IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 1044/MDS/2008 ASSESSMENT YEAR : 2003-04 M/S SHRIRAM PROPERTIES AND CONSTRUCTIONS(CHENNAI) LTD GREAMS DUGAR 149, GREAMS ROAD CHENNAI VS THE INCOME-TAX OFFICER (OSD) COMPANY CIRCLE VI(2) CHENNAI [PAN - AAACS0656G] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.D.GOPAL, ADVOCATE RESPONDENT BY : DR.I.VIJAYAKUMAR, CIT O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSESSMENT YE AR 2003-04, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT-III, CHEN NAI,DATED 10.3.2008, PASSED U/S 263 OF THE ACT. 2. THE FACTS, IN NUT SHELL, LEADING TO THIS APPEAL ARE THAT THE ASSESSEE IS A DOMESTIC COMPANY, ENGAGED IN THE BUSI NESS OF REAL ESTATE DEVELOPMENT. IT FILED ITS RETURN OF INCOME F OR ASSESSMENT YEAR 2003-04 ON 25.11.2003 ADMITTING TOTAL LOSS OF ` 34,62,933/-. REGULAR ITA 1044/08 :- 2 -: ASSESSMENT WAS PASSED ON 16.3.2006. SUBSEQUENTLY, THE LD. CIT CALLED FOR THE RECORDS OF THIS ASSESSMENT ORDER AN D FOUND IT TO BE ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE IN TERESTS OF THE REVENUE FOR THE FOLLOWING REASONS: IT IS SEEN THAT THE ASSESSEE HAS DEBITED TO THE PR OFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2003 A SUM OF ` 2297.95 LAKHS UNDER THE HEAD COST OF PROPERTY DEVELOPMENT. BREAK UP OF THIS ITEM IS GIVEN IN SCH EDULE 10 TO THE FINANCIAL STATEMENT. IT IS SEEN THERE FROM THAT THE AMOUNT DEBITED TO PROFIT & LOSS ACCOUNT CONSISTED O F THE FOLLOWING: A. COST OF CONSTRUCTION ` 21,67,18,408/- B. COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS FROM LAND OWNERS ` 1,30,76,329/- ` 22,97,94,737/- IT IS ALSO SEEN THAT THE BREAK UP OF COST OF CONST RUCTION OF ` 2167.18 LAKHS AT A ABOVE IS GIVEN SCHEDULE 6 AND TH AT ONE OF THE ITEMS INCLUDED IN THE SAID SCHEDULE 6 IS COS T OF ACQUISITION OF DEVELOPMENT RIGHTS ` 138.93 LAKHS. WHILE COMPLETING THE ASSESSMENT BY ORDER DT.16.3.2006 REF ERRED TO ABOVE, THE AO HAS ASSESSED ONLY ` 132.66 LAKHS SHOWN UNDER THE HEAD COST OF PROPERTY DEVELOPMENT, WHERE AS EXPENDITURE OF ` 1,30,76,329/- SHOWN TOWARDS 'COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS FROM LAND OW NERS' IN SCH. 10 HAS NOT BEEN ASSESSED. THIS OMISSION ON THE PART OF THE AO HAS RESULTED IN THE ESCAPEMENT OF INCOME RENDERING THE ASSESSMENT ORDER DT.16.3.2006 ERRONEO US ILL SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REV ENUE. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO FURNISH CALLING UPON THE ASSESSEE OBJECTIONS IF ANY AS TO WHY DIREC TIONS U/S. 263 SHOULD NOT BE ISSUED TO THE ASSESSING OFF ICER TO REVISE THE ASSESSMENT FOR ASST. YEAR 2003-04 ON TH E ABOVE ISSUE. 3. THE EXPENDITURE OF ` 1,30,76,329/- SHOWN TOWARDS COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS FROM THE LAND OWNERS IN SCHEDULE 10 HAS NOT BEEN ASSESSED. SO, A SHOW CAUSE NOTICE WAS ISSUED TO THE ITA 1044/08 :- 3 -: ASSESSEE TO FURNISH THE REQUIRED OBJECTION, IF ANY, AS THE LD. CIT HAD PROPOSED TO REVISE THE ASSESSMENT ORDER IN QUESTIO N. IN RESPONSE, THE REPLY ON BEHALF OF THE ASSESSEE WAS FILED, STAT ING THEREIN AS UNDER: 'PLEASE REFER TO YOUR NOTICE U/S 263 OF THE INCOME TAX ACT WHERE IN IT HAS BEEN MENTIONED THAT THE ASSESSMENT COMPLETED ON 16.03.2006 U/S 143 OF THE INCOME TAX ACT IN THE CASE OF ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE REASO N GIVEN IS THAT THE COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS FROM LAND OWNERS ` 13076329 HAS NOT BEEN ASSESSED BY ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER AN D IT HAS RESULTED IN TH E ESCA P E MENT OF INCOME . WE SUBMIT THAT ' T H E COST OF ACQUIRING R IGH TS FOR ADD I T I ONAL FLATS FROM LAND OWNERS IS N O T AN ASSESSABLE ITEM AND THE A SS ESSMENT MADE ON 16.03 . 2006 IS I N O RDER AND DOES NOT LEAD TO ANY ESC APEMENT OF INCOME . I N RESPECT OF THE PROJECTS AT WHIT E H OUSE & SHIVA R AN J AN I , TH E L A N D OWNERS WERE ELIGIBLE FOR GETTING CERT A I N FLATS AS THEIR SHAR E AS PER TH EIR AGREEMENT WITH US . THE Y WERE F REE TO DISPOSE OF THESE F LATS A T WHATEVER PRICE THEY CAN GET AND WH O M SO E VER THEY WANTED . HO WE V E R SINCE THEY WERE NOT HAVING N E CESSARY I NFRA S T R U C TUR E TO C OND UC T THE SALE OF TRANSACTION THEY APPROA C H US TO SE L L THE IR S HA R E OF FL AT S A LSO. ACCORDINGLY WE AGREED FOR THE SAM E A ND ARRIVE AT A VALUE W H ILE GIV E N T O THEM AND THIS HAS BEEN TERMED BY US AS COST OF ACQU IRING R I GHTS FO R ADD I T I ONAL FLATS FROM LAND OWNERS . THESE FLATS ACQU I RED F ROM THE M F OR SALE HAVE BEEN SO L D BY U S AN D HAS BEEN INC L UDED I N T HE I N CO ME FR OM PROPERTY DEVE L OPME N T . IT CA N BE SEEN THAT THE COST OF ACQU I SI T ION AS WEL L AS SALE VA L U E A RE P R OPE R L Y R EF L E C T E D I N T H E ACCOUNTS . AS WE HAVE ACQU IR ED T H E FLA TS F O R SE L LING , IT IS THE CO ST OF ACQU I SI T I ON OF STOCK IN TRADE . IT I S ONLY A REVENUE ITEM WHICH H A S BEE N PROPERLY ALLOWED A S A DEDUCTION IN THE ASSESSMENT . AS SU C H THERE IS NO ESCAPEMENT OF ANY I NCOME FRO M ASSESSMENT . WE SUBM I T THAT IT I S NOT PROPER TO TREAT THE COST OF ACQU I S I T ION OF RIGHTS FOR ADD I T I ONA L F LATS FROM LAN D OWN E RS AS A C AP I TA L EX P E NDITU R E. WE F U R TH E R S UB MIT THAT W E HAVE ACQUIRED TH E SAM E A S STO C K- IN - TRADE FOR OUR BUS I NESS , S I NCE TH E ACQU I SITION I S FO R S ELL I NG T HEM ONL Y . TH E R I GHTS ACQU I RED ARE NO T FI X ED ASSETS . I T MA Y B E APPRECI ATED THAT WE HAVE NOT ACQU I RED TH E L AND . ITA 1044/08 :- 4 -: WE S UBM I T THAT REF E R ENCE T O S EC . 32 { L )(I I ) IS INAPPROP R I A T E IN O UR CASE. THAT S E CTION SO FA R A S IT P ERTA IN S TO DEVELO P MENT RIGH TS A PPL IE S ONLY WH EN SUCH R I GHT S DO NO T C ONSTI T UTE S TO CK IN TRADE . WE WOU L D LIKE TO SUBMIT THAT IN CA SE THE COST OF ACQU I S I T I O N IS CONSI DERED AS CAPITAL EXPENDITURE, THE CORR E SPONDING SALE PR I CE OF TH E FL AT S R ECEIVED HAS TO BE TAKEN OUT FROM THE REVENUE ACCOUN T MA Y H AVE TO BE CONSIDERED UNDER THE HEAD 'CAP I TA L GAIN' . WE SUBM I T THAT T HE TREATMENT GIVEN IN THE ASSESSMENT TO THE COST OF ACQUISITION HAS NOT R ESULTED I N ANY ERROR AND PREJUDICE TO T HE INTEREST OF REVENUE, A S THE SALE PROCEDURE HAS BEEN BROUGHT T O TAX AND HAS NOT BEEN R EMOVED FROM TURNOVER REPORTED BY US . WE FURNISH BELOW A STATEMENT SHOWING THE COST OF ACQUIS I T I ON OF FLATS, FROM THOSE LAND OWNERS AND THE CORRESPONDI N G SALE PR I CE WE R ECE I VED ON SALE OF THE SAME AND WH I CH HAS BEEN I N C LUDED IN THE R E VENUE A C COUNT . ASSESSMENT YEAR ASSESSMENT YEAR 2002-03 2003-04 SALE PRICE ACCOUNTED ON SALE OF FLATS ACQUIRED FROM LAND OWNERS A) WHITEHOUSE 4,92,23,963 1,89,94,381 B) SIVARANJANI 74,63,169 53,97,007 TOTAL 5,66,87,132 2,43,91,388 PURCHASE COST CHARGED OFF IN THE ACCOUNTS TOTAL COST 3,91,00,000 A) WHITE HOUSE 2,60,04,447 96,33,703 85,00,000 B) SIVARANJANI 50,57,374 34,42,626 TOTAL 3,10,61,821 1,30,76,329 WE SUBMIT THAT THE ASSESSMENT ORDER DATED 16.03.200 6 IS NOT ERRONEOUS AND IS NOT PREJUDICIAL TO THE INTE REST OF REVENUE SO AS TO ATTRACT THE PROVISION OF SEC. 263 OF THE INCOME TAX ACT. IT CALL BE SEEN FROM THE EXPLANATIO N FURNISHED ABOVE THAT THERE IS NO ESCAPEMENT OF INCO ME AND THE TREATMENT GIVEN BY THE ASSESSING OFFICER HAS NO T RESULTED IN ANY PREJUDICE TO THE INTERESTS OF THE R EVENUE. HENCE WE SUBMIT THAT THE PRIMARY CUMULATIVE CONDITI ONS PRESCRIBED BY SEC.263 VIZ., THE ORDER BEING ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ARE NOT SATISFIED. ITA 1044/08 :- 5 -: 4. AFTER CONSIDERING THE OBJECTION OF THE ASSESSEE, TH E LD. CIT HAS SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE ASSESSING OFFICER TO COMPLETE THE SAME AFRESH IN ACCORDANCE W ITH LAW AFTER GOING INTO THE ENTIRE CIRCUMSTANCES CONCERNING THE ALLOWA BILITY OF THE EXPENDITURE OF ` 130.76 LAKHS GROUPED UNDER THE CAPTION COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS FROM LAND OWN ERS. NOW THE ASSESSEE IS AGGRIEVED AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER PASSED U/S.263 BY THE COMMISSIONER O F INCOME TAX - CHENNAI III IS AGAINST LAW AND FACTS O F THE CASE. 2. THE LEARNED CIT ERRED IN ASSUMING THAT THE ASSES SMENT ORDER U/S.143(3) DATED 16.03.06 FOR THE ASSESSMENT YEAR 2003-04 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND SETTING ASIDE THE ASSE SSMENT. 3. THE REASONING OF THE CIT THAT THE ACTION OF NOT ASSESSING 'COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS FROM LAND OWNERS ` 1,30,76,329/-' SHOWN IN THE PROFIT & LOSS ACCOUNT, WHILE DISALLOWING 'COST OF ACQUISITION OF DEVELOPMENT RIG HTS' OF ` 132.66 LAKHS OUT OF THE AMOUNT OF COST OF CONSTRUCT ION ` 21,67,18,408/- SHOWN IN THE PROFIT & LOSS ACCOUNT, IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE, IS NOT BASED ON PROPER APPRECIATION OF FAC TS. 4. THE CIT HAS FAILED TO APPRECIATE THAT THERE HAS BEEN NO ERROR NOR THERE IS ANY PREJUDICE TO THE INTEREST OF THE REVENUE IN THE ACTION OF THE ASSESSING OFFICER IN NOT ASSES SING THE COST OF ACQUIRING RIGHTS FOR ADDITIONAL FLATS. 5. THE CIT HAS FAILED TO APPRECIATE THAT THE APPELL ANT IS A PROPERTY DEVELOPER; AND DEALS IN FLATS; THAT THE AD DITIONAL FLATS ACQUIRED FROM LAND OWNERS HAS BEEN HELD BY THEM AS STOCK IN TRADE; THAT HAVE BEEN SOLD; AND THAT THE SALE VA LUE HAS BEEN SHOWN IN REVENUE ACCOUNT IN THIS YEAR; AND IN SUBSEQUENT YEARS ALSO. ITA 1044/08 :- 6 -: 6. THE CIT HAS FAILED TO APPRECIATE THAT THE ASSESS ING OFFICER HAS EXAMINED THE ACCOUNTS; HAS GONE THROUGH THESE I TEMS IN THE PROFIT AND LOSS ACCOUNT; THAT HE HAS CONSCIOUSL Y TAKEN THE VIEW THAT IT IS AN ALLOWABLE REVENUE ITEM AND H AS DISALLOWED THE OTHER ITEM OF COST OF ACQUISITION OF DEVELOPMENT RIGHTS TAKING THE VIEW THAT IT IS A REV ENUE ITEM. 7. THE CIT, HAS ADMITTED IN PARA 5 OF HIS ORDER THA T THE ASSESSING OFFICER HAS EXAMINED THE CASE IN THE LIGH T OF JUDICIAL DECISION CITED BY HIM. AS SUCH, AS THE VIE W TAKEN BY THE INCOME TAX OFFICER IS A POSSIBLE AND CORRECT VI EW, THE CIT CANNOT SUBSTITUTE IT WITH HIS VIEW AND ASSUME JURIS DICTION U/S.263 VIDE CIT VS MUNGAL CASTINGS 168 TAXMANN 241 P &H .. 8.THE DECISIONS IN THE CASE OF GEE VEE ENTERPRISES VS ADDITIONAL CIT (99 ITR 375 DEL) AND MALABAR INDUSTR IAL CO LTD VS CIT 243 ITR 83 SC) ARE NOT APPLICABLE ON THE FACTS OF THE APPELLANT'S CASE, SINCE THE ASSESSING OFFICER H AS, AS ADMITTED BY CIT, APPLIED HIS MIND ON THE POINT AT I SSUE. 9. THE LEARNED COMMISSIONER OF INCOME TAX HAS NOT ESTABLISHED THAT THE ASSESSING OFFICER'S ORDER IS E RRONEOUS AND IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE W HICH ARE CUMULATIVE CONDITIONS FOR ASSUMING JURISDICTION U/S .263. 10. THE CIT HAS ERRED IN ASSUMING JURISDICTION U/ S.263 ON THE FACTS OF THE CASE AND IN SETTING ASIDE THE ASSE SSMENT TO BE REDONE. ON THESE GROUNDS AND OTHER GROUNDS THAT MAY BE OFFE RED DURING OR BEFORE THE HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT SETTING ASIDE THE ASSESSMENT MAY BE CANCELLED A ND THE ASSESSMENT ORDER OF THE INCOME TAX OFFICER RESTORED . 5. WE HAVE HEARD BOTH SIDES IN DETAIL. WE HAVE AL SO PERUSED CAREFULLY THE ENTIRE MATERIAL AVAILABLE ON RECORD. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDITIO NS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO-EXI ST. ITA 1044/08 :- 7 -: 6. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEE N VASTLY EXAMINED AND ANALYSED BY VARIOUS COURTS INCLUDING T HAT OF HONBLE APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT VIDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CA LL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EM POWERS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION S ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFI CER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, T HE CIT IS EMPOWERED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE M AY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MA Y MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN SECTION 26 3. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED DIS CRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISION AL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FA IRNESS IN ITA 1044/08 :- 8 -: ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPEC T TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTIO N OF INDIA AS WELL IN SECTION 263. AS ORDER CAN BE TREATED AS ERRONE OUS IF IT WAS PASSED IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR P ASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAK ING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IT CONTEMPL ATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION A S A WHOLE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE CONTE XT. THE FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 MAY BE SUMM ARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUS T BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREME NT OR ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OF FICER ITA 1044/08 :- 9 -: HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LA W OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFIC ER IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HI S POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTI TUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIM ATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDICIA L POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SU CH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER SECTION 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQU IRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANAT ION BE A LETTER IN WRITING AND THE ASSESSING OFFICER AL LOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION O F THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CAN NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGAR D. 7. ADVERTING TO THE FACTS OF THIS CASE, WE FIND THAT THE ASSESSING OFFICER HAS EXAMINED THIS ASPECT. THE COST OF ACQU IRING RIGHTS FOR ADDITIONAL FLATS HAS BEEN GIVEN IN THE BREAK-UP VID E SCHEDULE 10 TO THE ITA 1044/08 :- 10 - : FINANCIAL STATEMENT. THE COST OF ACQUIRING RIGHT F OR ADDITIONAL FLATS FROM LAND OWNERS COULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE AS IT WAS A TRADING ACTIVITY AND THE COST OF ACQUIR ING RIGHTS FOR ADDITIONAL FLATS IS NOT AN ASSESSABLE ITEM BECAUSE IN RESPECT OF THE PROJECTS AT WHITEHOUSE AND SIVARANJANI, THE LAND OW NERS WERE ELIGIBLE FOR GETTING CERTAIN FLATS AS THEIR SHARE AS PER THE AGREEMENT BETWEEN THE PARTIES. THESE PERSONS WERE FREE TO DISPOSE OF THESE FLATS AT WHATEVER PRICE THEY WANTED TO AND TO WHOMSOEVER THE Y WANTED TO. SINCE THEY WERE NOT HAVING NECESSARY INFRASTRUCTURE TO CONDUCT THE SALE OR TRANSACTIONS, THEY APPROACHED THE ASSESSEE TO SELL THEIR SHARE OF FLATS ALSO. THE ASSESSEE AGREED AT A VALUE AND GIVEN THE SAME TO THEM AND THIS PAYMENT HAS BEEN TERMED AS COST OF AC QUIRING RIGHT FOR ADDITIONAL FLATS FROM THE LAND OWNERS. THESE FLATS WERE SOLD AND HAVE BEEN INCLUDED IN THE INCOME FROM PROPERTY DEVELOPME NT. THE COST OF ACQUISITION AS WELL AS SALE VALUE OF THESE ADDITION AL FLATS IS PROPERLY REFLECTED IN THE ACCOUNTS. THE ASSESSEE HAD ACQUIR ED THESE FLATS FOR SALE AND THE COST OF ACQUISITION OF STOCK-IN-TRADE HAS BEEN DISCLOSED. THIS IS ONLY A REVENUE ITEM WHICH HAS BEEN PROPERLY ALLOWED AS A DEDUCTION IN THE ASSESSMENT ORDER. HENCE, WE DO NO T FIND ANY ERROR IN THE ASSESSMENT ORDER. TE COST OF ACQUISITION OF RI GHTS FOR ADDITIONAL FLATS FROM LAND OWNERS CANNOT BE TREATED AS CAPITAL EXPENDITURE AS IT IS CLEARLY FOUND THAT THESE WERE ACQUIRED AS STOCK-IN- TRADE TOWARDS ITA 1044/08 :- 11 - : ASSESSEES BUSINESS. THE RIGHTS ACQUIRED ARE NOT F IXED ASSETS. THE ASSESSEE HAS NOT ACQUIRED LAND. THE ASSESSING OFFI CER HAS VERILY EXAMINED THIS ASPECT WHILE ALLOWING THE EXPENDITURE OF ` 130.76 LAKHS. THEREFORE, THE TWIN CONDITIONS WHICH ARE SINE QUA N ON FOR REVISING THE ASSESSMENT ORDER DO NOT CO-EXIST IN THIS CASE. HEN CE, THE REVISIONAL ORDER PASSED BY THE LD. CIT IS SET ASIDE AND THE AS SESSMENT ORDER IS RESTORED. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.6.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 30 TH JUNE, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR