Income Tax Appellate Tribunal - Chandigarh
Balbir Singh (Huf), Chandigarh vs Assessee on 29 October, 2013
1
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'B' CHANDIGARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
MS. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No. 49/CHD/2013
Assessment Year: 2004-05
Shri Balbir Singh (HUF), vs The DC IT, Circle 6(1),
Prop of M/s Sohi Banquet Hall, Mohali
H.No.10, Sector 3, Chandigarh
PAN No. AADHB4674A
&
ITA No. 1356/CHD/2012
Assessment Year: 2004-05
The ITO, Ward-1(3), Vs Shri Balbir Singh (HUF),
Chandigarh Chandigarh
PAN No. ACJPS6700J
(Appellant) (Respondent)
Date of hearing : 29.10.2013
Date of Pronouncement : 23.12.2013
Appellant By : Shri J.S.Nagar
Respondent By : Shri Ravi Shankar & Shri B.M. Manga
ORDER
PER T.R.SOOD, A.M.
The appeals filed by the assessee and Revenue are directed against the order dated 12.10.2012 of C IT(A) Chandigarh
2. Before us, Ld. Counsel for the assessee has moved an application dated 21.10.2013 for admission of additional evidence. The following documents are sought to be admitted.
2
Sr. No. Particulars Page No.
1. Certificate of the Chartered Accountant showing Land-total, sold 1-7 and balance, along with the Annexures.
2. Copies of 4 sale-deeds in English-Translation and in Punjabi 8-37 version.
3. Copies of Jamabandies (in True English - translation ) and in 38-43 Punjabi for the year 1987-88 and 1992-93.
3. The Ld. Counsel for the assessee submitted that this case was not properl y handled earlier particularl y because assessee who is about 85 years of age has lost his only son Shri Ravinder Singh due to brain hemorrhage. He submitted that copies of the details of the total land and copies of the sale deeds were not filed before the Assessing Officer but they are now being filed to assist the Court to understand the case. The copies of the Jamabandis which are also necessary for adjudication of the appeal are being filed now.
4. On the other hand, the Ld. DR opposed the submissions.
5. After considering the submissions and considering the circumstances of the case, we are of the view that additional evidence being filed now is relevant to the issue to be decided by us and, therefore, the same is admitted. ITA No. 49/Chd/2013
6. In this appeal the assessee has raised the following grounds:-
1. That the order of Learned CIT(Appeals), Chandigarh upholding the additions or authorities below is bad in law and contrary to the facts on record and liable to be set aside.
2. The Ld. CIT(Appeals) Chandigarh is not justified in upholding the addition of Rs. 13,00,000/- being the money forfeited which was received as advance for the sale of agricultural land.3
3. The CIT(Appeals) Chandigarh is not justified in upholding the addition of Rs. 2,89,97,783/- holding this total sale consideration, as business income instead of capital gain of Rs. 1,06,25,077/- from sale of agricultural land, as had rightly been claimed by the assessee.
4. The Ld. CIT(Appeals) has grossly erred in disallowing the claim U/s 54 B of the income Tax Act by holding that the land sold was not agricultural land.
5. The CIT (A) is not justified while upholding the addition of Rs. 20,76,224/- as unexplained cash and cheque deposits in bank account of the appellant ignoring the reconciliation filed by the assessee.
7. The facts of the case in brief are that in this case original assessment order was framed u/s 143(3) in which claim of the assessee was that sale of land is to be assessed as 'long term capital gain' was accepted. The assessee had received a sum of Rs. 13 lakhs as advance for which no details were there. That was also assessed under the head 'long term capital gains' and exempt u/s 54B has also been allowed. Further, certain amount deposited in the bank which has not been examined properl y and, therefore, revisionary order u/s 263 was passed on 19.3.2009. In that order, the assessment was cancelled and Assessing Officer was asked to reframe the assessment after making enquiries as recorded in the Revisionary order. This order was not challenged by the assessee, therefore, assessment was again commenced in pursuance of the order passed u/s 263 of the Act.
8. Ground No.1 is general in nature and does not require any separate adjudication
9. Ground No.2: After hearing both the parties, we find that during the year the assessee has received a sum of Rs. 13 lakhs which was shown as 4 forfeited and offered as income under the head 'long term capital gains'. However, no details were filed despite various opportunities. Therefore, the Assessing Officer treated the income of Rs. 13 lakhs as 'income from other sources'.
10. Before C IT(A), it was mainl y submitted that exemption u/s 54B was claimed on account of purchase of agricultural land and, therefore, receipt of Rs. 13 lakhs have not resulted in any excessive exemption. It was further submitted that a sum o f Rs. 13 lakhs was received by late Shri Ravinder Singh who was the onl y son of Shri Balbir Singh, Karta of HUF. Shri Ravinder Singh expired due to brain hemorrhage and, therefore, details were not available. Since Shri Ravinder Singh was mainl y looking after the issue of selling of land, therefore, this money have been received on account of land onl y. The Ld. CIT(A) did not find any force in the submissions because no evidence was there to show that money was received against sale of land.
11. Before us, Ld. Counsel for the assessee submitted that assessee has himself disclosed the sum of Rs. 13 lakhs in computation of income as forfeiture of advance. The deal in this respect was done by Shri Ravinder Singh who was the onl y son of Shri Balbir Sigh, Karta of HUF. Shri Ravinder Singh unfortunatel y expired suddenl y; therefore, details are not available. Since the assessee was in process of selling land, therefore, this amount must have been received onl y as advance.
12. On the other hand, the Ld. DR submitted that if it was a case of advance then somebody must have come forward to receive the same but till date nobody is coming to the assessee for recovery of this advance, therefore, it cannot be considered as advance.
5
13. We have considered the rival submissions carefull y and find force in the submissions of Ld. DR. Even if assuming that it was in the nature of advance, the amount was received by the late son of the assessee then some person must have definitel y approached the assessee for recovery of such advance and assessee would have known the particulars of such person but it has not happened. This clearl y suggests that this amount has been received from some other source and in the absence of the details; we are of the opinion that same has been correctl y assessed as 'income from other sources'.
14. Ground No.3 After hearing both the parties we find that assessee had disclosed sale of agricultural land amounting to Rs. 3,05,23,983/- and after reducing the indexed cost, determined the capital gain of Rs. 1,06,25,077/- including the sum of Rs. 13 lakhs after claiming the exemption u/s 54B for purchase of new agricultural land amounting to Rs. 1,03,26,200/-, the net amount was shown as long term capital gains. During assessment proceedings, the Assessing Officer noticed that land was sold through power of attorney and details of the persons to whom power of attorney was given as under;-
Name of persons to whom Power of Attorney was Address.
given Sh. Rajinder Singh S/o Teja Singh Village Baltana, Tehsil Dera Bassi Smt Surinder Kaur D/o Sh Sadhu Singh Village Lalru, Tehsil Dera Bassi Sh. Jagtar Singh S/o Sh. Jarnail Singh Village Baltana, Tehsil Dera Bassi Sh. Surjit Singh S/o Sh. Gurdit Singh Village Baltana, Tehsil Dera Bassi Smt Krishana Arora W/o Sh. Raj Kumar #712, Sector-16, Panchkula Sh. Ravinder Singh S/o Sh. Davinder Singh H.No. 1183, Sectgor-18-C, Chandigarh Since land has been sold in small plots through Attorney holders, according to Assessing Officer the same would constitute adventure in the nature of trade and in this regard he relied on the following decisions:-
6
CIT v Narasimha Reddy 150 ITR 347 (Karnatka) Raja J. Ramesh Rao Vs CIT 42 ITR 179 (SC) Janki Ram Bahadur Ram v CIT 57 ITR 21 (SC)
15. The assessee represented that land was sold through the power of attorne y holders who in turn had sold the land to individual plot holders. The Assessing Officer examined all these submissions but did not agree with the same and on the basis of above noted case laws held that sale of land has to be treated as adventure in the nature of trade instead of income of sale of land as 'capital gain'. He also observed that since land was inherited by the assessee, therefore, no cost of acquisition was incurred and therefore nothing was reduced from the sale proceeds. However, he was of the opinion that some expenses must have been incurred and accordingl y allowed 5% of the sale proceeds as business expenses and deducted the same. He also observed that sale proceeds have been deposited in the individual account of the assessee, therefore, tax was levied in the hands of the assessee in the individual capacit y.
16. On appeal, it was mainl y submitted that whether the sale of land was in the nature of adventure in the nature of trade or sale would depend upon the circumstances of the case. On the basis of various case laws it was submitted that following facts have to be considered.
"1. That the land sold by the assessee was ancestral land and was acquired about 25 years ago.
2. That no steps were taken with the intended result to improving its market ability.
3. The assessee has no commercial background in similar area or had previous experience for a similar commercial nature.
4. The sale has not taken place within a small period of time & after the acquisition of property pointing to a trading intention.
5. That no such sales were made in the past and subsequently.7
6. That the assessee still holds huge agricultural lands in the area.
7. That the assessee has purchased another agricultural land at cheap rates in another area and more in quantity.
8. That the agricultural operations were carried on land for the last 50 years."
17. The judgments relied upon by the Assessing Officer were distinguished by the Ld. counsel of the assessee and further reliance was placed on the decision of Hon'ble Punjab & Haryana High Court in the case of Raja Malwinder Singh ITA No. 712 of 2009, CIT Vs Sushila Devi Jain 259 ITR 671(P&H) and Kaur Singh 144 ITR 756(P&H). The Ld. C IT(A) examined these submissions. The Ld. C IT(A) further distinguished the cases relied upon by the assessee and following the case laws relied upon the Assessing Officer held that it was a case of adventure in the nature of trade and therefore, income from sale of land is to be assessed as business income. However, he held that income has to be assessed in the hands of Shri Balbir Singh HUF in the status of HUF because land was ancestral.
18. Before us, it was submitted that assessee has sold the land which was ancestral agricultural land. It was not possible to sell the huge chunk of land i.e. why the land was sold to several buyers. The assessee had sold onl y part of the land, i.e. approx 8.25 acres out of a huge chunk of land of 69.75 acres. Since assessee was an old person, therefore, land was sold through attorney holders. He further submitted that assessee has not carried out any improvement or even the land use was also not converted. No steps whatsoever were taken to run a business of selling of land. The assessee had no commercial background and was a simple agriculturist. The assessee never converted the land into non- agricultural use. He referred to the various cases relied on by the Assessing Officer and distinguished the same. He also relied on the following judgments:-
8
i) CIT v Shashi Kumar Aggarwal 195 ITR 767 (All.)
ii) Raja Malwinder Singh ITA No. 712 of 2009 (P&H)
iii) CIT Vs Sushile Devi Jain 259 ITR 671 (P&H)
iv) Kaur Singh Vs C IT 144 ITR 756 (P&H)
19. On the other hand, the Ld. DR strongl y supported the order of Ld. C IT(A) and submitted that assessee has sold the land to various small plot holders which clearl y shows that the assessee had intention to carry on the business of selling of land. He also relied on the decision of Hon'ble Supreme Court in the case of G. Venkataswami Naidu & Co. v C IT in 35 ITR 594 (SC) and DC IT v Gopal Ramnarayan Kasat 328 ITR 556 (Bom).
20. We have considered the rival submissions carefull y and find force in the submissions of Ld. Counsel for the assessee. The assessee has inherited 69.75 acres of land about 25 years ago which was mainl y used for agriculture purposes. The assessee has not carried out any development work by laying of roads, provision of lights, drainage and other facilities etc. The assessee has not even converted use of land from agricultural to residential or commercial. The onl y thing which assessee has done is that he appointed six attorney holders who in turn sold the land. Copy of the sale deed filed in the additional evidence shows that attorney holders have themselves sold the land because sale deeds have been executed by such attorney holders on behalf of the assessee being attorney holders. Even if assuming that land was sold by the assessee and these attorneys were onl y propert y dealers that fact can also not lead to the conclusion that assessee has undertaken an adventure in the nature of trade. The assessee is a simple agriculturist and not a businessman. Moreover, the assessee is an old persons of about 85 years of age. Even when the land was sold, assessee would have been of 75 years of age and if he wanted to sell land measuring about 8 acres even then help of propert y dealers or attorney was required. We find force in the submissions that assessee has not indulged in the trading in land before 9 these transactions or even after these transactions he has conducted any business in sale / purchase of land.
21. Coming to the case laws, the first decision relied upon by the Assessing Officer and Ld. C IT(A) is that of Hon'ble Karnatkas High Court in the case of CIT v Narasimha (supra). In that case, the assessee had purchased land alogwith his son as joint owner. Both of them were business man and not agriculturists. The land was located in an urban area surrounded by factories. The assessee had not cultivated land for five years. The assessee has also obtained permission for conversion of land to non agricultural land. The assessee further made a la y out of house sites and sold sites. On these facts it was held that assessee has carried on an adventure in the nature of trade. But in the case before us, the assessee has inherited agricultural land which was used as for agriculture and assessee has declared agricultural income. The assessee is not a businessman. The assessee has not got the use of land changed. The land was not divided into the house sites, therefore, clearl y this case is not applicable to the facts in the case before us.
22. The next case relied on is Raja J. Ramesh Rao Vs C IT (supra). In that case the assessee was a Jagirdar and was having income from Jagir and other sources. He acquired a village known as "Makhta" for Rs. 25,000/-. He also purchased 217 acres of land from Pattadars and a sum of Rs. 19,816/- was paid out of the total consideration of Rs. 25,502/-. The assessee also constructed a portion of land and acquired ganj and shops. The rest of land was laid out in plots. In this case it was ultimatel y held by the Hon'ble Apex Court that assessee has carried on the business. Clearl y, in this case the assessee had made construction and has also divided the land into plots and that is why it was held to be business income. As observed earlier, in the case before us, the assessee 10 has not done any development work, therefore, this case can also not be applied to the facts of the assessee's case.
23. The third case riled on by the Assessing Officer and CIT(A) is that of Janki Ram Bahadur Ram v C IT (supra). In this case, the assessee who was a dealer in iron scrap & hardware agreed to purchase all the rights of a compan y in a jute pressing factory installed on a piece of land belonging to it, together with certain lands held on lease and a warehouse thereon, and two warehouses on land held as a licensee. At that time the factory premises were in the occupation of a lessee and a suit in ejectment was pending against him. Possession of the propert y except the factory premises and the machinery was obtained on November 14, 1942, and the sale deed was executed in favour of the assessee on February 26, 1943. On June 12, 1943, the assessee agreed to sell the propert y to one Saha. After substituting itself as plaintiff in the ejectment suit, the assessee obtained possession of the factory premises from the lessee on August 10, 1943, and thereafter executed a sale deed on September 30, 1943, conveying the propert y to Saha. The Appellate Tribunal found (i) that the assessee did not carry on business in jute at any time before the purchase of the jute press, (ii) that apart from effecting certain repairs and putting the factory in working condition the appellant did not attempt to work the factory, and (iii) that a warehouse or warehouses were demolished by the appellant but sold as part of the propert y. On these facts in was held as under:-
"Held, on the facts, that the purchase and sale of the property was not an adventure in the nature of trade within the meaning of section 2(4) and the profit realised therefrom was not taxable under section 10 of the Indian Income-tax Act, 1922. The facts that the appellant made a profitable bargain when it purchased the property and that it had a desire to sell the property if a favourable offer was forthcoming could not without other circumstances justify an 11 inference that the appellant included by purchasing the property to start a venture in the nature of trade.
It is for the Revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must be determined on a consideration of all the facts and circumstances which are brought on the record of the income-tax authorities."
Thus, it is clear that despite the fact that assessee being a businessman and purchased some right in a company which was engaged in the jute processing, it was ultimatel y held that it was not a case of an adventure in the nature of trade. We fail to understand how Revenue takes assistance from this decision.
24. Before us, Ld. DR has also relied on the decision of in the case of G. Venkataswami Naidu & Co. v C IT (supra). In that case the assessee-firm which acted as managing agents purchased, for a total consideration of Rs. 8,713, four contiguous plots of land adjacent to the place where the mills of the company managed by it were situated. The first purchase was made in October, 1941, in the name of a benamidar covering land measuring about 28 cents and the second and subsequent purchases were made in November, 1941, June, 1942, and November, 1942, the plots of land measuring about 2 acres 79 cents, 28 cents and 1 acre and 90 cents, respectivel y. As long as the assessee was in possession of the lands it made no effort to cultivate them or erect any superstructure on them but allowed them to remain unutilized except for the rent received from the house which existed on one of the plots. The assessee sold these lands to the company managed by it in two lots in September and November, 1947, for a total consideration of Rs. 52,600. The question was whether the sum of Rs. 43,887 being the excess realised by the assessee by the two sales over its purchase price was assessable to income-tax. The Appellate Tribunal rejected 12 the contentions of the assessee that the properties were bought as an investment and that the plots were acquired for building tenements for the labourers of the mills as well as the alternative contention that the managed company desired to purchase the plots on account of an award of an industrial Tribunal recommending that the company should provide tenements for its labourers, and held that since the appellant was in a position to influence the decision of the managed company to purchase the properties, the plots were purchased by the appellant wholl y and solel y with the idea of selling them at a profit to the company. The Tribunal, therefore, came to the conclusion that the amount was not a capital accretion but was a gain made in an adventure in the nature of business and was therefore, taxable. On a reference, the High Court held that the transaction was an adventure in the nature of trade and that the Department was justified in taxing the amount. However, on appeal to the Supreme Court in these facts it was held as under:-
"Held, on the facts, that the Appellate Tribunal was right in inferring that the appellant knew that it would be able to sell the lands to the managed company whenever it thought it profitable so to do; that the appellant purchased the four plots of land with the sole intention of selling them to the mills at a profit which intention raised a strong presumption in favour of the view taken by the Tribunal; and that the High Court was right in holding that the transaction in question was an adventure in the nature of trade.
From the above, it emerges that assessee along with some Benemi holders purchased four plots which were contiguous to the mills of the company which were managed by the assessee, therefore, it was clear that assessee was knowing before hand that this land would be required by the assessee and that is why it was ultimatel y held confirming the decision of Appellate Tribunal that assessee had purchased the land with the sole intention of selling them to the mills and therefore, the same was an adventure in the nature of trade. The facts of the 13 case are quite distinguishable from the facts in the case before us. The assessee has merel y inherited the land and it cannot be said that this land was acquired with a clear motive of selling the same on profit to a known person.
25. In the case of DC IT v Gopal Ramnarayan Kasat 328 ITR 556 (Bom), three brothers along with an advocate purchased certain agricultural land between 1992 and 1998. The land was acquired immediatel y thereafter by the State Govt and assessee received compensation / enhanced compensation. The Assessing Officer observed that assessee did not have any intention to hold this land and cultivated the same, therefore, surplus received by the assessee in respect of this land was held to be taxable as business income terming the transaction as an adventure in the nature of trade. On these facts, it was held as under;-
"Held, (i) that from the material placed on record, on the basis of which the three authorities had concurrently held that the transactions were "adventure in the nature of trade", it could clearly be inferred that the assessees were involved in a series of transactions of purchasing lands which were notified or likely to be notified for acquisition by the Government. The transactions were not only pertaining to the Jalgaon District but also Aurangabad District, which was far away from the place of residence of the assessees. There was no perversity in the finding of fact recorded by the Assessing Officer and confirmed by the Commissioner (Appeals) and the Tribunal, that the transactions were "adventure in the nature of trade" and the gains therefrom were chargeable to tax under the head "Profits and gains of business or profession".
Again the facts are quite distinguishable because assessee was involved in purchasing of land in series of transactions which were already notified or likel y to be notified by the government for acquisition. These facts are totall y distinguishable from the facts in the case before us.
14
26. Coming to the cases relied on by the Ld. Counsel for the assessee, we find that in the case of Kaur Singh v CIT 44 ITR 756 (P&H). The Hon'ble Punjab & Haryana High Court was concerned with a case where the assessee alongwith his two brothers purchased two bungalows. One bungalow with 8 bighas of land was purchased in 1965 and the other bungalow with 174 kanals of land was purchased in 1967. Both the bungalows were rented out by the co-owners. The assessee, instead of declaring his income from propert y at 1/3rd of the total amount, claimed that his share in the income was 1/9th, because in his 1/3rd share there were 3 co-owners, viz., the assessee himself and his two sons. In support of the claim the assessee produced the decrees passed by the Civil Court in the suits filed by the assessee's sons against him. The ITO rejected the claim of the assessee on the ground that the decrees had been passed by the Civil Court after the previous year for the relevant assessment year. The ITO also found that out of the agricultural land of about 65 bighas attached to one of the bungalows, a big piece of land had been converted into certain plots out of which seven plots were sold during the relevant previous year for a consideration of Rs. 18,500. The ITO, therefore, held that the assessee had entered into an adventure in the nature of trade and added a sum of Rs. 7,000 as the assessee's income. The Appellate Assistant Commissioner deleted the addition on the ground that the assessee had made onl y an investment in the purchase of the propert y and if there was any accretion on the sale of a part of such investment, such accretion, if any, could not be treated as the assessee's income. On appeal both by the assessee and the Revenue, the Tribunal upheld the addition of the sum of Rs. 7,000 as income of the assessee from an adventure in the nature of trade. The Tribunal also found that the assessee was the owner of l/3rd share in the propert y along with the agricultural lands attached to them.
27. On the above facts it was held as under:-
15
"Held, (i) that the Tribunal had taken into consideration the decrees and awards passed by the Civil Court and had come to the conclusion that the assessee had failed to prove that his two sons also had a share in his 1/3rd share. The finding of the Tribunal was justified.
(ii) Though even a single venture may be regarded as a trade or business, yet there have to be circumstances which may give rise to such a conclusion. No hard and fast rule can be laid down. The decision of a case must turn on its own facts. For arriving at the finding that the transaction was an adventure in the nature of trade, the Tribunal was mainly influenced by the fact that out of the land attached to one of the bungalows, 42 plots had been earmarked for sale, that, in the relevant year, seven plots were sold and that advances had been received in respect of other plots. On the basis of these facts alone, no inference could be drawn that the transaction was a venture in the nature of trade. The assessee had purchased the property in the year 1967 and the Revenue had not brought any evidence to show that at the time of purchase, the assessee had an intention to sell the property. The mere fact of carving out the plots in a portion of the land, without proof of anything more, could not give rise to the conclusion that the transaction was an adventure in the nature of trade. Therefore, the Tribunal was not right in holding that the income derived by the assessee from the sale of plots was from an adventure in the nature of trade."
Thus, it is clear from the above documentary evidence that mere selling of the huge chunk of land in smaller plots by dividing the land into smaller plots without doing anything further cannot be termed as an adventure in the nature of trade. This decision has been followed by Hon'ble Punjab & Haryana High Court in the csae of CIT v Raja Malvinder Singh (supra). In that case the assessee was owning a residential house which was a separate building in Patiala known as 16 "Lila Bhawan". This building was constructed by grand father of the assessee late Maharaja Bhupinder Singh in 1925 and gifted to the assessee by his late father Majaraja Yadvindra Singh vide deed of gift dated 10.8.1961. A part of the building was sold in assessment years 1977-78 to 1979-80 which was accepted by the Revenue as capital asset. Thereafter because of the multistor y building coming up in the area already sold and also by notification the area was declared as commercial. In these circumstances, the assessee decided to sell the propert y in question and build a new commercial area. He obtained approval for commercial house of the propert y and authorize one Shri Radhey Shyam for sale of said propert y. The Assessing Officer did not dispute that assets so held and sold was ancestral propert y and was initiall y a capital asset. However, he further held that since the assessee converted his residential house into commercial propert y and also earmarked 42% of the area for roads and sold the same by her services and as propert y dealer, the assessee had converted the capital assets into stock in trade and therefore, the proceeds were taxed under the head 'business income'. The Tribunal allowed relief by following the decision of Kaur Singh v CIT (supra). The Hon'ble High Court confirmed the decision of the Tribunal by following para:-
"We have heard learned counsel for the revenue-appellant at a considerable length. On 21.4.2010, when the matter came up for consideration we had adjourned the hearing to enable the learned counsel to produce any law showing that in the facts and circumstances of this case, the property belonging to the assessee-respondent could be assessed as 'business income' or it would continue to enjoy the status of 'capital asset' and assessable as 'long term capital gain'. Ms. Urvashi Dhugga has not been able to substantiate her argument by citing any view which may be applicable to the facts and circumstances of the present case. However, she cited the view of a Division Bench of Allahabad High Court rendered in the case of I.T.O. v. Rani Ratnesh Kumari, [1980] 123 ITR 343. The aforesaid judgment would not be applicable 17 because in that case the assessee had purchased the property and re-sold the same after developing it. There was finding of fact with regard to financial intention of the assessee who had purchased the land to improve and develop it and then sold. Therefore, we do not feel persuaded by the submission made by Ms. Dhugga. The appeals do not merit admission as no question of law, much less any substantive question of law would arise. The matter, in fact, seems to be covered against the revenue by the view taken by this Court in Kaur Singh's case (supra). Accordingly, these appeals fail and the same are dismissed.
Thus, despite the fact that the residential house premises was got converted into commercial area and even some area was earmarked for roads even then the Hon'ble High Court held that the same cannot be held as adventure in the nature of trade. The case of the assessee is on much better footing because the use of land was never got converted and no development such as roads was done by the assessee.
28. The next case relied on by the Ld. Counsel for the assessee is of Sushila Devi Jain (supra). In that case the assessee had included a piece of agricultural land. Some part of the land was sold for a consideration of Rs. 40 lakhs and assessee offered the same under the head 'long term capital gains." However, the Assessing Officer did not accept her plea and held that assessee had sold some pieces of land to different concerns and, therefore, there was a profit motive in acquiring the land and selling the same and the income was taken as arising from the trade. On these facts it was held as under:-
"Held, that what was necessary was to find out the intention of the assessee at the time of the purchase of land. In the instant case, the land was never purchased by her. She acquired the same on the basis of a will on the death of her husband. She sold the same in parcels because the huge area 18 could not be sold in one transaction. Such an activity could not amount to trade or business within the meaning of the Act. No substantial question of law arose."
From the above, it is clear that profit motive cannot be attributed when the land has been inherited. It is also important to note that it is not possible to sell huge area as a chunk of land to the buyer even if the assessee has sold such land in smaller pieces, it cannot be said that same is to be treated as an adventure in the nature of trade.
29. The last judgment relied on by the Ld. Counsel is that of CIT v Shashi Kumr Aggarwal. This judgment is also similar to the decision of Hon'ble Punjab & Haryana High Court in the case of C IT Vs Sushila Devi Jain because in this case also the assessee has inherited same land which was sold in small pieces. From the above discussion, it becomes clear that since the assessee has not done any development, the usage of land was not converted, the assessee is not a businessman and all other factors, we are of the opinion, that this is a simple case of sale of an asset, therefore, the same is required to be taxed under the head 'capital gains'. Therefore, we set aside the order of Ld. C IT(A) and direct the Assessing Officer to assess the income from the sale of land under the head 'capital gain'.
30. Ground No.4: After hearing both the parties, we find that during assessment proceedings the Assessing Officer noticed that the assessee has claimed exemption u/s 54B of the Act. According to him this exemption is available if the land which has been sold was being used in the immediatel y preceding two years before the transfer by the assessee or his parent for agricultural purposes. He observed that land sold by the assessee was not agricultural land and was located within the municipal limits. No agricultural operation was being performed on the land. The assessee despite many 19 opportunities could not bring any evidence to show that land was used for agricultural purposes. It was also observed that majorit y of the agricultural income declared by the assessee was from the land belonging to the assessee in the district of Yamunanagar. In this background, exemption u/s 54B was denied.
31. On appeal, the Ld. CIT(A) confirmed the denial of deduction because the income from sale of land was under the head 'business income'.
32. Before us, Ld. Counsel for the assessee submitted that land was inherited by the assessee as agricultural land and was also used for agricultural purposes. However, on a specific query by a Bench, whether he has any evidence to show that land was used for agricultural purposes, he admitted that there was no evidence to show that land was used for agricultural purposes.
33. On the other hand, the Ld. DR submitted that when land was not being used for agricultural purposes, then exemption u/s 54B is not available.
34. After considering the rival submissions carefull y, we find that no evidence was produced before Assessing Officer or CIT(A) to prove that land which was sold was being used for agricultural purposes. Even before us, rather it was admitted that there is no evidence to show that land was being used for agricultural purposes, therefore, in the absence of any evidence to show that land was being used for agricultural purposes, exemption u/s 53B has been rightl y denied by the lower authorities. Accordingl y, we confirm the order of Ld. C IT(A).
35. Ground No.5: After hearing both the parties, we find that during assessment proceedings the assessee was asked to give details of various bank 20 accounts and also narrations of the bank account. The details were filed as under:-
S.No. Bank Name & a/c No. Name of the Cheque Cash Total Remarks a/c holder deposited deposited 1 Central Bank of India Mrs. 25,20,000 30,08,000 55,28,000 Deposits (7481) Swaranjit from sale Kaur & Sh. of land in Balbir cash & Cheques 2 Karnataka Bank Ltd. Sh. Balbir 22,22,000 37,31,800 59,53,800 Deposits (1462500100240001) Singh & Mrs. from sale Swarajit Kaur of land in cash & Cheques 3 Karnataka Bank Ltd. Sh. Balbir 51,20,007 1,05,56,700 1,56,76,707 Deposits Panchkula Singh from sale (6082500100218501) of land in cash & Cheques 4 ICICI Bank Ltd. Mrs. 12,71,410 18,12,290 30,83,700 Deposits (001301043473) Swaranjit from sale Kaur & Sh. of land in Balbir Singh cash & Cheques 5 Punjab National Bank Sh. Balbir 3,00,000 Deposits in (3956000101010420) Singh & Mrs. Cheque Swaranjit Kaur 6 State Bank of Patiala Sh. Balbir 18,91,574 2,86,280 21,77,854 Deposit of (01170006466) Singh & Mrs. agricultural Swaranjit proceeds Kaur From the above, the Assessing Officer anal yzed the details and was of the opinion that there was no source of deposits to the extent of Rs. 28,76,224/- by the following :-
1. None of the bank accounts are in the name of M/s Balbir Singh (HUF) or Sh. Balbir Singh Karta. All the bank accounts were in the name of Sh. Balbir Singh (Individual) or in joint name with his wife.
2. As per the explanation offered by the counsel of the assessee that in bank accounts from S.No. 1-4 the money from the sale of land in Baltana has been deposited and the bank 21 account in the State Bank of Patiala the sale proceeds from agricultural proceeds are deposited.
3. The land that has been purchased in village Baltana and Distt. Yamunanagar have been purchased from the funds from these bank accounts.
The assessee was asked to explain the source of cash & cheque deposits in these bank accounts. The counsel of the assessee submitted that the source of cheque & cash deposits in bank account at Sr. No. 1-5 is from agricultural land sale proceeds. This fact was compared to the cash and cheque details as per the sales deed and agreement submitted. As per registries submitted which forms Annexure C to the order the cash and cheque component is Rs. 1,63,04,566/- and Rs. 75,41,417/- respectively. As per the agreement to sell dated 29.04.2003 (copy of the agreement forms annexure E to the order) the assessee has received Rs. 10,00,000/ - in cash and Rs. 5,00,000/- in cheque during the year. Later on 24.12.09, the counsel of the assessee submitted a letter from Sh. Raovinder Singh that he had made payment of Rs. 28,20,000 by cheque and Rs. 30,08,000/- by cash for purchase of land from Sh. Balbir Singh in Village- Baltana but in the absence of any receipt/affidavit/registry/power of attorney, the explanation regarding cash component cannot be accepted. Only cash paid of Rs. 10,00,000/- as per the agreement as per the agreement is being accepted. However, as per the bank accounts at S.No. 1-5 the total cheque deposit are for Rs. 1,14,33,417/- and cash deposit are for Rs. 1,91,08,790/-. Even if we accept the assessee reply that the cheque & cash deposits in bank are from the sale of land there is difference of rs. 18,04,224/- in cash deposited and Rs. 10,72,000/- in cheque deposits. The counsel of the assessee could not offer any explanation regarding the difference of Rs. 28,76,224/-"
36. On appeal, the assessee made detailed submissions before the Ld. C IT(A).
The Ld. C IT(A) after considering the submissions observed that working given by the Assessing Officer have to be taken as correct because assessee has not been able to controvert the same. However, he also noted that a sum of Rs.22
13,92,000/- deposited was out of agricultural income and, therefore, benefit to the tune of Rs. 8 lakhs was given.
37. Before us, Ld. Counsel for the assessee submitted that Assessing Officer has perhaps confused some cheques with the cash. He furnished following break-up:-
Total sale proceeds : Rs. 3,05,23,983/-
Total deposits in the bank as per Assessing Officer :
a) by cheque Rs. 1,14,33,417/-
b) by cash Rs. 1,91,08,790/-
Total Rs. 3,05,42,207/-
From the above, it becomes clear that source of deposits was sale of agricultural land onl y. In any case part apart from sale consideration of land, the assessee was also having agricultural income of Rs. 35 lakhs and also an advance of Rs.
13 lakhs which was offered for taxation.
38. On the other hand, the Ld. DR strongl y relied on the order of Assessing Officer and C IT(A).
39. After hearing the rival submissions, we find force in the submissions of Ld. Counsel for the assessee. However, he has convenientl y forgotten to point out that with sum of Rs. 30,08,000/- was paid by way of cash for purchase of fresh agricultural land and, therefore, total sources have to be reduced from this amount. This whole issue requires detailed examination but since the assessee is a very old person, we are of the opinion that there is no point for sending the matter back to the Assessing Officer, therefore, considering the over all circumstances, we further allow a sum of Rs. 7.5 lakhs out of agricultural income. This amount has been worked out by us as under:-
23
Sources available:
Agricultural income Rs. 35,00,000
Addition on account of alleged
advances received Rs. 13,00,000/-
Total sources Rs. 48,00,000/-
Amount utilized by the assessee
for purchasing land Rs., 30,00,000/- approx.
Net sources Rs. 18,00,000/-
Relief granted by CIT(A) Rs. 8 lakhs
Net Available Rs. 10,00,000/-=
Out of the above, the assessee might have incurred some expenses also and therefore, credit can be given onl y for a sum of Rs. 7.5 lakhs. Accordingl y, we set aside the order of Ld. CIT(A) and direct the Assessing Officer to further reduce the amount of addition on account of deposits by 7.5 lahs.
40. In the result, the appeal is partl y allowed.
ITA No. 1356/Chd/2012:-
41. In this appeal the Revenue has raised the following ground:-
The Ld. CIT(A) has erred in facts as well as law in deleting the addition in the case of Sh. Balbir Singh (Indl) prematurely without waiting for the assessee to accept the same in the hands of Sh. Balbir Singh (HUF) or without waiting for any finality arrived in appellate proceedings before higher authorities.
42. Before us, Ld. DR relied on the order of Assessing Officer. On the other hand, Ld. Counsel for the assessee supported the impugned order. 24
43. After considering the rival submissions, we find that the Ld. CIT(A) has adjudicated this issue vide para 5.3 which reads s under:-
"5.3 I have considered the submission of the Ld. Counsel. First issue to be decided in this case is whether income on sale of ancestral land is to be assessed in the hands of the HUF or individual. The Assessing Officer has assessed income in the hands of the appellant on protective basis. It is seen that the impugned land was ancestral land and sale of ancestral land is to be assessed in the hands of appellant (HUF), even if the sale proceeds are deposited in the individual bank account or sale proceeds have been utilized for purchase of agricultural land in individual hands. Also, the fact that land had been sold by Sh. Balbir Singh and not M/s Balbir Singh (HUF) as per the registration deeds is not relevant and the amount received is to be assessed in the hands of M/s Balbir Singh (HUF), since it was on account of sale of ancestral land. Hence, the Assessing Officer is not right in making assessment of the amount of sale of land in the hands of the appellant (HUF) on protective basis, which has to be assessed on substantive basis.
44. We are of the opinion that Ld. CIT(A) has correctl y adjudicated the issue because undisputedly the assessee has inherited the land from his ancestor, therefore, we confirm the order of Ld. CIT(A).
45. In the result, Revenue's appeal is dismissed.
Order Pronounced in the Open Court on 23.12.2013.
Sd/- Sd/-
(SUSHMA CHOWLA) (T.R.SOOD)
JUDICIAL MEMBER ACCOUNTANT MEMER
Dated : 23 r d December, 2013
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
25