INCOME TAX OFFICER, WARD-1, BARMER vs. PUSHP RAJ BOHRA, JALORE

Briefly the fact as per record are that the appellant is an Individual who filed his return of income on 14.10.2017 declaring total income of Rs.38,47,500/. The case was selected for scrutiny under CASS for the reason of "Deduction/Exemption of Capital Gains" and accordingly notices t/s 143(2) of the Act dated 11.09.2018 and notices u/s 142(1) of the Act on 25.10.2019, 01.11.2019 & 12.12.2019 to the Appellant. In response to the notices, the appellant complied on 20.09.2018, 29.10.2019, 07.11.2019, 22.11.2019 & 17.12.2019. The appellant has shown income from salary as director from M/s Fateh Granites Ltd., income from capital gains and income from other sources being interest on savings bank, GFDR, other interest and bond etc. The appellant had claimed deduction u/s 54EC and 54F of the Act in the return of income. During the course of assessment proceedings, the AO being not satisfied with the replies of the assessee and after analysing the details submitted by the appellant, completed the assessment order u/s 143(3) of the Act determining total income at Rs.3,63,33,232/- by making following addition/disallowances to total returned income of the assessee : S. No. Addition/disallowances Amount (Rs.)

Being aggrieved with the assessment order, the appellant filed appeal before the Ld. NFAC/CIT(A) who has granted relief to the assessee by giving contradictory observation as under:

I have gone through the assessment order, grounds of appeal and written submissions of the appellant. As seen from the assessment order, the appellant had claimed deductions/exemptions from capital gains and hence, his case was selected for scrutiny. During the course of assessment proceedings, it was found by the AO that the appellant had sold 10 immovable properties during the impugned AY for total consideration of Rs.4,18,45,690/-. These properties sold were constructed over a period of 3 years by joining the land of 3 family members. The AO held that the activity of joining the lands and constructing houses thereon amounted to adventure in the nature of trade and accordingly, the AO brought to tax the profit on sale of properties as income from business and disallowed the deductions/exemptions claimed by the appellant u/s.54F of the Act and 54EC of the Act. Aggrieved by the said additions/disallowances, the appellant is in appeal and has raised 07 grounds which are adjudicated as under:-

Ground no. 1, 6 & 7 are general in nature and hence, not adjudicated.

Ground no.2 to 4 are relating to treating the income from capital gains offered as income from business and disallowing the deductions/exemptions claimed u/s.54F/54EC of the Act. one of these grounds is also in respect of disallowance of part of the expenditure on construction for non production of details before the AO.

1 The identical issue was before Hon'ble ITAT Jodhpur Bench, in the appellant's own case for A.Y. 15-16 (ITA No. 158/Jodh/2019 dated 20.03.2020), this decision was taken by Hon'ble ITAT on the basis of decision taken in the case of appellant's brother Mr. Ramesh Raj Bohra on identical facts in ITA No. 157/Jodh/2019 dated 19.03.2020. The observations of Hon'ble ITAT in the case of Mr. Ramesh Raj Bohra are reproduced below for the sake of clarity:-

In view of the above discussion, we can safely conclude that the land was purchased by the assessee since long back as capita asset and was continuously hold by it for 20 years in case of Fateh Royal Residency as capita asset. There was no intention of assessee to trade for the land so purchased, contrary it was used for agricultural purposes continuously till the year of sale. Similarly, the Fateh Hills property was acquired long back in the year 2010-11 as capital asset and was so held as capita! asset in the balance sheet. Merely conversion of the agricultural land into non- agricultural land will not give rise to the taxable event until it is actually sold. Thus, the assessee has sold the capita! asset held for long term, accordingly, gain arising from sale was eligible for deduction U/s 54F of the Act. Accordingly, we direct the A.O. to treat the property on sale of land as capital gain and given the benefit of exemption claimed by the assessee U/s 54 of the Act. We direct accordingly.

The next grievance of the assessed relates to allowing deduction expenditure of Rs. 17, 56,012/- as against the expenditure of Rs.43, 90,029/- claimed by the assessee.

We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that the A.O. has allowed 50% of the expenditure by stating that no supporting bills of expenditure were provided to him. However, this finding of the A.O. was discarded by the Id CIT(A) after observing as under. 'That Ld. AO on the basis of finding recorded in Para 19 & 20 disallowed half of construction cost claimed on the property transferred during the year under consideration. From the bare reading of finding recorded while disallowing claim of construction cost it appears that Ld. AO recorded finding without considering documents produced for verification and documents submitted during the course of assessment proceeding. The finding that "No bills supporting such expenditure were provided to this office despite being asked clearly." is totally incorrect as the documents relevant to construction cost has been produced during the course of hearing and same has been verified by the Ld. AO on test check basis. It was submitted that plot wise details has not been maintained and total construction cost incurred has been averaged and claimed accordingly against property sold. Submission made had been reduced Ld. AO in the assessment order (page 16 of assessment order). Therefore finding recorded with reference to nonproduction of documentary evidences is grossly erroneous and contrary the material available on record. With reference to non reflecting of entries in bank statement on voucher to voucher and day to day basis was that for multiple invoices/expenditure payment was made through single cheque. A detailed submission showing each payment from bank account towards nature of expenditure and documents detail thereof [PB 33-46 (36-38), 56-66] were produced/submitted before Ld. AO. Going through such detail your good self will observe that all payment referred therein are not in next year. The submission of the assessee was that payment of multiple in voices was made through one cheque and at different date than of invoice. A detailed chart about the expenditure claimed and payment thereof through bank has been submitted during the assessment proceedings."

It is dear from the findings of the id. CTT(A) that he has totally discarded the observed of the A.O. for non-production of documentary evidence in support of the expenditure. However, in respect of giving this fact, the Id. CIT(A) has allowed on ad hoc basis only 40% of the expenditure so claimed was genuine and incurred for developing the property, therefore, eligible to be allowed as a deduction while computing capital gains on sale of this property amounting to Rs.43,90,029/-. Accordingly, we do not find any justification in the order of Ld. CIT(A) for sustaining disallowance of 40% against the 50% disallowance made by the AO, therefore, the AO is directed to allow full expenditure so incurred by the assessee amounting to Rs.43,90,029/-. We direct accordingly." 8.2In view of the fact that the issue in question has already been decided by ITAT in the case of appellant's own case in AY 2015-16, the same being binding on the CIT(A), the AO is directed to treat the income from the sale of 10 immovable properties as income from capital gains. In the assessment proceedings, the AO has not given any finding relating to eligibility of appellant's claim of exemption u/s.54F/54EC of the Act as the AO had treated the income from sale of properties as income from business. Now the AO shall examine the eligibility of exemption Uls.54F/54EC of the Act and allow the same only if the appellant is eligible for the same and has complied with all the provisions of the said sections. The AO shall allow the expenditure claimed by the appellant as per the decision of Hon'ble ITAT. Ground no. 2 & 4 are treated to have been allowed. Ground no.3 is treated to have been partly allowed as the AO has been directed to make the verification of eligibility of exemption u/s.54F/54EC of the Act.

Ground no.5 is relating to charging of interest u/s. 234A & 234B of the Act. The interest under these sections is consequential in nature and has to be charged. However, the AO shall rework the said interest after considering the relief granted to the appellant in deciding ground no.2 to 4 above. 10.In the result, the appeal is treated as partly allowed for statistical purpose."

The Ld. CIT (DR) for the Revenue presented the appeal and contended that the Ld. NFAC/CIT(A) was not justified in facts and law in directing to treat the income from the sale of immovable properties as capital gains instead of business income, by ignoring the fact that assessee in his business concerns was engaged in the business of real estate development and huge expenses of Rs.

72 Cr. were incurred on development of projects to earn profit and that the Id. CIT(A) has erred in law & facts by directing the AO to treat the income from the sale of immovable properties as income from capital gains instead of business income by merely following the order of Hon'ble ITAT in the case of appellant for F.Y. 2015-16 which is distinguishable on facts, and the merits of the present case for the year under consideration. It is pertinent to mention here that the order of Hon'ble ITAT for A.Y. 2015-16 in ITA No. 158/JODH/2019 was not acceptable by the department but further appeal against the order was not recommended only due to law tax effect involved. The CIT (DR) argued that the CIT(A) has been not justified as he has no authority under law in directing the AO to examine the eligibility of exemption u/s 54F/54EC without giving appeal effect in absence of any finding on eligibility of deduction u/s 54F and 54EC particularly without addressing the matter on the nature of the asset involved, in view of the date of conversion of properties into stock in trade for the assessment year under consideration for the purpose of carrying out the Real Estate Business of construction, before giving the order appeal effect, which is akin to setting aside the matter/issue which is contrary to the provisions of section 250. 6. The Ld. CIT (DR) in her contentions referred to the relevant paras of the assessment order on facts and merits of the case which were neither addressed by the Ld. NFAC while relying on the Tribunal decision in the assessee own case wherein the Tribunal followed judgment declined in the assessee's brother's Mr. RameshRaj Bohra (supra) case without addressing the vital issue.. She argued that the assessee purchased certain land in the year 1995 (khasra no 2011 to 20140n 02.11.1995) when simultaneously contiguous land was purchased by his brother Shri Ramesh Raj Bohra (khasra nos 2015 & 2016 on 27.11.1995). As per submission of the assessee before the AO, also certain part of contiguous land was already purchased by Smt. Lata Bohra, wife of the assessee's brother, Shri Dinesh Raj Bohra (khasra no 2010 on 15.09.1994). This contiguous land comprising of khasra numbers 2010 to 2016 along with nearby khasra number 1962 (purchased by brother of the assessee on 28.01.2011) was named as 'Fateh Royal Residency Township' (FRR) and as mentioned at Para 3.1.2 of AR's submission dated 02.11.2017, 'the planned map has been submitted to Nagar Parishad for approval which was approved and the status of property got changed to 'AT DISPOSAL After approval of the Township plan identity of the land by Khasra No has been lost. The approved plan of the Fateh Royal Residency Township is being enclosed with this order as Annexure A.

The CIT (DR) further submitted that similarly the assessee on 23.11.2010 and, Shri Rames Ral Bohra had purchased khasra number 1765/6320 on 25.02.2011 and Shri Dinesh Raj Bohra had purchased Khasra numbers 1760, 1761, 1763 and 1764 on 13.07.2010 itself. This contiguous land was named as 'Fateh Hills Township'. The Fateh Hills Township has been planned on the Khasra No. 1760, 1761, 1763, 1765 &1765/6320 at Sire Mandir Road, Jalore. These properties jointly owned by Pushp Raj Bohra (Assessee), Ramesh Raj Bohra and Dinesh Raj Bohra. Again, the planned map has been submitted to Nagar Parishad for approval which was approved and the status of the property got changed to 'AT DISPOSAL on 06.03.2014. Thereafter, the contiguous land was given to Fateh Agro Builders Pvt. Ltd through a developer agreement on 23.04.2014. 8. The Ld. CIT (DR) emphasized that it is all the more pertinent to mention here that the assessee and his two brothers are directors in Fateh Agro Builders Pvt. Ltd. The case of Fateh Agro Builders Pvt Ltd was under scrutiny for A. Υ. 2015- 16 also. The company was engaged in business of Builders - Property Developers. And that the company has projected in Jalore namely Fateh Royal Residency and Fateh Hills and at Bangalore in the names of Perfect Charm, Perfect Charisma and Perfect Bansankari'. During the survey held at the premise of M/s Fateh Agro Builders Pvt. Ltd., Sh. Pushp Raj Bohra himself admitted in the statement on oath given by himself that Fateh Royal Residency is jointly developed by himself, his brother Sh. Ramesh Raj Bohra and Smt. Lata Bohra W/o Sh. Dinesh Bohra and Fateh Royal Hills is jointly developed by himself, his brother Sh. Ramesh Raj Bohra and Dinesh Bohra which is produced as under: Payment mere Alt का किया गया, जिसका स्त्री करा। मैं मेरे .19 आप Jalore, 5.18 द्वारा तैयार कि गई colony Royal Resideny के बारे में पूर्ण निसटणीलिए मैं, मेरे भाई रमेश बोक्दा मेरी भीलता सोन्दा / दिar कीचा जमीन बोहरा के कसे युक्त नाम से लगभग 21 पूर्व दीदी हुई थी जिसको 2012 के अंतर गर्न भूमी सपतरण लखाया गया 170 H2 plot LTTC falch Agro Townching poling 201 बसने ने Aunty, প্রকলাकিत कि गई। उसमे से की चमीन हमारे तीनो की भागीदारी & T/S Aulades Intl 2ture किस पर नगर निगम द्वारा a Fatah Agro Builders. Sc. आगार अधिकारी Caracaबालोतरा canner 81 lushs nas ro 309 11120 18 कोष मूलो दण्डः नाग के चा‌टे जारी किए नाए । camy any प्लॉट लेते गए, तर लדער ז 뇌 हारा (18 शीले ग्रासकों को 10A mompany सर में" है जो closing पास शामिल है

The DR argued that the assessee himself has admitted that Fateh Royal Residency and Fateh Royal Hills is co-developed properties and the transactions are also done on reoccurrence basis. In fact, the developer agreement itself could not be treated as transfer of asset under consideration through a sale deed. It was purely a business transaction and could be carried out with such ease because it was done among the three brothers who were the directors in the company to which the developing rights were being sold. Accordingly, she contended that the AO has done detailed analysis and examination of the facts while arriving at the conclusion that the sales consideration of Rs. 4,18,45,690/- in respect of sale of land and building to 9 persons and land with certain developments at Fateh Royal Residency to Fateh Agro Builders Pvt. Ltd along with sale of land at and Fateh Royal Hills FH to Fateh Agro Builders Pvt. Ltd are being treated as business activity for the purposes of taxation under the provisions of the Income Tax Act, 1961. Further she contended that due to no bills/ vouchers supporting claim of expenditure were provided to the AO despite being asked clearly against income from sale of Villas at Fateh Royal residency assessee, the assessee's claim of construction cost of amounting to Rs. 1,42,03,562/- disallowed. The Ld. DR pleaded that the impugned order may be reversed and that the assessment order be restored.

The defendant counsel for the assessee although supported to the impugned order, but absented to the remitting verification of assessee's claim of decision of 54F and 54EC before appeal effect. The AR of assessee filed a brief written note and the relevant part reads as under:

Ld. AO rejected explanation offered by assessee and held that all transaction of sale of property is in the nature of business and the assessee purchase all property under consideration with business intention. Further out of expenditure claimed for Rs. 1,42,03,562/claimed by assessee toward construction Rs. 85,22,137/- allowed.

Assessment completed at total income amounting to Rs. 3,63,33,232/- as against returned income of Rs. 38,47,500/- and thereby making addition of Rs.

Against the assessment order framed appeal was preferred before the CIT(A) raising the following grounds for assessing the capital gain as business income and quantum of income: "2, That on the facts and in the circumstances of the case, Ld. AO erred in treating the capita/gain earned on sale of different properties as income from business on the basis of hypothesis presumption. The transaction of sale of property may kindly be held sale of capita/ assets and not in the nature of business.

That without prejudice to other grounds and in alternative in case transaction of development of township plan treated as business transaction instead of efforts for rea/isation of proper consideration of capita/ asset, business income and capita/ gain be computed invoking provisions of section 45(2).

That on the facts and in the circumstances of the case, Ld. AO erred in restricting the claim of expenditure towards construction to Rs. 85,22,137/- as against claim of assessee for Rs. 1,42,03,562/-. "

Ld. CIT(A) held that the gain arise to assessee is the Capital Gain and not Business Income. Relevant part of the order of CIT(A) is reproduced herein below: "In view of the fact that the issue in question has already been decided by ITAT in the case of appellant's own case in AY 2015-16, the same being binding on the CIT(A), the AO is directed to treat the income from the sale of 10 immovable properties as income from capital gains,"

After adjudication of the issues raised in favour of the assessee Ld. CIT(A) restored the matter before assessing officer holding that: "In the assessment proceedings, the AO has not given any finding relating to eligibility of appellant's claim of exemption u/s.54F/54EC of the Act as the AO had treated the income from sale of properties as income from business. Now the AO shall examine the eligibility of exemption U/s.54F/54EC of the Act and allow the same only if the appellant is eligible for the same and has complied with al/ the provisions of the said sections. The AO shall allow the expenditure claimed by the appellant as per the decision of Hon'ble ITAT.

After such direction for restoration of the assessment before the assessing officer, CIT(A) held that such restoration is due to partly allowance of Ground No. 3 raised by the assessee in Form 35. For a judicious person such a reason does not appear a proper reason as Ground No. 3 itself got redundant when Ground No. 2 allowed. Ground No. 3 was an alternative ground and require to be adjudicate only if Ground No. 2 not decided in favor of assessee. In the case under consideration, it has been specifically recorded by the Ld. AO that Ground No. 2 and 4 are allowed. Without prejudicious to the submission that Ground No. 3 did not require to be adjudicate separately when Ground No. 2 decided in favor of assessee, your good self is requested to examine that the issue raised in the Ground No.

Eligibility of exemption u/s 54F/54EC was not subject matter of the Ground No.

Even eligibility of exemption u/s 54F/54EC was not subject matter of the any of the Ground raised in Form No. 35. 11. Even for the sack of submission if it held that eligibility of exemption u/s 54F/54EC is the subject matter of appeal before the CIT(A), restoration of the issue before the assessing officer is not within the powers of the CIT(A). Section 251(1)(a) laid in very clear terms that in an appeal against an order of assessment, CIT(A) may confirm, reduce, enhance or annul the assessment. Power of restoration of case to the assessing officer is restricted in the case of assessment u/s 144. In the case under consideration assessment has been framed u/s 143(3) and not u/s 144. 12. Further, the direction to the assessing officer to examine the issue which is not part of the original assessment amount to enhancement of the of the assessment and as per section 251(2) same cannot be done without providing opportunity to the assessee. considering all above factors, it is requested to please issue the requisite order to delete the direction to the assessing officer for examination of exemption u/s 54F/54EC.

It is pertinent to mention that neither the CIT (A)/NFAC has discussed the fact regarding the date of transfer of these properties on the sales consideration of Rs. 4,18,45,690/- in respect of sale of land and building with certain developments at Fateh Royal Residency to Fateh Agro Builders Pvt. Ltd and similarly sale of land at Fateh Royal Hills FH to Fateh Agro Builders Pvt. Ltd which are being rightly taxed as business income by the AO being the business activity as adventure in the nature of trade for the purposes of taxation under the provisions of the Income Tax Act, 1961. 14. In our view, in the present case, the vital question that the AO has decided the date of transfer conversion of the subject properties into stock in trade of business of the company which neither addressed by the CIT (A)/NFAC nor the Coordinate Bench in the assessee own case in ITA No. 158/JODH/2019 and in the case of assessee's brother Ram Raj Bohra in ITA No. 157/JODH/2019 (Supra) in respect of Assessment Year 2015-16 whose decision relied upon. Since, a planned map has been submitted to Nagar Parishad for approval of the properties which was duly approved and therefore the status of the said properties get stands changed to 'AT DISPOSAL on 06.03.2014 and thereafter, the contiguous land was given to Fateh Agro Builders Pvt. Ltd through a developer agreement on 23.04.2014. 15. Meaning thereby that the subject properties of the assessee stands converted into stock in trade as on 23.04.2014. It is settled law that any profit or income or gain on transfer of a capital assets up to the stage of conversion into stock in trade shall be charged to capital gains and thereafter as business income. In our view, on the date of approval of map of the property by the Nagar Parishad and its transfer to the Company dealing in Real Estate Business, even the status of an open plot with or without construction would get changed from the character of capital assets to stock in trade of the assesse's Real Estate Commissioner of Income-tax, [2024] 158 taxmann.com 426 (Ahmedabad - Trib.), THE ITAT AHMEDABAD BENCH 'A' has held as under:

We have given our thoughtful consideration and perused the materials available on record including the Paper Book and Synopsis filed by the assessee. The Assessing Officer after detailed verification found that the assessee and seven co-owners in their respective shares formed a new partnership firm in the name of Ashirwad Infrastructure in 2010 with the same ratio of the land holding as their partnership shares. The above land was purchased by the co-owners on 2-01-2006 for a consideration of Rs. 6 lakhs and assessee's share is 18%. All the co-owners entered into a development agreement dated 30-11-2011 with their own partnership firm Ashirwad Infrastructure to develop the land into 18 bungalows in the prime location at Thaltej for a consideration of Rs. 9,21,52,500/- and assessee's share is Rs. 1,65,87,450/-. The assessee claimed for the present assessment year LTCG of Rs. 1,26,80,990/- and also claimed exemption u/s. 54F of Rs. 75,16,000/-. It is further seen from the assessment order, the assessee bought another parcel of land for total consideration of Rs. 7.1 crores on 9-09-2014 along with seven other co-owners and constituted another partnership firm namely Sudarshan Developers on 6-05-2014 with the very same set of co-owners as the partners and engaged in the business of land development. This clearly establishes the motive, intention and interest of the assessee in doing the real estate business. Thus the motive to acquire land was to earn profit through activity of development of the land through his own partnership firm as builder, contractors of the partnership firm also not paid taxes. Whereas the assessee herein claim the above transaction as capital gain and also claim exemption u/s. 54F of the Act. If the assessee would have done this construction project in his individual capacity, he should have been liable for higher tax and will not have been eligible for claiming exemption u/s. 54F of the Act. Thus the above transaction of the assessee is clearly to evade legitimate taxes due on the profit of the sale of the property. Further the moment when the assessee was entered into the development agreement on 30-11-2011, the value of the land belongs to the assessee became Rs. 1,65,87,450/- as per assessee's own submission. In that case, the assessee was liable to file Wealth Tax Return for the A.Ys. 2012-13 to 2015-16, but the assessee never filed Wealth Tax Return for these assessment years. Thus it can be clearly construed the above piece of land was treated by the assessee as stock-in-trade and no question of capital gain arise in the above set of facts. Thus overall consideration of circumstantial and surrounding evidences, the profit earned by the assessee on sale of land is correctly treated as business income by the Lower Authorities. It is further evident in other co-owner cases, similar reopening of assessments were done and one of the co-owner as against the reassessment order settled the issue under Vivad Se Vishwas Scheme. Thus the case laws relied by the assessee clearly distinguishable to the facts of the present assessee's case. Thus we do Commissioner of Income-tax [2022] 143 taxmann.com 421 (Bombay), the Hon'ble HIGH COURT OF BOMBAY has observed that where a assessee-company, dealing in real estate, had booked two office premises in a building on 31-3-1982 which were sold on 3-8-1988 before taking possession and it claimed surplus on sale of premises as capital gain, as office premises by assessee were acquired with an intention to resell and not use, same could be treated as stock in trade and not as investment and thus, surplus was assessable as business income. The relevant para 12 of the Judgement reads as under:

Though it is sought to be contended by the Appellant-Assessee that the decision to sell the property was taken earlier, the issue is whether the finding of the Tribunal can be considered as perverse. The Tribunal also found that the Appellant - Assessee had invested the entire funds in acquiring the premises was a relevant factor in deciding the intention as a man of normal business prudence would not normally invest its entire funds in acquiring the premises when it could easily carry on the business from some other premises. The Assessee had not provided any evidence of litigation or paucity of funds. Considering the totality of these circumstances, the Tribunal rendered its finding that it is not possible for us to re-appreciate the evidence on record and come to another finding of fact as that is not the scope of the appeal under section 260-A of the Act. The Tribunal has applied the correct test, taking into consideration all the relevant facts and drawing inferences from the same. The Tribunal has considered the business reality and found that the two office premises by the Appellant-Assessee were acquired with an intention to resell and not for use. Having found no perversity in the approach of the Tribunal and its conclusion, the first question of law framed will have to be answered against the Appellant-Assessee and is accordingly answered.

The Hon'ble Apex Court in the case of Karanpura Development Co. Ltd. vs. Commissioner of Income-tax [1962] 44 ITR 362 (SC) has observed as under: Section 28(i) of the Income-tax Act, 1961 (Corresponding to section 10(1) of the Indian Income-tax Act, 1922) - Business income - Chargeable as - Assessment years 1949-50 and 1950-51 - Whether where a company acquires properties which it sells or leases out with view to acquiring other properties to be dealt with in same manner, company is not treating them as properties to be enjoyed in shape of rents which they yield but as a kind of circulating capital leading to profits of business, which profits may be either enjoyed or put back into business to acquire more properties for further profitable exploitation - Held, yes - Assessee-company was incorporated with objects of purchase and sale of coal mining - Assessee acquired coal mines on lease and paid salami for same - After developing said coal mines, it granted them on sub-lease and charged salami for said sub-lease at higher rates - Whether, on facts, it could be said that nature of business was trading within objects of company and not enjoyment of property as landowner and there was also no sale of its fixed capital - Held, yes - Whether, therefore, increased salami received from sub-leases represented profits of that business liable to be included in assessable income for income-tax purposes and in profits for purposes of business profit tax.

In the present case, the AO has done a detailed analysis and examination of the facts while arriving at the conclusion that the sales consideration of Rs. 4,18,45,690/- received by the assessee in respect of sale of land and building to 9 persons and other land with certain developments at Fateh Royal Residency to Fateh Agro Builders Pvt. Ltd and that Fateh Royal Hills FH to Fateh Agro Builders Pvt. Ltd and he has rightly treated the gains on transfer of the capital assets as business activity for the purposes of taxation under the provisions of the Income Tax Act, 1961. Since the assessee failed to produce bills/ vouchers supporting claim of expenditure against income from sale of Villas at Fateh Royal residency assessee, before the AO, despite being granted many opportunities and hence the AO was justified in disallowing the claim of the assessee regarding construction cost of Rs. 1,42,03,562/-. However, we understand that no business activity could be carried out without incurring expenses in the real estate or other businesses. In order to determine the legitimate nature of expenses required to be incurred, the assessee is required to furnish copies of bills/voucher. May be assessee has claimed capital gains income with deduction u/s 54F and 54EC which legally not correct, but he is deserved to be given benefit of actual expenditure incurred by him on the development of the properties for conversion and approval with Nagar Nigam while determining the actual business income earned by the assessee. Therefore, this limited issue of claim of expenditure is restored to the AO to examine veracity of the bills and vouchers of the expenditure of the assessee to allow the actual claim against expenses.

The Ld. CIT (A) has also observed that the subject properties sold were constructed over a period of 3 years by joining the land of 3 family members. However, he has ignored the vital fact that the assessee has converted these properties with a map duly approved by Nagar Parishad and transferred to his business concern company in which he was one of the Director along with his other two brothers as above which were engaged in the business of real estate development where huge expenses of Rs. 8.72 Cr. were incurred by assessee on development of projects to earn profit.

Since the planned map has been submitted to Nagar Parishad for approval which was approved and the status of property got changed to 'AT DISPOSAL after approval of the Township plan identity of the land by Khasra Nos. have been lost. The approved plan of the Fateh Royal Residency Township was being enclosed with the assessment order as Annexure A.

From the planned map submitted to Nagar Parishad for approval it is evident that the properties were approved and the status of the property got changed to 'AT DISPOSAL on 06.03.2014. Thereafter, the contiguous land was given to Fateh Agro Builders Pvt. Ltd through a developer agreement on 23.04.2014 by the assessee and his two brothers who were directors in Fateh Agro Builders Pvt. Ltd., the company which was engaged in business of Builders - Property Developers, having project in Jalore namely Fateh Royal Residency and Fateh Hills and at Bangalore in the names of Perfect Charm, Perfect Charisma and Perfect Bansankari'. During the survey held at the premise of M/s Fateh Agro Builders Pvt. Ltd., Sh. Pushp Raj Bohra himself admitted in the statement on oath given by himself that Fateh Royal Residency is jointly developed by himself, his brother Sh. Ramesh Raj Bohra and Smt. Lata Bohra W/o Sh. Dinesh Bohra and Fateh Royal Hills is jointly developed by himself, his brother Sh. Ramesh Raj Bohra and Dinesh Bohra.

In our view, the developer agreement itself could not be treated as transfer of asset under consideration through a sale deed and in fact, it was purely a business transaction which could be carried out with such ease because it was done among the three brothers who were the directors in the company to which the developing rights were being sold. In view of that matter the AO has rightly held that the activity of joining the lands and constructing houses thereon amounted to adventure in the nature of trade and accordingly, the AO was justified in charging tax on the profits on sale of the properties as income from business and disallowed the deductions/exemptions claimed by the appellant u/s.54F of the Act and 54EC of the Act.

Considering the facts in totality, and judicial precedents we hold that the Ld. CIT (A) failed to appreciate the merits of the case and consider the issue in judicious manner. Accordingly, we hold the impugned order as cryptic, infirm and perverse to the facts on record which is contrary to the law. Therefore, the impugned order is set aside.

Without prejudice to above, the limited issue of claim of expenditure is restored to the AO to examine veracity of bills and vouches and decide genuineness of the claim of the expenditure amounting to Rs. 1,42,03,562/- made by the assessee after granting an adequate opportunity of being heard.

In the backdrop of the aforesaid discussion, the appeal of the revenue is allowed, in the manner discussed as above. Order pronounced on...//...7.../2025 in the open court. (RAYPAL YADAV) VICE PRESIDENT Dated:./../97/2025 (DR. MITHA LAL MEENA) ACCOUNTANT MEMBER Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By Oder