SAGAR JEEVANRAO PATIL,,KOLHAPUR vs. INCOME TAX OFFICER,,

PER R.S.SYAL, VP :

This appeal by the assessee is directed against the order passed by the CIT(A) on 27-09-2016 in relation to the assessment year 2011-12.

2 ITA No. 2661/PUN/2016 Sagar J. Patil

filed his return declaring total income of Rs.2,56,570/- inclusive of

Rs.1,20,000/- shown as ‘Other income’. On verification of the

information, the Assessing Officer (AO) observed that the assessee

acquired agricultural property admeasuring 288585 sq.ft. bearing

R.S.No.18A/2A, 18A/2B, 18A/2C, 18A/2D situated at Nipani,

Taluka Chikodi, Dist. Belgaum, Karnataka as per the Sale Deed

dated 22-01-2010 for a total consideration of Rs.68,80,000/- plus

Stamp duty of Rs.4,66,700/-. Payment towards purchase of the

said property was made through cheques. On being called upon to

explain the source of funds invested in the acquisition of the

property, the assessee submitted that his own source of income was

salary from his employment with M/s. Tessitura Monti India Pvt.

Ltd. He further submitted that payment towards acquisition of

property was made by M/s. Aurora Apparel Pvt. Ltd. (AAPL)

which was a collaborating company of his employer company M/s.

Tessitura Monti India Pvt. Ltd. It was stated that all the expenses

concerning the acquisition of property, its conversion into non-

agricultural land etc. were borne by AAPL alone. The assessee

still further submitted that after getting the agricultural land

converted into non-agricultural one, the same was apparently sold

3 ITA No. 2661/PUN/2016 Sagar J. Patil

by him to AAPL for Rs.70.00 lakh on 18-10-2010. It was,

therefore, stated that the assessee received only a sum of

Rs.1,20,000/- as income from the transaction which was offered

for taxation and that the acquisition of property was done for and

on behalf of AAPL, which transaction was fully financed by that

company only. The AO observed that the property was purchased

by the assessee in his own name and thereafter sold to AAPL

again, as a seller for a total consideration of Rs.70.00 lakh. He

found out the Stamp value of the property at Rs.2,30,86,800/-.

Taking such Stamp value as sale consideration under section 50C

at Rs.2,30,86,800/, the AO, after reducing purchase price of

Rs.68,80,000/-, computed short term capital gain on transfer of

such property at Rs.1,62,06,800/-. The assessee’s contentions

before the ld. CIT(A) in this regard that the property was not

purchased as his own or in the alternative it was converted into

stock in trade or in another alternative, the intention at the time of

purchase of land was to resell the land and hence, the provisions of

section 45 should not be applied, did not find favour with the ld.

CIT(A), who echoed the assessment order on this point. The

assessee is aggrieved by the addition of Rs.1.60 crore and odd.

4 ITA No. 2661/PUN/2016 Sagar J. Patil

relevant material on record. There is no doubt on the fact that it

was the assessee who acquired the agricultural property bearing

R.S.No.18A/2A to 18A/2D from four persons as per Sale Deed

dated 22-01-2010 for a total consideration of Rs.68,80,000/-.

There is equally no doubt that it was the assessee, who ex facie

transferred this property to AAPL on 18-10-2010 for a

consideration of Rs.70,00,000/-. In such a scenario, it is difficult

to accept the contention of the ld. AR that the assessee should not

be taken as an owner and hence the transaction should be treated as

done on behalf of AAPL. Once the property was purchased by the

assessee through a legal process under which he became its owner,

there can be no question of denting his character as a legal owner

by putting across an argument that the same was purchased on

behalf of AAPL, more so when the sale deed does not recognize

this fact. It is manifest from the factual panorama discussed supra

that the entire purchase consideration of Rs.68,80,000/- plus Stamp

duty of Rs.4,66,700/- at the time of purchase of the property was

paid by AAPL. AAPL has confirmed in writing through page 1 of

the paper book that the assessee undertook the trading of lands and

it was AAPL which collaborated with the assessee for purchasing

5 ITA No. 2661/PUN/2016 Sagar J. Patil

the land for setting up its factory. AAPL passed a resolution on

09-11-2009, whose copy is available at page 2 of the paper book

indicating that the assessee would be purchasing property on behalf

of the company. Even though an application for conversion of

agricultural land into non-agricultural land was moved by the

assessee but all the financial burden in this respect was borne by

AAPL. In the ultimate analysis, when the land was got converted

into non-agricultural land, the assessee transferred it to AAPL.

Thus, it can be seen that the purchase transaction was done in

January, 2010 by the assessee and after converting, the non-

agricultural land in question was transferred to AAPL in October,

2010, just within a short span of 10 months. Thus, the facts amply

indicate that the ab initio intention of the assessee was to purchase

the property for re-sale to AAPL which got fructified as well

accordingly. In such circumstances, the property purchased by the

assessee cannot be construed as a `capital asset’ so as to fall for

consideration within Chapter IV-E of the Act. Since the land was

purchased with intention of re-selling the same at a short span of

time, such transaction can be characterized only as an ‘Adventure

in the nature of trade’ so as to fall under Chapter IV-D of the Act,

being, income chargeable to tax under the head ‘Profits and gains

6 ITA No. 2661/PUN/2016 Sagar J. Patil

from business or profession’. Going by this, the purchase was

made at Rs.68.80 lakh and the sale was made at Rs.70.00 lakh

resulting into income of Rs.1.20 lakh, which the assessee had

voluntarily declared in the return. We, therefore, hold that the

authorities below were not justified in making and confirming the

addition of Rs.1,60,86,800/- in the hands of the assessee. The

addition is directed to be deleted.

Order pronounced in the Open Court on 06th November, 2019.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 06th November, 2019 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-1, Kolhapur 4. The CIT-1, Kolhapur िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “ए” / DR ‘A’, ITAT, Pune गाड� फाईल / Guard file 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार / True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

ITA No. 2661/PUN/2016 Sagar J. Patil

Date 1. Draft dictated on 05-11-2019 Sr.PS 2. Draft placed before author 05-11-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.

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