ACIT, New Delhi V. Smt. Veena Anand, New Delhi

ITA 3382/DEL/2011

• Counselvise Citation: 338220114 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 09-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI; DR B R R KUMAR
• Keywords: Capital asset; Gift; Business income; Salary income; Source of fund; Additional evidence; Cost of acquisition; Capital receipt
• Section: 143(3); 2(14); 142(1); 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AND SHRI RAJPAL YADAV, HONBLE JUDICIAL MEMBER ITA NO. 3382/DEL/2011 ASSESSMENT YEAR: 2008-09 ASSISTANT CIT, VS. VEENA ANAND, CIRCLE 45(1), 53/25, RAMJAS ROAD, NEW DELHI. KAROL BAGH, NEW DELHI. (PAN: AACPA6154D) (APPELLANT) (RESPONDENT) ITA NO. 2892/DEL/2011 ASSESSMENT YEAR: 2008-09 VEENA ANAND, VS. ADDITIONAL CIT, 53/25, RAMJAS ROAD, RANGE-45, KAROL BAGH, NEW DELHI. NEW DELHI. (PAN: AACPA6154D) (APPELLANT) (RESPONDENT) REVENUE BY: MS. REENA S. PURI, CIT & DR.BRR KUMAR, SR. DR ASSESSEE BY: SHRI AJAY WADH WA, ADV. & RAJEEV SABHARWAL, CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE AND ASSESSEE ARE IN CROSS-APPEALS AGAI NST THE ORDER OF LEARNED CIT(APPEALS) DATED 05.04.2011 PASSED FOR AS SESSMENT YEAR 2008- 09. FIRST, WE TAKE THE APPEAL OF THE REVENUE. THE G ROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE FOLLOWING AD DITIONS: 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LEARNED CIT(APPEALS)-XXX, NEW DELHI HAS ERRED IN DELETING THE ADDITION OF RS.9,56,53,491 ON ACCOUNT OF PROFIT & GAINS OF BUSINESS OR PROCESSIONS MADE BY T HE A.O. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW , THE LEARNED CIT(APPEALS)-XXX, NEW DELHI HAS ERRED IN ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF R ULE 46A OF THE I.T. RULES. THE APPELLANT CRAVES THE RIGHT TO ALTER, AMEND ADD OR SUBSTITUTE THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE I S AN INDIVIDUAL. SHE HAS FILED HER RETURN OF INCOME ELECTRONICALLY ON 21 ST JULY, 2008 DECLARING TOTAL INCOME OF RS.49,01,493. THE INCOME-TAX RETURN-V WAS FILED WITH THE ASSESSING OFFICER ON 31 ST JULY 2008. IN THE RETURN, ASSESSEE HAS DISCLOSED INCOME FROM SALARY AT RS.5,43,188. SHE IS A READER WITH MATA SUNDRY COLLEGE FOR WOMEN, UNIVERSITY OF DELHI. APART FROM SALARY INCOME, SHE HAS SHOWN PROPERTY INCOME AT RS.37,50,597. SHE HAS ALSO SHOWN INCOME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM OTHER SOURC ES. 3. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTI NY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE INCOME-TAX ACT, 196 1 AND QUESTIONNAIRE 3 UNDER SECTION 142(1) OF THE ACT WERE ISSUED AND SER VED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE, SHRI RAJIV SABHARWAL, AR OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER FROM TIME TO TIME AND FILED THE REQUIRED DETAILS. ACCORDING TO THE ASSESSING OFFICER, THE RECORD OF T HE ASSESSEE WITH THE INCOME-TAX DEPARTMENT HAD DISCLOSED THAT ASSESSEE W AS HAVING LANDS IN THE REVENUE ESTATE OF VILLAGE GWAL PAHARI AND BALOLA S ITUATED IN DISTRICT GURGAON. THESE LANDS HAVE BEEN SOLD. DETAILS HAVE B EEN NOTICED BY THE ASSESSING OFFICER AS UNDER: DATE OF SALE DEED LOCATION OF LAND AREA OF LAND SOLD AMOUNT IN RS. NAME OF PURCHASER. 10.04.2007 VILALGE BALODA TEHSIL SOHNA, GURGAON 27 KANALS 9 MARLAS 4,69,90,971 KARAMCHAND REALTECH P. LTD. 10.04.2007 VILLAGE BALOLA, TEHSIL SOHNA, GURGAON 20 KANALS 11 MARLAS 3,51,79,029 KARAMCHAND REALTECH P. LTD. 10.08.2007 GWAL PAHARI, TEHSIL SOHNA, GURGAON 16 KANALS 1 MARLA 1,80,56,250 METRO VALLEY BUSINESS PARK P LTD. TOTAL 10.02,26,250 4. ASSESSING OFFICER COLLECTED INFORMATION FROM THE INTERNET AND FORMED AN OPINION THAT ONE OF THE PURCHASER IS METRO VALAL EY BUSINESS PARK PVT. LTD. WHO IS DEVELOPING A SPECIAL ECONOMIC ZONE ON A LARGE PIECE OF LAND IN THIS AREA. THE LAND PURCHASED FROM THE ASSESSEE FOR MS ONLY A SMALL PART OF 4 THE LAND WHICH IS BEING USED FOR THE PURPOSE OF DEV ELOPING SEZ. THUS, HE FORMED AN OPINION THAT THE LAND SOLD BY THE ASSESSE E CEASES TO BE AN AGRICULTURAL LAND. THE ASSESSEE OUGHT TO HAVE OFFER ED CAPITAL GAIN ON THE SALE OF THIS LAND. HE, THEREFORE, INVITED THE EXPLANATIO N OF THE ASSESSEE AS TO WHY THE TRANSACTIONS RELATING TO THE ABOVE LAND HAD NOT BEEN REPORTED IN COLUMN OF THE ITR FORM. HE DIRECTED THE ASSESSEE TO FURNIS H THE DETAILS OF AGRICULTURE OPERATION CARRIED ON BY HER AND HOW THE LAND IS TO BE TREATED AS AGRICULTURAL LAND. IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER, IT WAS CONTENDED THAT SEC. 2(14) OF THE ACT PROVIDES THE D EFINITION OF EXPRESSION CAPITAL ASSETS. ACCORDING TO THIS DEFINITION, CA PITAL ASSETS MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONN ECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE; ------ III A GRICULTURAL LAND IN INDIA, NOT BEING LAND SITUATED (A) X X X (B)IN ANY AREA WITHIN SUCH DISTANCE, NOT BEING MORE THAN 8 KM, FROM THE LOCAL LIMIT OF ANY MUNICIP ALITY OR CANTONMENT BOARD REFERRED TO IN ITEM (A) AS THE CENTRAL GOVERN MENT MADE, HAVING REGARD TO THE EXTENT OF, AND SCOPE FOR, URBANIZATION OF TH AT AREA AND OTHER RELEVANT CONSIDERATION, SPECIFIED IN THIS BEHALF BY NOTIFICA TION IN THE OFFICIAL GAZETTE. ACCORDING TO THE ASSESSEE, HER LAND WAS AN AGRICULT URAL LAND WHICH IS SITUATED AT A DISTANCE OF 12 KMS AND 15 KMS FROM THE MUNICIP AL LIMIT OF GURGAON. IN SUPPORT OF HER CONTENTIONS, SHE SUBMITTED THE RE VENUE RECORD I.E. COPY OF 5 JAMABANDI, COPY OF MUTATION REGISTER, A CERTIFICATE FROM THE PATWARI EXHIBITING THE DISTANCE OF LAND FROM THE MUNICIPAL LIMIT OF THE GURGAON. ON THE STRENGTH OF THESE DOCUMENTS, IT WAS CONTENDED B Y THE ASSESSEE THAT THE LAND WAS A AGRICULTURAL LAND WHICH DOES NOT FALL WI THIN THE AMBIT OF CAPITAL ASSETS DEFINED IN SEC. 2(14) OF THE INCOME-TAX ACT, 1961. SALE OF SUCH AGRICULTURAL LAND WOULD NOT RESULT ANY CAPITAL GAIN WHICH CAN BE BROUGHT TO TAX. 5. LEARNED ASSESSING OFFICER HAS REJECTED THIS CON TENTION OF THE ASSESSEE. HE OBSERVED THAT A LAND COULD BE TREATED AS A AGRICULTURAL LAND ONLY IF ASSESSEE DEMONSTRATES ON THE RECORD THAT SHE HAD CARRIED OUT BASIC OPERATION OF AGRICULTURE ON THE LAND IN DISPUTE. HE FURTHER OBSERVED THAT A SEZ WAS NOTIFIED IN THE VICINITY OF THE ASSESSEES LAND UNDER SEC. 3 OF SPECIAL ECONOMIC ZONE ACT, 2005 (28 OF 2005). A LET TER OF APPROVAL FOR ESTABLISHMENT OF A SEZ WAS GRANTED BY THE CENTRAL G OVERNMENT ON 6.11.2006. THUS, THE AREA WHERE LAND IS SITUATED HA S BEEN CEASED TO BE AN AGRICULTURAL LAND. LEARNED ASSESSING OFFICER THERE AFTER MADE REFERENCE TO THE DECISION OF HON'BLE KARNATAKA HIGH COURT RENDER ED IN KALPETIA ESTATES LTD. VS. CIT REPORTED IN 61 TAXMAN 543, SHIV SHANKE RR LAL VS. CIT REPORTED IN 94 ITR 433, CWT VS. OFFICER INCHARGE (COURT OF W ARDS) REPORTED IN 105 6 ITR 133 AND SMT. SARIFA BIBI MOHD. IBRAHIM REPORTED IN 204 ITR 631. ON THE STRENGTH OF THESE DECISIONS, HE RECORDED THAT I T WAS A CAPITAL ASSET AND ASSESSEE OUGHT TO HAVE OFFERED CAPITAL GAIN FOR TAX ATION ON TRANSFER OF THIS ASSET. 6. LEARNED ASSESSING OFFICER HAS NOT ONLY HELD THA T ON A SALE OF AGRICULTURAL LAND, ASSESSEE IS LIABLE TO PAY CAPITA L GAIN TAX. HE OBSERVED THAT ASSESSEE HAD CARRIED OUT THE ACTIVITY OF SALE AND P URCHASE OF LAND SYSTEMATICALLY AND, THEREFORE, IT IS AN ADVENTURE I N TRADE. THE INCOME FROM SALE OF LAND IS TO BE ASSESSED AS A BUSINESS INCOME . ACCORDINGLY, HE TREATED ALLEGED GAIN OF RS.965,53,491 AS A BUSINESS INCOME. ASSESSING OFFICER IN THIS WAY, DETERMINED THE TAXABLE INCOME OF THE ASSE SSEE AT RS.10,29,98,180. 7. DISSATISFIED WITH THE ASSESSMENT ORDER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). ALONG WITH HER APPEAL, SHE FILED STATEMENT OF FACTS RUNNING INTO 30 PAGES. IN THE ST ATEMENT OF FACTS, SHE HAS DEMONSTRATED IN SERIATIM AS TO HOW AGRICULTURAL LAN D OWNED AND POSSESSED BY HER PRIOR TO ITS SALE WAS AN AGRICULTURAL LAND. IT DID NOT CEASE TO BE AN AGRICULTURAL LAND. THE FACTS NARRATED BY THE ASSESS EE ON PAGE NOS. 7 TO 12 OF THE STATEMENT OF FACTS ARE WORTH TO NOTE IN ORDER T O UNDERSTAND. WHAT 7 DOCUMENTARY EVIDENCE ASSESSEE BROUGHT TO THE NOTICE OF THE LEARNED ASSESSING OFFICER IN SUPPORT OF HER EXPLANATION. IT READS AS UNDER: (I) THAT ALL THE SALE DEEDS OF THE 'AGRICULTURE LA NDS' PURCHASED BY THE APPELLANT IN THE YEAR 1995-96, AND IN THE YEAR 2003 -04, SHOW THAT THE LANDS WERE 'AGRICULTURE LANDS' AT THE TIME OF T HEIR PURCHASE, (II) THAT ALL THE SALE DEEDS OF THE 'AGRICULTURE LA NDS' SOLD BY THE APPELLANT IN THE YEAR 2007-08, SHOW THAT 'THE LANDS WERE 'AGRICULTURE LAN DS' AT THE TIME OF THEIR SALE, (III) THAT THE LAND REVENUE RECORDS I.E. 'REGISTER INTAKALS' SHOW THAT THE LANDS IN THE NAME OF APPELLANT WERE ENTERED IN LAND REVENUE RECORDS AS 'AGRICULTURE LANDS', (IV) THAT THE LAND REVENUE RECORDS I.E. 'REGISTER I NTAKAL' SHOW THAT THE LANDS SOLD BY THE APPELLANT WERE ENTERED IN THE NAM E OF THE PURCHASERS IN THE LAND REVENUE RECORDS AS 'AGRICULT URE LANDS', (V) THAT THE 'JAMABANDIS' OF THE LAND REVENUE RECOR DS SHOW THAT THE LANDS SOLD BY THE APPELLANT ARE ENTERED IN THE LAND REVENUE RECORDS IN THE NAME OF THE APPELLANT AS 'AGRICULTURE LANDS', (VI) THAT THE 'JAMABANDIS' OF THE LAND REVENUE RECO RDS ALSO SHOW THAT THE LANDS WERE CULTIVATED AS 'KHUDKAST' WHICH MEANS 'SELF CULTIVATION', (VII) THAT THE 'JAMABANDLS' 01 THE LAND REVENUE RECORDS FURTHER SHOW THAT THE 'SOURCE OF IRRIGATION' USED FOR CULTIVATIO N OF THE 'AGRICULTURE LANDS' I S 'TUBEWELL WATER' (VIII) THAT THE SAID JAMABANDIS OF THE LAND REVE NUE ALSO SHOW THAT AN AMOUNT OF RS.1.00, RS.1.00, RS.7.50 AND RS. 0.12 WAS LEVIED A S LAND REVENUE/LAGAN ON THE SAID AGRICULTURAL LAND SOLD BY THE APPELLANT. (IX) THAT THE 'DISTANCE CERTIFICATES' ISSUED BY THE PATW ARI/TEHSILDAR SPECIFICALLY STATES IN HINDI THAT THE LANDS ARE 'ARAIL JARAL' I.E 'AGRICULTURE LANDS' (THE ENGLISH MEANING OF ARAJI JARAI' IS 'AGRICULTURE LAND'). (X) THAT THE 'DISTANCE CERTIFICATES' ISSUED BY THE PATWARI/TEHSILDAR SPECIFICALLY STATES 8 IN HINDI THAT 'ARAJI JARAI' (ENGLISH MEANING OF 'ARAJI JARAL' IS 'AGRICULTURAL LAND') I.E. THE LANDS ARE 'AGRICULTURE LANDS' WH IC H ARE SITUATED AT A D',S TANCE OF 12 KM AND 15 KM OUTS IDE THE MUNICIPALITY LIMIT AT GURGAON. (XI) THAT THE 'AGRICULTURE LAND' IN VILLAGE GW AL PAHARI, TEHSIL SOHNA, GURGAON, WHICH WAS PURCHASED BY THE APPELLANT IN THE YEAR 1995-96 HAS BEEN REGULARLY ASSESSED BY THE DEPARTMENT IN THE 'RETURNS 01 WEALTH', OF THE APPELLANT AS 'AGRICULTURE LAND' UNDER THE HEADING 'IMMOVABLE ASSETS' (WHICH IS NON TAXABLE ASSET BEING EXEMPT UNDER SECTION 2(E) (A) OF THE WEALTH TAX ACT), CONT INUOUSLY FOR THE LAST 12 YEARS I.E. DURING THE ASSESSMENT YEARS 1996-97, 1997-98, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04, 2004 -2005, 2005-2006,2006-2007 A ND 2007-2008. (XII) THAT THE 'AGRICULTURE LAND' IN VILLAGE 8ALOL A, TEHSIL SOHNA, GURGAON, WHICH WAS PURCHASED BY THE APPELLANT IN THE YEAR 2003-2004, H AS BEEN REGULARLY ASSESSED BY THE DEPARTMENT IN THE 'RETURNS 01 WEALTH', OF THE APPELLANT AS 'AGRICULTURE LAND' UNDER THE HEADING 'IMMOVABLE ASSET' (WHICH IS NON T AXABLE ASSET BEING EXEMPT UNDER SECTION 2(E) (A) OF THE WEALTH TAX ACT), CONT INUOUSLY FOR THE LAST 4 YEARS I.E. DURING THE ASSESSMENT YEARS 2004 -2005,2005-2006,20 06-2007 AND 2007-2008. (XIII) THAT DURING THE ASSESSMENT YEAR 2005-06, TH E 'RETURN OF INCOME', OF THE APPELLANT WAS SELECTED FOR SCRUTINY, & AN ASSESSMENT ORDER DATED 27.10.2005, UNDER SECTION 143(3) OF THE INCOM E TAX ACT WAS PASSED BY THE DEPARTMENT AND DURING THE SAID ASSESS MENT YEAR 2005-2006, THE SAID 'AGRICULTURAL LANDS' HAD BEEN A SSESSED BY THE DEPARTMENT IN 'RETURN OF WEALTH', OF THE APPELLANT AS 'AGRICULTURAL LANDS' UNDER THE HEADING 'IMMOVABLE ASSETS' (WHICH IS NON TAXABLE BEING EXEMPT UNDER SECTION 2 (E) (A) OF THE WEALTH TAX ACT. (XIV) THAT DURING THE ASSESSMENT YEAR 2005-06, THE 'RETURN OF WEALTH' OF THE APPELLANT WAS SELECTED. FOR SCRUTINY, & AN ASSESSMENT ORDER DATED 16.3.2006, UNDER SECTION 16(3) OF THE WEALTH TAX ACT WAS PASSED BY THE DEPARTMENT. IT WAS ALSO PROVED BY THE APPELLANT THAT IN THE SAID ASSESSMENT ORDER UNDER SECTION 16(3) OF THE WEALTH TAX ACT FOR THE ASSESSMENT YEAR 2005-06 PASSED BY THE D EPARTMENT, THE SAID 'AGRICULTURAL LANDS', (I.E. THE 'AGRICULTU RE LAND' PURCHASED BY THE APPELLANT IN VILLAGE GWAL PAHARI, TEHSIL SOH NA, GURGAON, IN THE YEAR 1995-96 WHICH WAS SOLD BY THE APPELLANT IN THE ASSESSMENT YEAR 2008-2009, AND THE SAID 'AGRICULTURE LANDS' PU RCHASED BY THE APPELLANT IN 2003-2004 IN VILLAGE BALOLA, TEHSIL SO HNA, GURGAON, WHICH WAS ALSO SOLD BY THE APPELLANT IN THE ASSESSM ENT YEAR 2008- 9 6(09), WERE ASSESSED AS 'AGRICULTURE LANDS' BY THE DEPARTMENT UNDER THE HEADING 'IMMOVABLE ASSETS' (WHICH IS NON TAXABLE BEING EXEMPT UNDER SECTION 2(E)(A) OF THE WEALTH TAX ACT) . THE RELEVANT PORTION OF THE SAID ASSESSMENT ORDER DATED 16.3.2006 IS REPRODUCED AS UNDER:- 'A RETURN DISCLOSING TAXABLE WEALTH OF RS.37.23,900/- HAS BEEN FILED ON 2.8.2004, WHICH WAS PROCESSED U/S 16(1) ON RETURNED WEALTH ON 31.8.2005. THE CASE WAS SELECTED FOR SCRUTINY. IN RESPONSE TO A NOTICE U/S 16(2) SHRI RAJEEV SABHARWAL, C.A. ATTENDED FROM TIME TO TIME AND FILE D THE DETAILS ASKED FOR. THE CASE HAS BEEN DISCUSSED. THE WEALTH OF THE ASSESSEE COMPRISES OF AGRICULTURAL LANDS, RESIDENTIAL HOUSE AND COMMERCIAL ESTABLISHME NTS, PLOTS AND JEWELLARY. THE VALUATION OF COMMERCIAL ESTABLISHMENTS HAS BEEN TAKEN AS PER RULE 1 AA AND VALUE OF PLOTS HAS BEEN TAKEN ON THE BASIS OF RATE LIST OF TEHSIL GURGAON ISSUED BY THE SUB- REGISTRAR, GURGAON. AFTER DISCUSSION NET WEALTH DECLARED BY THE ASSESSE E IS ACCEPTED.' (XV) THAT DURING THE ASSESSMENT YEAR 2003-04, THE 'RETURN OF INCOME' OF THE APPELLANT (AND IN WHICH ASSESSMENT YEAR, THE 'A GRICULTURE LAND' PURCHASED BY THE APPELLANT IN VILLAGE GWAL PAHARI, TEHSIL SOHNA, GURGAON, IN THE YEAR 1995-96 WHICH WAS SOLD BY THE APPELLANT IN THE YEAR 2008-2009, WAS SHOWN AS 'IMMOVABLE ASSET' WHIC H IS NON TAXABLE BEING EXEMPT UNDER SECTION 2(E)(A) OF THE W EALTH TAX ACT, IN THE 'RETURN OF WEALTH' OF THE APPELLANT), WAS AS SESSED BY THE DEPARTMENT VIDE ASSESSMENT ORDER PASSED UNDER SECTI ON 154 OF THE INCOME TAX ACT. HOWEVER, THE SAID ORDER PASSED UNDE R SECTION 154 OF THE INCOME TAX ACT WAS APPEALED BY THE APPELLANT IN APPEAL NO. 399/05-06, AND THE SAID APPEAL OF THE APPELLANT WAS PARTLY ALLOWED BY THE COMMISSI ONER OF INCOME TAX (APPEALS) XXX NEW DELHI), VIDE ITS APPELLATE ORDER DATED 8.3. 2006 PASSED UNDER SECTION 250(6) OF THE INCOME TAX ACT. THAT IT WAS ALSO PROV ED TO THE LD. ADDL.CIT THAT THE SAID APPELLATE ORDER OF CIT (APPE ALS) WAS NOT CHALLENGED BY THE DEPARTMENT, AND HENCE THE ASSESSM ENT OF THE SAID 'AGRICULTURE LANDS' UNDER THE HEADING 'IMMOVAB LE ASSET' (WHICH IS NON TAXABLE AND EXEMPT UNDER SECTION 2(E) (A) OF THE WEALTH TAX ACT) HAS BECOME FINAL AND BINDING ON THE DEPARTMENT. 10 (XVI) THAT IN THE 'DETAILED NOTE' DATED 2~. 11 .~0 1 0 ON THE SALE OF 'AGRICULTURE LANDS' IN VILLAGE 8ALOLA AND VILLAGE G WAL PAHARI', SUBMITTED BY THE APPELLANT TO LD. ADD!. CIT, IT WAS PROVED THAT THE 'AGRICULTURE LANDS' SOLD BY THE APPELLANT ARE SITUA TED AT A DISTANCE OF 12 KM AND 15 KM OUTSIDE THE MUNICIPALITY LIMITS OF GURGAON AND THE SAID 'AG~ICULTURE LAND' DO NOT FALL WITHIN THE DEFINITION OF 'CAPITAL ASSET' PROVIDED UNDER SECTION 2(14)(III)(B) OF THE INCOME TAX ACT, AND HENCE NO CAPITAL GAIN IS APPLICABLE ON THE SAID 'AGRICULTURE LANDS'. (XVII THAT IN THE 'NOTE' DATED 13.12.2010 ON SUPPOR TING DOCUMENTS OF 'AGRICULTURE LANDS' IN VILLAGE BALOLA & VILLAGE GWAL PAHADI, TEHSIL SOHNA, DISTT. GURGAON, WHICH WERE SOLD BY THE APPEL LANT IN THE YEAR 2007-2008', SUBMITTED BY THE APPELLANT, IT WAS PROV ED TO THE LD. ADD!. CIT THAT THE LANDS SOLD BY THE APPELLANT WERE 'AGRICULTURE LANDS'. IT WAS PROVED TO THE LD. ADDL. CIT THAT THE SALE DEEDS OF 'AGRICULTURE LANDS' SOLD BY THE APPELLANT SHOW THAT THE LANDS SOLD BY THE APPELLANT WERE 'AGRICULTURE LANDS', 'JAMABANDIS ' OF LAND REVENUE RECORDS SHOW THAT THE LANDS SOLD BY THE APP ELLANT ARE 'AGRICULTURE LANDS', AND IN THE 'JAMABANDIS' THE NA ME OF THE 'CULTIVATOR' IS SHOWN AS 'KHUDKAST' I.~. SELF CULTI VATION IT ALSO SHOW THAT LAND REVENUE/LAGAN OF RS.1.00, RS.1.00, RS.7.5 0 & RS.0.12 IS LEVIED ON THE SAID 'AGRICULTURE LANDS' AND IT ALSO SHOW THAT THE SOURCE OF IRRIQATION USED FOR CULTIVATION IS 'TUBE WELL' IT WAS PROVED TO THE LD ADDL CIT THAT THE PATWAN AND TEHSILDAR OF TEHSIL SOHNA HAD ISSUED 'DISTANCE CERT IFICATES' DATED 6.3.2007 CERTIFYING THE DISTANCE OF THE SAID 'AGRICULTURE LA NDS' AND ALSO CERTIFYING THAT THE SAID 'AGRICULTURAL LANDS' ARE SITUATED AT A DISTANC E OF 12 KM TO 15 KM OUTSIDE MUNICIPALITY LIMITS OF GURGAON. IT WAS ALSO PROVED TO THE LD. I\DDL ELT TH3T THESE 'AGRICULTURE L.ANDS' WERE SITUATED AT 12 KM &15 KM OUTSIDE MUNICIPALITY LIMITS OF GURGAON AND THE S AID 'AGRICULTURE LANDS' DO NOT FALL WITH THE DEFINITION OF 'CAPITAL ASSET' PROVIDED UNDER SECTION 2(14)(III)(B), OF THE INCOME TAX ACT, AND HENCE NO CAPITAL GAIN TAX IS APPLICABLE ON THE SAID 'AGRICULTURE LANDS' AS IT IS NOT A 'CAPITAL ASSET' FALLING WITHIN THE MEANING OF THE I NCOME TAX ACT. (XVIII) THAT WITH THE SUPPORT OF THE JUDGMENT OF T HE DIVISION BENCH OF HON'BLE DELHI HIGH COURT IN THE MATTER OF 'HINDUSTA N INDUSTRIAL RESOURCES LTD. VS ASSTT. COMMISSIONER OF INCOME TAX ' IN THE CASE NO. ITA 1130 OF 2006 DECIDED ON 9.1.2009, IT WAS PR OVED TO THE LD 11 ADDL CIT THAT THE SAID JUDGMENT IS DIRECTLY APPLICA BLE TO THE FACTS OF THE CASE OF THE APPELLANT, AND THE CASE OF THE APPE LLANT IS SQUARELY COVERED BY THE SAID JUDGMENT OF THE DIVISION BENCH OF THE HON'BLE DELHI HIGH COURT. 8. LEARNED CIT(APPEALS) HAS CONSIDERED THE EXPLANAT ION OF THE ASSESSEE AS WELL AS DOCUMENTARY EVIDENCE PRODUCED BY THE ASS ESSEE. LEARNED FIRST APPELLATE AUTHORITY HAS ALSO TOOK COGNIZANCE OF THE STATEMENT OF FACTS, EXTRACTED SUPRA IN THE IMPUGNED ORDER. APART FROM T HE ABOVE STATEMENT OF FACTS, LEARNED FIRST APPELLATE AUTHORITY HAS ALSO R EFERRED THE DOCUMENTS AVAILABLE ON THE RECORD BY MENTIONING THE ANNEXURE. LEARNED CIT(APPEALS) HAS HELD THAT LAND IN DISPUTE IS AN AGRICULTURAL LA ND. IT WAS SITUATED WITHIN THE REVENUE ESTATE OF VILLAGE PAHARI GWAL AND BALOLA IN GURGAON DISTRICT. BOTH THESE REVENUE ESTATES ARE SITUATED AT A DISTANCE OF 12 KMS TO 15 KMS OUTSIDE THE MUNICIPAL LIMIT OF GURGAON. LEARNED CIT(APPEALS ) TOOK INTO CONSIDERATION LAND REVENUE RECORD MAINTAINED UNDER THE PUNJAB LAND REVENUE ACT I.E. JAMABANDI KHASRA GIRDAWARI AND MUT ATION REGISTER. THE REPORT OBTAINED FROM THE PATWARI I.E. ( A REVENUE O FFICIAL UNDER THE PUNJAB LAND REVENUE ACT WHO MAINTAINS THE REVENUE RECORD ) . LEARNED CIT(APPEALS) ALSO OBSERVED THAT ASSESSING OFFICER H AS APPRECIATED THE FACTS WRONGLY. ACCORDING TO THE LEARNED CIT(APPEALS), THE LAND OF THE ASSESSEE WAS NEVER FORMED PART OF SEZ, BEFORE ITS SALE OR SU BSEQUENT TO THE SALES ALSO. IT IS AN INCORRECT INFERENCE OF FACTS AT THE END OF LEARNED ASSESSING OFFICER TO 12 SAY THAT THIS LAND WAS FORMING PART OF SEZ. LEARNED FIRST APPELLATE AUTHORITY IN THIS WAY HELD THAT LAND OF THE ASSESSEE WAS AN A GRICULTURAL LAND WHICH WAS SOLD BY HER AND WHICH DOES NOT LIABLE HER TO PAY CA PITAL GAIN TAX. 9. THIS PART OF THE LEARNED FIRST APPELLATE AUTHORI TYS ORDER HAS NOT BEEN CHALLENGED BY THE REVENUE BEFORE US. WE HAVE EXTRAC TED THE GROUNDS OF APPEAL TAKEN BY THE REVENUE IN THE OPENING PARAGRAP H OF THIS ORDER. IT SUGGESTS THAT AS FAR AS FACTUM OF AGRICULTURAL LAND OWNED AND POSSESSED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE REVENUE. THER EFORE, WE NEED NOT TO GO INTO THE DETAILS OF AGRICULTURAL OPERATION, ELECTRI CITY BILLS, EVIDENTIARY VALUE OF ENTRIES RECORDED IN THE JAMABANDI AND KHASRA GIRDAW ARI. THE LIMITED ISSUE FOR OUR ADJUDICATION IS WHETHER ASSESSEE WAS CARRYING O UT A BUSINESS IN THE SALE AND PURCHASE OF THE LAND AND HER INCOME FROM THAT S OURCE HAS TO BE ASSESSED AS A BUSINESS INCOME. 10. THE FACTS HARBORED BY THE LEARNED ASSESSING OF FICER IN ORDER TO TREAT THE ASSESSEE AS A DEALER IN LAND ARE THAT ASSESSEE HAD PURCHASED AND SOLD VARIOUS OTHER IMMOVEABLE PROPERTIES SINCE ASSESSMEN T YEAR 2004-05. THE DETAILS OF SUCH TRANSACTIONS HAVE BEEN COMPILED IN ANNEXURE A ATTACHED WITH THE ASSESSMENT ORDER. ON THE STRENGTH OF THESE DETA ILS, LEARNED ASSESSING 13 OFFICER INVITED THE EXPLANATION OF THE ASSESSEE AS TO WHY IT SHOULD NOT BE TREATED THAT ASSESSEE WAS CARRYING A BUSINESS/ADVEN TURE IN THE NATURE OF TRADE. IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER, ASSESSEE FILED WRITTEN SUBMISSIONS ON 27.12.2010. LEARNED ASSESSING OFFIC ER HAS REPRODUCED THE SUBMISSIONS MADE BY THE ASSESSEE WHICH READ AS UNDE RA: I) DURING THE F.Y. 1995-96 (I.E. 12 YEARS PRIOR TO THE YEAR UNDER ASSESSMENT) AND DURING THE F.Y. 2003-04 (I.E. 4 YEARS PRIOR TO THE YEAR UNDER ASSESSMENT), THE ASSESSEE H AD PURCHASED AGRICULTURE LAND IN VILLAGE GWAL PAHADI AND VILLAGE BALULA, TEHSIL SOHNA, DISTT. GURGAON. THE SAID AGRICULTURE LAND IS SITUATED AT A DISTANCE OF APPROX. 12 TO 15 KMS. OUT SIDE THE MUNICIPAL LIMITS OF GURGAON MUNICIPALITY. THE SAID AGRICULTURE LAND DOES NOT FALL UNDER THE DEFINITION OF ASSET UNDER THE INCOME TAX ACT. (II) THE AGRICULTURAL LAND WAS NOT INTENDED FO R RESALE AND THE PURCHASE OF 1995 WERE OWNED FOR 12 YEARS. HOWEVER, SINCE THE SAID AGRICULTURE LAND WAS NOT GIVING APPROPRIATE AG RICULTURE INCOME TO THE ASSESSEE INSPITE OF THE ARDUOUS NATUR E OF AGRICULTURAL WORK, THE ASSESSEE WAS FINDING IT HARD FOR HER ADVANCING AGE AND PREOCCUPATION WITH HER PROFESSION AL WORK AND THEREFORE HAD SOLD THE SAID AGRICULTURE LAND AS IT IS IN THE F.Y. 2007-08 (AFTER 12 YEARS AND 4 YEARS OF ITS ACQ UISITION), IN FULL AS AN ISOLATED TRANSACTION. 14 (III) IT IS SUBMITTED THAT ON THE DATE OF ACQUI SITION, THE SAID AGRICULTURE LAND WAS AN AGRICULTURE LAND, AND ON TH E DATE OF SALE, THE SAID AGRICULTURE LAND WAS AN AGRICULTURE LAND. IT IS CLARIFIED THAT EVEN TODAY THE SAID AGRICULTURE LAND IS AN AGR ICULTURE LAND. SINCE THE ASSESSEE WAS GROWING OLDER AND IN ORDER T O SECURE HER FUTURE FOR A STABLE AND REGULAR INCOME, THE ASSESSE E HAD FROM THE PROCEEDS RECEIVED FROM THE SALE OF THE SAID AGRICUL TURE LAND, PURCHASED OFFICE SPACES, AND THE SAID OFFICE SPACES ARE GIVING REGULAR AND STABLE RENTAL INCOME TO THE ASSESSEE WH ICH IS BEING ASSESSED TO TAX AS INCOME FROM HOUSE PROPERTY. (IV) THE ABOVE PURCHASE OF THE AGRICULTURE LAND IN THE YEAR 1995-96 AND IN THE YEAR 2003-04 AND SALES THEREOF A S IT IS WITHOUT MAKING ANY CHANGES THEREIN DURING THE YEAR 2007-08 IN FULL, DOES NOT, IN ANY MANNER WHATSOEVER, TANTAMOUN T TO ANY BUSINESS ACTIVITY. SIR, WE HAVE ALREADY PROVIDED T O YOU THE WEALTH TAX RETURNS OF THE ASSESSEE FOR THE YEAR 200 3-04, 2004- 05, 2005-06, 2006-07 AND 2007-08. SIR, FROM THE SA ID WEALTH TAX RETURNS OF THE ASSESSEE, YOU WILL KINDLY APPREC IATE THAT THERE IS NO OTHER SALE OF ANY AGRICULTURAL LANDS OR ANY O THER PROPERTIES BY THE ASSESSEE UP TILL THE YEAR 2007-08 EXCEPT THE SALE OF THE SAID AGRICULTURE LAND, DURING 2007-08 AND THAT TOO IN VIEW OF THE CIRCUMSTANCES STATED ABOVE. THIS DOES NOT, IN ANY MANNER WHATSOEVER, TANTAMOUNT TO ANY BUSINESS ACTIVITY. C OPY OF THE SAME ARE AGAIN ENCLOSED FOR YOUR KIND REFERENCE. 15 (V) A. SECTION 28 OF THE INCOME TAX ACT STATES T HE FOLLOWING SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD P ROFIT AND GAINS OF BUSINESS OR PROFESSION (I) THE PROFITS AN D GAINS OF ANY BUSINESS OR PROFESSION WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR. B. SECTION 2(13) OF THE INCOME TAX ACT DESCRIBES THAT BUSINESS INCLUDES ANY TRADE COMMERCE OR MANUFACTURE OR ANY A DVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANU FACTURE. 11. LEARNED ASSESSING OFFICER HAD GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED THAT THE HON'BLE SUPREME COUR T AS WELL AS HON'BLE HIGH COURT IN THEIR AUTHORITATIVE PRONOUNCEMENTS HA D PROPOUNDED THE MEANING OF EXPRESSION IN THE NATURE OF TRADE. ACC ORDING TO THESE DECISIONS, THE EXPRESSION IN THE NATURE OF TRADE POSTULATE THE EXISTENCE OF CERTAIN ELEMENTS IN THE ADVENTURE WHICH IN LAW WOULD INVEST IT WITH THE CHARACTER OF A TRADE OR BUSINESS. AN ADVENTURE IN THE NATURE OF TRADE CANNOT PROPERLY BE REGARDED AS A TRADE OR BUSINESS. EVEN AN ISOLATED A ND SINGLE TRANSACTION CAN BE SPECIFIED OF AN ADVENTURE IN THE NATURE OF TRADE . LEARNED ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE DID NOT ENJO Y ANY AGRICULTURAL INCOME FROM THE SAID PIECE OF AGRICULTURAL LAND. NO AGRICU LTURAL OPERATIONS WERE PERFORMED ON THESE LANDS, THEREFORE, IT CLEARLY EST ABLISHES THAT THESE LANDS 16 WERE PURCHASED BY THE ASSESSEE ONLY TO SELL AT A PR OFIT. HE MADE REFERENCE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F G. VENKATESWARAM NAIDU & CO. VS. CIT REPORTED IN 35 ITR 594 AND CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. REPORTED IN 107 ITR 706. 12. BEFORE LEARNED CIT(APPEALS), IT WAS POIN TED OUT THAT LEARNED ASSESSING OFFICER HAS ERRED IN APPRECIATING THE FAC TS AND CIRCUMSTANCES ON THE RECORD. WE WILL DEAL WITH THE FACTUAL INACCURAC IES POINTED OUT BY THE ASSESSEE TO THE LEARNED CIT(APPEALS). HOWEVER, LEAR NED FIRST APPELLATE AUTHORITY HAS ACCEPTED THE CONTENTIONS OF THE ASSES SEE THAT SHE WAS NOT DOING ANY BUSINESS IN THE SALE AND PURCHASE OF LAND OR RE AL ESTATES, INCOME ON SALE OF AGRICULTURAL LAND CANNOT BE TREATED AS INCOME FR OM BUSINESS. 13. BEFORE US, LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. SHE POINTED OUT THAT ASSESSEE IS A READER IN A COLL EGE. BUT FROM THE LAST MANY YEARS, SHE HAS BEEN SHOWING HUGE PROPERTY INCOME. S HE HAS BEEN PURCHASING PLOTS, FLATS AND AGRICULTURAL LAND ON REGULAR INTER VALS. SHE HAS SOLD SOME OF THE PROPERTIES DURING THE YEAR. SHE HAS SOLD EARLIE R ALSO. THE DETAILS HAVE BEEN MENTIONED BY THE ASSESSING OFFICER IN ANNEXURE -A. LEARNED CIT(DR) TOOK US THROUGH ANNEXURE-A AND APPRAISED US THE SYS TEMATIC MANNER OF 17 ACQUISITION OF PROPERTY BY THE ASSESSEE. THE LEARNE D COUNSEL FOR THE ASSESSEE ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSE SSING OFFICER. HE PLACED ON RECORD BRIEF WRITTEN SYNOPSIS AND ALSO RELIED UP ON THE FOLLOWING CASE LAWS: I) CIT VS. R.V. GUPTA (DEL) ITA NO. 175 OF 2002 (20 02) 258 ITR 261; II) JANKI RAM BAHDUR RAM VS. CIT (S.C) (1975) 57 IT R 21; III) CIT VS. KASTURI ESTATES (P) LTD. [1966] 62 ITR 578; IV) CIT VS. A. MOHAMMED MOHIDEEN (1989) 176 ITR 393. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE RECORD CAREFULLY. SECTION 2(13) OF THE INCOME-TAX ACT, 196 1 PROVIDES THE DEFINITION OF EXPRESSION BUSINESS. ACCORDING TO THIS DEFINIT ION, BUSINESS INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. THE MEANI NG OF THIS EXPRESSION FALLEN FOR CONSIDERATION BEFORE HONBLE COURTS ON A NUMBER OF COUNTS. IT WAS PROPOUNDED THAT WORD BUSINESS HAS A WIDE IMPORT A ND IT MEANS AN ACTIVITY CARRIED ON CONTINUOUSLY AND SYSTEMATICALLY BY A PER SON BY APPLICATION OF HIS LABOUR AND SKILL WITH A VIEW TO EARN AN INCOME. THE EXPRESSION ADVENTURE IN TRADE REFERRED BY THE ASSESSING OFFICER SUGGESTS T HAT A PARTICULAR TRANSACTION MAY NOT PROPERLY BE REGARDED AS A TRADE OR BUSINESS BUT IT IS ALLIED TO A 18 TRANSACTION THAT CONSTITUTES TRADE OR BUSINESS. IT MAY NOT BE TRADE OR BUSINESS IN ITSELF BUT IT MIGHT HAVE SOME ESSENTIAL FEATURES , THAT MAKE UP A TRADE OR BUSINESS. THUS, THE QUESTION WHETHER A TRANSACTION CARRIED OUT BY AN ASSESSEE IS AN ADVENTURE IN THE TRADE OR NOT, CANNOT BE DECI DED BY ATTACHING IMPORTANCE TO ONE OR MORE FACTS IN ISOLATION. IT IS NOT POSSIBLE TO EVOLVE ANY SINGLE LEGAL TESTS OR FORMULA WHICH CAN BE APPLIED IN DETERMINING WHETHER A TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE OR NOT. THE ANSWER TO THE QUESTION MUST NECESSARILY DEPEND IN EACH CASE ON TH E TOTAL IMPRESSION AND EFFECT OF ALL THE RELEVANT FACTORS AND CIRCUMSTANCE S PROVED THEREIN, WHICH DETERMINED THE CHARACTER OF THE TRANSACTION. THERE ARE BASIC TEST WHICH CAN BE APPLIED ON THE FACTS TO DECIDE THE CONTROVERSY WHET HER TRANSACTION WAS IN THE NATURE OF TRADE OR NOT. THERE ARE CERTAIN BASIC PAR AMETER WHICH THE ADJUDICATING AUTHORITY OUGHT TO HAVE KEPT IN MIND. THESE BASIC TEST ARE, NAMELY, (I) WHAT IS THE DOMINANT INTENTION OF AN AS SESSEE WHILE CONDUCTING THE TRANSACTION; (II) WHETHER THE PURCHASE WAS MAD E SOLELY WITH AN INTENTION OF RESALE AT A PROFIT; (III) WHETHER ASSESSEE HAS B EEN CARRYING OUT SUCH TRANSACTIONS CONTINUOUSLY, SYSTEMATICALLY AND REGUL ARLY; (IV) WHAT IS THE SOURCE OF FUNDS FOR PURCHASE OF LAND; (V) WHAT IS T HE HOLDING PERIOD OF SUCH AN ASSET; (VI) WHETHER AN ELEMENT OF RISK OR UNCERT AINTY IS INVOLVED IN THE TRANSACTION CARRIED OUT BY THE ASSESSEE. THESE ARE THE CERTAIN BASIC TESTS APART 19 FROM THE OTHERS WHICH CAN BE CARVED OUT FROM THE FA CTS OF A PARTICULAR CASE WHICH CAN BE APPLIED ON THE TRANSACTION. 15. LET US CONSIDER THE FACTOR WHICH INFLUENCED LEA RNED ASSESSING OFFICER TO TREAT THE SALE OF AGRICULTURAL LAND AS AN ADVENT URE IN THE NATURE OF TRADE. IN ORDER TO HARBOR A BELIEF THAT ASSESSEE IS ENGAGED I N THE TRADING OF REAL ESTATES. LEARNED ASSESSING OFFICER HAS OBSERVED THAT ASSESS EE HAS PURCHASED THE LAND WITH A VIEW TO SELL IT AT A PROFIT. HE MADE RE FERENCE TO ANNEXURE-A ATTACHED WITH THE ASSESSMENT ORDER AND OBSERVED THA T IN ASSESSMENT YEAR 2004-05, ASSESSEE HAS ACQUIRED FOUR PROPERTIES AT D LF CITY-I, GURGAON. THIS IS THE FIRST INSTANCE REFERRED BY THE ASSESSING OFF ICER TO SAY THAT ASSESSEE IS VENTURING IN THE TRADE OF REAL ESTATES. BEFORE LEAR NED CIT(APPEALS), IT WAS CONTENDED THAT THIS OBSERVATION OF THE ASSESSING OF FICER IS FACTUALLY INCORRECT. THE PROPERTY B-4, QUTAB PLAZA, DLF CITY- I, GURGAON WAS ACQUIRED BY THE ASSESSEE IN SEPTEMBER, 1995. IT HAS NOT BEEN SOLD. LEARNED ASSESSING OFFICER HAS ERRONEOUSLY REFERRED THIS PRO PERTY TO BE ACQUIRED IN ASSESSMENT YEAR 2004-05. SIMILAR IS THE POSITION WI TH REGARD TO PROPERTY BEARING NO. BB-4, QUTAB PLAZA, DLF, GURGAON. THE TH IRD INSTANCE CITED BY THE ASSESSING OFFICER IS IN RESPECT OF PROPERTY BEA RING NO. JB-18, QUTAB PLOT, DLF CITY-I, GURGAON. ACCORDING TO THE ASSESSI NG OFFICER, THIS PROPERTY 20 WAS ACQUIRED BY THE ASSESSEE IN ASSESSMENT YEAR 200 4-05. HOWEVER, ASSESSEE DEMONSTRATED BEFORE THE LEARNED FIRST APPELLATE AUT HORITY THAT THIS PROPERTY WAS ACQUIRED IN 2002. THE FOURTH PROPERTY I.E. D-16 , SHOPPING MALL, DLF CITY, PHASE-I, GURGAON WAS ALLEGED TO HAVE BEEN ACQ UIRED BY THE ASSESSEE IN ASSESSMENT YEAR 2004-05 BY THE ASSESSING OFFICER WH EREAS ACCORDING TO THE ASSESSEE, IT WAS ACQUIRED IN DECEMBER, 1994. THE NE XT INSTANCE REFERRED BY THE ASSESSING OFFICER IS WITH REGARD TO THE PROPERT Y BEARING NO. MS-0305, MEGHA MALL, DLF, GURGAON. ACCORDING TO THE ASSESSIN G OFFICER, THIS PROPERTY WAS ACQUIRED IN ASSESSMENT YEAR 2005-06, T HE ASSESSEE DID NOT DISPUTE THE ACQUISITION OF THIS PROPERTY IN THIS YE AR. THUS, THE FOUNDATION OF THE FACTS PUT BY THE ASSESSING OFFICER IS INCORRECT , WHICH LEADS TO DRAW INCORRECT INFERENCE. LEARNED FIRST APPELLATE AUTHOR ITY HAS OBSERVED THAT THESE FOUR PROPERTIES WERE ACQUIRED EARLIER IN TIME AND T HEY ARE RETAINED BY THE ASSESSEE FROM THE DATE OF THEIR ACQUISITION. 16. THE NEXT CIRCUMSTANCE REFERRED BY THE ASSESSING OFFICER IS WITH REGARD TO THE APARTMENT NO. 1/203, MALIBU TOWN, GUR GAON. ASSESSING OFFICER HAS OBSERVED IN THE ANNEXURE THAT THIS PROPERTY WAS AVAILABLE WITH THE ASSESSEE IN ASSESSMENT YEAR 2004-05 BUT IT IS NOT A PPEARING IN HER ASSETS IN ASSESSMENT YEAR 2006-07. IT SUGGESTS THAT SHE MUST HAVE SOLD THE PROPERTY. IT 21 WAS EXPLAINED BY THE ASSESSEE THAT THIS PROPERTY WA S GIFTED TO HER DAUGHTER SONALI ANAND BY THE ASSESSEE. HER DAUGHTER WAS TO G ET MARRY IN THE SUBSEQUENT YEAR AND THE ASSESSEE MADE THE GIFT SO T HAT SHE CAN LIVE A HAPPY MARRIED LIFE. THE ASSESSEE ALSO POINTED OUT THAT SH E IS STILL STAYING IN THE SAID APARTMENT. 17. THE NEXT INSTANCE REFERRED BY THE ASSESSING OFF ICER IS PLOT NO. LS-22, MALIBU TOWN. HE OBSERVED THAT IT WAS ACQUIRED BEFOR E MARCH 2004 AND IT WAS SOLD DURING THE YEAR 2006-07. THE ASSESSEE HAS POINTED OUT THAT THIS PLOT WAS PURCHASED ON 23 RD MARCH 1996. IT WAS SOLD IN THE YEAR 2006-07. AS PE R THE PLOT BUYER AGREEMENT DATED 23.3.1996, ASSESSEE HAD TO RAISE CONSTRUCTION OVER THE PLOT WITHIN A PERIOD OF THREE YEARS FROM T HE DATE OF THIS SALE DEED. THREE YEARS WERE EXPIRED. THUS, UNDER THE COMPELLIN G CIRCUMSTANCES, ASSESSEE HAS SOLD THIS PLOT. THE ASSESSEE HAS PREPA RED AN ANNEXURE WHEREIN SHE HAS SHOWN THE EXACT POSITION OF HER PROPERTIES, EXHIBITING THE YEAR OF PURCHASE, YEAR OF SALE, IF ANY ETC. 18. THE ASSESSEE HAS SHOWN ALL INVESTMENT IN HER WE ALTH-TAX RETURN. THE INVESTMENT WAS NOT MADE OUT OF BORROWED FUNDS. THE MOST OF THE PROPERTIES RETAINED BY THE ASSESSEE FOR A PERIOD OF MORE THAN TEN YEARS. LEARNED 22 ASSESSING OFFICER IN HIS CHART MADE REFERENCE TO FI FTEEN PROPERTIES WHERE ASSESSEE HAS MADE INVESTMENT. ALL THESE PROPERTIES ARE RETAINED BY THE ASSESSEE EXCEPT TWO. THE ONE APARTMENT WAS GIFTED T O HER DAUGHTER AND THE OTHER WAS SOLD FOR COMPELLING CIRCUMSTANCES. OTHERW ISE, SHE HAS BEEN EARNING HANDSOME HOUSE PROPERTY INCOME AND OFFERING SUCH INCOME FOR TAXATION. 19. THE PROPERTIES ARE DULY SHOWN IN THE RETURNS M ORE PARTICULARLY IN THE WEALTH-TAX RETURN. THUS, IN OUR OPINION, LEARNED ASSESSING OFFICER DRAW WRONG INFERENCE BY CONSIDERING THE FACTS IN AN ERRO NEOUS MANNER. HE COULD NOT BRING ANY MATERIAL WHICH SUGGESTS THE DOMINANT INTENTION OF THE ASSESSEE TO EARN PROFIT BY SELLING THE PROPERTIES AT HIGHER RATE IMMEDIATELY AFTER THE PURCHASE. ON THE OTHER HAND, ASSESSEE HAS DEMONSTRA TED THAT SHE HAS BEEN MAKING INVESTMENT IN THE PROPERTIES INTENDING TO HO LD THEM, ENJOY THEIR INCOME. 20. THE REVENUE IN ITS GROUNDS OF APPEAL HAS ALSO P LEADED THAT LEARNED CIT(APPEALS) HAS DELETED THE ADDITION BY ENTERTAINI NG ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A OF INCOME-TAX RULES, 1962 . HOWEVER, LEARNED DR WAS UNABLE TO POINT OUT WHICH DOCUMENT WAS PRODUCED BY THE ASSESSEE BY 23 WAY OF ADDITIONAL EVIDENCE. THE ASSESSEE DID NOT MO VE ANY APPLICATION UNDER RULE 46A OF THE ACT. THE DOCUMENTS CONSIDERED BY THE LEARNED CIT(APPEALS) WERE PRODUCED BEFORE THE ASSESSING OFF ICER. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE A PPEAL OF THE REVENUE. IT IS DISMISSED. 21. NOW, WE TAKE THE APPEAL OF THE ASSESSEE. THE SO LITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.15,43,200 IN THE TOTAL INCOME OF THE ASSESSEE . 22. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD BOOKED A PROPERTY BEARING NO. MS-305, DLF, MEGHA MALL. SHE HAS MADE T HE PAYMENT OF RS.58,63,050 THROUGH ACCOUNT PAYEE CHEQUE. THE PROP ERTY COULD NOT BE CONSTRUCTED WITHIN THE STIPULATED PERIOD AS PROVIDE D IN THE AGREEMENT. CLAUSE 12 OF THE AGREEMENT PROVIDES THAT IN CASE THE DEVEL OPER FAILED TO CONSTRUCT THE BUILDING THEN IT WILL PAY A COMPENSATION OF RS. 50 PER SQ.FT. OF THE SUPER AREA PER MONTH TO THE INTENDING ALLOTTEE FOR THE PE RIOD OF SUCH DELAY. THIS CLAUSE ALSO PROVIDES THAT IF THE INTENDING ALLOTTEE FAILED TO TAKE POSSESSION OF THE COMMERCIAL SPACE WITHIN PERIOD OF SIX MONTHS FR OM THE DATE OF INTIMATION IN WRITING BY THE DEVELOPER THEN THE ALL OTTEE SHALL ALSO PAY HOLDING CHARGES OF RS. 50 PER SQ. FT. OF THE SUPER AREA PER MONTH FOR THE ENTIRE PERIOD OF SUCH DELAY. THIS HOLDING CHARGES IS SEPARATE FRO M THE MAINTENANCE 24 CHARGES. ACCORDING TO THE ASSESSEE, THE BUILDING WA S NOT COMPLETE AND DLF COMMERCIAL ENTERPRISES LTD. PAID COMPENSATION EVERY MONTH WITH A COVERING LETTER THAT IT IS A COMPENSATION FOR DELAY IN HANDING OVER THE POSSESSION OF THE PROPERTY. ACCORDING TO THE ASSESS EE, IT IS A CAPITAL RECEIPT. SHE HAS REDUCED THE COST OF ACQUISITION OF THE ASSE TS BY THIS AMOUNT. 23. LEARNED ASSESSING OFFICER HAS REJECTED THE CON TENTIONS OF THE ASSESSEE ON THE GROUND THAT THIS PROPERTY HAS BEEN SHOWN IN THE WEALTH-TAX RETURN OF THE ASSESSEE FROM ASSESSMENT YEAR 2005-06 ONWARDS. HE FURTHER OBSERVED THAT IN THIS SITUATION, IT IS DIFFICULT TO BELIEVE WHY THE ASSESSEE HAS NOT RECEIVED THE POSSESSION OF THE PROPERTY. HE ASS ESSED THE ALLEGED COMPENSATION AS INCOME FROM OTHER SOURCES. 24. APPEAL TO THE LEARNED CIT(APPEALS) DID NOT BRIN G ANY RELIEF TO THE ASSESSEE. 25. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT RIGHT FROM THE BEGINNING, ASSESSEE WAS SAYING THAT SHE HAS RECEIVE D A SUM OF RS.1,28,600 PER MONTH AS A COMPENSATION FROM M/S.DLF COMMERCIAL DEVELOPER ON ACCOUNT OF DELAY IN CONSTRUCTION OF THE PROPERTY PU RCHASED BY THE ASSESSEE. 25 THE ASSESSEE HAS POINTED OUT THAT IN ASSESSMENT YEA RS 2005-06 AND 2006-07 INADVERTENTLY SHE HAS SHOWN THIS COMPENSATION AS RE NTAL INCOME. IN THE PRESENT YEAR, ASSESSEE HAS REALIZED HER MISTAKE OF SHOWING SUCH INCOME AS RENTAL INCOME BECAUSE SHE HAS NOT RECEIVED THE POSS ESSION OF THE PROPERTY. IN SUCH SITUATION IT CANNOT BE AN INCOME FROM HOUSE PR OPERTY. IT IS A COMPENSATION WHICH IS A CAPITAL RECEIPT AND THE ASS ESSEE HAS RIGHTLY REDUCED THE COST OF ACQUISITION BY SUCH COMPENSATION. THE T AXABILITY OF THIS RECEIPT WOULD BE DEALT WITH WHEN THE PROPERTY WILL BE SOLD BY THE ASSESSEE. THE CAPITAL GAIN WOULD BE ON HIGHER SIDE BECAUSE PART O F THE COST OF ACQUISITION IS BEING ALREADY SET OFF AGAINST THIS COMPENSATION. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE FOLLOWING DECISION S: I) DDA VS. ITO (1995) REPORTED IN 53 ITD 19; II) KUSHAL K BANGIA VS. ITO REPORTED IN ITA NO. 2349/MUM/2011; AND III) CIT VS. CHIRANJI LAL MULTANI MAL RAI BAHADUR P VT. LTD. (1989) REPORTED IN 179 ITR 157. 26. ON THE OTHER HAND, LEARNED DR RELIED UPON THE O RDERS OF THE REVENUE AUTHORITIES BELOW. SHE POINTED OUT THAT ASSESSEE HE RSELF SHOWN THE ALLEGED COMPENSATION AS RENTAL INCOME. SHE HAS ALSO SHOWN T HE ASSETS IN HER WEALTH- 26 TAX RETURN. IN SUCH SITUATION, LEARNED ASSESSING O FFICER HAS RIGHTLY ASSESSED THIS INCOME AS AN INCOME FROM OTHER SOURCES. 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE RECORD CAREFULLY. THERE IS NO FINDING AT THE END OF THE AS SESSING OFFICER THAT POSSESSION OF THIS PROPERTY WAS HANDED OVER TO THE ASSESSEE. HE SIMPLY OBSERVED THAT IT IS DIFFICULT TO UNDERSTAND HOW THE ASSESSEE CAN CLAIM THAT DLF COMMERCIAL DEVELOPER HAS NOT GIVEN THE POSSESSI ON OF THE SAID PROPERTY, WHEREAS THE SAME IS APPEARING IN THE WEAL TH-TAX RETURN OF THE ASSESSEE FOR ASSESSMENT YEAR 2005-06. THE ASSESSEE HAS RAISED A SPECIFIC PLEA BEFORE THE ASSESSING OFFICER THAT SHE HAS WRONGLY S HOWN THE INCOME FROM THIS PROPERTY AS A RENTAL INCOME. IT WAS IN FACT A COMPENSATION FOR DELAY IN COMPLETION OF THE CONSTRUCTION. THUS, THE ORDER OF THE ASSESSING OFFICER SUGGESTS THAT HE PROCEEDS ON THE ASSUMPTION THAT PO SSESSION WAS RECEIVED BY THE ASSESSEE AND IT IS AN INCOME FROM THE PROPERTY. THIS REASONING IS NOT LOGICAL FOR THE TWO REASONS. IF THE POSSESSION WAS HANDED OVER TO THE ASSESSEE THEN WHY DLF IS PAYING COMPENSATION TO THE ASSESSEE AND IF CONSTRUCTION IS COMPLETE AND ASSESSEE FAILED TO TAKE POSSESSION OF THE COMPLETED PROPERTY THEN AS PER THE CLAUSE 12 OF THE AGREEMENT, SHE HAS TO PAY HOLDING CHARGES TO THE DLF. THESE TWO CIRCUMSTANCES SUGGEST THAT CONST RUCTION WAS NOT 27 COMPLETE. THE ASSESSING OFFICER DID NOT CROSS-VERIF Y HIS ASSUMPTION OF FACT FROM THE DLF. LET US APPROACH THE ISSUE WITH ONE MO RE ANGLE ALSO. IF THE PROPERTY WAS COMPLETED AND POSSESSION WAS HANDED OV ER TO THE ASSESSEE AS CONSTRUED BY THE ASSESSING OFFICER THEN ANY INCOME RECEIVED BY THE ASSESSEE FROM THIS PROPERTY WOULD BE AN HOUSE PROPERTY INCOM E AND NOT AN INCOME FROM OTHER SOURCES. IN THAT SITUATION, ASSESSING OF FICER SHOULD HAVE VERIFIED THAT WHO IS THE TENANT OVER THE PROPERTY BUT NO SUC H STEPS WERE TAKEN BY THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSE SSEE PUT HEAVY RELIANCE UPON THE ORDER OF THE ITAT PASSED IN THE CASE OF DD A VS ITO REPORTED IN 53 ITD 90. THE FACTS OF THIS CASE ARE ALMOST SIMILA R TO THE FACTS OF THE ASSESSEE. THE DDA HAS FLOATED A SCHEME FOR CONSTRUC TION OF FLATS WHICH WAS TO BE FINANCED BY THE PROSPECTIVE ALLOTTEE. THE DDA COULD NOT COMPLETE THE CONSTRUCTION WITHIN THE STIPULATED PERIOD PROVIDED IN THE ALLOTMENT LETTER. IT HAS CREDITED THE INTEREST ON THE AMOUNTS PAID BY TH E ALLOTTEES TO THE DDA FOR THE CONSTRUCTION OF THE FLATS. THE ITO DISALLOWED T HE PAYMENT MADE BY THE DDA ON THE GROUNDS THAT IT HAS FAILED TO DEDUCT THE TDS. THE DISPUTE TRAVELED UP TO THE ITAT ON THE ISSUE WHETHER THE PA YMENT MADE BY THE DDA IS AN INTEREST WITHIN THE MEANING OF SEC. 2(28)(A) OF THE INCOME-TAX ACT, 1961 OR NOT. THE ITAT HELD THAT THOUGH THE NOMENCLA TURE IS INTEREST BUT IT IS NOT THE INTEREST AS SUCH, IT IS A COMPENSATION PAID BY THE DDA ON ACCOUNT OF 28 DELAY IN THE CONSTRUCTION OF THE DEVELOPED UNITS AN D THE TERM INTEREST USED ONLY AS A MEASURING OF QUANTIFICATION. ITAT HELD SU CH PAYMENT BY DDA AS CAPITAL RECEIPT IN THE HANDS OF ALLOTTEE. SIMILAR I S THE SITUATION IN THE PRESENT CASE. TAKING INTO CONSIDERATION ALL THE FACTS AND C IRCUMSTANCES, WE ALLOW THE GROUND OF APPEAL RAISED BY THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO TREAT THIS COMPENSATION RECEIVED FORM DLF COMMERCIA L AS A CAPITAL RECEIPT. 28. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 12.10.20 12 SD/- SD/- ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 12/10/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR