THE COMMISSIONER OF INCOME TAX vs. SHRI BHARAT R GAJRIA

THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1(2), C.R. BUILDING, QUEENS ROAD, BANGALORE.

FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA No.705/BANG/2013 DATED 05/09/2014 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BANGALORE.

The appeal has been admitted by this Court to consider the following substantial questions of law:

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that it is not inclined to accept the contention of the Revenue that there is suppression of sale consideration by the assessee even when the assessing authority has clearly made out the case that the assessee has suppressed the sale consideration by showing Rs.975/- sq.ft., instead of Rs.1,224/- per sq.ft., and Sri.Purushotham Reddy had given the said amount in the statement recorded during search proceedings which was not disputed by the assessee?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance under Section 40[a][ia] of the Act even when the assessing authority has rightly disallowed under the said provision as all the

The assessee, an individual had filed his return of income for the assessment year under consideration declaring a total income of Rs.2,97,39,262/- and subsequently filed a revised return of income declaring a total income of Rs.6,06,32,187/-. Subsequent to the search proceedings in the case of Sri.Purushotham Reddy, Managing Director of M/s.Chamundi Gold Hills Estate and Others, the Assessing Officer passed Assessment Order under Section 143 [3] of the Act accepting the return of income. Consequent to the assessment proceedings initiated under Section 153C of the Act in the case of M/s.Chamundi Gold Hills Estate and Others, the assessment of the assessee was re-opened under Section 147 of the Act. In reply thereto, the assessee’s legal representative filed a letter requesting to

Being aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income Tax [Appeals] who partly allowed the same. Aggrieved by the same, the Revenue preferred appeal before the Tribunal and the assessee preferred Cross- Appeal. The Tribunal has allowed the Cross-Appeal and dismissed the appeal preferred by the Revenue. Hence, the Revenue has preferred this appeal.

Learned counsel for the Revenue argued that the Tribunal has disposed of the appeal and the Cross- Appeal mainly relying on the earlier order passed by the Tribunal in the assessee’s own case in ITA No.816/Bang/2010 relating to the assessment year 2006-07. The said order was challenged by the Revenue before this Court in ITA No.233/2011. But, due to want of monetary limits, the appeal came to be disposed of as not maintainable. Learned counsel placing reliance on G.Venkataswami Naidu and Company V/s. Commissioner of Income Tax [(1959) 35 ITR 594], argued that the transaction of the assessee cannot be construed as coming under capital gains but it is an adventure in the nature of trade, as rightly held by the Assessing Officer. Nextly, it was contended that there was suppression of sale consideration by the assessee by showing the sale value at Rs.975/- per square feet instead of Rs.1,224/-. This fact has come to light in the statements of Sri.Purushotham Reddy recorded during

Learned counsel for the assessee submitted that the findings of the Assessing officer are incongruous in nature. The Assessing Officer has recorded that the assessee has entered into an agreement with Sri.Jawar Gopal and Sri.U.C.Rami Reddy on 01.12.2003 to sell the land at Amanikere, Bellandur and has taken an advance of Rs.50,00,000/- each from the said parties but he didn’t had even an inch of land. However, in the next paragraph, it has been recorded that the assessee purchased agricultural lands from various persons at Amanikere Bellandur between 25.08.2003 to 30.12.2004. It is thus evident that the Assessing Officer had failed to apply his mind in a right perspective.

We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.

It is ex-facie apparent that based on a letter said to have been written by the assessee who is no more to Sri.Rami Reddy which is said to have been found in possession of one Sri.Purushotham Reddy, the Assessing Officer has arrived at a conclusion that the transaction in question was taxable as business income and not capital gains. It is significant to note that the said property was held by the assessee as long term capital asset. The Tribunal being the last fact finding authority, has recorded a finding that the contents of the letter alleged to have been written by the assessee to his partner do not clearly establish as to whether the assessee was really carrying on the activity of adventure

The disallowance under Section 40[a][ia] of the Act by the Assessing Officer cannot be sustained in view of the income from the sale of property under consideration is now held to be taxed as capital gains and not as income from business.

Even the other ground of challenge inasmuch as the Tribunal remitting the matter to the Assessing officer with a direction to examine and verify whether the compound wall was actually constructed around the schedule land and the expenditure allegedly incurred towards the construction of the compound

The judgment relied upon by the Revenue is not applicable in the present facts and circumstances of the case. Moreover, the Hon'ble Apex Court has observed that in reaching the conclusion that the transaction is an adventure in the nature of trade, the Tribunal has to find primary evidentiary facts and then apply legal principles. It is evident that the Tribunal has rightly considered the factual aspects and then applied the legal principles.

There being no perversity or arbitrariness in the order of the Tribunal impugned, the same requires to be confirmed. The issues involved relates to pure questions of facts, no substantial questions of law arises for our consideration.