Gujarat High Court
Hemachand Hirachand Shah vs Commissioner Of Income-Tax on 8 June, 1993
Equivalent citations: [1994]206ITR55(GUJ)
JUDGMENT Y.B. Bhatt, J.
1. The present reference arises from a decision of the Income-tax Appellate Tribunal in two appeals involving common points. The relevant assessment year are 1969-70 and 1970-71. The short and pertinent facts are as under :
The assessee who claimed to be an agriculturist had entered into a series of transactions of purchase and sale of lands which were treated by the Income-tax Officer as business operations and the profit arising from the sale of such lands was treated as taxable income.
2. The first transaction was in respect of Survey Nos. 368 to 372 within the municipal limits of Navsari, which were purchased between December 10, 1968, and March 25, 1969. They were purchased for Rs. 16,420 and sold for Rs. 38,001 on January 23, 1969.
3. The assessee had further purchased lands bearing Survey Nos. 349/1, 350, 351, 389, 390, 392 and 393 within the municipal limits of Navsari between December 10, 1968, and April 18, 1969. These lands were purchased for Rs. 26,302 and were sold for Rs. 36,000.
4. The assessee further purchased Survey Nos. 347 and 452 on April 16, 1969, and February 22, 1969, respectively, which were sold on May 9, 1969. They were purchased for Rs. 8,000 and sold for Rs. 23,501.
5. The assessee further purchased Survey No. 349 of Navsari on December 30, 1969, for Rs. 3,999 which was sold on February 20, 1970, for Rs. 5,000. According to the assessee, his transactions were not taxable on the ground that such lands were agricultural lands and that he was an agriculturist engaged in agriculture.
6. The Income-tax Officer found that the purchase and sale of these lands by the assessee was part of an organised business activity, that he had entered into other business such as plying of motor trucks on hire, etc., and moreover, the assessee had not produced any material or direct evidence to indicate that he was still carrying on agricultural activity on the date of the transactions. Accordingly, the profits that accrued from the said transactions were treated by him to be business income and taxed accordingly. A similar view was taken by the Appellate Assistant Commissioner.
7. The question raised for consideration in the present reference before us is as under :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was carrying on a business or an adventure in the nature of trade when he purchased and sold certain agricultural lands ?"
8. On the facts and circumstances of the case and in view of the present question raised for our consideration, the only aspect we are required to consider is whether the view taken by the Tribunal to the effect that the assessee was carrying on business or an adventure in the nature of trade, when he purchased and sold the lands in question, is a reasonable and correct view, looking to the facts and evidence on record. In other words, what we are required to consider is whether the view taken by the Tribunal is, on the material on record, reasonable and sustainable, or whether the same is illegal or perverse or the result of non-application of mind or not sustainable for any other similar reason.
9. On the facts of the case and from the material on record, we find that the explanations offered by the assessee for disposing of the lands soon after the purchase are just not acceptable. The explanation of the assessee in most of the cases is that the lands were "dabhada" lands, on which considerable expenditure would have to be incurred in order to develop them and made them fir for agricultural operations. It should be noted that the assessee who professes to be an agriculturist would be aware of the nature and character of the land he is purchasing particular when he professes to purchase the said lands for the purpose of agriculture. We cannot accept a situation where such agriculturist would purchase a land for the purpose of agriculture, on an assumption or on observation that it would be fit for agriculture, and immediately after the purchase, arrive at a conclusion that it would be uneconomical to develop the same for agriculture and would, therefore, be required to dispose of the same. We find the assessee to have entered into a series of transactions of purchase and sale and, in each case, the sale was within a reasonably short time of the purchase. Thus, the very fact that the large number of such transactions was entered into within a reasonably short period of time enables us to reach the conclusion that it was an organised business activity on the part of the assessee.
10. The contention raised on behalf of the assess before the Tribunal to the effect that his explanation ought to have been accepted as aforesaid is unreasonable and has rightly been rejected by the Tribunal.
11. On a totally of the assessment of the facts and circumstances of the case and on the material on record, we find that the conclusion arrived at by the Tribunal is correct. In this context, we also find that the assessee was, at least, so far as the transactions in question are concerned, carrying on business or an adventure in the nature of trade, and that, therefore, the profit which accrued from such transactions would be taxable as business income.
12. In view of our observations made hereinabove, we do not propose to enter into a detailed discussion as to the treatment given by the Tribunal on the material on record and the appreciation of such evidence. Suffice it to say that the conclusions drawn by the Tribunal on the basis of such material is eminently reasonable and sustainable and it cannot be said that the Tribunal erred in law in arriving at such a conclusion.
13. In the aforesaid premises, the question before us would be required to be answered in the affirmative. Accordingly, we hold that the Tribunal was right in law in holding that the assessee was carrying on a business or an adventure in the nature of trade when he purchased and sold the agricultural lands.
14. Before parting with this matter, we may observe that the applicant was directed to be served with notice of this reference and in fact he has so been served as per the endorsement on the acknowledgment slip on October 20, 1992.
15. This reference is, therefore, disposed of accordingly with no order as to costs.