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TMI Blog2007 (11) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... one through while disposing of the appeal. 2. The only ground taken by the department is that "On the facts and in the circumstances of the case, the learned CIT (Appeals) has erred in deleting the addition of Rs. 1.7 crores made by the Assessing Officer on account of income from sale of property No. l5-B, West End, New Delhi". The brief facts giving rise to the appeal are these. The assessee is a limited company. It filed return for the assessment year 1996-97 declaring total income of Rs. 15,73,220. On 31-3-1993, it filed a revised retun declaring net loss of Rs. 1,55,80,308. In the revised return, the assessee excluded the profit of Rs. 1,70,00,000 on sale of property No. 15-B, West End, New Delhi to M/s. Silver Glades Construction P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, despite the fact that the purchaser company did not pay the price for the property immediately as provided in the agreement, the assessee handed over possession. Thus, the assessee by its own conduct had allowed the performance of the agreement to sell by permitting the buyer to make payments later along with interest. It was noted by the Assessing Officer that clause 3 of the agreement to sell itself provided for delayed payments with interest even though clause 1 stated that the sale consideration shall be paid immediately and timely payment was of the essence of the agreement. On these facts, the Assessing Officer came to the conclusion that there was a part performance of the sale contract within the meaning of section 53A of the Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w to conceal its income. He, therefore, held that the profit of Rs. 1,70,00,000 on the sale of West End property was liable to tax as business profits. 4. On appeal, the CIT (Appeals) posed two questions to himself for decision. The first was whether the agreements to sell and the cancellation deeds produced before the Assessing Officer on stamp papers purchased on 31-1-1998 were genuine and if the agreements to sell were genuine whether the cancellation deeds were entered into in the normal course of business or to defraud the revenue. The second was whether the West End property was transferred to Silver Glades Constructions and if so, whether any income accrued to the assessee. He opined that the inclusion of the profit on the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( v ) of the Income-tax Act was not attracted and there was no "transfer". In this view, he held that the judgment of the Hon ble Delhi High Court in CIT v. Reliance International Corpn. (P.) Ltd. [1995] 211 ITR 666 was not applicable. He further held that the mere entries in the accounts will not change the character of the transaction, as held by the Supreme Court in CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 and further found that in any case "M/s. Silver Glades Construction Pvt. Ltd. in assessment year 1998-99 has reversed the entries in their books of account". It appears that he had obtained a remand report from the Assessing Officer. In the said report, the Assessing Officer had stated that the effect of cancellation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit to tax under the head "capital gains" but has assessed it only under the head "business" as the computa- tion of the taxable income in the assessment order would show. It appears to us that the reference by him and the CIT(A) to section 2(47)( v ) of the Act is not relevant as it would be relevant only if the profit had to be assessed under the head "capital gains". The property was obviously treated as stock-in-trade by the assessee and stock-in-trade is excluded from the definition of a "capital asset" in section 2(14). Therefore, the proper head of assessment of the profit is only "business" and not "capital gains". But that may not drastically change the question arising in the present case because even in the case of sale of immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd out their intention and also to find out why they should cancel the agreements to sell. The alleged discrepancies in the dates of purchase of stamp papers may also be put to them for explanation, though we find that the contents of the documents, written in stamp papers purchased on different dates, are the same. The learned senior DR had pointed out that in clause 1 of the agreement to sell there was a stipulation that timely payment of the sale price was of the essence of the contract and in clause 3 there was provision for delayed payment of the price subject to interest, which throws serious doubts about the seriousness of the parties in saying that timely payment of the price was of the essence of the contract. An in-depth examinati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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