Krishna Palemar Jappinamogaru , Mangalore V. Assistant Commissioner of Income Tax, Circle-1(1) & TPS, Mangaluru

ITA 741/BANG/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0745 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 05-06-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 21-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TRANSFER OF SHARES; SALE OF RIGHTS ENTITLEMENT OF PARTLY; SALE OF RIGHTS
• Keywords: Capital asset converted into stock in trade; Capital asset; Gift; Business income; Question of law; Cost of acquisition; Date of conversion; Reassessment proceedings; TDS; Capital Gains
• Section: 54; 45(2); 250; 192; 13; 22; 20

Judgement Text

ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No.741/Bang/2024 Assessment Year: 2017-18 Krishna Palemar Jappinamogaru City Point, Kodialbail Mangalore Dakshina Kannada Karnataka 575 003 PAN NO : ACZPP0444N Vs. ACIT Circle-1(1) & TPS Mangalore APPELLANT RESPONDENT Appellant by : Smt. Sheetal Borkar, A.R. Respondent by : Ms. Neera Malhotra, D.R. Date of Hearing : 06.06.2024 Date of Pronouncement : 26.07.2024 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of NFAC for the assessment year 2017-18 dated 29.9.2023 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). The assessee has raised following grounds of appeal: 1. The learned CIT(A) erred in passing the order in the manner he did. 2. The learned CIT(A) ought to have appreciated that condition preceded being absent, reassessment proceedings is invalid and bad in law. 3. The learned CIT(A) on the facts, and in the circumstances of the case is not justified in law in taxing the sale consideration amounting to Rs. 17 Crore as business income of the appellant which was already offered for tax as long-term capital gain during the assessment year 2015-16. 4. The learned CIT(A) on the facts, and in the circumstances of the case has failed to comprehend the fact that appellant did not use any of the clearance obtained from his real estate business or development. Land conversion from residential purpose to commercial use through conversion ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 2 of 28 endorsement and obtained layout clearance does not impact on the nature of holding of an asset. 5. The learned CIT(A) on the facts and in the circumstances o the case has failed to consider the agreement for sale, transfer of substantial consideration, possession transferred and section 53A of the transfer of property act. 6. The learned CIT(A) on the facts, and in the circumstances of the case has overlooked the fact that the consideration which was already offered for Tax as long-term capital gain during that assignment year 2015-2016 and taxing the same during the year under question as business income of the appellant amounts to double taxation. 7. The learned CIT(A) on the facts and in the circumstances o the case has erred in law in withdrawing the TDS of Rs.4,68,865 in advance received from customers on sale of flats as reflected in the form, 26AS during the year under question. 8. The Appellant craves leave to add, amend or alter any of the foregoing grounds. 9. For these and any other grounds that may be urged before the Hon’ble ITAT, it is prayed that the Hon’ble ITAT may allow the appeal with cost.” 1.1 There was a delay of 146 days in filing the appeal before this Tribunal. The assessee filed a condonation petition stating that assessee’s income tax matters have been attended by assessee’s Chief Accountant Mrs. Lakshmi P. Suvarna who was under medical treatment for severe back pain and sciatica and was in long leave. In support of this assessee filed a medical certificate from Dr. V. Srinivas Talithaya, MBBS Regd.No.11369 Chilimbi, Mangalore 575 006. Further, it was stated that since she was on medical leave, it took time to appoint the advocate to file appeal before this Tribunal against the order of first appellate authority and prayed that the delay was bonafide and not on account of negligence on the part of assessee and prayed to condone the delay and admit appeal for adjudication. 2. We have heard the rival submissions and perused the materials available on record. In our opinion, it cannot be said that assessee is very callous in its approach in filing the appeal ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 3 of 28 before the ld. CIT(A) as the assessee’s Chief Accountant Mrs. Lakshmi P. Suvarna who was under medical treatment for severe back pain and sciatica and was in long leave in support of which assessee filed a medical certificate from Dr. V. Srinivas Talithaya, MBBS Regd.No.11369 Chilimbi, Mangalore 575 006 which resulted in delay in filing the appeal before this Tribunal. 2.1 In the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471), Hon’ble Supreme Court laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder: “(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 2.2 Being so, when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 4 of 28 of non-deliberate delay. In our opinion, this is a fit case to condone the short delay of 146 days in filing the appeal before this Tribunal. Accordingly, the delay is condoned and admit the appeal for adjudication. 3. At the time of hearing, assessee has not pressed ground Nos.1 & 2. Accordingly, these grounds are dismissed as not pressed. 4. First, we consider ground Nos.3 to 6 which is with regard to treating the income earned from sale of property as “business income” as against the treatment given by assessee as “long term capital gain.” 5. Facts of the issue are that in the assessment year under consideration, assessee sold a property for a consideration of Rs.17 crores vide sale deed dated 9.3.2017 and after reducing the indexed cost of acquisition, arrived at long term capital gain of Rs.10,11,54,759/- and offered for taxation in the assessment year 2015-16 which is on the basis of sale agreement entered by the assessee with M.P. Associates on 30.8.2014. 5.1 The contention of the ld. A.R. is that the said sale consideration of Rs.70 crores was brought to tax by ld. AO as “business income” in the assessment year under consideration i.e. in the AY 2017-18 though the same was offered for taxation by the assessee under the head “long term capital gain”. During the assessment year 2015-16, she submitted that the assessee entered into an agreement for sale with M/S N.P Associates on 30.08.2014 to sell the property in question for Rs.17,00,00,000/-. Accordingly, M/s. N P Associates paid Rs.5.50 crores to the assessee and the balance amount was to be paid at the time of registration of the sale deed. The sale transaction was to be completed within a period of 12 months from the date of agreement for sale. Subsequently, M/s. N.P. Associates could not fulfill its obligation of paying the remaining amount and, hence, vide letter dated 15.9.2015 stated ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 5 of 28 that they could not pay the balance of the agreed sale consideration of Rs.11.50 crores. A copy of the letter dated 15.09.2015 is furnished by the assessee. Thereafter, a sale deed was registered for Rs.17,00,00,000/- for the sale of the property in question on 09.03.2019 between the assessee and Mrs. Bhavana M and Mr. P. Krishna Raja Mayya, both being purchasers. M/s. N.P Associates acted as the consenting parties in this deed of sale. The assessee considered the agreement for sale made on 3.08.2014 as the sale deed and disclosed the transaction of Rs.17,00,00,000/- in A.Y 2015-16, even though the entire amount of Rs.17,00,00,000/- was not received (the assessee had received only Rs.5.50 crores). The perusal of computation of income for A.Y.2015-16 showed that the assessee considered the sale consideration at Rs.17,00,00,000/- and after reducing the indexed cost of the acquisition of property, arrived at long term capital gain of Rs.10,11,54,759/-. As against this capital gain, the assessee claimed exemption under section 54 due to purchase of residential house property for Rs.9,59,41,705/- on 07.08.2015. The assessee, therefore, arrived at a net capital gain of Rs.52,13,054/-. On the basis of this contention, the assessee stated that he had already disclosed this transaction in A.Y 2015- 16 and, hence, the same could not be brought to tax again in AY 2017-18. 5.2 Further, she submitted that ld. AO wrongly stated that assessee has made an error by offering the capital gain on the basis of agreement for sale only and without registered sale deed so as to claim the long-term capital gain in assessment year 2015-16. According to her, assessee was holding the property as an investment from year to year and the same has been shown in the balance sheet and not as a business asset and the finding given by the ld. AO is contrary to this fact. The ld. AO came to the conclusion that the assessee is holding the asset as a business ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 6 of 28 asset on the basis that the possession is not transferred to NP Associates vide agreement dated 30.8.2014. However, this is not correct as per sale agreement dated 30.8.2014. The possession of the property has been given to NP Associates on receipt of Rs.5.5 Crores advanced from that party. Further, ld. AO observed that the assessee has got the property converted for residential purpose and that has been converted for fetching better price and that cannot be reason to hold that assessee is carrying the business of real estate. Further, she submitted that land conversion from residential purpose to commercial use through conversion endorsements and obtained layouts’ clearance does not impact the nature of holding of an asset. The assessee never converted the fixed asset into stock in trade in terms of section 45(2) of the Act and also the assessee, holding the asset as investment at all times and gain arising out of transfer of said property to be considered as long-term capital only and the assessee is entitled for that deduction as per provision of section 54 of the Act. Regarding deed of nomination of agreement for sale dated 15.5.2017, wherein it is clear that M/s. NP Associates could not complete the balance payment of balance consideration and on their request, the assessee permitted them to transfer the right, title and interest in the said property acquired through agreement dated 30.8.2014 to Bhavana M. & Mrs. P. Krishna Raj Maiya as their nominee which permits them vide the impugned agreement dated 30.8.2014 and it being so, M/s. NP Associates was confirming party to the sale deed dated 15.2.2017. Further, she submitted that assessee has already offered the capital gain in the assessment year 2015-16 and accepted by the department as it is now cannot change the assessability of the income or capital gain arising out of transfer of property in the assessment year under consideration, otherwise it amounts to double taxation one in assessment year 2015-16 as long-term capital gain and another in assessment year 2017-18 as business income, which is contrary to ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 7 of 28 the provisions of the Act. Further, she submitted that the transfer already took place in the assessment year 2015-16 for which agreement dated 30.3.2014 u/s 247(5) of the Act and assessee has rightly offered the same as long term capital gain in the assessment year 2015-16 and this view of assessee is supported by the judgement of Hon’ble Karnataka High Court in the case of CIT Vs. T.K. Dayalu reported in 202 Taxman 431, wherein held as follows: “The finding of fact arrived at by the Tribunal is based upon the material on record. The contents of the agreement dt. 26th Jan., 1996, the second supplementary agreement dt. 14th Oct., 1998, the third supplementary agreement dt. 26th Nov., 1999 and also the affidavit filed by the assessee stating that the actual possession of the schedule property was handed over on 30th May, 1996 the said finding on the question of fact that the possession was handed over on 30th May, 1996 is based upon the material on record and cannot be said to be perverse or illegal. It is not disputed that the assessee had received capital gain in the year 1997-98 and having regard to the finding of fact that the possession of the property has been handed over on 30th May, 1996, and cash part of the agreement also received on that date, appropriate assessment year in which the capital gain is to be taxed is 1997-98. There is no merit in the contention of counsel appearing for the assessee that since the entire project has been completed in the year 2003-04, the tax on capital gain has to be made in that year. It is now well-settled that the date on which possession was handed over to the developer is relevant and in the present case, it is not disputed that assessee has already received a sum of Rs. 45 lakhs in addition to the structures which would enable to put up construction. - Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 180 CTR (Born) 107 : (2003) 260 ITR 491 (Bom) relied on.” 5.3 Further, she also relied on the order of coordinate bench in the case of Jaico Automobiles Engineering Company Pvt. Ltd. reported in 192 ITD 147, wherein held as under: “69. It is abundantly clear therefore that, the rights of possession have been alienated to IDEB in letter and spirit. The contentions of the assessee in this regard are therefore not tenable with regard to transfer of possession. Apart from disputing the year of taxability in respect of the impugned transaction, it is not the assessee's case that the agreements dated 30/03/2007 with IDEB were not enforced or continued in the subsequent years. It is also not the assessee's contention that the aforecited agreements were either cancelled or that the deposits received from IDEB were refunded at a later date. Therefore the transaction of sale / JDA with IDEB remained intact, without the assessee having duly declared the transactions as liable to capital gains. The AO in this regard has recorded in para 8.5.5 of his order that lDEB in its letter dated 11/03/2014 had expressly admitted that the JDA dated 30/03/2007 remained in force and was not cancelled. In these facts & circumstances the agreement between the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 8 of 28 assessee and IDEB remaining effective, the transactions entered by way of the JDA dated 30/03/2007 would undisputably constitute a "transfer" in terms of the section 2(47) of the I.T. Act r.w.s. 53A of the T.P. Act, 1982. The orders of the lower authorities on this account is therefore to be upheld. ........................ 72. In this case, JDA has been registered and assessee has given Power of Attorney on 30.3.2007. As per Power of Attorney also, the assessee has given the right to the developer to execute agreement or sale deeds or other conveyance in respect of schedule property and to do all acts, deeds and things with the said developer as considered necessary or any other manner as deemed fit so as to fully and effectually convey the same. This issue is also covered against the assessee by the judgment of the Hon’ble Supreme Court in the case of CIT v. Balbir Singh Maini, 391 ITR 531 (SC) as JDA & POA has been registered and reading of these registered documents show that the present assessee being owner of the land has parted with ownership of land to the developer and developer has the right to develop, alienate, sale, convey and transfer the constructed area and there is valid transfer of rights by the landlord to the developer. By the same GPA, the assessee has also given right to the developer to sell upto 115000 sq.ft. built up area of the assessee’s share of constructed area also. Thus, he has given the bundle of rights through GPA in favour of the developer including right to sell the property. .................. 76. It is a well settled proposition of law that the substance shall prevail over the form. Though it is mentioned in the agreement that the possession of land shall be handed over only after receipt of security deposit, yet the builder, under practical circumstances, cannot start construction unless the physical possession of land is handed over to him. Hence, for all practical purposes, we are of the view that the physical possession was handed over to the builder after entering into the agreement dated 30.3.2007 and right to entry into the property cannot be construed as permissive possession when the developer has a right to alienate the same to others by way of sale, mortgage, gift, loan or otherwise dispose of the same. 77. In our opinion, as held by the Supreme Court in the case of Alapati Venkataramiah v. CIT, 57 ITR 185 (SC), to attract liability to tax u/s. 45, it is sufficient if in the accounting year profits have arisen out of transfer of capital asset. In other words, if the assessee had a right to receive the profit in the assessment year under consideration, the assessee is liable to pay capital gains tax on transfer of capital asset. Actual receipt of profit is not a relevant consideration. Once the profits have arisen in the accounting year out of the transfer of capital asset, it would be sufficient to attract liability u/s. 45 of the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 9 of 28 Act. The contention of the assessee is that there was no transfer in the assessment year under consideration as the possession of the property has not been given to the developer. In the present case, the assessee executed registered JDA along with registered GPA which authorizes the developer a provisional permission to enter into the land and authorizing them to develop, execute sale deed or other conveyance in respect of the impugned property and authorize to sell the constructed area of both the assessee as well as the developer. As such, there is a transfer in terms of section 45 r.w.s. 2(47) of the Act. Accordingly, we decide this ground against the assessee in favour of the department.” 5.4 Finally, she relied on the order of the Tribunal in the case of A.N. Manidatta in WTA Nos.125 & Others/Bang/2016 dated 28.7.023, wherein held as under: “6. We have heard the rival submissions and perused the material on record. Subsequent to the remand by the Hon’ble High Court, the issue for consideration is whether the land in Survey No.11/3 (supra) continue to be agricultural land and accordingly not ‘asset’ as defined under section 2(ea) of the Act. Under section 2(ea) of the Act, the asset includable for wealth tax refers to urban land in clause (v). The urban land has been defined in explanation (b) to section 2(ea) of the Act. In the said explanation, the land which is agricultural land in the records of the Government and also used for the agricultural purposes is excluded from the urban land. Therefore, the issues which needs to be answer by the Tribunal subsequent to the remand by the Hon’ble High Court are (i) whether the land in question is agricultural land as per the records of the government and (ii) whether the land in question is used for agricultural purposes. As regards question (i), we find that assessees have placed on record RTC certificates which has characterized the impugned land in survey No.11/3 (supra) as agricultural land having various agricultural trees and fruit trees. The RTC certificate issued is in the year 2012. Hence, as far as the first condition is concerned, the same is satisfied. 7. As regards the second condition, whether the said land has been used for agricultural purposes, we find that the department valuer in his report dated 28.11.2014 has stated that there are several trees standing in land. The relevant portion of the DVO’s report (which is also extracted in the Hon’ble High Court’s judgment) is reproduced below for ready reference: “Nature and Brief Description of the property: This property consists of 5 Acre in Survey No.11/3 located at T Dasarahalli village, Yeshwanthapur Hobdi, Bangalore. The asse ssee owns this parcel of land having a total land area of 7acres and 27 guntas in Survey No.11/3 without any demarcation/identification/boundaries. Rest of the land i.e 2 Acre 27.5 ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 10 of 28 guntas is owned by his father. This parcel of land is converted into agricultural to residential use during 06.10.2008. The nearby areas are well developed and all civic amenities are available within the near vicinity. This parcel of land is not having any approach from the road and the access through Survey no.14/1 which is owned by Shri A R Narendranath. During inspection it was found that there were so many trees standing in the entire land. However this parcel of entire land alongwith Survey no.14/1 which is also owned by Shri AN Narendranath was converted from agricultural land to residential use vide conversion order dated 6.10.2008. There are four workers shed with AC sheet lean to roof, cement flooring etc. These structures are of temporary in nature and no workers were seen occupying the sheds as on date of inspection. There is a residential house lying vacant as on the date of inspection claimed to be constructed about 40 Years back.” 8. The DVO has further stated that the impugned land has not been developed as on the date of valuation and is still being used for agricultural purposes. The relevant observation of the DVO in this regard reads as follows: “Land rate and pros & cons: There is no similar comparable sale instances in the near vicinity. Except the subject property which is having a land area of 8 Acre and 39.5 Guntas (owned by father and son) all the nearby site are developed as layout duly approved by competent authority. The sale instances in the nearby locations are for smaller plots in a well developed layout having residential building and hence cannot be compared with subject property which is converted from agricultural to residential use on October 2008 and also having large extend of area. However no layout is formed in the subject property and is still in agricultural use even after conversion. The subject property is proposed to be assessed taking in to considering the applicable guide line land rates to arrive the Fair Market Value for the Wealth Tax purpose. The subject property is with standing coconut tree and other fruit yielding trees in the entire land as on the date of valuation.” (emphasis supplied) 9. The department’s valuer itself who had valued the property at the instance of the WTO had stated that “however no layout is formed in the subject property and is still in agricultural use even after conversion”. From the above observation of the DVO, it is obvious that the land remained to be the agricultural land as on the date of inspection i.e., on 13.10.2014. Therefore, second condition is also satisfied. 10. The assessee has also placed a photograph to show that the trees were in existence in the land on all the valuation dates. In fact, the photograph was taken on google on 15.01.2015 i.e., much later to the valuation dates relevant to the Assessment Year concerned. Another important point is that the assessee has also declared agricultural income / loss for the relevant years while filing the return of income. Copies of the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 11 of 28 returns filed are placed on record. The sole reasoning of the WTO and the CWT(A) for holding the land as non-agricultural land is on account of order of conversion dated 06.10.2008 for conversion of land for residential use. Orders of sanction of conversion of land are enclosed in the Paper Book filed by the assessees. On perusal of the order of the conversion, it is clear that assessees had sought for permission for conversion of land for residential use. Accordingly, order was passed granting permission coupled with conditions therein. Conditions are provided at page 3 of the said order. At clause 3 of the said order, it is clearly mentioned that in case there is any violation of the condition, the impugned land conversion order will be cancelled without giving any notice and action will be taken to levy penalty as per section 96 of the Karnataka Land Revenue Act, 1964. Even though the assessee had obtained permission to convert the land, the assessee continued to keep the land as agricultural land without removing the trees and reaped the benefit from the trees and the agricultural income therefrom has been declared in the Income Tax returns filed. This fact is also discernible from DVO’s report itself as mentioned supra. The fact that the impugned land has been subsequently converted will not have an impact as on the valuation date of the respective Assessment Year. In this context, we rely on the judgment of the Hon’ble jurisdictional High Court in the case of CIT Vs. M. R. Anandram HUF reported in 450 ITR 94. The CWT(A) has also mentioned that the impugned land was leased out during 01.01.2010 to 31.03.2012. Leasing of the impugned land to a third party would not per se make the land being used for non-agricultural purposes. On the other hand, as mentioned earlier, the DVO’s report itself clearly mentioned that the land in question was having several fruit trees and still in agricultural use when the land was inspected on 13.10.2014 (valuation report given on 28.11.2014). Therefore, on the facts on records, it is clear that as on the respective valuation dates, the impugned land in question is an agricultural land in the government records and also the land was used for agricultural purposes. For the aforesaid reasoning and the judicial pronouncement cited supra, we hold that the above said land being the agricultural land does not come within the purview of urban land as on the respective valuation dates and cannot be liable to be taxed as an ‘asset’ under section 2(ea) of the Act. It is ordered accordingly.” 6. On the other hand, ld. D.R. submitted that the assessee has been in the business of construction for the last 35 years or so. The Assessee had purchased the property from 2006-2010. The assessee had taken all permissions and clearances in the year 2011 granting him the right use the property for commercial purposes. Therefore, the intention of the assessee was always to use the property commercial use since the assessee himself was in the construction business last so many years. Non conversion of the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 12 of 28 capital asset into stock in trade not hide the real intention of the Assessee to use the property for commercial purposes alone. Therefore, sale of the property does not result into any capital gains. The profits so arising is in the nature of business income. This business income is taxable in the relevant assessment year i.e. AY 2017 18 as the sale deed of the property has been registered in A.Y.2017-18. The assessee had entered into agreement to sale with NP Associates in AY 2015-16 against part payment only. However, it got registered in AY.2017-18 only. On consideration of submissions made by the Assessee and findings of the AO, the NFAC observed that the AO is correct in taxing the gains arising to the Assessee on sale of the property as business income in the relevant assessment year i.e. A.Y. 2017-18. The ld. D.R. submitted that the NFAC observed the reasons for the same herein below: A. Sale transactions of property took place in AY 2017-18 and not A.Y.2015-16 6.1 The undisputed facts of case are that the Appellant entered into agreement to sale with NP Associates in A.Y .2015-16 for a total consideration of Rs.17,00,00,000/-. Against this, the Appellant has received Rs.5,50,00,000/-. Since NP Associates could not pay the balance payments, the Appellant transferred and registered the property in the names of Mr. P. Krishna Raja Mayya and Mrs. Bhavana M. jointly for a consideration of Rs.17,00,00,000/- and N.P. Associates acted as the consenting parties for the said sale. These facts show that although agreement to sale was entered with NP Associates, however, it was not never sold to them. Thus, the transaction of sale of the property did not finally culminate in favour of the NP Associates. Therefore, the concept of 'doctrine of part performance' -has no relevance here since the 'part performance' was never converted the complete performance'. Had the Appellant finally registered the property the name of NP Associates in A.Y.2017-18, he could have raised the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 13 of 28 argument that the part performance of the transaction was done in A.Y.2015-16 and in lieu of such part performance, certain rights in the said property and the possession stand transferred to-NP Associates in A.Y. 2015-16 itself. And therefore, in term of section 2(47) of the IT Act, 1961 and section 53A of TP Act, 1882, the property got transferred to NP Associates in AY 2015-16. However, here the facts are different. The Appellant did not sell the property to NP Associates and therefore, there is no question of any profits arising to the Appellant on account of such transaction. Further, as discussed above, this transaction is also not in the nature of 'part performance'. Since, the said property was finally sold to Mr. P. Krishna Raja Mayya and Mrs. Bhavana M. jointly or a consideration of Rs.17,00,00,000/-, in A.Y. 2017-18, the profits (capital gains or business income) would arise to the Appellant in A.Y .2017-18 on account of this transaction. Thus, the AO has rightly that the profits on sale of the property has to be rep6rted as income in the A.Y.2017-18 and not in A.Y.2015-16 as has been done by the Appellant. B. Sale of the property results into 'business income' and not 'capital gains 6.2 The undisputed facts of the case are that the Appellant is in the business of construction. He has purchased the property from the year 2006 to 2010 and subsequently in the year 2011 he has obtained all the necessary permissions and clearances to use the said property as commercial premises. Details have been discussed by the AO in the assessment order. I am not repeating the same for sake of brevity. The sale transactions have taken place post sanction to use the property for commercial purposes. On these set of facts, the Appellant is submitting that the property is a capita asset in the books and was never converted into stock in trade in terms of section 45(2) of the Act. Therefore, the Appellant has rightly treated the sale as long term capital gains. However, the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 14 of 28 AO has ignored these submissions and has tried to look into intention of the Appellant i.e. whether circumstantial evidences indicate that the Appellant had the intention to use the property for commercial purposes. The circumstantial evidences in the nature of permissions and clearances obtained from authorities concerned do indicate that the intention of the Appellant was always to use the property for commercial purposes. Had there been no such intention, there was no logic for the Appellant to unnecessarily spend money for obtaining such permissions and clearances and more so, in the light of the fact that the Appellant is in the business of construction. In this regard, it must be appreciated that it is well settled Law that book entries are not determinative of income of assessee. When the question is, whether receipt of money is taxable or not, or whether certain deductions from those receipts are permissible in Law or not, the question has to be decided according to principles of Law and not in accordance with the Accounting Practice. 6.3 She placed reliance in this regard on following case laws: (i) Hon'ble Supreme Court in the case of Sutlez Cotton Mills Ltd., vs. Commissioner of Income Tax West Bengal (1979) 116 ITR 1 (SC), in which has held as under: "It is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper principles of accountancy, conceal profit or show loss and the entries made by him cannot, therefore, be regarded as conclusive one way or the Other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee. " (ii) The Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., 227 ITR 172 (SC) has held as under: "Book entries are not determinative of income of assessee. When the question is, whether a receipt of money is taxable or not, or whether certain deductions from ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 15 of 28 that receipts are permissible in Law or not, the question has to be decided according to the Principles of Law, but not in accordance with the Accounting Practice". (iii) The Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd., 2 5 ITR 746 held as under: "Under the Act, income chargeable to tax is the income that is received r is deemed to be received in India in the previous year relevant to the ye r for which assessment is made or the income that accrues or arise or s deemed to accrue or arise in India during such year. The computation of such income is to be made in accordance with method of accounting regularly employed by the assessee. If income does not result at all there cannot be a tax even though in bookkeeping. " (iv) Hon'ble Jurisdictional High Court of Karnataka has so held in the case of CIT Vs Sriram Chita Pvt Ltd in I.T.A. No. 814 of 2018, date of Judgement/Order 07/12/2020: "6. We have considered the submissions made on both sides and have perused the record. Paragraph 19 of the decision rendered by the Supreme Coud in TAPARIA TOOLS, supra, is reproduced below for the facility of reference: "19 In the instant case, as noticed above, the Assessee did not want spread over of this expenditure over a period o five years as in the return filed by it, it had claimed the entire interest pai upfront as deductible expenditure in the same year. In such a situation, when this course of action was permissible in law to the Assessee as it was in consonance with the provisions of the Act which permit the Assessee to claim the expenditure in the year in which it was incurred, merely because a different treatment was given in the books of accounts cannot be a factor which would deprive the Assessee from claiming the entire expenditure as a deduction. It has been held repeatedly by this Court that entries in the books of accounts are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act (See-Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income Tax (Central), Calcutta (1972) 3 SCC 252; Tuticorin Alkali Chemicals and Fertilizers Ltd., Madras v. Commissioner of Income Tax, Madras (1997) 6 SCC 117; Sutlej Cotton -Mills Ltd. v. Commissioner of Income Tax, Calcutta (1978) 4 SCC 358; and United Commercial Bank, Calcutta v: Commissioner of Income Tax, WB-III, Calcutta (1999) 8 SCC 338," 6.4 According to ld. D.R., the intention of the Assessee was always to use the property for commercial purposes. And therefore, the fact that the property was not converted into stock in trade in terms of section 45(2) does not make any difference and does not alter the real intention. She submitted that the action of the AO in treating the property as stock in trade (business asset) of the ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 16 of 28 Assessee to be upheld and not as capital asset and the action of the AO in treating the profits arising to the Assessee to be upheld on account of transfer of such property as 'business income' and not as 'capital gains'. The action of the AO in treating the profits arising to the assessee on sale of the property as 'business income' and taxing the same in the relevant assessment year i.e. A.Y.2017- 18. 6.5 Further, she relied on judgement of Hon’ble Supreme Court in the case of Suraj Lamp & Industries Pvt. Ltd. in SLP(C) No.13917 of 2009 dated 11.10.2011 wherein held as under: “16. We therefore reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. Transactions of the nature of S GPA sales' or € SA/GPA/WILL transfers' do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property. Tire courts will not treat such transactions as completed or concluded transfers or as conveyances us they neither convey title nor create any interest in an immovable property. They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act. Such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue Records. What is stated above will apply not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered Assignment of Lease. It is time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales. 17. It has been submitted that making declaration that GPA sales and SA/GPA/WILL transfers are not legally valid modes of transfer is likely to create hardship to a large number of persons who have entered into such transactions and they should be given sufficient time to regularize the transactions by obtaining deeds of conveyance. It is also submitted that this decision should be made applicable prospectively to avoid hardship. 18. We have merely drawn attention to and reiterated the well-settled legal position that SA/GPA/WILL transactions are not ‘transfers’ or ‘ sales' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale. Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said SA/GPA/WILL transactions' may also be used to obtain specific performance or to defend possession under section 53A of TP Act. ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 17 of 28 If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities. We make it clear that if the documents relating to N SA/GPA/WILL transactions' has been accepted acted upon by. DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision. We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a Power of Attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided shares in the land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreements and powers of attorney are already regulated by law and subjected to specific stamp duty. Our observations regarding ‘SA/GPA/WILL transactions’ are not intended to apply to such bonafide/genuine transactions.” 7. We have heard the rival submissions and perused the materials available on record. The assessee made following plea before us. The assessee has been in the business of construction for the last 35 years or so on. The assessee purchased impugned property from year 2006 to 2010. The assessee had taken all permission and clearance in the year 2011 granting him to right to use the property for commercial purposes. The said property has been shown in balance sheet as investment only. The assessee not converted the capital asset into stock in trade. The assessee entered into sale agreement on 30.8.2014 with M/s. NP Associates for a total consideration of Rs.17 crores and received advance of Rs.5.5 crores and gave possession of the property to M/s. NP Associates. M/s. NP Associates could not make the advance payments and so the property was transferred and registered in the name of P. Krishna Raja Mayya and Mrs. Bhavana M., jointly for a consideration of Rs.17 crores and M/s. NP Associates acted as the consenting parties for the said sale. The registration of property took place in the assessment year 2017-18. Since the possession of ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 18 of 28 property was given to M/s. NP Associates vide agreement to sale on 30.8.2014 and receipt of substantial part of sale consideration the assessee considered as a transfer in the assessment year 2015-16 and offered the capital gain arising out of this transaction for taxation and the department accepted it as taxable capital gain and in the assessment year 2015-16. Contrary to this, the ld. AO brought the income arising out of registered deed executed by assessee in the name of P. Krishna Raja Mayya and Mrs. Bhavana M., as business income in the hands of present assessee worked out at Rs.13,24,35,690/- in the present assessment year 2017-18. As seen from the above, assessee has treated the above impugned land as investment in its balance sheet from year to year and never treated it as a stock in trade and not carried on any business activity on this said lands though assessee was engaged in real estate activities in respect of other properties. 7.1 As held by Mumbai High Court in the case of CIT Vs. Heritage Estate Pvt. Ltd. reported in 303 ITR 469, wherein held that assessee having carried on no business activity and treated as investment by ITO for several years, compensation received by assessee from the agreement earlier entered into by parent company and or from land which was acquired by the Government was assessable as capital gain. 7.2 In the case of CIT Vs. Hitashi Estate Ltd. (2009) reported in 313 ITR 393 wherein held that in case of assessee dealing in real estate, tenancy right in respect of a building occupied by it for a long term constituted capital asset in its hands notwithstanding that it was shown as stock in trade in its books of accounts and receipt from surrender thereof in favour of owner gave rise to capital gain/loss. According to Hon’ble Delhi High Court, the assessee was not involved in the business of purchase of land and sale of tenancy right and this was solitary transaction. Tenancy right is a capital ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 19 of 28 asset and cannot acquire a different character because of treatment accorded to it in the books of accounts of the assessee. 7.3 In the case of CIT vs. Amit Modi (2011) 334 ITR 192 (P&H), it was held that the Tribunal has discussed various relevant factors to infer the intention and the nature of transactions and concluded that by no stretch of imagination the surplus/account made by the assessee could be regarded as surplus from business of dealing with shares. These are necessarily findings of fact. It is also concluded by the Tribunal that the redemption of mutual funds by the assessee along with the income of the minor daughters could also not be regarded as trade so as to reckon the same as business income. No substantive question of law warranting its admission would arise. 7.4 In the case of CIT & Anr., vs. Gajanana Enterprises (2009) 314 ITR 247 (Kar), the Karnataka High Court held that the Assessee having entered into an agreement to purchase a piece of land-by paying an advance and obtained permission to convert the land into an industrial land and subsequently entered into an agreement with a company to sell the said land, it cannot be said that there was an intention to make profit and that the transaction was an adventure in the nature of trade and, therefore, the profit arising to the assessee on pre-emptive purchase of the property by the Appropriate Authority under the provisions of Chapter XX-C is to be assessed under the head "Capital gains" and not as business income. 7.5 In the case of CIT vs. SMC Credit Ltd. (2010) 228 CTR (Del) 353 / (2010) 321 ITR 194 (Del)] the Tribunal found as a fact that the loss was a result of a systematic activity in relation to shares and, therefore, it came to the conclusion that the loss claimed by the assessee should have been accepted as a business loss; finding of Tribunal being a finding of fact based on material on record, no substantial question of law arises. ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 20 of 28 7.6 In the case of CIT & Anr. vs. S. Rajamannar (2010) 329 ITR 626 (Kar), it was held that profit on sale of land (though not registered in his name) received by the assessee from the owner of the land in pursuance of an agreement to develop his land and for spending certain amount for developing it for the owner, was taxable as - capital gain - when there is no material to hold that the assessee was indulging in to business transaction right from the beginning. 7.7 In case of CIT vs. Nirai Amidhar Surti (2011) 238 CTR (Guj) 294, it was held that in view of the fact that assessee had held the shares for fourteen months, which is a long period for the purpose of long-term capital gain, shares had not been treated as stock in trade by the assessee and in the past profit was assessed as capital gains, profit from sale of shares in question was assessable as capital gains and not as business income. 7.8 In case of Ramchandra Estate Development & Investment Co. (P) Ltd. vs. Jt. CIT & Anr. (2011) 244 CTR (Bom) 573, in the absence of any finding of the authorities below as to the date of acquisition of the property in question by the assessee, matter was restored to the Tribunal to determine the actual date of acquisition of the property and also to decide afresh the question as to whether the profit arising out of the sale was in the nature of business profit or capital gain. 7.9 In the case of CIT, Delhi vs. Delhi Apartments Pvt Ltd (2013) 84 CCH 138 Del HC: (2013) 352 ITR 322 (Delhi), the issue was head of taxability of income received from sale of land. Assessee had shown certain land as fixed asset and claimed profits from their sale as long term capital gain instead of business income. AO made addition treating same as business income. The Court held, assessee could be a trader in land as well as an investor in land simultaneously; depending on what his intention was and how he treated the asset in question. Assessee could hold lands either for ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 21 of 28 business or as an investment and there was no bar on same. Land purchased by assessee long back was also used for agricultural purposes and was also shown it as an asset in balance sheet. No evidence on record was available to show that borrowed capital had been used by assessee for purchase of land. Accordingly, profits received by assessee from sale of lands were held to be capital gain. 7.10 In the case of CIT Vs. Om Prakash Suru (2012) 80 CCH 388 MPHC: (2013) 359 ITR 39 (MP) it was held that delivery based transactions made with investment motive, income therefrom was in nature of Short-Term Capital Gains. Whereas income from F & O transactions and daily trading in shares were with business motive, income therefrom was business income only, which were mainly through stock broker registered with NSC, NSE and BSE - 7.11 In the case of CIT Vs. Devendra Pal Singh (2012) 82 CCH 107 All. HC, it was held that the assessee declared income as capital gain on sale of agricultural land. AO brought total sale consideration in respect of plots, whose sale deeds were registered during year, to tax as income from business. Tribunal confirmed findings of CIT(A) that income from sale of land was taxable under head "capital gains" and that transactions could not be termed as an adventure in nature of trade. The High Court held, agreement with coloniser, who had to develop plots and ultimate sale of plots to nominees of colonisers, at a price to be fixed by coloniser in which assessee had no share of excess profits, was not in nature of any adventure in nature of trade. Assessee was not engaged in any trade or business of selling land. Transaction was only to get best price of his land, which coloniser was ready to pay. Entire benefits, if any, flowing from transaction, after agreement were to be appropriated by colonizer. There was no element of business involved in transaction. ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 22 of 28 7.12 In the case of CIT Vs. Jindal Wequipment Leasing & Consultancy Services Ltd., (2015) 94 CCH 092 Del HC, it was held that Assessee company was an investment company belonging to Jindal Group of companies. Jindal Group was mainly engaged in manufacturing and production of ferrous metals and alloys. Jindal Group included investment companies such as assessee, which, inter alia, held and dealt in shares of operational companies of group. Assessee furnished return of Income for AY 1992-93 (Previous year ending 31st March, 1992) declaring an income of Rs. 25,37,330 and claimed carry forward of short term capital loss of Rs. 1,41,73,760 to be set off against future capital gains. Assessee claimed that it suffered short term loss on sale of rights entitlement of Partly Convertible Debentures (hereafter - PCDs - ) of M/S Jindal Strips Ltd. (hereafter - JSL - ) and M/S Jindal Iron & Steel Co. Ltd. (hereafter - JISCO - ). At material time, assessee was a shareholder or JSL and JISCO - During impugned year JSL announced a Rights Issue in terms of which every shareholder was entitled to subscribe to 7 (seven) PCDs for every 10 (ten) equity shares. AO held that sale consideration received by assessee by transfer of shares and sale of rights entitlement of partly convertible Debentures (PCDs) was income from business and not capital gains. The High Court Held, During the year in question assessee company sold 50,000 equity shares of JSL and 141400 shares of M/S Saw Pipes Ltd which, according to assessee resulted in short term capital gains of Rs.1,15,59,800. In addition, Assessee declared income from business and profession of Rs.57,02,340. During impugned year; Assessee also renounced its entitlement to subscribe 78000 PCDs of JSL to Gagan Trading Co. Ltd at rate of Rs. 98 per PCD and 1,36,750 PCDs of JISCO to Nalwa Investment limited at rate of Rs. 30 per PCD. Both purchasers were a pact of Jindal Group. According to Assessee, cum-right market price of each share of face value of Rs. 10 of JSL was Rs. 615 (on 20th ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 23 of 28 December, 1991) and ex-rights price was Rs. 475 (on 24th December, 1991). Similarly, cum-right price of each share of face value of Rs. 10 of JISCO was Rs. 625 and ex right price was Rs. 425. On aforesaid basis, Assessee claimed that cost of acquisition of rights to subscribe to PCD was dimunition in value of share holding in JSL and JISCO computed at Rs.140 per share of JSL and Rs. 200 per share of JISCO - After accounting for sale consideration for renunciation of rights to subscribe PCDs, Assessee claimed that it had suffered a loss of Rs. on renunciation of PCDs of JSL and Rs. 1,77,77,500/- on renunciation of PCDs of JISCO. After setting off loss against gains on sale of shares, Assessee claimed a net loss of Rs.1,41,73,760 to be carried forward. Assessee had held shares of JISCO and JSL as stock-in-trade in its final accounts as on 31st March, 1991 and had valued same at cost or market price whichever was lower - According to Assessee, its board of directors decided to retain said shares on long term basis and consequently passed a resolution on 4th April, 1991 that shares held by it be treated as investment/capital. Thus, Sale consideration received by assessee by transfer of shares and sale of rights entitlement of partly convertible Debentures (PCDs) would be income from business and not capital gains. 7.13 In the case of CIT Vs. Kapur Investments (P) Ltd. (2015) 93 CCH 297 Kar. HC, it was held that the High Court held that Profits from investment through Portfolio Management Service, either directly or through professionally managed firm, would still remain as profits to be taxed as capital gains as same will not change nature of investment, that is in shares, and law permits it to be taxed as capital gains and not as business income 7.14 In the case of CIT Vs. Stainless Investment Ltd. (2015) 94 CCH 095 Del HC, it was held that the High Court held that sale consideration received by the assessee by transfer of shares and ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 24 of 28 sale of rights entitlement of Partly Convertible Debentures (PCDs) is income from capital gains and not income from business in view of decision in Commissioner of Income Tax Delhi-I v. M/S Abhinandan Investment Ltd.: ITA No. 130/2001. 7.15 In the case of CIT Vs. Sun Investments Ltd. (2015) 94 CCH 083 Del HC, the High Court held that sale consideration received by the assessee by transfer of shares and sale of rights entitlement of Partly Convertible Debentures (PCDs) is income from capital gains and not income from business in view of decision in Commissioner of Income Tax Delhi-I v. M/S Abhinandan Investment Ltd.: ITA No. 130/2001. 7.16 Further, the Hon’ble Andhra Pradesh High Court in the case of Spectra Shares & Scripes Pvt. Ltd. Vs. CIT 354 ITR 35 held as under: “48. Admittedly the Revenue had accepted that the assessee was an investor whose income is chargeable under the head "capital gains" for a number of years from 1999-2000, particularly for the assessment years 2005-06 and 2007-08 i.e. before and after the assessment year 2006-07 which js the subject matter of these proceedings. The assessee has filed assessment order for 2004-05, 2005-06, 200708 from which it is clear that the department had accepted that the assessee is only investing in shares and mutual funds and his profits from sale of shares or mutual fund units should be taxed under the head "capital gains". It is admitted by the Revenue that only after the impugned order of the respondent dated 31- 032011, the assessment order for 2005-06 and 2007-08 were reopened. In Raja Bahadur Visheshwara Singh (1 Supra) and in New Jahangir Vakil Mills Co.Ltd., (16 Supra), the Supreme Court no doubt held that there is no such thing as res judicata in Income Tax matters and the decision given by an Income Tax Officer for one assessment year cannot effect or bind his decision for another year and that generally, the doctrine of res judicata or estoppel by record does not apply to such decisions. But in Radhasoami Satsang (12 Supra), the Supreme Court held at page-329 as follows: "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 25 of 28 On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter-and, if there was no change, it was in support of the assessee — we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income tax in the earlier proceedings, a different and-contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961". 49. In Escort Ltd., (7 Supra), it was held by the Delhi High Court that although principle of res judiciata did not apply to the income tax proceedings, the Revenue cannot be allowed to change its view with regard to a fundamental aspect of a transaction taken in earlier assessment year unless it is Able to demonstrate a change in circumstances in the subsequent assessment year. It held that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Similar view was taken by the Mumbai High Court in Darius Pandole (10 Supra) and in Gopal Purohit (11 Supra). The decision of the Mumbai High Court in Gopal Purohit (11 Supra) was upheld by the Supreme Court in CIT Vs. Gopal Purohit, dated 15-11-2010 in SLP (Civil) No.32891 of 2010. 50. In view of the above, we hold that the respondent cannot under Sec.263 interfere on an issue which has been accepted by the Revenue for a number of years particularly when the Assessing Officer in the assessment order for the assessment year 2006-07 takes the same view by terming it erroneous as the respondent is able to demonstrate a change in circumstances in the said assessment year.” 7.17 In the present case also assessee’s income from the sale transactions has been accepted from the impugned property as income from capital gain in assessment year 2015-16 and paid long term capital gain tax and the following observations of the ld. AO is also support the case of the assessee. “2.3 .................. 5. The perusal of computation of income for AY 2015-16 showed that the assessee considered the sale considewration at Rs.17,00,00,000/- and after reducing the indexed cost of the acquisition of property, arrived at long term capital gain of Rs.10,11,54,759/-. As against this capital gain, the assessee claimed exemption under section 54 due to purchase of residential house property for Rs.9,59,41,705/- on 7.8.2015. The assessee, therefore, arrived at a net capital gain of Rs.52,13,054/-. On the basis of this contention, the assessee stated that he ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 26 of 28 had already disclosed this transaction in AY 2015-16 and, hence, the same could not be brought to tax again in AY 2017-18. 7.18 From the above observation of ld. AO in his assessment order, it is clear that assessee has offered the income arising out of the sale of the said property at Chilimbi by deleting block of fixed assets at Rs.3,75,64,310/- in the balance sheet as on 31.3.2015 in the assessment year 2015-16, after accepting the same the ld. AO cannot change the year of assessability of the income arising out of sale of the said property. Even on the basis of principles of estoppel and consistency, which is in favour of the assessee. In our opinion, taxing of the income generated from the said transaction once again in assessment year 2017-18 by ld. AO amounts to double taxation, which cannot be permitted. 7.19 Further, the ld. A.R. placed reliance on the judgement of coordinate bench in the case of Shri A.N. Manidataa (HUF) in WTA Nos.1 to 5/Bang/2016 and WTA Nos.7 to 11/Bang/2017 in the case of Shri A.R. Narendranath (HUF) vide order dated 28.7.2023, the Tribunal held as under: “9. The department’s valuer itself who had valued the property at the instance of the WTO had stated that “however no layout is formed in the subject property and is still in agricultural use even after conversion”. From the above observation of the DVO, it is obvious that the land remained to be the agricultural land as on the date of inspection i.e., on 13.10.2014. Therefore, second condition is also satisfied. 10. The assessee has also placed a photograph to show that the trees were in existence in the land on all the valuation dates. In fact, the photograph was taken on google on 15.01.2015 i.e., much later to the valuation dates relevant to the Assessment Year concerned. Another important point is that the assessee has also declared agricultural income / loss for the relevant years while filing the return of income. Copies of the returns filed are placed on record. The sole reasoning of the WTO and the CWT(A) for holding the land as non-agricultural land is on account of order of conversion dated 06.10.2008 for conversion of land for residential use. Orders of sanction of conversion of land are enclosed in the Paper Book filed by the assessees. On perusal of the order of the conversion, it is clear that assessees had sought for permission for conversion of land for residential use. Accordingly, order was passed granting permission coupled with conditions therein. Conditions are provided at page 3 of the said order. At clause 3 of the said order, it is clearly mentioned that in case there is any violation of the condition, the impugned land conversion order will be cancelled without giving any notice and action will be taken to levy penalty as per section 96 of the Karnataka Land Revenue Act, 1964. Even though the assessee had obtained permission to convert the land, the assessee continued to keep the land as agricultural land without removing the trees and reaped the benefit from the trees and the agricultural income therefrom has been declared in the Income Tax returns filed. This fact is also discernible from DVO’s report itself as mentioned supra. The fact that the impugned land has been subsequently converted will not have ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 27 of 28 an impact as on the valuation date of the respective Assessment Year. In this context, we rely on the judgment of the Hon’ble jurisdictional High Court in the case of CIT Vs. M. R. Anandram HUF reported in 450 ITR 94. The CWT(A) has also mentioned that the impugned land was leased out during 01.01.2010 to 31.03.2012. Leasing of the impugned land to a third party would not per se make the land being used for non-agricultural purposes. On the other hand, as mentioned earlier, the DVO’s report itself clearly mentioned that the land in question was having several fruit trees and still in agricultural use when the land was inspected on 13.10.2014 (valuation report given on 28.11.2014). Therefore, on the facts on records, it is clear that as on the respective valuation dates, the impugned land in question is an agricultural land in the government records and also the land was used for agricultural purposes. For the aforesaid reasoning and the judicial pronouncement cited supra, we hold that the above said land being the agricultural land does not come within the purview of urban land as on the respective valuation dates and cannot be liable to be taxed as an ‘asset’ under section 2(ea) of the Act. It is ordered accordingly. 7.20 In the present case also, if the assessee carried out any conversion of that property for residential purpose or any other commercial purpose, the treatment given by the assessee in respect of that land as fixed assets/investments cannot be treated as the said land seized to exist as fixed assets/investments and it continued as fixed assets and cannot be treated as business assets or current assets so as to treat the income arose out of sale of said property as business income by considering that assessee is engaged in adventure in the nature of trade. In our opinion, even after conversion of property for commercial purpose by competent authority won’t change the asset from fixed asset into business asset. The asset has been converted for commercial purpose so as to fetch better price in the market and we do not find any fault in conversion of the property for commercial purpose so as to earn more income. It is to be noted that even the person holding the property as investment is interested in maximizing of his income and that conduct of the assessee cannot be considered as carrying on of the any business by assessee. Further, we also note that we have carefully gone through the various case laws relied by the ld. D.R. which are not applicable to the facts of present case. Hence, not considered. In view of this, we direct the ld. AO not to tinker the income declared by the assessee and tax the income generated from the sale of impugned property as income from business in this assessment year under consideration. Accordingly, these grounds of appeal of the assessee are allowed. ITA No.741/Bang/2024 Krishna Palemar Jappinamogaru, Dakshina Kannada Page 28 of 28 8. There is one more ground with regard to non-granting of TDS of Rs.4,68,865/-. The ld. A.R. submitted that this amount represents TDS on the advance received by assessee and the advance received by the assessee offered to taxation when sale of flats was taken place. However, the assessee was to take the credit of this amount of TDS in the assessment year under consideration. 9. On the contrary, ld. D.R. submitted that matching principle to be followed and the assessee could take the benefit of TDS in the year in which corresponding income has been offered for taxation. 10. We have heard the rival submissions and perused the materials available on record. In our opinion, the income relating to this TDS has not been offered for taxation in the assessment year under consideration. Being so, the assessee not entitled to claim TDS credit in the assessment year under consideration. However, we direct the ld. AO to give the benefit of TDS when the assessee offering the corresponding income for taxation. Ordered accordingly. 11. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 26 th July, 2024 Sd/- (Keshav Dubey) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 26 th July, 2024. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore.