Shri Shailesh Gordhandas Patel, Valsad V. The Income Tax Officer, Ward-4, Valsad

ITA 2418/AHD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6188 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 23-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MAJUMDAR
• Keywords: Rejection of books of accounts; Gift; Business income; Business expenditure; Opportunity of being heard; Cost of acquisition
• Section: 131; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.2418/AHD/2016 (ASSESSMENT YEAR:2012-13) SH. SHAILESH GORDHANDAS PATEL BHAGWATI, MANINAGAR SOCIETY, TITHAL ROAD, VALSAD - 396001 APPELLANT VS. INCOME TAX OFFICER, WARD-4, VALSAD RESPO NDENT PAN: ABAPP0016E /BY ASSESSEE : MR. S. N. SOPARKAR WITH MR. RAJESH UPADHYAY, A.R. /BY REVENUE : MR. PRADEEP KUMAR MAJUMDAR, SR. D.R. /DATE OF HEARING : 22.03.2017 /DATE OF PRONOUNCEMENT : 21.04.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE CIT(A), VALSADS ORDER DATED 02.08.2016, PASSED IN APPEAL NO. CIT(A)/VLS/41/15-16, IN PROCEEDINGS U/S.143(3) OF T HE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 2 - 2. THE ASSESSEE PLEADS FOLLOWING SUBSTANTIVE GROUND S IN THE INSTANT APPEAL: 1. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPH ELD THE ACTION OF THE AO FOR REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) BECAUSE C LAIM OF EXPENDITURE BY APPELLANT WAS NOT SUPPORTED BY DOCUMENTARY EVIDENCE S AND PROVISION OF LAW. 2. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHE LD DISALLOWANCE OF RS.53,20,000/- BEING BUSINESS EXPENDITURE OF THE AP PELLANT WHO INDULGED INTO SALE AND PURCHASE OF LAND WITHOUT EXECUTING THE REGISTER SALE DEED AFTER ORIGINAL PURCHASE OF LAND AT RS.5,65,000/- IN F.Y. 2006-07. 3. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT NONE SUPPLY OF RECORDED STATEMENT OF THE APPELLANT AND VENDOR DOES NOT AMOUNT TO DENIAL OF REASONABLE OPPORTUNITY OF BEING HEARD WHEN SHOW CAU SE NOTICE WAS ISSUED AND IT'S REPLY WAS ACCEPTED BY THE AO PRIOR TO FINALIZE THE ASSESSMENT ORDER. 3. MR. SOPARKAR INFORMS US AT THE OUTSET THAT THE A SSESSEES SUBSTANTIVE GRIEVANCE WHICH CAN BE SUMMARIZED FROM ABOVE PLEADI NGS IS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN REJECTING HIS BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT THEREBY DISALLOWING PURCHASE COST OF RS.58. 85LACS OF THE LANDS SOLD IN THE IMPUGNED ASSESSMENT YEAR. 4. WE COME TO RELEVANT FACTS. THE ASSESSEE/AN INDI VIDUAL IS A VENDOR AND DEVELOPER. HE CARRIES HIS BUSINESS IN THE NAME AND STYLE OF M/S. NISHIT DEVELOPERS. HE DECLARED NET PROFIT OF RS.9,92,921/ - ON TOTAL TURNOVER OF RS.70.38LACS IN THE RELEVANT PREVIOUS YEAR. THE S AME COMPRISED OF BUSINESS INCOME OF RS.70.70LACS DERIVED FROM SALE OF LANDS. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE SOUGHT TO KNOW ABOUT THE SALE / PURCHASE DETAILS OF THE LAND PARCELS SOLD. DOCUMENTS COLLECTED FROM THE SU B-REGISTRAR, VALSAD REVEALED THAT THE ASSESSEE HAD PURCHASED THE SAID T HREE TRACTS OF LAND FOR RS.1.4LACS + RS.1.85LACS + RS.2.40LACS; AGGREGATING TO RS.5.65LACS. THE ASSESSEE ON THE OTHER HAND HAD TAKEN COST OF THE SA ID LAND AS RS.58.85LACS IN THE RELEVANT PREVIOUS YEAR. ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 3 - 5. WE PROCEED FURTHER TO NOTICE THAT THE ASSESSEE S OUGHT TO JUSTIFY THE ABOVE ENHANCED PURCHASE COST FROM RS.5.65LACS TO RS .58.85LACS BY PLEADING THAT HE HAD SOLD / TRANSFERRED THE LANDS IN QUESTIO N TO HIS NRI SISTER NAMELY BHARTIBEN PATEL ON 31.12.2006 FOR RS.39LACS. HE TH EREAFTER PLACED ON RECORD AN MOU DATED 30.12.2006 AS SUPPORTIVE EVIDENCE TO P ROVE THE FACT OF ABOVE TRANSFER TO HIS SISTER. THE ASSESSEE THEN STATED T O HAVE RE-PURCHASED THE VERY LAND ON 15.04.2011 FOR RS.58.85LACS BY WAY OF ANOTH ER MOU IN THE SAME TUNE. THE ASSESSING OFFICER DID NOT SUBSCRIBE TO T HE SAID EXPLANATION. HIS VIEW WAS THAT THE ASSESSEE ABOVE EXPLANATION TO HAV E TRANSFERRED THE LAND IN QUESTION IN ASSESSMENT YEAR 2007-08 WAS NOT LIABLE TO BE ACCEPTED AS HE HAD NOT OFFERED THE PROFITS ARISING THEREFROM AT THAT P OINT OF TIME. HE FURTHER REJECTED THE ASSESSEES TRANSFER AND RE-PURCHASE PL EA AFTER OBSERVING THAT THERE WAS NO REGISTRATION OF THE SAID TWO MOUS IN ORDER T O BUTTRESS ASSESSEES STAND. HE APPEARS TO HAVE DOUBTED THE ENTIRE EXPLA NATION BY CONCLUDING THAT THE SAME WAS AN ATTEMPT TO INFLATE THE COST OF ACQU ISITION IN ORDER TO MINIMIZE THE RESULTANT PROFIT OF THE REAL ESTATE BUSINESS. T HE ASSESSING OFFICER THEREFORE REJECTED ASSESSEES BOOKS AND DISALLOWED THE SUM IN QUESTION OF RS.53.20LACS OUT OF RS.58.85LACS THEREBY TAKING THE COST OF ACQU ISITION/PURCHASE PRICE AS RS.5.65LACS ONLY. 6. THE CIT(A) AFFIRMS ASSESSING OFFICERS FINDINGS AS FOLLOWS: DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A S CONTAINED IN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AS WELL AS THE WRITTEN SUBMISSION MADE BY AR OF THE APPELLANT DURING THE APPELLATE PR OCEEDINGS. THE FIRST GROUND OF APPEAL IS ABOUT THE REJECTION O F AUDITED BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER. DURING THE APPELLATE PROCEEDINGS, THE AR OF THE APP ELLANT SUBMITTED THAT THE ASSESSING OFFICER HAS ARBITRARY REJECTED THE BO OKS OF ACCOUNTS FOR THE FOLLOWING REASONS MENTIONED IN THE WRITTEN SUBMISSIONS AS BEL OW: ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 4 - (I) THE APPELLANT HAS NOT PRODUCED LEGAL AND VALID SALE DEED AS REQUIRED UNDER THE PROVISIONS OF REGISTRATION ACT A ND/OR AS PER SEC, 54 OF THE TRANSFER OF PROPERTY ACT. COST OF PURCHASE CLAIM BY THE APPELLANT AT RS.58,85,000/- IS IN RESPECT OF LAND WHICH IS TANGI BLE IMMOVABLE PROPERTY VALUE OF WHICH IS RS.100/- AND THEREFORE, IT IS TO BE SUPPOR TED BY REGISTERED SALE DEED ONLY. (PARA 5.3) (II) IN BOOKS OF ACCOUNT OF THE APPELLANT FOR F.Y. 2006-07, COST OF PURCHASE OF THE SAID LAND WAS NOT RECORDED AT (RS. 1,40,000/- + RS.1,85,000/- + RS.2,40,000/-) AS PER REGISTERED SALE DEED EXECUTED BY THE SELLER. (PARA 5.3) (III) THE SAID LAND WAS NOT SOLD TO BHARTIBEN S. PA TEL IN F.Y. 2006-07 FOR RS.39,00,000/- AS THERE IS NO LEGAL VALID DOCUMENT WAS PRODUCED BY THE APPELLANT. (PARA 5.3) (IV) SMT. BHARTIBEN S. PATEL STAYS IN U.K WHO HAS N OT SUBMITTED COPY OF HER U.K TAX RETURN WHEREIN SHE HAS SHOWN THE PURCHA SE OF THIS PROPERTY. (PARA 5.4) (V) WHEN BHARTIBEN S. PATEL HAS PURCHASE PROPERTY I N F.Y. 2006-07 FOR RS.39,00,000/- AND LATER ON SOLD TO THE APPELLANT F OR RS.58,85,000/-, EVEN THAN HAS NOT PAID CAPITAL GAIN TAX THOUGH SHE EARNED PROFIT OF RS.19.85 LAKH IN A.Y. 2012- 13. (PARA 5.4) (VI) PURCHASE AND SALE TRANSACTION IN LAND BY APPEL LANT'S SISTER AND NOT PAYING TAX EITHER IN INDIA OR IN U.K AND NON-REFLEC TION OF THIS INCOME AND NON- PAYMENT OF DUE TAXES THEREON SQUARELY SHOWS THAT TH E CONTENTION RAISED BY THE ASSESSEE NOT ONLY BLATANTLY FALSE BUT ALSO THERE IS A DELIBERATE INTENTION ON THE PART OF THE ASSESSEE TO INFLATE THE COST OF ACQUISITION OF THE LAND TO SUPPRESS THE BUSINESS INCOME EARNED FROM THE SALE OF LAND, (PARA 5.5) (VII) THE PRINCIPAL OF 'RAS-JUDICATA' OR 'ESTOPPEL' IS NOT APPLICABLE TO IT AUTHORITIES AS EVEN IN ONE ASSESSEE'S CASE. EACH AS SESSMENT YEAR IS A SEPARATE ASSESSMENT YEAR AND A STAND TAKEN BY AN AO IN A PAR TICULAR YEAR IS NOT BOUND TO BE FOLLOWED BY OTHER AO IN A SUBSEQUENT ORDER. (PARA 5 .6) (VIII) THE ASSESSEE DID NOT FILE ROI SHOWING INCOM E OF RS.33,35,000/- (RS.39,00,000/- - RS.5,65,000/-) FOR A.Y. 2007-08 A ND DID NOT PAY TAXES THEREON, CLEARLY PROVES THAT THEY DID NOT PRODUCED ALL DETAI LS BEFORE ACIT, CENTRAL CIRCLE - 2, SURAT AND DELIBERATELY WITHHOLD VITAL PIECE OF I NFORMATION FROM HIM AND THEREBY DEFRAUD THE EXCHEQUER. IN THE GROUNDS OF APPEAL, THE AR OF THE APPELLANT H AS SUBMITTED THAT THE ASSESSING OFFICER HAS RESORTED TO THIS ACTION ONLY BECAUSE THE CLAIM OF THE APPELLANT WAS NOT SUPPORTED BY ANY REGISTERED SALE DEED. I HAVE GIVEN MY CAREFUL THOUGHTS TO THE WRITTEN SUB MISSION OF THE AR OF THE APPELLANT AS WELL AS THROUGH THE FACTS AS CONTAINED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF EXPENDI TURE CLAIMED BY THE APPELLANT AGAINST THE BUSINESS INCOME BECAUSE IT WAS NOT SUPP ORTED BY ANY DOCUMENTARY ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 5 - EVIDENCE AND THE PROVISIONS OF LAW. IT IS NOT A NOR MAL CLAIM AND AS PER ASSESSING OFFICER, IT IS A MANIPULATED ONE WITH AN PURPOSE IN MIND TO REDUCE THE TAXABLE INCOME. AFTER GOING THROUGH THE RIVAL CLAIMS, I AM OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOK S OF ACCOUNTS U/S 145(3) OF THE ACT. THEREFORE, THIS GROUND OF APPEAL OF THE APPELL ANT IS DISMISSED. THE SECOND, THIRD AND FOURTH GROUND OF APPEAL ARE I NTERRELATED AND CONCERN THE DISALLOWANCE OF RS.53,20,000/- BEING EXPENDITUR E CLAIMED WHICH IS NOT SUPPORTED BY ANY LEGALLY VALID DOCUMENT. FOR THE SA KE OF CONVENIENCE ALL THESE GROUNDS OF APPEAL ARE TAKEN TOGETHER FOR ADJUDICATI ON. FACTS IN BRIEF AS EMANATING FROM THE RECORD SHOW TH AT DURING THE YEAR THE APPELLANT HAS SHOWN INCOME OF RS.70,70,000/- UNDER THE HEAD BUSINESS INCOME FROM THE SALES OF LAND AND CLAIMED THE EXPENDITURE OF RS.58,85,000/- BEING THE COST INCURRED ON THE LAND AND TREATED AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER C ALLED FOR THE DETAILS AND EVIDENCE OF THE EXPENDITURE OF RS.58,85,000/- CLAIM ED IN THE PROFIT & LOSS ACCOUNT. FINDING NO RESPONSE FROM THE APPELLANT, TH E ASSESSING OFFICER CALLED THE INFORMATION FROM THE SUB-REGISTRAR, VALSAD ABOUT TH E COST OF LANDS WHICH THE APPELLANT HAS SOLD BY TREATING THEM AS STOCK IN TRA DE. THE SUB REGISTRAR, VALSAD INFORMED THAT THE LANDS ARE THREE IN NUMBER AND WER E PURCHASED FOR A TOTAL COST OF RS.5,65,000/-(RS. 1,40,000/- + RS. 1,85,000/- + RS. 2,40,000/-). WHEN THIS INFORMATION WAS COMPARED BY THE ASSESSING OFFICER W ITH THE COMPUTATION OF BUSINESS INCOME SUBMITTED BY THE APPELLANT ALONG WI TH RETURN OF INCOME, IT WAS OBSERVED THAT THE APPELLANT CLAIMED THE COST OF THE SE LANDS AT RS.58,85,000/- (RS.54,75,000/- + RS.4,10,000/-). TO ENQUIRE ABOUT THE DIFFERENCE THE ASSESSING OFFICER SUMMONED THE APPELLANT U/S 131 OF THE ACT A ND RECORDED HIS STATEMENT. IN THE STATEMENT THE APPELLANT DISCLOSED THAT THE LAND S UNDER REFERENCE WERE PURCHASED DURING THE F.Y.2006-07 AND WERE SOLD TO H IS SISTER SMT. BHARTIBEN S. PATEL WITHOUT EXECUTING ANY SALE DEED ON 31.12.2006 ON THE STRENGTH OF ONE MOU. LATER ON, THIS VERY LAND WAS PURCHASED BY THE APPEL LANT ON 15.04.2011 FROM HIS SISTER FOR AN AMOUNT OF RS.58,85,000/- WHICH WAS AG AIN BASED ON AN MOU AND NO SALE DEED WAS EXECUTED. FROM THESE FACTS, THE ASSES SING OFFICER CONCLUDED AS UNDER: I) THE FIRST SALE OF LAND MADE BY THE APPELLANT T O HIS SISTER ON THE STRENGTH OF AN MOU AND NOT SUPPORTED BY ANY LEGALLY RECOGNIZED SALE DEED AND REGISTRATION THEREAFTER. IT MEANS THERE WAS NO SALE . II) EVEN IF, IT IS PRESUMED THAT THIS WAS A VALID SALE THEN IN THAT CASE THE APPELLANT HAS NOT SHOWN ANY BUSINESS INCOME WHICH C OMES TO RS.33,35,000/- (RS.39,00,000/- - RS.5,65,000/-) IN HIS RETURN OF INCOME FOR THE RELEVANT A.Y.2007-08. III) THE ABOVE FALSIFIES THE CLAIM OF THE APPELLANT THAT THERE WAS A SALE. IV) THE REPURCHASE OF THIS VERY LAND BY THE APPELLA NT FOR AN AMOUNT OF RS.58,85,000/- ON THE STRENGTH OF AN MOU, IS ALSO N OT A VALID PURCHASE BECAUSE NO SALE DEED WAS EXECUTED AND REGISTERED WH ICH ESTABLISHES THE CHANGE OF TITLE TO THE LAND. ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 6 - V) EVEN IF FOR THE ARGUMENT'S SAKE IT IS PRESUMED THAT IT WAS A VALID SALE THEN THE SELLER I.E. SMT. BHARTIBEN S. PATEL SHOULD HAVE REFLECTED THE CAPITAL GAINS IN THE RETURN OF INCOME WHICH IN FACT WAS NOT DONE SO. VI) THE ABOVE AGAIN FALSIFIES THE CLAIM OF THE APP ELLANT THAT THERE WAS SALE/PURCHASE OF THE LAND. ON THE OTHER HAND, DURING THE ASSESSMENT PROCEEDING S AS WELL AS APPELLATE PROCEEDINGS, THE STAND OF THE APPELLANT WAS THAT TH ESE WERE VALID SALES/PURCHASES DUE TO THE FOLLOWING REASONS: I) THE FIRST SALE AFFECTED BY THE APPELLANT ON 31.1 2.2006 IS DULY SUPPORTED BY AN MOU WHICH SHOWS THAT A TRANSACTION OF SALE OF LA ND TOOK PLACE. THE COST OF PURCHASE OF LAND SHOWN AND CLAIMED AT RS.58 ,85,000/- IS CORRECT. THE DISALLOWANCE OF RS.53,20,000/- OUT OF COST OF P URCHASE BY THE ASSESSING OFFICER IS NOT CORRECT. THE AR OF THE APPELLANT IN SUPPORT OF HIS CLAIM REGARDING THE COST OF PURCHASE OF LAND SUBMITTED TH E FOLLOWING DOCUMENTS AND RELIED UPON THEM. (I) AUDITED PROFIT & LOSS ACCOUNT AND BALANCE SHEET . (II) LAND PURCHASE ACCOUNT. (III) LEDGER ACCOUNT OF BHARTIBEN S. PATEL FOR F.Y. 2011-12. (IV) COPY OF ALLAHABAD BANK STATEMENT FROM WHICH PAYMENT WAS MADE TO HER IN F.Y.11-12. (V) LEDGER ACCOUNT OF BHARTIBEN S. PATEL FOR F.Y . 2012-13. (VI) COPY OF ALLAHABAD BANK STATEMENT FROM WHICH P AYMENT WAS MADE TO HER IN F.Y. 12-13. (VII) COPY OF MOU DATED 15.04.2011 (VIII) LEDGER ACCOUNT FOR BHARTIBEN S. PATEL FOR F.Y. 2006 -07. (IX] CERTIFICATE ISSUED BY PUNJAB NATIONAL BANK DATED 04.05.2015 CONFIRMING PAYMENTS MADE BY BHARTIBEN IN F.Y. 2006- 07. (X) A WRITTEN AGREEMENT DATED 30.12.2006. (XI) NOTARIZED AFFIDAVIT DATED 13.02.2015. (XII) A STATEMENT RECORDED BY THE AO U/S. 131 OF S HRI BHARTIBEN PATEL AND THE APPELLANT DURING ASSESSMENT PROCEEDINGS IS TO BE SUBMITTED ON RECEIPT OF THE SAME FROM THE AO IN PURSUANT TO O UR APPLICATION DATED 25.03.2015. COPY ENCLOSED. (XIII) SUBMISSION MADE BY CA. M/S. PKMG & COMPANY I N SEARCH ASSESSMENT PROCEEDINGS FOR A.Y. 2007-08. ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 7 - (XIV) COPY OF EXTRACT FROM AO'S NOTICE ASKING EXPL ANATION ON SEIZED MATERIAL NAMELY BS-17 & BS-18. (XV) COPY OF RELEVANT PAGES OF APPELLANT'S EXPLANA TION ON VARIOUS ANNEXURE INCLUDING BS - 17 & BS-18. (XVI) COPY OF TRIAL BALANCE SHEET BEING PAGE NO. 1 41, 158 & 140 BEING PART OF ANNEXURE BS -18 FOUND IN SEARCH OPERATION. (XVII) COPY OF ASSESSMENT ORDER FOR A.Y. 2007-08. FURTHER, IT WAS SUBMITTED BY THE AR OF THE APPELLAN T THAT LAND HAS BEEN TREATED AS STOCK IN TRADE BY THE APPELLANT SO AT THE TIME OF S ALE THERE IS NO REQUIREMENT OF LAW TO EXECUTE A SALE DEED AND REGISTER IT UNDER THE IN COME TAX ACT. THERE IS ONLY REQUIREMENT OF CONTRACT IN TERMS OF SEC. 53A OF TRA NSFER OF PROPERTY ACT AND PERFORMANCE OF CONTRACT IN VIEW OF SEC.2(47) OF THE ACT. AS AN ALTERNATIVE, IT WAS ALSO SUBMITTED BY THE AR OF THE APPELLANT THAT INST EAD OF TREATING IT AS BUSINESS INCOME, THE SAME INCOME SHOULD BY CALCULATED UNDER THE CAPITAL GAINS. AS THE LAND WAS PURCHASED IN F.Y.2006-07 FOR RS.39,00,000/- SO LONG- TERM CAPITAL GAIN IS LEVIABLE. THIS PROPOSAL WAS MADE WITH A VIEW TO OVE RCOME; THE LITIGATION WITH THE DEPARTMENT. IF THIS PROPOSAL IS ACCEPTED THEN PENAL TY U/S 271(1)(C) MAY NOT BE LEVIED. I HAVE GIVEN MY CAREFUL THOUGHTS TO THE RIVAL SUBMI SSIONS AS WELL AS THE WRITTEN SUBMISSIONS MADE BY THE ASSESSING OFFICER D URING THE APPELLATE PROCEEDINGS AND THE COUNTER COMMENTS MADE BY THE AR OF THE APPELLANT ON IT. THE UNDISPUTED FACTS ARE THAT THE APPELLANT HAS SHO WN RS.70,70,000/- AS BUSINESS INCOME ON ACCOUNT OF SALE OF LAND WHICH WA S TREATED AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS. AGAINST THIS INCOME, THE APP ELLANT HAS CLAIMED EXPENDITURE OF RS.58,85,000/- BEING THE COST OF ACQUISITION OF THESE LANDS IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER HAS ALSO ACCEPTED TH E HEAD OF INCOME I.E. BUSINESS INCOME AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. THE WHOLE DISPUTE REVOLVES ARROUNDS THE CLAIM OF EXPENDITURE ON ACCOU NT OF THESE LANDS. THE ASSESSING OFFICER IS OF THE VIEW THAT COST OF ACQUI SITION OF THESE LANDS IS RS.5,65,000/- BECAUSE THIS HAS BEEN EVIDENCED BY RE GISTERED SALE DEEDS. BUT THE AR OF THE APPELLANT IS OF THE VIEW THAT THESE LANDS WE RE FURTHER SOLD FOR RS.39,00,000/- TO HIS SISTER ON THE BASIS OF AN MOD WITHOUT EXECUT ING A REGISTERED SALE DEED. THE PURCHASER HAS ADMITTED THIS TRANSACTION AND THE PAY MENTS HAS BEEN MADE THROUGH CHEQUE AND REFLECTED IN THE BOOKS OF ACCOUNTS. SIMI LARLY, THIS VERY LAND WAS AGAIN RE-PURCHASED FROM HIS SISTER FOR RS.58,85,000/- ON THE BASIS OF ANY MOU WITHOUT EXECUTING ANY REGISTERED SALE DEED AND THE AMOUNT O F CONSIDERATION HAS BEEN MADE THROUGH CHEQUES AND DULY REFLECTED IN THE BOOKS OF ACCOUNTS. IN SUCH A SITUATION, THE COST OF ACQUISITION OF THE LAND FOR THE APPELLA NT IS RS.58,85,000/- AND NOT RS.5,65,000/- AS TREATED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER NOT AGREEING WITH THE APPELLANT ON THIS ISSUE DISALLOWED THE AMO UNT OF RS.53,20,000/- (RS.58,85,000/- -RS.5,65,000/-) BEING THE EXPENDITU RE CLAIMED IN EXCESS BY THE APPELLANT FOR CALCULATING THE BUSINESS INCOME. AFTER PURSUING THE CORE FACTS OF THE CASE AS ENUMER ATED ABOVE, I AM OF THE CONSIDERED OPINION THAT THAT THE ACTION OF THE ASSE SSING OFFICER IS CORRECT AND AS ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 8 - PER LAW. FIRSTLY, THE CONTENTION OF THE APPELLANT T HAT REASONABLE OPPORTUNITY OF BEING HEARD HAS NOT BEEN GIVEN BY THE ASSESSING OFF ICER IS NOT CORRECT BECAUSE A DETAILED SHOW CAUSE NOTICE WAS ISSUED TO THE APPELL ANT AND THE REPLY RECEIVED WAS DULY CONSIDERED AND ANALYZED BY THE ASSESSING OFFIC ER. THE NON-SUPPLYING OF RECORDED STATEMENT OF APPELLANT HIMSELF AND TO HIM DOES NOT AMOUNT TO DENIAL OF REASONABLE OPPORTUNITY OF BEING HEARD. THE LAND IN THE CASE IS BEING TREATED AS STOCK IN T RADE IN THE BOOKS OF ACCOUNTS BY THE APPELLANT AND THE TRANSACTION OF LA ND IS DONE ON THE BASIS OF AN MOU WITHOUT EXECUTING ANY REGISTERED SALE DEED. IN MY CONSIDERED VIEW THE JURISDICTIONAL HON'BLE HIGH COURT HAS HELD THAT FOR COMPLETION OF SALE, THE EXECUTION AND REGISTRATION OF SALE DEED IS NECESSAR Y WHICH IS MUST FOR TRANSFERRING THE TITLE FROM THE SELLER TO THE PURCHASER. THE JURISDICTIONAL HON'BLE GUJARAT HIGH COURT HAS B EEN HELD IN THE CASE OF CIT V/S ASHALAND CORPORATION REPORTED IN 133 ITR 55 THAT 'IN RESPECT 'OF LAND PURCHASED BY THE ASSESSEE AS STOCK IN TRADE, THE AS SESSEE WOULD CONTINUE TO BE THE OWNER OF THE LAND WHICH IT HAS PURCHASED WHICH IS P ART OF STOCK IN TRADE, TILL IT IS DIVESTED OF THE OWNERSHIP BY THE COMPLETION OF THE SALE TRANSACTION. THE BUSINESS DEAL IN RESPECT OF A LAND OWNED BY THE ASSESSEE WOU LD BE COMPLETE ONLY WHEN IT EXECUTES A REGISTERED SALE DEED. IT IS ONLY ON COMP LETION OF THE SALE TRANSACTION IN RESPECT OF THE LAND OWNED BY THE ASSESSEE THAT THE ASESSEE COULD BE SAID TO HAVE EARNED PROFIT OR SUFFERED LOSS, AS THE CASE MAY BE, AND THE SALE WOULD NOT BE COMPLETE UNLESS IT EXECUTES A REGISTERED SALE DEED. THE COURT REJECTED THE ARGUMENT OF THE ASSESSEE THAT SINCE THE BUSINESS OF THE ASSE SSEE IS TO PURCHASE AND SELL LAND, IT IS IMMATERIAL AS TO WHEN THE SALE DEED IN RESPEC T OF THE LAND AGREED TO BE SOLD ARE EXECUTED, WHATEVER IT RECEIVES IN ADVANCE TOWAR DS THE SALE PRICE BETWEEN THE AGREEMENT TO SELL AND EXECUTION OF THE REGISTERED S ALE DEED IS NOTHING BUT TRADING RECEIPT. ON BEHALF OF THE ASSESSEE, IT WAS FURTHER CONTENDED THAT SUCH TRADING RECEIPTS REPRESENT THE ASSESSEE'S INCOME EARNED ON THE DATE ON WHICH THEY ARE RECEIVED. THE HON'BLE COURT HELD THAT ALL RECEIPTS ARE NOT INCOME. IN ORDER TO PARTAKE OF THE CHARACTER OF A INCOME, RECEIPT MUST BE PART OF THE PROFIT EARNED BY THE ASSESSEE. IN OTHER WORDS, THE RECEIPT MUST ASSU ME THE CHARACTER OF INCOME BEFORE IT BECOMES EXIGIBLE TO INCOME TAX. THE REAL TEST IN DECIDING WHETHER THE RECEIPT IS THE ASSESSEE'S INCOME OR NOT WHETHER THE ASSESSEE CONTINUES TO BE THE OWNER OF THE LAND, OR WHETHER HE IS DIVESTED OF SUC H OWNERSHIP. THE LAND OF WHICH THE ASSESSEE IS THE OWNER IS STOCK IN TRADE AND THE LAND WHICH IS SOLD I.E. LAND OF WHICH THE OWNERSHIP OR TITLE IS TRANSFERRED, CEASES TO BE ITS STOCK IN TRADE ONLY WHEN THE TRANSACTION IS COMPLETE.' SIMILARLY, THE SAME VIEW WAS ALSO TAKEN BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S MOTILAL C PATEL & CO. REPORTED IN 173 ITR 666. KEEPING IN VIEW THE ABOVE AND THE FACTS THAT THE AP PELLANT HAS INDULGED INTO SALE AND PURCHASE OF LAND WITHOUT EXECUTING TH E REGISTERED SALE DEED AFTER THE ORIGINAL PURCHASE OF LANDS AT RS. 5,65,000/- IN F.Y .2006-07, I AM OF THE CONSIDERED OPINION THAT THE SALE/PURCHASE AFFECTED ON THE STRE NGTH OF MOD IS NOT SALE/PURCHASE IN THE EYES OF LAW HENCE, THE COST OF ACQUISITION IN THE CASE OF APPELLANT ADOPTED AT RS.5,65,000/- INSTEAD OF RS.58 ,85,000/- BY THE ASSESSING OFFICER IS CORRECT. THEREFORE, THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER AT ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 9 - RS.53,20,000/- IS CONFIRMED AND ALL THESE GROUNDS O F APPEAL OF APPELLANT ARE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES REITERATING THEIR RESPECTIVE STANDS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE MADE BY BOTH THE LOWER AUTHORITIES AS PERTAINING TO PURCHASE COST OF THE L AND IN QUESTION. THE ASSESSEE SEEKS TO ACCEPT THE SAME AS RS.58.85LACS A S PAID TO HIS SISTER SMT. BHARTIBEN PATEL WHEREAS THE REVENUES CASE IS THAT THE SAME HAS TO BE TAKEN AS THE ORIGINAL PURCHASE COST OF RS.5.65LACS (SUPRA ) ONLY. THERE DOES NOT APPEAR TO BE ANY DISPUTE THAT THE ASSESSEE HAD IN F ACT PURCHASED THE ABOVE THREE PARCELS OF LAND FOR A COST PRICE OF RS.5.65LA CS ONLY IN ASSESSMENT YEAR 2007-08. HE TAKES US TO PAGE 75 OF THE PAPER BOOK INDICATING SMT. BHARTIBEN PATEL TO HAVE GOT SANCTIONED AN OD LOAN OF RS.94.27 LACS ON 10.10.2006 FOLLOWED BY TRANSFER OF RS.39LACS MADE IN FAVOUR OF ASSESSEES CONCERNED M/S. NISITH DEVELOPERS (SUPRA). THIS TRANSFER INVO LVES FIVE TRANSACTIONS BETWEEN 09.11.2006 TO 28.03.2007. PAGE 76 OF THE S AID PAPER BOOK IS LEDGER ACCOUNT CONCERNED IN THE BOOKS OF M/S. NISITH DEVEL OPERS INDICATING DEBIT INSTANCES OF A SUM TOTALING TO RS.58.85LACS IN FAVO UR OF MS. BHARTIBEN. PAGE 77 IS M/S. BHARTIBENS ACCOUNT IN ASSESSEES BOOKS WHEREIN THE TRANSACTIONS IN QUESTION ARE DULY RECORDED AS LAND PURCHASES. T HE SAME SUFFICIENTLY PROVES THAT THE ASSESSEE HAS IN FACT PAID RS.58.85L ACS TO HIS SISTER. PAGE 115 OF THE PAPER BOOK CONTAINS MS. BHARTIBENS ASSESSME NT ORDER DATED 20.12.2016 ASSESSING THE INTEREST AMOUNT OF RS.19.8 5LACS I.E. RS.58.85LACS RS.39LACS AS HER TAXABLE INCOME. THE REVENUE THERE FORE IS ESTOPPED FROM CHALLENGING THE GENUINENESS OF THE PAYMENT CLAIM OF RS.58.85LACS IN QUESTION. 8. WE NOW PROCEED TO DEAL WITH THE EQUALLY IMPORTAN T CONCLUSION OF BOTH THE LOWER AUTHORITIES THAT THE ASSESSEE HAS FAILED TO PROVE VERACITY OF THE TWO MOUS HEREINABOVE. THE SAME VERY MUCH FORM PART OF THE PAPER BOOK. ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 10 - THERE IS NO QUARREL THAT BOTH ARE UNREGISTERED DOCU MENTS. THE FIRST ONE IS DATED 30.12.2006. THE ASSESSEE / FIRST PARTY MADE IT CLEAR THEREIN THAT HE HAD PURCHASED THE THREE PARCELS OF LAND. HE THEN DECLA RES IN THIS FORMER MOU TO HAVE TRANSFERRED THE SAME TO HIS SISTER FOR RS.39LA CS. THE ABOVE PAYMENT SCHEDULE IS DULY REITERATED THEREIN. THIS MOU THEN READS THAT SMT. BHARTIBEN WOULD NOT BE ENTITLED TO SELL, MORTGAGE OR GIFT THE PROPERTY IN QUESTION EXCEPT TO THE FIRST PARTY IN LIEU OF AN AGREED AMOUNT BETW EEN THEM. THIS FOLLOWED THE SECOND MOU AT PAGE 93 OF THE PAPER BOOK DATED 1 5.04.2011 WHEREIN THE ASSESSEE HAS PAID RS.58.5LACS TO HIS SISTER IN ORDE R TO GET BACK THE LAND IN QUESTION. THIS IS THE POINT OF DISPUTE BETWEEN THE PARTIES LEADING TO REJECTION OF ASSESSEES BOOKS U/S.145(3) OF THE ACT FOLLOWED BY THE DISALLOWANCE OF THE SAID PURCHASE COST OF RS.58.85LACS. LEARNED DEPART MENTAL REPRESENTATIVE STRONGLY SUPPORTS ASSESSING OFFICERS CASE IN REJEC TING THE SAID FORMER AND LATTER MOU THAT THE SAME DO NOT AMOUNT TO TRANSFER AS PRESCRIBED U/S.2(47) OF THE ACT. THIS ARGUMENT FAILS TO CONVINCE US. W E DEEM IT APPROPRIATE TO OBSERVE AT THIS STAGE THAT THE ABOVE TWO MOUS ARE M ORE IN THE NATURE OF AN ARRANGEMENT WHEREIN THE ASSESSEE AVAILED AN AMOUNT OF RS.39LACS FROM HIS SISTER IN ASSESSMENT YEAR 2007-08 IN LIEU OF PARTIN G WITH HIS LANDS IN QUESTION WHICH WERE REPURCHASED FOR RS.58.85LACS. WE REPEAT THAT ASSESSEES SISTER DID NOT HAVE ANY AUTHORITY TO ALIENATE THE SAID LAN DS IN ANY MANNER WHATSOEVER. WE ACCORDINGLY ARE OF THE OPINION THAT SINCE THE ASSESSEE HAS GOT BACK HIS LANDS FOR RS.58.85LACS IN PRECEDING AS SESSMENT YEAR FOLLOWED BY SALE THEREOF IN THE IMPUGNED ASSESSMENT YEAR, HE IS HELD ENTITLED TO CLAIM THE PURCHASE COST AS RS.58.85LACS INSTEAD OF RS.5.65LAC S. LEARNED DEPARTMENTAL REPRESENTATIVE THEN REITERATES REVENUES STAND THAT THE ASSESSEE HAS ATTEMPTED TO INFLATE THE ABOVE PURCHASE COST FOR TH E PURPOSE OF COMPUTING CAPITAL GAINS TAXABLE AT A LOWER RATE. WE DO NOT F IND ANY MERIT IN THIS PLEA SINCE THE ASSESSEE HAS DECLARED HIS PROFITS IN THE NATURE OF BUSINESS INCOME ASSESSABLE AS MAXIMUM RATE THAN CAPITAL GAINS TAXAB LE AT A LOWER RATE. WE ITA NO. 2418/AHD/2016 (SH. SHAILESH G. PATEL VS. IT O) A.Y. 2012-13 - 11 - THEREFORE REVERSE BOTH THE LOWER AUTHORITIES ACTIO N REJECTING ASSESSEES BOOKS U/S.145(3) OF THE ACT AS WELL AS IN DISALLOWING PUR CHASE COST OF RS.58.85LACS. 9. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF APRIL, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 21/04/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 / GUARD FILE. BY ORDER / . // . /0