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TMI Blog2013 (4) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 12.10.99 313200 31.3.06 3158158 2758003 4 Sayajipura S. No. 118/119/121 9.7.99 163859 17.4.05 260000 50648 5 Makarpura S.No. 232, 233, 248, 391, 250 21.7.99 404478 31.3.06 2200337 1374980 6 Harni S.No.1280 1.7.92 6940 16.5.05 1334040 1318555 Total 898259 7500285 6030012 As per assessee's submission, the said land were sold to various members in small plots through partnership firms in which the assessee is a partner. The ld. A.O. gave the reasonable opportunity of being heard as to why the income arising out of sale of land should not be treated as business income. The assessee filed reply vide letter dated 16.12.2008 before the A.O., which was considered by the ld. A.O. After considering the assessee's reply, the ld. A.O. observed as under: (A) These lands were purchased by in the years 1992-93, 199394 and 1999-98. (B) All these lands were agricultural lands. (C) Development agreement was entered into with M/s. Sai Developers and with Sidharth Enterprise, Shri Kishanbhai Belaram Advani Prop.of M/s.Hariom Enterprise or M/s.Sarveshwar Infracture. The agricultural land purchased was converted into non-agricultural land by appropriate autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee are easily distinguishable. In the case cited supra, the transaction was an isolated transaction of purchase and sale of agricultural land by the assessee. While, here, the assessee is actively engaged in the purchase of land and this is not an isolated instance. Moreover, assessee in its balance sheet has shown "Advances received against land". This shows the magnitude of the trading in land. It is well settled law that if the commodity purchased is generally the subject Inaner of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. (J) Assessee' other contention that it is not holding land as stock-in-trade and has shown the same as fixed assets does not have any force. The consistent methods followed by the assessee have nothing to do with the chargeability of the correct income. Moreover, Income-tax Authorities are not required to put blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in the documents. (K) The assessee's c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction in question cannot properly be regarded as trade or business. Instead, it is allied to transaction that constitutes trade or business but may not be trade or business itself. In a case where the purchases had been made solely and exclusively with the intention to resell at a profit and the purchaser had no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and Unless it is offset by the presence of other factors, it would raise a strong presumption that the transaction is an adventure in the nature of trade. In the present case, there is total absence of any factor which could offset this presumption. 4.3.2. In the following cases, the transaction was held to be adventure in the nature of trade on the facts of respective cases. (i) CIT Vs. B. Narasimha Reddy 150 ITR 347 (Kar): The assessee purchased agricultural land in 1962. It was left fallow upto in which year he obtained permission to convert the land for non-agricultural purpose. Immediately thereafter, he formed a layout for house sites and sold the sites to the workers in nearby factories. It was held that the events, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The agricultural lands have been purchased primarily for purpose of carrying out agricultural activities thereon. From time to time the Agricultural lands were shown as investment in the balance sheet and also covered in the Wealth tax returns. Copy of Wealth tax return for earlier year i.e. A.Y. 2005-06 has been filed during course of hearing. 2. Later on with the development in the area in which agricultural land was situated, the appellant decided to sell some of the lands. First sale of agricultural land took place in the A.Y. 2004-05 of the lands which were purchased by the appellant as early as in C. Y. 1993. Such lands were in Village Harni and Village Sayajipura. It is pointed out that the magnitude of sale of agriculture lands is very small and that too not frequent as compared to lands held by the Appellant. 3. The Assessing Officer treated the gain on sale A.Y. 2004-05 as business income, however, CIT(A) reversed the decision and treated the same as long term capital gain. Department filed appeal to ITAT, which was dismissed by Hon'hle ITAT by their order in appeal No.3288/Ahd/2008. (PI. see Paper Book Page No. 20 to 27). 4. Then again A.Y.2006-07 lands situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural land by the appropriate authority. [Page 6 para 4(i)(c) of assessment order]. (v) Assessee had purchased the land, converted it into non agricultural land, developed it and sold it in small pieces. The assessee was a well known builder carrying out this activity through its various firms or otherwise [Reference para 4 of the assessment order]. (vi) Agricultural land in the close vicinity of city was purchased solely with intention to resell at profit and purchaser had no intention of doing agricultural activity on it as the land was converted into non agricultural land and after doing some development was sold [Para 4(iv) of the assessment order]. [Here it may be further mentioned that if the sole intention of the assessee at the time of purchase, was to carry out agricultural activity, assessee would have purchased land in remote areas at cheaper rates. But with vast experience at his command and skilled business acumen and with a foresight he made purchases of land at strategic locations which would resul in profit in future. The subsequent activity of the assessee and resultant profit only strength this inference and also the business character of these transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) As on 31.03.2006, there are around 87 pieces of land and 21 shops etc. indicated in balance sheet under the category of fixed asset, (d) the buying and selling of land is not a stray activity but a well thought out strategy to earn profit (e) the true facts were not brought to the kind notice of the Hon'ble TTAT for earlier year (f) The ratios in the case of G. Venkataswami Naidu & Co. Vs, CIT 35 ITR 594 (SC) and CIT Vs. B. Narasimha Reddy 150 ITR 347 (Kar) were relied upon by the Ld. CIT(A) [Reference page 4 & 5 of the CIT(A)'s order] and CIT Vs. R. Ramiah [146 ITR 39 (Kar.)]. The facts and circumstances of these cases were very similar and hence applied to case of assessee. (g) The Ld. CIT(A) has made it clear in para 4.3.5 of his order that aforesaid facts were not correctly brought to the knowledge of CIT(A) while appeal for A.Y. 2004-05 was being decided by Ld. CIT(A). (h) The Ld. CIT(A) has also specifically distinguished the case of Shri Bholabhai R. Patel (HUF) on facts as in that case there was no frequent buying and selling of lands (Reference page 6 of CIT(A)'s order). In view of the above mentioned facts and circumstances of the assessee's case, in ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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