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TMI Blog2009 (3) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of apartments etc - It was only a spontaneous later development that keeping in view of the need of liquidity, they proceeded to construct some shops and offices - It was at the best a case of co-ownership and not more than that - In the case of Saroj Kumar Mazumdar vs. CIT, the Hon'ble Supreme Court held that in the absence of any evidence to support the inference that the isolated transaction constituted an adventure in the nature of trade, it should be regarded as on capital account - Appeal is allowed Regarding unaccounted income - the difference between declared consideration and stamp valuation of Rs. 4,82,355 - assessee in the present case is purchaser and not the seller in which case provisions of s. 50C are applicable for the purpose of computation of capital gain under s. 48 of the Act - it appears that the AO and the learned CIT(A) have not appreciated the material facts that all the purchasers are income-tax assesses being in the services of the State Government for last several years and in some cases the spouse is also in services, it should not have been difficult for them to have invested Rs. 5 lacs, when individual share, if assumed, comes below Rs. 1.25 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, Sikar at Rs. 9,42,355. 4.1 The AO alleged that the appellants purchased the land in the capacity of an association of persons ("AOP" for short), which is a status under s. 2(31) falling within the definition of person under the Act. He alleged that the said AOP was constructing a commercial complex namely, M/s Sangam Tower and till February, 2006 an amount of Rs. 35 lacs had already been invested in the construction. After hearing the assessee on the issue whether the appellant was having status of AOP or they were mere co-owners, the AO concluded that it was a case of an AOP, on the following reasonings and allegations: (A) Shri Natraj Sikariya, a member of the alleged AOP, admitted in his statement dt. 16th Feb., 2006 accepting the existence of such AOP. He reproduced answer to q. 12 at p. 6 and also alleged that an amount of Rs. 35 lacs had already been invested in the construction of this complex. He himself made a contribution of Rs. 3.28 lacs towards the construction activity, the source of which was not fully explained by him. Shri Natraj Sikaria further stated that 28 shops have been constructed at the ground floor and 13 flats are under construction at the upper st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves, can be said to have formed an AOP. He placed reliance on the decision of Meera Company Etc. vs. CIT (1997) 139 CTR (SC) 442 : (1997) 224 ITR 635 (SC) : (1997) 91 Taxman 219 (SC). 4.3 He further submitted that element of volition is essential for forming an 'AOP'. The members of the association must join together for the purposes of producing an income. An 'AOP' can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence, volition on the part of the members of the association is an essential ingredient and relied upon G. Murugesan Bros. vs. CIT 1973 CTR (SC) 279 : (1973) 88 ITR 432 (SC) and Smt. Jaswani Kaur Sehgal Ors. vs. CIT (2005) 193 CTR (Gau) 530. However, in the present case none of the appellants have joined hands with the other, for the purposes of carrying of any business, in any manner whatsoever. Thus, there is no person (tax entity) like M/s Sangam Towers AOP. 4.4 He submitted that the land was purchased in their individual capacity and the Municipal Council of Sikar granted permission in their respective individual capacity, for the use of the land for residential purposes. It was only because of the need of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter appreciation, reference may kindly be made to the charts annexed with this w/s "Annex. 1" shows expenditure incurred by the 4 persons separately in asst. yrs. 2004-05, 2005-06 to 2006-07. Further "Annex. 2" shows the sale proceeds as well as the identified part of the property sold and amount received by the 4 persons, in three years. Shri Natraj Sikaria constructed Friends Tower, whereas Sangam Offices by Shri Shrichand Dhaka, Sangam Tower by Shri Raghuveer Singh. Shri Jamana Lal Chaher provided no name. These submissions though made before the authorities below, however, were not considered judicially nor was any further investigation made by them. (v) In response to the notice under s. 142(1)(i) even no return of income has been filed by the alleged AOP for asst. yr. 2005-06 or 2006-07. (vi) A notice dt. 24th Feb., 2006, was issued and served upon Shri Jamna Lal Chahar, however Shri Chahar very categorically stated vide his letter dt. 30th Oct., 2006 that there was no AOP in the name of M/s Sangam Tower. 4.7 Support from the following cases was taken: CIT vs. Smt. Saraswati Bai Ors. (1982) 137 ITR 656 (P H), Smt. Jaswant Kaur Sehgal Ors. vs. CIT (2005) 193 CTR (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mon multistoried construction. However, this does not lead to the conclusion that members formed an AOP. 4.11 As regards the AO's allegations of purchasing Haveli at Laxmangarh he submitted that admittedly Shri Yashpal Jain and Om Prakash Saini were the outsiders and not the same persons. They never intended to carry on a business in a regular and systematic manner. 4.12 This being a solitary transaction, it cannot be said that the same was necessarily an adventure in the nature of trade, submitted the learned Authorised Representative. He also cited CIT vs. Smt. Saraswati Bai Ors., IRC vs. Reinhold (1953) 34 Tax Cases 389 (C. Sess) and Saroj Kumar Mazumdar vs. CIT (1959) 37 ITR 242 (SC). 4.13 Moreover the AO, by its own admission, has already decided that the purchase of land was an individual affair of the members and therefore the issue of investment in the subjected land was considered in their respective hands, pointed out the learned Authorised Representative. In the case of Shri Nathat Raj Sikariya, in the assessment order framed under s. 143(3) on dt. 27th Dec., 2006, the AO with reference to the 20 per cent share of Shri Sikariya in the investment of the land (oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r challenge. We find that there is no specific definition provided of the word "person" contained under s. 2(31) of the Act. Therefore, we have to refer to the decided case laws. In Meera Company Etc. vs. CIT, if was held that several individuals, including minors can form AOP/BOI-When several individuals (including minors) are found to have joined together for the purpose of making profit, the group of individuals may be conveniently described as a 'BOI/AOP'. In G. Murugesan Bros. vs. CIT it was held that element of volition is essential. For forming an 'AOP', the members of the association must join together for the purposes of producing an income. An 'AOP' can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence, volition on the part of the members of the association is an essential ingredient. Therefore, it has to be seen whether the four persons have joined hands, with the intention to earn income/make profit by carrying of any business. Moreover, the substance of the transaction has to be seen as against the form. 7. Before proceeding, we may also refer to the decided case laws cited by the parties. In CIT vs. Smt. Sarasw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO duly assessed the income. Though initially the assessment was by way of protective measure, it was treated to be a substantive assessment in terms of the order dt. 27th March, 1991, passed by the CIT(A) in appeals filed by the appellants. The position was confirmed by the order dt. 3rd March, 2000, passed by the Tribunal. After seven months notices under s. 148 dt. 14th Nov., 1991, addressed to M and seven others mentioning inter alia, the names and addresses of all the eight prize winners of the lottery were served on the appellants. A writ petition against the notice was dismissed. On appeal: Held, (i) that there was no written agreement amongst the purchasers to form an AOP to purchase the lottery ticket for winning a prize. No tangible evidence was available to establish any such intention. 7.3 After the purchase of the lottery ticket they had no control over the transaction and the income from the winning ticket was per chance. Further they made their intentions clear immediately after the result and demanded payment of their individual shares which was accepted and payments were made by deducting the income-tax at source from their respective shares of prize money. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al house. Thus, conduct of the parties was very vital and should not have been ignored by the authorities below. It was only a spontaneous later development that keeping in view of the need of liquidity, they proceeded to construct some shops and offices. Here also, they had an understanding that which part of the construction belonged to which particular person. The chart enclosed with the written submissions shows that there were different names given by the four persons to the portion owned by them. There were respective investments made by them which were duly shown in their respective returns of income. It is also claimed that the resultant income relating to the respective part of the property was declared by the person in his own return of income. We concur with the argument of the Authorised Representative that one of the essential conditions to form an AOP is the existence of volition on the part of the persons to do something common. Further such volition should not be with regard to any activity by with a view to earn profits from a business. The Revenue has not brought anything to show that a regular business was carried on by all the four persons. There was no regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 of the assessment order. The plot was valued by the sub-Registrar, Sikar for the purposes of the stamp duty at Rs. 9,82,355 on which stamp duty of Rs. 88,420 was paid. The AO therefore asked the appellant as to why the value of the subjected land be not taken at Rs. 10,70,775 (i.e., Rs. 9,82,355 + Rs. 88,420 stamp fees). The appellant, however objected to the addition vide letter dt. 25th Dec., 2006, which was rejected by the AO. The AO further alleging that there was no evidence supporting the declared investments, despite opportunities, added the entire amount of Rs. 10,70,775 as the value of investment made in the subjected land purchased by the alleged AOP. The addition of Rs. 4,82,355, was to the extent of the difference between the declared consideration and the stamp duty valuation. The balance addition of Rs. 5 lacs was due to non-satisfactory explanation as regards the source. 9.2 In first appeal, the learned CIT(A) confirmed the entire addition made by the AO. Hence the assessee is in appeal. 9.3 The learned Authorised Representative of the assessee submitted that though the stamp valuation, of course may be a factor in drawing an inference, however can never be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of share application. It has been held that investment in share should be considered and even if necessary, addition should be made in their hands only. He relied upon CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj) and CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308. 9.7 He further submitted that it is a clear case of double taxation of the same amount, at least to the extent of Rs. 1,12,189, which has already been added and confirmed in the case of Shri Natraj Sikaria. For this purpose he drew our attention towards the assessment order and the order of CIT(A) in that case made available at page Nos. 40 to 48 of the paper book. 9.8 As regards the source, it was submitted that Shri Sikaria in answer to question No. 19, when asked, explained the source of share in the land. Shri Raghuveer Singh Rathore, is a Government servant in Education Department since last 20 years. His wife Smt. Urmila is also a Government servant in Education Department since lat 18 years. They both used to file returns of income. He is having ancestral land and having agricultural income. Shrichand Dhakar is also a Government servan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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