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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R PER KUL BHARAT, J.M: Appeal by the assessee is directed against order of the
CIT(A)-1, Bhopal dated 29.2.2016 pertaining to the
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] assessment year 2011-12. The assessee has raised
following grounds of appeal:
That the learned first appellate authority has erred in arbitrarily confirming the addition of Rs.3,91,250/- made by the learned assessing authority by treating the same as undisclosed short term capital gain which is neither correct nor justified therefore same is liable to be deleted. 2. That the learned first appellate authority has erred in arbitratrily confirming the addition of Rs.42,30,092/- made on account of sale proceed of the flats as business income by applying the provision u/s 45(2) of the I.T. Act 1961 and imposing the tax on the same which is neither correct nor justified therefore same is liable to be deleted. 3. That the learned first appellate authority has erred in arbitrarily confirming the addition of Rs.20,43,000/- made by the learned assessing authority by disallowing the expenses u/s 40A(3) of the I.T. Act, 1961 which is neither correct nor justified therefore same is liable to be deleted.. 2. Briefly stated facts are that case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) vide order dated 11.2.2014. The assessee derived its income from land, interest on savings. While framing the assessment, the A.O. made addition on account of undisclosed short term capital gain of Rs.3,91,250/- undisclosed profit from sale of flats of Rs.42,30,092/- and disallowance u/s 40A(3) of the Act of Rs.20,43,000/-.
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] 3. Aggrieved by this, the assessee preferred an appeal before Ld. CIT(A) who after considering the submissions, dismissed the appeal of the assessee. Now the assessee is in appeal before this Tribunal. Ground Nos.1 to 3 of this appeal are inter connected. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. For the sake of clarity, submissions of the assessee are reproduced as under:
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi]
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi]
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi]
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] 4. He submitted that authorities below have failed to
appreciated the fact that assessee is not engaged into any
business of construction/sale/purchase of house property.
The revenue has not brought any material on record
suggesting that the assessee was engaged in any kind of
business. In fact, initially, the assessee wanted to
construct house for self-occupation and the construction
plan was duly filed for approval of local authority. But due
to change in circumstances and compelling needs, assessee
decided to dispose of the property. Owing to the fact that
no single buyer was available and also to fetch a better
price, the property was sold by constructing flats/units.
This act from no stretch of imagination can be treated as
adventure in nature of trade and commerce and provisions
of section 45(2) of the Income Tax Act, 1961 (hereinafter
called as ‘the Act’) have been wrongly invoked by the A.O.
Same cannot be applied under the facts of the present
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] case. In support of this, Ld. Counsel relied upon the case
laws as mentioned in the written submissions. Per contra,
Ld. D.R. vehemently opposed the submissions of the Ld.
Counsel for the assessee and supported the orders of the
authorities below. He submitted that even a single
transaction can be treated as adventure in the nature of
trade and commerce. He submitted that the facts and
circumstances surrounding the impugned transaction
clearly prove it being an act of adventure in the nature of
trade and commerce. However, Ld. A.R. in the rejoinder
submitted that if this yardstick is to be applied, then every
transaction would be treated as adventure in the nature of
trade and commerce. Ld. Counsel submitted that it was
purely for the purpose of getting better price of the capital
asset. He further contended that from the material placed
on record, the intention of the assessee can be very well
inferred that the assessee intended for self-use and
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] occupation of the property. But due to change in the
circumstances and compelling reason, the assessee had to
dispose it off. This does not mean that assessee was
engaged in the business.
We have heard the rival submissions, perused the
materials available on record and gone through the orders
of the authorities below. The only issue germane to dispute
is whether the transaction in question is in the nature of
adventure in trade and commerce as treated by the A.O.
The case of the assessee is that she wanted to construct
house for self-occupation but due to change in the
circumstances, she had to dispose of the property as no
single buyer was available and in order to fetch higher
consideration, the property was constructed into flats and
sold to different individuals. It is averred the assessee is
not involved at any point of time in the business of building
construction, except this transaction, no such other
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] transaction is made previously or subsequently. Under
these undisputed facts, revenue was not justified to treat
the same as adventure in the nature of trade and
commerce. Whether a particular transaction is adventure
in the nature of trade and commerce is to be decided on
the principles laid down by various judicial
pronouncements, the Hon'ble M.P. High Court in the case
of CIT Vs. Suresh Chand Goyal 298 ITR 277 (MP) has
decided the issue that whether an agricultural land
converted to non-agricultural land sold after developing 40
plots was business activity or sale of capital asset. The
Hon'ble High Court after considering the various case laws
held as under:
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi]
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] 6. The Ld. Counsel has also placed reliance on judgement of Hon'ble High Court of Punjab & Haryana rendered in the case of CIT Vs. Sushila Devi Jain (2003) 259 ITR 671, wherein the Hon'ble High Court has held as under: “2. We have heard the learned senior counsel for the department and find no ground to entertain the appeal. The Tribunal and the Commissioner (Appeals) have both rightly held that the sale of land by the assessee was not in the nature of business because there is no continuous activity. It is true that even a single venture could be regarded as a trade or business but there have to be circumstances which should give rise to such a conclusion. There are no such circumstances existing in the present case. What is necessary is to find out the intention of the assessee at the time of the purchase of land. In the case before us, the land was never purchased by her. She acquired the same on the basis of a will on the death of her husband. She sold the same in parcels because the huge area could not be sold in one go. Such an activity, in our opinion, cannot amount to trade or business within the meaning of the Act. Both the Commissioner and the Tribunal have followed the correct principles of law and no factual or legal error could be pointed out by the Department. In this view of the matter, we are of the opinion that no substantial question of law arises from the order of the Tribunal so as to warrant the entertainment of this appeal.” 7. In the written synopsis by the assessee, it is treated
that the income from sale of all the 9 flats was
Rs.39,62,290/- only. The figures at paper book page 5 are
undisputed by the revenue. The income of Rs.6 lakhs on
which registry was done during the year, even if taken as
per the computation of the assessing officer should be
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] Rs.26,66,597/-. The A.O. has come at the figure of
Rs.66,66,852/-. It is also stated that if the contention of
the A.O. that land was converted into stock entry is
adopted, the project would be complete only when the
possession was handed over. Completion contract method
is a well recognised method for computation of profit. It is
also stated that the authorities below assumed that
possession is invariably handed over at the time of the sale
deed. It is stated that the possession was handed over
subsequently. It is also stated that the calculation is based
on pure guess work. We find some merit in the contention
of the Ld. Counsel for the assessee in view of the
judgement of the jurisdictional High Court and the facts
placed before us, we deem it proper that the assessing
officer should give a specific finding with regard to the
contentions of the assessee after conducting proper
enquiry. The impugned order is set aside. The A.O. is
[ITA No.568/Ind/2016] [Smt. Sangeeta Nayar, New Delhi] hereby directed to frame de-novo assessment. The grounds
raised in this appeal are allowed for statistical purposes.
In the result, the appeal filed by the assessee is
allowed for statistical purposes.
Order was pronounced in the open court on 27 .11.2018.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER
Indore; �दनांक Dated : 27/11/2018 VG/SPS
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order
Assistant Registrar, Indore