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TMI Blog1981 (10) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's income from undisclosed sources. 3. The ld CIT(A) has erred in treating the following income as income from agriculture and in sustaining an addition of Rs. 1,704 being 1/5th of the above income on A/c of the appellant's share in it: Hire charges of cutting machine 858 Income from sale of cattle 2664 Sale of trees 5000 Total Rs.8522 4. The ld. CIT(A) has erred in sustaining an addition of Rs. 6,100 out of an out of an addition of Rs. 10,010 made by the ITO treating the same as the appellants income from undisclosed sources by holding that it did not represent the assessee's share from agricultural income credited in the books of M/s Jain Vegetable Farm, Kupkalan, from sale of agricultural procedure. 5. The ld. CIT(A) has erred in law in sustaining an addition of Rs. 19,170 treating the same as capital gains from a piece of land contributed by the assessee as one of the partners to a firm in which he was a partner. 6. The ld. CIT(A) has erred in holding that no appeal lies against the charging of interest u/s 217 and in not entertaining the appeal on this ground" 2. To understand the contentions, relevant basic facts are that the assessee-HUF filed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of Ved Parkash. (i) Ved Parkash Singla is an Income-tax/Sales-tax Practitioner who is expected to know the complications of name-lending which can deprive him of his right to practice on Income-tax side; (ii) The assessee raised loans aggregating to Rs. 97,000 and though the assessing officer added all the loans as undisclosed income of the assessee, loans totalling Rs. 77,000 were accepted to be genuine by the CIT (A), whose order has not been challenged by the revenue; (iii) Out of the loan of Rs.33,000 advanced by Ved Parkash to Prem Chand Jain, a sum of 12,000 was stated to have been advanced out of funds of his HUF; (This aspect, according to Sh. Gupta, proved that Ved Parkash's HUF was not only having income of Rs. 7,200 per year from rent and agricultural but also derived income from money-lending, as stated by him). (iv) Ved Parkash categorically admitted to have advanced an amount of Rs. 20,000 to the assessee on 3rd Feb, 1975 by way of loan; and (v) The statement of Ved Parkash was neither evasive nor incomplete. On the above facts, Sh. Gupta very vehemently argued that the assessee did discharge the onus of proof cast him to prove the genuineness of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upta contended that the receipts from the sale of cattle did not fall within the definition of "Agricultural income" as contained in s. 2(1) of the Act. He further submitted that it was not the business of the five brothers, AOP, to purchase and sell cattle. According to him, therefore, the receipts from cattle did not represent income. As for the sale of trees, he argued that the amount of Rs. 5,000 was on account of gross sales and could not, therefore, be said to be net agricultural income arising from the sale of trees which he, in fairness, conceded were not of spontaneous growth. He also did not raise any contention on facts regarding the quantum of receipts amounting to Rs. 858 from hire charges from cutting machine. However, he pleaded that in view of r. 6 of the IT Rules, for computation of net agricultural income, and s. 85(v) of the Act, the receipts were not liable to tax. 10. After hearing the parties, we are inclined to exclude the sale of cattle and hire charges from the above computation and reduce the income from sale of trees to Rs. 2,500. In that way, income from agriculture, as mentioned above, will come to Rs. 2,500 and the assessee's share at 1/5th to Rs. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 10,100 21(I) It is contended before me that the ITO has erred in not accepting the declared agricultural income and that in any case the addition made is highly excessive. (b) I have considered various submissions made before me very carefully. The A/c of M/s. Kanwal Fruit Agency stands as under: Date Debit Credit . Balance 19-10-1974 10500 . Debit 10500 24-10-1974 — 10500 . — 1-11-1974 — 5000 . 5500 6-12-1974 — 5500 . — The debits represent sales made by the assessee and the credits represent the amounts realised from M/s Kanwal Fruit Agency. There is absolutely no evidence on record to show that these sales are bogus. I, therefore, hold that the ITO has erred in treating the amount of Rs. 21,000 as income from undisclosed sources. (c) The position of paddy account is, however, different. The paddy has been sold from 2nd May, 1974 to 30th July, 1974. The A/c books do not show any opening stock as on 1st April, 1974. The new crop had admittedly not come by that buyer that last year it had kept some paddy that has been sold this year, is not supported by any evidence. I, therefore, uphold the ITO 's action in treating the sum of Rs. 35, 882 as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same as the assessee's income from undisclosed sources and making it liable to tax. The Id. advocate contended that the amount out of which addition of Rs. 6,100 was made in the case did not appear as cash credit in the books of M/s. Jain Vegetable Farm either in the accounts of the partners or in the account of any third party. That being so, according to him, the provisions of s. 68 of the Act, were not applicable giving authority to the revenue to treat the same as income from undisclosed sources. 14. Sh. Gupta further pleaded that in the first place the provisions of ss. 68 to 69 D of the Act did not apply to the computation of net agricultural income and secondly, if the said sections at all apply, the receipts in dispute could not be said to be covered by any of the ss. from 68 to 69D. From there, he went on to argue that the amount in question of which the impugned amount of Rs. 6,100 formed a part, could not be treated as income from undisclosed sources, to be assessed directly in the hands of the partners of the said firm. According to him, this would be in violation of r. 5 for computation of net agricultural income which comes into play when the firm has either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto existence. This firm was created on papers only to avoid tax on this receipt of Rs. 36,000 from the company. When the company does not become the owner of the land, this amount can only be paid either for user of land or for the services rendered by Sh. Parkash Chand as Director. Therefore, in any case, this amount is taxable in the hands of the assessee and represents his income.' The IAC(C), Range I, Ludhiana, issued the following directions u/s 144B: ' Considering all the facts and circumstances of the case, I am of the view that the amount of Rs. 36,000 represented the consideration received by the assessee from the Ltd. Co. for indirect sale of part of his land for industrial purposes. No addition could be made by the ITO on receipts of consideration in r/o the land. However, the ITO will compute the capital gains and tax them, as pleaded by the ITO Sh. Kundrs.' The ITO finally added Rs. 19,170 as long term capital gains calculated as under: Total consideration received on A/c of sale of land by Sh. Parkash Chand 36,000 Less: Land (as on 1st Jan, 1964 at the . . approxim rate of Rs. 600 . . per bigha) Assessee's 1/5th . . share works out to 1,400 . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant date at 25 times of its market value as on 1st January, 1964. However, he contested this addition more seriously on legal grounds. Referring us to the definition of 'transfer' u/s 2(47) of the Act, he submitted that the word 'extinguishment' meant complete termination of the rights. For this proposition he cited the judgment of the Hon'ble Supreme Court in the case of AIR 1969 SC 168 and particularly the observations at page 175. The Id. advocate also relied on the judgment of the Hon'ble Andhra Pradesh High Court in the case of Ghanshyam Das Kishan Chander vs. CIT (1980) 121 ITR 121 (AP). The Hon'ble High Court in the said case held that unless the entire interest is transferred or assigned, without retaining any interest whatsoever in the transferor or the original owner and thus effective conveyance of a capital asset is made, the transaction cannot be said to fall within the meaning of 'transfer' as defined in s. 2(47) of the Act. Shri Gupta then alternatively pleaded that for the application of s. 2(47) of the Act, there must first be a transfer of asset. Sale, exchange, relinguishment of asset or the extinguishment of any rights therein are the different modes of tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2(47) of the Act and, therefore, attracted capital gains tax. 19. After carefully, considering the rival submissions, in our opinion, the Full Bench judgment in the case of A. Abdul Rahim is distinguishable inasmuch as in the present case immovable property is involved whereas in the said case movable assets were involved, which did not require conveyance deed for their being transferred. As for as the judgment in the case of M.A.J. Vasanaik, here also movable property was involved. That apart, Hon'ble Karnataka High Court in the said case did not interpret the definition involved in s. 2(47) of the Act because, in its opinion, that was not necessary to decide as to whether development rebate could be withdrawn in consequence of transfer of machinery and plant by an individual to a Firm in which he became a partner. The Hon'ble judges at page 124 observed as under: "We are of the opinion that in order to hold that on the individual business being converted into partnership business there is a transfer of the assets of individual to the partnership it is not necessary to rely on the definition in s. 2(47) at all because the said transaction amounts to a transfer in the eye of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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