ACIT, CIRCLE, BHARATPUR V. SHRI RADHEY SHYAM GARG, DHOLPUR

ITA 1317/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9110 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 02-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RUNI PAL DCIT
• Assessee Lawyers: SUBHASH CHAND GUPTA
• Keywords: Rejection of books of accounts; Capital asset converted into stock in trade; Capital asset; Business income; Date of conversion; Fair market value; Set aside
• Section: 69; 45(2); 54F

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC B, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 1317/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- BHARATPUR, BHARATPUR. CUKE VS. DR. RADHEY SHYAM GARG, MAYURI BHAWAN, G.T. ROAD, NH-8, DHOLPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACPPG 8311 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT CROSS OBJECTION NO. 02/JP/2020 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 1317/JP/2019 ) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17. DR. RADHEY SHYAM GARG, MAYURI BHAWAN, G.T. ROAD, NH-8, DHOLPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- BHARATPUR, BHARATPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACPPG 8311 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAL (DCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SUBHASH CHAND GUPTA (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23.07.2020. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 10/08/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 5 TH SEPTEMBER, 2019 OF LD. CIT (A), ALWAR FOR THE ASSE SSMENT YEAR 2016-17. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 2 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT (A) IS JUSTIFIED IN DELETING ADDITION OF RS. 1, 01,774/- MADE BY THE AO ON ACCOUNT OF CASH DEPOSITED IN BANK ACCOUNT DESPITE OF THE FACT THAT SUFFICIENT CASH WAS NOT HAND AS PER CASH BOOK. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND LAW, THE LD. CIT (A) IS JUSTIFIED IN DELETING THE ACTION OF THE AO IN CONSIDERING RS. 4,07,77,191/- AS BUSINESS INCOME AS AGAINST OF LONG TERM CAPITAL GAIN OF RS. 3,51,17,040/- DECLARE D BY THE ASSESSEE IN THE RETURN OF INCOME, WITHOUT APPRECIAT ING MATERIAL FACTS OF THE CASE. DUE TO THE PREVAILING SITUATION OF COVID 19 PANDEMI C, THE HEARING OF THE APPEAL WAS CONCLUDED THROUGH VIDEO CONFERENCE. GROUND NO. 1 IS REGARDING AN ADDITION OF RS. 1,01,7 74/- MADE BY THE AO ON ACCOUNT OF CASH DEPOSIT IN THE BANK ACCOUNT O F THE ASSESSEE WAS DELETED BY THE LD. CIT (A). 2. THE ASSESSEE IS AN INDIVIDUAL AND RUNNING A HOSP ITAL IN THE NAME AND STYLED AS M/S. MAYURI SURGICAL HOSPITAL. THE ASSESSEE HAS F ILED HIS RETURN OF INCOME ON 14.10.2016 DECLARING TOTAL INCOME OF RS. 3,80,07,40 0/- INCLUDING LONG TERM CAPITAL GAIN OF RS. 3,51,17,040/-. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS DEPOSITED CASH OF RS. 2,90,00 0/- IN THE CENTRAL BANK OF INDIA WHEREAS ON THE SAID DATE I.E. 16.11.2015 THERE WAS A NEGATIVE CASH BALANCE IN THE CASH BOOK OF RS. 1,01,773.84. THE AO ACCORDINGLY MADE A N ADDITION OF RS. 1,01,774/- UNDER SECTION 69 OF THE IT ACT READ WITH SECTION 115BBE O F THE IT ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND SUBMITTED THAT THE AO HAS MADE THE ADDITION WITHOUT GIVING HIM ANY SHOW CAUSE NOTICE AND OPPORTUNITY TO EXPLAIN 3 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. THE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNT. THE AO HAS CALLED FOR A COPY OF CASH BOOK FOR THE DESIGNATED DATE TO VERIFY THE CASH DEP OSIT WITH THE BANK AND IN COMPLIANCE THE ASSESSEE FILED COPY OF THE CASH BOOK FOR THE RE QUIRED DATE ONLY. THUS THE ASSESSEE HAS CONTENDED BEFORE THE LD. CIT (A) THAT WITHOUT G IVING SHOW CAUSE NOTICE AND OPPORTUNITY TO EXPLAIN THE AVAILABILITY OF CASH, TH E ADDITION MADE BY THE AO IS NOT JUSTIFIED AND LIABLE TO BE DELETED. THE ASSESSEE F URTHER EXPLAINED THAT IT IS A WRONG ENTRY PASSED ON 17.11.2015 INSTEAD OF 16.11.2015 OR 14.11.2015 FOR RS. 1,20,000/- BEING CASH SHOWN AS DEPOSITED WITH THE BANK ON 14.1 1.2015. SINCE THERE WAS NO ACTUAL CASH DEPOSITED IN THE BANK ON THE SAID DATE, THEREF ORE, A REVERSE ENTRY WAS PASSED ON 17.11.2015. THE LD. CIT (A) DELETED THE ADDITION A FTER CONSIDERING THE FACTS EXPLAINED BY THE ASSESSEE. 3. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R AND CAREFULLY PERUSED THE ORDERS OF THE AO AND LD. CIT (A). THE AO HAS MADE THE ADDITION ON THE BASIS OF COPY OF THE CASH BALANCE IN THE CASH BOOK ON A PARTICULA R DATE. IT IS MANIFEST FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT ISSUED ANY SHO W CAUSE NOTICE TO THE ASSESSEE OR EVEN ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF CA SH DEPOSIT IN THE BANK ACCOUNT. THE LD. CIT (A) AFTER CONSIDERING THE FACTS AS EXPLAINE D BY THE ASSESSEE HAS DELETED THE ADDITION IN PARA 4.3 AS UNDER :- 4.3. I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS FILED BY THE APPELLANT INCLUDING JUDICIAL CITATIONS GIVEN THEREIN. FOLLOWING FACTS HAVE EMERGED : 4 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. 1, THAT THE APPELLANT HAS SUBMITTED THAT CASH OF RS . 1,20,000/- WAS HANDED OVER TO THE CASHIER FOR DEPOSIT IN THE BANK BUT BEING A SATURDAY THE SAME COULD NOT HAVE BEEN DEPOSITED BUT IN THE C ASH BOOK ENTRY WAS MADE ON 14.11.2015. HOWEVER, ON MONDAY I.E. 16.11.2 017 A TOTAL CASH OF RS. 2,90,000/- INCLUDING RS. 1,20,000/- WAS DEPOSIT ED AND THE CONTRA ENTRY IN THE CASH BOOK WAS MADE IN THE CASH BOOK ON 17.11.2015 INSTEAD OF 16.11.2015 DUE TO OVERSIGHT OF THE COMPUTER OPER ATOR. I HAVE CONSIDERED THE SUBMISSION ALONG WITH THE CASH BOOK ENTRY AND IT IS MY CONSIDERED VIEW THAT IT IS A GENUINE MISTAKE ON THE PART OF DATA ENTRY OPERATOR. THE AO HAS ALSO NOT REJECTED THE BOOKS OF ACCOUNTS. THEREFORE, THE ADDITION OF RS. 1,01,774/- IS DELETED AND THE A PPELLANTS GROUND OF APPEAL ON THE ISSUE IS ALLOWED. THUS THE ENTRIES MADE IN THE CASH BOOK FROM 14.11.2 015 TO 17.11.2015 WERE CONSIDERED BY THE LD. CIT (A) AND IT WAS FOUND THAT IT WAS ONLY A GENUINE MISTAKE ON THE PART OF THE DATA ENTRY OPERATOR WHO HAS MADE TH E ENTRY OF 17.11.2015 INSTEAD OF 16.11.2015. IN VIEW OF THE ABOVE FACTS AS DISCUSSE D BY THE LD. CIT (A) AND NO CONTRARY MATERIAL BROUGHT BEFORE US, WE DO NOT FIND ANY ERRO R OR ILLEGALITY IN THE IMPUGNED ORDER OF LD. CIT (A). GROUND NO. 2 OF THE REVENUES APPEAL AND GROUND IN THE CROSS OBJECTION ARE COMMON REGARDING THE LONG TERM CAPITA L GAIN DECLARED BY THE ASSESSEE WAS TREATED AS BUSINESS INCOME BY THE AO A ND SUBSEQUENTLY BIFURCATED BY THE LD. CIT (A) INTO LONG TERM CAPITA L GAIN AS WELL AS BUSINESS INCOME AS PER PROVISIONS OF SECTION 45(2) OF THE IT ACT. THUS THE REVENUE AS 5 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. WELL AS THE ASSESSEE ARE AGGRIEVED BY THE ORDER OF LD. CIT (A) AND FILED RESPECTIVE APPEAL AND CROSS OBJECTION ON THIS ISSUE . 4. THE LD. D/R HAS SUBMITTED THAT THE ASSESSEE HAS SHOWN THE LONG TERM CAPITAL GAIN ON SALE OF VARIOUS PLOTS AND SHOPS AFTER CLAIM ING DEDUCTION UNDER SECTION 54F. SINCE THE ASSESSEE HAS DEVELOPED A RESIDENTIAL COLO NY AND DIVIDED THE LAND INTO 102 RESIDENTIAL PLOTS IN THE COLONY NAMED AS MAYURI NAG AR COLONY, THEREFORE, THE AO HAS RIGHTLY CONSIDERED THIS ACTIVITY OF THE ASSESSEE AS A BUSINESS ACTIVITY INSTEAD OF INVESTMENT IN CAPITAL ASSET. THE AO HAS RIGHTLY TR EATED THE INCOME ARISING FROM THE SALE OF THE SAID PLOTS AS INCOME FROM BUSINESS AND CONSE QUENTLY THE DEDUCTION UNDER SECTION 54F WAS DENIED. THE LD. D/R HAS FURTHER SU BMITTED THAT THIS IS NOT THE ONLY ACTIVITY OF THE ASSESSEE IN THE REAL ESTATE BUSINES S BUT THE ASSESSEE HAS ALSO SOLD SHOPS DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IT IS EVIDENT FROM THE FACTS THAT THE ASSESSEE IS PURCHASING AND SELLING THE REAL ESTATE PROPERTY AND EVEN DEVELOPING THE LAND AND THEN SELLING, SOME OF WHICH EVEN CONSTRUCT ED AS COMMERCIAL PROPERTY AND SHOPS ARE SOLD. HE HAS RELIED UPON THE ORDER OF TH E AO. THE ACTIVITY IS A REGULAR BUSINESS ACTIVITY AND THE ASSESSEE HAS SPECIFICALLY DEVOTED HIS TIME TO DEVELOP THE COLONY BY PREPARING A LAY OUT PLAN, SITE PLAN, EAR MARKING THE BLOCKS IN THE COLONY A, B, C, D, E, F, G, H, I, J, K AND THEREAFTER THE PLOTS WERE SOLD AS RESIDENTIAL PLOTS AND NOT AGRICULTURAL LAND. THEREFORE, THE INCOME ARISING FR OM SALE OF THESE PLOTS IS NOTHING BUT THE BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE IS OTHERWISE ENGAGED IN THE BUSINESS OF RUNNING THE HOSPITAL AND HENCE BIFURCAT ION OF THE SAID INCOME INTO LONG 6 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. TERM CAPITAL GAIN AND BUSINESS INCOME BY THE LD. CI T (A) IS NOT BASED ON THE FACTS OF THE CASE. 5. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE H AS SUBMITTED THAT THERE IS NO DISPUTE THAT THE ASSESSEE PURCHASED THE AGRICULTURA L LAND IN THE VILLAGE MEHEMADPUR, DISTRICT DHOLPUR IN THE YEAR 2000 AS AN INVESTMENT WITHOUT ANY INTENTION TO DERIVE PROFIT BY SELLING THE SAME. THE ASSESSEE WAS HOLDING THIS LAND FOR A LONG TIME TILL IT WAS SOLD IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS USING THE LAND FOR AGRICULTURAL PURPOSES TILL THE LAND WAS DIVIDED INTO PLOTS AND S OLD. SINCE THE NEARBY AREA OF THE LAND HAS BEEN DEVELOPED AND PEOPLE STARTED RESIDING ALON G WITH FARMING THEIR LANDS, THEREFORE, TO AVOID THE ILLEGAL ENCROACHMENT ON THE LAND, THE ASSESSEE DECIDED TO SALE THE LAND AFTER DIVIDING THE SAME INTO RESIDENTIAL P LOTS. THUS THE LD. A/R HAS SUBMITTED THAT THE ASSESSEE HAS SOLD THE AGRICULTURAL LAND TH OUGH AFTER DIVIDING THE SAME INTO PLOTS AND, THEREFORE, GAIN ARISING FROM THE SALE OF THE LAND IS NOTHING BUT LONG TERM CAPITAL GAIN AS THE ASSESSEE PURCHASED THE LAND AS AN INVESTMENT AND AT THE TIME OF SALE IT CANNOT BE TREATED AS BUSINESS ACTIVITY. HE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SO HAN KHAN & MOHAN KHAN, 304 ITR 194 (RAJ.). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE UNDISPUTED FACT AS EMERGING FROM THE R ECORD IS THAT THE ASSESSEE PURCHASED THE AGRICULTURAL LAND IN QUESTION IN THE YEAR 2000-01. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD VARIOUS PLOTS OF LAND AND THE DESCRIPTION OF THE LAND GIVEN IN THE SALE DOCUMENT CLEARLY REVEALS THA T WHAT IS SOLD BY THE ASSESSEE IS 7 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. RESIDENTIAL PLOT TO EACH BUYER. THEREFORE, UNDISPUT EDLY THE ASSESSEE HAS DEVELOPED THE LAND INTO A RESIDENTIAL COLONY BY CARVING OUT 102 R ESIDENTIAL PLOTS, EAR-MARKING THE PLOTS AS A, B, C, D, E, F, G, H, I, J, K AS WELL AS NUMBE R OF THE PLOTS. THIS EXERCISE OF THE ASSESSEE, WHEREBY THE ASSESSEE HAS PREPARED A LAY-O UT PLAN AND WHICH HAS BEEN EXECUTED ON THE GROUND THE PLOTS HAVE BEEN CARVED O UT AS PER THE LAY-OUT PLAN AND THE MAP UNDER WHICH A PROPER RESIDENTIAL COLONY IS DEVE LOPED. THEREFORE, THE PLOTS ARE SOLD BY THE ASSESSEE AS RESIDENTIAL PLOT IN A COLONY DEV ELOPED BY THE ASSESSEE THOUGH THE COLONY WAS YET TO BE APPROVED BY THE AUTHORITIES. WHEN THERE WERE PROPER ROADS AND PATHWAYS IN THE SAID COLONY, THEN IT CANNOT BE SAID THAT THE AGRICULTURAL LAND WAS SIMPLY DIVIDED AND SOLD BY THE ASSESSEE FOR MAXIMIZING THE VALUATION OF THE LAND. THE AO HAS REPRODUCED THE CONTENTS OF THE REGISTERED DOCUMENTS THROUGH WHICH THE PLOTS OF LAND WERE SOLD BY THE ASSESSEE. THE ASSESSEE HAS NOT DI SPUTED THOSE CONTENTS AND FACTS THAT WHAT IS SOLD BY THE ASSESSEE ARE THE RESIDENTI AL PLOTS IN THE COLONY DEVELOPED BY THE ASSESSEE IN THE NAME OF MAYURI NAGAR COLONY. T HIS DESCRIPTION IS GIVEN BY THE ASSESSEE IN THE SALE DEED WHEREBY THE PLOTS WERE SO LD. THE AO HAS ALSO GIVEN THE DETAILS OF THE PLOTS SOLD BY THE ASSESSEE DURING TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AT PAGES 4 & 5 OF THE ASSESSMENT ORDER AS UNDER :- SALE OF PLOTS 40328500 ON 31.03.2016 25510500 ON 30.09.2015 4033000 8 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. ON 31.12.2015 10785000 SALE OF SHOPS 2836600 ON 12.02.2016 1493000 ON 29.02.2016 1343600 TOTAL SALES 43165100 COST OF PLOTS SOLD 365396 COST OF PLOTS SOLD ON 31.03.2016 232030 COST OF PLOTS SOLD ON 30.09.2015 35601 COST OF PLOTS SOLD ON 31.12.2015 97765 COST OF SHOPS SOLD 372513 COST OF SHOPS SOLD ON 12.02.2016 (COST OF LAND PURCHASE 14675 + CONSTRUCTION COST 200000) 214675 COST OF SHOPS SOLD ON 29.02.2016 (COST OF LAND PURCHASE 7838 + CONSTRUCTION COST 150000) 157838 DEVELOPMENT COST OF COLONY 1650000 TOTAL COST OF SOLD PROPERTY 2387909 PROFIT FROM BUSINESS OF REAL ESTATE 40777191 9 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. THUS IT IS CLEAR THAT THE ASSESSEE HAS SOLD THE PLO TS AS WELL AS SHOPS IN THE COLONY DEVELOPED BY ASSESSEE. THE LD. CIT (A) THOUGH UPHE LD THE FINDING OF THE AO TO THE EXTENT THAT WHAT WAS SOLD BY THE ASSESSEE WERE THE RESIDENTIAL PLOTS AND, THEREFORE, THE ACTIVITY OF DEVELOPING THE COLONY IS A BUSINESS ACT IVITY OF THE ASSESSEE WHICH IS ADVENTUROUS IN NATURE. HOWEVER, THE LD. CIT (A) HA S ALSO HELD THAT INITIALLY THE ASSESSEE HAS INVESTED IN CAPITAL ASSETS AND, THEREF ORE, THE CAPITAL ASSET WAS CONVERTED INTO STOCK-IN-TRADE AND THEREBY THE PROFIT ARISING FROM SALE OF PLOTS HAS BEEN BIFURCATED BY THE LD. CIT (A) INTO CAPITAL GAIN AS WELL AS BUS INESS PROFIT. THE LD. CIT (A) HAS APPLIED THE FAIR MARKET VALUE FOR THE PURPOSES OF A RRIVING AT THE CAPITAL GAIN AND THE DIFFERENCE OF THE SALE CONSIDERATION AND THE FAIR M ARKET VALUE IS TREATED AS BUSINESS INCOME OF THE ASSESSEE. THE RELEVANT FINDING OF TH E LD. CIT (A) ON THIS ISSUE IS IN PARA 5.3 AS UNDER :- 5.3. I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS FILED BY THE APPELLANT INCLUDING JUDICIAL CITATIONS GIVEN THEREIN. FOLLOWING FACTS HAVE EMERGED: 1. THAT THE APPELLANT HAD PURCHASED AGRICULTURAL LAND VIDE REGISTERED DEED DATED 27.09.2000 & 12.02.2001 FOR AN AMOUNT OF RS. 3,73,234/- . 2. THAT IN THE YEAR 2015-16, THE APPELLANT HAD DIVIDED THE AGRICULTURAL LAND INTO SMALL PLOTS AND DEVELOPED A COLONY UNDER THE NAME OF MAYURI NAGAR COLONY. 3. THAT THE APPELLANT HAD ALSO CONSTRUCTED SHOPS ON TH E LAND FOR SALE. 4. THAT AFTER PLOTTING HAS BEEN DONE, THE APPELLANT HA S STARTED SELLING THE PLOTS. SUCH PLOTS WERE SOLD DURING THE YEAR UND ER CONSIDERATION AND DECLARED THE INCOME AS LONG TERM CAPITAL GAIN. 10 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. 5. THAT THE AO HAD CONSIDERED THE INCOME ARISEN OUT OF THE ABOVE MENTIONED SALE AS BUSINESS INCOME BY TREATING IT AS BUSINESS INCOME. ON PRINCIPLE, WE AGREE WITH THE ORDER OF THE LD. CI T(A) ON THE POINT THAT INITIALLY THE ASSESSEE HAS INVESTED IN THE LAND IN QUESTION, HOWE VER, SUBSEQUENTLY WHEN THE ASSESSEE HAS DECIDED TO DEVELOP THE RESIDENTIAL COL ONY ON THIS LAND THEN THE CAPITAL ASSET HAS BEEN CONVERTED INTO STOCK-IN-TRADE. HOWE VER, THE BIFURCATION OF THE PROFIT ARISING FROM THE SALE OF THE PLOTS OF LAND OUGHT TO HAVE BEEN BASED ON THE FMV ON THE DATE WHEN THE ASSESSEE HAS DECIDED TO DEVELOP THE L AND INTO RESIDENTIAL COLONY. THE TIMING AND DATE OF SUCH CONVERSION IS TAKEN BY THE LD. CIT(A) AS ON 1 ST DAY OF FINANCIAL YEAR 2015-16 I.E. 01.04.2015. HOWEVER, THE SAID DAT E IS NOT THE ACTUAL DATE COMING FROM THE RELEVANT MATERIAL/RECORD. THE PREPARATION OF THE SITE PLAN FOR DEVELOPING THE COLONY SHALL BE THE ACTUAL DATE OF CONVERSION OF TH E AGRICULTURAL LAND INTO STOCK-IN-TRADE. THE LD. CIT(A) HAS NOT EXAMINED THIS ISSUE AS ON WH EN THE CAPITAL ASSET WAS CONVERTED INTO STOCK-IN-TRADE. THE LD. CIT(A) HAS JUST TAKEN THE 1 ST DAY OF PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR AS THE DATE OF CONVERSION WHICH IS NOT BASED ON ANY DOCUMENTARY EVIDENCE. ACCORDINGLY, THE COMPUTATION OF CAPITAL GAIN AS WELL AS THE BUSINESS INCOME ARISING FROM THE SALE OF LAND IS DEPENDENT ON THE F AIR MARKET VALUE OF THE UNDEVELOPED LAND IN QUESTION ON THE DATE WHEN THE ASSESSEE DECI DED TO DEVELOP THE LAND. THE DOCUMENTARY EVIDENCE ON THIS POINT WOULD BE THE LAY OUT PLAN PREPARED BY THE ASSESSEE OR ANY OTHER DOCUMENT WHICH WAS PREPARED BY THE ASS ESSEE FOR THE PURPOSE OF DEVELOPMENT OF THE LAND. THEREFORE, THE BIFURCATIO N AND COMPUTATION OF LONG TERM 11 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. CAPITAL GAIN AND BUSINESS INCOME REQUIRES A PROPER VERIFICATION AND RE-CONSIDERATION. ACCORDINGLY WE SET ASIDE THIS LIMITED ISSUE TO THE RECORD OF THE AO FOR DETERMINING THE ACTUAL DATE OF CONVERSION OF THE CAPITAL ASSET INTO STOCK-IN-TRADE AND THEN APPLY THE PROVISIONS OF SECTION 45(2) OF THE IT ACT TO BIFURC ATE THE PROFIT INTO LONG TERM CAPITAL GAIN AND BUSINESS INCOME. 6.1. AS REGARDS THE DEDUCTION UNDER SECTION 54F IS CONCERNED, THE LD. CIT (A) HAS NOT CONSIDERED THIS ISSUE. THE AO HAS DENIED THE CL AIM SOLELY ON THE GROUND THAT THE PROFIT ON SALE OF THE LAND IS BUSINESS INCOME WHERE AS THE LD. CIT (A) HAS NOT ADJUDICATED THIS ISSUE WHILE PASSING THE IMPUGNED O RDER. ACCORDINGLY THE AO IS DIRECTED TO EXAMINE THE CLAIM OF DEDUCTION UNDER SECTION 54F AND THEN DECIDE THE SAME AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 6.2. AS REGARDS THE INCOME ARISING FROM SALE OF SHO PS, THE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AS INCOME FROM CAPITAL GA IN, WE FIND THAT ONCE THE ASSESSEE HAS DECIDED TO DEVELOP THE LAND BY CONSTRUCTION OF SHOPS FOR THE PURPOSE OF SALE, THEN A DIFFERENT PARA METER CANNOT BE APPLIED AS APPLIED I N THE CASE OF DEVELOPMENT OF LAND IN A RESIDENTIAL COLONY. ACCORDINGLY, THE PROFIT ARIS ING FROM THE SALE OF SHOPS IS ALSO REQUIRED TO BE BIFURCATED AS PER THE PROVISIONS OF SECTION 45(2) OF THE IT ACT. THE AO HAS TO COMPUTE THE CAPITAL GAIN AS WELL AS THE BUSI NESS INCOME IN VIEW OF OUR OBSERVATIONS AS REGARDS THE CONVERSION OF THE AGRIC ULTURAL LAND INTO RESIDENTIAL COLONY. HENCE THE APPEAL OF THE REVENUE IS PARTLY ALLOWED F OR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 12 ITA NO. 1317/JP/2019 & C.O. NO.02/JP/2020 DR RADHEY SHYAM GARG, DHOLPUR. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10/08/2 020. SD/- SD/- ( JES'K LH- 'KEKZ] ) ( FOT; IKY JKWO (RAMESH C. SHARMA) ) (VIJAY PAL RAO) YS[KK LNL; @ ACCOUNTANT MEMBER U;KF;D LNL; / JUDICIAL MEMBER JAIPUR DATED:- 10/08/2020. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE BHARATPUR, BHAR ATPUR. 2. THE RESPONDENT DR. RADHEY SHYAM GARG, DHOLPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1317/JP/2019 & CO NO. 02/JP/ 2020) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR