The ITO, Ward-9(2), Ahmedabad V. Shri Gobindram Khushiram Basantani, Ahmedabad

ITA 2685/AHD/2004

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6706 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-04-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 08-09-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSI
• Assessee Lawyers: S N DIVETIA
• Keywords: Business income
• Section: 147; 148

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI M.K. SHRAWAT, JM AND D.C.AGRAWAL, AM APPELLANT BY :- SHRI G. S. SOURYAWANSI, DR RESPONDENT BY:- SHRI S. N. DIVETIA, AR ITA NO. CO NO. ASST. YEAR 1.2685/AHD/2004 289/AHD/2004 1996-97 2.2686/AHD/2004 290/AHD/2004 1996-97 3.296/AHD/2006 1997-98 4.297/AHD/2006 1997-98 5.4506/AHD/2003 1998-99 6.4507/AHD/2003 1998-99 1. ITO, WD-9(2), AHMEDABAD. 2. DO- 3. DO- 4. DO- 5. DO- 6. DO- VS. SHRI GOBINDRAM KHUSHIRAM BASANTANI, 7 TH FLOOR, TRADE CENTRE, STADIUM CROSS ROADS, AHMEDABAD. AOP, SH. G.K.BASANTANI, AOP, SH.G.K. BASANTANI & OTHERS. AOP, SHRI G.K. BASANTANI & OTHERS SHRI G.K. BASANTANI, AHMEDABAD. SHRI G. K. BASANTANI, AHMEDABAD. (APPELLANT) .. (RESPONDENT) ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 2 O R D E R PER BENCH SIX APPEALS HAVE BEEN FILED BY THE REVENUE AND TWO CROSS OBJECTIONS BY THE ASSESSEE. SINCE COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS AND THE CROSS OBJECTIONS, THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. ITA NO.4506/AHD/2003 ASST. YEAR 1998-99 (REVENUES APPEAL) 2. THE LEAD YEAR IS ASST. YEAR 1998-99 WHEREIN REVE NUE HAS FILED APPEAL MARKED AS ITA NO.4506/AHD/2003. IN THIS APPE AL THE REVENUE HAS RAISED FOLLOWING GROUNDS :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ASSESSMENT OF RS.19,51,873/- MADE SUBSTANTIALLY IN THE STATUS OF AOP BY TREATING THE INCOME FROM SALE OF PROPERTY AS BUSINESS INCOME. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT INCOME OF THE CO-OWNERS FROM CONSTRUCTION & SALE OF PROPERTY CANNOT BE ASSESSED IN THE STATUS OF AOP. (3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT PROFITS FROM SALE OF THE PROPERTY CANNOT BE TREATED AS BUSINESS INCOME. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. THE COMMON ISSUE INVOLVED IN THIS APPEAL AS WELL AS OTHER APPEALS IS WHETHER ANY AOP HAS COME INTO EXISTENCE AND THER EBY ENABLING THE AO TO MAKE ASSESSMENT IN THAT STATUS. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SHR I G. K. BASANTANI, ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 3 (INDIVIDUAL) FOR ASST. YEAR 1998-99 IT WAS NOTICED BY THE AO THAT SHRI G.K. BASANTANI WAS INVOLVED IN THE BUSINESS OF ACQU IRING OLD STRUCTURE IN THE JOINT NAMES OF HIS FAMILY MEMBERS. THE STRUCTUR ES THEREAFTER WERE DEMOLISHED AND LAND WAS DEVELOPED AND NEW CONSTRUCT IONS WERE RAISED ON SUCH LAND. NEW STRUCTURE CONSISTED OF MULTIPLE U NITS. THESE UNITS THEREAFTER WERE SOLD TO DIFFERENT BUYERS. THE PROFI TS FROM SALE OF SUCH UNITS WERE DECLARED BY SHRI G.K. BASANTANI AND OTHE R CO-OWNERS UNDER THE HEAD LONG-TERM CAPITAL GAINS AFTER DIVIDING T HE SURPLUS BETWEEN THEMSELVES. IT WAS NOTICED BY THE AO THAT SHRI G. K . BASANTANI AND OTHER CO-OWNERS HAD DURING THESE YEARS ACQUIRED, CONSTRUC TED AND PARTLY SOLD SHOPS AND OFFICES IN FOLLOWING COMPLEXES :- A) HIRA PANNA COMMERCE HOUSE - 128 SHOPS/OFFICES B) NAVRATNA BHAVAN - 20 SHOPS/ OFFICES C) BASANT CHAMBERS - 14 SHOPS/OFFIC ES + 1 HOTEL CONSISTING OF 34 ROOMS D) KHATRI HOUSE - 13 SHOPS/OFFICES E) MANU MANSION - 10 SHOPS/OFFICES IN ADDITION TO ABOVE, SHRI G. K. BASANTANI AND OTHE R CO-OWNERS HAD CONSTRUCTED PROPERTY NAMELY MANU MANSION, MALHAR CHAMBERS, LAXMI NARAYAN CHAMBERS AND SHIV GANGA TOWERS. THE AO SUMM ONED ALL THE FAMILY MEMBERS/CO-OWNERS AND RECORDED THEIR STATEME NTS AND NOTICED THAT THESE FAMILY MEMBERS WERE ENGAGED IN SYSTEMATIC, RE GULAR AND ORGANIZED COURSE OF ACTIVITIES WITH SET OF PURPOSE OF ACQUIRI NG OLD STRUCTURE, DEMOLISHING THEM AND THEREAFTER BUILDING NEW STRUCT URES CONSISTING OF NUMBER OF UNITS AS OFFICES AND SHOPS WHICH WERE SUB SEQUENTLY SOLD TO VARIOUS BUYERS, EARNED PROFITS AND DIVIDED AMONG TH E MEMBERS. THE ACTIVITIES OF SHRI G. K. BASANTANI AND OTHER MEMBER S WERE CLEARLY BUSINESS ACTIVITIES. THE AO, HOWEVER, NOTED THAT TH ESE JOINT OWNERS WERE DECLARING THE PROFITS FROM THE PROPERTY SOLD UNDER THE HEAD CAPITAL GAINS ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 4 AFTER TAKING THE BENEFIT OF INDEXATION, TO REDUCE T HE TAX LIABILITIES. IN THE INDIVIDUAL CASE OF SHRI G. K. BASANTANI, THE AO NOT ED THAT IN FY 1997-98 ASSESSEE GROUP HAD OPENING STOCK, CLOSING STOCK AND SALES OF VARIOUS OFFICES AND SHOPS AS UNDER :- NAME OF PROJECT FY OP.STOCK CONSTN .EXPENSES SALES CL.STOCK PROFIT CAPITAL GAIN SHOWN AS PER RETURN BASANT CHAMBER 97-98 3199116 170 3700000 NIL 500714 35590 HERA PANNA COMMERCE HOUSE 97-98 127499 15322 571760 NIL 428939 171168 KHATRI HOUSE 97-98 548427 177087 1162205 352878 789569 622383 NAVRATNA BHAVAN 97-98 60286 1287 110000 NIL 51001 2723 MANU MANSION 97-98 18350 200000 NIL 181650 122127 FROM THE ABOVE PROJECTS SHRI G. K. BASANTANI HAD SH ARE OF PROFITS AS UNDER :- PROFIT SHARE AMOUNT OF PROFITS 1. BASANT CHAMBERS 500714 40% RS.2,00,285 2. HERA PANNA COMMERCE HOUSE 428939 32% RS.1,37,260 3. KHATRI HOUSE 789569 50% RS.3,94,785 4. NAVRATNA BHAVAN 51001 50% RS.25,500 5. MANU MANSION 181650 40% RS.72,660 TOTAL 1951873 RS.8,30,490 THE AO THEREAFTER TREATED THE ACTIVITIES OF THE ASS ESSEE AS BUSINESS ACTIVITIES AND TAXED THE PROFITS IN THE HANDS OF SH RI G. K. BASANTANI ON PROTECTIVE BASIS AND INITIATED ASSESSMENT PROCEEDIN GS IN THE CASE OF AOP ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 5 CONSISTING OF VARIOUS FAMILY MEMBERS. THIS AOP, WHI CH IS THE ASSESSEE, IS IN APPEAL BEFORE US. FOR TAXING AOP THE AO ISSUE D A NOTICE U/S 148 BUT NO RETURN IN RESPONSE THERETO WAS FILED. THE REASON S RECORDED BY THE AO WERE ALSO SUPPLIED TO THE ASSESSEE. THE AO TREATED THE GROUP CONSISTING OF SHRI G. K. BASANTANI, SHRI L. K. BASANTANI, SMT. KAMLADEVI L. BASANTANI AND LATE SMT. LATADEVI G. BASANTANI , AS AOP FOR THE FOLLOWING REASONS: (1) ALL THE CO-OWNERS/JOINT OWNERS OF THE PROPERTY, THE INCOME FROM WHICH IS CLAIMED TO BE EARNED AS LONG TERM CAPITAL GAINS ARE MEMBERS OF THE AOP. (2) THE SHARES OF THE MEMBERS ARE UN-SPECIFIED. (3) ALL THE FOUR MEMBERS ARE ENGAGED IN SYSTEMATIC, REG ULAR AND ORGANIZED COURSE OF ACTIVITIES WITH THE SAID PURPOS E OF ACQUIRING OLD STRUCTURE, DEMOLISH AND DEVELOP NEW STRUCTURES CONSISTING OF NUMBER OF UNITS WHICH WERE SUBSEQUENTLY SOLD TO EAR N PROFITS. (4) THE INCOME SO EARNED FROM CONSTRUCTION OF THESE PRO PERTY IS NOT LONG TERM CAPITAL GAINS BUT BUSINESS INCOME. THE ASSESSEE, HOWEVER, DENIED THE CHARGE OF EXISTEN CE OF AOP FOR THE FOLLOWING REASONS :- (1) FIVE BUILDINGS AS MENTIONED BY THE AO ARE OWNED BY DIFFERENT PERSONS AS CO-OWNERS. THESE BUILDINGS NEITHER BELONGED TO ALL FIVE PERSON S NOR BELONGED TO ALLEGED AOP. (2) THERE ARE DIFFERENT OWNERS IN DIFFERENT BUILDINGS W ITH DIFFERENT SHARES. SOME PERSONS DO NOT FIGURE AS OWNER IN SOME PROPERTY. (3) EACH BUILDING IS OWNED BY DIFFERENT CO-OWNERS AS DI FFERENT AGREEMENTS SPECIFYING DIFFERENT SHARES TO EACH OF T HEM AND EACH HAVE CONTRIBUTED NECESSARY CAPITAL FOR THE PURPOSE OF PURCHASING THE PROPERTY AS CO-OWNER. ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 6 (4) SEPARATE BOOKS HAVE BEEN MAINTAINED FOR EACH BUILDI NG. (5) SOMETIMES PARTNERSHIP FIRMS HAVE BEEN DRAWN TO CARR Y ON THE BUSINESS AND SUCH INCOME HAS BEEN DECLARED AS BUSIN ESS INCOME E.G. FIRM OF BASANTANI BROTHERS AND NEW BUILDING EN GINEERS. (6) CERTAIN CONSTRUCTED PREMISES WERE GIVEN ON RENT AND RENTAL INCOME WAS DECLARED BY THE CO-OWNERS WHICH WAS ACCE PTED BY THE DEPARTMENT. (7) SHARES OF THE CO-OWNERS IN DIFFERENT BUILDINGS ARE SPECIFIED, THEREFORE, IT IS INCORRECT TO SAY THAT SHARES ARE U NSPECIFIED. (8) EVEN SECTION 26 OF THE ACT PROVIDES FOR JOINT OWNER SHIP. (9) INCOME FROM PROPERTY JOINTLY OWNED AND TAXABLE IN I NDIVIDUAL HANDS OF THE CO-OWNERS COULD NOT BE TREATED AS AOP AS HELD IN THE CASE OF CIT VS. INDIRA BALKRISHNA 39 ITR 546 (S C). (10) INDIVIDUAL ASSESSMENTS OF THE CO-OWNERS HAVE LONG B EEN MADE AND THIS POSITION HAS BEEN ACCEPTED BY THE DEPARTME NT. (11) THERE IS FULL DISCLOSURE OF ALL THE MATERIAL FACTS. 4. THE AO, HOWEVER, DID NOT AGREE WITH THE REPLY OF THE ASSESSEE AND HELD THAT - (1) AGREEMENT OF CO-OWNERS IS ON STAMP PAPER OF RS.10/- WHICH IS NEITHER REGISTERED NOR NOTARIZED. (2) THE ARRANGEMENT OF CO-OWNERSHIP IN DIFFERENT PROJEC TS IS A JOINT VENTURE RUN BY CONSTITUENT MEMBERS OF THE AOP. (3) MERELY LETTING OUT A PART OF THE BUILDING ON RENT I S ONLY A BUSINESS PRUDENCE. IT CANNOT BE SAID THAT BUSINESS WAS CONSTRUCTION FOR LETTING OUT ON RENT. (4) THE ACTIVITY OF THE ASSESSEE GROUP IS NOT DIFFERENT FROM THE ACTIVITY OF THE BUILDER. ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 7 (5) THE SHARES OF THE MEMBERS OF THE AOP ARE NOT FOUND DEFINITE AND ASCERTAINABLE. THE ARRANGEMENT OF CO-OWNERSHIP HAS BEEN FORMED IN DIFFERENT PROJECTS WITH THE SOLE OBJECT O F CONSTRUCTION OF PROPERTY AND SALE ALL PROJECTS ON PROFITS. THEREAFTER THE AO RELYING UPON FOLLOWING AUTHORITIE S - (I) G. VENKATASWAMI NAIDU & CO. (1959) 35 ITR 594 (SC) (II) DALMIA CEMENT CO. LTD. (1976) 105 ITR 633 (SC) (III) P. M. MOHAMED MIRAKHAN (1969) 73 ITR 735 (SC) (IV) K. NALLATHAMPI PILLAI (1975) 98 ITR 30 (MAD) (V) NARAYAN SWADESH WEAVING MILLS (1954) 27 I TR 765 (SC) HELD THAT AN AOP HAS COME INTO EXISTENCE AND ACCORD INGLY HE TAXED THE BUSINESS INCOME OF RS.19,51,873/- WORKED OUT FOR TH IS YEAR FROM SALE OF PROPERTIES. 5. WHEN THE MATTER CAME UP BEFORE LD. CIT(A) HE NOT ED THAT EACH CO- OWNER HAS DIFFERENT PERCENTAGE OF SHARES IN DIFFERE NT PROPERTY AS UNDER :- NAME OF BUILDING L.K. BASANTANI G.K. BASANTANI KAMLADEVI L. BASANTANI LATADEVI G. BASANTANI DATE OF CO- OWNER AGREEMENT HEERA PANNA COMM.HOUSE 30% 20% 30% 20% 2.5.81 BASANT CHAMBERS 25% 25% 25% 25% 10.7.91 NAVRATNA BHAVAN 50% 50% 27.9.90 KHATRI HOUSE 50% 50% 30.7.90 MANU MANSION 60% 40% 17.7.74 THE LD. CIT(A) ALSO NOTED THE DETAILS OF THE PROPER TY WITH DATE OF PURCHASES AND CONSTRUCTION AS UNDER :- NAME OF THE BLDG. DATE OF PURCHASE DATE OF DEMOLITION DATE OF CONS. COMME- NCEMENT DATE OF COMPLN. OF CONSTN. NO. OF UNITS DATE OF FIRST UNITS SALE DATE OF LAST UNITS SALE HEERA 6.3.81 8.1.82 8.5.81 29.5.89 130 14.4.88 STOC K 2 ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 8 PANNA COMM. HOUSE UNIT BASANT CHAMBERS 26.3.91 22.3.93 29.1.93 28.10.97 14 UNITS & UPPER FLOORS HOTEL 34 ROOMS 8.8.94 22 ND OCT.97 NAVRATNA BHAWAN 24.9.90 1.9.90 7.5.91 9.11.92 19 UNITS 8.8.92 24 TH SEPT.97 KHATRI HOUSE 27.7.90 1.8.90 1.1.91 NEAR COMPLETE 22 UNITS 11.9.97 STOCK 9 UNITS MANU MANSION 1,972 1,972 1,973 1,997 10 1,989 THE LD. CIT(A) THEN OBSERVED AS UNDER :- THE CLUBBING OF THE CO-OWNERS AS AOP IS CONTRARY T O THE STATUTORY PROVISIONS CONTAINED IN SECTION 26 OF THE IT ACT. I T PROVIDES THAT WHERE PROPERTY CONSISTING OF BUILDING OR BUILDINGS AND LA NDS APPURTENANT THERETO IS OWNED BY TWO OR MORE PERSONS AND THEIR R ESPECTIVE SHARES ARE DEFINITE AND ASCERTAINABLE SUCH PERSONS SHALL NOT I N RESPECT OF SUCH PROPERTY BE ASSESSED AS ASSOCIATION OF PERSONS BUT THE SHARE OF EACH SUCH PERSON IN THE INCOME FROM THE PROPERTY AS COMPUTED IN ACCORDANCE WITH SECTIONS 22 TO 25 SHALL BE INCLUDED IN THIS TOTAL I NCOME. THIS POINT HAS BEEN MADE CLEAR BY THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF CIT VS. INDIRA BALKRISHNA 39 ITR 546 WHERE IT WAS H ELD THAT THE INCOME FROM PROPERTY JOINTLY OWNED FOR TAXABLE INDIVIDUAL IN THE HANDS OF THE CO- OWNERS CANNOT BE TREATED AS AOP. THE ONLY TWO REQUI REMENTS FOR APPLICABILITY OF SECTION 26 OF THE ACT ARE:- (I) THE PROPERTY MUST BE OWNED BY TWO OR MORE CO-OWNERS AND (II) THE RESPECTIVE SHARES OF SUCH CO-OWNERS MUST BE DEF INITE AND ASCERTAINABLE. HENCE THE FIVE BUILDINGS BELONGING TO DIFFERENT CO- OWNERS CANNOT BE CLUBBED TOGETHER WITH THE AOP OF G.K. BASANTANI & O THERS. EACH OF THE CO-OWNERS HAVE SHOWN INCOME ARISING BY WAY OF RENTA L INCOME OR CAPITAL GAIN ON THE SALE OF PORTIONS OF THE SAID BUILDINGS IN THEIR INCOME-TAX RETURNS RIGHT FROM THE BEGINNING. THE RETURNS HAVE BEEN ACCEPTED U/S 143(1)(A) OR 143(3). THEY HAVE ALSO FILED WEALTH-TA X RETURNS WHICH ARE ALSO ACCEPTED AND HENCE THE INCOME SHOWN BY THE CO- OWNERS CANNOT BE ASSESSED IN THE HANDS OF THE AOP. MOREOVER, THE ASS ESSING OFFICER HAS ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 9 BASED HIS DECISION ON THE STATEMENT OF SOME OF THE PURCHASERS BEHIND THE BACK OF THE APPELLANT. THE APPELLANT HAS RAISED GRI EVANCE AGAINST RECORDING OF STATEMENT WITHOUT GIVING OPPORTUNITY T O CROSS-EXAMINE THEM. HENCE THE RELIANCE PLACED ON THESE STATEMENTS CANNO T BE TAKEN AS VALID EVIDENCE. THE APPELLANT HAS CLAIMED THAT THE INTENTION OF TH E CO-OWNERS IN PURCHASING THE OLD PROPERTY WAS TO HAVE A REGULAR S OURCE OF INCOME BY WAY OF RENT AND IN FACT SOME OF THEM HAVE BEEN LET OUT FROM YEAR TO YEAR WHEREAS IN SOME CASES THEY HAVE FAILED TO GET THE T ENANT INSPITE OF BEST EFFORT IN ORDER TO MAXIMIZE THE RENTAL INCOME, THE OWNER, WOULD MAKE THE PROPERTY AS IT WOULD FETCH HIGHER RENT OR READILY A CCEPTABLE TO THE PROSPECTIVE TENANT. THE FACT THAT VARIOUS ADVERTISE MENT FOR LETTING OUT AND EVEN LETTERS WRITTEN TO PROSPECTIVE TENANTS FROM TI ME TO TIME CLEARLY PROVES THAT THE MAIN INTENTION WAS TO HAVE RENTAL I NCOME. THE SALE OF SAID PROPERTY WAS RESORTED ON ACCOUNT OF COMPELLING CIRC UMSTANCES SUCH AS NO TENANT, WERE FORTHCOMING INSPITE OF BEST EFFORTS. S OME OF THE PROPERTY REMAINING VACANT FOR A CONSIDERABLE PERIOD OF TIME. THERE SEEMS TO BE FORCE IN THE ARGUMENT OF THE APPELLANT BECAUSE THER E WAS A TIME GAP OF FIVE YEARS OR MORE IN THE SALE OF SOME OF THE UNITS . AN ASSOCIATION OF PERSONS DOES NOT MEAN ANY AND EV ERY COMBINATION OF PERSONS. IT IS ONLY WHEN THEY ASSOCI ATE THEMSELVES IN AN INCOME-PRODUCING ACTIVITY THAT THEY BECOME AN ASSOC IATION OF PERSONS. THEY MUST COMBINE TO ENGAGE IN SUCH AN ACTIVITY, TH E ENGAGEMENT MUST BE ASSOCIATION, THERE MUST BE A MEETING OF MINDS, SO T O SPEAK. IN A NUT-SHELL, THERE MUST BE COMMON DESIGN TO PRODUCE INCOME. IF T HERE IS NO COMMON DESIGN, THERE IS NO ASSOCIATION. COMMON INTEREST IS NOT ENOUGH. PRODUCTION OF INCOME IS NOT ENOUGH. THIS INTERPRETA TION OF THE EXPRESSION ASSOCIATION OF PERSONS FLOWS FROM THE MEANING OF THE WORD ASSOCIATION. WHEN THE WORD ASSOCIATION IS REPLACE D BY THE WORD BODY IT MUST FOLLOW THAT THE FEATURE OF COMMON DESIGN OR CO MBINED WILL SO PECULIAR OR DISTINCTIVE TO AN ASSOCIATION OF PERSON S IS NOT A CHARACTERISTIC OF BODY OF INDIVIDUALS. THE ABSENCE OF A COMMON DES IGN IS WHAT PRINCIPALLY DISTINGUISHED A BODY OF INDIVIDUALS FRO M AN ASSOCIATION OF PERSONS. ANOTHER DISTINGUISHING FEATURE IS THAT THE ONE REFERS TO PERSONS AND THE OTHER TO INDIVIDUALS. A PERSON BY DEFINITIO N, INCLUDES AN INDIVIDUAL. BUT AN INDIVIDUAL APPARENTLY DOES NOT I NCLUDE A PERSON. IN THE CASE OF THE APPELLANT, THERE IS NO SUCH ASSOCIATION OF OR MEETING OF MINDS AMONG THE MEMBERS. IN FACT, SMT. LATADEVI VASANTANI HAD EXPIRED ON 26/2/1995. THEREFORE, SHE CANNOT BE CONSIDERED TO B E A MEMBER OF THE AOP FOR THE ASST. YEAR 1998-99. FURTHER, FOR OTHER MEMBERS ALSO THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THEY HAD ASSOCIA TED TO FORM THE AOP. ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 10 IT IS SIMPLY BECAUSE THEY ARE MEMBER OF ONE FAMILY, THE AO HAS PRESUMED THAT THERE WAS MEETING OF MIND. WITHOUT ANY EVIDENC E, SUCH AN ATTEMPT TO CLUB THE INCOME IN THE HANDS OF THE AOP CANNOT BE J USTIFIED. EVEN THE CONTENTION OF THE AO THAT THE PROFIT ON S ALE OF VARIOUS UNITS OF DIFFERENT PROPERTY AS BUSINESS INCOME IS N OT CORRECT. IT IS, BECAUSE THE CO-OWNERS HAVE MADE ATTEMPTS TO LET OUT THE PRO PERTY AND WHENEVER THE SAME WAS NOT POSSIBLE. IT WAS SOLD IN PIECEMEAL . THE VERY FACT THAT THE PROPERTY LIKE MANU MANSION, KHATRI HOUSE, ETC. ARE BEING OWNED FOR MORE THAN AT LEAST 10 YEARS, RENTAL INCOME IS BEING ENJOYED THEREFROM. IT CLEARLY SHOWS THAT THE CO-OWNERS ARE ENJOYING THE O WNERSHIP RIGHTS IN THE PROPERTY AND HAVE NOT JOINT TOGETHER WITH A VIEW TO CARRY ON THE ACTIVITY OF A DEVELOPER OR BUILDER. THE PROPERTY IS RETAINED FOR A LONG PERIOD WHICH IS MORE THAN 10 YEARS. NO BUILDER OR DEVELOPE R WOULD LIKE TO RETAIN THE PROPERTY WITH A VIEW TO EARN RENTAL INCOME. HEN CE, THE CONTENTION OF THE AO TO TREAT THE PROFIT ON SALE OF VARIOUS UNITS OF DIFFERENT PROPERTY IS BUSINESS INCOME IS NOT CORRECT. EVEN THE MAINTENANC E OF BOOKS OF ACCOUNT IN RESPECT OF VARIOUS PROPERTY CANNOT BE TAKEN AS A N ACTIVITY IN THE NATURE OF BUSINESS OF A BUILDER. THE CO-OWNERS HAVE TO MAI NTAIN THE BOOKS OF ACCOUNTS TO KEEP CONTROL OF THE ACTIVITY OR THE CO- OWNERSHIP. MOREOVER, IF THE OWNER OF THE HOUSE PROPERTY BEFORE LETTING IT O UT MAKES THE BUILDING SUITABLE FOR SAFE DEPOSIT BOND BY THE BANK, IT CANN OT BE TREATED AS BUSINESS ACTIVITY. HENCE IT IS QUITE CLEAR THAT THE CO-OWNERS HAD ENJOYED THE RENTAL INCOME AND SOLD THE VARIOUS UNITS FOR WH ICH THEY COULD NOT GET SUITABLE RENTAL INCOME. THE DETAILS RELATING TO VAR IOUS PROPERTY GIVES A CLOSE INDICATION OF THE EFFORT MADE. THE PLEA TAKEN BY THE APPELLANT IN RESPECT OF THE FIVE BUILDINGS ARE AS BELOW :- (1) MANU MANSION- IT WAS CONSTRUCTED IN 1973 AND WA S FULLY OCCUPIED BY TENANTS AND THE ORAL SALE HAS TAKEN PLACE IN 198 3 AFTER A PERIOD OF 10 YEARS. THE APPROACH LANE TO THE PROPERTY IS NARROW AND HAVING DIRTY ENVIRONMENTS FOR WHICH VARIOUS LETTERS WRITTEN TO P OLLUTION DEPARTMENT ARE ALREADY ON RECORD. (2) KHATRI HOUSE IT WAS VIRTUALLY COMPLETED IN 19 91-92, CONSTRUCTION COST IN EACH YEAR SUPPLIED TO THE AO MAJOR CONSTRUC TION WAS OVER EXCEPT FOR FEW PARTITIONS AND FINISHING ITEMS. THE APPELLA NT WAS IN SEARCH OF TENANTS FOR WHICH COPIES OF THE CORRESPONDENCE HAS BEEN SUBMITTED. AFTER WAITING FOR NEARLY 10 YEARS FAILING TO GET TENANTS FIRST SALE WAS EFFECTED ON 29.10.1997. (3) NAVRATNA BHAVAN IT WAS VIRTUALLY COMPLETED IN 1991-92. CONSTRUCTION COST INCURRED RS.8,69,603/-. FAILING T O GET TENANTS, FOR A FEW ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 11 MONTHS, APPELLANT STARTED SELLING THE PROPERTY AND THE FIRST SALE WAS EFFECTED ON 8.8.1992. (4) BASANT CHAMBERS FAILING TO GET TENANTS, THE A PPELLANT DECIDED TO CONSTRUCT AND RUN GUEST HOUSE ON OUR OWN ON UPPER F LOORS. AS THE APPELLANT RECEIVED THREATS FROM SHRI RANCHOD SETIA SEVA PARIVAR AND NOTICE FROM ADVOCATE SHRI BHARAT B. MODI THAT NO HO TEL WILL BE ALLOWED IN THE AREA WHICH IS/OR DOMINANTLY RESIDENTIAL AREA AN D THAT ILLEGAL ACTIVITIES TAKE PLACE IN HOTEL. COPIES OF THESE LETTERS ARE SU BMITTED. (5) HEERA PANNA COMMERCE HOUSE THE RENT INCOME WAS FOR MORE THAN 2-3 YEARS. THE TENANTS VACATED. OUR EFFORTS TO GET TENANTS BY WAY OF CORRESPONDENCE, ADVERTISEMENTS, COPIES OF CORRESPON DENCE IS ON YOUR RECORD AND HAVING FAILED, THE APPELLANT DECIDED TO SELL THE PROPERTY. CONSIDERING THE VARIOUS DETAILS AS MENTIONED ABOVE IT IS QUITE CLEAR THAT A NUMBER OF EVIDENCES WERE SUBMITTED IN SUPPOR T OF THE CONTENTION THAT EFFORTS WERE MADE TO GET RENTAL INCOME FROM TH E PROPERTY BUT BECAUSE OF THE VARIOUS CIRCUMSTANCES, THE PROPERTY HAD TO B E PUT ON RENT. SINCE THE RENTAL INCOME WAS ASSESSED AS INCOME FROM HOUSE PRO PERTY THE SALE OF UNITS HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAIN. IT CANNOT BE ASSESSED AS BUSINESS INCOME. CONSIDERING THE ABOVE DISCUSSION, THE CLUBBING OF THE INCOME OF VARIOUS CO-OWNERS AS AOP OF SHRI G.K. BASANTANI & O THERS CANNOT BE SUTAINED. MOREOVER, THE ASSESSMENT OF THE INCOME,EA RNED FROM THE SALE OF PROPERTY BY THE CO-OWNERS CANNOT BE TAKEN AS BUSINE SS INCOME FROM THE SALE OF PROPERTY IN THE HAND OF AOP OF G.K. BASANTA NI & OTHERS.HENCE THE ASSESSMENT OF THE BUSINESS INCOME FROM SALE OF PROPERTY AT RS.19,51,873/- IN THE HANDS OF AOP OF GK BASANTANI & OTHERS IS DELETED. MOREOVER, THE ASSESSMENT OF THE INCOME OF THE ALL T HE CO-OWNERS OF DIFFERENT CO-OWNERSHIPS CANNOT BE ASSED IN THE STAT US OF THE AOP OF SHRI G.P. BASANTANI & OTHERS. IT HAS TO BE ASSESSED IN T HE HANDS OF RESPECTIVE CO-OWNERS. OBSERVING AS ABOVE, LD. CIT(A) ALLOWED THE APPEAL O F AOP HOLDING THAT NO SUCH AOP HAS COME INTO EXISTENCE. 6. AGAINST THIS, LD. DR HEAVILY RELIED ON THE ORDER OF AO AND SUBMITTED THAT AN AOP HAS ACTUALLY COME INTO EXISTE NCE FOR LONG. ALL THE ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 12 FOUR PERSONS ARE DOING BUSINESS TOGETHER, PURCHASIN G PROPERTY, DEMOLISHING THEM, MAKING NEW STRUCTURE, SELLING THE M EARNING PROFITS. WHAT HAS BEEN DONE TO DECLARE JOINT OWNERSHIP OF DI FFERENT MEMBERS WITH DIFFERENT PERCENTAGE IN DIFFERENT BUILDINGS IS ONLY A SMOKE SCREEN AND THIS CANNOT UNDO THE REALITY THAT THEY ALL TOGETHER ASSO CIATED FOR EARNING PROFITS HAVING COMMON INTEREST, COMMON PURPOSE OF SHARING P ROFITS FROM COMMON ARRANGEMENTS. THE FUNDS ARE ALSO BEING TRANS FERRED FROM ONE ACCOUNT TO ANOTHER AS AND WHEN REQUIRED. 7. ON THE OTHER HAND, LD. AR HEAVILY RELIED ON THE ORDER OF LD. CIT(A) AND SUBMITTED THAT ONCE DIFFERENT OWNERSHIP OF PROP ERTY HAS DIFFERENT PROFIT SHARING RATIOS WHICH HAS BEEN ACCEPTED BY TH E DEPARTMENT FOR LONG THEN THE POSITION CAN NOT BE CHANGED NOW BY HOLDING THAT AN AOP IS IN EXISTENCE. NO NEW EVENTS OR ACTIVITIES HAVE BEEN DO NE THIS YEAR. SAME SITUATION OR CONDITION IS CONTINUING FOR LONG SINCE 1981 WHEN FIRST PROPERTY WAS PURCHASED, DEMOLISHED AND CONSTRUCTED. ONE PROPERTY WAS PURCHASED, DEMOLISHED IN 1972 AND CONSTRUCTION WAS COMMENCED FROM 1973, OTHERS IN OTHER DIFFERENT YEARS, IN THE DIFFE RENT JOINT OWNERSHIP AND DIFFERENT PROFIT SHARING RATIOS THEN HOW SUCH DIFFE RENT CO-OWNERSHIPS CAN BECOME AN AOP NOW IN ASST. YEAR 1998-99 EVEN IF PUT TOGETHER. MANY PERSONS ARE NOT CO-OWNERS IN SEVERAL PROPERTIES THE N HOW THEY CAN SHARE THE PROFITS AS A MEMBER OF AOP. A LEGAL FORMALITY H AS TAKEN PLACE AND ACCEPTED BY THE DEPARTMENT IN THE FORM OF CO-OWNERS HIP THEN FOLLOWING THE PRINCIPLES OF CONSISTENCY A DIFFERENT VIEW CANN OT BE TAKEN. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ORDER OF LD. CIT(A) REQUIRES TO BE UPHELD. THE REASONS ARE THAT DIFFERENT PROPERTY WER E CONSTRUCTED IN DIFFERENT PERIOD, THEY HAD DIFFERENT MEMBERS WITH D IFFERENT CO-OWNERSHIP ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 13 SHARES. THIS STATUS HAS BEEN ACCEPTED BY THE DEPART MENT FOR LONG. THE RETURN OF INCOME SHOWING THIS ARRANGEMENT HAS BEEN ACCEPTED. FOR EXAMPLE, IN THE CASE OF HEERA PANNA COMM. HOUSE FOU R PERSONS ARE CO- OWNERS, NAMELY - SHRI G. K. BASANTANI, SHRI L. K. B ASANTANI, SMT. KAMLADEVI L. BASANTANI AND LATE SMT. LATADEVI G. BA SANTANI WITH CO- OWNERSHIP SHARES OF 30%, 20%, 30% AND 20% RESPECTIV ELY. IT WAS PURCHASED IN 1981 AND CONSTRUCTION WAS COMPLETED IN MAY, 1989. THERE WERE 130 UNITS. THE FIRST SALE HAD TAKEN PLACE IN A PRIL, 1988 THEREAFTER SALES IN DIFFERENT YEARS HAVE BEEN SHOWN. PROFITS T HEREFROM AS CAPITAL GAIN HAS BEEN DECLARED IN THE RETURN OF INCOME OF RESPEC TIVE CO-OWNERSHIP WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. SIMILARL Y, BASANT CHAMBER WAS PURCHASED IN MARCH, 1991 AND IT WAS DEMOLISHED IN MARCH, 1993 AND CONSTRUCTION WAS COMPLETED IN OCTOBER, 1997. THE FI RST SALE TOOK PLACE IN OCTOBER, 1994 DURING THE PERIOD OF CONSTRUCTION. TH E PROFIT THEREFROM WAS SHARED BY SHRI G. K. BASANTANI, SHRI L. K. BASANTAN I, SMT. KAMLADEVI L. BASANTANI AND LATE SMT. LATADEVI G. BASANTANI IN TH E RATIO OF 25% EACH. THIS PROFIT WAS DECLARED AS CAPITAL GAIN AND ACCEPT ED BY THE DEPARTMENT SINCE THEN. IN NAVRATNA BHAVAN THERE WERE ONLY 2 CO -OWNERS NAMELY- SHRI L. K. BASANTANI AND SHRI G. K. BASANTANI WITH 50% S HARES. IT WAS PURCHASED IN SEPTEMBER, 1990 AND DEMOLISHED IN THAT YEAR ITSELF AND CONSTRUCTION WAS COMPLETED IN NOVEMBER, 1992 AND FI RST SALE HAD TAKEN PLACE IN AUGUST, 1992. THE PROFIT THEREFROM WAS DEC LARED BY CO-OWNERS AS CAPITAL GAINS AND ACCORDINGLY ACCEPTED BY THE DE PARTMENT. SIMILAR WAS THE POSITION IN THE CASE OF KHATRI HOUSE AND MANU M ANSION. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO APPRECIATE AS TO HO W THE POSITION CAN BE CHANGED BY THE DEPARTMENT BY HOLDING THAT AN AOP HA S COME INTO EXISTENCE. EVEN THOUGH CERTAIN INGREDIENTS OF AOP A RE IN EXISTENCE SUCH AS COMMON PURPOSE, COMMON BUSINESS ACTIVITIES, COMM ON INTEREST IN EARNING OF PROFITS BUT OTHER INGREDIENTS ARE MISSIN G SUCH AS ALL THE CO- ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 14 OWNERS ARE NOT TOGETHER IN ALL THE ACTIVITIES. THER E IS IN FACT NO FINDING AS TO HOW THE FUNDS HAVE FLOWN FROM THE COFFER OF ONE CO-OWNER TO ANOTHER CO-OWNER IN FACILITATING THE ACQUISITION AND CONSTR UCTION OF THE PROPERTY. WITHOUT SHOWING COMMON INTEREST AND INTERMINGLING O F FUNDS IT CANNOT BE SAID THAT JOINT OWNERSHIP OF DIFFERENT PERSONS W ITH DIFFERENT SHARES WAS ONLY FOR THE NAME SAKE. 9. VARIOUS AUTHORITIES HAVE LAID DOWN CRITERIA AS T O WHEN AN AOP WOULD COME INTO EXISTENCE. HON. MADRAS HIGH COURT I N STATE OF TAMIL TAMIL NADU VS. THIRUVALARGAL SINGARA ESTATE (1996) 217 ITR 199 HELD THAT JOINTNESS OF THE ENTERPRISE AIMED AT PROD UCTION AND THE SHARING OF INCOME, PROFIT OR GAINS ARE THE ESSENTIAL INGRED IENTS TO CALL A BOP OR AOP. AN AOP MUST BE THE ONE, THE OBJECT THEREOF IS TO PRODUCE INCOME, PROFIT OR GAINS AND SHARE THE SAME. THE TEST TO DET ERMINE THE TRUE MEANING OF EXPRESSION AOP HAS BEEN LAID DOWN BY HON. SUPREM E COURT IN G. MURUGASION & BROS. VS. CIT (1973) 88 ITR 432 (SC) . ACCORDING TO THE HON. SUPREME COURT AN AOP IS THE ONE IN WHICH TWO O R MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION. THE AOP OF THESE PERSONS MUST BE THE ONE THE OBJECT WHEREOF IS TO PRODUCE IN COME, PROFITS & GAINS AND SHARE THE SAME. IT HAS ALSO BEEN LAID DOWN BY H ON. SUPREME COURT THAT WHERE AN ASSOCIATION OF PERSONS HAS ENGAGED IT SELF IN AN ACTIVITY WITH A COMMON OBJECT TO PRODUCE INCOME, PROFITS OR GAINS AND SHARE THE SAME WOULD DEPEND UPON THE FACTS AND CIRCUMSTANCES OF EA CH ONE. HON. PATNA HIGH COURT IN CIT VS. CHANDMULL RAJGARHIA (1995) 213 ITR 789 HELD THAT THE WORD ASSOCIATION INDICATE PLAINLY THE VO LUNTARY BONDING FOR A COMMON ENDEAVOUR AND NOT A MERE LEGAL STATUS RESULT ING FROM OPERATION OF LAW. CO-OWNERS, CO-HEIRS OR LEGALITIES DO NOT CO NSTITUTE SUCH AN ASSOCIATION IN RESPECT OF THE INCOME OF THE JOINT O R COMMON ASSET BY VIRTUE ONLY OF THEIR JURAL RELATIONSHIP. BUT WHERE THESE PERSONS UNITE ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 15 THEMSELVES WITH THE OBJECT OF EARNING INCOME, THEY CONSTITUTE AN AOP FOR ASSESSMENT PURPOSE AND THEY CANNOT TAKE ADVANTAGE O F THEIR LEGAL POSITION TO RESIST ASSESSMENT ON THAT BASIS. THE ESSENTIAL C RITERIA THAT ATTRACTS THE LEVELS OF AOP FOR THE INCOME-TAX PURPOSES IS THE UN ITY OF INCOME MAKING PURPOSE RATHER THAN THE UNITY OF TITLE IN THE INCOM E YIELDING ASSET. IN CIT VS. INDIRA BALKRISHNA (1960) 39 ITR 546, 551, HON. SUPREME COURT HELD THAT AN AOP MUST BE THE ONE IN WHICH TWO OR MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION AND AS WO RD OCCURS IN RELEVANT SECTION OF IT ACT WHICH IMPOSES TAX ON INC OME, THE ASSOCIATION MUST BE ONE THE OBJECT OF WHICH IS TO PRODUCE INCOM E, PROFIT OR GAINS. HON. CALCUTTA HIGH COURT IN CIT VS. SHRIKRISNA BANDAR TRUST (1993) 201 ITR 989 (CAL) HAS HELD THAT THE WORD ASSOCIATION MEANS TO JOIN IN COMMON PURPOSE OR TO JOIN IN ACTION. THEREF ORE, ASSOCIATION OF PERSONS AS USED IN SECTION 2(31)(V) OF THE IT ACT, 1961 MEANS AN ASSOCIATION IN WHICH TWO OR MORE PERSONS JOIN IN A COMMON PURPOSE OR COMMON ACTION. HON. MADRAS HIGH COURT IN STATE OF MADRAS VS. VR. M. SM. KARUPPAN CHETIAR & OTHERS (1966) 61 ITR 488 (MAD) HELD THAT A COMMON OBJECT OR INCOME, THE JOINT ENDEAVOUR TOWARDS COMMON AND R ESULTANT INCOME BEING THE FRUIT OF THE JOINT ENTERPRISE ARE THE ESS ENTIAL WHICH SHOULD BE PRESENT BEFORE INDIVIDUALS CAN BE CLUBBED TOGETHER AS AN ASSOCIATION TO BE TAXED. WHERE TENANTS IN COMMON OF A PROPERTY DIVIDE THE INCOME IN THE RATIO OF THEIR DEFINITE SHARE WITHOUT A DIVISION OF A CORPUS BY MEES AND BOUND THEY CANNOT BE SAID TO HAVE EARNED THEIR RESP ECTIVE INCOME BY A JOINT ENDEAVOUR. A JOINT MANAGEMENT OF THE UNDIVIDE D PROPERTY HELD IN ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 16 SHARES EITHER BY ONE OF THE SHARERS OR BY A DULY AP POINTED ATTORNEY WOULD NOT CONSTITUTE AN INDIVIDUAL OR AOP. 10. FROM THE ABOVE AUTHORITIES, IT FOLLOWS THAT AN AOP CAN BE SAID TO HAVE COME INTO EXISTENCE IF (1) TWO OR MORE PERSONS JOIN TOGETHER (2) FOR A COMMON PURPOSE (3) FOR EARNING PROFITS; (4) SHARING SUCH PROFITS; AND (5) IN A DEFINITE RATIO IN OTHER WORDS THE NUMBER OF PERSONS FROM BEGINNING OF ENTERPRISE HAVING THEREIN A COMMON PURPOSE OF EARNING PROFIT A ND SHARING THE SAME SHOULD REMAIN THE SAME TILL THE END OF SHARING OF P ROFIT. IF THERE ARE SEVERAL ENTERPRISES AND THEY ARE DIFFERENT PERMUTAT ION OR COMBINATION OF PERSONS AND DIFFERENT PERMUTATION OR COMBINATION OF PROFIT SHARING RATIOS THEN IT CANNOT BE SAID THAT AN AOP OF ALL THE PERSO NS PUT TOGETHER HAS COME INTO EXISTENCE BECAUSE THERE IS NO JOINTNESS I N ALL OF THEM IN THE SAME PURPOSE OR IN THE SAME ENTERPRISE. THERE IS NO COMMON LENGTH OF THE ENTERPRISE. IF, LIKE IN THE PRESENT CASE, DIFFERENT ENTERPRISES HAVE DIFFERENT MEMBERSHIP WITH DIFFERENT PERIOD OF INITIATION AND DIFFERENT PERIOD OF COMPLETION THEN THERE CANNOT BE ONE ASSOCIATION. IN FACT THERE COULD BE A BETTER CASE TO SAY THAT THERE IS AN ASSOCIATION OF PERSONS IN RESPECT OF ONE ENTERPRISE HAVING FIXED MEMBERSHIP JOINING TOGETHER TO EARN PROFIT AND SHARING THE SAME AT THE END OF THE ENTERPRISE. IT M EANS THAT EVEN IN THE PRESENT CASE, ASSESSEE, SHRI G. K. BASANTANI HAS CR EATED LEGALLY FOUR OR FIVE SUB-GROUPS WITH DIFFERENT MEMBERS WITH DIFFERE NT PROFIT SHARING RATIO, INITIATED AT DIFFERENT PERIODS, CLOSED OR CONTINUED IN DIFFERENT PERIOD, THEN ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 17 THERE CANNOT BE ONE AOP. AT BEST THERE CAN BE A CAS E OF SMALLER ASSOCIATION OF PERSONS IN RESPECT OF ONE PROJECT WH ERE MEMBERSHIP IS FIXED, AND RATIO OF PROFIT SHARING IS FIXED. IN INI TIATION OF THE PROJECT IN ITS OPERATION, SALES AND EARNING PROFIT, THERE IS A COM MON PURPOSE OF THOSE MEMBERS. THUS THERE IS A POSSIBILITY OF HOLDING THA T THERE IS AN AOP IN RESPECT OF BASANT CHAMBERS, THERE IS ANOTHER AOP IN RESPECT OF HEERA PANNA HOUSE, SIMILARLY DIFFERENT ASSOCIATION IN RES PECT OF KHATRI HOUSE, NAVRATNA HAVAN AND MANU MANSION. BUT ALL OF THEM TO GETHER CANNOT CREATE ONE BIGGER ASSOCIATION OF PERSONS AS ESSENTI AL INGREDIENTS OF SUCH BIGGER AOP ARE NOT PRESENT. THERE IS NO COMMONNESS OR JOINTNESS OF ALL THE MEMBERS PUT TOGETHER AND THERE IS NO FIXED PROF IT SHARING RATIO AVAILABLE AS SEVERAL PERSONS ARE NOT THE MEMBERS IN OTHER PROJECTS. THEREFORE, THE ACTION OF THE AO TO TAX A SUM OF RS. 19,51,873/- AS INCOME OF BIGGER AOP CONSISTING OF ALL THE FIVE PROJECTS I S NOT LEGALLY SUSTAINABLE. 11. EVEN OTHERWISE FOLLOWING THE PRINCIPLES OF CONS ISTENCY THE DEPARTMENT HAS TO ACCEPT THE WAY THE ASSESSEE HAS F ILED THE RETURN OF INCOME IN THE PAST, ACCEPTED BY THE DEPARTMENT AND NOW AGAIN THE RETURNS ARE BEING FILED IN THE SAME WAY. NO NEW FACTS ARE D ISCOVERED REQUIRING TO TAKE A DIFFERENT STAND. NO NEW LAW HAS COME INTO EX ISTENCE REQUIRING THE CHANGE IN THE SET UP SHOWN BY THE ASSESSEE AND ACCE PTED BY THE DEPARTMENT FOR LONG. ON THE ISSUE OF CONSISTENCY WE DERIVE SUPPORT FROM THE DECISION OF THE TRIBUNAL IN ITA NO.1281/AHD/200 5, ASST. YEAR 2001- 02 AND ITA NO.1291/AHD/2005 ASST. YEAR 2001-02 IN T HE CASE OF ITO VS. MADHUR INDUSTRIES LTD. AND MADHUR INDUSTRIES LTD. V S. ITO RESPECTIVELY, PRONOUNCED ON 5.2.2010. THUS FOLLOWING THE PRINCIPL ES OF CONSISTENCY AND FINDING THE MATERIAL INADEQUATE TO HOLD THE EXI STENCE OF AOP, WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APP EAL FILED BY THE REVENUE. AS A RESULT, THE APPEAL FILED BY THE REVEN UE IS DISMISSED. ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 18 ITA NO.4507/AHD/2003 ASST. YEAR 1998-99 (REVENUES APPEAL) 12. IN THIS APPEAL FILED BY THE REVENUE FOLLOWING G ROUNDS HAVE BEEN RAISED:- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ASSESSMENT MADE PROTECTIVELY IN THIS CASE, WHEREIN CAPITAL GAIN OF RS.4,33,660/- FROM SALE OF PROPERTY IS ASSESSED AS BUSINESS INCOME AT RS.8,30,490/-. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT INCOME OF THE CO-OWNERS FROM CONSTRUCTION AND SALE OF PROPERTY CANNOT BE ASSESSED IN THE STATUS OF AOP. (3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT PROFITS FROM SALE OF THE PROPERTY CANNOT BE TREATED AS BUSINESS INCOME. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 13. THE ONLY ISSUE INVOLVED IN THIS APPEAL BY THE R EVENUE IS THAT IN THE INDIVIDUAL CASE OF SHRI G. K. BASANTANI ASSESSMENT HAS BEEN HELD ON SUBSTANTIVE BASIS. 14. WE HAVE HEARD THE PARTIES. WHILE DISPOSING OF T HE APPEAL IN THE CASE OF AOP IN ITA NO.4506/AHD/2003 ASST. YEAR 1998 -99 (REVENUES APPEAL) WE HAVE HELD THAT NO AOP HAS COME INTO EXIS TENCE. FOLLOWING THE ABOVE ORDER, WE HOLD THAT THE ASSESSMENT IN THE CAS E OF SHRI G. K. BASANTANI ON SUBSTANTIVE BASIS AND DISMISS THE APPE AL FILED BY THE REVENUE. ITA NO.2686/AHD/2004 ASST. YEAR 1996-97 (REVENUES APPEAL) 15. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS:- ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 19 (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ASSESSMENT OF BUSINESS INCOME OF RS.5,84,061/- IN T HE HANDS OF AOP OF G.K. BASANTANI & OTHERS. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 16. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT BUSINESS INCOME HAS BEEN ASSED IN THE HANDS OF AOP OF SHRI G.K. BASANTA NI AND OTHERS. THE ASSESSMENT IN THIS CASE WAS REOPENED U/S 147 FOR TA XING THE INCOME OF THE ENTIRE GROUP IN THE HANDS OF AOP ON THE BASIS OF AS SESSMENT DONE BY THE AO FOR ASST. YEAR 1998-99 IN THE CASE OF SHRI G. K. BASANTANI (INDIVIDUAL) WHEREAS HIS ASSESSMENT WAS MADE ON PRO TECTIVE BASIS AND ASSESSMENT IN THE CASE OF AOP WAS INITIATED U/S 147 ON SUBSTANTIVE BASIS. 17. WHILE DISPOSING OF THE APPEAL IN THAT CASE OF A OP IN ITA NO.4506/AHD/2003 ASST. YEAR 1998-99 (REVENUES APPE AL) WE HAVE HELD THAT NO AOP HAS COME INTO EXISTENCE. FOLLOWING THAT ORDER, WE UPHOLD THE ORDER OF LD. CIT(A) IN THIS YEAR AND DISMISS THE AP PEAL FILED BY THE REVENUE. ITA NO.2685/AHD/2004 ASST. YEAR 1996-97 (REVENUES APPEAL) 18. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE AO TO ASSESSEE THE CAPITAL GAIN OF RS.64,343/- AS SUCH ON SUBSTANTIVE BASIS WITHOUT CONVERTING IT INTO BUSINE SS INCOME AT RS.1,96,460/-. (2) THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS I N DIRECTING THE AO TO ASSESS THE INCOME FROM HOUSE PROPERTY AS SUCH ON SUBSTANTIVE BASIS AND NOT AS BUSINESS INCOME. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 20 19. THE ASSESSMENT IN THIS CASE WAS REOPENED U/S 14 7 FOR TAXING THE INCOME OF THE ENTIRE GROUP IN THE HANDS OF SHRI G. K. BASANTANI, INDIVIDUAL ON THE BASIS OF ASSESSMENT DONE BY THE A O FOR ASST. YEAR 1998-99 IN THE CASE OF SHRI G. K. BASANTANI & OTHER S WHEREAS HIS ASSESSMENT WAS MADE ON PROTECTIVE BASIS AND ASSESSM ENT IN THE CASE OF AOP WAS INITIATED U/S 147 ON SUBSTANTIVE BASIS. 20. WHILE DISPOSING OF THE APPEAL IN THAT CASE OF A OP IN ITA NO.4506/AHD/2003 ASST. YEAR 1998-99 (REVENUES APPE AL) WE HAVE HELD THAT NO AOP HAS COME INTO EXISTENCE. FOLLOWING THAT ORDER, WE UPHOLD THE ORDER OF LD. CIT(A) IN THIS YEAR AND DISMISS THE AP PEAL FILED BY THE REVENUE. ITA NO.296/AHD/2006 ASST. YEAR 1997-98 (REVENUES A PPEAL IN THE CASE OF AOP) 21. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ASSESSMENT OF RS.10,46,820/- MADE SUBSTANTIALLY BY THE AO IN THE STATUS OF AOP BY TREATING THE INCOME FROM SALE OF PROPERTY AS BUSINESS INCOME. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT INCOME OF THE CO-OWNERS FROM CONSTRUCTION AND SALE OF PROPERTY CANNOT BE ASSED IN THE STATUS OF AOP. (3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT PROFITS FROM SALE OF THE PROPERTY CANNOT BE TREATED AS BUSINESS INCOME. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 22. THE ASSESSMENT IN THIS CASE WAS REOPENED U/S 14 7 FOR TAXING THE INCOME OF THE ENTIRE GROUP IN THE HANDS OF AOP OF S HRI G. K. BASANTANI ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 21 AND OTHERS ON THE BASIS OF ASSESSMENT DONE BY THE A O FOR ASST. YEAR 1998-99 IN THE CASE OF SHRI G. K. BASANTANI & OTHER S WHEREAS HIS ASSESSMENT WAS MADE ON PROTECTIVE BASIS AND ASSESSM ENT IN THE CASE OF AOP WAS INITIATED U/S 147 ON SUBSTANTIVE BASIS. 23. WHILE DISPOSING OF THE APPEAL IN THAT CASE OF A OP IN ITA NO.4506/AHD/2003 ASST. YEAR 1998-99 (REVENUES APPE AL) WE HAVE HELD THAT NO AOP HAS COME INTO EXISTENCE. FOLLOWING THAT ORDER, WE UPHOLD THE ORDER OF LD. CIT(A) IN THIS YEAR AND DISMISS THE AP PEAL FILED BY THE REVENUE. ITA NO.297/AHD/2006 ASST. YEAR 1997-98 [REVENUES A PPEAL IN THE CASE OF SHRI G.K. BASANTANI (INDIVIDUAL)] 24. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE AMOUNT OF RS.3,75,050/- MADE AS BUSINESS INCOME ON SALE OF PROPERTY ON PROTECTIVE BASIS AND DIRECTED TO ASSESS THE CAPITAL GAINS OF RS.55,750/- FROM SALE OF PROPERTY ON SUBST ANTIVE BASIS. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT INCOME OF THE CO-OWNERS FROM CONSTRUCTION AND SALE OF PROPERTY CANNOT BE ASSED IN THE STATUS OF AOP. (3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOL DING THAT PROFITS FROM SALE OF THE PROPERTY CANNOT BE TREATED AS BUSINESS INCOME. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 25. THE ONLY ISSUE INVOLVED IN THIS APPEAL BY THE R EVENUE IS THAT IN THE INDIVIDUAL CASE OF SHRI G. K. BASANTANI ASSESSMENT HAS BEEN HELD BY LD. CIT(A) ON SUBSTANTIVE BASIS. ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 22 26. WE HAVE HEARD THE PARTIES. WHILE DISPOSING OF T HE APPEAL IN THE CASE OF AOP IN ITA NO.4506/AHD/2003 ASST. YEAR 1998 -99 (REVENUES APPEAL) WE HAVE HELD THAT NO AOP HAS COME INTO EXIS TENCE. FOLLOWING THE ABOVE ORDER, WE UPHOLD THAT THE ASSESSMENT IN THE C ASE OF SHRI G. K. BASANTANI ON SUBSTANTIVE BASIS AND DISMISS THE APPE AL FILED BY THE REVENUE. 27. C.O. NO.289/AHD/2004 IN ITA NO.2685/AHD/2004 AN D C.O. NO.290/AHD/2004 IN ITA NO.2686/AHD/2004 FOR ASST. Y EAR 1996-97 ARE NOT PRESSED BY THE LD. AR. HENCE THEY ARE REJECTED. 26. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 29/04/11. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 29/04/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NOS.2685 & 2686 & OTHERS ASST. YEARS 1996-97 & OTHERS 23 1.DATE OF DICTATION 19/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 28/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..