2019 (1) TMI 682 - AT - Income Tax

Treating the gain on sale of land as Capital Gain - whether the land was purchased as business asset or for investment as capital asset? - Held that - Joint Venture does not contain any contract to transfer for consideration, any immovable property. The Joint Venture Agreement in the present case does not fall within the category of documents of which registration is compulsory u/s. 17 of the Registration Act, 1908. Hence, the second reasoning given by the Revenue to discard Joint Venture Agreement holds no water. The assessee has discharged his onus by furnishing Joint Venture Agreement reflecting his intention at the time of purchase of land. A Joint Venture Agreement placed on record shows the intention of the assessee to develop the land and sell the same after plotting. Since, the entire chunk of land was sold in a short span of two months time from the date of purchase that explains the reason for not seeking any approvals from Government authority for plotting etc. or carrying out any other development activity on the land. Thus, from the perusal of documents on record we find merit in the submissions of the assessee that the land was purchased by the assessee with the intention to exploit it commercially and to hold it as business asset. Since, we have held the land as business asset, the provisions of section 50C does not get attracted. Addition on account of cash deposit in the bank - Held that - CIT (Appeals) accepted the explanation of assessee to the extent of gifts ₹ 20,00,000/- received by the assessee from his sons and after adjusting the same restricted the addition to ₹ 6,00,000/-. Before us the assessee has not been able to controvert the findings of Commissioner of Income Tax (Appeals). Hence, we do not find any reason to interfere with the findings of Commissioner of Income Tax (Appeals) on this ground. - Appeal of assessee partly allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Treatment of gain on sale of land as Capital Gain vs. Business Income.
3. Addition of ?6,00,000 on account of cash deposit in the bank.

Issue-wise Detailed Analysis:

Condonation of Delay:
The appeal by the assessee was delayed by 278 days. The assessee filed an application for condonation of delay, supported by an affidavit, citing medical exigencies as the reason. The assessee, aged around 75 years, had undergone angioplasty and was advised bed rest, which hindered his ability to manage business affairs. The Tribunal referred to the Supreme Court's ruling in Ram Nath Sao @ Ram Nath Sahu and Others Vs. Gobardhan Sao and Others, which emphasizes that acceptance of delay should be the rule and refusal an exception, especially when no negligence or inaction is evident. Consequently, the Tribunal condoned the delay and admitted the appeal for hearing on merits.

Treatment of Gain on Sale of Land:
The assessee purchased land in the name of his son and entered into a Joint Venture Agreement for development, which was later sold due to the project's failure. The assessee offered the profit from the sale as business income, but the Assessing Officer treated it as Short Term Capital Gain, invoking section 50C for valuation. The Tribunal examined the intention behind the purchase, the sequence of events, and the Joint Venture Agreement. The Tribunal found that the land was purchased with the intention to exploit it commercially, thus treating it as a business asset. Consequently, the provisions of section 50C were deemed inapplicable, and the gain was considered business income. The Tribunal set aside the findings of the First Appellate Authority on this issue.

Addition of ?6,00,000 on Cash Deposit:
The Assessing Officer added ?12,00,000 to the assessee's income, disbelieving the source of cash deposits in the bank, which totaled ?52,00,000. The First Appellate Authority accepted part of the explanation, particularly the gifts received from the assessee's sons, and restricted the addition to ?6,00,000. The Tribunal found that the assessee could not effectively counter the findings of the Commissioner of Income Tax (Appeals) regarding the unexplained cash deposit. Hence, the Tribunal upheld the addition of ?6,00,000, dismissing the assessee's ground on this issue.

Conclusion:
The appeal was partly allowed. The Tribunal condoned the delay in filing the appeal, treated the gain on the sale of land as business income, and upheld the addition of ?6,00,000 on account of cash deposits in the bank.