B.Lakshmanan, CHENNAI V. ACIT, CHENNAI

ITA 1293/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7789 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 31-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-05-2016
• Court: TRIBUNAL
• Department Lawyers: AWIJIT RAKSHIT
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment; Unexplained investment; Capital asset; Gift; Business income; Depreciation; Date of conversion; Fair market value; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 54F; 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1293 /MDS/2016 / ASSESSMENT YEAR :2010 - 1 1 SHRI B. LAKSHMANAN, NO. 389, KAPALEESWARA NAGAR, 2 ND MAIN ROAD, NEELANKARAI CHENNAI 600 0 4 1. [PAN:A BKPL7682A ] VS. THE ASSISTANT COMMISSIONER OF IN COME TAX , BUSINESS CIRCLE VI , CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI T. BANUSEKAR, C.A. / RESPONDENT BY : SHRI A W IJIT RAKSHIT, JCIT / DATE OF HEARI NG : 3 1 . 1 0 .201 6 / DATE OF P RONOUNCEMENT : 23 . 12 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER: T HE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 5 , CHEN NAI, DATED 15 .0 6 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 0 - 1 1 . IN PRINCIPLE, THE ASSESSEE HAS CHALLENGED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] AND ON MERITS, HE HAS CHALLENGED THE DENIAL OF EXEMPTION UNDER SECTION 54F OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] , CONFIRMATION OF 30% OF THE EXPENSES AND I.T.A. NO . 1293 /M/ 16 2 ADOPTING GUIDELINE VALUE INSTEAD OF FAIR MARKET VALUE FOR WORKING OUT LTCG. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVID UAL AND HAVING RENTAL INCOME AND BUS INESS INCOME. HE HAS FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 ON 31.03.2011 DECLARING TOTAL INCOME OF .1,89,750/ - . AS THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, T HE CASE WAS REOPENED AND NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED. SUBSEQUENTLY, NOTICES UNDER SECTION 143(2)/142(1) OF THE ACT WERE ISSUED. THEREAFTER, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ON 01.05.2014 BY ASSESSIN G THE TOTAL INCOME OF THE ASSESSEE AT .70,31,837/ - AFTER DENYING THE CLAIM OF LONG TERM CAPITAL GAINS SINCE THE SAME WAS TREATED AS BUSINESS INCOME. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CONSIDERING VARIOUS CASE LAW, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING UPON THE GROUNDS OF APPEAL WITH REGARD TO REOPENING OF ASSESSMENT , I.T.A. NO . 1293 /M/ 16 3 THE LD. COUNSEL FOR THE ASSESSEE HA S SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BASED ON THE VERY SAME SET OF BOOKS OF ACCOUNTS, BANK STATEMENT, EVIDENCE FOR PAYMENT, ETC. AS PLACED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITHOUT ANY ADDITIONAL FACTS OR MATERIAL EV IDENCE. THEREFORE, THE REOPENING OF ASSESSMENT IS BAD IN LAW. WITH REGARD TO THE ADDITION TOWARDS UNEXPLAINED INVESTMENT, HE HAS SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO TAKE INTO ACCOUNT THE ACTUAL COST OF EQUIPMENT AND ITS PAYMENT MADE THROUGH BANK. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT WARRANTED. 5 . ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTH ORITIES BELOW. WITH REGARD TO REOPENING OF ASSESSMENT, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE REASSESSMENT WAS DONE ONLY ON THE BASIS OF SAME SET OF FACTS, WHICH WERE ALREADY AVAILABLE ON RECORD AND IT CANNOT BE A GROUND FOR REOPENI NG OF THE ASSESSMENT. 6.1 THE REASONS FOR REOPENING OF ASSESSMENT ARE THAT FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 20 10 - 11 & 2011 - 12, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE SOLD PLOTS AND CLAIMED AS I.T.A. NO . 1293 /M/ 16 4 SALE OF CAPI TAL ASSET AND ACCOUNTED AS CAPITAL GAIN. DURING THE FINANCIAL Y EAR 2009 - 10, THE ASSESSEE HAS CHANGED THE COMPOSITE LAND AVAILABLE WITH HIM, INTO PLOTS AS UN - APPROVED LAY - OUT. AFTER LEVELLING OF LAND, CONSTRUCTION OF ROAD , THE ASSESSEE HAS DIVIDED THE COMPO SITE LAND INTO 74 PLOTS; CONSTRUCTED 40 FEET ROAD, 20 FEET ROAD AND PARK; AND NAMED AND M ARKETED AS ' P ARADISE N AGAR'. FURTHER HE GIFTED THE ROAD TO LOCAL AUTHORITY. FROM THE FINANCIAL YEAR 2009 - 10, THE ASSESSEE HAS BEEN SELLING AS PLOTS IN EACH YEAR AT DIF FERENT RATES DEPEND UPON THE LOCATION, SIZE, STRUCTURE AND PROXIMITY FROM THE ROAD. THE ABOVE OBSERVATIONS CORROBORATES THE NATURE OF ACTIVITY CARRIED ON BY THE ASSESSEE AS ADVENTURE IN NATURE AS PER SEC. 2(13) ACT. HENCE, IT IS CLEAR THAT THE INTENTION OF THE ASSESSEE IS TO ATTAIN MAXIMUM PROFIT FROM SALE OF PLOTS WHICH HAVE BE E N D I V I DED AND DEVELOPED AS THE ASSESSEE HAS BEEN SELLING THEM AT VARIOUS INTERVALS. AS THE ASSESSEE HA S DIVIDED THE COMPOSITE LAND INTO PLOTS, DEVELOPED THE AREA TO MAKE IT MORE ATT RACTIVE AND SOLD THE LAND NOT AS A SINGLE UNIT AS HE BOUGHT I T, BUT INSTEAD HE SOLD IN PARCELS, AS HIS STOCK - IN TRADE. THEREFORE, I T IS TO BE CONSTRUED THAT HE IS CARRYING ON BUSINESS AND MAKING A PROFIT. THE ACTIVITIES CARRIED BY THE A SSESSEE TO CONVERT T HE LAND INTO PLOTS ARE NOTHING BUT CONVERSION OF CAPITAL ASSET INTO S T OCK - IN - TRADE. CONSIDERING THE ABOVE FACTS OF THE ASSESSEE'S CASE, AFTER VERIFYING THE NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE, THE ASSESSING OFFICER HAS ASSESSED THE ABOVE TRANSA CTIONS FOR THE ASSESSMENT YEAR 2011 - 12 AS 'BUSINESS INCOME' ON PROFIT ON SALE OF PLOT AS PER SEC 2(13) AND L ONG TERM I.T.A. NO . 1293 /M/ 16 5 CAPITAL GAINS - FROM THE DATE OF PURCHASE TO THE DATE OF CONVERSION OF CAPITAL ASSET INTO STOCK - IN TRADE FOR THE ASSESSMENT YEAR 2010 - 11. B UT THE ASSESSEE HAS CLAIMED THE ABOVE TRANSACTION ONLY AS LONG TERM CAPITAL GAINS AND CLAIMED DEDUCTION U NDER SECTION 54F OF THE ACT FOR THE ASSESSMENT YEAR 2010 - 11. WHEREAS THE ACTIVITIES OF THE ASSESSEE , WHEREIN , HE DEVELOPED AND DIVIDED THE LAND TO SELL AT VARIOUS INTERVALS SHOW THAT THE ASSESSEE IS CARRYING ON A BUSINESS ACTIVITY OF DEVELOPING LAND AND SELLING PLOTS. THE ABOVE FACTS AND ANALYSIS PROVED THAT THE CASE IS CLEARLY ESTABLISHED AS FIT FOR BOTH CAPITAL GAINS AND BUSINESS INCOME AS PER SEC 2(13 ) OF THE ACT. THEREFORE, IN ORDER TO RECOMPUTE THE CAPITAL GAINS AND ALLOW THE ELIGIBLE CLAIM OF DEDUCTION U NDER SECTION 54F OF THE ACT AND BRING THE EXCESS CLAIM OF DEDUCTION TO TAX, THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE A CT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT AND DULY SERVED UPON THE ASSESSEE. 6.2 IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, IF THERE IS A PRIMA FACIE CAUSE AVAILABLE BEFORE THE ASSESSING OFFICER, HE CAN FORM THE OPINION THAT THE INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT. AFTER RECORDING REASONS FOR REOPENING OF ASSESSMENT, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSI NG OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ESCAPED ASSESSMENT, I.T.A. NO . 1293 /M/ 16 6 ACTION U NDER SECTION 148 OF THE ACT CAN BE TAKEN. BUT OBVIOUSLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE MAN COULD HAVE FORMED A REQUISITE BELIEF . WHETHER THIS MATERIAL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED IS THE SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJECTIVE MATERIAL EVIDENCE. IN THE GIVEN CAS E, O RIGINAL ASSESSMENT WAS COMPLETED ON 16 . 09 .20 08 UNDER SECTION 143(3) OF THE ACT. THE REASON FOR REOPENING WAS RECORDED AS DISCUSSED ABOVE. 6 . 3 THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT IN THIS CASE, THE ASSESSING OFFICER HAVE NO TANGIBLE FRESH MATERIAL FOR THE REASSESSMENT FOR THAT ASSESSMENT YEAR. AS SEEN FROM THE REASONS RECORDED WHICH GIVES A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION THAT INCOME HAS ESCAPED ASSESSMENT AND THAT IS WHY HE REOPENED TH E ASSESSMENT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THAT POINT OF TIME OF REOPENING WHEN THE REASONS ARE RECORDED AFTER FORMING OPINION OF ESCAPEMENT OF INCOME IS ONLY RELEVANT. HENCE, THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE IS NOT TENABLE IN THE EYES OF LAW. UNDER SECTION 147, THE ASSESSING OFFICER CAN EITHER ASSESS OR RE - ASSESS BUT FOR TAKING ACTION THERE UNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS ALSO MANDAT ED BY SECTION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSMENT I.T.A. NO . 1293 /M/ 16 7 PROCEEDINGS UNDER SECTION 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151,152 AND 153. IN THE PRESENT CASE, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCE EDINGS UNDERTAKEN WITHIN FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION. THE ASSESSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLANATION 2(C) BECAUSE IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ARE SATISFIED OR NOT. IN CASE, (I ) INC OME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECTIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANC E UNDER THIS ACT HAS BEEN COMPUTED, THE ASSESSING OFFICER WOULD HAVE VALID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY DEMONSTRATES THAT THOUGH THE ASSESSEE PRODUCED BOOKS OF ACCOUNT, THE DISCREPANCY NOTICED BY THE ASSESSING OFFICER CAN ONLY BE POINTED OUT THAT DUE DILIGENT OF ASSESSING OFFICER. AS SUCH, THE PRODUCTION OF BOOKS ITSELF CANNOT CONSTITUTE FULL DISCLOSURE OF ALL MATERIAL FACTS FOR THE PURPOSE OF ASSESSMENT. BEING SO, WE ARE SATISFIED THAT THE ASSESSING O FFICER HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS FACT CONFERS JURISDICTION ON THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. THE POWER UNDER SECTION 147 TO RE - ASSESS THE INCOME POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BEFORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY POWERS TO THE I.T.A. NO . 1293 /M/ 16 8 ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASSES SMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN - BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. ON THE BASIS OF CHANGE OF OPINION WHICH, CANNOT BE PER SE A REASON TO REOPEN THE ASSESSMENT. IN O UR OPINION, AS SEEN FROM THE ABOVE REASONS RECORDED, THE ASSESSING OFFICER WOULD HAVE ASCERTAINED THE ESCAPEMENT OF INCOME AT THE TIME OF ORIGINAL ASSESSMENT ALSO ONLY WITH DUE DILIGENT. HENCE, THE REOPENING IS HELD TO BE VALID. EVEN OTHERWISE, IT IS THE D UTY OF THE ASSESSEE TO BRING ALL THE FACTS TO THE KNOWLEDGE OF THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT AND ONLY JUST FILING OF DOCUMENTS AT THE TIME OF ASSESSMENT IS NOT ENOUGH AND HE SHOULD BE DREW THE ATTENTION OF THE ASSESSING OFFICER T O ALL NECESSARY MATERIAL. CONSEQUENTLY, WE HOLD THAT THE ENTIRE ASSESSMENT IN THIS CASE IS VALID AND THEREFORE, THE REOPENING OF ASSESSMENT IS UPHELD. 7. THE NEXT EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO THE CLAIM OF EXEMPT ION UNDER SECTION 54F OF THE ACT. ON PERUSAL OF THE SUBMISSIONS AND INFORMATION AVAILABLE WITH THE DEPARTMENT, THE ASSESSING OFFICER HAS NOTED THAT ASSESSEE HA S SOLD THE PLOTS, BUT CLAIMED AS SALE OF CAPITAL ASSET AND ACCOUNTED AS CAPITAL GAIN. FURTHER, I T WA S NOTED THAT ASSESSEE HA S PURCHASED THE LAND IN THE YEAR OF 1983 - 84, WHEN HE WAS MINOR. DURING THE YEAR 2008 - 09, HE HAS GIVEN GENERAL POWER OF ATTORNEY TO I.T.A. NO . 1293 /M/ 16 9 HIS MOTHER. DURING THE YEAR 2009 - 10, HE HAS CHANGED THE LAND INTO PLOTS AS UN - APPROVED LAY - OUT. F URTHER, IN THE SAME YEAR HE CLAIMED THAT HE SPENT AROUND . 47.68 LAKHS TO PUT UP THE LAY - OUT IN THE TOTAL AREA OF 4 ACRES AND 21 CENTS (421.5 CENTS). AFTER LEVELLING OF LAND, CONSTRUCTION OF ROAD ASSESSEE HAS MADE 74 PLOTS AND NAMED AND MARKETED AS ' P ARADISE N AGAR'. HE HAS ALLOCATED AROUND 1/4TH OF THE TOTAL LAN D FOR ROAD AND CONSTRUCTED 40 FEET ROAD, 20 FEET ROAD AND PARK. FURTHER , HE GIFTED THE ROAD TO LOCAL AUTHORITY. SINCE FROM THE FINANCIAL YEAR 2009 - 10, LAND HAS BEEN SOLD AS PLOTS IN EACH Y EAR IN DIFFERENT RATES DEPENDS UPON THE LOCATION, SIZE, STRUCTURE AN D PROXIMITY FROM THE ROAD. THE ABOVE OBSERVATIONS ARE CORROBORATING THE NATURE OF BUSINESS CARRIED BY THE ASSESSEE AS ADVENTURE IN NATURE AS PER SEC TION 2(13) OF THE ACT. FURTHER, IT IS CLEAR FROM ASSESSEE S INTENTION THAT THE NATURE OF SALE OF PLOTS RESUL TING INTO THE BUSINESS. MANY APPELLATE AUTHORITIES CONSIDERED EVEN A SINGLE VENTURE MAY BE REGARDED AS IN THE NATURE OF TRADE OR BUSINESS WHEN A PERSON ACQUIRED LAND WITH A VIEW TO SELLING IT LATER AFTER DEVELOPING IT, HE IS CARRYING ON AN ACTIVITY RESULTI NG IN PROFIT, AND THE ACTIVITY CAN ONLY BE DESCRIBED AS A BUSINESS VENTURE. WHERE THE PERSON GOES FURTHER AND DIVIDES THE LAND INTO PLOTS, DEVELOPS THE AREA TO MAKE IT MORE ATTRACTIVE AND SELLS THE LAND NOT AS A SINGLE UNIT AND AS HE BOUGHT IT BUT IN PARCE LS, HE IS DEALING WITH LAND AS HIS STOCK - IN TRADE, HE IS CARRYING ON BUSINESS AND MAKING A PROFIT. ACCORDING TO SECTION 45(1) OF TH E ACT, WHEN THE CAPITAL ASSET IS TRANSFERRED THEN THE ASSESSEE IS LIABLE TO PAY TAX ON CAPITAL GAIN OR TO AVAIL I.T.A. NO . 1293 /M/ 16 10 BENEFITS OF DEDUCTIONS AS PER THE PROVISIONS OF THE ACT. IN THIS CASE, ASSESSEE HAS PURCHASED THE CAPITAL ASSET DURING THE YEAR AND HOLDS IT FOR MORE THAN THREE YEARS WHICH IS CLAIMED AS LONG TERM CAPITAL ASSET. IF HE WOULD HAVE SOLD THE SAME PROPERTY OR SAME CAPITAL ASSET, HE IS ELIGIBLE TO GET THE BENEFITS AS PER PROVISIONS OF THE ACT. IN THE INSTANT CASE, THE ASSESSEE HAS NOT SOLD THE SAME CAPITAL ASSET - WHAT HE PURCHASED - WHICH IS A PARCEL OF LAND ABOUT 4.02 A CRES. INSTEAD, HE SOLD 'DEVELOPED' PLOTS WHICH ARE NOT T HE CAPITAL ASSET. HE SOLD THE PLOTS AFTER VALUE ADDITION TO THAT LAND. MOREOVER, THE ASS ESSEE HAS DONE VARIOUS ACTIVITIES LIKE LEVELLING AND DEVELOPING THE LAND, REMOVAL OF FENCING ETC . WHIC H ENSURE GOOD APPEARANCE , AESTHETIC VALUES WITHOUT AFFECTING THE O RIGINAL COMPOSITE AND STRUCTURE OF THE L AND. AS CLAIMED BY THE ASSESSEE, THESE ACTIVITIES DEFINITELY PROMOTE THE LAND AS HABITABLE AND SALEABLE LAND. EVEN AFTER LEVELLING AND DEVELOPMENT, THE STRUCTURE OF THE LAND WAS NOT ALTERED AND DID NOT CHANGE ITS CHA RACTER. STILL IT WAS THE SAME ASSET WHAT HE ACQUIRED AND THE INTENTION OF THE ASSESSEE ALSO STOOD AS INVESTMENT. BUT CONTRARY TO THIS, THE ASSESSEE HAS CHANGED HIS INTENTION AND HAS DONE SOME ADDITIONAL ACTIVITIES TO SELL THE LAND FOR MORE PROFIT, WHICH HA S CHANGED THE COMPOSITE AND STRUCTURE OF THE LAND. CONSEQUENTLY, THE COMPOSITE LAND TRANSFERRED INTO SMALL PIECES OF SPECIFIC SHAPE WITH ADEQUATE DIMENSION I. E. , AS PLOTS. THE PLOTS ARE AN AREA USED FOR BUILDING. TO MAKE OUT THESE PLOTS, ASSESSEE HAS FURTH ER CONSTRUCTED THE 40F EE T AN D 20 FEET ROAD, AND GIF TED THE LAND AN D ROAD TO LOCAL AUTHORITY AND I.T.A. NO . 1293 /M/ 16 11 GOT N OC. HE TRANSFERRED THE TOT AL LAND INTO 74 PLOTS AND NAMED AS 'PARADISE NAGAR'. ULTIMATELY THE ASSESSEE HAS SOLD THE PLOTS, NOT THE LAND WHAT HE ACQUIRED LO NG TIME BACK. THE ACTIVITIES CARRIED BY THE A SSESSEE TO CONVERT THE LAND INTO PLOTS ARE NOTHING BUT CONVERSION OF CAPITAL ASSET INTO SOCK - IN - TRADE. THESE ARGUMENTS AND FACTS ARE ALSO SUBSTANTIATED BY THE REGISTRATION DEPARTMENT. TILL THE CAPITAL ASSET HAS NOT CHANGED, THE SRO CLASSIFIED THE SAME LAND AS 'DRY MANAVARI LAND'. THE DAY (28 .04. 2009), IN WHICH THE COMPOSITE LAND IS CONVERTED AND SOLD INTO PLOTS, THE SR O DEPARTMENT RECLASSIFIED THE SAID 'DRY MANAVARI LAND' INTO 'RESIDENTIAL LAND'. HENCE IT IS CLEA R THAT THE ASSESSEE HAS PURCHASED AND HOLDS UP TO 20 . 04 . 2009 AS 'DRY MANAVARI LAND' AND SOLD 'RESIDENTIAL LAND' AS PLOTS. OVER AND ABOVE IN THIS CASE THE A SSESSEE HAS TAKEN INVESTMENT RISK FOR ROAD CONSTRUCTION AND GIFTED 1/ 4 TH OF THE LAND TO THE P ANCHAYAT . AFTER PLOTTING THE LAND INTO 74 PLOTS, THE A SSESSEE HAS SOLD TOTAL 51 PLOTS IN THR E E CONSECUTIVE YEAR S AND STILL HE HOLDS AROUND 20 PLOTS THAT TOO IN THE FIRST ROW NEAR TO THE MAIN ROAD EXPECTING GOOD MARKET VALUE. IN VIEW OF THE ABOVE FACTS AND CIRCUMST ANCES AND BY FOLLOWING VARIOUS CASE LAW, THE ASSESSING OFFICER TREATED THE PROFITS ON SALE OF LAND AS BUSINESS INCOME AS THE NATURE OF THE TRANSACTION WAS ONLY AN ADVENTURE IN THE NATURE OF TRADE AND BROUGHT TO TAX. 7.1 FURTHER, THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES AS IF HE HAS INCURRED THOSE EXPENSES FOR EVERY YEAR WHICH ARE AS FOLLOWS: I.T.A. NO . 1293 /M/ 16 12 EXPENSES CLAIMED BY THE ASSESSEE AY 2010 - 11 AY 2011 - 12 AY 2012 - 13 ROAD RELAYING 10,00,000 27,68,614 9,27,500 FENCING & REMOVING OF ENCROACHMENT 6,83,415 9,95,875 - BROKERAGE 3,16,000 - - TOTAL 19,99,415 37,64,489 9,27,500 AS DIRECT ED BY THE ASSESSING OFFICER , THE ASSESSEE HAS FURNISHED THE ENTIRE EXPENDITURE DETAILS. ON VERIFICATION OF THE BILLS AND VOUCHERS SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THE ENTIRE WORK WAS COMPLETED DURING THE FINANCIAL YEAR 2009 - 10, BUT CLAIMED THE EXPENDITURE AS DETAILED ABOVE. FURTHER, THE ASSESSING OFFICER HAS NOTED THAT THE VOUCHERS ARE ALL SELF - MADE VOUCHERS AND NO PAYMENT WAS MADE THROUGH BANK ACCOUN T. SINCE IT WAS CLEARLY ESTABLISHED THE BUSINESS IN ADVENTURE NATURE AS PER SECTION 2(13) OF THE ACT, IN THE ABSENCE OF CASH BILL, THE ASSESSING OFFICER ESTIMATED THE EXPENDITURE AND ALLOWED TO THE EXTENT OF .1,39,950/ - FOR THE ASSESSMENT YEAR 2010 - 11 AND WORKED OUT THE LONG TERM CAPITAL GAINS AND DISALLOWED AND ASSESSED THE SAME AS BUSINESS INCOME. THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SINCE THERE WAS NO MERIT IN THE CLAIM OF THE ASS ESSEE. 7.1 WITH REGARD TO THE CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT, TO ASCERTAIN AS TO WHETHER THE ACTIVITIES CARRIED OUT BY THE ASSESSEE AMOUNT TO AN ADVENTURE IN THE NATURE OF TRADE OR NOT , THE LD. COUNSEL FOR THE ASSESSEE HAS FILED VARIOUS CASE LAW. HOWEVER, THERE IS HARDLY ANY NEED TO EXAMINE THE I.T.A. NO . 1293 /M/ 16 13 DECISIONS OF VARIOUS COURTS , WHEN THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF RAJA J. RAMESHWAR RAO V. CIT 42 ITR 179, WHICH WAS RELIED ON BY THE ASSESSING OFFICER AND REPRODUCED THE H ELD PORTION IN THE ASSESSMENT ORDER , IS SQUARELY APPLIES TO THE FACTS OF THE CASE . 7.2 WITH REGARD TO PROVING THAT THE ASSESSEE S INTENTION TO INDULGE IN A TRADING ACTIVITY, IT IS CLEAR FROM THE FACT THAT THE PROPERTY OWNED BY THE ASSESSEE, WHICH WAS CLA SSIFIED AS DRY MANAVARI LAND , BUT ON THE DAY OF 28.04.2009, IN WHICH THE COMPOSITE LAND WAS CONVERTED AND SOLD INTO PLOTS, THE SRO DEPARTMENT RECLASSIFIED THE SAID DRY MANAVARI LAND INTO RESIDENTIAL LAND . THEREFORE, IT IS AMPLY CLEAR THAT ASSESSEE S INTENTION WAS EXCLUSIVELY IN TRADING ACTIVITY. 7.3 UNDER THE ABOVE FACTS AND CIRCUMSTANCES, THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE HAS NO APPLICATION TO THE FACTS OF THE CASE AND THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED . 8 . WITH REGARD TO THE EXPENDITURE TOWARDS DEVELOPMENT OF THE LAND CLAIMED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 AT .19,99,415/ - , THE ASSESSING OFFICER HAS DISALLOWED 30% OF THE ABOVE EXPENDITURE ON ESTIMATED BASIS SINCE THE ASSESSEE HAS FURNISHE D ONLY SELF MADE VOUCHERS AND NOT FURNISHED ANY VALID BILLS/VOUCHERS AND THE PAYMENTS WERE NOT MADE THROUGH BANKING CHANNEL . ADMITTEDLY, THE ASSESSEE HAS CONSTRUCTED 40 FEET I.T.A. NO . 1293 /M/ 16 14 ROAD AND 20 FEET ROAD IN HIS LAND. THE EXPENDITURE IN QUESTION WAS NOT DOUBTED AND IN FACT, THE ASSESSEE HAS DEVELOPED 4 ACRES AND 21 CENTS BY CONSTRUCTING AND RELAYING 40 FEET AND 20 FEET ROADS AND PARK AND GIFTED TO LOCAL AUTHORITY . BEING A VILLAGE AREA, THE ASSESSEE COULD NOT PRODUCE VALID BILLS/VOUCHERS. THEREFORE, WE ARE OF THE OPI NION THAT DISALLOWANCE OF 10% OF TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE WOULD BE MORE REASONABLE THAN 30% DISALLOWED BY THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO REVISE THE EXPENDITURE COMPONENT . 9. WITH REGARD TO THE NEX T GROUND RAISED BY THE ASSESSEE THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ADOPTING THE GUIDELINE VALUE AS ON 28.04.2009 INSTEAD OF FAIR MARKET VALUE FOR WORKING OF LONG TERM CAPITAL GAINS , SIMILAR GROUND WAS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A). BUT, THE LD. CIT(A) HAS HELD THAT THE ASSESSING OFFICER HAS CORRECTLY ADOPTED THE GUIDELINE VALUE WITHOUT GIVING ANY DETAILED FINDINGS. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF A CIT VS. MRS. N. MEENAKSHI (319 ITR (AT) 262) HA S HELD THAT GUIDELINE VALUE COULD NOT BE A CONCLUSIVE PROOF AND FAIR MARKET VALUE COULD BE DIFFERENT FROM THE VALUE ADOPTED BY THE REGISTRATION AUTHORITY. I N THE CASE OF THULASIMANI AMMAL V. CIT (158 CTR 5) THE HON BLE JURISDICTIONAL HIGH COURT HAS DIRECTED THE A SSESSING O FFICER TO ADOPT THE MARKET VALUE OF THE LAND . SINCE IT POSTULATES THAT THE FAIR MARKET VALUE MAY BE DIFFERENT FROM THE I.T.A. NO . 1293 /M/ 16 15 VALUE ADOPTED BY THE REGISTRATION AUTHORITY AND IN SUCH CASES, PROCEDURE FOR REFERENCE TO THE VALUATION CELL WAS PROVIDED. HOWEVER, IN THIS CASE, THE ASSESSING OFFICER HAS NOT REFERRED THE MATTER TO THE VALUATION CELL. DESPITE SPECIFIC GROUND HAS BEEN RAISED BY THE ASSESSEE B EFORE THE LD. CIT(A), THE MATTER WAS NOT REFERRED TO VALUATION CELL FOR GETTING THE MARKET VALUE. IT IS ALSO NOT CLEAR FROM THE ASSESSMENT ORDER AS TO WHETHER THE ASSESSEE HAS FURNISHED ANY FAIR MARKET VALUE OBTAINED FROM THE REGISTERED VALUER. BY NO STRET CH OF IMAGINATION, THE LAND AT MEZHUR, TUTICORN COULD BE SOLD OR BOUGHT AT .61,130/ - PER ACRE IN 2009 . UNDER THESE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO REFER THE VALUATION OF THE LAND TO THE VALUATION CELL AND THEREAFTER, AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD, RECOMPUTE THE LONG TERM C APITAL GAIN BY ADOPTING FAIR MARKET VALUE AS MAY BE FURNISHED BY THE DVO. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 23 RD DECEMBER , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 23 . 12 .201 6 VM/ - I.T.A. NO . 1293 /M/ 16 16 / COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) / CIT(A), 4. / CIT, 5. / DR & 6. / GF.