Shailesh Gangaram Ramani, Bhuj V. The Income Tax Officer, Ward-2, GANDHIDHAM

ITA 260/RJT/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6835 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MJ RANPURA
• Assessee Lawyers: HARGOVIND SINGH D R
• Keywords: Capital asset; Business income; Corroborative evidences
• Section: 2(14); 142(1); 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER , .. !'# , $ %&' ./ ITA NOS. 260 & 294/RJT/2014 / ASSESSMENT YEARS: 2009-10 SHAILESH GANGARAM RAMANI C/O. GAYATRI HARDWARE STORE, STATION ROAD, BHUJ VS ITO, WARD 2, BHUJ / (APPELLANT) / (RESPONDENT) AND CROSS OBJECTOR REVENUE BY : SHRI M. J. RANPURA, A.R. ASSESSEE BY : SMT. HARGOVIND SINGH, D.R. ( ) * + $ / DATE OF HEARING : 08/11/2017 ,- * + $ /DATE OF PRONOUNCEMENT : 04/12/2017 PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE AND REVENUE ARE IN CROSS APPEAL AGAINS T ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, RAJKOT DAT ED 21.02.2014 PASSED FOR ASSESSMENT YEAR 2009-10. 2. THE GROUNDS TAKEN BY BOTH THE APPELLANTS ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES, THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF SHORT COMMON QUESTION INVOLVED IN BOTH THE APPEALS RELATES TO DETERMINATION OF NATURE OF INCOME DERIVE D BY THE ASSESSEE ON SALE OF LAND, I.E. WHETHER THE PROFIT ON SALE OF LA ND IS TO BE ASSESSED AS BUSINESS INCOME OR UNDER THE HEAD CAPITAL GAIN. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED HIS RETURN OF ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 2 - INCOME ON 21.01.2010 DECLARING TOTAL INCOME AT RS.9 ,48,823/-. HIS CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICES U/ S. 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTI NY OF ACCOUNTS IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS DERIVED INCOME FROM TRADING IN PLASTIC, COTTON AND STEEL, ALSO SHOWN PR OFIT OF RS.3,52,19,658/- FROM SALE OF AGRICULTURAL LAND SITUATED AT VILLAGE : PADDHAR, TAL : BHUJ- KUTCH. THIS PROFIT HAS BEEN CLAIMED AS EXEMPT ON TH E GROUND OF THAT THE SAID LAND IS NOT A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE IT ACT, 1961. 4. LD. ASSESSING OFFICER DID NOT ACCEPT THE CONTENT IONS OF THE ASSESSEE AND TREATED HIM AS A TRADER IN THE LAND. HE ASSESSE D THE ALLEGED AMOUNT AS BUSINESS INCOME. 5. ON APPEAL LD. CIT(A) HAS PARTLY ACCEPTED THE CON TENTION OF THE ASSESSEE. HE CONFIRMED THE ASSESSMENT OF RS.2,60,55 ,922/- UNDER THE HEAD BUSINESS INCOME AND ACCEPTED THE CONTENTION OF THE ASSESSEE QUA THE BALANCE AMOUNT. THE REVENUE IS CHALLENGING THE ORDER OF LD.CIT(A) QUA THE AMOUNT, WHICH HAS BEEN ACCEPTED AS ASSESSAB LE UNDER THE HEAD CAPITAL GAIN AND EXEMPT FROM TAX BEING ARISEN ON SALE OF AGRICULTURE LAND. ON THE OTHER HAND, ASSESSEE IS IMPUGNING THE ORDER OF THE LD.CIT(A) FOR ASSESSING THE BALANCE AMOUNT OF RS.2, 60,55,922/- UNDER THE HEAD BUSINESS INCOME. WE WILL BE REVERTING TO THE F ACTS IN DETAILS. 6. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD. THE ISSUE, WHETHER GAIN FROM SALE OF AG RICULTURAL LAND IS TO BE ASSESSED AS A BUSINESS INCOME OR SHORT TERM CAPITAL GAIN/LONG TERM ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 3 - CAPITAL GAIN, IS A HIGHLY DEBATABLE ISSUE. IT ALWAY S PUZZLED THE ADJUDICATOR EVEN AFTER AVAILABILITY OF LARGE NUMBER S OF AUTHORITATIVE PRONOUNCEMENTS BY THE HONBLE SUPREME COURT/HONBLE HIGH COURT. THE REASON FOR THE PUZZLE IS, ONE HAS TO GATHER THE INTENTION OF AN ASSESSEE WHILE HE ENTERED INTO THE TRANSACTION. THE EXPRESSION INTENTION AS DEFINED IN MERIAM WEBSTER DICTIONARY MEANS, WHAT ONE INTENDS TO ACCOMPLISH OR ATTAIN, IT IMPLIES LITTLE MORE THAN WHAT ONE HAS IN MIND TO DO OR BRING OUT. IT SUGGESTS CLEAR FORMU LATION OR DELIBERATION. THUS, IT IS ALWAYS DIFFICULT TO ENTER INTO THE RECE SS OF THE MIND OF AN ASSESSEE TO FIND OUT THE OPERATIVE FORCES EXHIBITIN G THE INTENTION FOR ENTERING INTO THE TRANSACTION. THIS WOULD GIVE RISE A DEBATE. NEVERTHELESS, WE HAVE TO LOOK INTO THE CURIOUS FEAT URES OF THIS CASE WHICH WILL GOAD US ON JUST CONCLUSION. 7. BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS OF PRESENT CASE SO AS TO FIND OUT, WHETHER ASSESSEE IS TO BE TERMED AS INVOLVING IN THE TRADING OF LAND OR TO BE TREATED AS A SIMPLICITOR AGRICULTURIST. W E WOULD LIKE TO REFER THE THREE BASIC QUESTIONS FORMULATED BY LD. FIRST APPELLATE AUTHORITY FOR ADJUDICATING THE CONTROVERSY. THESE Q UESTIONS ARE AS UNDER:- I. IS THE SOLD LAND AGRICULTURAL LAND ? II. WHETHER THE TRANSACTION CARRIED OUT BY THE APPE LLANT WAS ADVENTURE IN THE NATURE OF TRADE AND THE PROFITS THUS REQUIRED TO BE TAXED AS BUSINESS INCOME ? III. IS THE TRANSACTION A SHAM TRANSACTION AND CAN IT BE LABELED AS A COLOURABLE DEVICE ? ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 4 - 8. LD. FIRST APPELLATE AUTHORITY HAS MADE A LUCID E NUNCIATION OF LAW AND FACTS UNDER EACH QUESTION. SHE ACCEPTED THAT TH E LAND SOLD BY THE ASSESSEE WAS AGRICULTURAL LAND. SHE ALSO ACCEPTED T HAT THE TRANSACTION WAS NOT SHAM OR COLOURABLE TRANSACTION. 9. THE PARTIES ARE NOT DISPUTING ON THESE CONCLUSIO NS. THUS, THE CONTROVERSY BETWEEN ASSESSEE AND REVENUE BOILS DOWN TO QUESTION 2 FORMULATED BY THE LD.CIT(A). THE LD. FIRST APPELLAT E AUTHORITY HAS PARTLY TREATED THE ASSESSEE AS INDULGED IN ADVENTURE IN TH E NATURE OF TRADE AND THUS THE PROFIT RESULTED TO HIM HAS BEEN ASSESSED A S A BUSINESS INCOME. LD. FIRST APPELLATE AUTHORITY ACCEPTED THE ASSESSEE AS AN INVESTOR IN AGRICULTURE LAND, SAME WOULD NOT RESULT ANY CAPITAL GAIN, BECAUSE THE ASSET POSSESSED BY THE ASSESSEE WAS NOT A CAPITAL A SSET WITHIN THE MEANING OF SECTION 2(14)(III) OF THE ACT. 10. THUS, AT THIS STAGE, LET US FIRST NOTE THE FACT S IN A LITTLE MORE DETAIL. IT IS PERTINENT TO OBSERVE THAT ASSESSEE IS AN AGRICUL TURALIST BY INHERITANCE. HE PURCHASED AGRICULTURAL LAND COMPRISED IN SURVEY NO.563/2 AND 564 ADMEASURING 10.18 ACRE AT VILLAGE PADDHAR TAL. BHUJ IN KUTCH DISTRICT IN THE MONTH OF APRIL 2005 FOR CONSIDERATION OF RS.84, 600/-. BROTHER OF THE ASSESSEE HAS ALSO PURCHASED THE ADJOINING AGRICULTU RAL LAND COMPRISED AT SURVEY NO. 559/1, 562/1 AND 563/1, SUBSEQUENTLY, IN THE MONTH OF FEB- MARCH 2007. THEY HAVE PURCHASED FURTHER LAND IN SUR VEY NO. 567/1, 567/2 ADMEASURING 4.33 AND 9.23 ACRE. THIS LAND WAS PURCHASED FOR A CONSIDERATION OF RS.22,000/- AND RS.43,600/-. THE A SSESSEE HAS SOLD THE LAND IN JULY-AUGUST 2008. THE DETAILS HAVE BEEN NOTI CED BY THE LD. FIRST ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 5 - APPELLATE AUTHORITY, WHILE TAKING COGNIZANCE OF THE SUBMISSIONS MADE BY THE ASSESSEE. SUCH DETAILS READ AS UNDER:- SR. NO. SURVEY NO. OF VILLAGE PADDHAR NAME OF PURCHASER DATE OF SALE SALE CONSIDERATION 1. 567/1/1 NARU KHERAJ GADHVI 29.08.08 42,70,112 2. 564 VEJANAND VIRA GADHVI 29.07.08 63,05,664 3. 568/3 RANA PARBAT GADHVI 22.07.08 24,00,088 4. 563/2 VEJANAND VIRA GADHVI 29.07.08 29,42,672 5. 568/1 RANA PARBAT GADHVI 22.07.08 19,34,986 6. 560/3 HARSUR KHERAJ GADHVI 22.07.08 72,00,115 7. 568/2 RANA PARBAT GADHVI 22.07.08 19,49,960 8. 567/2 NARU KHERAJ GADHVI 03.10.08 84,73,961 3,54,77,558 11. ACCORDING TO THE ASSESSEE, LANDS HAVE BEEN MENT IONED AS AGRICULTURAL LAND IN THE LAND REVENUE RECORD. AGRIC ULTURE OPERATIONS WERE CARRIED ON AND THEY WERE SITUATED ABOUT 20 KM FROM BHUJ. THE GAIN REALIZED ON SALE OF SUCH LAND WAS CLAIMED EXEMPT U/ S.2(14) OF THE I.T. ACT. 12. THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTE NTION OF THE ASSESSEE AND TREATED THE PROFIT AS BUSINESS INCOME. ON APPEA L LD.CIT(A) ACCEPTED THE GAIN ARISEN ON SALE OF AGRICULTURAL LAND PURCHA SED IN APRIL 2005 AS EXEMPT U/S.2(14) OF THE I. T. ACT. HOWEVER, WITH RE GARD TO THE LAND PURCHASED IN THE MONTH OF FEB-MARCH 2007, HE TREATE D THE GAIN ARISEN TO ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 6 - THE ASSESSEE AS BUSINESS INCOME. THIS ACTION OF THE LD.CIT(A) IS BEING IMPUGNED BY THE ASSESSES IN HIS APPEAL, WHEREAS RES T IS BEING IMPUGNED BY THE REVENUE. 13. WHILE APPRECIATING THE CONTROVERSY, LD. FIRST A PPELLATE AUTHORITY TOOK INTO CONSIDERATION. THE BROAD PRINCIPLES LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SID DHARTH J. DESAI [1983] 139 ITR PAGE 628/10. ALONGWITH THE TEST PROPOUNDED BY HONBLE JURISDICTIONAL HIGH COURT, LD. FIRST APPELLATE AUTH ORITY HAS CONSIDERED THE REPLY GIVEN BY THE ASSESSEE AS TO HOW HIS TRANSACTI ONS DO NOT FALL WITHIN THE AMBIT OF AN ADVENTURE IN THE NATURE OF TRADE. W E DEEMED IT APPROPRIATE TO TAKE NOTE OF THOSE TESTS AS WELL AS THE REPLY GIVEN BY THE ASSESSEE, WHICH HAS BEEN REPRODUCED BY THE LD.CIT(A ) IN THE IMPUGNED ORDER ON PAGE 9. THEY READ AS UNDER:- 1. WHETHER THE LAND WAS CLASSIFIED IN THE REVENUE RECORDS AS AGRICULTURAL AND WHETHER IT WAS SUBJECT TO THE PAYMENT OF LAND R EVENUE? YEAS THE LAND IS CLASSIFIED IN THE REVENUE RECORDS A S AGRICULTURAL LAND. 2. WHETHER THE LAND WAS ACTUALLY OR ORDINARILY USED F OR AGRICULTURAL PURPOSES AT OR ABOUT THE RELEVANT TIME? YES THE LAND WAS USED FOR AGRICULTURAL PURPOSE. 3. WHETHER SUCH USER OF THE LAND WAS FOR LONG PERIOD O R WHETHER IT WAS OF A TEMPORARY CHARACTER OR BY ANY OR A STOPGAP ARRANGEM ENT? IT WAS NOT FOR STOPGAP ARRANGEMENT BUT THE INTENTION WAS FOR LONGER PERIOD. 4. WHETHER THE INCOME DERIVED FROM THE AGRICULTURAL OP ERATIONS CARRIED ON IN THE LAND BORE ANY RATIONAL PROPORTION TO THE INVEST MENT MADE IN PURCHASING THE LAND? ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 7 - THE CROP OF JUWAR WAS GIVEN TO THE TRUST/PANJARAPOL F OR CATTLE FEEDS. 5. WHETHER, THE PERMISSION UNDER SECTION 65 OF THE BO MBAY LAND REVENUE CODE WAS OBTAINED FOR THE NON-AGRICULTURAL USE OF T HE LAND? IF SO, WHEN AND BY WHOM (THE VENDOR OR THE VENDEE)? WHETHER SUCH PER MISSION WAS IN RESPECT OF THE WHOLE OR A PORTION OF THE LAND? IF T HE PERMISSION WAS IN RESPECT OF A PORTION OF THE LAND AND IF IT WAS OBTA INED IN THE PAST, WHAT WAS THE NATURE OF THE USER OF THE SAID PORTION OF THE L AND ON THE MATERIAL DATE? NOT APPLICABLE AS THE LAND WAS CONVERTED INTO NA AND WAS SOLD AS AGRICULTURAL LAND. 6. WHETHER THE LAND, ON THE RELEVANT DATE, HAD CEASED TO BE PUT TO AGRICULTURAL USE? IF SO, WHETHER IT WAS PUT TO AN ALTERNATIVE US E? WHETHER SUCH CESSER AND/OR ALTERNATIVE USER WAS OF A PERMANENT OR TEMPO RARY NATURE? NOT APPLICABLE AS THE LAND WAS CONVERTED INTO NA AND WAS SOLD AS AGRICULTURAL LAND. 7. WHETHER THE LAND, THOUGH ENTERED IN REVENUE RECORDS , HAD NEVER BEEN ACTUALLY USED FOR AGRICULTURE, THAT IS, IT HAD NEVE R BEEN PLOUGHED OR TILLED? WHETHER THE OWNER MEANT OR INTENDED TO USE IT FOR A GRICULTURAL PURPOSES? YES THE LAND HAS BEEN USED FOR AGRICULTURAL PURPOSES TILL THE DATE OF SALE. 8. WHETHER THE LAND WAS SITUATED IN A DEVELOPED AREA? WHETHER ITS PHYSICAL CHARACTERISTICS, SURROUNDING SITUATION AND USE OF T HE LANDS IN THE ADJOINING AREA WERE SUCH AS WOULD INDICATE THAT THE LAND WAS AGRICULTURAL? IN SURROUNDING AREA THERE ARE ADJOINING AGRICULTURAL LAND ONLY AND THE AREA WAS NOT DEVELOPED. 9. WHETHER THE LAND ITSELF WAS DEVELOPED BY PLOTTING A ND PROVIDING ROADS AND OTHER FACILITIES? NO THE APPELLANT BEING AGRICULTURIST HAS CARRIED OU T AGRICULTURAL ACTIVITIES AND SOLD TO THE AGRICULTURIST. 10. WHETHER THERE WERE ANY PREVIOUS SALES OF PORTIONS O F THE LAND FOR NON- AGRICULTURAL USE? ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 8 - NO. 11. WHETHER PERMISSION UNDER SECTION 63 OF THE BOMBAY T ENANCY AND AGRICULTURAL LANDS ACT, 1948, WAS OBTAINED BECAUSE THE SALE OR INTENDED SALE WAS IN FAVOUR OF A NON-AGRICULTURIST? IF SO, W HETHER THE SALE OR INTENDED SALE TO SUCH NON-AGRICULTURISTS WAS FOR NON-AGRICUL TURAL OR AGRICULTURAL USER? NOT APPLICABLE. 12. WHETHER THE LAND WAS SOLD ON YARDAGE OR ON ACREAGE BASIS? ACREAGE BASIS. 14. IT IS PERTINENT TO OBSERVE THAT ITAT LUCKNOW BE NCH IN THE CASE OF SARNATH INFRASTRUCTURE (P) LTD. V. ACIT (2009) 120 TTJ 216 HAS ALSO CONSIDERED ISSUE WHETHER AN ASSESSEE DESERVES TO BE TREATED AS A TRADER OR INVESTOR. THOUGH THE ISSUE INVOLVED IN THAT CASE RELATES TO INVESTMENT/TRADING IN SHARES, BUT BROAD PRINCIPLE C ARVED OUT BY THE ITAT IS APPLICABLE ON ALL SORTS OF TRANSACTIONS, WH ERE ADJUDICATOR IS REQUIRED TO FIND OUT WHETHER TRANSACTION WAS ENTERE D INTO BY THE ASSESSEE WITH A PRE-DOMINANT INTENTION OF TRADING O R INVESTMENT. THE FOLLOWING TESTS ARE WORTH TO NOTE: 13. AFTER CONSIDERING ABOVE RULINGS WE CULL OUT FO LLOWING PRINCIPLES, WHICH CAN BE APPLIED ON THE FACTS OF A CASE TO FIND OUT WHETHER TRANSACTION(S) IN QUESTION ARE IN THE NATURE OF TRA DE OR ARE MERELY FOR INVESTMENT PURPOSES: (1) WHAT IS THE INTENTION OF THE ASSESSEE AT THE TI ME OF PURCHASE OF THE SHARES (OR ANY OTHER ITEM). THIS CAN BE FOUND OUT FROM THE TREATMENT IT GIVES TO SUCH PURCHASE IN ITS BOOKS OF ACCOUNT. WHETHER IT IS TREATED STOCK-IN-TRADE OR INVESTMENT. WHETHER S HOWN IN OPENING/CLOSING STOCK OR SHOWN SEPARATELY AS INVEST MENT OR NON-TRADING ASSET. ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 9 - (2) WHETHER ASSESSEE HAS BORROWED MONEY TO PURCHASE AND PAID INTEREST THEREON? NORMALLY, MONEY IS BORROWED TO P URCHASE GOODS FOR THE PURPOSE OF TRADE AND NOT FOR INVESTING IN AN AS SET FOR RETAINING. (3) WHAT IS THE FREQUENCY OF SUCH PURCHASE AND DISP OSAL IN THAT PARTICULAR ITEM? IF PURCHASE AND SALE ARE FREQUENT , OR THERE ARE SUBSTANTIAL TRANSACTION IN THAT ITEM, IF WOULD INDI CATE TRADE. HABITUAL DEALING IN THAT PARTICULAR ITEM IS INDICATIVE OF IN TENTION OF TRADE. SIMILARLY, RATIO BETWEEN THE PURCHASES AND SALES AN D THE HOLDINGS MAY SHOW WHETHER THE ASSESSEE IS TRADING OR INVESTING ( HIGH TRANSACTIONS AND LOW HOLDINGS INDICATE TRADE WHEREAS LOW TRANSAC TIONS AND HIGH HOLDINGS INDICATE INVESTMENT). (4) WHETHER PURCHASE AND SALE IS FOR REALIZING PROF IT OR PURCHASES ARE MADE FOR RETENTION AND APPRECIATION ITS VALUE? FOR MER WILL INDICATE INTENTION OF TRADES AND LATTER, AN INVESTMENT. IN THE CASE OF SHARES WHETHER INTENTION WAS TO ENJOY DIVIDEND AND NOT MER ELY EARN PROFIT ON SALE AND PURCHASE OF SHARES. A COMMERCIAL MOTIVE I S AN ESSENTIAL INGREDIENT OF TRADE. (5) HOW THE VALUE OF THE ITEMS HAS BEEN TAKEN IN TH E BALANCE SHEET? IF THE ITEMS IN QUESTION ARE VALUED AT COST, IT WOU LD INDICATE THAT THEY ARE INVESTMENTS OR WHERE THEY ARE VALUED AT COST OR MAR KET VALUE OR NET REALIZABLE VALUE (WHICHEVER IS LESS), IT WILL INDIC ATE THAT ITEMS IN QUESTION ARE TREATED AS STOCK-IN-TRADE. (6) HOW THE COMPANY (ASSESSEE) IS AUTHORIZED IN MEM ORANDUM OF ASSOCIATION/ARTICLES OF ASSOCIATION? WHETHER FOR TR ADE OR FOR INVESTMENT? IF AUTHORIZED ONLY FOR TRADE, THEN WHETHER THERE AR E SEPARATE RESOLUTIONS OF THE BOARD OF DIRECTORS TO CARRY OUT INVESTMENTS IN THAT COMMODITY? AND VICE VERSE. 7. IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHO W THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT DISTINCTI ON HE HAS KEPT IN THE RECORDS OR OTHERWISE, BETWEEN TWO TYPES OF HOLDINGS . IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRIMA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT (OR SAY, STOC K-IN-TRADE) THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NO T REAL. 8. THE MERE FACT OF CREDIT OF SALE PROCEEDS OF SHAR ES ( OR FOR THAT MATTER ANY OTHER ITEM IN QUESTION) IN A PARTICULAR ACCOUNT OR NOT SO MUCH FREQUENCY OF SALE AND PURCHASE WILL ALONE WILL NOT BE SUFFICIENT TO SAY THAT ASSESSEE WAS HOLDING THE SHARES (OR THE ITEMS IN QUESTION) FOR INVESTMENT. ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 10 - 9. ONE HAS TO FIND OUT WHAT ARE THE LEGAL REQUISITE S FOR DEALING AS A TRADER IN THE ITEMS IN QUESTION AND WHETHER THE ASS ESSEE IS COMPLYING WITH THEM. WHETHER IT IS THE ARGUMENT OF THE ASSES SEE THAT IT IS VIOLATING THOSE LEGAL REQUIREMENTS, IF IT IS CLAIMED THAT IT IS DEALING AS A TRADER IN THAT ITEM? WHETHER IT HAD SUCH AN INTENTION (TO CA RRY ON ILLEGAL BUSINESS IN THAT ITEM) SINCE BEGINNING OR WHEN PURCHASES WER E MADE? 10. IT IS PERMISSIBLE AS PER CBDTS CIRCULAR NO. 4 OF 2007 OF 15 TH JUNE, 2007 THAT AN ASSESSEE CAN HAVE BOTH PORTFOLIO S, ONE FOR TRADING AND OTHER FOR INVESTMENT PROVIDED IT IS MAINTAINING SEPARATE ACCOUNT FOR EACH TYPE, THERE ARE DISTINCTIVE FEATURES FOR BOTH AND THERE IS NO INTERMINGLING OF HOLDINGS IN THE TWO PORTFOLIOS. 11. NOT ONE OR TWO FACTORS OUT OF ABOVE ALONE WILL BE SUFFICIENT TO COME TO A DEFINITE CONCLUSION BUT THE CUMULATIVE EF FECT OF SEVERAL FACTORS HAS TO BE SEEN. 15. THE HONBLE GUJARAT HIGH COURT HAD ALSO AN OCCA SION TO CONSIDER THIS ISSUE IN THE CASE OF COMMISSIONER OF INCOME TA X VS. RIVA SHARKAR A KOTHARI REPORTED IN 283 ITR 338. HONBLE COURT HAS MADE REFERENCE TO THE TEST LAID BY IT IN ITS EARLIER DECISION RENDERE D IN THE CASE OF PARI MANGALDAS GIRDHARDAS VS. CIT REPORTED IN 1977 CTR 6 47. THESE TESTS READ AS UNDER: AFTER ANALYZING VARIOUS DECISIONS OF THE APEX COUR T, THIS COURT HAS FORMULATED CERTAIN TESTS TO DETERMINE AS TO WHETHER AN ASSESSEE CAN BE SAID TO BE CARRYING ON BUSINESS. (A) THE FIRST TEST IS WHETHER THE INITIAL ACQUISITION O F THE SUBJECT-MATTER OF TRANSACTION WAS WITH THE INTENTION OF DEALING IN THE ITEM, OR WITH A VIEW TO FINDING AN INVESTMENT. IF THE TRANSACTIO N, SINCE THE INCEPTION, APPEARS TO BE IMPRESSED WITH THE CHARACT ER OF A COMMERCIAL TRANSACTION ENTERED INTO WITH A VIEW TO EARN PROFIT, IT WOULD FURNISH A VALUABLE GUIDELINE. (B) THE SECOND TEST THAT IS OFTEN APPLIED IS AS TO WHY AND HOW AND FOR WHAT PURPOSE THE SALE WAS EFFECTED SUBSEQUENTLY. ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 11 - (C) THE THIRD TEST, WHICH IS FREQUENTLY APPLIED, IS AS TO HOW THE ASSESSEE DEALT WITH THE SUBJECT-MATTER OF TRANSACTION DURING THE TIME THE ASSET WAS THE ASSESSEE. HAS IT BEEN TREATED AS STO CK-IN-TRADE, OR HAS IT BEEN SHOWN IN THE BOOKS OF ACCOUNT AND BALANCE S HEET AS AN INVESTMENT. THIS INQUIRY, THOUGH RELEVANT, IS NOT CONCLUSIVE. (D) THE FOURTH TEST IS AS TO HOW THE ASSESSEE HIMSELF H AS RETURNED THE INCOME FROM SUCH ACTIVITIES AND HOW THE DEPARTMENT HAS DEALT WITH THE SAME IN THE COURSE OF PRECEDING AND SUCCEEDING ASSESSMENTS. THIS FACTOR, THOUGH NOT CONCLUSIVE, CAN AFFORD GOOD AND COGENT EVIDENCE TO JUDGE THE NATURE OF THE TRANSACTION AND WOULD BE A RELEVANT CIRCUMSTANCE TO BE CONSIDERED IN THE ABSEN CE OF ANY SATISFACTORY EXPLANATION. (E) THE FIFTH TEST, NORMALLY APPLIED IN CASE OF PARTNER SHIP FIRMS AND COMPANIES, IS WHETHER THE DEED OF PARTNERSHIP OR TH E MEMORANDUM OF ASSOCIATION, AS THE CASE MAY BE, AUTHORIZES SUCH AN ACTIVITY. (F) THE LAST BUT NOT THE LEAST, RATHER THE MOST IMPORTA NT TEST, IS AS TO THE VOLUME, FREQUENCY, CONTINUITY AND REGULARITY OF TRA NSACTION OF PURCHASE AND SALE OF THE GOODS CONCERNED. IN A CAS E WHERE THERE IS REPETITION AND CONTINUITY, COUPLED WITH THE MAGNITU DE OF THE TRANSACTION, BEARING REASONABLE PROPOSITION TO THE STRENGTH OF HOLDING THEN AN INFERENCE CAN READILY BE DRAWN THAT THE ACTIVITY IS IN THE NATURE OF BUSINESS. 16. IN THE LIGHT OF THE ABOVE, LET US EXAMINE ORDER OF THE LD.CIT(A). A PERUSAL OF THE IMPUGNED ORDER WOULD INDICATE THAT T HE LD.CIT(A) HAS DEVOTED MUCH ENERGY TOWARDS HIGHLIGHTING POSITION O F LAW LAID DOWN IN VARIOUS JUDGMENT VIZ. G. VENKATASWAMI NAIDU & CO. V S. CIT, 35 ITR 594 (SC) AND JANKI RAM BAHADUR RAM VS. CIT, 57 ITR 2 1 (SC). CONCLUSIONS BRIEFLY DRAWN BY THE CIT(A) ARE ON PAGE NO.35 OF THE IMPUGNED ORDER. IT READS AS UNDER: 1. THE APPELLANT'S CASE IS REQUIRED TO BE BROKEN I NTO TWO PARTS TO GET THE CORRECT PERSPECTIVE. ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 12 - 2. THE APPELLANT HAD PURCHASED EIGHT PIECES OF LAND . TWO PIECES WERE HELD FOR MORE THAN THREE YEARS WHILE THE REMAINING SIX PIECE S WERE HELD FOR LESS THAN TEN TO FIFTEEN MONTHS. THERE HAS BEEN A MASSIVE INCREAS E OF ABOUT 800% IN THE PRICE OF THE LAND WITHIN A VERY SHORT SPAN OF TIME. THERE ARE TWO POSSIBILITIES. EITHER THE PURCHASE PRICE HAS BEEN DOCTORED OR THERE ARE S OME EXCEPTIONAL CIRCUMSTANCES LEADING TO SUCH AN ABNORMAL INCREASE IN PRICE. THE FIRST POSSIBILITY CANNOT BE COMMENTED UPON AS NO EFFORTS HAVE BEEN DONE BY THE A.O. IN THIS REGARD. ALSO, WHAT EXACTLY HAS BROUGHT ABOUT THE MASSIVE INCREASE IN THE PRICE OF THE LANDS IS NOT CLEAR. HOWEVER, IT CAN BE SAID WITH CERTAINTY THAT THE APPELLANT WAS VERY MUCH AWARE OF THE DEVELOPMENTS I N THAT AREA AND IN RESPECT OF THE SIX PIECES OF LANDS WHICH HAVE BEEN HELD FOR LESS THAN TEN TO FIFTEEN MONTHS, HE HAS SENSED THE BUSINESS OPPORTUNITY OF M AKING A KILL AND HAS THEREFORE PURCHASED THESE LANDS AND SOLD THEM AFTER A SHORT PERIOD. THIS CONDUCT ON THE PART OF THE APPELLANT CAN DEFINITELY POINT TO THESE TRANSACTIONS BEING IN THE NATURE OF BUSINESS ACTIVITY OR ADVENTU RE IN THE NATURE OF TRADE. 7.19 HOWEVER, THE ABOVE LOGIC CANNOT BE APPLIED I N ENTIRETY TO ALL PIECES OF LAND. THIS CAN HE APPLIED ONLY TO THE SIX PIECES OF LAND WHICH HAVE BEEN HELD FOR LESS THAN TEN TO FIFTEEN MONTHS. THE PROFIT FROM SA LE OF THESE SIX LANDS, ARE TREATED AS BUSINESS PROFIT ARISING OUT OF TRANSACTI ONS BY WAY OF ADVENTURE IN THE NATURE OF TRADE. IN RESPECT OF THE OTHER TWO LANDS WHICH HAVE BEEN HELD FOR MORE THAN THREE YEARS, IT CANNOT BE SAID THAT THEIR SALE AMOUNTS TO ADVENTURE IN THE NATURE OF TRADE. THUS, THE AO IS DIRECTED TO RECOMPU TE THE BUSINESS PROFITS AS ABOVE. 17. THUS, AN ANALYSIS OF COMPLETE RECORD WOULD INDI CATE THAT BASIC POINT WHICH WEIGH WITH THE LD.CIT(A) FOR TREATING T HE ASSESSEE PARTLY AS TRADER IS THE FACT THAT THE INCREASE IN SALE PRICE IS 800%. IN OTHER WORDS, VOLUME OF PROFIT RESULTED TO THE ASSESSEE PERSUADED THE LD.CIT(A) TO HABOUR A BELIEF THAT THE LAND PURCHASED IN THE YEAR OF 2007 AND SOLD AFTER 15-16 MONTHS IS TO BE TREATED AS A TRADE ASSET. NO DOUBT THE PROFIT ON TRANSFER OF ALLEGED AGRICULTURE LAND WAS QUITE HIGH . BUT THIS IS ONE OF THE CORROBORATIVE EVIDENCES, AMONGST OTHER, PROPOUNDED IN VARIOUS CASE LAWS NOTICED BY US. MERELY IF AN ASSESSEE IS GETTI NG A HIGHER VOLUME OF SALE CONSIDERATION, THEN IT COULD NOT BE CONSTRUED THAT TRANSACTION WOULD TAKE COLOUR OF A BUSINESS TRANSACTION. THE ASSESSE E IS BASICALLY AN ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 13 - AGRICULTURIST; PURCHASES LAND AT A DISTANCE OF MORE THAN 20 KMS. AWAY FROM MUNICIPALITY AND CLOSE TO HIS NATIVE VILLAGE. AFTER SALE OF THIS LAND, HE HAS AGAIN PURCHASES AGRICULTURE LAND. HE HAS NO T ENTERED INTO ANY SALE/PURCHASE OF LAND IN EARLIER PERIOD OF TIME OR IN SUBSEQUENT PERIOD OF TIME. HE HAS NOT BORROWED MONEY FOR PURCHASE OF LAND AND INCURRED INTEREST EXPENDITURE. THERE MIGHT BE REASONS FOR A LL OF A SUDDEN SPURT IN THE PRICE OF LAND IN THE AREA. THERE COULD BE CHAN GE OF POLICY OF GOVERNMENT LEVEL; INTRODUCTION OF SOME PROJECT, BUT THAT TYPE OF CHANGE IN THE POLICY, WHETHER, WAS IN THE NOTICE OF THE A SSESSEE. NO SUCH FACTORS HAVE BEEN BROUGHT ON RECORD BY THE AO. IT IS ALSO PERTINENT TO OBSERVE THAT WHETHER THE ASSESSEE COULD ANTICIPATE SUCH SUB STANTIAL INCREASE IN THE SALE PRICE OF THE LAND BECAUSE OF ANY POLICY IN TRODUCED BY THE GOVERNMENT, NO SUCH FACTORS HAVE BEEN BROUGHT ON RE CORD. FACTS ARE TO BE VIEW KEEPING IN VIEW PERSPECTIVE THE ASSESSEE, I .E. FROM WHERE HE BELONGS; WHETHER HE HAS VENTURED IN ANY TRADING ACT IVITIES OF SIMILAR NATURE; HIS EDUCATIONAL BACKGROUND ETC. EVEN THE E NTIRE TRANSACTION IS BEING LOOKED INTO WITH THAT ANGLE, THEN IT WOULD RE VEAL THAT HE HAS NOT TRADED IN THE LAND, RATHER IT WAS A SIMPLICITOR INVESTMENT FOR AGRICULTURE OPERATION, BUT ON ACCOUNT OF GETTING GOOD PRICE LAN D HAS BEEN SOLD, AND HIGHER VOLUME OF LAND PURCHASED AT DIFFERENT PLACES . EVERY AGRICULTURIST WOULD LIKE TO ENHANCE HIS LAND HOLDING, IF SIMILAR TYPE OF SALE OF LAND CAN RESULT INTO A PRICE, WHICH CAN ENABLE HIM TO BUY HI GHER VOLUME OF OTHER AGRICULTURE LAND. IN VIEW OF THE ABOVE DISCUSSION , WE ALLOW APPEAL OF THE ASSESSEE AND DIRECT THE AO TO TREAT THE ASSESSE E AS AN INVESTOR IN THE AGRICULTURE LAND. ENTIRE LAND SOLD TO BE TREATED A S AGRICULTURE LAND AND GAIN ON SALE OF THIS LAND IS BEYOND THE PURVIEW OF THE CAPITAL GAIN UNDER ITA NOS. 260 &0 294/RJT/2014 SHAILESH GANGARAM RAMANI A.Y. 2009-10 - 14 - SECTION 2(14) OF THE INCOME TAX ACT, 1961. THE EXE MPTION CLAIMED BY THE ASSESSEE BE GRANTED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D, AND THAT OF THE REVENUE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2017 SD SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER