SMT. ANITA SINGH, Indore V. THE ACIT-3(1), Indore

ITA 261/IND/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3040 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-07-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 21-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S S DESHPANDE
• Keywords: Capital asset; Business income; Cost of acquisition; Competent authority
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.261/IND/2016 ASSESSMENT YEAR:2012-13 SMT. ANITA SINGH, EF-14, SCH. NO.54, VIJAY NAGAR, INDORE / VS. ACIT - 2(1), INDORE ( APPELLANT ) (RE VENUE ) P.A. NO. AERPA9561K ITA NO.474/IND/2017 ASSESSMENT YEAR: 2013-14 SMT. ANITA SINGH, EF-14, SCH. NO.54, VIJAY NAGAR, INDORE / VS. ACIT - 2(1), INDORE (APPELL ANT ) (REVENUE) P.A. NO. AERPA9561K APPELLANT BY SHRI S.S. DESHPANDE CA REVENUE BY SHRI RAJIV JAIN, SR. DR DATE OF HEARING: 10.07.2018 DATE OF PRONOUNCEMENT: 28.08.2018 / O R D E R PER MANISH BORAD, A.M: THESE TWO APPEALS FILED BY THE ASSESSEE PERTAINING TO A.YS. 2012-13 & 2013-14ARE DIRECTED AGAINST THE ORDER OF LD. ANITA SINGH 2 COMMISSIONER OF INCOME TAX(APPEALS)-I, INDORE,(IN S HORT CIT(A)), VIDE APPEAL NO. IT-752/14-15 &NO.IT-23/2016-17 ORDE R DATED 04.11.2015 &01.05.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER CALLE D AS THE ACT) FRAMED ON 28.01.2015 & 29.01.2016 BY ACIT-3(1), IND ORE. 2. AS THE ISSUES RAISED IN BOTH THESE APPEALS RELAT ES TO SAME ASSESSEE AND ISSUES ARE IDENTICAL, THESE WERE HEARD TOGETHER AND BEING DISPOSED OFF BY THIS COMMON ORDER FOR SAKE OF CONVENIENCE AND BREVITY. 3. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE REC ORDS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAIL TRADE OF COUNTRY MADE LIQUOR AND FOREIGN LIQUOR. RETURN OF INCOME FOR AS SESSMENT YEAR 2012-13 AND ASSESSMENT YEAR 2013-14 WERE FILED ON 2 3.1.2013 AND 29.4.2014 DECLARING INCOME OF RS.3,22,49,498/- AND RS. 2,47,87,020/- RESPECTIVELY. CASES FOR BOTH THE YEA RS WERE PICKED UP FOR SCRUTINY THROUGH CASS, FOLLOWED BY THE ISSUA NCES OF STATUTORY NOTICES U/S 143(2) OF THE ACT AND U/S 14 2(1) OF THE ACT WHICH WERE DULY SERVED UPON THE ASSESSEE. DETAILED QUESTIONNAIRE WAS ISSUED AND WERE DULY REPLIED BY THE ASSESSEE. THE LD. A.O WHILE FRAMING THE ASSESSMENT OBSERVED THAT THE ASSE SSEE HAS EARNED SIGNIFICANT AMOUNT OF INCOME SHOWN UNDER THE HEAD CAPITAL GAIN FROM SALE OF LAND. LD.A.O ALSO NOTICED THAT TH E ASSESSEE OWNED THE LAND IN THE SAME VICINITY AND SOME PORTION OF T HE LAND WERE PURCHASED DURING THE FINANCIAL YEAR 2005-06 AND 200 6-07 AND THE ANITA SINGH 3 REMAINING WERE PURCHASED DURING THE FINANCIAL YEAR 2011-12. THE CAPITAL GAIN WAS ACCORDINGLY DECLARED AS SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN AS PER THE PERIOD OF OWN ERSHIP. ON MAKING FURTHER INVESTIGATION LD. A.O REVEALED THAT THE ALLEGED LAND WHICH HAS BEEN SOLD DURING THE ASSESSMENT YEAR 2012 -13 AND ASSESSMENT YEAR 2013-14 WERE SOLD WITH THE ASSISTAN CE OF DEVELOPER COMPANY NAMELY M/S. AARONE DEVELOPERS PVT . LTD WHO WAS APPOINTED AS HOLDER OF POWER OF ATTORNEY BY THE ASSESSEE AND ACTED ON BEHALF OF THE ASSESSEE FOR ARRANGING THE S ALE. M/S. AARONE DEVELOPERS PVT. LTD (ADPL) ALSO CONTACTED OTHER OWN ERS OF THE LAND IN THE VERY SAME VICINITY AND COMBINED DEAL WAS MAD E IN WHICH THE SALE DEEDS WERE EXECUTED BY THE ASSESSEE ALONG WITH VARIOUS OTHER PERSONS. AS FAR AS SALE CONSIDERATION IS CONCERNED M/S. ADPL WAS TO PROVIDE AN ACCOUNT WITH TOTAL SALES FOR THE YEAR AND AFTER CLAIMING THE EXPENSES INCURRED FOR THE PROJECT, THE ASSESSEE USED TO RECEIVE ITS SHARE. LD. A.O ON THE BASIS OF DETAILE D INVESTIGATION CAME TO A CONCLUSION THAT THE MODUS OPERANDI ADOPTED BY THE ASSESSEE IS PURELY AN ADVENTURE IN THE NATURE OF TR ADE AND AS SUCH HE ASSESSED THE PROFIT EARNED FROM SALE OF LAND AS BUSINESS PROFITS AS AGAINST CAPITAL GAIN DECLARED IN THE INCOME TAX RETURN. APART FROM THIS LD. A.O ALSO MADE DISALLOWANCES U/S 14A O F THE ACT AT RS.13,00,145/- FOR ASSESSMENT YEAR 2012-13 AND RS.8 ,49,934/- FOR ASSESSMENT YEAR 2013-14 AND ASSESSED THE INCOME AT RS.3,36,49,643/- AND RS.2,58,46,160/- FOR ASSESSMEN T YEAR 2013- 13 AND 2013-14 RESPECTIVELY. ANITA SINGH 4 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) BUT COULD SUCCEED ONLY IN RELATION TO DISALLOWANCES MADE U/S 14A OF THE ACT. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L AGAINST THE COMMON ISSUE OF THE TREATMENT OF THE PROFIT EARNED ON SALE OF LAND PLEADING THAT THE ALLEGED PROFIT FOR BOTH THE YEARS IS CAPITAL GAIN WHEREAS BOTH THE REVENUE AUTHORITIES HAVE TREATED I T AS ITS BUSINESS PROFIT. 6. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO T HE WRITTEN SUBMISSIONS MADE BEFORE THE LD. CIT(A) SUBMITTED TH AT THE ASSESSEES MAIN BUSINESS IS OF TRADING OF LIQUOR. INVESTMENTS WERE MADE TO PURCHASE LAND AND THEY WERE SHOWN UNDER THE HEAD OF FIXED ASSETS, AND THE ASSESSEE IS NOT ENGAGED IN TH E ACTIVITY OF PURCHASE/SALE OF LAND. THE PURPOSE OF APPROACHING M/S. AARONE DEVELOPERS PVT. LTD WAS ONLY TO FETCH BETTER PRICE FOR THE LAND AND ALSO TO FIND THE BUYERS WHO WERE INTERESTED TO PURC HASE THE LAND SHE HELD THESE LANDS AS A CAPITAL ASSET. THE AMOUNT S RECEIVED FROM THIS COMPANY FOR THE SALE OF THE LAND HAS BEEN SHOW N AS A LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL GAIN IN ACCORD ANCE WITH THE PERIOD OF HOLDING OF THE PROPERTIES. THE ACCOUNTS A RE AUDITED AND ANITA SINGH 5 THE TAX AUDIT REPORT IS OBTAINED. THE ASSESSEE ACQ UIRED THE AGRICULTURAL LAND OF 6. 53 HTRS. AT VILLAGE JHALA RIA IN THE YEAR 2006. THIS LAND WAS HELD BY THE ASSESSEE AS AN INVESTMENT . THE ASSESSEE ENTERED INTO AN UNDERSTANDING WITH M/S AARONE DEVEL OPERS PVT. LTD., DELHI, FOR DEVELOPMENT AND SALE OF THIS LAND. THE COMPANY AARONE HAD ENTERED INTO SIMILAR UNDERSTANDING WITH VARIOUS LAND OWNERS HOLDING THE SURROUNDING LANDS. A COMMON MAP WAS SANCTIONED FOR DEVELOPING ALL THESE LANDS. IT WAS A GREED BETWEEN THE PARTIES TO SHARE A PARTICULAR PERCENTAGE OF THE SAL E CONSIDERATION OF THE LAND. ACCORDINGLY THE ASSESSEE'S SHARE FOR EACH SALE CAME TO APPROXIMATELY 4.5. SPECIAL WEIGHTAGE WAS GIVEN TO T HE ASSESSEE FOR THE PRIME LOCATION OF HER LANDS. THE COMPANY AARONE DEVELOPED THE WHOLE LAND OF APPROXIMATELY 96 HTRS AND EFFECTED VA RIOUS SALE DEEDS OF THE DEVELOPED PLOTS TO VARIOUS PURCHASERS. THESE SALE DEEDS WERE EXECUTED WITH THE SIGNATURE OF ALL THE LAND OWNERS ALONG WITH TWO OF THE REPRESENTATIVES OF AARONE. THE ASSESSEE RECEIVE D AN AMOUNT OF RS.3,32,22,388/- DURING THE YEAR AND ACCORDINGLY SH OWED THE LONG TERM CAPITAL GAINS ON THE SALE OF THESE LANDS. WHIL E FRAMING THE ASSESSMENT THE LD AO OBSERVED ON PAGE 5 PARA 3.2 TH AT IT IS A BUSINESS ACTIVITY OF THE ASSESSEE CARRIED OUT THROU GH THE COMPANY ANITA SINGH 6 AARONE AND IT IS IN THE NATURE OF TRADING. THE LD A O FURTHER OBSERVED IN PARA 3.3 THAT THE EXACT PIECE OF LAND S OLD BY THE BUILDER IS NOT ASCERTAINABLE. THE LD AO STATED IN PARA 3.6 PAGE 7 THAT THE ASSESSEE HAS PURCHASED FOUR PLOTS DURING THE YEAR A ND AS SUCH IT ESTABLISHES THAT SHE IS ENGAGED IN THE TRADING ACTI VITY. THIS REMARK IS TOTALLY UNJUSTIFIED BASED ON PURE SURMISES SINCE THREE PLOTS ARE STILL HELD BY THE ASSESSEE AS A CAPITAL INVESTMENT. IN PARA 3.8 THE LD AO OBSERVED THAT THE CAPITAL GAINS ARE NOT QUANTIFI ABLE EXACTLY BUT IT IS AN ESTIMATE WHICH IS NOT ACCEPTABLE. THE LD A O RELIED ON THE DECISION IN THE CASE OF RAJA RAMESHWAR REPORTED IN 42ITR 179 AND ULTIMATELY CONCLUDED THAT THE ACTIVITY OF THE ASSES SEE IS NOTHING BUT AN ADVENTURE IN THE NATURE OF TRADE AND THE INCOME ARISING OUT OF IT IS TAXABLE AS A BUSINESS INCOME. 7. IT WAS FURTHER SUBMITTED THAT THE SAID LAND WAS PURCHASED AS AN AGRICULTURAL LAND AND WAS HELD BY THE ASSESSEE FOR MORE THAN FOUR YEARS AS A CAPITAL ASSET. ON BEING APPROACHED BY M/ S AARONE THE ASSESSEE DECIDED TO SALE THIS CAPITAL ASSET AND FOR BETTER REALISATION AGREED TO RECEIVE THE CONSIDERATION IN PART. THE SA ID CONSIDERATION WAS RECEIVED FROM AARONE ON THE SALE OF PLOTS. THE LD AO TOTALLY OVERLOOKED TO THE FACT THAT THE POSSESSION OF THE L AND WAS HANDED ANITA SINGH 7 OVER TO AARONE FOR DEVELOPMENT. THE MAP FOR THE COL ONY WAS SANCTIONED IN THE NAME OF THE AARONE AND ON THE SAL E DEED TWO OF THE DIRECTORS OF AARONE HAVE SIGNED ALONG WITH ALL THE OWNERS. THE ASSESSEE ALONG WITH THE OTHER OWNERS ALSO SIGNED TH E SALE DEEDS BECAUSE THE TRANSFER CAN BE EFFECTED ONLY BY THE OW NERS. IT IS WORTH NOTING FACT THAT THE TOTAL SALE CONSIDERATION WAS RECEIVED BY AARONE AND WAS DEPOSITED IN THEIR BANK - ACCOUNT. THE PROP ORTIONATE CONSIDERATION WAS RECEIVED BY THE ASSESSEE FROM AAR ONE IN INSTALLMENTS. THUS, IT ESTABLISHES THE FACTUAL POSI TION THAT THE ASSESSEE HAS NOT DEALT WITH THE SAID LAND AS A TRAD ING ACTIVITY BUT HAS RECEIVED THE CONSIDERATION IN PARTS ON THE SALE OF A CAPITAL ASSET FROM THE DEVELOPERS. UNDER THESE CIRCUMSTANCES THE CAPITAL GAINS IS CORRECTLY SHOWN BY THE ASSESSEE ON THE SALE OF THE CAPITAL ASSET AND CANNOT BE TAXED AS A BUSINESS PROFIT. THE CASE LAWS CITED BY THE LD AO ARE NOT APPLICABLE IN THE INSTANT CASE SINCE THE ASSESSEE HAD PURCHASED THIS LAND NOT WITH THE INTENTION OF DOING ANY BUSINESS BUT HELD THE SAME AS A CAPITAL ASSET. WE WOULD LIKE TO DRAW YOUR HONOURS KIND ATTENTION TO THE FOLLOWING JUDGMENTS W HEREIN IT HAS BEEN HELD THAT IF THE PLOTS ARE SOLD FOR GETTING BETTER PRICE THEN IT WOULD BE A CAPITAL GAIN AND NOT THE BUSINESS INCOME . ANITA SINGH 8 CIT V/S SURESH GOYAL 298 ITR P. 277 (MP) CIT V/S GAJANANA ENTERPRISES 314 ITR P. 247 (KAR) CIT V/S SOHAN KHAN 304 ITR 194 8. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENT ATIVE VEHEMENTLY ARGUED AND SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE SOLE ISSUE RAISED IN THESE TWO APPEA LS IS THAT WHETHER THE PROFITS EARNED BY THE ASSESSEE FROM SALE OF LAN D IS TO BE ASSESSED AS BUSINESS INCOME OR CAPITAL GAIN. 10. WE FIND THAT THE ASSESSEE IS MAINLY ENGAGED IN LIQUOR BUSINESS. INVESTMENTS WERE ALSO MADE IN THE AGRICU LTURAL LAND AND OTHER PROPERTIES. THE IMPUGNED LAND UNDER CONSIDER ATION OF THESE TWO APPEALS ARE THE CHUNK OF LAND SITUATED AT VILLA GE JHALARIA. ASSESSEE PURCHASED PIECE OF AGRICULTURAL LAND AT VI LLAGE JHALARIA NEAR INDORE DURING THE FINANCIAL YEAR 2005-06 AND 2 006-07 AND PURCHASES OF ANOTHER PORTION OF LAND IN THE VERY SA ME AREA WERE MADE DURING THE FINANCIAL YEAR 2010-11. AS ACCEPTE D BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE ENTERED INTO AN UNDERSTANDING WITH M/S. AERONE DEVELOPERS PVT. LTD, DELHI (ADPL) FOR DEVELOPMENT AND SALE OF THIS LAND. ADPL ENTERE D INTO SIMILAR ANITA SINGH 9 UNDERSTANDINGS WITH VARIOUS LAND OWNERS HOLDING THE SURROUNDING LANDS. A COMMON MAP WAS SANCTIONED FOR DEVELOPING ALL THESE LANDS. IT WAS AGREED BETWEEN VARIOUS PARTIES TO SH ARE A PARTICULAR PERCENTAGE OF THE SALE CONSIDERATION AND SPECIAL WE IGHTAGE WAS GIVEN FOR THE LAND IN PRIME LOCATION. AS INFORMED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE DEVELOPER COM PANY M/S. ADPL DEVELOPED APPROXIMATELY 96 HECTARES OF LAND AND THE REAFTER SOLD THE DULY DEVELOPED PLOT OF LANDS TO VARIOUS PURCHASERS. 11. WE FIND THAT FOR THE ASSESSMENT YEAR 2012-13 AN D 2013-14 FOLLOWING AMOUNTS HAVE BEEN DISCLOSED BY THE ASSESS EE AS SHORT TERM CAPITAL AND LONG TERM CAPITAL GAIN FROM SALE O F IMPUGNED LAND OWNED BY THE ASSESSEE. ASSESSMENT YEAR 2012-13 S.NO DATE OF PURCHASE COST OF ACQUISITION & SURVEY NO. OF THE LAND DATE OF SALE SALES CONSIDERATION CAPITAL GAIN OFFERED IN RS. 1 13/08/20 10 3075429 (SURVEY NO.27) 31.03.2012 54,68,011 23,92,582(STCG) 2 01/04/20 10 1564292 (SURVEY NO.62/22 31.03.2012 1883489 3,19,197 (STCG) 3 10/07/06 548209 (SURVEY NO. 17/ 2, 54/2, 31.03.2012 20323345 1,97,75,136 (LTCG) ANITA SINGH 10 29/1, 64/1 4 10/02/06 123477 31.03.2012 5547543 54,24,066 (LTCG) ASSESSMENT YEAR 2013-14 S.NO DATE OF PURCHASE COST OF ACQUISITION & SURVEY NO. OF THE LAND DATE OF SALE SALES CONSIDERATION CAPI TAL GAIN OFFERED IN RS. 1 13/08/20 10 2236365 (SURVEY NO.27) 31.03.201 3 46,890,752 23, 53,387 (STCG) 2 01/04/20 10 15 29420 (P-3) 31.03.201 3 44,90,799 29,51,379 (STCG) 3 F.Y 2006 - 07 432667 (SURVEY NO. 29/1,, 54/2, 58/2, 64/1, 17/1, 17/2 31.03.201 3 1,10,59, 788 1, 06,27,121 (LTC G) 4 F.Y 2005 - 06 97,542 (COUNTRY WALK SURVEY NO.62/2) 31.03.201 3 47,52,449 46,54,997 (LTCG) 12. LD. A.O WHILE EXAMINING THE IMPUGNED TRANSACTIO NS AS WELL AS THE CIRCUMSTANTIAL EVIDENCES PROCURED FROM THE ASSE SSEE IN THE PROCEEDINGS CONCLUDED THAT THE PROFITS EARNED FROM SALE OF LAND SHOULD BE TAXED AS BUSINESS INCOME AND NOT AS CAPIT AL GAIN BECAUSE THE ACTION OF THE ASSESSEE PROVES THAT SHE ENTERED INTO AN ADVENTURE IN THE NATURE OF TRADE AND FOR COMING TO THIS CONCLUSION LD.A.O OBSERVED AS FOLLOWS WHILE FRAMING THE ASSESS MENT FOR A.Y. 2012-13. ANITA SINGH 11 3.1 BEFORE COMMENTING UPON THE CAPITAL GAIN OFFER ED BY THE ASSESSEE ON THE SAID LAND IT WOULD BE PERTINENT TO DISCUSS T HE MODUS OPERANDI OF THE BUSINESS CARRIED OUT BY THE ASSESSEE. THE ASSES SEE HAS PURCHASED AGRICULTURE LAND WITH A VIEW TO FETCH BETTER PRICE. THE SAID LAND HAS BEEN SOLD THROUGH M/S AARONE DEVELOPERS PVT. LIMITED. THE SAID COMPANY HA S RECEIVED LAND FROM ASSESSEE I.E OWNER OF THE LAND W HO CARRIED OUT TRADING OF LAND AFTER DEVELOPING THE SAID LAND AND COMPANY HAS BEEN SELLING THE LAND INTO PIECES AND HAS CHARGED THE 'DEVELOPMENT C HARGES' FROM THE ASSESSEE. THE DEVELOPER COMPANY NAMELY M/S AARONE DEVELOPERS PVT. LTD. HAS BEEN APPOINTED AS HOLDER OF 'POWER OF ATTO RNEY' BY THE ASSESSEE AND ACTED ON BEHALF OF THE ASSESSEE ARRANGING THE S ALE AND SOLD THE PIECES OF LAND TO VARIOUS CUSTOMERS FOR WHICH REGIS TERED DOCUMENTS WERE EXECUTED IN NAME OF THE ASSESSEE. IN EACH 'SALE DEE D' EXECUTED THE ASSESSEE ALONG WITH OTHER PERSONS HAVE APPEARED AND DIRECTOR OF THE COMPANY SHRI SANJAY PHAWA ALONG WITH SHRI MUKESH KU MAR ARE EXERCISING 'POWER' OF ATTORNEY' ON BEHALF OF SELLER S. DURING THE F.Y.2011- 12 RELEVANT TO THE A.Y.2012-13 M/ S AARONE DEVELOPERS PVT. HAS EXECUTED SEVERAL SALE DEEDS AS A RESULT THE COMPANY HAS RECE IVED A SALE CONSIDERATION AMOUNTING TO RS.78,69,83,437/- OUT OF WHICH THE 'ASSESSEE'S SHARES SUSTAIN AT RS3,32,22,388/-. THE CERTIFICATE TO THIS EFFECT ADMITTING THE TRANSACTION GIVEN BY M/S AARON E DEVELOPERS IS REPRODUCED AS UNDER- ANITA SINGH 12 AARONE DEVELOPERS PVT.LTD AARONE 6 TH FLOOR, SELECT CITY WALK, GROUP A-3, DISTRICT CENTER, SAKET NEW DELHI . TO, MS. ANITA SINGH EF14, SCHME NO.54, VIJAY NAGAR INDORE. DEAR SIR. THIS IS CONFIRM THAT WE HAVE ACCOUNTED FOR THE FY 2 011-12 AMOUNT PAYABLE TO YOU AGAINST THE SALE OF YOUR LAND . TOTAL SALES OF THE YEAR -786,983,437 LESS: EXPEJNSE PAID BY US ON VARIOUS A/C -21,751,7 25 NET AMOUNT RECEIVED BY US -76 5,231,712 SHARE OF MS.ANITA SINGH AMT. OF TOTAL SALE 33,222 ,388 THIS LETTER IS BEING GIVEN TO YOU FOR YOUR PURPOSE AND REQUEST THANKS, DIRECTOR AARONE DEVELOPERS PVT. LTD. 6 TH FLOOR. SELECT CITY WALK. A3, DISTRICT CENTER, SAKET, NEW DELHI PAN AAACV0276C 3.2 FURTHER, AS SUBMITTED BY THE ASSESSEE SHE HAS . GIVEN A PLOT OF LAND MEASURING 6.03 HECTARES TO M/S .AARONE DEVELOPERS PVT. LTD. FOR SA LE AND RECEIVED CONSIDERATION FROM THE SAID COMPANY AS AND WHEN THE LAND WAS SOLD BY THE COMPANY. THE ASSESSEE HAS REDUCED HER P ART OF LAND GIVEN TO ANITA SINGH 13 M/S AARONE PVT. LTD TO THAT PROPORTION FROM WHICH THE C OMPANY HAS SOLD THE ASSIMILATED PLOTS OF LAND. FOR EXAMPLE, IF COMP ANY DECLARES THAT IT HAS SOLD 10% OF LAND RECEIVED FROM THESE 18 PERSONS THEN ASSESSEE ASSUMES THAT 10% OF LAND GIVEN BY HER TO THE COMPAN Y HAS BEEN SOLD. BUT, IT IS NOT ASCERTAINABLE AS TO WHETHER 10% OF L AND EXCLUSIVELY PERTAINING TO THE ASSESSEE HAS ACTUALLY BEEN SOLD O R NOT. FROM PLAIN READING OF MODE OF OPERATION OF THE BUSINESS ACTIVI TY CARRIED OUT BY THE ASSESSEE, IT ESTABLISHES THAT THE ASSESSEE IS CARRY ING OUT BUSINESS ACTIVITY OF TRADING OF LAND THROUGH THE COMPANY M/S AARONE PVT. LTD. AND LAND IS BEING SOLD WHICH IS OF THE NATURE OF TRADING AND IS NOTHING BUT A BUSINESS. 3.3 FURTHER, IT IS NOT ASCERTAINABLE FROM THE DETAI LS GIVEN BY THE ASSESSEE AS TO WHICH PIECE OF LAND OWNED BY HER WAS SOLD BY THE BUILDER. IN CASE ASSESSEE IS ABLE TO QUANTIFY THAT THE PIECE OF LAND WHICH IS OWNED BY HER HAS BEEN SOLD BY WAY OF REGISTERED DOCUMENTS SIGNED BY HER SOLD THROUGH BUILDER THEN ONLY THE QUESTION OF CAPITAL GAIN ARIS ES IN HER HANDS LEADING TO THE ACTUAL TRANSFER OF CAPITAL ASSETS WI THIN THE MEANING OF SEC.2(47) R.W.S 53A OF THE TRANSFER OF PROPERTY ACT . BUT IN THE ASSESSEE'S CASE THIS IS NOT THE SITUATION LEADING TO FACT THAT NO CAPITAL ASSET HAS BEEN TRANSFERRED BY HER AND' IS OUT OF THE PURVIEW OF CHARGING OF CAPITAL GAIN IN HER HAND. SINCE THE ACTIVITY CARRIED OUT BY HER IS TRADING OF LAND AMOUNTING TO BUSINESS. 3.4 VIDE NOTE SHEET ENTRY DATED 21/12/2014 THE ASSESSEE WAS CATEGORICALLY ANITA SINGH 14 ASKED TO EXPLAIN AS WHY SHALL NOT CAPITAL GAIN BE T REATED AS BUSINESS INCOME BEING SALE OF PLOT AFTER DEVELOPMENT THROUGH M/S ARONE DEVELOPER PVT. LTD . IN COMPLIANCE TO THE SAID QUER Y VIDE LETTER DATED 13/01115 THE ASSESSEE REPLIED AS UNDER.- 'IN THIS REGARD THIS IS TO SUBMIT TO THE ASSESSEE I S MAKING HER INVESTMENTS IN PROPERTIES. SHE IS NOT A REGULAR TRA DER OR BUYING AND SELLING FREQUENTLY AS REQUIRED FOR A TRADING ACTIVI TY. SHE WAS HOLDING THE CURRENT LAND FOR A LONG TIME' AND WAS NOT DOING ANY TRADING ACTIVITIES. SHE GETS THE PROPERTY REGISTERED IN HER NAME AND SE LLS WHEN GOOD PRICING ARE ACHIEVED. NORMALLY, IN THE PROPERTY BUSINESS TH E PROPERTIES ARE NOT REGISTERED AND THEN SOLD AS IT IS A COSTLY AFFAIR I NCURRING AROUND 20 EXPENSES ON REGISTRATION FIRST AT THE TIME OF BUYING AND THEN A T THE TIME OF SELLING WHICH INFLATES THE PRICE BY 20. NORMALLY ON THE BASIS OF AGREEMENT THE BUSINESS OF PROPERTY IS DONE BY DOING REGULAR S ALES AND PURCHASES BUT IN THE PRESENT CASE, THE ASSESSEE HAS NEVER UND ERTAKEN ANY SUCH ACTIVITIES. IN FACT, ASSESSEE WAS NOT ACTING EVEN A S A BUILDER DURING THE RELEVANT POINT OF TIME AND THEREFORE THIS LAND WAS PURCHASED ONLY AS AN INVESTMENT AND WAS ALSO REFLECTED IN THE BALANCE SH EET AS AN INVESTMENT. IF A PERSON INVESTS MONEY IN LAND INTENDING TO HOLD IT, ENJOYS ITS INCOME FOR SOME TIME AND THEN SELLS IT AT A PROFIT, IT WOU LD BE A CLEAR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERIVED FROM AN AD VENTURE IN THE NATURE OF TRADE. IT IS IMPORTANT TO UNDERSTAND THE DISTINCTION BETWE EN DEALER MID INVESTOR ANITA SINGH 15 STATUS. THE TERM 'DEALER' IS WIDELY USED TO DENOTE ONE WHO HOLDS REAL PROPERTY FOR SALE RATHER THAN FOR INVESTMENT PURPOS ES. FACTOR TO CONSIDER IN DETERMINING DEALER VERSUS INV ESTOR STATUS INCLUDE THE FOLLOWING THE NATURE AND PURPOSE OF THE PROPERTY ACQUISITION AND PERIOD OF OWNERSHIP, THE LENGTH OF TIME THE PROPERTY WAS HELD, THE REASON THAT THE PROPERTY WAS HELD THE NATURE AND EXTENT OF ANY IMPROVEMENTS THE EXTENT OF DEVELOPING AND SUBDIVIDING THE PROPER TY INCLUDING ADVERTISING TO INCREASE SALES. :PRIOR AND CURRENT D EALINGS IN SIMILAR PROPERTY THE EFFORTS OF THE TAXPAYER TO SELL THE PROPERTY THE NUMBER, SUBSTANTIALITY, EXTENT, AND CONTINUITY OF THE SALES(FREQUENCY): THE USE OF A BUSINESS OFFICE IN THE SALE OF THE PRO PERTY: THE DEGREE AND CHARACTER OF CONTROL OR SUPERVISION' THAT THE TAXPAYER EXERCISES OVER ANY REPRESENTATIVE SELLING THE PROPE RTY; AND THE TIME AND EFFORT THAT THE TAXPAYER DEVOTED TO TH E SALES, THE FREQUENCY AND SUBSTANTIALITY OF THE SALES ARE C ONSIDERED THE MOST IMPORTANT FACTOR IN ATTAINING INVESTOR STATUS. PROF IT MOTIVE WOULD ALWAYS BE THERE IN ALL INVESTMENT TRANSACTIONS, BUT BECAUS E OF IT SAME CANNOT BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE THAT ASSESSEE WAS NOT A ANITA SINGH 16 TRADER IN LAND. NO ACTIVITY WAS DONE TO IMPROVE THE QUALITY OF LAND BY ASSESSEE HERSELF. NO ACTIVITY SIMILAR TO THE ACTIV ITIES REQUIRED FOR TRADING OPERATIONS WAS CARRIED ON. THE ACTIVITY IS NOT DONE ON REPETITIVE BASIS, THEREFORE, THE INVESTMENT IN THE PLOT COULD NOT BE HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE AND IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS .RAUNAQ SINGH SWARAN SINGH[85 ITR 22], 3.5 THE ARGUMENT PUT FORTH BY THE ASSESSEE WAS CONS IDERED CAREFULLY BUT DIDN'T FIND PLAUSIBLE ON FOLLOWING GROUNDS.:- 3.6 AS REGARDS THE CLAIM OF THE ASSESSEE THAT SHE I S NOT A REGULAR TRADER OR BUYING AND SELLING LAND FREQUENTLY IS CONCERNED THE SAME IS NOT TRUE IN LIGHT OF THE REPLY FURNISHED BY THE ASSESSEE. SI NCE 01/04/10 THE ASSESSEE 'HAS PURCHASED FOUR PLOTS OF LAND WITH AN INTENT TO EARN PROFIT BY SELLING IT. EVEN DURING THE F.Y.2011-12 RELEVANT TO THE A.Y.2012-13 SHE HAS PURCHASED PLOTS OF LAND OF WORTH RS.781AC.F OR THE SAKE OF CLARITY THE PLOTS OF LAND PURCHASED BY THE ASSESSEE IS REPR ODUCED AS UNDER:- DETAILS OF IMMOVABLE ASSETS PURCHASED AFTER 01.04.09 DATE OF PURCHASE AMOUNT SOURCE COUNTY WALK P - 3 13-08-2010 70,87,866/- SALE PROCEED OF COUNTY WALK RESIDENTIAL PLOT AT SCH.NO.78 29-01-2010 16,37,3101- - DO - RESIDERITIAL PLOT AT JHAJARIA 13-10-2011 83,58,365/- - DO - AGRICULTURAL LAND AT SULAKHDI 27.01.2012 1,85,86,260/- - DO - ANITA SINGH 17 3.7 FROM THE ABOVE CHART, IT AMPLY ESTABLISHES THAT THE ASSESSEE IS FREQUENTLY PURCHASING PLOTS OF LAND SINCE 01/04/2010 AND IS ENGAGED IN THE TRADING ACTIVITY THROUGH M/S AARONE DEVELOPERS PVT. LTD . 3.8 THE CLAIM OF THE ASSESSEE WITH REGARD TO CAPITA L GAIN ARISING ON ACCOUNT OF 'SALE OF LAND IS NOT CONSIDERABLE. IN VI EW OF THE FACTS THAT THE ASSESSEE HAS FAILED TO 'QUANTITY THE ACTUAL LAND EX CLUSIVELY PERTAINING TO HER WHICH WAS SOLD BY MIS .AERON PVT. LTD DURING TH E YEAR WHEREAS NO ACTUAL TRANSFER OF SPECIFIC PIECE OF LAND OWNED BY THE ASSESSEE IS ASCERTAINABLE. TO COMPUTE AND CLAIM CAPITAL GAIN TH E COST OF ACQUISITION OF THE CAPITAL ASSET BEING SOLD MUST BE ASCERTAINAB LE FROM THE DOCUMENTS AGAINST 'PURCHASE OF LAND WHICH IS BEING TRANSFERRE D, OTHERWISE THE CAPITAL GAIN SO COMPUTED WOULD NOT BE ACTUAL AND A UTHENTIC. IN THE ASSESSEE'S CASE !HE COST OF ACQUISITION OF THE LAND (EXCLUSIVELY PERTAINING TO THE ASSESSEE) AND SOLD THROUGH M/S AARONE PVT. LTD. IS NOT QUANTIFIABLE AND CAPITAL GAIN OFFERED BY THE ASSESS EE ON THAT LAND IS NOT ACTUAL BUT AN ESTIMATION WHICH IS NOT ACCEPTABLE BE ING CLAIMED AS CAPITAL GAIN WITHIN THE MEANING OF SECTION 45 OF TH E ACT. THE ASSESSEE' HAS ASSUMED PURCHASE COST OF HER LAND TO THE PROPOR TION BY WHICH M/S AARONE PVT LTD. HAS SOLD THE ASSIMILATED PLOTS OF L AND. FOR EXAMPLE, IF COMPANY DECLARES THAT IT HAS SOLD THE 10% OF LAND R ECEIVED FROM VARIOUS 'PERSONS THEN ASSESSEE ASSUMES THAT 10% OF LAND GIV EN BY HER TO THE COMPANY HAS ACTUALLY BEEN SOLD. THIS ESTIMATION IS UNWARRANTED AND CONTRARY TO THE BELIEF THAT WHETHER THE ACTUAL SALE HAVING REGARDS TO ANITA SINGH 18 THOSE PLOTS OF LAND EXCLUSIVELY PERTAINING TO THE A SSESSEE HAS BEEN DONE OR NOT. AS THE LAND TAKEN FROM VARIOUS PERSONS HAVE BEEN ME RGED BY M/S AARONE PVT LTD. AND THEREAFTER IT IS BEING SOLD BY M/S AERON PVT. LTD ON BEHALF OF ALL THE PERSONS AND IN EACH SALE EXECUTIO N, LAND OF ALL THE PARTIES (REFLECTING IN THE SALE DEED) CONCERNED HAV E NOT ACTUALLY BEEN SOLD AND HENCE CAPITAL GAIN DOESN'T ARISE THEREOF. DURIN G THE A.Y UNDER CONSIDERATION M/S AARONE PVT LTD. HAS INTIMATED TO THE ASSESSEE THAT 29 OF LAND PERTAINING TO HER HAVE BEEN SOLD. THE ASSES SEE REDUCED THE PLOTS OF LAND GIVEN BY HER TO M/S AARONE PVT. LTD. TO THE EXTENT OF 29 AND HAS TAKEN PURCHASE PRICE ON THAT PART OF LAND TO COMPUTE COST OF ACQUISITION WITH A VIEW TO CLAIM CAPITAL GAIN AND ACCORDINGLY H AD OFFERED CAPITAL GAIN. THE METHOD ADOPTED BY THE ASSESSEE IS JUST AN ESTIMATION CONTRARY TO THE REALITY HENCE CAPITAL GAIN OFFERED BY HER IS NOT AN AUTHENTIC' ONE. FURTHER THE METHOD ADOPTED BY THE ASSESSEE TO FETCH BETTER PROFIT IS NOTHING BUT A BUSINESS CARRIED OUT THROUGH M/S. AAR ONE PVT.LTD . 4. ON BEING SPECIFICALLY QUERIED AS PER ORDER SHEET DATED 30/12/2014 WITH REGARD TO ANY AGREEMENT BEING SIGNED BY ASSESS EE WITH THE DEVELOPER M/S AARONE DEVELOPERS PVT. LTD, VIDE LETT ER RECEIVED IN THIS OFFICE ON 23/01/15 THE ASSESSEE SUBMITTED AS UNDER: - RESPECTED SIR, IN REFERENCE TO THE CAPTIONED SUBJECT, WE WISH TO PUT FORTH FOLLOWING INFORMATION/ DOCUMENTS: ANITA SINGH 19 THE ASSEESSEE WAS HAVING INVESTMENT IN AGRICULTURE LAND SITUATED AS VILLAGE JHALARIA INDORE ADMEASURING 6.53 HECTARE LAND. SHE WAS INTENDING TO FETCH B ETTER PRICE OF THIS IN VES TM CNT. IF THE LAND WERE TO BE SOLD NUT ON AS IT IS CONDITION, IT COULD NOT HAVE FETCHED BETTER PRICE SE CON DLY SHE WAS NOT INTERESTED TO DISPOSC OFF THE LAND IN WHOLE THEREFO RE SHE BAD A VERBAL UNDERSTANDING WITH M / S AARONE DEVELOPERS TO SALE THE LAND AVAILABLE WITH HER BY M AKING VALUE ADDITION TO THE LAND SO AS TO FETC H BETTER PRICE US AND 'WHEN THE GOOD PRICING IS AVAI L AB L E IN THE MARKET. SINCE BOTH THE P ARTIES WERE NOT INTERESTED TO FIX UP THE PRICES AS THE GUIDEIINES IN THE COMING YEARS WERE BOUND TO CHANGE HENCE THEY HAVE NOT AGREED TO ENTER INTO ANY OFFICIAL AGREEMENTS. THE LAND WAS NOT TRANSFERRED TO M / S AARONE. THE OWNERSHIP REMAINED 'WITH ASS ES SEE AND WAS TO BE PART WITH IN PIECE AS AND WHEN THE PEACE OF LAUD IS SOLD, IT WAS GIVEN TO M / S AARONE JUST TO HNPIE111ENT THE DEVELOPMENT WORK AND NO DOCUMENT WAS REGISTERED FOR THE PURPOSE. M / S AARENE DEVELOPERS HAS MADE SIMILAR ARRANGEMENTS WITH VARIOUS OTHER LAND O WNERS OF ADJOINING LANDS. AFTER MAKING VALUE ADDITION TO THE LAND THE LAND WAS TO BE SOLD OUT TO DIFFERENT PERSONS. S INCE M/ S AARONE HAS COMBINED AN THE LANDS AND HAS GOT SINGLE MAP SANCTIONED FROM THE COMPETENT AUTHORITY, IT WAS DIFFICUL T TO IDENTIFY INDIVIDUAL PIECE OF LAND AND AREA. COMBINED BY I N DIVIDUAL LAND OWNERS AFTER DEVELOPMENT HEN C E, WHENEV ER 'ANY PARTICULAR AREA /PLOTS ARE SOLD M/S AARONE DISTRIB U TES THE TOTAL AMOUNT ARTLOL1G VARIOUS LAND OWNERS AFTER KEEPING A CE RT AIN PORTION TOWARDS HIS COST OF VALUE ADDITION AND HIS COMPENSATION WHICH IS ANITA SINGH 20 6 0% OF THE TOTAL AN10UNT RECEIVED. THE TOTAL AMOUNT RECEIVED BY SALE OF TOTAL AREA OF LAND IN A PARTICULAR FINANCIAL YEAR IS DISTRIBUTED AMONG LAND OWNERS AND NOT AS PER THE AREA AS THE AREA AVAILABLE TO INDIVIDUAL OWNER WAS NOT AVAILABLE, IT IS THE PROPORTION WHICH FORMED THE BASIS OF DISTRIBUTION. THE ASSESSEE DEDUCTS THE PROPORTIONATE COST OF THE TOTAL COST OF LAND OF 6.53 HECTARE LAND WHICH SHE HAS CONTRIBUTED. THE TO TAL SA L ABLE AREA IS AVAILABLE WITH AARONE AND IT HAS TO SALE THE TOTAL AREA AS PER SANCTIONED MAP AND TOTAL A MO UNT TO HE RECEIVED IS TO BE DISTRIBUTED AMONG LAND O WNERS AS PER THEIR INDIVID U AL CONTRIBUTION OVER THE YEARS TILL THE TOTAL AREA IS SOLD OFF. UNDER THE C IRCUMSTANCES THE PROPORTION OF ASSESSEE WAS FIXED AS FOLLOWS; TOTAL AREA OF LA ND AS PER SANCTIONED MAP .. 95.028 HECTARE AREA OF ASSESSEE OUT OF TOTAL LAND .. 06.53 HECTARE 40 % SHARE OF ASSESSEE IN HET TOTAL LAND . 2.75% THUS THE ASSESSEE WAS TO GET 2.751' OF THE TOTAL SALE CONSIDERATION RECEIVED DURING A PARTICULAR FINANCIAL YEAR. DURING THE YEAR UNDER AS SESSMENT THE COST OF LAND HAS U NDERGONE CHANGES TOWARDS POSITIVE SIDE HENCE WITH THE MUTUAL UNDERSTANDING THE AARO NE HAS GIVEN TO ASSESSEE ADDITIONAL 1.4 CONTRIBUTION EXTRA FOR THE YEAR UNDER ASSESSMENT. WE HAVE ALREADY SUBMITTED THE C O NFIRMATION FROM M / S AARONE FOR THE TOTAL AM OUNT RECEIVED FROM THEM. IN VIEW OF ABOVE SUBMISSION, IT IS EVIDENT THAT THE RE DO NOT EXIST ANY AGREEMENT/MOU BETWEEN M/S AERONE PVT.LTD AND THE AS SESSEE, WHICH DEEPENS THE BELIEF THAT M/S AERONE PVT. LTD IS COND UCTING BUSINESS ON BEHALF OF THE ASSESSEE AND OTHER 17 PERSONS INDEPEN DENTLY. IN THIS REGARD, ANITA SINGH 21 RELIANCE IS PLACED UPON THE LANDMARK DECISION OF TH E APEX COURT IN THE CASE OF RAJA J. RAMESHWAR RAO VS CIT(SC) 42ITR 179 WHEREIN IT WAS H ELD THAT :- 'EVEN A SINGLE VENTURE MAY BE REGARDED AS IN THE NA TURE OF TRADE OR BUSINESS. WHEN A PERSON ACQUIRES LAND WITH A VIEW T O SELLING IT LATER AFTER DEVELOPING IT, HE IS CARRYING ON AN ACTIVITY RESULTING IN PROFIT, AND THE ACTIVITY CAN ONLY BE DESCRIBED AS A BUSINESS VE NTURE. WHERE THE PERSON GOES FURTHER AND DIVIDES THE LAND INTO PLOTS , DEVELOPS THE AREA TO MAKE IT MORE ATTRACTIVE AND SELLS THE LAND NOT AS A SINGLE UNIT AND AS HE BOUGHT IT, BUT IN PARCELS, HE IS DEALING WITH LAND AS HIS STOCK-IN-TRADE; HE IS CARRYING ON BUSINESS AND MAKING A PROFIT. ' THE SAME FORA WAS DELVED BY THE HON'BLE KARNATKA HI GH COURT IN THE CASE OF CIT VS. RAMAIAH &ORS.146ITR 39 AND P. KANNAN VS CIT(KAR) 154ITR 441 WHEREIN THE HON'BLE HIGH COURT HELD THAT 'SALE OF LAND AFTER PLOTTING IS A BUSINESS VENTURE '. THE DECISION OF THE ABOVE JUD ICIAL PRONOUNCEMENTS ARE SQUARELY APPLICABLE IN THIS CASE. 3. IT IS ALSO BEYOND DOUBT THAT THE ACTIVITY CARRIE D OUT BY THE ASSESSEE IS NOTHING BUT PURCHASE AND SALE OF LAND AMOUNTING TO TRADING WITH A VIEW TO EARN MORE PROFIT. IN LIGHT OF THE DISCUSSION HELD H EREINABOVE, IT ESTABLISHES THAT THE ACTIVITY OF THE ASSESSEE IS NOTHING BUT AN ADVENTURE HAVING NATURE OF TRADE. HENCE, CAPITAL GAIN OFFERED ON ACCOUNT OF SALE OF LAND IS TREATED AS BUSINESS INCOME. M / S AERONE PVT. LTD HAS BORNE ALL THE EXPENSES ARISIN G ON ACCOUNT OF DEVELOPMENT AND SALE OF LAND AND THE ASS ESSEE HAS RECEIVED HER SHARE FROM NET SALE RECEIPTS OF M / S AERONE PVT. LTD. HENCE, NO EXPENSES ARE ALLOWABLE IN THE CASE OF THE ASSESSEE. FURTHER, DUR ING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS CARRIED OUT BU SINESS ON ACCOUNT OF TRADING IN SALE & PURCHASE OF LAND THROUGH M / S AERONE DEVELOPERS PVT. LTD. AS PER DETAILED SUBMISSIONS MADE DURING THE AS SESSMENT PROCEEDINGS. THEREFORE, NET SALE PROCEEDS RECEIVED BY THE ASSESS EE AMOUNTING TO RS.2,79,1 0,981/- AS ADMITTED AND DISCLOSED IN THE FORM OF STCG/LTCG IN ANITA SINGH 22 THE RETURN FILED IS TREATED AS INCOME FROM BUSINESS AND TAXED ACCORD INGLY. 13. WE FURTHER FIND THAT LD.CIT(A) CONFIRMED THE VI EW TAKEN BY THE LD.A.O BY DISTINGUISHING THE FACTS WITH FACTS OF T HE CASES RELIED BY THE ASSESSEE, OBSERVING AS UNDER; 4.1 IN VIEW OF ABOVE SUBMISSION, IT IS EVIDENT THAT THERE DO NOT EXIST ANY AGREEMENT IMOU BETWEEN M/ S AARONE PVT. LTD. AND THE ASSESSEE, WHICH DEEPENS THE BELIEF THAT M/S AARONE PVT. LTD. IS CONDUCTING BUSINESS ON BEHALF OF THE ASSESSEE AND OTHER 17PERSONS INDEPEND ENTLY. IN THIS REGARD, RELIANCE IS PLACED UPON THE LANDMARK DECISION OF TH E APEX COURT IN THE CASE~ OF RAJA J. RAMESHWAR RAO VS CIT(SC) 42ITR 179 WHEREIN IT WAS HELD THAT :_ 'EVEN A SINGLE VENTURE MAY BE REGARDED AS IN. THE-NATURE OF TRADE OR BUSINESS. WHEN A PERSON ACQUIRES LAND WITH A VIEW TO SELLING IT LATER AFTER DEVELOPING IT, HE IS CARRYING ON AN ACTIVITY RESULTING IN PROFIT, AND THE ACTIVITY CAN ONLY BE DESCRIBED AS A BUSINESS VENTURE. WHERE THE PERSON GOES FURTHER AND DIVIDES THE LAND INTO PLOTS , DEVELOPS THE AREA TO MAKE IT MORE ATTRACTIVE AND SELLS THE LAND NOT AS A SINGLE UNIT AND AS HE BOUGHT IT, BUT IN PARCELS, HE IS DEALING WITH LAND AS HIS STOCK-IN-TRADE; HE IS CARRYING ON BUSINESS AND MAKING A PROFIT.' 4.2 THE SAME FORA WAS DELVED BY THE HON'BLS KARNATKA HIGH COURT IN TH E CASE OF CITVS. RARNAIAH &ORS.146ITR 39 AND P. KANNA N VSCIT(KAR} 154 ITR 441 WHEREIN' THE HON'BLE HIGH COURT HELD THAT 'SALE OF LAND AFTER PLOTTING IS A BUSINESS VENTURE'. THE DECISION OF THE ABOVE JUDICIAL PRONOUNCEMENTS ARE SQUARELY APPLICABLE IN THIS CASE . 4.3 IT IS ALSO BEYOND DOUBT THAT THE ACTIVITY CARR IED OUT BY THE ASSESSEE IS NOTHING BUT PURCHASE- AND SALE, OF LAND AMOUNTIN G TO TRADING WITH A VIEW TO EARN MORE PROFIT. IN LIGHT OF THE DISCUSSIO N HELD HEREINABOVE, IT ESTABLISHES THAT THE ACTIVITY OF THE ASSESSEE IS NO THING BUT AN ADVENTURE ANITA SINGH 23 HAVING NATURE-OF TRADE. HENCE, CAPITAL GAIN OFFERED ON ACCOUNT OF SALE OF LAND IS TREATED AS BUSINESS INCOME. MJS AARONE PVT. LTD HAS-BORNE ALL ~HE EXPENSES ARISING ON ACCOUNT OF DEVELOPMENT AND SALE OF LAND AND THE ASSESSEE HAS RECEIVED HER SHARE FROM NET SALE RECEI PTS OF M/S AARONE PVT. LTD. HENCE, NO' EXPENSES' ARE ALLOWABLE IN THE CASE OF T HE ASSESSEE. 4.4 FURTHER, DURING THE ASSESSMENT YEAR UNDER CONSI DERATION THE ASSESSEE HAS CARRIED OUT BUSINESS ON ACCOUNT OF TRA DING IN SALE & PURCHASE OF LAND THROUGH M/S AARONE DEVELOPERS PVT. LTD. AS PER DETAILED, SUBMISSIONS MADE DURING THE ASSESSMENT PR OCEEDINGS. THEREFORE, NET SALE PROCEEDS RECEIVED BY THE ASSESS EE AMOUNTING TO RS.2,79,10,951/- AS ADMITTED AND DISCLOSED IN THE F ORM OF STCG/LTCG IN THE RETURN FILED IS TREATED AS INCOME FROM BUSIN ESS AND TAXED ACCORDINGLY. 14. AFTER CAREFUL PERUSAL OF THE DETAILED FINDINGS OF FACT BY THE LD. ASSESSING OFFICER AS WELL AS LD. CIT(A) AND THE SUB MISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US AND B EFORE THE LOWER AUTHORITIES, IT CAN BE CONSTRUED THAT FOR ASSESSING THE PROFIT FROM TRANSACTION OF SALE OF ASSET AS CAPITAL GAIN OR BUS INESS INCOME, DEPENDS ON CIRCUMSTANTIAL EVIDENCES, FREQUENCY OF T HE TRANSACTION AND THE MODUS OPERANDI TO CONCLUDE THE TRANSACTION. AT THIS JUNCTURE WE WOULD LIKE TO REFER TO THE FINDINGS OF HON'BLE APEX COURT GIVEN IN THE CASE OF CIT V/S HOLCK LARSEN (1986) 16 0 ITR 67 WHERE HON'BLE SUPREME COURT HELD THAT CONSIDERATION OF ALL RELEVANT FACTS INVOLVES APPRECIATION OF ALL THE FACTS FOR THEIR PR OPER PERSPECTIVE. IF ANITA SINGH 24 THAT IS NOT DONE, THEN, IT CANNOT BE SAID THAT THER E HAS BEEN CONSIDERATION OF ALL RELEVANT FACTORS. WHETHER ANY TRANSACTION IS AN ADVENTURE IN NATURE OF TRADE OR NOT MUST BE DECIDED ON CONSIDERATION OF ALL THE RELEVANT FACTS AND CIRCUMSTANCES, WHICH ARE PROVED IN PARTICULAR CASE. AS SUCH THE DETERMINATION OF SUCH TRANSACTION DEPENDS SOLELY ON THE MERITS OF A CASE. 15. HON'BLE APEX COURT ALSO HELD IN THE CASE OF KHA N BAHADUR AHMAD ALLADIN & SONS (1968) 68 ITR 574 AS WELL AS I N THE OF JANKIRAM BAHADURAM VS CIT (1965) 57 ITR 21, THAT WHERE A COMMODITY IS PURCHASED AND SUB DIVIDED, ALTERED OR REPAIRED AND IS SOLD OR IS CONVERTED INTO A DIFFERENT QUANTITY AND THEN SOLD, AN INTENTION TO LAUNCH UPON AN ADVENTURE IN THE NATURE OF TRADE MAY READILY BE INFERRED. IF A PERSON BUYS LAND WITH A VIEW TO SELL AND THEREAFTER CARRIES ON CERTAIN OPERATIONS SO AS TO B RING A GREATER PROFIT AND FACILITIES, THE SALE OF PLOTS, IT CAN BE SAID E VEN IF IT IS A SINGLE TRANSACTION THAT HIS ACTIVITY IS ADVENTURE IN THE N ATURE IS A RELEVANT FACTOR THAT RAISES A STRONG PRESUMPTION. AS MATTER OF FACT, WHATEVER TEST HAVE BEEN LAID DOWN TO DETERMINE A TRANSACTION TO BE IN THE NATURE OF TRADE OR NOT, NO ONE TEST IS IN ITSELF CO NCLUSIVE. IT IS A CUMULATIVE EFFECT OF ALL THE FACTORS, WHICH CAN HEL P TO ARRIVE AT A ANITA SINGH 25 CONCLUSION AS TO WHETHER THE TRANSACTION WAS AN INS TANCE OF INVESTMENT OR AN ADVENTURE IN THE NATURE OF TRADE. 16. WE FURTHER FIND THAT HON'BLE SUPREME COURT HEL D IN THE CASE OF RAJA J. RAMESHWAR RAO VS. CIT (1961) 42 ITR 179 HEL D THAT THE ACTIVITY OF THE ASSESSEE IN PROVIDING THE LAND INTO PLOTS AND NOT SELLING IT AS A SINGLE UNIT AS HE ACQUIRED GOES TO ESTABLISH THAT HE WAS CARRYING ON THE BUSINESS IN A REAL PROPERTY AND IT IS BUSINESS VENTURE. TO SUM UP ORDINARILY WHERE A PERSON ACQUIRED A LAND WITH A VIEW TO SELLING IT LATER ON AFTER DEVELOPMENT AND DIVIDING COULD ONLY BE DESCRIBED AS A BUSINESS ADVENTURE. GENERALLY SPEAKI NG THE ORIGINAL INTENTION OF THE PARTY IN PURCHASING THE PROPERTY, THE LENGTH OF ITS OWNERSHIP AND HOLDING, CONDUCT AND THE SUBSEQUENT DEALING OF THE ASSESSEE IN RESPECT OF THE PROPERTY, THE MANNER OF DISPOSAL AND THE FREQUENCY AND MULTIPLICITY OF TRANSACTIONS OFFERS A VALUABLE GUIDE IN DETERMINING WHETHER THE ASSESSEE WAS CARRYING ON A TRADING ACTIVITY AND WHETHER A PARTICULAR TRANSACTION SHOULD BE STAM PED WITH THE CHARACTER OF A TRADING ADVENTURE. 17. SO THE CRUX OF THE ABOVE DISCUSSIONS IS THAT WE WILL HAVE TO CONSIDER THE CUMULATIVE EFFECTS OF ALL THE FACTORS AS WELL AS THE ACTION TAKEN BY THE ASSESSEE IN ORDER TO SALE THE L AND. ANITA SINGH 26 18. FIRSTLY WE FIND THAT THE ASSESSEE KEPT ON PURC HASING LAND IN THE SAME VERY AREA ON VARIOUS DATES WHICH WAS FALLING I N THE FINANCIAL YEAR 2005-06 AND 2006-07 AND FINANCIAL YEAR 2010-11 . SECONDLY, SALE OF LAND HAVE BEEN EFFECTED WITH THE ASSISTANCE OF DEVELOPER M/S. ADPL, NEW DELHI. THIRDLY, AS PER THE SALE DEE D THE ASSESSEE HAS TRANSFERRED THE TITLE IN THEIR LAND ALONG WITH 17 OTHER OWNERS OF OTHER PIECES OF LAND. FOURTHLY, ASSESSEE HAS RECEIV ED THE CONSIDERATION OF SALE AT THE YEAR END I.E. AS ON 31 .3.2012 AND 31.03.2013 WHICH SHOWS THAT AT THE END OF THE YEAR THE ACCOUNT HAS BEEN MADE AND THE SHARE OF THE ASSESSEE HAS BEE N GIVEN AFTER THE FINALIZATION OF THE ACCOUNTS PAID BY M/S. ADPL. FIFTHLY, THE TOTAL AREA OF LAND AVAILABLE WITH ADPL WAS GIVEN UN DER POWER OF ATTORNEY BY AROUND 18 PERSONS INCLUDING THE ASSESSE E. THE ASSESSEE RECEIVED 40% SHARE IN THE TOTAL LAND OF 6. 53 HECTARE DURING A.Y. 2012-13. 19. SIXTHLY AND MOST IMPORTANT ASPECT WHICH WE OBS ERVE FROM GOING THROUGH ONE OF THE SALE DEED P[LACED AT PAGE- 39 TO 76 OF THE PAPER BOOK, WHICH REVEALS THAT THE PROJECT IN THE N AME OF COUNTRY WALK WAS PROPOSED TO BE DEVELOPED MEASURING 43.929 HECTARE OF LAND. IN THIS SALE DEED 18 PERSONS INCLUDING THE A SSESSEE ARE TERMED AS SELLER ALONG WITH TWO POWER OF ATTORNEY H OLDERS NAMELY MR. SANJAY PHAWA, DIRECTOR OF ADPL MR. MUKESH KUMAR , INDORE AND PARTY OF SECOND PART SMT. SANDHYA CHORDIA WHO H AS PURCHASED PLOT NO. C 168 IN THE COUNTRY WALK COLONY. IN P ARA ONE OF THIS SALE DEED AT PAGE 42 IT IS MENTIONED THAT REGISTRA TION NO.40/206 ANITA SINGH 27 DATED 21.08.2006 HAS BEEN ISSUED TO THE PARTIES OF FIRST PART AS REFERRED ABOVE UNDER THE MADHYA PRADESH GRAM PANCHA YAT RULES 1999 (COLONIZER) FOR THE PURPOSE OF DEVELOPMENT OF COLONY. THEREAFTER IN PARA-2 THE DETAILS OF VARIOUS SURVEY NUMBERS OF THE LANDS ACQUIRED BY THE ALLEGED 18 OWNERS WHO HAD GIV EN THEIR LAND IN THE COMMON POOL FOR THE PURPOSE OF DEVELOPING A CO LONY ALONG WITH A CLUB HOUSE. M/S. ADPL WAS ENTRUSTED WITH THE WOR K OF THE DEVELOPMENT AND IT CHARGED FOR ITS WORK ON YEARLY B ASIS. AS PER THE LETTER DATED 27.12.2014 MS/ ADPL HAS ACCEPTED THAT DURING THE FINANCIAL YEAR 2011-12 TOTAL SALES STOOD AT RS.78.7 0 CRORES AND AN EXPENDITURE OF RS.2.17 CRORES WAS INCURRED LEAVING BEHIND THE AMOUNT OF RS.76.52 CRORES AND THE SHARE OF THE ASSE SSEE OUT OF THIS TOTAL REMAINING AMOUNT HAVE BEEN SHOWN AT RS.3.32 C RORES APPROXIMATELY. 20. ALL THESE ABOVE SERIES OF EVENTS AND FACTS CLE ARLY SHOWS THAT IN THE YEAR 2006 ITSELF THE ASSESSEE ALONG WITH OTHER PERSONS INTIATED THE PROCESS OF DEVELOPING A COLONY WHICH IS PROVED BY THE REGISTRATION NO.40/2006 ISSUED ON 21.8.2006. FEW MO NTHS BEFORE AND THE PERIOD THEREAFTER ALL THESE 18 PERSONS KEPT ON PURCHASING THE LAND FROM VARIOUS LAND OWNERS AND PARALLELY M/S . ADPL WAS WORKING TO DEVELOP THE PROJECT NAMED COUNTRY WALK . ONCE THE AREA WAS DEVELOPED THEN THE SALES WERE EFFECTED BY DEMARCATING THEM IN VARIOUS PLOTS SIZES AND THE ADPL WAS HAVING THE POWER OF ATTORNEY TO DECIDE ABOUT THE SALE AND DEVELOPMENT O F THE LAND BANK. ALL THE SALE TRANSACTIONS WERE EFFECTED THROUGH IT AND THE LAND ANITA SINGH 28 OWNERS USED TO GET THEIR SHARE EXCLUDING THE EXPEND ITURE AS WELL AS EXCLUDING THE PORTION OF LAND WHICH HAS BEEN USED F OR DEVELOPMENT. THROUGH THIS PROCESS THE ASSESSEE GAINED SUBSTANTIA L AMOUNT WHICH HAS BEEN SPREAD OVER TO A.Y 2012-13 AND 2013- 14. 21. IN OUR CONSIDERED VIEW AS WELL AS IN THE GIVEN FACTUAL MATRIX IT IS CRYSTAL CLEAR THAT IT WAS A WELL THOUGHT BUSINESS P ROJECT CARRIED OUT BY THE ASSESSEE JOINTLY WITH 17 OTHER PERSONS BY WA Y OF TAKING THE SERVICES OF DEVELOPER M/S. ADPL AND THE INTENTION O F ENTERING INTO AN ADVENTURE OF BUSINESS WAS VERY CLEAR FROM THE VE RY FIRST DAY OF PURCHASE OF IMPUGNED LAND AND COMPLETED ON SELLING THE RESIDENTIAL PLOTS. WE ARE OF THE CONSIDERED VIEW THAT BOTH THE LOWER AUTHORITIES HAVE RIGHTLY APPRECIATED THE FACTS AND CONCLUDED TH AT THE PROFITS FROM SALE OF LAND SITUATED AT VILLAGE JHALARIA, TEH SIL INDORE IS A BUSINESS PROFIT AND CANNOT BE TAXED AS SHORT TERM C APITAL GAIN OR LONG TERM CAPITAL GAIN. IN THE RESULT THESE COMMON ISSUE RAISED FOR BOTH THE ASSESSMENT YEARS IS DECIDED AGAINST TH E ASSESSE. WE THEREFORE DISMISS ALL THE GROUNDS RAISED IN BOTH T HESE APPEALS OF THE ASSESSEE. 22. IN THE RESULT, APPEALS OF THE ASSESSEE FOR ASSESSM ENT YEAR 2012-13 AND ASSESSMENT YEAR 2013-14 ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.08 .2018. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 28/08/2018 DEV/ ANITA SINGH 29 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE