HER RIGHTS ITSELF IS ENOUGH TO CONCLUDE THAT THE ACTIVITY CARR IED ON BY THE ASSESSEE IS AN ADVENTURE IN THE NATURE OF TRADE. IT WAS, THEREFORE, SUBMITTED THAT THE AMOUNT HAS BEEN RIGHTLY ASSESSED AS INCOME FROM BUSINESS. 12. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE DO CUMENTS SUBMITTED IN THE PAPER BOOK. WE HAVE ALSO CAREFULLY GONE THRO UGH THE DECISIONS RELIED UPON BY THE PARTIES BEFORE US. AT THE OUTSET , WE CONSIDER IT APPROPRIATE TO OBSERVE, THERE CANNOT BE ANY DISPUTE WITH REGARD TO TAXABILITY OF THE AMOUNT RECEIVED BY THE ASSESSEE F ROM M/S FORTUNA INFRASTRUCTURES INDIA PVT. LTD. UNDER THE INCOME-TA X ACT. WE HAVE COME TO SUCH CONCLUSION IN VIEW OF THE CATEGORICAL AND UNEQUIVOCAL SUBMISSIONS OF THE ASSESSEE IN LETTER DATED 15/10/2 010 BEFORE THE AO IN COURSE OF THE ASSESSMENT PROCEEDING. THE RELEVAN T PORTION FROM THE LETTER, A COPY OF WHICH IS PLACED AT PAGE 187 O F ASSESSEES PAPER BOOK, IS REPRODUCED HEREUNDER FOR THE SAKE OF CONVE NIENCE: 13. IT IS SUBMITTED THAT WITH THE EXECUTION OF THE SUPPLEMENTARY AGREEMENT IN THIS FINANCIAL YEAR, I B ECAME ENTITLED TO LEGALLY APPROPRIATE THE AMOUNTS PAID TO ME EARLIER WITHOUT THE FEAR OF THE POSSIBILITY OF BEING REQUIR ED TO RETURN THE SAME. IN OTHER WORDS I BECAME ABSOLUTELY AND FULLY ENTITLED WITH 19 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD COMPLETE RIGHTS TO THE AMOUNTS PAID EARLIER AND THE NET GAIN ASSESSABLE U/S 45 IS AS UNDER: ACTUAL AMOUNT RECEIVED 5,40,00,000 LESS: AMOUNTS PAID TO SRI RK MITTAL 2,00,00,000 AMOUNTS PAID TO SRI KUMAR SWAMY 25,00,000 AMOUNT RETURNED 50,00,000 2,75,00,000 ACTUAL GAIN 2,65,00,000 14. WITH THE EXECUTION OF THE SUPPLEMENTARY AGREEME NT MODIFYING THE TRIPARTITE AGREEMENT, IT IS SUBMITTED THAT MY ORIGINAL PLEA THAT THERE WAS NO COST OF ACQUISITION NO LONGER HOLDS GOOD IN THE CHANGED CIRCUMSTANCES. HOWEVER, I N VIEW OF THE SETTLEMENT OF THE DIFFERENCES OF OPINION AND TH E DISPUTES, AS FAR AS I AM CONCERNED. I HUMBLY SUBMIT THAT THE GAI N OF RS. 2,65,00,000 IS ASSESSABLE FOR THE CURRENT FINANCIA L YEAR RELEVANT TO THE ASSESSMENT YEAR 2011-12 AND I SHALL PAY THE TAX PAYABLE BEFORE THE END OF THIS FINANCIAL YEAR. FROM THE AFORESAID EXTRACTED PORTION, IT BECOMES AB SOLUTELY CLEAR, ASSESSEE ACCEPTS THAT AMOUNT RECEIVED BY HER IS TAX ABLE THOUGH NOT IN AY 2008-09 BUT IN AY 2011-12. OF COURSE IT IS A DIFFERENT ISSUE, ASSESSEE DID NOT DECLARE THE INCOME EVEN IN THE ASS ESSMENT YEAR 2011-12. THEREFORE, THE ISSUES WHICH ARISE FOR OUR CONSIDERATION ARE THE FOLLOWING: A) YEAR OF TAXABILITY B) APPROPRIATE HEAD UNDER WHICH IT IS TO BE TAXED A) YEAR OF TAXABILITY: I) THE BASIC GROUND ON WHICH THE ASSESSEE HAS CLAIM ED THAT THE AMOUNT IS NOT TAXABLE IN THE IMPUGNED ASSESSMENT YE AR IS, THERE IS NO ACCRUAL OF INCOME AS THE TRANSACTION WAS NOT COMPLE TE IN ALL RESPECTS AND WHICH BECAME COMPLETE ONLY ON EXECUTION OF THE SUPPLEMENTARY AGREEMENT DATED 10/04/10. FURTHER, IT IS THE CONTEN TION OF THE ASSESSEE, AS THE OBLIGATIONS OF THE ASSESSEE UNDER THE TRIPARTITE AGREEMENT IS NOT FULFILLED IN THE IMPUGNED AY AND T HE CONSIDERATION RECEIVABLE BY THE ASSESSEE UNDER THE TRIPARTITE AGR EEMENT WAS ALSO NOT RECEIVED, IT CANNOT BE SAID THAT THE TRANSACTIO N WAS COMPLETE IN ALL RESPECTS. THEREFORE, WHATEVER AMOUNT THE ASSESSEE H AS RECEIVED FROM M/S FORTUNA INFRASTRUCTURES INDIA PVT. LTD. HA S TO BE TREATED AS ADVANCE ONLY. AFTER CAREFUL CONSIDERATION OF THE SU BMISSIONS OF THE 20 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD LEARNED AR IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD AND PARTICULARLY ON GOING THROUGH THE TERMS OF THE THRE E AGREEMENTS, I.E., AGREEMENT OF SALE-CUM-GPA DATED 10/10/02, TRIPARTIT E AGREEMENT DATED 12/11/07, REGISTERED SALE DEED DATED 17/11/07 , WE ARE OF THE VIEW THAT ASSESSEES CLAIM THAT THERE IS NO ACCRUAL OF INCOME IN THE IMPUGNED ASSESSMENT YEAR IS DEVOID OF MERIT FOR THE REASONS MENTIONED HEREINAFTER. A) AS WOULD BE EVIDENT FROM THE FACTS AND MATERIALS ON RECORD AS WELL AS AGREEMENT OF SALE-CUM-GPA DATED 10/10/02 BE TWEEN SHRI R.K. MITTAL AND THE ASSESSEE, SHRI R.K. MITTAL ORIG INALLY ENTERED INTO AN AGREEMENT OF SALE WITH A NUMBER OF PERSONS WHO A RE OWNERS OF LAND ADMEASURING ACRES 14.39 GUNTAS AT SOMAJIGUDA, HYDERABAD UNDER OLD SURVEY NO. 227 CORRESPONDING NEW SURVEY N OS. 23, 24, 25 AND 20/1 TO 4. AS THE VENDORS WERE NOT ABLE TO FINA LISE THE SALE IN FAVOUR OF SHRI R.K. MITTAL EVEN AFTER RECEIVING A M AJOR PORTION OF SALE CONSIDERATION, SHRI R.K. MITTAL FILED A SUIT IN THE CIVIL COURT REGISTERED AS OS NO. 1402/1996 FOR SPECIFIC PERFORMANCE AND AL SO OBTAINED A DECREE IN HIS FAVOUR. HOWEVER, SINCE SHRI R.K. MITT AL WAS NOT ABLE TO OBTAIN POSSESSION OVER THE PROPERTY, HE FILED EXECU TION PETITION FOR EXECUTING THE DECREE. THUS, SHRI R.K. MITTAL WAS NO T HAVING ANY PHYSICAL POSSESSION OVER THE PROPERTY. WHEN THE MAT TER STOOD LIKE THIS, THE ASSESSEE ENTERED INTO AN AGREEMENT OF SAL E-CUM-GPA 0N 10/10/10 WITH SHRI R.K. MITTAL FOR PURCHASE OF ACR E 1.96 GUNTA (9506 SQ.YDS.) OUT OF ACRES 14.39 GUNTAS OF THE SCHEDULED PROPERTY FOR AN AGREED CONSIDERATION OF RS. 28,100/- PER SQ.YD. AND PAID AN ADVANCE OF RS. 50,000/- TO SHRI R.K. MITTAL. HOWEVER, AS IT APPEARS FROM THE FACTS ON RECORD NOTHING HAPPENED TILL THE YEAR 2007 . SUBSEQUENTLY, ON 12/11/07, THE ASSESSEE, SHRI KVV PRASAD AND SHRI R.K. MITTAL ENTERED INTO A TRIPARTITE AGREEMENT WITH M/S FORTUN A INFRASTRUCTURE INDIA PVT. LTD. RELINQUISHING THEIR RIGHTS OVER THE PROPERTY IN FAVOUR OF M/S M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. FOR A CONSIDERATION. AS PER THE TERMS OF THE TRIPARTITE AGREEMENT SHRI R.K. MITTAL WAS TO BE 21 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD PAID CONSIDERATION @ RS. 28,100 PER SQ.YD. TOTALING TO RS. 53,42,65,300 WHEREAS THE ASSESSEE AND SHRI KVV PRA SAD WERE TO BE PAID @ RS. 15,100 PER SQ.YD AMOUNTING TO RS. 30,23, 06,700 TOWARDS EXTENT OF LAND ADMEASURING 19013 SQ.YDS. OUT OF THE TOTAL LAND OF 14.39 GUNTAS FOR WHICH SHRI R.K. MITTAL WAS HOLDING A DECREE. IN FACT AT THE TIME OF EXECUTION OF THE AFORESAID TRIPARTIT E AGREEMENT, THE ASSESSEE AND SHRI KVV PRASAD HAD ALREADY RECEIVED A N AMOUNT OF RS. 11,30,00,000 OUT OF WHICH ASSESSEES SHARE IS R S. 5.40 CRORES. ON EXECUTION OF THE AFORESAID TRIPARTITE AGREEMENT THE ASSESSEE AND SHRI KVV PRASAD TRANSFERRED THEIR NOMINEE RIGHTS IN FAVOUR OF M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. AND TO GIVE EFFECT TO THE SAID TRIPARTITE AGREEMENT THEY ALSO TOOK STEPS FOR SUBST ITUTING M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. IN THEIR PLACE IN TH E EXECUTION PETITION PENDING BEFORE THE CIVIL COURT. THEREFORE, ON READI NG OF THE AGREEMENT OF SALE-CUM-GPA DATED 10/10/02 AND TRIPARTITE AGREE MENT DATED 12/11/07 IT BECOMES CLEAR THAT EVEN SHRI R.K. MITTA L DID NOT HAVE PHYSICAL POSSESSION OVER THE PROPERTY EITHER AT THE TIME OF ENTERING INTO THE SAID AGREEMENT OR EVEN AT THE TIME OF TRIP ARTITE AGREEMENT. WHAT SHRI R.K. MITTAL WAS HAVING IS A DECREE OF CI VIL COURT IN HIS FAVOUR. BY ENTERING INTO THE AGREEMENT OF SALE-CUM- GPA THE ASSESSEE AND SHRI KVV PRASAD GOT THEMSELVES SUBSTITUTED AS N OMINEE OF SHRI R.K. MITTAL IN THE EXECUTION PETITION PENDING IN TH E CIVIL COURT. HOWEVER, BY VIRTUE OF THE TRIPARTITE AGREEMENT THE ASSESSEE AND KVV PRASAD GAVE UP THEIR NOMINEE RIGHTS FOR A CONSIDERA TION BY ALLOWING M/S FORTUNA INFRASTRUCTURES INDIA PVT. LTD. TO BE S UBSTITUTED AS A NOMINEE IN THEIR PLACE IN THE EXECUTION PETITION PE NDING IN THE CIVIL COURT. THAT IS THE REASON WHY NEITHER THE ASSESSEE NOR KVV PRASAD ARE PARTIES TO THE SALE DEED EXECUTED IN FAVOUR OF M/S FORTUNA INFRASTRUCTURES INDIA PVT. LTD. THROUGH THE CIVIL C OURT ON 17/11/07. THOUGH, SHRI R.K. MITTAL BEING THE ORIGINAL DECREE HOLDER IS A PARTY TO THE SALE DEED. THEREFORE, A CONJOINT READING OF THE AGREEMENT OF SALE- CUM-GPA DATED 10/10/02, TRIPARTITE AGREEMENT DATED 12/11/07 AND REGISTERED SALE DEED DATED 17/11/07 EXECUTED THROUG H THE COURT WOULD 22 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD MAKE IT AMPLY CLEAR THAT ON THE DATE OF EXECUTION O F TRIPARTITE AGREEMENT, THE TRANSACTION RELATING TO TRANSFER OF RIGHT BY THE ASSESSEE IN FAVOUR OF M/S FORTUNA INFRASTRUCTURES I NDIA PVT. LTD. IS COMPLETE. THE ASSESSEE AND SHRI KVV PRASAD HAVING GIVEN UP THEIR NOMINEE RIGHTS AS PER THE TERMS OF TRIPARTITE AGREE MENT THEY WERE NOT REQUIRED OR IN ANY WAY CONCERNED WITH THE SALE DEED TRANSFERRING THE RIGHTS OVER THE PROPERTY IN FAVOUR OF M/S FORTUNA I NFRASTRUCTURES INDIA PVT. LTD. THOUGH OF COURSE THE SAID SALE DEED HAS A LIMITED REFERENCE TO ASSESSEE AND SHRI KVV PRASAD RELATING TO THEIR N OMINEE RIGHTS. AT THIS STAGE, IT WILL BE NECESSARY TO LOOK INTO SOME OF THE TERMS OF THE TRIPARTITE AGREEMENT. AS CAN BE SEEN FROM THE CLAUS E (A)(V) OF THE TRIPARTITE AGREEMENT, M/S FORTUNA INFRASTRUCTURE IN DIA PVT. LTD. AFTER EXECUTING THE SALE DEED IN ITS FAVOUR HAS TO TAKE A LL STEPS FOR TAKING POSSESSION OF THE PROPERTY THROUGH COURT BY FILING APPROPRIATE APPLICATION AND THE SECOND PARTY I.E. SHRI R.K. MIT TAL HAS NO OBLIGATION WITH REGARD TO DELIVERY OF POSSESSION IN FAVOUR OF M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. IT IS FURTHER EVIDEN T THAT ON THE DATE OF THE TRIPARTITE AGREEMENT ASSESSEE AND KVV PRASAD HA VE ALREADY BEEN PAID AN AMOUNT OF RS. 11,30,00,000 AND AS PER THE T ERMS OF THE AGREEMENT THE BALANCE CONSIDERATION OF 23,43,06,700 WERE TO BE PAID TO THE ASSESSEE AND SHRI KVV PRASAD IN TWO INSTALME NTS AFTER HAPPENING OF THE FOLLOWING EVENTS: 1. 1 ST INSTALMENT AFTER 120 DAYS OF THE DATE OF REGISTRAT ION OF SALE DEED. 2. 2 ND INSTALMENT AFTER RECORDING OF DELIVERY POSSESSION BY THE COURT. B) APART FROM TRANSFERRING THEIR NOMINEE RIGHTS UND ER THE TRIPARTITE AGREEMENT, THE ONLY OTHER OBLIGATION OF THE ASSESSE E AND SHRI KVV PRASAD IS TO TAKE STEPS FOR NOMINATION OF M/S FORTU NA INFRASTRUCTURE INDIA PVT. LTD. IN THE RECORDS OF EP NO. 155/02 IN OS NO. 1402/1996 ON THE FILE OF SR. CIVIL JUDGE, CITY CIVIL COURT, H YDERABAD AND FURTHER CAUSE THE EXECUTION OF THE SALE DEED UNDER REGISTRA TION BY THE CIVIL COURT. THERE IS NO CONDITION IMPOSED UPON ASSESSEE S UNDER THE 23 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD TRIPARTITE AGREEMENT TO REFUND THE AMOUNT ALREADY R ECEIVED BY THEM TO M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. UNDER AN Y CIRCUMSTANCES. THEREFORE, AS CAN BE SEEN FROM THE FACTS ON RECORD NOT ONLY M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. HAS BEEN NOM INATED BY THE ASSESSEE AND SHRI KVV PRASAD AS PER THE TERMS OF TH E TRIPARTITE AGREEMENT BUT REGISTERED SALE DEED THROUGH THE COUR T HAS ALSO BEEN EXECUTED IN FAVOUR OF M/S FORTUNA INFRASTRUCTURE IN DIA PVT. LTD. ON 17/11/07. THUS, THE TRANSACTION IS COMPLETE IN SO FAR AS THE ASSESSEE AND SHRI KVV PRASAD ARE CONCERNED AS NOT ONLY THEY HAVE BEEN PAID CONSIDERATION BUT THEY HAVE ALSO PERFORMED THEIR PA RT OF THE OBLIGATION AS PER THE TRIPARTITE AGREEMENT. SO FAR AS DELIVERY OF POSSESSION OF THE PROPERTY IS CONCERNED, AS PER TRIPARTITE AGREEM ENT AND REGISTERED SALE DEED NEITHER THE ASSESSEE NOR SHRI KVV PRASAD HAVE ANY OBLIGATION TO ENSURE DELIVERY OF POSSESSION OF THE PROPERTY IN FAVOUR OF M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. IN THE A FORESAID VIEW OF THE MATTER, THE TRANSACTION IS COMPLETE IN ALL RESPECTS IN SO FAR AS ASSESSEE IS CONCERNED ON EXECUTION OF THE TRIPARTIT E AGREEMENT ON 12/11/07. AS THE ASSESSEE HAS RECEIVED THE CONSIDE RATION ON THE DATE OF EXECUTION OF THE TRIPARTITE AGREEMENT THE I NCOME ACCRUES TO THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. THE F ACT THAT THE ASSESSEE HAS GIVEN UP THE BALANCE PORTION OF THE CO NSIDERATION TO BE RECEIVED BY HER AS PER THE SUPPLEMENTARY AGREEMENT DATED 10/04/10 WILL NOT BE A FACTOR TO INFER THAT THE TRANSACTION WAS NOT COMPLETE TILL THAT DATE. WHAT THE ASSESSEES UNDER THE AGREEMENT D ATED 10/04/10 HAVE DONE IS THEY HAVE GIVEN UP THEIR RIGHT TO RECE IVE THE BALANCE PORTION OF THE CONSIDERATION AS PER TRIPARTITE AGRE EMENT DATED 12/11/07. THIS IS NOTHING MORE THAN A MUTUAL ARRANG EMENT BETWEEN THE PARTIES AND WILL HAVE NO IMPACT ON THE ACCRUAL OF INCOME AS PER THE TRIPARTITE AGREEMENT. IN OUR VIEW, THOUGH, AS P ER THE TERMS OF THE TRIPARTITE AGREEMENT THE AMOUNT OF RS. 11,30,00,000 ACCRUES TO THE ASSESSEE AS THE CONSIDERATION TO BE RECEIVED BY HER BUT THE AO IS FAIR AND REASONABLE ENOUGH TO ASSESS ACTUAL AMOUNT OF RS . 2,90,00,000 RECEIVED BY THE ASSESSEE BY APPLYING THE REAL INCOM E THEORY. SO FAR 24 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD AS DECISIONS RELIED UPON BY THE LEARNED AR ARE CONC ERNED, THOUGH, WE RESPECTFULLY AGREE TO THE PROPOSITION LAID THERE IN, HOWEVER, ON CAREFUL ANALYSIS OF THE FACTUAL ASPECT WE ARE OF TH E CONSIDERED VIEW THAT THEY ARE NOT APPLICABLE TO THE FACTS OF THE PR ESENT CASE. IN THE AFORESAID VIEW OF THE MATTER, WE HOLD THAT AO WAS C ORRECT IN ASSESSING THE AMOUNT OF RS. 2,90,00,000 AS INCOME O F THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. B) HEAD OF INCOME I) THE NEXT ISSUE ARISING FOR CONSIDERATION IS THE HEAD UNDER WHICH THE INCOME IS TO BE ASSESSED. WHILE THE AO HAS TREA TED THE TRANSACTION AS AN ADVENTURE IN THE NATURE OF TRADE AND ASSESSED IT AS BUSINESS INCOME, ASSESSEES CLAIM IS, IT IS TO BE T AXED AS CAPITAL GAIN. WE HAVE ALREADY OBSERVED HEREINBEFORE, THE V ENDOR SHRI R.K. MITTAL WITH WHOM THE ASSESSEE ENTERED INTO THE AGRE EMENT OF SALE- CUM-GPA WAS HIMSELF NEITHER THE OWNER OF THE PROPER TY NOR WAS IN PHYSICAL POSSESSION. WHAT SHRI R.K. MITTAL WAS HAVI NG IS A DECREE OF THE CIVIL COURT IN RESPECT OF THE SCHEDULED PROPERT Y ADMEASURING ACRE 14.39 GUNTAS AND HE HAS FILED A PETITION BEFORE THE CIVIL COURT FOR EXECUTION OF THE SAID DECREE. THE ASSESSEE HAD INTE NDED TO PURCHASE ACRE 1.96 GUNTAS (EQUALING TO 9506 SQ.YDS) OUT OF T HE TOTAL EXTENT OF LAND. THE ASSESSEE HERSELF HAS ADMITTED WHICH IS AL SO EVIDENT FROM OTHER FACTS AND MATERIAL AVAILABLE ON RECORD THE EX ACT NATURE OF LAND ON GROUND TO BE GIVEN TO THE ASSESSEE HAS NOT BEEN IDENTIFIED. THE ASSESSEE DOES NOT KNOW UNDER WHICH SURVEY NO. THE L AND GIVEN TO THE ASSESSEE IS SITUATED AS THE LAND HAS NOT BEEN MEASU RED AND SURVEYED. THEREFORE, WHEN THE ASSESSEE HERSELF IS N OT SURE ABOUT THE LAND ON GROUND IT CANNOT BE SAID THAT SHE HAS ACQUI RED A CAPITAL ASSET AS PER THE AGREEMENT OF SALE-CUM-GPA. WHAT THE ASSE SSEE HAS ACTUALLY ACQUIRED BY PAYING A NOMINAL PRICE OF RS. 50,000 IS RIGHT TO BE NOMINATED IN THE EXECUTION PETITION IN PLACE OF THE ASSESSEE IN EXCHANGE OF CONSIDERATION PROMISED TO SHRI R.K. MIT TAL. THE TRIPARTITE AGREEMENT ALSO MAKES IT CLEAR THAT THE ASSESSEE WAS ONLY HAVING 25 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD NOMINEE RIGHTS WHICH SHE TRANSFERRED TO M/S FORTUNA INFRASTRUCTURE INDIA PVT. LTD. FOR A CONSIDERATION. IN THESE CIRCU MSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE WAS HOLDING A CAPITAL ASS ET TRANSFER OF WHICH RESULTED IN CAPITAL GAIN. 13. THE NEXT IMPORTANT FACTOR WHICH CLINCHES THE IS SUE IS THE INTENTION OF THE ASSESSEE IN ENTERING INTO THE TRAN SACTION. AS CAN BE SEEN FROM THE FACTS ON RECORD, A STATEMENT WAS RECO RDED FROM THE ASSESSEE U/S 131 ON 16/10/10 IN COURSE OF THE ASSES SMENT PROCEEDING OF THE IMPUGNED AY. AS CAN BE SEEN FROM THE STATEMENTS, A COPY OF WHICH IS SUBMITTED IN ASSESSEES PAPER BO OK, WHEN A SPECIFIC QUESTION REGARDING THE MOVABLE AND IMMOVAB LE PROPERTY WAS ASKED THE ASSESSEE ANSWERED AS UNDER: I HAVE 3000 SQ.YDS LAND AT PARVATHIPURAM AND 3 ACRE S OF AGRICULTURAL LAND AT PARVATHIPURAM AND 5 ACRES OF M ANGO GARDENS AND ONE AND HALF ACRES OF WET LAND AT RAMAV ARAM NEAR VIJAYANAGARAM ABOUT 300 TO 400 SQ.YDS OF HUDA PLOT PURCHASED BY HUSBAND ROUGHLY IN 1985-86. I HAVE NOT SOLD ANY OF THE PROPERTIES EXCEPT LAND 1000 SQ.YDS. I HAVE S OLD LAND AT POTHINA MALLAYYAPALEM SOLD IN THE YEAR 2004 OR 05 O R FOR RS. 10,00,000 (APPROXIMATELY) AND THE ENTIRE AMOUNT IS INVESTED IN THE HYDERABAD LAND. I HAVE ALSO PURCHASED PROPERTIE S IN LITIGATION FOR MORE THAN RS. 1 CRORE IN 2009 OR 201 0. I HAVE PURCHASED PROPERTIES IN LITIGATION BECAUSE THEY ARE AVAILABLE FOR A PRICE LESSER THAN THE MARKET PRICE. MY DAUGHTER B EING AN ADVOCATE WILL ATTEND TO THE LITIGATION AND WHEN THE LITIGATION IS CLEARED MY PROPERTIES WILL COMMAND GOOD PRICE AND C AN BE SOLD AT A HIGHER PRICE. BECAUSE MY ADVOCATE DAUGHTER IS LOOKING AFTER LITIGATION WITHOUT ANY PRICE, I AM ABLE TO TA KE RISK OF BUYING PROPERTIES IN LITIGATION. THE IDEA IS WHEN THE LITI GATION IS CLEARED, A PART OF THE PROPERTY CAN BE SOLD FOR A HIGHER PRI CE AND PART CAN BE SETTLED MY GRAND CHILDREN. AGAIN IN REPLY TO ANOTHER QUESTION, THE ASSESSEE RE PLIED AS UNDER: Q.7: CAN YOU IDENTIFY THE PERSONS FROM WHOM THE PRO PERTIES IN LITIGATION WERE PURCHASE IN VISAKHAPATNAM AND DID Y OU PAY THE MONEY DIRECTLY TO THEM AND PLEASE EXPLAIN THE MODE OF PAYMENT, AND THE EXACT AMOUNT. A: I HAVE ENTRUSTED EVERYTHING TO MY ADVOCATE DAUGH TER. THE TRANSACTIONS WERE ENTERED INTO BY MY DAUGHTER SMT. 26 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD MADHAVILATHA AND I PAID CASH TO MY DAUGHTER AND I G AVE A GENERAL POWER OF ATTORNEY TO MY DAUGHTER. I PAID AB OUT RS. 1 CRORE IN CASH AND I WILL FURNISH THE EXACT DETAILS IN DUE COURSE. SUBSEQUENTLY, WHEN THE ASSESSEE WAS AGAIN SUMMONED BY THE AO IN CONNECTION WITH THE ASSESSMENT PROCEEDING FOR THE I MPUGNED AY, SHE AUTHORIZED HER SON SHRI S.A. CHANDRAMOULI, WHO APPE ARED ON HER BEHALF AND STATED AS UNDER: ANS TO Q.7: IN THE YEAR 2007, MY MOTHER ENTERED INT O AN AGREEMENT ON 16/06/2007 FOR PURCHASE OF 434 ACRES O F AGRICULTURAL LAND FROM PEER JADA SHAQUE HUSSAIN AND OTHERS AT S. NO. 195/1 TD NOS. 3353, 3354, 3355 AND 3356 BAYY AVARAM VILLAGE, KASIMKOTA MANDAL, VISAKHAPATNAM DISTRICT. TOWARDS THIS SHE HAS MADE PAYMENT OF RS. 15 LAKHS THROUGH D D TAKEN FROM AXIS BANK, POOLPALLI ON 16/06/2007. SHE HAS AL SO MADE A CASH PAYMENT OF RS. 5,00,000/- ON 16/06/2007. THE T OTAL CONSIDERATION MENTIONED IN THE AGREEMENT IS RS. 6.5 CRORES. HOWEVER, THIS LAND IS NOT YET REGISTERED BECAUSE OF THE DISPUTE/LITIGATION PENDING BEFORE THE COURT. THE SE COND PROPERTY AGREEMENT WAS ENTERED INTO BETWEEN MY MOTHER SMT. S . CHINATALLI AND SHRI R. VENKATA RAO AND MAMIDI BALAR AM TOWARDS PURCHASE OF AGRICULTURAL LAND OF 94.49 ACRE S ( AT VARIOUS S.NOS. MENTIONED IN THE DOCUMENT) VELUPARTHI NEAR K OTHAVALASA NEAR VIJAYANAGARAM. TOWARDS THIS AGREEMENT, SHE HAD MADE PAYMENTS OF RS. 45 LAKHS ON VARIOUS DATES OF WHICH RS. 35 LAKHS WAS PAID BY CASH AND THE REMAINING RS. 10 LAC S WAS PAID THROUGH DD TAKEN FROM AXIS BANK, RAMNAGAR BRANCH, VISAKHAPATNAM. THIS PROPERTY IS ALSO NOT YET REGIST ERED BECAUSE OF DISPUTE/LITIGATION PENDING BEFORE THE CO URT. IN THE YEAR 2007, MY MOTHER SMT. S. CHINATALLI HAS ENTERED INTO A DEVELOPMENT AGREEMENT WITH SHRI SALAPALA RAMANUJULU AND OTHERS FOR CONSTRUCTION OF APARTMENTS AT S.NO. 9/1, 9/2 AND 9/4 AT MADHAVANDHARA, VISAKHAPATNAM AND PAID RS. 50 LAC S BY CASH IN JANUARY, 2008. THIS DEAL WAS ALSO FINALIZED DUE TO DISPUTE IN TITLE. THERE ARE TWO OTHER PROPERTIES WH ERE SHE ENTERED PURCHASE AGREEMENTS WITH DIFFERENT PARTIES, THE DETAILS OF WHICH WILL BE SUBMITTED SHORTLY. ANS. TO Q.8: SINCE THE MARGIN OF PROFIT IN THIS KIN D OF TRANSACTIONS IS MUCH MORE THAN REGULAR PROPERTY TRA NSACTIONS, SHE HAS PREFERRED TO ENTER INTO AGREEMENTS ONLY IN DISPUTED OR LITIGATION PROPERTIES. SHE HAD A TASTE/EXPERIENCE O F SUCCESS IN THE TRANSACTION OF DISPUTED LAND PURCHASE ADMEASURI NG 9506 SQ.YDS WITH R.K. MITTAL AND TC ASHOK AND OTHERS AT HYDERABAD SUBSEQUENTLY SHE HAS PREFERRED ONLY SUCH KIND OF TR ANSACTIONS IN ORDER TO ENJOY MORE PROFITS. 27 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ANS. TO Q.11: MY NET WORTH WAS AROUND RS. 15,00,000 /- AS ON THE DATE OF AGREEMENT I.E. 10/10/12. SINCE WE ARE F ULLY AWARE OF THE FAT THAT IT IS RISK GAME AND WE WERE HOPEFUL OF A FAVOURABLE OUTCOME. WE WANTED TO RETAIN A SMALL PART OF THE LA ND AND DISPOSE OF THE REST FOR A HIGHER CONSIDERATION. ANS. TO Q.12: WE ENTERED INTO THIS TRANSACTION WITH A PROFIT MOTTO TAKING RISK. HOWEVER, AFTER LAPSE OF FIVE YEA RS, THE DISPUTE WAS NOT SETTLED AND WE WERE NOT HOPEFUL OF EARLY SE TTLEMENT. BECAUSE OF VARIOUS REASONS, AT THIS MOMENT, WE WERE APPROACHED BY MR. TC ASHOK TO BUY THIS PROPERTY. AT THAT JUNCTURE WE ENTERED INTO TRIPARTITE AGREEMENT (RK M ITTAL ON ONE PART (SELLER); KVV PRASAD AND CHINATALLI AND TJ PRA KASH ON THE ONE PART (SELLER); SHRI TC ASHOK OF FORTUNA INFRAST RUCTURE P LTD., HYDERABAD, ON THE ONE PART (BUYER). BY THIS AGREEME NT, WE HAVE TRANSFERRED OUR RIGHTS IN THE PROPERTY IN FAVO UR OF TC ASHOK FOR A CONSIDERATION OF RS. 30.23 CRORES TO MY MOTHER AND KVV PRASAD. SUBSEQUENTLY, AFTER LAPSE OF 3 MORE YEA RS, STILL THE DISPUTE WAS NOT SETTLED, SINCE WE COULD NOT FULFIL THE OBLIGATIONS UNDER THE AGREEMENT, WE HAVE ENTERED INTO A SUPPLEM ENTARY AGREEMENT DATED 10/04/2010 FOR A TOTAL CONSIDERATIO N OF RS. 11,30,00,000/- WHICH WAS ALREADY PAID TO US BY SHRI TC ASHOK. THE CONSIDERATION WAS ALREADY PAID BY SHRI TC ASHOK BETWEEN AUGUST AND NOVEMBER, 2007. ANS TO Q.15: ORIGINALLY THE TRIPARTITE AGREEMENT WA S ENTERED WITH A HOPE TO CLEAR THE THEN EXISTING LITIGATION A ND HAND OVER THE PROPERTY. HOWEVER, SUBSEQUENT TO THE TRIPARTITE AGREEMENT, NEW CLAIMANTS HAVE ENTERED AND MADE THE SITUATION M ORE COMPLICATED. IN THE CIRCUMSTANCES, THERE WAS NO AMO UNTS FORTHCOMING FROM THE PURCHASES I.E. SHRI T.J. ASHOK AND WE ENVISAGED FURTHER EXPENDITURE FOR CLEARING THE LITI GATION, WE THOUGH IT PRUDENT TO EXIT FROM THE AGREEMENT WITH T HE AMOUNTS ALREADY PAID TO US. 14. ON GOING THROUGH THE STATEMENTS OF THE ASSESSEE AND HER SON EXTRACTED HEREIN ABOVE, THE INTENTION OF THE ASSESS EE BECOMES CLEAR. THE ASSESSEE ENTERS INTO TRANSACTION IN DISPUTED PR OPERTY BY PAYING A NOMINAL AMOUNT AND THEREAFTER SCOUTS FOR INTENDING BUYERS TO SELL IT AT A PREMIUM WITH AN INTENTION TO DERIVE MAXIMUM PROFI T. IT IS ALSO CLEAR THAT AS THE ASSESSEES DAUGHTER IS A PRACTICING ADV OCATE, SHE VENTURES INTO THIS KIND OF TRANSACTION WITH THE BEL IEF AND HOPE THAT HER DAUGHTER BEING AN ADVOCATE WILL TAKE CARE OF THE LI TIGATION AND WILL BE 28 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ABLE TO SALE THE PROPERTY AT A HIGHER PRICE. IN FAC T, IT WOULD NOT BE OUT OF PLACE TO MENTION HERE IT IS THE ASSESSEES DAUGH TER WHO IN FACT IS IN THE FOREFRONT OF ALL THE TRANSACTIONS WHICH WILL BE EVIDENT FROM THE FACT THAT SHE HAS ENTERED IN TO THE AGREEMENT OF SALE AS WELL AS THE TRIPARTITE OF AGREEMENT AS A POWER OF ATTORNEY HOLD ER OF THE ASSESSEE. IN THESE CIRCUMSTANCES, IT IS HARD TO BELIEVE THAT ACQUISITION OF PROPERTY BY THE ASSESSEE IS FOR INVESTMENT PURPOSE. IT IS BEYOND NORMAL HUMAN BEHAVIOR TO INVEST IN A DISPUTED/ LITI GATED PROPERTY AND THEREAFTER SPEND TIME, MONEY AND ENERGY TOWARDS SET TLEMENT OF THE DISPUTE. NO PRUDENT PERSON WOULD LIKE TO INVEST IN A DISPUTED PROPERTY PUTTING IN RISK HIS SAVINGS. AS IS CLEARLY EVIDENT FROM THE STATEMENTS OF THE ASSESSEE AND HER SON, TAKING ADVANTAGE OF THE F ACT THAT ASSESSEES DAUGHTER IS PRACTICING AS AN ADVOCATE, A SSESSEE KNOWINGLY AND PURPOSEFULLY ENTERS INTO TRANSACTION IN DISPUTED/LITIGATED PROPERTIES BY PAYING NEGLIGIBLE/ NOMINAL PRICE AND THEREAFTER SEARCHES FOR PROSPECTIVE BUYERS AND SELL IT AT HIGH PRICE THEREBY DERIVING MAXIMUM PROFIT FROM THE TRANSACTIO N. FURTHER, THE FACT THAT ASSESSEES DAUGHTER IS AN ADVOCATE, ALSO IS TO THE ADVANTAGE IN SECURING THE DEAL AND CLEARING THE LITIGATIONS. THEREFORE, THE MODUS OPERANDI OF THE ASSESSEE WOULD CLEARLY INDICATE THA T THE INTENTION OF THE ASSESSEE IS NOT TO ACQUIRE PROPERTIES FOR INVES TMENT PURPOSE BUT TO SECURE THE PROPERTY BY PAYING A NOMINAL AMOUNT A ND THEREAFTER SELL IT WITH HUGE PROFIT. THE CLAIM OF THE ASSESSEE THAT SHE INTENDED TO SECURE PROPERTY FOR HER GRAND CHILDREN IS NOT BELIE VABLE CONSIDERING THE OVERALL FACTUAL MATRIX OF THE CASE. FURTHER,HAD IT BEEN THE INTENTION OF THE ASSESSEE TO SECURE THE PROPERTY FOR HER GRAN D CHILDREN, SHE WOULD NOT HAVE SEARCHED FOR THE BUYER AND SOLD HER RIGHTS IN THE PROPERTY WITH A HEFTY SUM. AS CAN BE SEEN, WITH A M INIMUM INVESTMENT OF RS. 50000 THE ASSESSEE IN A MATTER OF FIVE YEARS HAS DERIVED A PROFIT OF RS. 2.90 CRORES. IN THESE CIRCU MSTANCES, WE ARE OF THE VIEW, THE REVENUE IS CORRECT IN TREATING THE AC TIVITY OF THE ASSESSEE AS AN ADVENTURE IN THE NATURE OF TRADE AND ASSESSING IT UNDER THE HEAD BUSINESS. ONE MORE FACTOR, WHICH C ANNOT BE IGNORED 29 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD IS, AS STATED HEREINBEFORE, DURING THE ASSESSMENT P ROCEEDING THE ASSESSEE HAS ADMITTED BEFORE THE AO THAT THE AMOUNT RECEIVED BY HER IS TAXABLE IN THE AY 2011-12 AND IN FACT HAS COMPUT ED THE CAPITAL GAIN AT RS. 2,65,00,000. HOWEVER, ASSESSEE HAS NOT SHOWN THE INCOME EVEN IN THE AY 2011-12 AS PROMISED BY HER. T HEREFORE, THE INTENTION OF THE ASSESSEE, AS APPEARS, IS NOT TO PA Y ANY TAX ON THE INCOME EARNED. ANOTHER FACTOR WHICH ASSUMES IMPORTA NCE IN DECIDING WHETHER THE ACTIVITY OF THE ASSESSEE IS AN ADVENTUR E IN THE NATURE OF TRADE IS, EVEN IN ABSENCE OF THE RESOURCES TO PAY T HE AMOUNT AS PER THE AGREEMENT OF SALE, SHE ENTERS INTO TRANSACTION WORTH CRORES OF RUPEES WITHOUT HAVING THE NET WORTH. CERTAINLY A PE RSON CANNOT THINK OF INVESTMENT IN ACQUIRING PROPERTY WITHOUT HAVING NECESSARY RESOURCES. THIS ITSELF REVEALS THE FACT THAT THE AS SESSEE WAS ENTERING INTO THE TRANSACTION NEVER WITH AN INTENTION TO KEE P IT AS INVESTMENT ONLY WITH A VIEW TO DERIVE PROFIT BY SELLING BUT IT A HIGHER PRICE. IN THE AFORESAID VIEW OF THE MATTER, WE UPHOLD THE VIEW OF THE AO IN ASSESSING THE RECEIPTS AS A BUSINESS INCOME. 15. AS WE HAVE HELD THAT THE RECEIPTS OF THE ASSESS EE IS TO BE ASSESSED AS BUSINESS INCOME, THE OTHER CONTENTIONS RAISED BY THE LEARNED AR RELATING TO COST OF ACQUISITION HAS BECO ME REDUNDANT AND DO NOT REQUIRE ADJUDICATION. 16. SO FAR AS GROUND NO. 3 & 4 RELATING TO DISALLOW ANCE OF PAYMENT OF COMMISSION TO SHRI M. KUMARSWAMY AMOUNTING TO RS . 25,00,000 AND DISALLOWANCE U/S 40A(3), WE HAVE TO OBSERVE THA T LEARNED AR NEITHER AT THE TIME OF HEARING NOR IN THE WRITTEN S UBMISSION HAS ADVANCED ANY SUBSTANTIVE ARGUMENT RELATING TO THE A FORESAID GROUNDS. EVEN OTHERWISE ALSO, WE ARE OF THE VIEW THAT AS THE ASSESSEE HAS NOT ESTABLISHED HER CLAIM WITH ADEQUATE EVIDENCE, THESE DISALLOWANCE ARE JUSTIFIED. 17. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. 30 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ITA NO. 25/V/2012 IN CASE OF SHRI K.V.V. PRASAD 18. THE FIRST ISSUE IN THIS APPEAL IS RELATING TO Y EAR OF TAXABILITY. AS FACTS RELATING TO THIS ISSUE IS MATERIALLY SAME AS THAT OF ITA NO. 24/V/12 IN CASE OF SMT. S. CHINATALLI (SUPRA) FOLLO WING OUR CONCLUSION VIDE PARA NO.11(A) , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 19. THE NEXT ISSUE IS RELATING TO TREATING THE RECE IPTS AS BUSINESS INCOME. FACTS IN THE PRESENT APPEAL ARE MORE OR LES S SIMILAR TO THE FACTS IN CASE OF SMT. S. CHNATALLI (SUPRA), IN THE PRESENT CASE ALSO ASSESSEES WIFE IS A PRACTICING ADVOCATE. FURTHER, FROM THE STATEMENT RECORDED FROM THE ASSESSEE ON 07/11/10, A COPY OF W HICH IS PLACED ON RECORD, IT APPEARS THAT THE ASSESSEE AS WELL AS HIS WIFE ALSO ENTERED IN TO TRANSACTION IN DISPUTED/LITIGATED PROPERTIES FOR DERIVING MAXIMUM PROFIT. IN THIS CONTEXT, WE REFER TO THE STATEMENT RECORDED FROM THE ASSESSEE EXTRACTED HEREUNDER: ANS. TO Q.13: THE PROPOSAL FOR PURCHASE OF LAND WAS BROUGHT TO MY WIFE THROUGH HER COUSIN SRI MUNTA BALAJI, PRIVAT E EMPLOYEE AT HYDERABAD SINCE 2000. THE SAID BALAJI GAVE THE I NFORMATION THAT THERE IS A DISPUTED LAND FOR SALE WITH R.K. MI TTAL FOR A LESSER PRICE. MY WIFE BEING AN ADVOCATE, WE VENTURED TO BU Y THIS LAND WITH THE HOPE THAT ONCE THE LITIGATION IS CLEARED, THE PROPERTY WILL COMMAND FOR BETTER PRICE, SO THAT THE VALUE OF INVE STMENT WILL GO UP ON THE ONE HAND. AS I SUBMITTED IN MY LETTER FILED ON 18/10/2010 I INTENDED TO RETAIN A PART OF THE LAND FOR MYSELF AND MY FAMILY AND THE REST TO BE SOLD HOPEFULLY FOR SOM E APPRECIATION AS AND WHEN THE DISPUTES WERE FINALLY RESOLVED. WITH THIS HOPE, WE TOOK THE RISK OF INVESTING OF AB OUT RS. 12 LAKHS INITIALLY. ANS. TO Q.17: SHRI T.J. PRAKASH PHONED UP MY WIFE A ND ENQUIRED ABOUT THE LAND. HE CALLED FOR A DISCUSSION . IN PURSUANCE, MY WIFE SMT. LAKSHMI DURGA WENT TO THE R ESIDENCE OF SRI T.J. PRAKASH WHICH WAS LOCATED HEAR SHANTINA GAR PARK, MASAB TANK, HYDERABAD, AROUND APRIL, 2007. THE DEAL WAS FINALIZED IN HIS RESIDENCE. WE AGREED FOR THE DEAL IN VIEW OF THE PROFITS INVOLVED, AND IN VIEW OF THE FACT THAT WE A RE NOT CAPABLE OF DEALING THE DISPUTE. 31 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD ANS. TO Q.19: NOT WITH THE ABOVE PERSONS. MY WIFE E NTERED INTO AGREEMENT OF PURCHASE OF DISPUTED LAND ADMEASURING 14 ACRES OF LAND AT S.NO. 44, GUTCHI BOWLI R.R. DIST., WITH MOHINUDDIN BURNI. I HAVE NO IDEA AS TO THE CONSIDERATION INVOL VED IN THE DEAL. THE LITIGATION IS GOING ON WITH THE GOVT. OF AP. THE SECOND DEAL IS AGAIN AN AGREEMENT OF PURCHASE OF DISPUTED LAND WITH SONU BAI OF HYDERABAD ADMEASURING 15 ACRES IN SURVE Y NO. 302, PUPPALAGUDA, RR DIST., HYDERABAD. THE AGREEMEN T IN RESPECT OF THE SECOND LAND WAS ENTERED INTO IN THE YEAR 2008 WITH SAID SONU BAI OF HYDERABAD. I HAVE NO IDEA OF THE CONSIDERATION INVOLVED. FROM THE AFORESAID STATEMENT OF THE ASSESSEE, IT BE COMES ABUNDANTLY CLEAR THAT LIKE SMT. S. CHINATALLI, THE PRESENT ASS ESSEE ALONG WITH HIS WIFE ALSO ENTERS INTO DEALING IN DISPUTED PROPERTIE S FOR DERIVING MAXIMUM PROFIT BY PAYING A NOMINAL PRICE. THEREFORE , FOR THE DETAILED REASON ON WHICH SIMILAR ISSUE WAS DECIDED IN CASE O F SMT. S. CHINATALLI HEREINBEFORE, WE UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING ASSESSMENT OF AMOUNT RECEIVED BY THE AS SESSEE AS BUSINESS INCOME. 20. SO FAR AS GROUNDS RELATING TO DISALLOWANCE U/S 40(A)(IA), 40A(3) AND MISCELLANEOUS EXPENDITURE, IN ABSENCE OF ANY VA LID ARGUMENT BY THE ASSESSEE SUPPORTED BY ADEQUATE EVIDENCE WE ARE NOT INCLINED TO INTERFERE WITH THE CONCLUSION DRAWN BY THE CIT(A) I N THIS REGARD. 21. IN THE RESULT BOTH THE APPEALS UNDER CONSIDERA TION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19/09/2014. SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 19 TH SEPTEMBER, 2014 KV 32 ITA NOS. 24 & 25/V/2012 SMT. S. CHINATALLI & SHRI K.V.V. PRASAD COPY TO:- 1) SMT. S. CHINATALLI, 9-16-37/2, GURURAJA ENCLAVE , CBM COMPOUND, VISAKHAPATNAM. 2) SHRI K.V.V. PRASAD, FLAT NO. 301, VYTLA RESIDEN CY, BALAJINAGAR, CBM COMPOUND, VISAKHAPATNAM 530 003. 3) THE ITO, WARD NO. 1, PALAKOL 4) CIT(A), VISAKHAPATNAM. 5) CIT-I, RAJAHMUNDRY 6) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T. VISAK HAPATNAM.