The Commissioner Of Income Tax, Alwar v. Shri Hazarilal Goyal

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 1. D.B. Income Tax Appeal No. 690 / 2008 The Commissioner of Income Tax, Alwar. ----Appellant Versus Shri Hazarilal Goyal, C/o M/s Bharatpur Traders, New Mandi,Bharatpur (Deceased) Through Legal Heirs, Since deceasedthrough legal representatives- 1. 1/1. Shri Ravinder Kumar Goyal S/o Late Sh. Hazari Lal Goyal,C/o MS. Bharatpur Traders, New Mandi, Bharatpur ----Respondent Connected With 2. D.B. Income Tax Appeal No. 830 / 2008The Commissioner of Income Tax, Alwar. ----Appellant Versus Shri Sriniwas Goyal (HUF), C/o M/s Bharatpur Traders , New Mandi, Bharatpur(Deceased), Since deceased through legal representatives- 1. 1/1. Smt. Sadhana Goyal W/o Late Sh. Shriniwas Goyal, B-2, Ranjeet Nagar, Bharatpur 2. 1/2. Sh. Krishan Kumar Goyal, S/o Late Sh. Shriniwas Goyal, B- 2, Ranjeet Nagar, Bharatpur ----Respondent 3. D.B. Income Tax Appeal No. 123 / 2009The Commissioner of Income Tax, Alwar ----Appellant Versus Shri Hazarilal Goyal, C/o M/s Bharatpur Traders, New Mandi, Bharatpur (Deceased) Through Legal Heirs, Since deceased through legal representatives- 1. 1/1 Sh. Ravinder Kumar Goyal, C/o M/s. Bharatpur Traders, New Mandi, D-9, Ranjeet Nagar Bharatpur 2. 1/2 Sh. Baij Nath Goyal, A-101, Ranjeet Nagar, Bharatpur 3. 1/3 Sh. Vindo Kumar Goyal, A-100, Ranjeet Nagar, Bharatpur4. 1/4 Sh. Anil Kumar Goyal, B-2, Ranjeet Nagar, Bharatpur5. 1/5 Sh. Krishna Kumar Goyal, B-2, Ranjeet Nagar, Bharatpur ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain with Ms. Shiva GoyalFor Respondent(s) : Mr. Ajay Shukla _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGHJudgment 05/09/2017 1. In all these appeals, common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has assailed thejudgment and order of the Tribunal whereby Tribunal has allowedthe appeal of the assessee. 3.This court while admitting the appeals framed followingsubstantial question of law:- 3.1Appeal No.690/2008 admitted on 21.1.2009 “Whether under the facts and circumstances ofthe case and in law the order of the Tribunal isperverse in holding that the land was sold bythe assessee is not in the nature is not in thenature of business and therefore the saleconsideration cannot be treated as businessincome which is contrary to the dictum ofHon’ble Apex Court in the case of Raja J.Rameshwar Rao vs. CIT reported in 42 ITR179?” 3.2Appeal no.830/2008 admitted on 9.2.2009 “Whether under the facts and circumstances ofthe case and in law the order of the Tribunal isperverse in holding that the land sold by theassessee is not in the nature of business andtherefore the sale consideration cannot betreated as business income which is contraryto the dictum of Hon’ble Apex Court in thecase of Raja J. Rameshwar Rao vs. CITreported in 42 ITR 179?” 3.3Appeal No.123/2009 admitted on 15.4.2009 i. Whether under the facts and circumstancesof the case and in law the order of the tribunalis perverse in holding that the land was sold bythe assessee is not in the nature of businessand therefore the sale consideration cannot betreated as business income which is contrary tothe dictum of Hon’ble Apex Court in the case ofRaja J. Rameshwar Rao vs. CIT reported in 42ITR 179? ii. Whether under the facts and circumstancesof the case and in law, the sale of land by theassessee by converting the land into smallerplots could be treated as ‘capital assets’ignoring the intention of the assessee whichwas to commercially exploit the land inquestion and therefore the Assessing Officerwas justified in treating it as ‘businessincome/? i. Whether under the facts and circumstancesof the case and in law the order of the tribunalis perverse in holding that the land was sold bythe assessee is not in the nature of businessand therefore the sale consideration cannot betreated as business income which is contrary tothe dictum of Hon’ble Apex Court in the case ofRaja J. Rameshwar Rao vs. CIT reported in 42ITR 179? ii. Whether under the facts and circumstancesof the case and in law, the sale of land by theassessee by converting the land into smallerplots could be treated as ‘capital assets’ignoring the intention of the assessee whichwas to commercially exploit the land inquestion and therefore the Assessing Officerwas justified in treating it as ‘businessincome/? iii. Whether under the facts and circumstancesof the case and in law, the findings of thetribunal are perverse with regard that the firmin whose name the land was purchased hasnever declared the same as capital asset in itsreturn and therefore treating it as capital assetis erroneous by the tribunal? 4.The facts of the case are that the appellant is an individualand filed his return of income for the relevant period declaringincome at Rs.15,37,334/- on 30.10.2001. During the relevantperiod the appellant disclosed capital gains to the tune of Rs.14,52,490/-on sale of land known as “Rose Villa” scheme. Theland in question was purchased in the year 1987 for Rs.7.00 lacsin co-ownership by the appellant with his sons. This amount wasreflected in the balance sheet of the firm for the relevant period.Subsequently the land was divided between the six co-owners on31.3.1991. 4.1The AO noted that prior to its division the co-owners hadreceived a sum of Rs.10.00 lacs on account of advance againstagreement of sale of aforesaid land which was allegedly forfeited.In view of this the AO treated the value of land as Nil and broughtto tax the entire sale consideration received by the appellantduring the relevant period. The appellant claimed that the landwas capital asset whereas the AO on the basis of surroundingcircumstances treated the same as his business asset. During therelevant period of the appellant sold 10051.40 sq. land for whichhe disclosed sale consideration @ Rs.200/- per sq. yard. The AOhowever on the basis of various evidences gathered during thecourse of assessment proceedings worked out the saleconsideration of Rs.900/- per sq. yard. She ultimately made anaddition of Rs.90,46,216/- in the income of the appellant on thisaccount. 5.Counsel for the appellant has taken us to the order of the AOand while considering the issue, the AO has taken intoconsideration the transaction which has taken place and landwhich was originally belonging to the assessee which was sold forconsideration and it has been held as under:- “Value of sale consideration Total area of Rose Villa Land, Bharatpur soldout during the A.Y. under consideration was10051.40 sq. yards. The assessee hasexecuted documents showing value @ Rs.200/-per sq. yards. Sub-registrar (Stamps),Bharatpur has taken the value of land @Rs.1100/- per sq. yards and additional stampduty was charged from the purchasers of plots.Moreover, some of the plot purchasers havealso confirmed that the plots have beenpurchased by them @Rs. 1100/- per sq. yards.Relevant facts of the statement recorded on26.02.2004 from Smt. Mithilesh Gupta w/o Sh.Ram prsad Gupta, Plot No. 21, Rose VillaScheme, Bharatpur is as under:- “iz’u la[;k&1& D;k vkius dksbZ IykWV [kjhnk gS rks crk, fd vkiusfdrus oxZ QqV@oxZ xt dk IykWV [kjhnk gSA fdl nj ls rFkk fdruhjkf’k esa [kjhnk gSa] crk,aA mRrj%& eSusa IykWV ua-21 dksBh jkst fcyk] Hkjriqj esa 40 x 60 oxZ QhV dkIykWV fnukad 16-01-2000 dks 1100@& :i;s izfr oxZ xt dh nj ls:i;s 2]80]000@& esa [kjhnk FkkA “iz’u la[;k&1& D;k vkius dksbZ IykWV [kjhnk gS rks crk, fd vkiusfdrus oxZ QqV@oxZ xt dk IykWV [kjhnk gSA fdl nj ls rFkk fdruhjkf’k esa [kjhnk gSa] crk,aA mRrj%& eSusa IykWV ua-21 dksBh jkst fcyk] Hkjriqj esa 40 x 60 oxZ QhV dkIykWV fnukad 16-01-2000 dks 1100@& :i;s izfr oxZ xt dh nj ls:i;s 2]80]000@& esa [kjhnk FkkA iz’u la[;k&2& ;g IykWV vkius fdlls rFkk fdl ek/;e ls [kjhnk FkkAmRrj%& mijksDr IykWV eSusa Jh fot; caly] gksVy n ikdZ ds ekfyd dsek/;e ls [kjhnk FkkA ;g IykWV geus gtkjh yky iq= txUukFk xks;y ls[kjhnk FkkAß Regarding the discrepancy the assessee wasapprised of and a copy of statement of theabove mentioned lady was supplied to theassessee. In response to this it has been statedthat the statement was not recorded in hispresence and thus, it has got no evidentiaryvalue. Smt. Mithilesh Gupta was issued asummon u/s 131 on 24.03.2004 for attendingthe office on 26.03.2004 but on the stipulateddate, instead of attending this office sheadmitted in hospital due to ill health. Whilecontacting by inspector of this office from theconcerned doctor it came to notice that Smt .Mithilesh Gupta is in a position to givestatement. A certificate in this regard has alsobeen given by the medical officer (which is onrecord). This shows that she was underpressure by the assessee. On 29.03.2004 Smt.Mithilesh Gupta attended this office and shewas cross examined by the assessee’s. Sh. L.K.Gupta, C.A. In the cross examination she hasagain affirmed/accepted for purchase of aforesaid plot for Rs.280000/- @Rs.1100/- persq. yards. From the U.I.T., Bharatpur informationregarding the rate of sale of land has also beengathered in respect of land situated in thevicinity of the Rose Villa Scheme i.e. JawaharNagar who has vide his letter no. 964 dt.30.01.2004 and letter no. 2216 dt. 27.03.2004addressed to ITO, Ward-1, BPR has confirmedthe rates of sale of land for residentialpurposes was @Rs.1244/- per sq. yards andfor commercial purposes its rate /- per sq. yards. These rates were forthe F.Y. relevant to the A.Y. 2001-02. Though the rate of land is Rs.1100/- per sq.yard as per statement recorded and Sub-registrar, Bharatpur and more as per U.I.T.,Bharatpur rates for adjourning land,considering the facts that the rates of plotsmay vary from situation to situation i.e. ratesof land of plots located on roadside is greaterthan the rates of plots of inner side, theaverage rate of sale of land is taken @Rs.900/-per sq. yards as against @ Rs.200/- declaredby the assessee. Thus, total sale value of landwill be worked out as under:- a.Total land area sold out 10051.40 sq. yards b. Rate of land taken as discussed above Rs.900/- per sq. yard Total sale consideration Rs.9046260/- Since, the value of stock in trade of land is nilas mentioned above, hence, total saleconsideration of Rs.9046260/- is business profitof the assessee.” 6.She contended that the same view was confirmed by the CIT(A) however the tribunal has wrongly reversed the finding ofboth the authorities. 6.1She has taken us to the order of the CIT(A) which reads as under:- a.Total land area sold out 10051.40 sq. yards b. Rate of land taken as discussed above Rs.900/- per sq. yard Total sale consideration Rs.9046260/- Since, the value of stock in trade of land is nilas mentioned above, hence, total saleconsideration of Rs.9046260/- is business profitof the assessee.” 6.She contended that the same view was confirmed by the CIT(A) however the tribunal has wrongly reversed the finding ofboth the authorities. 6.1She has taken us to the order of the CIT(A) which reads as under:- “6.1I have considered the facts of thecase and submissins of the AR of theappellant carefully. It is seen that theappellant purchased the immovable propertyknown as Rose Villa in co-ownership with hissons namely Sh. Baijnath, Sri Niwas, Sh.Vinod Kumar, Sh. Anil Kumar and Sh.Ravindra Kumar in duly executed registereddeed dated 28.3.1987. The co-owners werepartner inthe firm M/s Bharatpur Trading Co.And the total purchase cost of the propertyamounting to Rs. 7.00 lacs shown in thebooks of the firm. Thereafter on 31.3.91 thecost of the property was bifurcated equallyamong the co-owners by debit entry to theirrespective capital accounts. In meanwhile allthe above persons entered into a saleagreement in writing on stamp paper on20.7.90 with Sh. Narendra Singh AdvocateS/o Sh. Munshi Singh, Sh. Gopi Singh S/o Sh.Girraj Singh and others regarding sale ofentire land of 42 bighas and 7 biswas (i.e.79376 sq. Yards). The above parties agreedto sale the above land for a consideration ofRs. 90,00,000/- and the assessee alongwithhis other co-owners received an advance ofRs. 10.00 lacs as per terms and conditions ofthe sale agreement. The land was divided into4 sectors namely A,B,C and D andd thesesectors were further divided into plots ofvarious sizes. It was also agreed with theassessee and the other co-owners that theywill get registration of plots of land dividedinto different sectors during the period20.7.90 to 31.3.92, either in the names ofgroup of purchaser or in the names ofpersons nominated by them. As per the termsand conditions mentioned at Serial No. 3 and4 of the agreement as referred to above, ifthe group of purchaser failed to get registeredthe entire land upto 31.3.92 the advance soreceived of Rs. 10.00 lacs would be forfeitedby the seller of the land. The sale agreementwould stand concelled with immediate effect. 6.2 As per records of the appellant no saletransaction of land situated at Rose Villa,Bharatpur was effected during the peirod20.7.90 to 31.3.92. Though the appellantclaimed that the date of sale of plots wasextended and the advance of Rs. 10.00 lacs was not forfeited, yet documentary proof withregard to these claims weere not producedduring the assessment proceedings. 6.2 As per records of the appellant no saletransaction of land situated at Rose Villa,Bharatpur was effected during the peirod20.7.90 to 31.3.92. Though the appellantclaimed that the date of sale of plots wasextended and the advance of Rs. 10.00 lacs was not forfeited, yet documentary proof withregard to these claims weere not producedduring the assessment proceedings. 6.3 The Total land at rose Villa area was79,376 sq. Yards which was divided into plotsof different sizes. The land of 34,376 sq.Yards was provided for space for road, park,school etc. As per the note submitted duringthe assessment proceedings for thge A.Y.1996-67. Thus the net saleable land with theappellant and the co-owners was 45,000 sq.Yard. This land was later on divided amongsix co-owners wherein each co-owner washaving the area of 7500 sq. Yard. It may beseen that right from beginning when the landwas purchased by the appellant alongwith co-owners their intention was to exploit it for thebusiness purposes only. Their long term planfor using the land for entered into on 20.7.90with Sh. Narendra Singh S/o Sh. MunshiSingh and others. In the said agreement thesystematic plan has been drawn for sellingthe plots cut on the land. The appellant andhis co-owners divided the land into 4 sectorsand it is relevant to note that the plan for salewas chacked out in such a way that plots ofparticular sectors were required to be sell firstwith a view to fetch better market price dueto their location. Therefore, the surroundingcircumstances clearly establish the fact thatthe appellant alongwith his co-ownerspurchased the land to exploit the same forcommercial purposes only. 6.4 It may be pointed out that the appellantis in regular business of selling the land aftercutting the same into residential plots. He hassold the residential plots of land from thefinancial year 1995-96 to 2000-2001 as perfollowing details.- 6.5 It is relevant to note that in all the saledeeds which have been entered into by the appellant with the purchaser of landsfollowing facts have been mentioned:- Þc;kukek 1- eS gtkjh yky iq= Jh txUukFk izlkn vk;q 73 lky tkfr oS’; 2- fuoklh xaxk efUnj] Hkjriqj jktLFkku dk foØsrk gwao gdo gd 3- Jh eksgu dqekj xxZ iq= Jh jkeukFk xxZ tkfr oS’; fuoklh jkeHkou 4- iqjksfgr ekSgYyk] Hkjriqj jktLFkku & Øsrk 5- tks fd eq> foØsrk ds LokfeRo] fefyfd;rh] dCts;kr ,oa vf/kiR; 6- dh lEifRr [kljk ua- 1200 vkcknh okds pe ua- 1 Hkjriqj jkts 7- fcyk dksBh jktsUnz uxj ds ikl Hkjriqj esa fLFkr gS ftldk eSafoØsrkfoØsrk 8- Lokeh gwa eSaus mDo lEifRr esa NksVs NksVs fjgk;’kh Hkw[k.M cuk fn;s gSa 9- ftuesa ls eSa ,d Hkw[k.M uEcj 18 fcØh djuk pkgrk gwa ftls eq>sjgujgu 10- oS/k eqUrfdy djus dk ge izkIr gSA Hkw[k.M dk {ks=Qy 2400 oxZQqV gS 11- tks ekSds ij [kkyh gS fdlh Hkh rjg dk dksbZ fuekZ.k ugha gS ftldkuD’kk 12- o jax lq[kZ layXu c;ukek gktk gS layXu uD’ks esa jax lq[kZ lsnf’kZr Hkw[k.M 13- la[;k 18 o; gksxkß 6.5.1. The aforesaid would show that theappellant himself has claimed that he haddivided the land in the plots of reasonable sizesfor residential purposes. The cutting of land inthe plots for residential purposes clearlyestablishes the fact that the appellant wanted toexploit the land commercially. He has not soldthe land in the copndition in which it wasoriginally purchased. The land was not onlydivided in residential plots, yet the space forroads and other connected facilities for aresidential colony was also earmarked. 6.6 The Hon'ble Andhra Pradesh High Court inthe case of CIT v/s M Krishna Rao 120 ITR 101similar circumstances held that "the fact that theassessee purchased the land divided them intoplots and sold at higher price go to establish thatthe intention of the assessee was to carry on anadventure in the nature of trade. If his intentionwere otherwise he would not have plotted outthe land, but sold the same in the same 6.6 The Hon'ble Andhra Pradesh High Court inthe case of CIT v/s M Krishna Rao 120 ITR 101similar circumstances held that "the fact that theassessee purchased the land divided them intoplots and sold at higher price go to establish thatthe intention of the assessee was to carry on anadventure in the nature of trade. If his intentionwere otherwise he would not have plotted outthe land, but sold the same in the same condition as when he purchased it. Theproximity of the date of purchase of land and thedate of obtaining permission from the villagepanchayat for conversion of the land intobuilding sites supports the view that hisintention was not to sell the land withoutconversion. In the circumstances, the Tribunalwas not correct in holding that the assessee hasnot carried on an adventure in the nature oftrade. 6.61 The Hon'ble Punjab & Haryana High courtin the case of Harbans Singh v/s CIT, Amritsar-l132 ITR 77 on the identical facts has held asunder:- "Even a single venture may be regarded as atrade or business. When a person acquires landwith a view to selling it later after developing it,he is carrying on an activity resulting in profitand the activity can be described only as abusiness venture. Where the person goes furtherand divides the land into plots, develops thearea to make it more attraction and sells theland not as a single unit, as he bought it, but inparcels, he is dealing with land as his stock-in-trade, he is carrying on business and making aprofit. Held, that the transaction of the assesseeamounted to an adventure in the nature of tradebecause soon after purchasing the land hedeveloped it into residential sites and startedselling the plots within two years of its purchaseand the profit earned by the sale of theagricultural land was to be assessed as businessincome and not as capital gains." 6.7 The aforesaid decisions of Hon'ble HighCourts are based on the decision of Hon'bleSupreme Court rendered in the case of Raja JRameshwar Rao vs CIT (1961) 42 ITR 179 (SC). 6.8 Therefore, in view of the aforesaidcircumstances, the AO hasrightly treated theland under reference as stock-in-trade of theappellant for the relevant period. In view of thisthe appellant's ground against the AO's action ishereby rejected 7. The second issue under this ground raised bythe AR pertains to advance of Rs. 10.00 lacsallegedly forfeited by the appellant and the co- owners of the land. In this regard the AR of theappellant made the following submissions:- "From the discussion made earlier on this issue,it is clear that the ld. AO has on its ownassumption and to gain an unfair advantageover the appellant has alleged that the advanceof Rs. 10.00 lacs was forfeited. She has tried tofind support from the terms and conditions ofthe agreement dated 20-7-90 and from so-calledstatement of Shri Narendra Kumar. As against this, the appellant had categoricallysaid that the said agreement though could notbe completed in stipulated time due to certaindisputes, was still in force as per implied consentof both the parties and the sale of land has beencarried out in terms of the said agreement. Tosubstantiate the same by documentaryevidence, we have already placed copy of theregistered sale deed executed in the year 1995-96 which carried signature of Shri NarendraKumar establishing the fact that terms ofagreement were still in force even long after 3-3-1992 . So far as placing reliance on the statement ofShri Narendra Kumar is concerned we havecontended in detail that firstly the saidstatement cannot be used against the appellant.Secondly in the statement Shri Narendra Kumarhas nowhere alleged that the said Rs. 10.00 lacswas forfeited and lastly we have submitted copyof letter the from Shri Narendra Kumar, wherehe has confirmed that Rs. 10.00 lacs advancewas not forfeited. So far as placing reliance on the statement ofShri Narendra Kumar is concerned we havecontended in detail that firstly the saidstatement cannot be used against the appellant.Secondly in the statement Shri Narendra Kumarhas nowhere alleged that the said Rs. 10.00 lacswas forfeited and lastly we have submitted copyof letter the from Shri Narendra Kumar, wherehe has confirmed that Rs. 10.00 lacs advancewas not forfeited. 7.1 I have considered the facts of the case andsubmissions of the AR of the appellant carefully.It is seen that as per the conditions mentionedat serial no. 3 and 4 of the agreement dated20.7.90 as referred to above, if the group ofpurchaser failed to get registered the entire landupto 31-3-92 the advance so rcceived of Rs.10.00 lacs would be forfeited by the seller of theland. The sale agreement would stand cancelledwith immediate effect. 7.2 As per records of the appellant no saletransaction of land situated at Rose Villa,Bharatpur was effected during the period 20-7-90 to 3 l-3- 92. Though the appellant claimedthat the date of sale of plots was extended andthe advance of Rs. 10.00 lacs was not forfeited,yet documentary proof with regard to theseclaims were not produccd during the assessmentproceedings. Shri Narendra Singh in hisstatement dated 25-3-2004 reiterated the factthat the Rs. 10,00,000/- were not returned tohim by the appellant till date. 7.3 The copy of the statement was given to theappellant. The AR of the appellant during theappellate proceedings has filed a copy ofundated letter (page 11 of the paper book dated22.11.2004) from Sh. Narendra Singh. In thisletter Shri Narendra Singh i stated that themoney under reference was not forfeited. 7.4 The AR has not controverted the conditionregarding forfeiture of the amount in theagreement dated 20-7-90. There is also notdenial of fact that the conditions of theagreement were violated. The appellant has notfiled any other document to know that the timeperiod of execution of the agreement dated 20-790 was extended beyond 31-3-1992 and thecondition for forfeiture amount under referencewas waved. There is no evidence on record toshow that money was returned to Sh. NarendraSingh. It is quite surprising that the appellantwas selling plots as per his on will in the F.Y.2001 without any interference of Sh. NarendraSingh, yet he was claiming that the impugnedagreement was in force. 7.5 In view of the foregoing discussion it is clearthat money under reference remained with theappellant and the co-owners. I have already heldthat the land has to be treated as tock-in-tradeof the appellant, therefore, the provisions ofsection 51 of the Act cannot be invoked in thegiven circumstances. The cost of land underreference cannot be adjusted against theaforesaid amount. The cost of land has to betaken as per the records of the appellant. This is a case where the appellant receivedadvance in usual course business which 7.5 In view of the foregoing discussion it is clearthat money under reference remained with theappellant and the co-owners. I have already heldthat the land has to be treated as tock-in-tradeof the appellant, therefore, the provisions ofsection 51 of the Act cannot be invoked in thegiven circumstances. The cost of land underreference cannot be adjusted against theaforesaid amount. The cost of land has to betaken as per the records of the appellant. This is a case where the appellant receivedadvance in usual course business which remained with him and same was not returnedtill date. The AR of the appellant claimed thatthe agreement was in force in F.Y. 1995-96. Hefiled the copy of a registered sale deed executedin F.Y. 1995-96 bearing signature of Sh.Narendra Singh However, no evidence has beenbrought on record to show that the agreementwas in force beyond F.Y. 1995-96. Therefore, ifagreement lasted till F.Y. 1995-96, yet theappellant could not give any evidence to showthat any plots etc. was given to Sh. NarendraSingh against the advance of Rs. 10.00 lacsunder reference. There is nothing on record toshow that Sh. Narendra Singh carried out anyproceedings to take back the advance given tothe appellant and the co-owners of the land. Asper the Limitation Act Sh. Narendra Singh couldhave claimed his amount from the appellant bythe financial year 1999-2000 as the agreementwas in force till F.Y. 1995-96. This has not beendone. Therefore, under these circumstancesthere was a final forfeiture of the amount by theappellant in the financial year 1999-2000. Thisforfeited of amount was in connection with theland under reference. The forfeited amount inthe hands of the appellant and the co-ownerscannot be treated as capital receipts in view ofthe decision of Hon'ble Supreme Court in thecase of CIT v/s Karm Chand Thapar & Othersreported in 222 ITR 112 wherein the Hon'bleCourt as held that "the amount initially notreceived as trading receipt can become a tradingreceipt subsequently". I have already held thatthe land under reference is stock-in-trade of theappellant. Therefore, in view of aforesaid circumstancesthe AO may examine the taxability of forfeitedamount in the relevant assessment year when itwas finally forfeited by the appellant and the co-owners He must follow due procedure of law inthis regard. 8. The 3rd grievance under this ground isagainst adoption of sale consideration of Rs.900/- per sq. yard as against the amount shownby the appellant. During the assessment proceedings the AOnoted that the appellant sold total area of RoseVila land measuring 10051.4 sq. yard and thedocuments were executed showing value at Rs.200/- per sq. yard. The Sub-Registrar (Stamp Duty) had taken the value of land at Rs. 1100/-per sq. yard and additional stamp duty wascharged from the purchaser of the plot. The AOrecorded the statement of Smt. Mithlesh Guptawho had purchased the Plot No. 21 in Rose VilaScheme wherein she had confirmed that the plotwas purchased by her Rs 1100 per sq. yard. TheAO provided the copy of the statement of Smt.Mithlesh Gupta to the appellant. Subsequentlythe AR of the appellant Sh. L.K. Gupta crossexamined Smt. Mithlesh Gupta on 29-3-2004.During the cross examination again Smt.Mithlesh Gupta confirmed that the plot waspurchased by her a Rs. 1100/- per sq. yard. TheAO also collected information from the UIT,Bharatpur regarding sale of land situated invicinity of Rose Vila Scheme i.e. Jawahar Nagar.The Secretary, UIT, Bharatpur vide letter dated8-3-2004 No. 1695 informed that the rate ofsale of land for residential purposes was Rs.1244/- per sq. yard and for commercial purposethe rate was Rs. 4110/- per sq. yard at therelevant point of time. Therefore, keeping inview the surrounding circumstances the AOtaken the average rate of land at Rs. 900/- persq. yard accordingly. 8.1 During the appellate proceedings the AR ofthe appellant has objected to the aforesaidaction of the AO and has made the followingsubmissions:- "That it would have been evident that statementof Smt. Mithlesh Gupta has been treated asbench mark. We have also contended that herstatement is unreliable piece of document as shelooses her credibility because while before theregistrar she admits that she has purchased theland Rs. 200/- per sq. yards as is depicted in theregistered sale deed and on the other handbefore the ld. AO she states the rate at Rs.1100/- per sq. yards. The department sought toblindly rely on the statement of Smt. MithleshGupta without trying to inquire from her thatwhat was the source for alleged unaccountedpayment that whether she has reflected in herbooks the value of purchase of land Rs. 1100/-and if not what actions are taken against her forthe said concealment. Has the department actedjudicially by not making requisite inquiry andgranting her immunity because her statementserves their purpose. In fact we have in detail argued that the revenue has acted in conspiracyby not disclosing the statement of Shri VijayBansal which probably contradicts the statementof Smt. Mithlesh Moreover, the department byadoption the rate of Rs. 900/- has proved bythemselves that even they do not rely on thestatement of Smt. Mithlesh Gupta. He relied onthe decision of Hon ble ITAT Hyderabad in thecase of Smt. K.Narasamma vs ITO 32 ITD 494and quoted extensively from the said judgementin his submissions. 8.2 During the appellate proceedings the AR ofthe appellant filed affidavits from the followingpersons:- (i) Sh. Balwant Kumar S/o Sh. Om Prakashdated 26.6.2004 (ii) Sh. Gauri Shankar S/o Sh. Om Prakashdated 26.6.2004 (iii) Smt. Sandhya Bansal W/o Sh. Vijay KumarBansal dated 18.6.2004 (iv) Smt. Kusum Tiwari W/o Sh. Baijnath Tiwaridated 18.6.2004 (v) Sh. Baijnath Tiwari S/o Sh. Soni Lal Tiwari dated 18.6.2004 (vi) Smt. Mohini Bansal W/o Sh. Suresh Bansaldated 18.6.2004 (vii) Sh. Vijay Bansal S/o Sh. Kedarnath Bansaldated 18.6.2004 Since these were the additional evidences filedat the appellate stage, the copy of all theaffidavits were sent to the AO for hisexamination i.e. this office letter No. 996 dated3-1-2005 in terms of Rule 46A of the IT Rules1962. The report of the AO in this regard wasreceived vide his letter No. 3756 dated 24-3-2005. The AO inter-alia reported that Smt.Sandhya Bansal, Kusum Tiwari, Baijnath Tiwari,Vijay Bansal and Smt. Mohini Bansal confirmedthat they had purchased the land in the RoseVilla Scheme (at Rs. 200/- per sq. yard The AOrecorded the statement of Sh. Balwant Kumarand Sh. Gauri Shankar subsequently as theywere not available at that time. The AO vide hisreport brought on record further facts in thisregard:- (i) The sale price of the plots is depending onvarious factor, like location, corner plot, backside plot, distance from main road distance frommarket and price of the plots in the near by locality Smt. Mithlesh Gupta, Sh. BhupendraSingh and Sh. Chandra Pal Singh havepurchased their plots Rs. 1100/-,900/- and600/- per sq. yard during the year in the samecolony (Rose villa). They are all governmentservant and filing income- tax returns to thedepartment. Only computation of income filed bythese government servants and not filing theirbalance sheet. (i) The sale price of the plots is depending onvarious factor, like location, corner plot, backside plot, distance from main road distance frommarket and price of the plots in the near by locality Smt. Mithlesh Gupta, Sh. BhupendraSingh and Sh. Chandra Pal Singh havepurchased their plots Rs. 1100/-,900/- and600/- per sq. yard during the year in the samecolony (Rose villa). They are all governmentservant and filing income- tax returns to thedepartment. Only computation of income filed bythese government servants and not filing theirbalance sheet. (ii) it is normal practice that no one can declareactual sale consideration at the time ofregistered the document before Sub Registrarfor the purpose of saving stamp duty. Due tothis state government is suffering from greatloss of revenue charged from stamp duty. Tostop the evasion of stamp revenue, statementgovernment fixed the rate of land in each areafor charging of stamp duty. Rates are decided bythe District Magistrate in a meeting of revenueofficers in each three months on the basis oflocation, other facts and circumstances of theland. In this area Sub-Registrar taken marketrate 2 Rs. 1035/- to Rs. 1273/- per sq. yard forthe purpose of charging of stamp duty.Therefore, it is established that market value ofthis land is approximately Rs 1100/- per sq. yardin this colony. (iii) The land of the Rose Villa Colony belongs tothe royal family of Bharatpur Riyasat. This landis situated at National high Way, near to citynear to hotels situated at Highway, Collectorate,Ghana Bird Centauro, circuit house, near to IASand RAS officers Govt. bungalows. This hascommercial value whereas Jawahar NagarColony is far from National High Way, city,collectorate, bird centaury in comparison to RoseVilla. This way the location of Rose villa is muchbetter than Jawahar Nagar Colony. UIT,Bharatpur auctioned the plot in Jawahan NagarRs. 1240/- per sq. yard during the year underconsideration. When land of inferior quality issold in open auction Rs. 1240/- per sq. yardthen land of better quality should be sold atleast to the rate of inferior quality plots sold bythe UIT, Bharatpur. Hence, it is well establishedthat market rate in Rose Vila colony isapproximately Rs. 1100/- per sq yard. (iv) Assessee purchased 79376 sq. yard land forRs. 7,00,000 in 1987. the land also includes onebig kothi. From these facts assessee purchasedabove land Rs. 8.81 per sq. yard in 1987. (v) Assessee himself made an agreement of79376 sq. yard land of Rose Vila with Sh.Narendra singh and others on 22-7-90 for Rs.90.00 lacs. According to which rate of the landcomes to Rs 113.38 per sq. yard in the year1990. this way value of the land inflated 12 to13 times in 3 years. It is worthwhile to mentionhere that during the period 1990 no 2001 pricesof the urban land has inflated substantiallywhereas the assessee claimed that there was noincrease in the value of the land during the longspan of 10 to 11 years. It s also surprise to notethat in 10 years of the time value of the land notincreased to twice whereas in three years valueof the land has increased 12 to 13 times. (vi) Assessee filed affidavits from 7 purchaserswhich are all business men and are regularlyfiling return of income along with trading, P&La/c and balance sheet. In case they admittedmore purchase consideration of plot thendeclared in the return. In this situation theircases can be reopened which may adverselyaffect their interests. No one can give such typeof evidence/statement which can adverselyaffect their own cases. In these circumstancesno one would admit the real fact. (vii) Although the above said persons have notadmitted the real truth (i.e. the real purchasecost), yet following persons in their statementrecorded earlier during the assessmentproceedings by the undersigned have clearlyadmitted higher rate of purchase price thandeclared in the registered documents. (vii) Although the above said persons have notadmitted the real truth (i.e. the real purchasecost), yet following persons in their statementrecorded earlier during the assessmentproceedings by the undersigned have clearlyadmitted higher rate of purchase price thandeclared in the registered documents. S.No. Name of Year of Rate shown Rate per sq. Remarkspersonpurchaseper sq. yard in yard admitted registryin the statement1.Smt. 2000-01200/-1100/-StatementMithlesh recorded Guptaat the time of assessme nt2.Sh. 2000-01200/-900/--do-Bhupendra Singh3.Sh. Chandra2000-01200/-600/--do-Pal Singh The copy of the aforesaid report was handed overto the AR of the appellant for further submissionsin this regard. The AR of the appellant vide letterdated 2-4-2005 countered the report of the AOand made the following submissions:- " That so far as Smt Sandhya Bansal, Smt KusumTiwari, Shri Bejnath Tiwari and Shri Vijay Bansalare concerned, they have confirmed the saleconsideration Rs. 200/- and thus the issue endsthan and there and the doubts and apprehensionsof the Id AO are irrelevant. We hope your honourwould appreciate that assessments cannot bebased on mere conjectures and surmise. That even Smt. Mohini Bansal has confirmed therate of Rs. 200- per sq. yard and thereafrer, it ishardly material that the stamp paper has not beenpurchased by her own. The issue is and has alwaysbeen as to what is the sale consideration that haspassed on to the appellant. The answer to which isRs 200/-. That so far as emphasis laid down by theld. AO that stamp paper was not purchased by thedeponent is concerned, probably the ld. AO haslittle awareness of the fact, that firstly there is nostrict requirement under the law that an affidavithas to be made on a stamp paper, it could well beon a plain paper. Moreover, simply because entriesin the registers of the stamp vendor on respectivepages were found signed by other persons in thename of executor, the affidavit would not becomesuspicious or forged. Your honour must not loosesight of the fact that the signatures have beenattested by the notary public and it is only the ld.AO who can dare to adversely comment on a legalauthority. In view of the above discussions and issue inhand, there is hardly any requirement to commentupon the further remakes given in the remandreport, however, in fitness of the circumstances,we shall take this opportunity to further support our contentions placed in our written submissionsas under:- (a) Regarding statement of Smt. Mithlesh Guptayour honour would note that we have madedetailed arguments in our written submissionsboth on veracity of her statement and prejudicialattitude of the ld. AO who has suppressed theconnected and important piece of statement ofShri Vijay Bansal. We are really surprised that howeasily that issue is being sidelined. Withoutrepeating the detailed contentions placed inwritten submissions, we would once againemphasize that the statement of Shri Vijay Bansalis probably the most relevant piece of document,which should clarify the modus operandi of theassessment proceedings, the prejudicial attitude ofthe ld. AO and veracity of statement of Smt.Mithlesh Gupta who has admitted that the land hasbeen purchased through Shri Vijay Bansal. Similar is the position with regards to BupendraSingh who has also stated that he has purchasedthe land through Shri Vijay Bansal and thereforehis statement should also be considered in light ofthe statement of Shri Vijay Bansal. Reliance place on the statement of shri ChandrapalSingh is of no relevance in the case of theappellant as clearly enough the said person hasnot purchased land from the appellant, but fromSriniwas Goyal and therefore necessary commentson merits would be given in the relevant case. Similar is the position with regards to BupendraSingh who has also stated that he has purchasedthe land through Shri Vijay Bansal and thereforehis statement should also be considered in light ofthe statement of Shri Vijay Bansal. Reliance place on the statement of shri ChandrapalSingh is of no relevance in the case of theappellant as clearly enough the said person hasnot purchased land from the appellant, but fromSriniwas Goyal and therefore necessary commentson merits would be given in the relevant case. We have repeatedly emphasized that even thoughstatement of Shri Vijay Bansal has not been givento the appellant, yet as the same has beenrecorded, your honour to consider the same andshould clearly comment upon the same. (ii) In the next para the ld. AO has madegeneralized adverse comment that no one declaresthe actual sale consideration and therefore thestatement government has fixed DLC rate whichestablishes that market value of this land isapproximately Rs.1100/- per sq. yard. Deemingprovisos have always found place in statutes forone reason or the other and the recent section50C inserted in the Income-tax Act, 1961 is anapparent example of it. But such provisions neverconclusively states that the deemed value is thereal value and always leaves an option for theassessee to chose otherwise. What this suggests isthat even the legislature does not treat everysingle individual in the same way and thereforewho has given the authority to ld. AO to pass such general comments. He is fee to have an option buthe has no authority under law to pass suchgeneralized adverse comments and notsubstantiate the same. 8.3 I have considered the facts of the case andsubmissions of the AR of the appellant carefully.The main controversy involved herein pertains tothe rate of land sold by the appellant during therelevant period. In order to arrive at anyconclusion in this regard it would be necessary toappraise the surrounding circumstances, locationof the land and related factors having effect on itsrate. There is no denial of fact that the land underreference belong to the Royal Family of BharatpurRiyasat. This is situated at National Highway nearthe city and close to Ghana Bird Sanctuary. TheCircuit House and Bungalows of IAS and RASofficers are located in the vicinity of this land. TheUIT, Bharatpur has developed a colony calledJawahar Nagar colony far away from this locationwhere it has sold the plots of land @ Rs. 1240 persq. yard during the relevant period. The appellantalongwith his sons purchased this land in 1987 andmade agreement to sell it on 22-7-90 for a sum ofRs. 90.00 lacs. The rate per sq. yard was workedout at 113.38 in that condition. As per record theappellant divided the land in residential plots ofvarious sizes provided space for road, school andother amenities. After such allocation naturally thetotal saleable area reduced from 79376 sq. yard to45000 sq. yard. Yet the appellant alongwith hisother co-owners sold the land @ Rs. 200/ per sq.Yard at a meagre profit of Rs. 86/- per sq. yardafter a lapse of 10 years. 8.4 The AO recorded the statement of Smt.Mithlesh Gupta wherein she had deposed that shepurchased the plot of land from the appellantmeasuring 40x60 sq. Feet for Rs. 2,80,000/-@ Rs.1100/- per sq. Yard. The AR of the appellant alsocross examined Smt. Mithlesh Gupta on 29-3-2004wherein she has reiterated that she purchased theplot from the appellant @ Rs. 1100/- per sq.Yard.The AR of the appellant has not brought onrecord any evidence to show that Smt. MithleshGupta was having any animosity with theappellant. Further, there is nothing on record toshow that statement was motivated. 8.5 It may be pointed out that Shri Sri NiwasGoyal son of the appellant also sold his plotsduring the relevant period and discloscd the rate 8.4 The AO recorded the statement of Smt.Mithlesh Gupta wherein she had deposed that shepurchased the plot of land from the appellantmeasuring 40x60 sq. Feet for Rs. 2,80,000/-@ Rs.1100/- per sq. Yard. The AR of the appellant alsocross examined Smt. Mithlesh Gupta on 29-3-2004wherein she has reiterated that she purchased theplot from the appellant @ Rs. 1100/- per sq.Yard.The AR of the appellant has not brought onrecord any evidence to show that Smt. MithleshGupta was having any animosity with theappellant. Further, there is nothing on record toshow that statement was motivated. 8.5 It may be pointed out that Shri Sri NiwasGoyal son of the appellant also sold his plotsduring the relevant period and discloscd the rate at Rs. 200/- per sq. yard. Shri Chandra Pal Singhwho had purchased the plot from Shri Sri NiwasGoyal deposed before the AO that he hadpurchased the plot a Rs. 600 per sq, yard. Shri SriNiwas Goyal did not cross examined Sh. Chandrapal Singh when opportunity for the same wasgiven to him by the AO in this regard. 8.6 The AR of the appellant in support of his claimhas filed affidavits from the aforesaid 7 personswherein they have stated that they had purchasedthe land from him Rs. 200/- per sq,yard. I havegone through the affidavit and found that theycontain the identical language. It may be pointedout that these affidav