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TMI Blog2016 (5) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... tion over assessee in the status of AOP. Therefore, acquisition of land and sale thereof subsequently has been rightly assessed in the hands of the AOP. Therefore, the objection of the assessee in this regard fails. We also find that the claim of the assessee that AOP family members owned the land and received the benefit/income since 1985-86 is in contradiction to the information recorded in 7/12 extracts as reproduced in para 19 of the CIT(A) order. The 7/12 extracts demonstrates that the members of the AOP were in possession of land from 1994-95 and also a part of land remain vacant and office were constructed on it. It is also clear that they were no fruit garden at though on a part of land, some seasonal crop have grown up. The situs of the land is within the municipal limits of Nasik and an urban land at the time of its sale. Therefore, it is clear in the prevailing circumstances that all the members of the AOP had combined together to purchase land with a pre-conceived idea to commercially exploit the property and make profits by immediate sale thereof as a business adventure. In totality, the circumstances are weighed against the assessee when tested on the touchston ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purchase of agricultural land in question was paid during the year under review. 5. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in holding that the possession of the agricultural land in question was taken by the member of the socalled AOP from 1994-95 and not from 1985-86 as claimed. 6. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in holding that the Kabje Pawti of the agricultural land in question dated 02.01.1996 is not genuine. 7. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in holding that the deposit in the bank account of Mr. Iqbal Khatib was claimed to be out of agricultural income, when no such claim was made and thereby denying the same as one of the source of investment. 8. On the basis of facts and in the circumstances of the case, whether the Commissioner of Income Tax, Appeals-II, Nashik is justified in not considering the bank withdrawal personal income out of agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons of Khatib family as the members of AOP. In the course of survey action conducted under section 133A of the Act on 03.08.2000 in the case of one Shri J.D. Jaybhawe Advocate, Nashik, documents relating to agreement of sale of land between family members of the assessee and M/s Pai Developers Pvt. Ltd. were found. The AOP comprising of members of Khatib family acquired certain parcel of land situated in survey no. 49/3A 49/3B, 50/3/2 49/3. The Assessing Officer observed that from the documents found in survey, it was gathered that Shri C. M. Khatib other 15 members inter-alia jointly purchased parcel of land admeasuring about 3 Hector 90 are relating to Survey No.49 50 in Anandwali area of Nashik. The land was purchased from one Shri R. S. Lath of Nashik as per agreement dated 19.03.1993. The Assessing Officer further noted that the total consideration of land was fixed at ₹ 13,00,000/-. It is the case of the Assessing Officer that the purchase consideration of ₹ 13,00,000/- was paid by the appellant AOP (16 members) in cash. Shri C. M. Khatib is also one of the members of the AOP. The Assessing Officer observed that ₹ 9,61,000/- was paid from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1 The Assessing Officer observed that in response to query regarding source of investment of ₹ 15,06,000/- for acquiring the impugned land, the assessee firstly objected to a status of AOP allegedly thrust upon it and secondly questioned the jurisdiction of the Assessing Officer over the AOP at the time of issue of notice under section 148 of the Act. According to the Assessee, the jurisdiction of the Assessee falls with other ward officer. As regards investments in land, it was clarified on behalf of the assessee that all the co-holders of land were agriculturists and it is also not correct to say that purchase was made on 19.03.1993. It is also wrong to allege that the said land was purchased to deal in land business. It was further submitted by the assessee before the Assessing Officer that only a sum of ₹ 3,39,000/- were paid during the year under consideration relevant to assessment year 1993-94 and balance ₹ 9,61,000/- was not paid during the year under review. The source of payment of ₹ 3,39,000/- was explained to be from income earned from existing agricultural lands and dairy business. 4.2 The Assessing Officer rejected all contentions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unexplained investment under section 69 of the Act as undisclosed income of the AOP relevant to assessment year 1993-94. 6. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the CIT(A). 6.1 The assessee assailed the action of the Assessing Officer broadly on following counts before the CIT(A) summarized hereunder. (i) Issuance of notice under section 148 of the Act by the Officer was not correct as he was not holding the jurisdiction over the case of the assessee. (ii) The purchase of land was wrongly held to be relatable to assessment year 1993-94 merely on the basis of agreement dated 19.03.1993 as against the claim of the assessee that the purchase of land was made by the assessee family by way of an agreement dated 21.12.1985 and the assessee was in legal possession of the land by virtue of Kabja Pawati dated 02.01.1986. (iii) The Assessing Officer was incorrect in not accepting the contention of the assessee that out of total consideration of ₹ 15,06,000/-, ₹ 9,61,000/- was paid in the earlier years and only ₹ 3,39,000/- was paid at the time of registration during the year out of known sources of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- by a sum of ₹ 13,96,000/- as per para 25 26 of its order on the ground that balance amount does not belong to the current year when the registered deed was executed. In the result, the CIT(A) upheld the order of the Assessing Officer in substance. 7. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. 8. In the course of hearing, the Ld. Authorized Representative for the assessee submitted that he does not seek to press Ground No.1 concerning his objection of assumption of jurisdiction by wrong Assessing Officer for issuance of notice under section 148 in view of the order of the CIT under section 127 of the Act. However, he adverted our attention to additional Ground of Appeal filed under Rule 11 of the Income Tax (Appellate Tribunal) Rules 1963 by a petition dated 28.01.2016 whereby assessee raised the ground that reasons for issuance of notice were not provided to the assessee in spite of request on behalf of the assessee and in consequence the assessment order is bad in law. Since, the assessee has raised legal ground, we consider it expedient to dispose the same at the outset. On a query from the Bench, the Ld. Authorized Representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee that all the members of the AOP were not informed of the proceedings. Notably, none of the member of the assessee AOP has taken any objection in the regard in the course of the assessment proceedings. This also gives an unmistakable impression that all the members of the AOP were duly informed. We decline to entertain this plea for one more reason. When notice under section 142(1) of the Act dated 10.08.2001 is read in conjunction as annexed at page 181 182 of the Paper Book addressed to Shri C. M. Khatib (AOP), it is evident that notice under S. 142(1) was issued to each member separately for necessary compliance. No objection was raised at any stage. The proceedings under Income Tax Act is not a game of hide and seek. The income-tax proceedings are not adversarial proceedings either. Hence, we are of the considered view that in the circumstances existing in the matter, notice under section 148 of the Act was issued to all members of the AOP in compliance of law and therefore the argument of the assessee on this count is also without any force. 9.1 The Ld. Authorized Representative for the assessee next submitted that the impugned agricultural land was purchased by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the AOP. The share of co-ownership in land is assessable in the hands of the respective members in their individual capacity. 9.3 He next contended that the CIT(A) was not justified in holding the said investment in impugned agricultural land in question as business adventure on the basis of wrong premise. To justify the land to be agricultural one, he submitted that agricultural produce were cultivated on the aforesaid land before its sale. Secondly, the said land was transferred to M/s Pai Developers Pvt. Ltd. after a long gap. While General power of attorney in favour of the developer was executed on 25.05.1995, the sale deed was executed on 08/05/1996. Thus, no aspersion can be cast on intention of the assessee to hold the land as capital asset . He finally submitted that the order of the Assessing Officer and the CIT(A) suffers from error due to incorrect appreciation of facts on record and is liable to be set-aside. 10. The Ld. Departmental Representative for the Revenue, on the other hand, relied upon the orders of the authorities below and submitted that all the objections of the assessee has been dealt with objectively and therefore no interference is cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons constituting the association; there must be a meeting of the minds, so to speak. In a nutshell, there must be a common design to produce income. If there is no common design, there is no association. Common interest is not enough. Production of income is not enough. The meaning of AOP, as culminates from different decisions of Supreme Court and High Court is that an association of persons exist when following conditions are satisfied :(i) Two or more persons joins; (ii) Voluntarily for; (iii) A common purpose or common action with object to produce profit or gains. However, notably the object to produce profit or gains is no longer a sine qua non in view of the Explanation to section 2(31); (iv) combine for in joint enterprise; and (v) creates some kind of scheme for common management. 12.3 To elaborate, in view of Explanation inserted to S. 2(31), an entity would be deemed to be an AOP whether or not it is formed with the object of earning income, if two or more person come together voluntarily and income is produced [common design] . What this essentially implies is that the intention may not be to produce income, but if income is produced, it would be taxed as an AOP. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that a case has been made out by the revenue that that the assessee was in contact with many builders for the development of the property immediately after acquisition of the land in March, 1993 for its resale. We also notice observations of the CIT(A) with reference to 7/12 extracts that the impugned land was not used for agriculture purpose. It is also noticed that substantial majority of AOP members (13 persons) of Khatib family surrendered their rights in the said land by giving Power of Attorney to M/s Pai Developers Pvt. Ltd. in May, 1995 and the possession was also given to the developer. Therefore the consensus ad idem is clearly visible in the concerted action of the Assessee. On these facts, we have to endorse the observation of the CIT(A) that the land was acquired by 16 members of the family who combined together for a common purpose and common action in their own volition with a view to commercially exploit the land acquired by resale thereof at profits. It is evident that soon after purchase deed was registered, the same was handed over to the builder for development and prior thereto also the members of Khatib family were negotiating various builders for the disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances that all the members of the AOP had combined together to purchase land with a pre-conceived idea to commercially exploit the property and make profits by immediate sale thereof as a business adventure. In totality, the circumstances are weighed against the assessee when tested on the touchstone of preponderance of probabilities. Therefore, We see no error in the action of the revenue in treating the investment in purchase of land as unexplained investment under S. 69 for the relevant assessment year 1993-94 which is rightly assessed in the hands of the AOP. We also do not find any fault in treating the transaction of purchase and sale as a part of business deal. 14. In the result, the appeal of the assessee in ITA No.857/PN/2004 relating to assessment year 1993-94 is dismissed. ITA No.858/PN/2004 (A.Y. 1996-97) : 15. Now, we shall take-up the appeal of the assessee in ITA No.858/PN/2004 relating to assessment year 1996-97, which is against the order of CIT(A)-II, Nashik dated 27.02.2004 passed under section 143(3) of the Act. 16. In this appeal, the assessee has contested the taxability of sale proceeds determined by the Assessing Officer at ₹ 43,06, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tib 540191 (Bom) 15-10-95 Rs.5,00,000/- ii) Amir Khatib 540192 (Bom) 15-10-95 Rs.5,00,000/- 96-97 Total Rs.33,06,413/- Rs.43,06,413/- i) Amir S. Khatib ii) Aniruddin S. Khatib 9.1 The learned authorized representative has objected to the adoption of amount of ₹ 43,06,413/- as sale consideration solely relying upon the said piece of paper. It was stated that the amount as above has not been identified as sale price. Further, he also pointed out the notings (S.No.49/3A, 49/3B 50/3/2) has been made in different ink and different hand writing. The claim regarding difference in hand writing and in ink was found to be correct. Further, the notings on the piece of paper only states that two cheques each of ₹ 5 lakhs was paid to Amir S. Kha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members of the family is supported by the observations of the A.O. in para-6 of the assessment order where he has stated that 3 members did not make sale. The A.O. therefore, has deducted the 10% of the price of land stated to be attributable to 3 members. However, while doing so, he has ignored to reduce the area of land sold by the share belonging to those 3 members. It is apparent from the facts mentioned above that whole area the piece of land as purchased vide registered deed dt: 13-1-93 was not sold therefore, it was not correct on the part of the A.O. to adopt the sale price at ₹ 43,06,413/- figured which appears to have been computed with reference to all the land under S.No.49/3A, 49/3B 50/3/2. 12. From the copy of Sammati Patra made on 18-9-95 it was observed that after purchase of land vide registered deed dt: 13-3-93, there was a split in the AOP constituted by 16 members. As a result of a split, 13 members formed a group who sold the land for the price of ₹ 28,85,000/-. The other part was held by smaller AOP formed as a result of split. The Sammati Patra and facts deducible therefrom, rebuts the claim of appellant that adoption of AOP by AO is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark of the area in which the constructed bunglow in the said land stated earlier answer ? Ans : As per our joint visit with Income-tax Inspector on the site on today we have shown specific area of survey No. 49/3A + 3B and survey 50/3/2 where the bunglows are constructed and handed over so also the vacant land of survey No. 42/1 and 2 wherein we could not carry out any business due to the technical defect in the title of the land. Show also to produce the proof of cultivation in the said land the adjoining area in the central of this survey No. where developments not yet started and the cultivation of grapes and vegitables going on which is in possession of other partners. The clarification as above by the purchaser clearly shows that the negotiated price of ₹ 43 lakhs was applicable for the whole piece of land indicated in survey No.49/3A, 49/3B 50/3/2. However, during the year under consideration only part of it as discussed above, was sold by the appellant. The rest of the land and other piece of land were purchased by the Pai Developers in subsequent period. Therefore, the facts stated in registered agreement dt: 8-5-96 is corroborated by other documents a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant AOP led by Mr. Chiraguddin Mohd. Khatib along with other 16 family members stated to have jointly purchased land from one Shri Vilas Rasiklal Shah by making two sale deeds. First sale deed was dated 07.06.1987 and another sale deed was executed on 28.09.1988 for an aggregate total area admeasuring around 7 H 12 Are. The Assessing Officer observed that total investment in the purchase of land by assessee AOP (Khatib family of 17 members) was about ₹ 10,60,000/-. The rights in the aforesaid land were surrendered by the assessee AOP by executing Power of Attorney dated 20.09.1997 and possession in favour of M/s Pai Developers Pvt. Ltd. for development of land. The execution of development agreement was for a total consideration which was fixed at ₹ 1,50,00,000/-. The possession of land was stated to be given by possession receipt dated 22.09.1997. The developer was required to pay ₹ 1.35 crore in cash/ cheque to the assessee AOP. The developer was also required to construct two bungalows on the layout worth ₹ 15 lakhs on behalf of the assessee. It was also noticed by the Assessing Officer that the developer has already paid ₹ 32,00,000/- in aggregat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income computed by Assessing Officer at ₹ 140.46 lacs was substituted by ₹ 32 lakhs by CIT(A). He accordingly granted partial relief while determining the quantum of addition and dismissed all other objections of the assessee in tandem with reasonings given in assessment years 1993-94 and 1996-97. 22. We find that the facts are similar to the facts concerning in both the assessment years 1993-94 and 1996-97 except survey number. From the undated development agreement read with Power of Attorney, we find that a contract was entered for development of land situated at Survey No.42 at an agreed price of ₹ 150.00 lacs which did not sail through. The property was admittedly situated in the residential zone of Nashik Municipal Corporation. The development agreement was executed with an intention to commercially exploit the land by construction of residential units/ bungalows/ row houses, etc.. A bare reading of development agreement clearly shows that the transactions between the assessee and the developer was clearly in the nature of business deal, profits arose wherefrom by way of forfeiture of advance receipt. We are of the view that amount forfeited owi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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