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TMI Blog2020 (5) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... e deleted the addi tion after having the following observation: "2. In this appeal, the assessee is aggrieved for taxing capital gain under the head business income and not giving benefit of exemption U/s 54F of the Act. 3. Rival contentions have been heard and record perused. Facts in brief are that during the year under consideration, the assessee has sold his land and offered capita gain thereon after claiming deduction U/s 54F of the Act. The AO rejecting explanation offered by assessee held that all transaction of sale of property are in the nature of business and the assessee purchase all property under consideration with business intention. Further out of expenditure being Rs. 43,90,029/- claimed by assessee toward construction, the A.O. allowed Rs. 21,95,015/-. 4. By the impugned order, the Ld. CIT(A) did not find any merit in the submission of assessee that the AO enhanced the scope of assessment. For income earned from transfer of assets Ld. CIT(A) upheld the finding of the AO that same is taxable as business income but the alternative plea of assessee that till the date of conversion of capital assets into business asset gain has to treated as capital gain as per p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of property by the assessee is capital gain or business income. Such enhancement of scope of limited scrutiny assessment was without any approval from Pr. CIT. That enhancing scope of limited scrutiny assessment without any prior approval of Pr. CIT is contrary to the CBDT Direction and therefore the same is without jurisdiction and any addition made beyond the scope of limited scrutiny is void ab initio. 8. With regard to merit of addition, it was contended that the assessee was having property since last 20 years, the same held as investment therefore, eligible to claim benefit of long term capital gains and utilization of capital gains for purchase of house U/s 54 of the Act. 9. On the other hand, the ld DR has contended that the property on sale of land to a construction company were in the nature of business transaction, therefore, liable to tax as business income. 10. We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that during the year under consideration the assessee declared gain earned on following immovable properties under capital gain head while filing return of income: S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Detailed explanation on the finding so recorded was submitted before Ld. CIT(A). The Ld. CIT(A) despite holding that assets under consideration were purchased as capital asset concluded that sale of such assets was an 'adventure in the nature of trade' and not merely realization of investment in capital assets. The basis of the conclusion drawn by Ld. CIT(A) is factually incorrect. Finding recorded by CIT(A) at page 13-14 in Para 6.3. 13. From the order of the A.O., we observe that to determine the intention at the time of purchase of property AO drawn inference only from three facts that (1) assessee has carried on construction activity before sale of property, (2) assessee is director in the company in Fateh Agro Builders Pvt. Ltd and (3) adjoining property was purchase by the family members of assessee. However, we found from the record that in case of Fateh Royal Residency all three facts present and in case of Fateh Hills no construction activity has been carried out. Intention of assessee at the time of purchase of property and Time period of holding of property not at all considered by the AO in determination of nature of transaction under consideration. Further to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer found the sale to be not taxable as capital gain, but it was found to be a business income, and for that, the Assessing Officer found, that the original land is surrounded by many lands of his near relatives and family members, and if the plots would have been carved out from his land alone, they could not have been sold for want of network of roads being available up to the adjoining lands only, and that, at some distance there is government road measuring 200 ft. Then the other circumstance is, that all the land owners had planned the sale of plots, in Nagnechi Scheme, and Vallabh Garden, together, and no land could be sold for residential purposes. Then the next ground considered is, that the purchasers were impressed by the fact that all the land belong to the same family, and is being planned, and sold together, at no stage the huge property of the assessee or his family members was used for personal purposes, and the intention was to gain profit only. Inter alia with this, it was concluded, that the transaction was in the nature of trade. ... ... 11. Coming to the G. Venkataswami Naidu and Co.'s case [1959] 35 ITR 594 (SC), the facts of that case were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of purchase and sale. Mere fact that there was a series of transactions of sale only, by selling the part of the whole land, purchased in one go, or purchased once upon a time, in piecemeal, would not render the activity of sale to be an "adventure in the nature of trade". In the present case, there is nothing to show that the land was purchased with the intention to sell at a profit, or with requisite intention, to bring it within the parameters of "stock-in-trade". It is not shown that the assessee is a regular dealer in real estate. It appears, that the land was purchased in 1970, which was under cloud of land ceiling laws, and after that cloud was cleared, and other adjoining lands had been developed, and since the land was not yielding any return, it was decided to be sold in piecemeal, by earmarking plots, but then nonetheless it would remain a disposal of the capital asset only, and not a transaction of any "stock-in-trade" so as to be described as "adventure in the nature of trade". Obviously therefore, it is liable to be taxed only, as the capital gain." 15. In the case of Ramswaroop Saudagar vs ITO [ITA No 329/JP/2017] relied on by the CIT(A) only factual similarit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g claim of construction cost it appears that Ld. AO recorded finding without considering documents produced for verification and documents submitted during the course of assessment proceeding. The finding that "No bills supporting such expenditure were provided to this office despite being asked clearly." is totally incorrect as the documents relevant to construction cost has been produced during the course of hearing and same has been verified by the Ld. AO on test check basis. It was submitted that plot wise details has not been maintained and total construction cost incurred has been averaged and claimed accordingly against property sold. Submission made had been reproduced by the Ld. AO in the assessment order (page 16 of assessment order). Therefore finding recorded with reference to non production of documentary evidences is grossly erroneous and contrary the material available on record. With reference to non reflecting of entries in bank statement on voucher to voucher and day to day basis was that for multiple invoices/ expenditure payment was made through single cheque. A detailed submission showing each payment from bank account towards nature of expenditure and docume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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