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TMI Blog1989 (2) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and hence the order of the CIT be set aside, and the surplus on sale of land be accepted as income from business and not as capital gain as held by CIT(A)". 2. The assessee in this case is an individual deriving income from property, share from various firms, interest and dividends. The ITO, in the course of the assessment proceedings, brought to tax a sum of Rs. 6,46,532 under the head "Capital gains" in respect of large plot of land. The assessee's case was that the surplus resulting from the transaction be taxed under the head "business" viz. "trading profit" and not under the head "capital gains". The undisputed facts leading to the addition were recorded in the assessment order are as under: "The assessee has during the accounting year started business in the name of M. Mangaldas Enterprises. The assessee on 20th Oct., 1975 made a declaration that land bearing sub-plot No. 685/2/A/1B of TPS No.: 3, situated at Ellis bridge admeasuring 5450 sq. yds. will be his stock in trade for the purposes of business started in the name of M. Mangaldas Enterprises, w.e.f. 20th Aug., 1975. The value adopted was 13.20 np for sq. yd. To this effect the assessee passed entries in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 1975 as stated in the affidavit. The assessee has replied to this question that he had made entries in the books of accounts on 20th Aug., 1975 and that is the only evidence. I have perused the books of accounts mentioned above and it is seen that the assessee do not maintain a cash book but keeps an extract of transaction effected by him through Mangaldas Girdhardas. It can further be seen that the books mentioned by the assessee are of such nature that they can be written at any time. It was enquired from the Accountant of the assessee as to the style of the books of account for the current year and it was explained that entries upto the month of December have been incorporated whereas entries in respect of other months were yet to be made. This clearly show that no reliance can be put on books of account and therefore the assessee's statement that the land was converted in stock in trade on 20th Aug., 1975 cannot be accepted. The assessee was also asked to state whether he had done any business activity during the period from 20th Aug., 1975 to 20th Oct., 1975, so that it can be established that he had started business in land on 20th Aug., 1975. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, I hold that no conversion of land in stock in trade has taken place either on 20th Aug., 1975 or on 20th Oct., 1975 and therefore will be liable to capital gains. The capital gain is worked out as under: . Rs. Sale price realised 7,35,800 Less: Expenses incurred 45,968 . 6,89,832 Less: Value as on 1-1-1954 as per valuer's report 43,300 . 6,46,532" 3. The ITO also made alternative computations under s. 9(1) and s. 56 of the IT Act, 1961. As the present case has proceeded only on the aspect whether the surplus in question is capital gains or business profit, we need not examine the alternative computations. Even the CIT(A) has not adjudicated upon these. 4. Before the CIT(A), the assessee advanced arguments on lines identical to those as before the ITO. He also made an attempt to distinguish the decision of the Hon'ble Gujarat High Court in the case of Smt. Anusuyaben (Decd.) vs. CIT on which strong reliance had been placed by the ITO in rejecting the assessee's claim. This was done on the ground that unlike Smt. Anusuyaben (Decd.), the assessee was a businessman of repute and books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is such that the judicial process may accord its approval to it". Considering the fact of the case I uphold the decision of the ITO that receipts from sale of impugned land is taxable under the head capital gains and the facade of business transaction given by the assessee is sham and a device to avoid tax. 10. The assessee's contention that he did not have any dealing in land in future because as per Ceiling Act he could not buy and sell land is not correct. Although the land holding of the assessee was more than the limit fixed by the Ceiling Act the assessee could sell lands by obtaining permission of the concerned authorities and even after the Ceiling Act came into operation some lands are purchased and sold after obtaining permission of the authorities". 5. The learned counsel for the assessee in the course of his lengthy arguments detailed the undisputed facts of the case. But as these have already been extracted by us earlier in our order, they need not be repeated here. The arguments of the learned counsel for the assessee are summarised point wise as under: (1) The assessee was a person of means with a business background, good business connections, acumen and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and sell vacant land in view of the aforesaid enactment. (15) The prior to the Urban Land (Ceiling and Regulation) Act, the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972 was in operation in the State of Gujarat from 11th Aug., 1972 to 10th Aug., 1975. The learned counsel for the assessee also invited our attention to the provisions of s. 3 and s. 5(3) of the Urban Land (Ceiling and Regulation) Act, 1976 in support of his submissions. (16) That the assessee already had an office at Laldarwaja where the books of accounts were being maintained and since the assessee had part-time accountants to do so, it was not necessary for him to engage more staff in respect of the new business of dealing in lands. (17) That it was not necessary to engage a broker or advertise in the newspapers to sell these plots of land since the assessee wanted to adopt a pick and choose policy of having good neighbours since the plots sold were adjoining his own residential house. (18) No doubt had been raised by the ITO regarding the sale deeds effected to the nine different parties and even during the course of the assessment no specific question was put to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nally made an impassioned plea for the acceptance of the assessee's claim to be treated to tax on the transaction in dealing in land under the head "business" rather than under the head "capital gains". 8. The learned Departmental Representative, on the other hand, vehemently supported the orders of the ITO and the CIT(A). His detailed arguments thereafter, reiterated the reasons which weighed with the two lower authorities in rejecting the assessee's claim. The further submissions made by him were as under: (1) The assessee had acquired the plot of land in question in 1956 but had not thought of indulging in a business venture for all these years till 1975. (2) The assessee had never purchased any land but had sold the land which he had inherited. (3) There was no similar transaction in the past or future, this being the solitary instance. (4) No evidence was produced at any stage to support the assessee's intention of dealing in real estate. (5) The assessee had violated the law by obtaining the approval from the Municipal Corporation after the property in question had been sold off. (6) As this was a new venture undertaken by the assessee, it was necessary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the decision of the Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust relied upon by the learned Departmental Representative was not good lay any more having been overruled by the Hon'ble Supreme Court in its decision in the case of Addl. CIT vs. Surat Art Silk Cloth Mfrs. Association (1979) 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC). 12. We have examined the rival submissions and have also perused the orders of the lower authorities. The paper book furnished by the assessee's counsel as also the authorities cited at the bar have been duly considered. It would be necessary to set out certain relevant dates to appreciate the controversy involved. These are as under: (i) Date of conversion into stock-in-trade 20th Aug., 1975 (ii) Date of declaration confirming the conversion 20th Oct., 1975 (iii) Dates of execution of sale deeds with the 9 parties 30th Oct., 1975 and 1st Nov., 1975 (iv) Date of the application for sub-plotting to the Municipal Corporation 10th Nov., 1975 (v) Date of the approval from the Municipal Corporation 17th Nov., 1975 13. The following situation emerges after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently by the CIT(A) have not been rebutted. The assessee has not even chosen to furnish the copies of the statements to us. (4) The assessee has not indicated the period during which the bifurcation of the plot, the laying of roads, etc., was going on since this cannot be an activity performed overnight. There has to be some degree of planning involved in it and the role played by the assessee in this entire venture is not known. This was absolutely necessary to establish whether he was in fact engaged in the transaction as a "businessman" or as an "investor". (5) The transaction involves persons "close to the assessee" and the public at large has been kept out. An advertisement in the paper book could have not only lent credence to the assessee's case and established his bona fides but may have helped him in getting a better price. 14. We would also like to mention that in a case of the type with which we are seized, it is nigh impossible for any side to come up with proof or evidence which would clinch the issue favourably or adversely. The evidence that is tendered has to be reasonable and tinged with genuineness. These types of cases have to be decided on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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