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TMI Blog2009 (11) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appeals Nos. 5 of 2009 to 19 of 2009, 26 of 2009 and 27 of 2009 are filed by the original assessees and the Tax Appeals Nos. 3 of 2009 and 20 of 2009 to 25 of 2009 are filed by the Revenue. 2. All these appeals are arising out of identical facts and since the issues involved in all these appeals are identical, we have heard all these appeals together and they are being decided by this common judgment and order. 3. The appellant-assessees, namely, Gopal Ramnarayan Kasat, Subhash Ramnarayan Kasat and Kiran Ramnarayan Kasat are real brothers. The said assessees and one Narayan Ramdayal Lathi, who is an advocate by profession, had purchased certain agricultural lands during the period 1992 to 1998. The said lands were acquired immediately thereafter by the State Government. The assessees received compensation/enhanced compensation towards the acquisition of the said lands during the assess- ment years 2000-01, 2001-02 and 2002-03. The assessees had filed their returns for the said assessment years. Noticing that the assessees, apart from their regular business/professional activities, had jointly purchased agricultural lands involving 13 transactions and out of the said 13 trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Commissioner of Income- tax (Appeals), directed deletion of the enhanced compensation and the interest component, in view of pendency of the issue regarding enhanced compensation before the High Court. 7. Being aggrieved by the orders passed by the Commissioner of Income- tax (Appeals), both, the assessees so also the Revenue, filed further appeals before the Income-tax Appellate Tribunal. The appeals filed by the asses- sees were rejected. In so far as the appeals filed by the Revenue are concerned, they were partly allowed. It was held that the enhanced com- pensation was liable to be taxed. In so far as the finding of the Commis- sioner of Income-tax (Appeals), regarding interest on enhanced compen- sation being not liable to be taxed, the Tribunal held that the interest was to be assessed on accrual basis from year to year. The Tribunal upheld the view of the Commissioner of Income-tax (Appeals), to the extent, that the interest was liable to be taxed only on reaching its finality. The Tribunal also upheld that the interest has to be assessed under the head "Income from other sources". Being aggrieved by this order, both the assessees, so also, the Revenue have preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the end of the month in which the return is fur- nished. He submits that no notice was furnished within a period of 12 months from the end of the month in which the return was filed. He, therefore, submits that the reassessment proceedings cannot be initiated under section 147 by issuing notice under section 148 of the said Act. In support of this submission, he relies on the judgment of a Division Bench of this court, in the case of CWT v. HUF of H. H. Late J. M. Scindia [2008] 300 ITR 193 (Bom). 12. The next submission of Mr. M. K. Kulkarni, learned counsel appearing on behalf of assessees, is that the provisions of section 234B of the said Act applies to situation where there is default in the payment of advance tax. He submits that the said provision only applies when the assessee is liable to pay advance tax in that year and if he has failed to do so. In the sub- mission of the learned counsel, firstly, no tax was payable on the com- pensation so received and, secondly, since the assessees could not estimate as to how much compensation was to be received by them, they could not have paid the advance tax. In support of his submission, in this respect, he relies on the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion. In support of this pro- position, he relies on the judgment of the apex court, in the case of Dalmia Cement Ltd. v. CIT [1976] 105 ITR 633 ; [1976] 4 SCC 614. He submits that in arriving at such a finding, intention of the assessee is relevant. He also relies on the judgment of a Division Bench of this court, in the case of Gurdial Naraindas and Co. v. CIT [1963] 50 ITR 633 (Bom). 15. In view of the rival submissions, the following questions arise for our determination : "(1) As to whether the assessees were liable to be assessed for the profits earned by them on account of the compensation received by them for acquisition of agricultural lands by terming the same to be `adventure in the nature of trade', as defined under section 2(13) of the said Act ? (2) As to whether the assessment proceedings could be reopened under section 147 of the said Act by issuing a notice under section 148 of the said Act, if no notice is issued to the assessee within a period of 12 months from the end of the month in which the return is filed, in view of the provisions of section 143(2) of the said Act ? (3) As to whether the interest, as provided under section 234B of the said Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is within these narrow limits that the conclusions of fact recorded by the Tribunal can be challenged under section 66(1). Such conclusions can never be challenged on the ground that they are based on misappreciation of evidence. There is yet a third class of cases in which the assessee or the Revenue may seek to challenge the correctness of the conclusion reached by the Tribunal on the ground that it is a conclusion on a question of mixed law and fact. Such a conclusion is no doubt based upon the primary evidentiary facts, but its ultimate form is deter- mined by the application of relevant legal principles. The need to apply the relevant legal principles tends to confer upon the final con- clusion its character of a legal conclusion and that is why it is regarded as a conclusion on a question of mixed law and fact. In dealing with findings on questions of mixed law and fact the High Court would no doubt have to accept the findings of the Tribunal on the primary questions of fact ; but it is open to the High Court to examine whether the Tribunal had applied the relevant legal princi- ples correctly or not ; and in that sense, the scope of enquiry and the extent of the jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts subsequent to their purchase clearly shows that it was not interested in obtaining any return from them. No doubt the appellant sought to explain its purpose on the ground that it wanted to build tenements for the employees of the mills ; but it had taken no steps in that behalf for the whole of the period during which the plots remained in its possession. Besides, it would not be easy to assume in the case of a firm like the appellant that the acquisition of the open plots could involve any pride of possession to the purchaser. It is really not one transaction of purchase and resale. It is a series of four transactions undertaken by the appellant in pursuance of a scheme and it was after the appellant had consolidated its holding that at a convenient time it sold the lands to the Janardana Mills in two lots. When the Tribunal found that, as the managing agent of the mills, the appellant was in a position to influence the mills to purchase its properties its view cannot be challenged as unreasonable. If the pro- perty had been purchased by the appellant as a matter of investment it would have tried either to cultivate the land, or to build on it ; but the appellant did neither a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC), it was sought to be contended on behalf of the appellant that the purchases made by the appellant were nothing more than an investment and that if by resale some profit was realized, that cannot impress the transaction with the character of an adventure in the nature of trade. The court found that to make investment in lands was not an ordinary business of the said firm. The court found that the purchase, in question, was the first step taken by the appellant in execution of a well-considered plan to acquire open plots near the mills. The apex court, from the conduct of the appellant, found that the plots, in question, were purchased by the appellant with the sole intention to sell them to the mills at a profit. 20. In this background, let us examine the observations of the Tribunal while affirming the findings of the Assessing Officer and the Commis- sioner of Income-tax (Appeals), that the transactions, which are the subject-matter of the proceedings, amounted to "adventure in the nature of trade". The Tribunal has found thus : "21. We have also examined the meaning of the term `adventure in the nature of trade' mentioned in section 2(13) of the Act. It has now been def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee so as to establish that the adventure as taken by him was within the sphere of trade activity. Though these facts can also not be ruled out that not one of the con- sideration mentioned in the foregoing paragraphs by itself really is a conclusive criteria, hence the decision in each case must rest on the totality of the facts and the combined effect of all the circumstances. Our endeavour in deciding these appeals was in this direction only. 22. In a nutshell, on the basis of the detailed discussion made here- inabove, the conclusion can be drawn that the entire activity of this appellant was within the domain the adventure in nature of trade. We are aware that by profession an advocate, but he has also entered into an activity which can be held to be incident to the business activity. His act prior to the acquisition was definitely assailed with the profit motive. He was aware at the time of purchase that the land in ques- tion was within the acquisition proceedings, hence it cannot be held as an investment for a long period. The land in question could never be a pride of possession since it was about to be acquired by the Government. The land in question was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the apex court in the case of G.Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 594. From the mate- rial placed on record, on the basis of which the three authorities have con- currently held that the transactions were "adventure in the nature of trade", it can clearly be inferred that the assessees herein were involved in a series of transactions of purchasing lands which were notified or likely to be notified for acquisition by the Government. It is to be noted that the transactions were not only pertaining to the Jalgaon District but also Aurangabad District, at a far away distance from the place of residence of the assessees. We do not find any perversity in the finding of fact recorded by the Assessing Officer and confirmed by the Commissioner of Income- tax (Appeals) and the Income-tax Appellate Tribunal, that the transactions were "adventure in the nature of trade". 22. Now, let us deal with the contention of the assessees, that in view of provisions of section 2, sub-section (14)(iii), clauses (a) and (b) of the said Act, the agricultural lands were excluded from the definition of "capital asset" and, as such, no tax was payable on the compensation received on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer has reason to believe that the net wealth chargeable to tax in respect of which any person is assessable under this Act has escaped assessment for any assessment year (whether by reason of underassessment or assessment at too low a rate or otherwise), he may, subject to the other provisions of this section and section 17A, serve on such person a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the pres- cribed form and verified in the prescribed manner setting forth the net wealth in respect of which such person is assessable as on the valu- ation date mentioned in the notice, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such net wealth and also any other net wealth chargeable to tax in respect of which such person is assessable, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section for the assessment year con- cerned (hereafter in this section referred to as the relevant assessment year) and the provisions of this Act shall, so far as may be apply as if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1st October, 1991, thereby introducing proviso to the said section. The amended section 148 reads as under : "148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case- (a) where a return has been furnished during the period com- mencing on the 1st day of October, 1991, and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice issued is after the expiry of the time limit provided in sub-section (2) of section 153. We accordingly reject the contention of the assessees, in this regard, also. Question No. 3 27. In support of the proposition, that interest under section 234B is not tax- able in the facts of the present case, the learned counsel appearing for the assessees has relied on the judgment of the Delhi High Court, in the case of CIT v. Anand Prakash [2009] 316 ITR 141 (Delhi), to contend that since the assessee had not withheld any money belonging to the Government and the interest payable on account of enhanced compensation was unknown to the assessee on the date of completion of assessment, there- fore, the assessee could not have included the interest received on the enhanced compensation in the assessment year while estimating his income for the purposes of calculation of advance tax for the relevant years. 28. The scope of section 234B and section 234C of the Income-tax Act, 1961, came up for consideration before the Division Bench of this court, in the case of CIT v. Kotak Mahindra Finance Ltd. [2004] 265 ITR 119. It would be relevant to refer to paragraph 7 of the said judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be referred to as current income. The basic burden of the assessee's argument is that companies falling under section 115J of the Income- tax Act are assessed on the basis of deemed income which is computed as per Schedule VI to the Companies Act. That, such com- panies have to compare the total income computed under the normal provisions of the Income-tax Act with the book profits computed under Chapter VI of the Companies Act. That, the accounts of the company under Schedule VI cannot be prepared before the end of the previous year whereas, section 207 of the Income-tax Act provides for estimation of the `current income' at the end of the previous year. That, section 207 contemplates estimation of current income by the end of the financial year and on that estimation the assessee is required to pay advance tax. According to the assessee, therefore, interest cannot be levied on account of short payment of advance tax in cases of companies falling under section 115J. We do not find any merit in this argument. The difficulty faced by the assessee in the matter of computation cannot defeat the liability for payment of advance tax. Under section 207 of the Income-tax Act, advance ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [2001] 250 ITR 686. Consequently, we respect- fully disagree with the judgment of the Karnataka High Court in the case of Kwality Biscuits Ltd. [2000] 243 ITR 519." 31. It can thus be clearly seen that the Division Bench has held that the difficulty faced by the assessee in the matter of computation cannot defeat the liability for payment of advance tax. It has been held that under section 207 of the Income-tax Act, 1961, advance tax is payable during any finan- cial year in respect of the "current income". In the said case, the court has clearly negated the contention of the assessee, that merely because the curtain raises in the cases of companies falling under section 115J after March 31, cannot be a ground for the assessee-company not to pay interest under section 234B and section 234C. Since we have already upheld that the profit earned by the assessee on receipt of the compensation is an income chargeable to income-tax under the head "Profit from business", holding the transaction to be "adventure in the nature of trade", in view of the judgment of the Division Bench, cited supra, mere difficulty faced by the assessee in the matter of computation cannot defeat the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dis- pute), the same is liable to be taxed under section 45(5) of the 1961 Act. This is the scheme of section 45(5) and section 155(16) of the 1961 Act. We may clarify that even before the insertion of section 45(5)(c) and section 155(16) with effect from April 1, 2004, the receipt of enhanced compensation under section 45(5)(b) was taxable in the year of receipt which is only reinforced by the insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the court/tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act, it is on the basis that award of the Collector or the court, under reference, has not compensated the owner for the full value of the property as on date of notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eemed income" as and when the asses- see- claimant, is in receipt of enhanced compensation and further held that the interest under section 28 is also a component of the enhanced com- pensation and since we have already held that the compensation received on account of acquisition of the lands, in question, was a business income taxable under section 28 of the Income-tax Act, 1961, we find that the Income-tax Appellate Tribunal has erred in treating the interest as "income from other sources". 37. We accordingly answer the issues as under : (1) We uphold the concurrent finding of the authorities, that the transactions, in question, were "adventure in the nature of trade" and as such, chargeable to income-tax under the head "Profits and gains of busi- ness or profession". (2) Since in view of the amendment to section 148 by the Finance Act, 2006, the notices issued to the assessees under sub-section (2) of section 143 of the Income-tax Act, 1961, after the expiry of 12 months, specified in the proviso to sub-section (2) of section 143, where returns have been fur- nished during the period commencing from the 1st day of October, 1991, and ending on September 30, 2005, have been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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