Law:

Section:

JUDGMENT N. Kumar, J. - The Revenue has preferred this appeal against the order passed by the Income-tax Appellate Tribunal, Bangalore (for short hereinafter referred to as "the Tribunal") upholding the order of the Commissioner of Income-tax (Appeals), Bangalore, which held that the transaction involving transfer of capital asset in the hands of the assessee yielded in capital gains and not business income in the hands of the assessee. 2. The property known as "Hepburn Hall" situated in Convent Road in the Civil and Military Station of Bangalore, bearing Municipal No. 2 belongs to Miss. Rubab Mohamed Ali Kazerani, a resident of Bombay. She entered into a memorandum of understanding (for short hereinafter referred to as "the MOU") with the assessee to identify buyers for her property. In terms of the MOU, a sum of Rs. 5,50,00,000 was paid by the assessee to the owner of the property. The said MOU is dated June 8, 1995. Contemporaneously with the MOU, the owner executed a letter dated June 8, 1995, confirming that she has handed over a vacant possession of the said property to the assessee in terms of the MOU. One more letter to that effect was executed on the very same day. Thereafter, the assessee entered into a MOU with the Indian Society of the Church of Jesus Christ of Latterday Saints and received a sum of Rs. 3,73,35,320 as advance, the total sale consideration being Rs. 12,47,84,400. In other words, though he paid Rs. 5,50,00,000 to the owner, he earned a sum of Rs. 6,97,84,400 as income from the said property. Subsequently, the owner and the assessee executed a registered sale deed dated May 10, 1999, conveying the aforesaid property in favour of the said purchaser. Thereafter, the assessee declared the income under the head "Capital gains" as Rs. 3,19,60,831. The said return was accepted under section 143(1) of the Income-tax Act, 1961 (for short hereinafter referred to as "the Act"). Thereafter, the proceedings were initiated for reopening of the assessment. The assessee was issued notice. He entered appearance through a counsel, filed a detailed reply and requested to drop the proceedings. Thereafter, the assessing authority, after carefully…

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