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TMI Blog2023 (8) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... nference that the assessee in his individual capacity was also intended indulging in such business. For that matter the assessee s affidavit in proceedings before the Civil Court stating that he and his son were involved in real estate business also is of no relevance and consequence since the entire affidavit is not reproduced in the order and until it is read in entirety the import of it cannot be gathered. PCIT s reference to the contents of the affidavit can only be treated as his inference from the same and the affidavit could very well be also read to have been stated by the assessee in the context of the fact that he was indulging in real estate business in partnership. Therefore, we hold that there is no basis with the Ld. PCIT to hold that the facts relating to the transaction in sale of land were indicative of the same being in the nature of adventure in the nature of trade and the AO having accepted assessee s claim of returning capital gains on the same was an error on his part. In the absence of any finding of error in the order of the AO allowing the assessee s claim of gains earned from sale of land as being in the nature of capital gains, the order passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relying on the case laws not relevant to the facts of the appellants case and/or were distinguishable and in Ignoring the binding judgments of the Apex Court and Jurisdictional High Court in favour of the appellant. It be so held now. 5. The Order passed by ld Principal CIT under section 263 is invalid, illegal and bad in law since the same is passed without application of mind to the facts since in para 11 of his order, there is no firm conclusion and contradictory conclusion in his direction to the AO to pass fresh order. It be so held now and order passed be set aside. 6. The Order passed by ld Principal CIT is also otherwise invalid and untenable since the order of assessment was passed after due consideration of facts by the Id AO and hence there was no lack of inquiries as alleged. It be so held now. 7. The ld Principal CIT erred in law and on facts in placing reliance to Explanation-2 to section 263 since it is settled legal position as considered by various judicial pronouncements that it does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues. It be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any examination. From the above facts, it is clear that these transactions are in the nature of trade / business and AO should have been treated the profit/gains from this transaction as business income instead of Long Term Capital Gain as treated by the assessee. 4. We have noted from the order of the ld. PCIT that his basis for holding the gain earned by the assessee to be assessed as business income was the fact that the assessee had converted an agricultural land into non-agricultural land and then sold it; and, also the fact that he was the owner of other pieces of land also. From the same, he inferred that the assessee was engaged in the regular purchase sale activity of land and, therefore, the gain earned during the year was assessable as business income and not capital gains as returned by the assessee and accepted by the Assessing Officer. A further perusal of the order of the ld. PCIT reveals that the assessee, in response to the show-cause notice, had contended that the Assessing Officer had rightly treated the gains to be in the nature of capital gains and not business income. He had pointed out that the assessee never intended to do any business in land whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of assessee was to investment and not for business and trade. Later on part of land (2150 sq. mtr.) sold in the FY 2016-17 and balance of land (1603 sq. mtr) was still held as investment for the purpose of to gain appreciation only. So from the above it is proved that the land was purchased for the sole purpose of investment and not for the purpose of trade or business. Further to get NA permission one has to follow stringent procedures and have to submit all revenue records with history of the land with respective authorities and after detailed scrutiny of the revenue records with legality and title of the land grant the NA permission. Therefore the only intention behind the NA was to know/check and to make sure about the clearance, legality and title of the ownership because the market price of the said land is increased due to it is situated near by the capital city- Gandhinagar. So by simply converting the agriculture land into NA does not mean/prove that it is for the purpose of the trade or business as claimed by your honour. As stated above assessee would like to draw your honour kind attention that the even as on today assessee is holding the balance of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same in the interest of the natural justice. 5. The ld. PCIT, we have noted, has rejected this explanation of the assessee and has held the transaction of sale of land to be in the character of an adventure in the nature of trade/business and his basis for treating it so is the fact of the land sold being converted from agricultural to non-agricultural land by the assessee. He has also noted that the firms in which assessee is a partner are into real estate business and the assessee alongwith his sons has admitted on affidavit, filed in proceedings in Civil Court, of being involved in real estate business His findings in this regard at paragraph nos. 6 to 6.2 of his order is as under:- 6. The submission of the assessee along with the documentary evidence is duly considered but the same is not found acceptable. It is seen that the assessee has purchased the agricultural land and thereafter converted it to Non-agricultural land with a view to make it more marketable and profitable with an intent to earn more profit. The intent to resale at profit is a very strong factor. In the case of CIT vs. Premji Gopalbhai [113 ITR 785 (Guj.), it has been held that even if the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es it is said that a single plunge in the waters of trade may partake of the character of an adventure in the nature of trade. This statement may be true; but in its application due regard must be shown to the requirement that single plunge must be in the waters of trade. In other words, at least some of the essential features of trade must be present in the isolated or single transaction. On the other hand, it is sometimes said that the appearance of one swallow does not make a summer. This may be true, if, in the metaphor, summer represents trade, but it may not be true if summer represents an adventure in the nature of trade because, when the section refers to an adventure in the nature of trade, it is obviously referring to transactions which individually cannot themselves be described as trade or business but are essentially of such a similar character that they are treated as in the nature of trade. It would be unreasonable to apply the conventional test of income coming in with some sort of regularity or expected regularity from definite sources' or 'income being likened pictorially to the fruit of a tree or the crop of the field' to the determination of the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of trade. But at least some of the essential features of trade must be present in the isolated or single transaction. 7. The Hon ble Court then went on to list the various determinative factors for holding the transaction as being in the nature of adventure in trade as whether the person was a trader and the asset purchased was in course of his regular activity, that whether any act subsequent to purchase was done to improve the quality of the commodity so as to make it readily saleable, whether the incidents associated with the transaction were as done in regular business, whether the transaction was repeated, whether purchase was made with an intention to resell etc. The Hon ble apex court held that all surrounding factors needed to be considered for drawing any inference regarding the nature of the transaction. Its findings in this regard are as under:- If, a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would from an adventure in the nature of trade. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e presence of such an intention is no doubt 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. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. Thus, the decision about the character of a transaction in the context cannot be based solely on the application of any abstract rule, principle or test and must in every case depend upon all the relevant facts and circumstances. 8. In the present case, the Ld. PCIT, we find, has relied only on the fact of conversion of the land sold from agricultural to non-agricultural, as the basis of his finding that the assessee indulged in the activity of sale of land during the year as an adventure in the nature of trade. He has completely given a goby to other conditions and circumstances demonstrated by the Ld. Counsel for the assessee to exist in the present case such as that the asset sold by it, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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