Law:

Section:

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 year 1956-57 - Assessee entered into contract with agent of original owner to purchase a estate - Assessee divided said estate into different plots and sold it to different parties and sale deed was executed by original owner - One of said plot remained with assessee - Whether division of land into plots and sale to various purchasers indicated that there was scheming and organization on part of assessee and thus, transaction of assessee constituted an adventure in nature-of-trade and was in course of a profit-making scheme - Held, yes - Whether in such a situation, income-tax authorities had correctly estimated profit of assessee by treating land as stock-in-trade and valuing it according to normal accountancy practice. - Held, yes FACTS In this case the appellant was assessed for the assessment year 1956-57 on a total income of Rs. 8,400. The ITO later on came to know that the assessee's income from the sale of estates had escaped assessment. The ITO took action under section 34(1)(a) of the 1922 Act for the assessment year 1956-57 on 13-8-1959. Under an agreement a company, namely 'M' sold and delivered an estate to one 'A'. It was agreed that the vendor would execute the necessary conveyance in favour of 'A' or his nominees. The assessee entered into an agreement with 'A' part of that estate. The assessee subsequently divided the area into 23 plots and found purchasers for 22 of these plots. The total extent of 22 plots for which he found purchasers, a sale deed was executed by the original selling company and plots were conveyed to the respective purchasers and the 23rdplot was conveyed to the assessee himself. The ITO worked out profit from above transaction held that as the assessee's profit from an adventure in the nature-of-trade and included in his total income under section 34(1)(a) of Act 1922. The assessee appealed to the AAC who rejected the appeal. The assessee's appeal before the Tribunal was also rejected. On reference the High Court answered the question against the assessee. On appeal to…

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