R.R. Rastogi, J. - (1.) THESE two petitions can be conveniently taken up together. The facts giving rise to these writ petitions are as under: The petitioner, S. P. Kochhar, an individual, is proprietor of a business carried on in the name and style of Dehra Dun Land and Housing Corporation. The business is that of coloniser and a dealer in real estate. On May 19, 1967, the petitioner had entered into an agreement with Amitabh Textile Mills Ltd., Dehra Dun (hereinafter referred to as " the company"). This company was the absolute owner of a bungalow and land surrounding, bearing No. 52, Rajpur Road, Dehradun, having a total area of 8 bighas 17 biswas and 10 biswansis (71,876 sq. ft.). The company agreed to sell and the petitioner agreed to purchase this property for a sum of Rs. 1,40,000. The petitioner paid a sum of Rs. 10,000 as earnest money and promised to pay the balance before or at the time of the execution of the sale deed. The petitioner could buy the property in his own name or in the name of his nominee or nominees partly in his name and partly in the names of his nominees and in one lot or in pieces and at one time or at different times. The possession of the bungalow except for the portion occupied by the Kapoor was delivered to the petitioner who was entitled to make additions or alterations therein without diminishing the value of the property. It was further agreed that the petitioner could prepare layout plan for the development of the said property and get the necessary sanction therefor. The transaction was agreed to be completed within two years, that is by May 18, 1969, provided Sri Kapoor vacated the portion occupied by then, and in case he did not do so the price would stand reduced by Rs. 5,000. It was further provided in the agreement that during the said period of two years if the petitioner wanted that any portion of the said property may be conveyed to any other person, the company would sell the same to the said person as the petitioner's nominee and the price was to be paid at the rate of Rs. 15,000 per bigha. The price of the entire constructed portion along with 1 bigha 17 biswas 12 biswansis of appurtenant land was to be at Rs. 50,000 and if portions thereof were sold to the petitioner's nominee, sales were to be made for a proportionate price.
(2.) PARTIES proceeded to act upon this agreement and a sale deed was executed in favour of the petitioner by the company on June 26, 1969, The preamble of the sale deed proceeded to state that after the completion of the agreement to sell, the petitioner started repair and improvement of the property by levelling uneven ground, laying the main sewage line, constructing roads, etc. During this period the company effected the following sales : JUDGEMENT_255_ITR145_1984Html1.htm The preamble further recited that the balance consideration of Rs. 71,732.00 had been paid by the petitioner to the company by means of various cheques. It had been agreed that out of the said payments the vendor was to sell the remaining property in favour of three persons : one to Mrs. Sandhu for Rs. 40,000 ; second portion to the petitioner's wife for Rs. 732 and the third portion to the petitioner himself for Rs. 31.000. For the assessment year 1970-71, the previous year ended March 31, 1970, the assessee filed a return showing a loss of Rs. 28,672 on June 8, 1970. Subsequently, he filed a revised return on March 6, 1973, showing a loss of Rs. 5,80,204. The ITO completed the assessment at a total income of Rs. 50,286 after setting off the carried forward losses of earlier years. One of the additions made consisted of Rs. 85,625 which was arrived at in the following manner : JUDGEMENT_255_ITR145_1984Html2.htm It may be noted that the petitioner had admitted before the ITO that the land left with him after the sales made to his nominees by the company was his stock-in-trade but the question of taking any profit did not arise until the entire land had been eventually sold. Further, he claimed an expenditure of Rs. 1,03,785 as having been incurred between April 1, 1967, and March 31, 1970, on the development of the land. These contentions were repelled by the ITO. In regard to the sale of land made to the assessee's wife for Rs. 732, which was in respect of one-fourth of a bigha, in the opinion of the ITO, the agreed price of land to be sold to the nominee of the petitioner being Rs. 15,000 per bigha, the balance was to be treated as petitioner's profit and thus an addition of Rs. 2,268 was made. Similarly, the petitioner had sold a plot to Smt. Bawa for Rs. 9,000 and profit of Rs. 900 was shown in that transaction. In the opinion of the ITO the profit shown was low. He estimated the sum at 38 per cent. and made an addition of Rs. 2,420.
(3.) THE petitioner appealed to the AAC. THE AAC deleted these latter two additions. In his opinion there could have been no profit in respect of the sale made by the petitioner in favour of his wife and as regards the sale made in favour of Smt. Bawa, he held it to be a distress sale. Coming to the addition of Rs. 85,625 he was of the opinion that this transaction had been entered into by the petitioner with a view to acquire a residence for himself and there was no element of profit involved therein. In the result, all these additions were deleted. Aggrieved, the Revenue filed an appeal before the Appellate Tribunal. The Tribunal found that the real issues involved in the case had not been decided by the Revenue authorities and remanded the case to the ITO for making a fresh assessment. The conclusions arrived at by the Tribunal were : " 1. That the assessee did carry out a business deal in purchasing the land and building and having plots thereof sold to various of his nominees. 2. That these sales which resulted in profit to the assessee took place in the previous year earlier to the previous year under consideration except for one sale of Rs. 40,000 to Mr. Sandhu, which alone was relevant for this year. 3. That the profits on transactions should be found out by estimating the cost price of the plot, and the land sold and considering the sale price for which that particular piece of land had been sold and treating the difference as the profit or the loss ; and 4. That in so ascertaining the cost price, cost price of the building and the plot retained by the assessee should be excluded and the assessee should also be given the benefit of the development expenditure, if any, incurred for developing the land. " ;