The Upper India Couper Paper Mills Co. Pvt.Ltd., Lucknow V. Commissioner of Income Tax-II, Lucknow

ITA 154/LKW/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8158 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R N SHUKLA
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Opportunity of being heard; Rule of consistency; Cost of acquisition; Date of conversion; Fair market value; Valuation report; Assessment record; Revised return
• Section: 45(2); 143(3); 50C; 80HHC; 27; 263; 63; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A : LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER I.T.A. NO.154 /LKW / 20 12 ASSESSMENT YEARS: 2007 - 2008 THE UPPER INDIA COUPER PAPER VS. C.I.T. - II, MILLS CO. PVT. LTD., LUCKNOW. MASJID BAGH, NISHATGANJ, LUCKNOW. PAN:AABCT5709M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. N. SHUKLA, ADVOCATE RESPONDENT BY : SHRI PRAVEEN KUMAR, CIT, D.R. DATE OF HEARING :21 . 05 . 2012 DAT E OF PRONOUNCEMENT : 07.08.2012 O R D E R PER SUNIL KUMAR YADAV : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT ON VARIOUS GROUNDS, WHICH ARE AS UNDER: 1. BECAUSE THE VERY BASIS OF ISSUING THE NOTICE U/S 263 AND CONSEQUENTIAL ORDER U/S 263 AND CONSIDERING THAT THE ASSESSMENT ORDER PASSED IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE PREJUDICIAL IS SUBJECT TO MISLEADING AND WRONG APPRECIATION OF FACTS AS WELL AS LAW. : - 2 - : 2. BECAUSE THE ORDER U/S 263 HAS BEEN PASSED C ONTRARY TO STATUTORY PROVISIONS OF THE INCOME TAX ACT 1961 . 3. BECAUSE THE ORDER U/S 26 3 SUFFERS FROM JURISDICTIONAL IMPROPRIETY. 4. BECAUSE THE SHOW CAUSE NOTICE ISSUED U/S 263, AS WELL AS THE ORDER PASSED U/S 263 OF INCOME TAX ACT 1961 SUFFERS FROM MAT ERIAL IRREGULARITY FACTS AS WELL AS LAW. 5. BECAUSE THE CIT HAS ERRED IN LAW TO ADOPT THE VALUATION OF ITS OWN. 6. BECAUSE THE RESPONDENT HIMSELF ON ONE HAND HAS ACCEPTED THE REPORT OF THE GOVERNMENT APPROVED VALUER FOR ASCERTAINING THE FAIR MARKET VALUE ON THE DATE OF CONVERSION INTO STOCK IN TRADE I.E. ON 01.04.2003 BEING ` 1,02,25,02,097/ - AND ON THE OTHER HAND DID NOT ACCEPT THE REPORT OF THE GOVERNMENT APPROVED VALUER FOR ASCERTAINING FAIR MARKET VALUE AS ON 01.04.1981 OF ` 34,08,34,032/ - ON THE BASIS OF WHICH THE ASSESSING AUTHORITY HAS CALCULATED THE INDEX COST OF ` 1,578,061,568 / - . HENCE THE NOTICE U/S 263(1) AS WELL AS ORDER HAS BEEN PASSED AGAINST THE FINE NORMS OF JURISPRUDENCE AND NOT IN ACCORDANCE WITH LAW IN GROSS VIOLATION OF SETTLED LAW OF JURISPRUDENCE 'QUI APPROBATE NON REPROBATE' (ONE WHO APPROBATES CANNOT REPROBATE). 7. BECAUSE IN THE SHOW CAUSE NOTICE U/S 263 AS WELL AS ORDER PASSED U/S 263 SUFFERED FROM ERRONEOUS METHOD OF CALCULATION ON THE BASIS OF D.M. CIRCLE RATE, AGAINST THE STAT UTORY PROVISIONS ENVISAGED IN SECTION 55(2)(B)(I) OF INCOME TAX ACT 1961; AS SUCH THE CALCULATION OF CAPITAL GAIN OF ` 93,88,53,854/ - IS NOT LAWFUL. 8. BECAUSE THERE IS NO STATUARY PROVISION IN THE INCOME TAX ACT TO VALUE THE STOCK IN TRADE FOR CALCULATING CAPITAL GAINS U/S 55(2)(B)(I) ON THE BASIS OF DM'S CIRCLE RATE. 9. BECAUSE THE RESPONDENT IN ITS SHOW CAUSE NOTICE ISSUED U/S 263 AS WELL AS THE ORDER PASSED U/S 263 FAIL TO : - 3 - : CONSIDER THE VALUATION REPORT OF THE GOVERNMENT APPROVED VALUER PROPERLY, WHICH WAS LAWFULLY CONSIDERED BY THE ASSESSING AUTHORITY AND ON THE BASIS OF WHICH THE ASSESSMENT ORDER WAS PASSED, ALTHOUGH THE ASSESSMENT ORDER SUFFERED FROM APPARENT MISTAKE RECTIFIABLE U/S 154 OF INCOME TAX ACT 1961. 10. BECAUSE IT IS A SETTLED PRINCIPLE TH AT WHERE THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE HON'BLE COMMISSIONER OF INCOME TAX DOES NOT AGREE, IT IS NOT PERMITTED TO SUBSTITUT E HIS OWN OPINION ABOUT THE COMPUTATION OF INCOME IN PLACE OF THE INCOME ASSESSED BY ASSESSING AUTHORITY AS SUCH THE ASSESSMENT ORDER CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 11. BECAUSE THE ASSESSING AUTHORITY WITH PROPER AND LAWFUL APPLICATION OF MIND ADOPTED THE LAWFUL COURSE AVAILABLE U/S 45(2) READ WITH SECTION 55(2)(B)(I) AS WELL AS PROVISIONS OF SECTION 2(22B) WITH RESPECT TO FAIR MARKET VALUE AND THE PROVISIONS OF SECTION 55A OF THE INCOME TAX ACT 1961 AFTER PROPER INQUIRY AFTER ISSUING THE NOTICE U/S 142 AS WELL AS UNDER THE KNOWLEDGE THAT IN THE A.Y. 2004 - 05 THE REPORT OF THE GOVERNMENT APPROVED VALUER WAS ACCEPTED BY THE ASSESSI NG AUTHORITY, HENCE THE ASSESSEE CANNOT BE SUBJECTED TO THE EXERCISE OF THE JURISDICTION U/S 263 OF THE I.T. ACT, 1961. 12. BECAUSE ONCE THE MATTER IN DISPUTE WAS ALREADY CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) , LUCKNOW IN ITS APPELLATE ORDER, THE NOTICE U/S 263 IS ALSO NOT MAINTAINABLE ON SAME MATTER IN VIEW OF THE SECTION 263(1 )(C) OF INCOME TAX ACT 1961. 13. BECAUSE THE CIT HAS ERRED IN LAW IN DEALING WITH THE LAND ON WHICH THE METRO CITY IS BEING DEVELOPED WHICH IS UNDER CONSTRUCTIO N/DEVELOPMENT AND ITS TOTAL SALE IS YET TO BE COMPLETED IN SUBSEQUENT YEARS AND IS NOT PART : - 4 - : OF ASSESSMENT ORDER FOR A.Y. 2007 - 08 AND THE VALUATION OF ` 95/ - SQ.FT. IS FOR THE LAND WHICH IS BEING DEVELOPED AS METRO CITY WHICH IS NOT THE PART OF A.Y. 2007 - 08 ; EVEN ASSESSING AUTHORITY IN HI S ASSESSMENT ORDER WHILE CALCULATING THE CAPITAL GAINS DID NOT CONSIDER THE VALUATION OF ` 95/ - SQ.FT.AS ON 1.4.1981. 14. BECAUSE THE CIT ERRED ON THE FACTS AS STATED ON ITS SHOW CAUSE NOTICE DATED 20.1.2012 THAT THE ASSESSING OFFICER HAS ACCEPTED THE COST OF ACQUISITION AS ON 1.4.1981 AS ` 17,80,61,568.00 AND HAS INDEXED THE SAME AS ON 1.4.2003, BECAUSE NEITHER IN THE ASSESSI NG OFFICER NOR IN THE VALUATION REPORT THERE IS ANY AMOUNT OF ` 17,80,61,568.00 . 15. BECAUSE THE CIT ERRED IN LAW IN ACTING AS A VALUATION OFFICER, SUPERSEDES THE SEC.55A OF THE ACT AND ACTED BEYOND THE JURISDICTION. 16. BECAUSE THE RESPONDENT FAIL TO SHO W THAT HOW THE ORDER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. NO EVIDENCE CONTRARY TO FACT OR LAW IS AVAILABLE IN RECORD. 17. BECAUSE THE CIT ERRED ON THE FACTS CONSIDERING THE LEASE DEED OF THE ASSESSEE TO BE FOR INDUSTRIAL USE W HILE AS THE LEASE DEED OF THE COMPANY IS FOR BUILDING PURPOSES AND THE LAND USE IS GOVERNED BY THE MASTER PLAN OF THE CITY OF LUCKNOW WHICH FOR RESIDENTIAL AND COMMERCIAL AS CORRECTLY TAKEN BY GOVT. APPROVED VALUER. 18. BECAUSE THE CIT ERRED IN LAW IN DEC LARING THE ASSESSMENT ORDER OF A.O. IN PARTICULAR THE VALUATION REPORT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE FOUR QUASI - JUDICIAL ORDERS THAT IS ASSESSMENT ORDER FOR 2004 - 05, ASSESSMENT ORDER FOR A.Y. 2007 - 08, CIT(A) ORDER FOR 2004 - 05, CIT(A) ORDER FOR 2008 - 09, HAS ACCEPTED THE VALUATION REPORT OF GOVT. APPROVED VALUER. 19. BECAUSE ANY OTHER GROUND TAKEN AT THE TIME OF HEARING WITH THE PERMISSION OF THE COURT. : - 5 - : 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS 19 GROUNDS BUT THEY ALL RELATE TO THE VALIDITY OF THE ORDE R OF CIT PASSED U/S 263 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF P ROPERTY DEVELOPMENT DURING THE IM PUGNED ASSESSMENT YEAR. ON SCRUTINY OF THE ASSESSMENT ORDER AND RECORDS THE CIT NOTICED CERTAIN FACTS ON THE BASIS OF WHICH HE FORMED A BELIEF THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 20/01/2012 ASKING HIM AS TO WHY ACTION U/S 263 SHOULD NOT BE TAKEN IN HIS CASE FOR CERTAIN REASONS. THE CIT NOTICED THAT THE ASSESSEE HAS CONVERTED 12,04,438.33 SQ. FT. OF LAND HELD BY HIM AS CAPITAL ASSET INTO STOCK IN TRADE ON 01/04/2003. THE SAID LAND WAS PROPOSED TO BE BIFURCATED INTO 9,33,518.33 SQ. FT. OF LAND FOR RESIDENTIAL PURPOSES AND 2,70,920 SQ. FT. FOR COMMERCIAL PURPOSE. THE COST PRICE OF THE LAND ON 01/04/2003 WA S TAKEN TO BE THE COST PRICE AS ON 01/04/1981 WHICH WAS INDEXED AS PER THE COST INDEX PRESCRIBED ON THE DATE OF CONVERSION. THE RATE ADOPTED BY THE ASSESSEE AS ON 01/04/1981 WAS ` 95/ - PER SQ. FT. IT WAS FURTHER NOTICED BY THE CIT THAT THE DISTRICT MAGIST RATES CIRCLE RATE PRESCRIBED FOR THE AREA AS ON 01/04/1981 WAS ` 10/ - TO ` 15/ - PER SQ. FT. ONLY. HE OBSERVED THAT EVEN IF MAXIMUM RATE OF ` 15/ - WAS TO BE ADOPTED, THE TOTAL VALUE OF THE LAND IN QUESTION AS ON 01/04/1981 WOULD WORK OUT OF ` 1,80,66,575/ - ON LY. UPON INDEXATION AT THE PRESCRIBED RATE, THE COST OF THE SAID LAND AS ON 01/04/2003 WORKS OUT TO ` 8,36,48,243/ - . THIS LAND HAD BEEN CONVERTED BY THE ASSESSEE IN TO STOCK IN TRADE ON 01/04/2003 AT THE VALUE OF ` 121,55,25,020/ - . THE DIFFERENCE BETWEEN THE COST OF ACQUISITION AND FAIR MARKET VALUE ON THE : - 6 - : DATE OF CONVERSION IS TAXABLE AS CAPITAL GAINS AS PER THE PROVISIONS OF SECTION 45(2) OF THE ACT IN THE YEAR OF SALE OF SUCH CAPITAL ASSET. THEREFORE, THE AMOUNT OF ` 93,88,53,845/ - WAS TAXABLE AS CAPITA L GAIN IN THE YEAR OF SALE. 4. HOWEVER, THE ASSESSING OFFICER CALCULATED THE CAPITAL GAIN AT A LOSS OF ( - )79,25,89,300/ - . HE ACCEPTED THE COST OF SAID LAND AS ON 01/04/1981 AT ` 17,80,61,568/ - @ ` 95/ - PER SQ. FT. AND INDEXED THE SAME AS ON 01/04/2003. SINCE THE ASSESSING OFFICER HAD ACCEPTED THE VALUATION SUBMITTED BY THE ASSESSEE MECHANICALLY, WITHOUT APPLICATION OF MIND AND WITHOUT CARRYING OUT ANY ENQUIRIES, THE ASSESSMENT ORDER PASSED BY HIM WAS CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE REVENUE BY THE CIT AND ISSUED A NOTICE U/S 263 OF THE ACT. 5. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE HAS FILED VARIOUS OBJECTIONS TO THE PROPOSED ACTION U/S 263 OF THE ACT, WHICH WERE DEALT BY THE CIT IN VARIOUS PARAS IN THE LIGHT OF V ARIOUS JUDICIAL PRONOUNCEMENTS AND THE RELEVANT OBSERVATION OF THE CIT ARE EXTRACTED HEREIN: 1. THE FIRST CLAIM OF THE ASSESSEE IS THAT WHILE PASSING THE ASSESSMENT ORDER FOR A.Y. 2004 - 05, THE AO ACCEPTED THE VALUE OF THE LAND ADOPTED BY THE ASSESSEE AS ON 01.04.81. THE A.O. SOUGHT TO TAX THE PROFIT FROM THE TRANSACTION U/S 2(47)(V) AND 2(47)(VI) OF I.T. ACT IN THAT YEAR BUT THE CIT(A) HELD THAT THE PROVISIONS OF SECTION 45(2) WOULD APPLY AND THE LOSS/GAIN FROM SALE OF THE LAND WOULD BE TAXABLE IN THE YE AR OF SALE OF THE SAID LAND. IT WAS CLAIMED THAT SINCE THE VALUATION REPORT OF THE SAID LAND AS ON 01.04.81, PREPARED BY A GOVERNMENT APPROVED REGISTERED VALUER HAD BEEN ACCEPTED BY THE A.O., IT WAS NOT OPEN TO THE DEPARTMENT TO QUESTION THE SAME IN THIS ASSESSMENT YEAR. : - 7 - : IN THIS CONNECTION, I WOULD LIKE TO EMPHASIZE THAT THE ISSUE OF THE CORRECT VALUE OF LAND AS ON 01.04.81 WAS NOT LOOKED INTO BY THE A.O. NO ENQUIRIES WERE MADE BY HIM, NOR DID HE MAKE ANY ATTEMPT TO VERIFY THE CORRECTNESS OF THE SUBMISSIO NS MADE BY THE ASSESSEE. HE FAILED TO APPRECIATE THAT THE VALUATION REPORT FILED BY THE ASSESSEE WAS MERELY AN OPINION. MOREOVER, THE SAID VALUATION REPORT WAS NOT BINDING UPON HIM AS THE DEPARTMENT HAD NOT MADE ANY REFERENCE TO THE VALUATION CELL. THIS WA S A MERELY AN OPINION FILED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM. IN ANY CASE, SINCE THIS ISSUE WAS NOT RAISED BY THE A.O. IN ASSESSMENT PROCEEDINGS, IT WAS NOT ADJUDICATED UPON BY THE CIT(A) IN HIS ORDER. THEREFORE IT IS INCORRECT FOR THE ASSESSEE TO C LAIM THAT THE ISSUE OF VALUATION OF LAND AS ON 01.04.81 HAD REACHED FINALITY IN A.Y. 2004 - 05. 2. THE NEXT CLAIM OF THE ASSESSEE IS THAT IT HAD FILED ITS RETURN OF INCOME FOR A.Y. 2008 - 09 RELYING ON THE REPORT OF THE SAME GOVERNMENT APPROVED REGISTERED VALU ER. IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE I.T. ACT THE A.O. APPLIED THE PROVISIONS OF SEC. 45(2) OF THE I.T. ACT. FURTHER, THE AO DID NOT ACCEPT THE REPORT OF THE APPROVED VALUER AND HE APPLIED THE DM'S CIRCLE RATE TO ARRIVE AT THE COST PRICE OF THE LAND AS ON 01.04.81. THE ASSESSEE APPEALED TO CIT(A) WHO VIDE ORDER DATED 05.12.2011 ALLOWED THE ASSESSEE'S APPEAL. IT IS CLAIMED BY THE ASSESSEE THAT THE CIT(A) HAS ALLOWED THE APPEAL AND ACCEPTED THE VALUE OF THE LAND AS ON 01.04.81 AS DETERMINED B Y THE GOVERNMENT APPROVED REGISTERED VALUER RELYING ON THE FOLLOWING DECISIONS: - ( I ) SPECIAL LAND ACQUISITION OFFICER VS. DAVANGERE V.P VEERABHADRAPPA AND OTHERS (1985) (154) ITR 190 (SC) ( II ) CIT VS. JUMRAMAL SONS [1985] 154 ITR 689 (ALLD.) IT HAS BEEN CLAIMED THAT SINCE THE ISSUE IN DISPUTE HAS ALREADY BEEN DECIDED BY THE APPELLATE AUTHORITY IN A.Y. 2008 - 09 THE SAME COULD NOT BE THE SUBJECT MATTER OF PROCEEDINGS U/S 263(1) IN VIEW OF THE PROVISIONS OF SEC. 263(L)(C) OF THE I.T. ACT. BEFORE ANSWERING THE ASSESS EE'S ARGUMENTS AGAINST INVOKING OF THE PROVISIONS OF SECTION 263(1), I WOULD LIKE TO : - 8 - : DISCUSS THE VALUATION REPORTS FILED BY THE ASSESSEE IN SUPPORT OF HIS VALUATION AS ON 01.04.81 (THE SAID VALUATION REPORTS ARE ANNEXED AS ANNEXURES - I & II CONTAINING 10 PA GES EACH TO THIS ORDER.) THE ASSESSEE FILED VALUATION REPORTS DATED 19.03.2001 AND 13.06.2002 OF SRI B.M. GUPTA APPROVAL VALUER. FROM THE RECORDS IT IS SEEN THAT THE TOTAL LAND AREA WITH THE ASSESSEE WAS 19,82,785 SQFT. THE LEASE OF THE LAND WAS OBTAINED IN 1942 FOR A PERIOD OF 30 YEARS, RENEWABLE UP TO A MAXIMUM OF 90 YEARS. THE LEASE OF THE LAND WAS TAKEN FOR INDUSTRIAL PURPOSE. A PAPER MILL WAS SITUATED ON THE PREMISES AND THE ASSESSEE WAS KNOWN AS 'THE UPPER INDIA COUPER PAPER MILLS CO. LTD.'. WHILE VA LUING THE LAND OF THE ABOVE INDUSTRIAL UNDERTAKING, THE ASSESSEE'S VALUER HAS RELIED ON THE PRICE OF A PIECE OF LAND OF 504 SQ . MT. I.E. ABOUT 5,000 SQ.FT, SITUATED NEARBY . THIS LAND WAS AUCTIONED BY NAGAR MAHA PALIKA, LUCKNOW, IN 1985 @ RS. 246.3 PER SQ.F T. FROM THE DETAILS GIVEN IN THE WORKING, IT APPEARS THAT THIS LAND WAS COMMERCIAL IN NATURE AS THE VALUER HAS REDUCED THIS PRICE BY 50% TO ARRIVE AT THE PRICE OF RESIDENTIAL LAND. THEREAFTER, HE HAS EXTRAPOLATED THE COST INDEX BACKWARDS TO ARRIVE AT THE P RICE ON 01.04.1981. THIS CALCULATION OF THE APPROVAL VALUER CANNOT BE RELIED UPON FOR THE FOLLOWING REASONS: - 1. THE LAND OF THE ASSESSEE IS ABOUT 19,82,785 SQ.FT., WHILE, THE COMPARATIVE SALE INSTANCE QUOTED IS OF ONLY 5,000 SQ.FT, NO ALLOWANCE HAS BEEN MADE BY THE VALUER ON ACCOUNT OF THE LARGE SIZE OF THE LAND AVAILABLE WITH THE ASSESSEE. 2. THE SALE INSTANCE CITED BY THE ASSESSEE IS OF DEVELOPED LAND SITUATED ON MAIN ASHOK MARG AT NISHATGANJ, NEAR RAILWAY CROSSING. IT IS COMMERCIAL LAND SITUATED IN THE MAIN MARKET AND IT APPEARS TO BE A CORNER PLOT. IN FACT IT IS OPEN ON 3 SIDES AS ON THE NORTH SIDE THERE IS RAILWAY OPEN LAND. THUS THE LAND IS OPEN ON THE EAST, SOUTH & NORTH SIDES. THE ABOVE LAND HAS BEEN COMPARED WITH THE LAND OF THE ASSESSEE WHICH IS OF HUGE SIZE, IS ODDLY SHAPED, UNDEVELOPED : - 9 - : AND DOES NOT HAVE THE SAME LOCATIONAL ADVANTAGES. NO ALLOWANCE HAS BEEN MADE BY THE VALUER FOR THESE FEATURES. THE VALUER OF THE ASSESSEE HAS STATED IN HIS VALUATION REPORT THAT THE LAND WAS LEASED TO THE ASSESSEE FOR 'BUILDING PURPOSE'. HE HAS CONCEALED THE FACT THAT THE LAND WAS LEASED FOR 'INDUSTRIAL USE'. IN FACT A PAPER MILL WAS ESTABLISHED ON THE LAND AND WAS IN OPERATION, EVEN IN THE YEAR 1981. IT IS A WELL KNOWN FACT THAT BEFORE A RESIDENTIAL/ COMM ERCIAL COMPLEX CAN COME UP ON SUCH LAND, THE 'LAND USE' HAS TO BE CHANGED BY THE GOVT. AUTHORITIES. THE VALUERS REPORT IS SILENT ON THE ISSUE. THE FIRST QUESTION THAT NEEDS TO BE ANSWERED IS WHETHER SUCH CHANGE OF LAND USE WAS AT ALL PERMISSIBLE AS ON 01.0 4.81. IF IT WAS NOT PERMISSIBLE IN THE FIRST PLACE THEN T HE VALUATION OF THE LAND CANNOT BE MADE SEPARATELY AND THE ENTIRE COMPANY WILL HAVE TO VALUED AS A GOING CONCERN. HOWEVER, IF CHANGE OF USE WAS POSSIBLE THEN THE MARKET VALUE WILL HAVE TO BE DETERMIN ED AFTER MAKING AN ALLOWANCE FOR THE LIKELY LIABILITY TO BE INCURRED ON ACCOUNT OF SUCH CHANGE OF USE. THE VALUER HAS NOT MADE ANY SUCH DEDUCTION FROM THE VALUE. IT IS THEREFORE CLEAR THAT THE VALUATION REPORT IS NOT CORRECT AND IS UNRELIABLE. 4. THE LEASE OF THE SAID LAND WAS OBTAINED IN 1942 FOR 30 YEARS, RENEWABLE EVERY 30 YEARS UPTO A MAXIMUM OF 90 YEARS. NO DEDUCTION HAS BEEN MADE BY THE VALUER FROM THE VALUE AS ON 01.04.81 ON ACCOUNT OF THE BRIEF PERIOD OF LEASE THAT WAS LEFT WITH THE ASSESSEE AND THE LIKELY LIABILITY TO BE INCURRED FOR GETTING THE LAND CONVERTED INTO 'FREEHOLD' LAND. 5. THE VALUER OF THE ASSESSEE HAS ARRIVED AT THE VALUATION OF THE LAND AS ON 01.04.81 BY RELYING ON THE SALE PRICE REALIZED IN AN AUCTION OF A VERY SMALL PIECE OF COMMERCIAL LAND WHICH IS SITUATED NEAR THE ASSESSEE'S LAND. THIS AUCTION TOOK PLACE IN 1985 ABOUT 4 YEARS AFTER THE VALUATION DATE. IN THIS CONNECTION, I WOULD LIKE TO REFER TO THE DECISION OF THE HON'BLE S.C. IN THE CASE OF EXECUTIVE ENGINEER KARNATAKA H OUSING BOARD VS. LAND ACQUISITION OFFICER GADAG AND OTHERS (2011) I SCR 600. : - 10 - : IN THIS CASE THE HON'BLE COURT HELD THAT. 'THERE IS THEREFORE EVERY LIKELIHOOD OF AUCTION PRICE BEING EITHER HIGHER OR LOWER THAN THE REAL MARKET PRICE, DEPENDING UPON THE NATURE OF SALE. AS A RESULT , COURTS ARE WARY OF RELYING UPON AUCTION SALE TRANSACTIONS WHEN OTHER TRADITIONAL SALE TRANSACTIONS ARE AVAILABLE WHILE DETERMINING THE MARKET VALUE OF THE ACQUIRED LAND.' FROM THE ABOVE DECISION IT IS AMPLY CLEAR THAT AUCTION PRICES ARE UNRELIABLE. FURTHER THE COURT HAS OBSERVED THAT NORMAL SALE TRANSACTIONS SHOULD BE RELIED UPON. IT IS STRANGE THAT THE APPROVED VALUER CHOSE TO RELY ON AN AUCTION SALE TRANSACTION THAT TOOK PLACE IN 1985 TO ARRIVE AT THE VALUE AS ON 01.04.81. THE AREA IN WHICH THE LAND IS SITUATED IS ONE IN WHICH TRANSACTIONS IN LAND TAKE PLACE FREQUENTLY. IT IS THEREFORE OBVIOUS THAT A PARTICULAR TRANSACTION WAS PICKED OUT TO SUPPORT A RIDICULOUSLY HIGH VALU ATION. THIS VALUATION SHOULD NOT HAVE BEEN ACCEPTED UNDER ANY ' CIRCUMSTANCES WITHOUT THOROUGH INQUIRY. THE A.O. FAILED TO MAKE ANY INQUIRIES WITH THE LUCKNOW MUNICIPAL AUTHORITIES TO FIND OUT THE VALUE OF LAND IN COMPARATIVE SALE INSTANCES IN THE YEAR 198 1 ITSELF. HE MECHANICALLY ACCEPTED THE VALUATION ADOPTED BY THE ASSESSEE EVEN THOUGH THE ASSESSEE WAS INFLATING THE COST PRICE BY ALMOST 100 CR. AFTER TAKING THE BENEFIT OF INDEXATION. ANOTHER - QUESTION WHICH HAS TO BE ANSWERED IS WHETHER T HE CIRCLE RATE CAN BE CONSIDERED AS A BASIS FOR DETERMINING THE MARKET VALUE OF LAND. IN THIS CONNECTION ATTENTION IS INVITED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAMESH CHAND BANSAL VS. DISTRICT MAGISTRATE/COLLECTOR, G HAZIABAD 1999 (5) S CC 62 WHE RE THE HON'BLE COURT HELD : - 'READING SECTION 47 - A WITH THE AFORESAID RULE 340 - A, IT IS CLEAR THAT THE CIRCLE RATE FIXED BY THE COLLECTOR IS NOT FINAL BUT IS ONLY A PRIMA FACIE DETERMINATION OF RATE OF AN AREA CONCERNED ONLY TO GIVE GUIDANCE TO THE REGIST ERING AUTHORITY, TO TEST PRIMA FACIE WHETHER THE INSTRUMENT HAS PROPERLY DESCRIBED THE VALUE OF THE PROPERTY.' : - 11 - : IN THE CASE OF R. SAI BHARATHI VS. J. JAYALALITHA 2004(2) SCC 9 THE HON'BLE SUPREME COURT HELD: 'THE GUIDELINE VALUE IS A RATE FIXED BY AUTHORITIES UNDER THE STAMP ACT FOR PURPOSES OF DETERMINING THE TRUE MARKET VALUE OF THE PROPERTY DISCLOSED IN AN INSTRUMENT REQUIRING PAYMENT OF STAMP DUTY. THUS THE GUIDELINE VALUE FIXED IS NOT FINAL BUT ONLY A PRIMA FACIE RATE PREVAILING IN AN AREA. IT IS OPEN TO THE REGISTERING AUTHORITY AS WELL AS THE PERSON SEEKING REGISTRATION TO PROVE THE ACTUAL MARKET VALUE OF PROPERTY.' IN THE CASE OF LAL CHAND VS. UNION OF INDIA AND OTHERS 2009 (11) SCALE 627 THE HON'BLE SUPREME COURT HELD: 'IN SPITE OF IT, THE LEARNED COUNSEL FOR APPELLANT SUBMITTED BEFORE US THAT THOUGH THE SAID CIRCLE RATES CANNOT BE BASIS FOR DETERMINING THE MARKET VALUE, IT MAY BE TAKEN NOTE OF AS ONE OF THE RELEVANT PIECES OF EVIDENCE INDICATIVE OF THE MARKET VALUE.' IN THE CASE OF R. SAI BHARATHI SUPRA IT WAS ALSO HELD: 'IT SHOULD HOWEVER BE NOTED THAT AS CONTRASTED FROM THE ASSESSMENT OF MARKET VALUE CONTAINED IN NON - STATUTORY BASIC VALUE REGISTERS, THE POSITION MAY BE DIFFERENT WHERE THE GUIDELINE MARKET VALUES ARE DETERMINED BY EXPERT COMMITTEES CONSTITUTED UNDER THE STATE STAMP LAW, ........................WHEN THE GUIDELINE MARKET VALUES, THAT IS MINIMUM RATES FOR REGISTRATION OF PROPERTIES, ARE SO EVALUATED AND DETERMINED BY EXPERT COMMITTEES AS PER ST ATUTORY PROCEDURE, THERE IS NO REASON WHY SUCH RATE SHOULD NOT BE A RELEVANT PIECE OF EVIDENCE FOR DETERMINATION OF MARKET VALUE.' IT IS CLEAR FROM THE ABOVE DECISIONS THAT THE CIRCLE RATE IS A VALID BASIS FOR DETERMINING THE MARKET VALUE OF A PROPERTY UN LESS EVIDENCE IS PRODUCED OTHERWISE. I HAVE ALREADY DISCUSSED IN DETAIL AS TO WHY THE VALUATION REPORT OF THE APPROVED VALUER IS NOTHING BUT A SELF - SERVING DOCUMENT WHICH CANNOT BE ACCEPTED. IN THESE CIRCUMSTANCES THE VALUE OF THE PROPERTY IN QUESTION CAN ONLY BE DETERMINED CORRECTLY ON THE BASIS OF THE CIRCLE RATE AS ON 01.04.81, OR THE BASIS OF SALE INSTANCES IN THE YEAR 1981. THE A.O. HAS NEITHER APPLIED THE : - 12 - : CIRCLE RATE AS ON 01.04.81, NOR HAS HE MADE ANY INQUIRIES TO FIND OUT COMPARABLE SALE INSTANCES IN THE YEAR 1981. THE ASSESSMENT ORDER PASSED BY HIM U/S 143(3) IS THEREFORE CLEARLY BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSEE ON HIS PART HAS RELIED ON THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE FOLLOWING CASE: - ( I ) SPECIAL LAND ACQUISITION OFFICER VS . DAVANGERE U.P VEERABHADRAPPA AND OTHERS,(1985) (154) ITR 0190 - SC. AND THE HON'BLE ALLD. HIGH COURT IN: - ( II ) INCOME TAX OFFICER VS. JUMRAMAL SONS 1985 (154) ITR 689 (ALLD.) IT IS RESPECTFULLY OBSERVED THAT THESE DECISIONS HAVE BEEN QUOTED OUT OF CONTEXT BY THE ASSESSEE AND DO NOT APPLY TO THE FACTS OF HIS CASE. FURTHER, I HAVE DISCUSSED IN GREAT DETAIL AS TO WHY THE REPORT OF THE APPROVED VALUER IN THE ASSESSEE'S CASE IS INCORRECT AND CANNOT BE ACCEPTED . T HERE IS A RELEVANT PIECE OF EVIDENCE WHICH NEEDS TO BE CONSIDERED AT THIS JUNCTURE. THE A.O. WAS DIRECTED TO FIND OUT COMPARABLE SALE INSTANCES FROM THE L.D.A. THIS INQUIRY HAS YIELDED A SALE DEED DATED 17.03.1982 FOR A 3696 SQ.FT. OF LAND, SITUATED IN THE SAME MUNICIPAL WARD IN WHICH THE PRICE OF LAND HAS BEEN TAKEN AT ONLY RS. SEVEN PER SQ.FT. (COPY OF SALE DEED CONTAIN IN G 04, PAPER IS ANNEXED AS ANNEXURE - 3). IN THESE CIRCUMSTANCES THE ARGUMENTS, OF THE ASSESSEE ON THIS ISSUE CANNOT BE ACCEPTED. AS DISCUSSED EARLIER, THE ACTION OF THE A.O. IN ACCEPTING THE VALUATION OF THE APPROVED VALUER IS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSEE HAS PROCEEDED TO RELY ON VARIOUS DECISIONS TO ARGUE THAT THE PROVISIONS OF SEC. 2 63 ARE NOT APPLICABLE TO THE FACTS OF THE CASE. THESE ARE AS FOLLOWS: : - 13 - : 1. CIT VS. DHAMPUR SUGAR MILLS CO. LTD. 2009 (270) ITR 576 ALLD. 2. SHRI ARBUDA MILLS LTD. 231 ITR 50 (SC) 3. M /S RANKA JEWELLERS VS. ADDL. CIT ITA NO. 1311 OF 2009. 4. CIT VS. SUNBEA M AUTO LTD. 227 CTR 133 (SC) 5. CIT VS. GABRIEL INDIA LTD. 203 ITR 108 (BOM.) 6. CIT VS. GOYAI PRIVATE FAMILY SPECIFIC TRUST 1988 (171) ITR 698 (ALLD.) 7. MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) 8. CIT VS. MAX INDIA LTD. 295 ITR 282 (SC) 9. CIT VS. HONDA SIEL POWER PRODUCTS LTD. 10. HARI IRON TRADING CO. VS. CIT 263 ITR 437 (P&H) THE ASSESSEE HAS ARGUED THAT THE DECISION OF THE AO IN THE PRESENT A.Y. HAS GOT MERGED WITH THE ORDER OF THE CIT(A) FOR A.Y. 2008 - 09 AND THAT ACTION U/S 263 DOES NOT LIE. IT IS ALSO ARGUED THAT IF THERE IS INADEQUATE INQUIRY, ACTION U/S 263 WOULD NOT LIE. IT IS ALSO CLAIMED THAT WHERE TWO VIEWS ARE POSSIBLE AND THE I.T.O. HAS TAKEN ONE SUCH VIEW THEN THE ORDER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE. THIS VIEW OF THE ASSESSEE IS NOT CORRECT IN LAW. HE IS SEEKING TO IMPORT THE DECISION OF CIT(A) IN A.Y. 2008 - 09 INTO THE PRESENT A.Y. THIS IS NOT PERMISSIBLE. EACH YEAR'S ASSESSMENT IS SEPARATE AND INDEPENDENT AND HAS TO BE VIEWED SEPARATE LY. IN THE CASE OF DHAMPUR SUGAR MILLS CO. LTD. THE HON'BLE ALLAHABAD HIGH COURT HELD THAT IN VIEW OF THE AMENDMENT OF CLAUSES (A) AND (C) OF EXPLANATION TO SECTION 263 W. E. F. 01.06.88, THE CIT COULD REVISE ON ASSESSMENT ORDER PASSED U/S 144B ON OR BEFO RE 01.06.88. IT FURTHER HELD THAT THE PART OF THE ORDER WHICH WAS NOT SUBJECT MATTER OF APPEAL COULD ALSO BE REVISED AS IT HAD NOT MERGED IN ORDER OF CIT(A). IT HAS TO BE APPRECIATED, THAT IN THIS CASE ACTION U/S 263 HAS BEEN INITIATED IN RESPECT OF ISSUES WHICH ARE NOT PART OF THE APPEAL FOR THE RELEVANT ASSESSMENT YEAR. IN FACT THE HON'BLE SUPREME COURT IN THE CASE OF SHRI ARBUDA MILLS LTD. : - 14 - : CONFIRMED THAT THE POWER OF THE CIT U/S 263 SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO THEM BECAUSE THE SAME HAD NOT BEEN CONSIDERED AND DECIDED IN THE APPEAL FILED BY THE ASSESSEE. THE CASE OF M/S RANKA JEWELLERS ALSO DEALS WITH THE ISSUE AS TO WHETHER 263 LIES AGAINST AN ORDER WHICH HAS MERGED WITH THE ORDER OF THE CIT (A). HERE, I WOULD LIKE TO ONCE AGAIN EMPHASIZE THAT NO DECISION CITED BY THE ASSESSEE IN HIS FAVOUR SAYS THAT WHERE AN ISSUE IS NOT THE SUBJECT MATTER OF AN APPEAL, IN THE RELEVANT ASSE SSMENT YEAR, EVEN THEN ACTION U/S 263 WOULD NOT LIE. SIMILARLY THERE IS NO DECISION WHICH SAYS THAT IF THE CIT(A) HAS CONSIDERED AN ISSUE IN ONE ASSESSMENT YEAR THEN IT WILL HAVE TO BE PRESUMED THAT THE ORDER OF THE A.O. HAS MERGED WITH THE ORDER OF THE CI T(A) EVEN IN A DIFFERENT ASSESSMENT YEAR. THE ASSESSEE HAS ALSO CLAIMED THAT WHERE MORE TH A N ONE VIEW IS POSSIBLE THEN THE ORDER CANNOT BE REVISED U/S 263. ALTHOUGH THIS ARGUMENT MAY HOLD TRUE IN PROCEEDINGS U/S 154, THIS REASONING DOES NOT APPLY TO PROCE EDINGS U/S 263. IN THE CASE OF CIT VS. KHAMBHATWALA 198 ITR 144 (GUJ), IT HAS BEEN HELD THAT EVEN IF THE ISSUE IS DEBATABLE, THE ORDER CAN BE REVISED U/S 263. I HAVE ALREADY POINTED OUT ELSEWHERE IN THE ORDER THAT THE A.O. HAD ACCEPTED THE VALUATION REPORT FILED BY THE ASSESSEE MECHANICALLY, WITHOUT APPLICATION OF MIND AND WITHOUT ANY INQUIRY WHATSOEVER. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL DECISIONS WHEREIN IT HAS BEEN HELD THAT AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW IS S UFFICIENT FOR AN ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THIS BESIDES AN ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF LACK OF INQUIRY BY AN A.O.: - A ) MALABAR INDUSTRIAL CO. LTD. VS CIT 159 CTR (SC) B) K.A. RAMASWAMY CHETTIAR VS. CIT 220 ITR 657 (MAD) C) GEE VEE ENTERPRISES VS. ADDL. CIT 99 ITR 375 (DEL) KUMAR GULATI VS. CIT 269 ITR 71 (ALL) D) JAGDISH KIUMAR GULATI VS. CIT 269 ITR 71 (ALL) E) J YOTI ELECTRIC MOTORS LTD. VS. CIT 237 ITR 280 (GUJ) : - 15 - : F) CIT VS. INDUS SERVICES LTD. 230 ITR 328 (CAL.) G) RAIN COMMODITIES LTD. VS. DY. CIT ITAT, HYDERABAD 'B' BENCH 9 TAXMAN 128 THE NEXT ARGUMENT THAT THE ASSESSEE HAS ADVANCED IS THAT ALTHOUGH STRICTLY SPEAKING RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS EACH ASSTT. YEAR BEING A UNIT IN ITSELF, WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED, IT WOULD NOT BE APPROPR IATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT HAS BEEN CLAIMED THAT THERE MUST BE CONSISTENCY AND DEFINITENESS IN THE APPROACH OF THE REVENUE. IT HAS BEEN ARGUED THAT THE VALUATION REPORT FILED IS OF A GOVT. APPROVED VALUER AND HAS BEEN FILED IN A.Y.'S 2004 - 05, 2007 - 08 AND 2008 - 09. THE FOLLOWING DECISIONS HAVE BEEN RELIED UPON : - 1. RADHASOAMI SATSANG VS. CIT 193 ITR 321 (SC) 2. CIT VS. SRIDEV ENTERPRISES 192 ITR 105 (BOM.) 3. CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (BO M ) 4. MUNJAL SALES CORPN.VS. CIT 298 ITR 288 (SC) I WOULD LIKE TO POINT OUT HERE THAT WHILE CONSIDERING THE PRINCIPLE OF RES - JUDICATA THE HON'BLE SUPREME COURT IN THE CASE OF INSTALLMENT SUPPLY (P) LTD. VS. THE UNION OF INDIA 1962 AIR (SC) 53 CLEARLY HELD: - IT IS WELL SETTLED THAT IN MATTERS OF TAXATION THERE IS NO QUESTION OF RES - JUDICATA BECAUSE EACH YEAR'S ASSESSMENT IS FINAL ONLY FOR THAT YEAR AND DOES NOT GOVERN LATER YEARS, BECAUSE IT DETERMINES ONLY THE TAX FOR A PARTICULAR PERIOD.' THERE ARE VARIOUS OTHER DECISIONS ON THE SUBJECT WHICH HAVE FOLLOWED THE ABOVE REASONING. ALL OF THEM WITHOUT EXCEPTION LAY DOWN THE GENERAL RULE THAT RES - JUDICATA WILL NOT APPLY IF A DECISION IS INCORRECT, IF IT HAS BEEN ARRIVED AT WITHOUT DUE INQUIRY OR IF FRESH FACTS ARE BROUGHT ON RECORD. I HAVE DISCUSSED IN DETAIL AS TO WHY THE DECISION OF THE A.O. IS INCORRECT. IT MAY BE APPRECIATED THAT ALL THE ABOVE : - 16 - : PARAMETERS ARE SATISFIED WHICH WOULD EXEMPT THIS ORDER FROM EVEN THE LIMITED APPLICABILITY THAT THE PRINCIPLE OF RES - JUDICATA HAS TO INCOME TAX PROCEEDINGS. AT THIS JUNCTURE I WOULD ALSO LIKE TO POINT OUT THAT IN THE CASE OF MUNJAL SALES CORPN., SUPRA, CITED BY THE ASSESSEE IN HIS FAVOUR THE HON'BLE SUPREME COURT HAS NEITHER DEALT WITH ACTION U/S 263 NO R WITH THE PRINCIPLE OF RES - JUDICATA, AS SUCH. THE ASSESSEE'S ARGUMENT THAT HE HAS FILED THE VALUATION REPORT OF THE GOVERNMENT APPROVED VALUER IN A.Y.'S 2004 - 05, 2007 - 08 AND 2008 - 09 DOES NOT HELP HIM IN ANY WAY. THE A.O. DID NOT EXAMINE THE VALUATION REPORT AT ALL IN A.Y. 2004 - 05 AND ACCEPTED IT WITHOUT DUE INQUIRY. THE ISSUE IN THAT YEAR WAS ALSO DIFFERENT, I.E. WHETHER CAPITAL GAINS WAS ATTRACTED UPON CONVERSION OF A CAPITAL ASSET INTO STOCK IN TRADE IN THE YEAR OF CONVERSION OR IN THE YEAR OF SALE A S PER SEC. 45(2) OF THE I.T. ACT. IN .A.Y. 2008 - 09 THE A.O. DID NOT ACCEPT THE REPORT AND WORKED OUT THE VALUE OF THE LAND IN QUESTION AS ON 01.04.81, RELYING ON THE DM'S CIRCLE RATE. A.Y. 2007 - 08 IS THE PRESENT ASSESSMENT YEAR WHICH IS THE SUBJECT MATTER OF ACTION U/S 263. THE ASSESSEE'S CLAIM THAT HIS VALUATION HAS BEEN ACCEPTED ALL ALONG BY THE DEPARTMENT IS CLEARLY INCORRECT AND MISLEADING. THE ASSESSEE HAS AGAIN ARGUED THAT THE A.O.'S ACTION WAS CORRECT AS HE ADOPTED ONE OF THE TWO VIEWS THAT WERE POS SIBLE. HE HAS RELIED UPON: - 1. MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) 2. CIT VS. MAX INDIA LTD. 295 ITR 282 (SC). THIS ARGUMENT OF THE ASSESSEE IS NOT CORRECT. IN THE CASE OF MAX INDIA SUPRA THE A.O. ADOPTED ONE OF THE TWO 'LEGAL' INTERPRETATIONS AVAILABLE TO HIM WHILE ALLOWING DEDUCTION U/S 80 HHC OF THE I.T. ACT. A SIMILAR VIEW HAS BEEN EXPRESSED IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA). IN THE PRESENT CASE THE ISSUE IS WHETHER THE A.O. WAS CORRECT IN ACCEPTING A VALUATION REPORT WHICH WAS NOT ACCEPTABLE ON THE FACE OF IT, WITHOUT PROPER INQUIRY AND WITHOUT CONSIDERING ALL THE LEGAL AND FACTUAL ISSUES INVOLVED. IN FACT IN THE CASE OF MALAB AR INDUSTRIAL CO. (SUPRA) THE HON'BLE : - 17 - : SUPREME COURT HAS HELD THAT AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WOULD SERVE TO RENDER AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. I HAVE ALREADY DISCUSSED IN DETAIL AS TO HOW THE ORDER OF THE A.O. IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACTION INITIATED U/S 263 IS THEREFORE CORRECT AND JUSTIFIED. FINALLY, VARIOUS OTHER ARGUMENTS HAVE B EEN RAISED BY THE ASSESSEE, VIZ. THAT THE COMMISSIONER CANNOT I NITIATE PROCEEDINGS WITH A VIEW TO START FISHING AND ROVING ENQUIRIES, THAT AN ORDER CANNOT BE TERMED ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH THE LAW. THESE ARGUMENTS OF THE ASSESSEE ARE WITHOUT BASIS AND ARE INCORRECT. THE PRESENT ACTION HAS NOT BE EN INITIATED WITH A VIEW TO START FISHING OR ROVING INQUIRIES. THERE IS CONCRETE EVIDENCE TO ESTABLISH THAT THE VALUATION REPORT SUBMITTED BY THE ASSESSEE IS A MANIPULATED DOCUMENT WHICH HAS ARTIFICIALLY INFLATED THE VALUE OF THE LAND IN QUESTION AS ON 01. 04.81. SIMILARLY IT IS WELL SETTLED IN LAW THAT IT IS NOT MERELY AN INCORRECT APPLICATION OF LAW WHICH RENDERS AN ASSESSMENT ORDER ERRONEOUS. AN INCORRECT ASSUMPTION OF FACTS, OR LACK OF INQUIRY ALSO MAY CAUSE AN ORDER TO BE ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. T O SUM UP, IN VIEW OF THE DETAILED REASONS GIVEN BY ME IN THIS ORDER, I AM OF THE OPINION THAT THE ASSESSMENT ORDER DATED 23.12.2009 PASSED U/S 143(3) OF THE I.T. ACT, 1961 IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, AS PER THE PROVISIONS OF SECTION 263(1) IT IS CANCELLED AND THE A.O. IS DIRECTED TO PASS A FRESH ASSESSMENT ORDER AS PER LAW, AFTER GIVING THE ASSESSEE, A PROPER OPPORTUNITY OF BEING HEARD. 6. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTION AS RAISED BEFORE THE CIT. IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE IMPUGNED VALUATION REPORT ON THE BASIS OF WHICH ASSESSEE HAS ADOPTED THE VALUATION OF LAND AS ON 01/04/1981 WAS : - 18 - : ACCEPTE D BY THE REVENUE AUTHORITIES DURING THE ASSESSMENT YEAR S 2004 - 2005 AND 2008 - 2009. THEREFORE, THE CIT CANNOT DISPUTE THE SAID VALUATION REPORT IN THE ASSESSMENT YEAR 2007 - 2008 FOR INVOKING HIS JURISDICTION U/S 263 OF THE ACT. IN SUPPORT OF HIS CONTENTION HE HAS PLACED RELIANCE UPON THE ORDER OF CIT(A) PERTAINI NG TO ASSESSMENT YEAR S 2004 - 2005 AND 2008 - 2009. IN THE ASSESSMENT YEAR 2004 - 2005, THE ASSESSING OFFICER EXAMINED THE TRANSACTION OF TRANSFER OF LAND TO STOCK IN TRADE WITH REFERENCE TO PROVISIONS OF SECTION 2(47)(VI ) OF THE ACT HOLDING THE SAME TO BE TRAN SFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT AND WORKED OUT LONG TERM CAPITAL GAIN AT ` 37,31,686/ - AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(A) AND THE CIT(A) EXAMINED THE CLAIM OF THE ASSESSEE AND FINALLY CONCLUDED THAT THE LONG TERM CAPI TAL LOSS SHOWN BY THE ASSESSEE SHALL NOT ARISE IN THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2004 - 2005. THE LOSS OR GAIN WHATSOEVER AS PER SECTION 45(2) OF THE ACT WILL BE RELEVANT IN THE YEAR IN WHICH THE LAND CONVERTED IN TO STOCK IN TRADE IS SOLD AND NOT IN THE YEAR UNDER CONSIDERATION. 7. IN THE ASSESSMENT YEAR 2008 - 2009 THE PART OF SAME LAND WAS SOLD AND CAPITAL GAIN COMPUTED AS PER PROVISIONS OF SECTION 45(2) OF THE ACT AND DECLARED BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. T HE ASSESSING OFFICER HAS NOT ACCEPTED THE RATE AND VALUE OF LAND AS ON 01/04/1981 CALCULATED BY THE APPROVED VALUER AND HE APPLIED THE CIRCLE RATE FOR COMPUTING THE LONG TERM CAPITAL GAIN . THIS ORDER WAS CHALLENGED BEFORE THE CIT(A) AND THE ASSESSEE HAS RAISED A SPECIFIC PLEA WITH REGARD TO CONVERSION OF ITS LAND INTO STOCK IN TRADE AND THE APPLICABILITY OF PROVISION OF SECTION 45(2) OF THE ACT . THE ASSESSEE HAS TAKEN A DEEMED COST OF LAND AS ON 01/04/1981 AS ` 95/ - PER SQ. FT. ON THE BASIS OF GOVERNMENT APPROVED VALUER S REPORT AS THE FAIR MARKET VALUE FOR THE : - 19 - : PURPOSE OF SECTION 45(2)(I) OF THE ACT. THE CIT(A) ADJUDICATED THE ISSUE IN THE LIGHT OF VARIOUS PROVISIONS OF LAW AND FINALLY CONCLUDED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN TAKING THE FAIR MARKET VALUE OF THE IMPUGNED LAND FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS AS CIRCLE RATE. THE CIRCLE RATE IS NOT NECESSARY PARAMETER IN ARRIVING AT THE FAIR MARKET VALUE AND ON THE OTHER HAND RATE OF AUCTION OF A NEARBY PROPERTY HAS BEEN ACCEP TED AS FAIR MARKET VALUE IN THE JUDICIAL DECISIONS CITED SUPRA . IN ABSENCE OF ANY OTHER MATERIAL , IT WOULD BE REASONABLE TO ACCEPT THE REPORT OF THE REGISTERED V ALUER WHICH IS BASED ON AUCTION RATE OF NEIGHBORHOOD PROPERTY AND DOES GIVE AN INDICATION OF T HE VALUE OF THE PROPERTY IN THE VICINITY WAS FETCHING IN THE OPEN MARKET AND HENCE THE FAIR MARKET VALUE . THE CIT(A) ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO ADOPT THE VALUE OF THE PROPERTY AT THE RATE A DOPTED BY THE REGISTERED VALUER. IN THE ASSESSMENT YEAR 2008 - 2009, THE ASSESSMENT ORDER W AS MERGED WITH THE CIT(A)S ORDER AND THE RATES ADOPTED BY THE REGISTERED VALUER WAS APPROVED BY THE CIT(A). ONCE AN ISSUE OF FAIR MARKET VALUE OF THE LAND AS ON 1.4.1981 IN ASSESSMENT YEAR 2008 - 09 IS REACHED UPTO TO CIT(A) AND CIT(A) HAS ACCEPTED THE CONTENTION OF THE ASSESSEE, THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007 - 08 CA NNOT BE REVISED U/S 263 ON THE SAME ISSUE FOR THE REASONS THAT THE VIEW TAKEN BY THE ASSESSING O FFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN TWO ASSESSMENT YEARS THE VALUATION REPORT WAS CONSIDERED BY THE REVENUE AUTHORITIES AND WHENEVER THE ASSESSING OFFICER HAS VENTURED TO DISPUTE THE VALUATION REPORT, IT WAS APPROVED BY THE CIT(A), THE FIRST APPELLATE AUTHORITY. THEREFORE, THE ASSESSING OFFICER RIGHTLY FOLLOWED THE VALUATION REPORT WHILE ADJUDICATING THE ISSUE AND BY ANY STRETCH OF IMAGINATION IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND TO THE ISSUE IN DISPUTE . : - 20 - : 8. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO CONTENDED THAT THOUGH STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCOME - TAX PROCEEDINGS, YET THE RULE OF CONSISTENCY MUST BE FOLLOWED. IT WAS ALSO URGED ON BEHALF OF THE ASSESSEE THAT THE OPTION IS WITH THE ASSESSEE TO ADOPT THE RATES OF ITS CAPITAL ASSET ACQUIRED BEFORE 01/04/1981. HE MAY ADOPT THE FAIR MARKET VALUE OF THE ASSET ON 01/04/81 OR THE COST OF ACQUISITION OF THE ASSET. THE ASSESSEE HAS ADOPTED THE FAIR MARKET VALUE ON THE BASIS OF THE OTHER TRANSACTIONS AND ALSO THE REGISTERED VALUERS REPORT. THEREFORE, THE VALUE ADOPTED BY THE ASSESSEE SHOULD NOT BE DOUBTED BY THE REVENUE ON THE GROUND THAT THE RATES ADOPTED BY THE ASSESSEE WERE HIGHER THAN THE CIRCL E RATES. HE ALSO PLACED RELIANCE ON VARIOUS JUDGMENTS OF VARIOUS HIGH COURT S IN SUPPORT OF HIS CONTENTION, WHICH ARE AS UNDER: ( I ) SHYAM TELELINK LTD. VS. UNION OF INDIA, CIVIL APPEAL NO.7236 OF 2003 DATED 5 TH OCTOBER, 2010 ( II ) CHAIRMAN AND M.D. N.T.P.C. LTD. VS. RESHMI CONSTRUCTIONS, BUILDERS & CONTRACTORS 2004 (001) ARBLR - 0156 SC; 2004 - (SCI) - GJX - 0002 - SC ( III ) RADHASOAMI SATSANG VS. CIT [1992] 193 ITR 321 (SC) ( IV ) GIRDHARI LAL B. ROHRA VS. CIT [2004] 86 TTJ (MUM) 177 ( V ) ANJALI CONSTRUCTION VS. CIT ON 9 APRIL, 2010 I.T.A.T. AHMEDABAD IT(SS)A NO.121/AHD/2006 ( VI ) JAMNA DASS NIKKA MAL SARAF (P) VS. ACIT, I.T.A. NO.978/CHD/2008 DATED 25/11/2011 ( VII ) ATUL PAINTS AND CHEMICALS CO. VS. ADDL CIT I.T.A. NO. 3837/MUM/2011 DATED 31 OCTOBER, 2011 I.T.A.T., MUMBAI : - 21 - : ( VIII ) CIT VS. SUNBEAM AUTO LTD. 227 CTR 133; 332 ITR 167 ( IX ) CIT VS. DHAMPUR SUGAR MILLS CO. LTD. [2004] 270 ITR 576 (ALL) ( X ) M/S RANKA JEWELLERS VS. ADDL CIT ON 26 TH MARCH, 2010 IN I.T.A. NO.1311 OF 2009 ( XI ) CIT VS. GABRIAL INDIA LTD. 203 ITR 108 (BOM) ( XII ) CIT VS. GOYAL PRIVATE FAMILY SPECIFIC TRUST [1988] 171 ITR 698 (ALL) ( XIII ) MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) ( XIV ) CIT VS. MAX INDIA LTD. 268 ITR 128 (P&H) ( XV ) CIT VS. MAX INDIA LTD. 295 ITR 282 (SC) ( XVI ) MRS. KHATIZA S. OOMERBHOY VS. INCOME TAX OFFICER [2006] 100 ITD 173 MUM [2006] 101 TTJ MUM 1095 ( XVII ) M/S J L. MORISON (INDIA) LTD. VS. ACIT I.T.A. NO.786/KOL/2010 9. THE LEARNED D.R. ON THE OTHER HAND HAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE INDEPENDENTLY . B EING INFLUENCED WITH THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004 - 2005 , T HE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF LONG TERM CAPITAL LOSS OFFERED BY THE ASSESSEE. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004 - 2005 WAS PASSED ON 28/12/2006 IN WHICH THE ASSE SSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 2(47)(V) AND 2(47)(VI) OF THE ACT AND COMPUTED THE LONG TERM CAPITAL GAIN OF ` 37,31,686/ - WHEREAS THE ASSESSMENT ORDER WAS SET ASIDE BY THE CIT(A) VIDE HIS ORDER DATED 05/12/2011 H OLDING THEREIN THAT THE LOSS OR GAIN WHATSOEVER AS PER SECTION 45(2) OF THE ACT WILL BE RELEVANT IN THE YEAR IN WHICH THE LAND CONVERTED INTO STOCK IN TRADE IS SOLD AND NOT IN THE YEAR UNDER CONSIDERATION. : - 22 - : THEREFORE, THE FINDING S OF THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2 004 - 2005, WHICH WERE RELIED ON BY THE ASSESSING OFFICER WHILE PASSING THE IMPUGNED ASSESSMENT ORDER , WERE SET ASIDE BY THE CIT(A). SINCE THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAIN OR LOSS WAS NOT SUBJECT MATTER IN THE ASSESSMENT YEAR 2004 - 2005 AT THE TIME OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE, THERE WAS NO QUESTION OF VERIFICATION OF THE CORRECTNESS OF THE COST OF ACQUISITION ADOPTED BY THE ASSESSEE AS ON 01/04/1981. SINCE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 2005 IS MERGED WITH THE ORDER OF CIT(A), THERE CANNOT BE ANY ACCEPTANCE OF THE VALUATION REPORT BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2004 - 2005 AS THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAIN OR LOSS W AS NOT THE SUBJECT MATTER. 10. SO FAR AS THE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2008 - 2009 IS CONCERNED, IT WAS CONTENDED THAT THE ASSESSING OFFICER HAS ADOPTED THE CIRCLE RATE FOR COMPUTING THE CAPITAL GAIN AS PER PROVISIONS OF SECTION 45(2 ) OF THE ACT. T HERE IS NO ORDER OF CIT(A) FOR ASSESSMENT YEAR 2007 - 2008 IN WHICH SUCH TYPE OF ISSUE WAS EVER DISCUSSED. 11. WHILE EXERCISING THE JURISDICTION U/S 263 OF THE ACT , THE CIT HAS EXAMINE D THE CASE RECORD ALONG WITH THE ASSESSMENT ORDER AND NOT ICED THAT THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE CLAIM RELYING UPON THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 200 4 - 2005, WHICH WAS SET ASIDE BY THE CIT(A) VIDE HIS ORDER DATED 05/12/2011 WITH A DIRECTION TO INVOKE THE PROVISIONS OF SECTION 45(2) OF THE ACT IN THE YEAR IN WHICH THE ASSETS TRANSFERRED INTO THE STOCK IN TRADE ARE SOLD WITHOUT LOOKING TO THE CIRCLE RATE PRESCRIBED BY THE DISTRICT MAGISTRATE . THE LEARNED CIT ( D.R. ) FURTHER CONTENDED THAT THE REGISTERED VALUER HAS NOT TAKEN A COMPARABLE CASE FOR ADOPTING THE VALUE AS ON 01/04/1981. IN SUCH TYPE OF SITUATION, T HE : - 23 - : ASSESSING OFFICER SHOULD HAVE MADE NECESSARY ENQUIRIES FROM THE SUB - REGISTRAR OFFICE WITH REGARD TO THE S ALE DEED OF SOME ADJOINING LAND AS ON 01/04/1981 BUT IT WAS NOT DONE BY THE ASSESSING OFFICER AND HE HAS BLINDLY ACCEPTED THE CLAIM OF THE ASSESSEE. THEREFORE, THE CIT HAS RIGHTLY EXERCISED THE JURISDICTION U/S 263 OF THE ACT HAVING OBSERVED THAT ASSESSM ENT ORDER IS ERROENEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND SET ASIDE THE ASSESSMENT ORDER. THE LEARNED CIT ( D.R. ) HAS PLACED RELIANCE UP ON THE FOLLOWING JUDGMENTS: ( I ) CIT VS. JAWAHER BHATTACHARJEE 342 ITR 74 (GAU) ( II ) CIT VS. BHAGWAN DAS 272 ITR 367 (ALLD) ( III ) MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) ( IV ) CIT VS. DEEPAK KUMAR GARG 299 ITR 435 (MP) 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDER S OF THE AUTHORITIES BELOW, DOCUMENTS PLACED ON RECORD AND THE JUDGMENT REFERRED TO BY THE PARTIES AND W E FIND THAT THE CIT HAS INVOKED JURISDICTION U/S 263 OF THE ACT AFTER HAVING NOTED THAT THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF LONG TERM CAPITAL LOSS U/S 45(2) OF THE ACT HAVING RELIED UPON THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004 - 2005 IN WHICH THE ASSESSING OFFICER HAS COMPUTED THE LONG TERM CAPITAL GAIN ON TRANSFER OF LAND INTO STOCK - IN - TRADE. ON PERUSAL OF SEQUENCE OF EVENTS, WE FIND T HAT THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05 WAS PASSED BY THE ASSESSING OFFICER ON 28.12.2006 IN WHICH THE ASSESSING OFFICER HAS CALCULATED THE LONG TERM CAPITAL GAIN AT ` 37,31,686. WHILE COMPUTING THE LONG TERM CAPITAL GAIN, THE ASSESSING OFFICE R HAS RELIED UPON THE REGISTER VALUERS REPORT SUBMITTED BY THE ASSESSEE, IN WHICH FAIR MARKET VALUE OF THE LAND AS ON : - 24 - : 1.4.1981 WAS TAKEN TO BE AT ` 95 PER SQ. FT. THE COMPUTATION OF LONG TERM CAPITAL GAIN WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT( A) ON THE GROUND THAT DEVELOPMENT AGREEMENT DATED 26.6.2003 DOES NOT GIVE RISE TO ANY TRANSFER AND IN ANY CASE NOT FOR ASSESSMENT YEAR 2004 - 05 WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. IT WAS ALSO CONTENDED BEFORE THE LD. CIT(A) THAT ON TRANSFER OF CAPITAL ASSET INTO STOCK - IN - TRADE OF BUSINESS, CAPITAL GAIN IS TO BE WORKED OUT AS PER PROVISIONS OF SECTION 45(2) OF THE ACT. THIS APPEAL WAS FILED BY THE ASSESSEE ON 25.12.2005. THEREFORE , WHEN THE IMPUGNED ASSESSMENT ORDER WAS PASSED I.E. ON 23.12.200 9, THE MATERIAL AVAILABLE WITH THE ASSESSING OFFICER IN ORDER TO ADJUDICATE THE IMPUGNED ISSUE OF LONG TERM CAPITAL GAIN WAS ONLY THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05 AND PENDENCY OF APPEAL BEFORE THE LD. CIT(A) FOR ASSESSMENT YEAR 2004 - 05. SI NCE THE ASSESSING OFFICER IN ASSESSMENT YEAR 2004 - 05 HAS ACCEPTED THE REGISTERED VALUERS REPORT AND ADOPTED THE FAIR MARKET VALUE OF LAND AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAIN, THE ASSESSING OFFICER HAS NO OTHER OPTION BUT TO ACCEPT THE REGISTERED VALUERS REPORT AND TO ADOPT FAIR MARKET VALUE AS ON 1.4.1981 TO COMPUTE THE LONG TERM CAPITAL GAIN UNDER SECTION 45(2) OF THE ACT AS PER STAND TAKEN BY THE ASSESSEE BEFORE THE LD. CIT(A) IN APPEAL FILED AGAINST THE ASSESSMENT ORD ER FOR ASSESSMENT YEAR 2004 - 05. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN HIS ORDER VIDE PARAS 2 & 3 AND THEREAFTER COMPUTED THE LONG TERM CAPITAL GAIN IN PARA 4 OF HIS ORDER. IN ORDER TO UNDERSTAND THE DEGREE OF APPRECIATION OF FACTS BY THE ASSE SSING OFFICER TO THE IMPUGNED ISSUE, WE EXTRACT THE RELEVANT PORTION OF THE ASSESSMENT ORDER AS UNDER: - T H E ASSESSEE COMPANY HAS ITS REGISTERED OFFICE AT LUCKNOW, HEAD OFFICE AT MUMBAI AND BRANCH OFFICE AT AHMEDABAD. IT WAS : - 25 - : ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007 - 08. AS PER REVISED RETURN LOSS OF ` 7,24,12,945 HAS BEEN DECLARED. AS PER PROFIT AND LOSS ACCOUNT THE ASSESSEE'S INCOME FOR THE YEAR COMPRISED OF ` 1,05 ,00,00,000 FROM SALE PROCEEDS OF COMPANY'S LAND AND ` 1,40,73,949 FROM OTHER INCOME . AS PER PROFI T AND LOSS ACCOUNT, PROFIT HAS BEEN DECLARED AT ` 1 ,0 2,74,5 1 , 982. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE REASON FOR DEDUCTING GENERAL RESERVE OF ` 1, 33 ,98,204 F ROM ITS PROFIT. IT WAS ALSO REQUIRED TO EXPLAIN AS TO WHY THE AFORESAID AMOUNT, FROM THE PROFIT, BE NOT ADDED BACK TO PROFIT TO DETER M INE THE INCOME. THE ASSESSEE VIDE ITS WRITTEN REPLY DATED 23.12.2009, EXPLAINED THAT THE SAID FIGURE OF ` 1,63,48,386 HAD BEEN MENTIONED UNDER T HE HEAD OF FINANCIAL RESULTS IN THE ANNUAL REPORT FOR. F.Y. 2006 - 07 AND THE ASSESSEE HAD COMPUTED LOSS AS PER REVISED RETURN FILED ON 03.10.2008. AT THE TIME OF HEARING, ID. AR EXPLAINED THAT LAND OF COMPANY WAS CONVERTED INTO S TOCK IN TRADE ON 01.04.2003 AND A PART OF THIS LAND WAS SOLD FOR SALE CONSIDERATION OF ` 1,09,96,70,222. THE ASSESSEE HAS DEDUCTED THE SAID CONSIDERATION FROM NET PROFIT OF THE BUSINESS AND WORKED OUT LONG TERM CAPITAL LOSS OF ` 69,74,87,486 SEPARATELY. 3. T HE REPLY FILED BY THE ASSESSEE ON THIS POINT IS NOT SATISFACTORY AND WITHOUT ANY BASIS AS NO DOCUMENTARY EVIDENCE WAS PRODUCED IN THIS REGARD DURING THE ASSESSMENT PROCEEDINGS. IT IS PERTINENT TO MENTION THAT IN THE ASSESSEE'S CASE FOR ASSESSMENT YEAR 2004 - 05, THE ISSUE OF LONG TERM CAPITAL GAIN ON CONVERSION OF LAND INTO STOCK IN TRADE HAS BEEN DULY CONSIDERED AND ORDER DATED : - 26 - : 28 .1 2.2006 U/S 143(3) WAS PASSED BY ACIT, RANGE - IV, LUCKNOW. THE ASSESSEE HAS PREFERRED APPEAL AGAINST IT AND THE SAME IS PENDING FO R DECISION. IN VIEW OF MATERIAL ON RECORD, THE ASSESSEE'S CLAIM OF LONG TERM CAPITAL LOSS ON SALE OF COMPANY'S LAND CAN NOT BE ACCEPTED AND, HENCE, IT IS RECALCULATED . 13 . NOW WE DWELL UPON AN ANOTHER CONTROVERSY WITH REGARD TO THE JURISDICTION OF THE LD. CIT INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AFTER FORMING A BELIEF THAT THE ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LD. CIT INVOKED HIS JURISDICTION BY ISSUING A SHOW CAUSE NOTICE ON 20.1.2012 ASKING THE ASSESSEE AS TO WHY ACTION UNDER SECTION 263 OF THE ACT SHOULD NOT BE TAKEN IN HIS CASE FOR CERTAIN REASONS. THE MAIN REASON WAS THE COMPUTATION OF LONG TERM CAPITAL GAIN AFTER ADOPTING THE FAIR MARKET VALUE AS ON 1.4.1981 SHOWN BY THE ASSESSEE AS PER REGISTERED VALUERS REPORT INSTEAD OF ADOPTING THE CIRCLE RATE DECLARED BY THE DISTRICT MAGISTRATE. BY TH E TIME THE LD. CIT HAS INVOKED HIS JURISDICTI ON UNDER SECTION 263 OF THE ACT, T HE LD. CIT(A) HAD PASSED AN ORDER IN ASSESSMENT YEAR 2004 - 05 HOLDING THEREIN THAT THE CAPITAL GAIN IS TO BE COMPUTED AS PER PROVISIONS OF SECTION 45(2) OF THE ACT IN THE YEAR IN WHICH THE LAND CONVERTED TO S TOCK - IN - TRADE WAS SOLD AND NOT IN THE YEAR UNDER CONSIDERATION I.E. 2004 - 05. WHILE DECIDING THIS APPEAL, THE LD. CIT(A) HAS NOT GIVEN ANY FINDING WITH REGARD TO THE FAIR MARKET VALUE TO BE ADOPTED AS ON 1.4.1981. 14 . ONE IMPORTANT FACT ALSO TO BE MENTIONED HE RE IS THAT IN THE ASSESSMENT YEAR 2008 - 09 , THE ASSESSMENT ORDER WAS PASSED ON 31.12.2010 IN WHICH THE ASSESSING OFFICER RECOMPUTED THE LONG TERM CAPITAL GAIN AS PER PROVISIONS OF SECTION 45(2) OF THE ACT AND WHILE DOING : - 27 - : SO HE ADOPTED THE FAIR MARKET VALUE OF THE LAND CONVERTED INTO STOCK - IN - TRADE AS ON 1.4.1981 AT THE CIRCLE RATE DECLARED BY THE DISTRICT MAGISTRATE AND NOT AT THE RATE DECLARED BY THE ASSESSEE ON THE BASIS OF THE REGISTERED VALUERS REPORT. THIS ASSESSMENT ORDER WAS CHALLENGED BY THE ASSESS EE BEFORE THE LD. CIT(A) ON 28.1.2011 AND THE LD. CIT(A) HAS ADJUDICATED THE ISSUE WITH REGARD TO THE FAIR MARKET VALUE AS ON 1.4.1981 BY PASSING AN ORDER ON 5.12.2011 HOLDING THEREIN THAT THE FAIR MARKET VALUE AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN UNDER SECTION 45(2) OF THE ACT IS TO BE ADOPTED @ ` 95 PER SQ. FT. AS DETERMINED BY THE REGISTERED VALUER. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER: - '4(4 ). I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS MADE BY THE APPELLANT IN WRITING AND BEFORE ME DURING THE COURSE OF THE APPELLATE PROCEEDINGS. THE REGISTERED VALUER WHOSE REPORT HAS BEEN SUBMITTED BY THE ASSESSEE, ADOPTED A RATE OF 95 PER SQUARE FEET AS ON 01. 04.1981 ON THE BASIS OF AUCTION RATE OF 2650 PER SQUARE FEET OF AN ADJACENT LAND AUCTIONED IN 1985 AS IS EVIDENT FROM PAGE 2 OF THE VALUATION REPORT. THE VALUE OF LAND AT THE DATE OF CONVERSION OF THE LAND TO STOCK IN TRADE AS ON 01.04.2003 WAS TAKEN AS 285 PER SQUARE FEET BEING 3 TIMES OF THE RATE AS ON 01.04.1981. THE VALUE OF LAND SO ARRIVED WAS PROPORTIONATELY APPORTIONED TO THE FLATS SOLD DURING THE YEAR UNDER CONSIDERATION AND THEREBY THE ASSESSEE WORKED OUT THE C APITAL LOSS ON SALE OF LAND AT RS. 44,85,016 / - . THE ASSESSING OFFICER ON THE OTHER HAND ADOPTED A CIRCLE RATE OF 15 PER SQUARE FEET AS ON 01.04.1981 AND 325.27 PER SQUARE FEET AS : - 28 - : ON 01.04.2003 AND THEREAFTER WORKED OUT LONG TERM CAPITAL GAINS AT RS.84,27,06 5 / - . THE ISSUE INVOLVED IS VALUE OF LAND AS ON 01.04.1981 AND VALUE OF LAND T O BE AD O PTED AS AT 01.04.20 0 3. THESE VALUES WILL DETERMINE THE COST OF ACQUISITION IN THE FINANCIAL YEAR 2007 - 2008 RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 2008 - 2009 FOR THE PURPO SE OF COMPUTING THE CAPITAL GAINS. THE RELATED ISSUE IS THE B ASIS TO BE ADOPTED FOR THE PURPOSE OF ARRIVING AT THE VALUE OF IMPUGNED LAND AS ON THE RELEVANT DATES. 4(5) . SECTION 55(2)(B)(I) OF THE ACT PRESCRIBES THAT IN CASE WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BEFORE 01.04.1981, THE COST OF ACQUISITION FOR THE PURPOSE OF SECTION 48 AND SECTION 49 OF THE ACT MEANS COST OF ACQUISITION OF THE PROPERTY TO THE ASSESSEE OR THE FAIR MARKET VALUE OF THE ASSET AS ON 01.04.1981 AT THE OPTION OF THE ASSESSEE. IN THE IMPUGNED CASE THE ASSESSEE CHOSE TO EXERCISE ITS OPTION IN FAVOUR OF MARKET VALUE OF THE ASSET AS ON 01.04.1981. NOW THE TERM 'FAIR MARKET VALUE' IS DEFINED IN SECTION 2(22B) OF THE ACT AS UNDER - SECTION 2(22B)'FAIR MARKET VALUE', IN RELATION TO A CAPITAL ASSET, MEANS (I ) THE PRICE THAT THE CAPITAL ASSET WO ULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE; AND (II) WHERE THE PRICE REFERRED TO IN SUB - CLAUSE (I) IS NOT ASCERTAINABLE, SUCH PRICE AS MAY BE DETERMINED IN ACCORDANCE WITH THE RULES MADE UNDER THIS ACT; IT IS EVIDENT THAT CIRCLE RATE FIXED BY THE DISTRICT AUTHORITIES IS NOT A PRESCRIBED METHOD FOR VALUATION OF FAIR MARKET VALUE OF AN ASSET : - 29 - : UNDER THE SECTION 2(22B) OF THE ACT. ALTHOUGH SECTION 50C OF THE A CT PRESCRIBES FOR SUBSTITUTION OF VALUE FIXED BY STAMP VALUATION AUTHORITY FOR THE PURPOSE OF STAMP DUTY I.E. THE CIRCLE RATE AS DEEMED CONSIDERATION OF SALE OF A CAPITAL ASSET IN CASE THE SALE CONSIDERATION SHOWN IS LESS THAN SUCH VALUE, THE ABOVE PROVISI ON IS STRICTLY NOT APPLICABLE FOR THE PURPOSE OF DETERMINATION OF COST OF ACQUISITION. YET THE PROVISION OF SECTION 50C OF THE ACT DOES GIVE CREDENCE TO THE OPINION THAT THE FAIR MARKET VALUE OF AN ASSET COULD BE GREATER THAN, LESS THAN OR EQUAL TO THE CIR CLE RATE. TO PUT IT IN SIMPLE WORDS, THE FAIR MARKET VALUE OF AN ASSET IS THE PRICE THAT THE CAPITAL ASSET WOULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE AND THIS VALUE COULD BE ANY VALUE AND NOT NECESSARILY THE CIRCLE RATE . 4(6) . N OW THEREFORE HAVING ASCERTAINED THAT THE COST OF ACQUISITION OF THE IMPUGNED LAND SOLD BY THE ASSESSEE IN THE FORM OF PROPORTIONATE VALUE APPORTIONED TO CONSTRUCTED FLATS IS TO BE VALUED AT FAIR MARKET VALUE I.E. THE PRICE THAT THE ASSET WOULD ORDINARILY F ETCH ON SALE IN THE OPEN MARKET, THE ISSUE IS ASCERTAINMENT OF THAT PRICE. IN THIS CONNECTION A REFERENCE MAY BE MADE TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF SPECIAL LAND ACQUISITION OFFICER, DAVANGERE V. P. VEERABHADARAPPA AND OTHERS (1984) 1 8 TAXMAN 1 (SC), 42 CTR 357,154 ITR 190. THE RELEVANT PORTIONS ARE REPRODUCED AS UNDER : - IN VYRICHERLA NARAYANA GAJAPATIRAJU V. REVENUE DIVISIONAL OFFICER, VIZAGAPATNAM [1939] LR 661 A 104, THE PRIVY COUNCIL ADOPTED TO TRADITIONAL LEGAL DEFINITION OF THE V ALUE AS THE PRICE AT WHICH THE PROPERTY WOULD SELL 'AS BETWEEN A WILLING BUYER AND A WILLING : - 30 - : SELLER'. IN ITS A NARROWEST SENSE, IT IS DESIGNED TO PRECLUDE A VALUATION BASED ON AS ASSUMED FORCED SATE; THE PROPERTY MUST BE APPRAISED AT WHAT IT WOULD PROBABLY BRING THE OWNER ALLOWED A REASONABLE OPPORTUNITY FOR NEGOTIATIONS. BUT THE COURTS HAVE INVOKED A MYTHICAL WILTING BUYER TO JUSTIFY A VALUATION HIGHER THAN ANY ATTAINABLE SALE PRICE. ACCORDING TO THE PRIVY COUNCIL, 'MARKET VALUE' OF THE LAND WITHIN THE MEA NING OF S. 23 OF THE ACT IS THE PRICE THE PROPERTY MAY FETCH IN THE OPEN MARKET, IF SOLD BY A WILLING RENDER UNAFFECTED BY THE SPECIAL NEEDS OF A PARTICULAR PURPOSE. THE OWNER IS ENTITLED TO THE VALUE OF THE PROPERTY IN ITS ACTUAL CONDITION AT THE TIME OF EXPROPRIATION, WITH ALL ITS ADVANTAGES AND WITH ALL ITS POSSIBILITIES, EXCLUDING ANY ADVANTAGE DUE TO THE CARRYING OUT OF THE SCHEME FOR THE PURPOSE FOR WHICH THE PROPERTY IS ACQUIRED. IT IS NOT ONLY REALIZED POSSIBILITIES BUT ALSO THE FUTURE POSSIBILITIES THAT MUST BE TAKEN INTO CONSIDERATION. THE PRIVY COUNCIL FURTHER OBSERVED THAT THERE IS NOT IN GENERAL ANY MARKET FOR LAND IN THE SENSE THAT ONE SPEAKS OF THE MARKET FOR SHARES OR COMMERCIAL GOODS. THE VALUE OF THE ANY SUCH ARTICLE AT ANY PARTICULAR TIME CAN REALLY BE ASCERTAINED BY THE PRICE BEING OBTAINED FOR SIMILAR ARTICLES IN THE MARKET. IN THE CASE OF LAND, ITS VALUE CAN ALSO BE MEASURED BY A CONSIDERATION OF THE PRICES THAT HAVE BEEN OBTAINED IN THE PAST FOR LANDS OF THE SIMILAR QUALITY AND IN SIMIL AR POSITIONS, AND THAT IS WHAT MUST BE MEANT IN GENERAL BY THE 'MARKET VALUE' IN S. 23. THE FUNCTION OF THE COURT IN AWARDING COMPENSATION UNDER THE ACT IS TO ASCERTAIN THE MARKET VALUE OF THE LAND AT THE DATE OF THE NOTIFICATION UNDER S. 4(1) OF THE ACT AND THE METHODS OF VALUATION : - 31 - : MAY BE: (1) OPINION OF EXPERTS, (2) THE PRICES PAID WITHIN A REASONABLE TIME IN BONA FIDE TRANSACTIONS OF PURCHASE OR SALE OF THE LANDS ACQUIRED ON OF THE LANDS ADJACENT TO THOSE ACQUIRED AND POSSESSING SIMILAR ADVANTAGES, AND (3) A NUMBER OF YEARS' PURCHASE OF THE ACTUAL OR IMMEDIATELY PROSPECTIVE PROFITS FROM THE LANDS ACQUIRED. NORMALLY, THE METHOD OF CAPITALIZING THE ACTUAL OR IMMEDIATELY PROSPECTIVE PROFITS OR THE RENT OF A NUMBER OF YEARS' PURCHASE SHOULD NOT BE RESORTED TO IF THERE IS EVIDENCE OF COMPARABLE SALES OR OTHER EVIDENCE FOR COMPUTATION OF THE MARKE T VALUE. IT CAN BE RESORTED TO ONLY WHEN NO OTHER METHOD IS AVAILABLE. IT IS AXIOMATIC THAT THE BEST EVIDENCE TO PROVE WHAT A WILLING PURCHASER WOULD PAY FOR THE LAND UNDER ACQUISITION WOULD BE THE EVIDENCE OF SALES OF COMPARABLE PROPERTIES, PROXIMATE IN T IME TO DATE OF THE ACQUISITION, SIMILARLY SITUATE, AND POSSESSING THE SAME OR SIMILAR ADVANTAGES AND SUBJECT TO THE SAME OR SIMILAR DISADVANTAGES. MARKET VALUE IS THE PRICE THE PROPERTY MAY FETCH IN THE OPEN MARKET IF SOLD BY A WILLING SELLER UNAFFECTED BY THE SPECIAL NEEDS OF A PARTICULAR PURCHASE. WHERE DEFINITE MATERIAL IS NOT FORTHCOMING EITHER IN THE SHAPE OF THE SALES OF SIMILAR LANDS IN THE NEIGHBORHOOD AT OR ABOUT THE DATE OF THE NOTIFICATION UNDER S. 4(1) OR OTHERWISE, THE COURT HAS NO OTHER ALTERN ATIVE BUT TO FALL BACK ON THE METHOD OF VALUATION BY CAPITALIZATION. IN VALUING LAND OR INTEREST IN LAND FOR PURPOSE OF LAND ACQUISITION PROCEEDINGS, THE RULE AS TO NUMBER OF YEARS' PURCHASE IS NOT A THEORETICAL OR LEGAL RULE BUT DEPENDS UPON ECONOMIC FACT ORS SUCH AS THE PREVAILING RATE OF INTERESTS IN THE MONEY INVESTMENTS. THE RETURN : - 32 - : WHICH AN INVESTOR WILL EXPECT FROM AN INVESTMENT WILL DEPEND UPON THE CHARACTERISTIC OF INCOME AS COMPARED TO THAT OF IDLE SECURITY. THE MAIN FEATURES ARE: (1) SECURITY OF TH E INCOME; (2) FLUCTUATION; (3) CHANCES OF INCREASE; (4) COST OF COLLECTION, ETC. THE MOST DIFFICULT AND YET THE MOST IMPORTANT AND CRUCIAL PART OF THE WHOLE EXERCISE IS THE DETERMINATION OF THE REASONABLE RATE OF RETURN IN RESPECT OF THE INVESTMENT IN VARI OUS TYPES OF PROPERTIES. ONCE THIS RATE OF RETURN AND, ACCORDINGLY, THE RATE OF CAPITALIZATION ARE DETERMINED, THERE IS NO PROBLEM IN VALUATION OF THE PROPERTY. IT IS THUS CLEAR FROM THE ABOVE ENUNCIATION THAT THE METHOD OF DETERMINING THE VALUE OF THE PRO PERTY BY THE APPLICATION OF A MULTIPLIER T O THE NET ANNUAL INCOME OR PROF IT SHOULD ONLY BE ADOPTED WHEN THERE IS NO EVIDENCE OF COMPARABLE SALES OF SIMILAR LANDS IN OR ABOUT THE NEIGHBORHOOD AT THE RELEVANT TIME, I.E., ON THE DATE OF - THE NOTIFICATION UNDER S. 4(1) OF THE ACT. IN CERTAIN CIRCUMSTANCES, HOWEVER, THE COURT HAS NO OTHER ALTERNATIVE BUT TO FALL BACK ON THE CAPITALIZED VALUE. 'IT IS EVIDENT, THEREFORE, FROM THE FOREGOING DEFINITIONS AS WELL AS FROM NUMEROUS OTHER DEFINITIONS WHICH MAY BE CITED, T HAT THE FAIR MARKET VALUE OF THE PROPERTY TAKEN BY EMINENT DOMAIN IS THE PRICE THAT THE PROPERTY WILL BEING WHEN OFFERED FOR SALE BY ONE DESIRING, BUT NOT OBLIGED, TO SELL; AND PURCHASED BY ONE DESIRING TO PURCHASE BUT UNDER NO NECESSITY OF BUY ING. I T IS THE PRICE WHICH A PI ECE OF PROPERTY WILL BRING IN TH E MARKET WHEN OFFERED FOR SALE AND PURCHASED BY ANOTHER, TAKING INTO CONSIDERATION ALL THE ELEMENTS OF THE AVAILABILITY OF THE PROPERTY, ITS USE, POTENTIAL : - 33 - : OR PROSPECTIVE, AND ALL OTHER ELEMENTS WHICH COM BINE TO GIVE OF PROPERTY A MARKET VALUE.' HON'BLE ALLAHABAD HIGH COURT ALSO CONSIDERED THE ISSUE IN THE CASE OF COMMISSIONER O F INCOME - TAX V. JUMRAMAL SON. (1985) 154 ITR 689 (ALL) AND LAID DOWN THAT RATES OF AUCTION SALES OF PROPERTIES IN NEIGHBORHOOD SH OULD BE CONSIDERED WHILE ASCERTAINING THE MARKET VALUE OF AN ASSET ON A PARTICULAR DATE. 4(7) . THE AFORESAID DECISIONS GIVE CREDENCE TO THE VIEW THAT THE FAIR MARKET VALUE OF A PROPERTY COULD BE TAKEN AS THE RATE OF AUCTION OF A PROPERTY IN THE VICINITY OF THE IMPUGNED LAND. THE REGISTERED VALUER WHOSE REPORT FORMS THE BASIS OF VALUATION OF LAND AS ON THE RELEVANT DATE AND ADOPTED BY THE ASSESSEE HAS REFERRED TO A LAND MEASURING 504.0 SQUARE METER IN THE VICINITY OF IMPUGNED LAND WHICH WAS AUCTIONED IN 1985 FOR A RATE OF 246.3 PER SQUARE FEET. THE SAID LAND WAS COMMERCIAL LAND AND THEREFORE THE REGISTERED VALUER WORKED OUT THE RATE IN 1985 FOR RESIDENTIAL PURPOSES AT HALF OF THE SAID RATE AND THUS IN 1985 THE RATE WAS TAKEN AT 98.5 PER SQUARE FEET. THIS RATE WAS THEREFORE REDUCED TO RS. 95/ - PER SQUARE FEET AS ON 1.4. 1981. THE RATE WAS INCREASED BY A MULTIPLE OF 3 FOR ARRIVING AT THE RATE OF 285 PER SQUARE FEET AS ON 01.04.2003. I FIND THAT THE MULTIPLE IS ITSELF REASONABLE AS THE CIRCLE RATE OF 15 PER SQUARE FEET AS ON 01.04.1981 WAS REVISED TO 325.27 PER SQUARE FEET AS MENTIONED BY THE AO IN THE COMPUTATIONS. THE RATE ADOPTED BY THE REGISTERED VALUER HAS REFERENCE TO THE RATES THAT CORRESPONDING PROPERTIES WERE FETCHING IN THE VICINITY OF THE IMPUGNED LAND I N AUCTION AT RELEVANT PERIOD OF TIME. THE RATE IS ALSO IN ACCORDANCE : - 34 - : WITH THE DECISIONS CITED SUPRA WHERE AUCTION RATES HAVE BEEN ACCEPTED AS FAIR MARKET VALUE OF PROPERTY. 4(8) . THE AO REJECTED THE VALUATION REPORT OF THE REGISTERED VALUER FOR NO APPARENT REASONS, IN CASE THE AO WAS NOT SATISFIED ABOUT THE CORRECTNESS OF THE VALUATION DONE BY THE REGISTERED VALUER, A REFERENCE COULD HAVE BEEN MADE TO THE DEPARTMENTAL VALUATION OFFICER UNDER SECTION 55A OF THE ACT WHICH LAYS DOWN AS UNDER - REFERENCE TO VALUATION OFFICER. 55A. WITH A VIEW TO ASCERTAINING THE FAIR MARKET VALUE OF A CAPITAL ASSET FOR THE PURPOSES OF THIS CHAPTER, THE ASSESSING OFFICER MAY REFER THE VALUATION OF CAPITAL ASSET TO A VALUATION OFFICER - (A)IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERED VALUER, IF THE ASSESSING OFFICER IS OF OPINION THAT THE VALUE SO CLAIMED IS LESS THAN ITS FAIR MARKET VALUE ; (B)IN ANY OTHER CASE, IF THE ASSESSING OFFICER IS OF OPINION ( I)THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE OF THE VALUE OF THE ASSET AS SO CLAIMED OR BY MORE THAN SUCH AMOUNT AS MAY BE PRESCRIBED IN THIS BEHALF; OR (II)THAT HAVING REG ARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY SO TO DO, EVIDENTLY, THE ASSESSING OFFICER IS ENTITLED TO MAKE THE REFERENCE TO THE VALUATION OFFICER UNDER SECTION 55A(B)(II) OF THE ACT ON; : - 35 - : RECORDING AN OPINION THAT HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY TO .MAKE SUCH A REFERENCE. IN THE INSTANT CASE, THE ASSESSEE HAD CLAIMED THE FAIR MARKET VALUE OF PROPERTY AS PER THE GOVERNMENT APPROVED REGISTERED VALUER'S REPORT. THEREF ORE, UNDER SUB CLAUSE (II) OF CLAUSE (B) OF SECTION 55A OF THE ACT, THE ASSESSING OFFICER WAS REQUIRED TO FORM AN OPINION AS MENTIONED AND REFER THE PROPERTY FOR ASCERTAIN THE FAIR MARKET VALUE ON THE RELEVANT DATE. FURTHER, THE VALUATION REPORT OF THE REG ISTERED VALUER RELIED UPON BY THE ASSESSEE HAS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEARS 2004 - 2005 AND ASSESSMENT YEAR 2007 - 2008 WHEN THE ASSESSMENT ORDER HAVE BEEN PASSED UNDER SECTION 143(3) OF THE ACT . SINCE THE IMPUGNED VALU ATION REPORT HAS BEEN ACCEPTED BY T HE ASSESSING OFFICER IN THE EARLIER YEARS, THERE IS NO OCCASION TO REJECT THE SAME REPORT WITHOUT ANY BASIS AND WITHOUT TAKING THE OPINION OF THE DEPARTMENTAL VALUATION OFFICER ON THE FAIR MARKET VALUE OF THE PROPERTY UND ER THE POWERS GRANTED UNDER THE PROVISIONS OF THE ACT. 4(9) . IN VIEW OF THE DISCUSSION ABOVE, I AM OF THE OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN TAKING THE FAIR MARKET VALUE OF THE IMPUGNED LAND FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS AS CIRCLE RATE. THE CIRCLE RATE IS NOT A NECESSARY PARAMETER IN ARRIVING AT TH E FAIR MARKET VALUE AND ON THE OTHER HAND RATE OF AUCTION OF A NEARBY PROPERTY HAS BEE N ACCEPTED AS FAIR VALUE IN THE JUDICIAL DECISIONS CITED SUPRA. IN ABSENCE OF ANY OTHE R MATERIA L IT WOULD BE REASONABLE TO ACCEPT TH E REPORT OF THE REGISTERED VALUER WHICH IS BASED ON AUCTION RATES OF NEIGHBORHOOD PROPERTY AND DOES GIVE AN INDICATION O F THE VALUE : - 36 - : THE PROPERTY IN THE VICINITY WAS FETCHING IN THE OPEN MARKET AND HENCE THE FAI R MARKET VALUE. I AM THEREFORE OF THE CONSIDERED VIEW THAT THE COST OF ACQUISITION BEING FAIR MARKET VALUE OF THE PROPERTY IN QUESTION, THE RATE FOR THE PURPOSE OF VALUING THE PROPERTY REQUIRES TO BE TAKEN AS THAT ASCERTAINED BY THE REGISTERED VALUER. THE ADDITION OF ` 84 ,27,065 MADE BY THE AO BY WORKING OUT THE CAPITAL GAINS ON THE BASIS OF CIRCLE RATE FOR COST - OF ACQUISITION IS DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ALLOWED. 15 . IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS TRANSFERRED ITS LAND OF 1204438.33 SQ. FT. HELD BY HIM AS CAPITAL ASSET INTO STOCK - IN - TRADE ON 1.4.2003. THE SAID LAND WAS PROPOSED TO BE BIFURCATED INTO 933518.33 SQ. FT. LAND FOR RESIDENTIAL PURPOSES AND 270920 SQ. FT. LAND FOR COMMERCIAL PURPOSES. ON THIS LAND, THE ASSESS EE HAS DEVELOPED GROUP HOUSING - CUM - SHOPPING PROJECT WITH M/S AARIF INDUSTRIES LIMITED UNDER A COLLABORATION AGREEMENT. SOME OF THE PROPERTIES WERE TRANSFERRED IN ASSESSMENT YEAR 2007 - 08 AND SOME WERE TRANSFERRED IN ASSESSMENT YEAR 2008 - 09. THEREFORE, CAP ITAL GAIN UNDER SECTION 45(2) OF THE ACT WAS COMPUTED FOR TRANSFER OF SOME PART OF THE LAND IN ASSESSMENT YEAR 2007 - 08 AND ANOTHER PART OF THE LAND IN ASSESSMENT YEAR 2008 - 09. THEREFORE, AT THE RELEVANT POINT OF TIME WHEN THE LD. CIT HA D EXERCISED HIS JUR ISDICTION UNDER SECTION 263 OF THE ACT, THE ISSUE WITH REGARD TO ADOPTION OF FAIR MARKET VALUE AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAIN UNDER SECTION 45(2) OF THE ACT ATTAINED SOME FINALITY AT THE LEVEL OF THE LD. CIT(A) IN AS SESSMENT YEAR 2008 - 09. THE MATERIAL AVAILABLE BEFORE THE LD. CIT FOR EXERCISING HIS JURISDICTION UNDER SECTION 263 OF THE ACT WAS THE ORDERS OF : - 37 - : THE LD. CIT(A) FOR ASSESSMENT YEARS 200 4 - 05 & 2008 - 09 AND ASSESSMENT ORDERS FOR THE IMPUGNED ASSESSMENT YEARS AND THE ASSESSMENT RECORDS. 16 . NOW THE QUESTION ARISES WHETHER THE LD. CIT CAN EXERCISE HIS JURISDICTION UNDER SECTION 263 OF THE ACT ON A PARTICULAR ISSUE WHICH HAS ALREADY BEEN ADJUDICATED BY THE LD. CIT(A) THOUGH IN A DIFFERENT ASSESSMENT YEAR AND THE VIE W TAKEN BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER IS IN CONSONANCE WITH THE VIEW TAKEN BY THE LD. CIT(A). 17 . THE SCOPE OF JURISDICTION UNDER SECTION 263 OF THE ACT HAS BEEN REPEATEDLY EXAMINED BY THE APEX COURT AND VARIOUS HIGH C OURTS AT DIFFE RE NT POINT OF TIME EXPLAINING THE JURISDICTION OF THE LD. CIT UNDER SECTION 263 OF THE ACT. 18 . IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC), T HEIR LORDSHIPS OF THE APEX COURT HAVE EXAMINED THE SCOPE OF SECTION 263 OF THE ACT AND HE L D THAT PREREQUISITE TO THE SUO MOTU EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT I S THAT THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PROVISIONS CANNOT BE INVOKED TO CORRECT E ACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER. THE RELEVANT OBSERVATIONS OF THE APEX COURT ARE EXTRACTED HEREUNDER: - IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT THE INCOME - TAX OFFICER PASSED THE ORDER OF 'NIL' ASSESSMENT WITH OUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE INCOME - TAX OFFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT - CO MPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL : - 38 - : TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPT ED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS, THE CONCLUSION THAT THE ORDER OF THE INCOME - TAX OFFICER WAS ERRO NEOUS WAS IRRESISTIBLE. THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF JURISD ICTION BY THE COMMISSIONER UNDER SECTION 263(1) WAS JUSTIFIED. 19 . THEIR LORDSHIPS HAVE ALSO CLARIFIED THROUGH THIS JUDGMENT THAT WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME - TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. 20 . IN THE CASE OF CIT V. MAX INDIA LTD. [2007] 295 ITR 282 (SC), THEIR LORDSHIPS OF THE APEX COURT FURTHER REIT ERATED ITS VIEW THAT WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS U NSUSTAINABLE IN LAW. THEIR LORDSHIPS FURTHER OBSERVED WITH RESPECT TO THE FACTS OF THE CASE THAT WHEN THE CIT PASSED THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT TWO VIEWS WERE INHERENTLY POSSIBLE ON THE WORD PROFITS IN THE PROVISO TO SECTION 80HHC . THEREFORE, SUBSEQUENT AMENDMENT IN 2005 EVEN THOUGH RETROSPECTIVE DID NOT RENDER THE ORDER OF THE ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THE CIT COULD NOT EXERCISE HIS POWER UNDER SECTION 263 OF THE ACT. : - 39 - : 21 . IN THE CAS E OF CIT V. GOYAL PRIVATE FAMILY SPECIFIC TRUST [1988] 171 ITR 698 (ALL), THE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT WHERE THE INCOME - TAX OFFICER HAD CLEARLY STATED THAT HE HAD DISCUSSED THE CASE WITH THE REPRESENTATIVE OF THE ASSESSEE AND IT WAS ONLY AFTER THE DISCUSSION THAT THE INCOME - TAX OFFICER HELD THAT THE ASSESSEE WAS A PRIVATE SPECIFIC TRUST AND THE INCOME THEREOF WAS EXEMPT IN THE HANDS OF THE TRUST BUT IT WAS ASSESSABLE IN THE HANDS OF THE BENEFICIARIES. NO ERROR WAS POINTED OUT BY THE CIT IN THE ORDER OF THE INCOME - TAX OFFICER. IT IS NOT A FIT CASE WHERE THE CIT CAN EXERCISE HIS JURISDICTION UNDER SECTION 263 OF THE ACT AND THE CONCLUSION OF THE CIT THAT THE ASSESSMENT HAD BEEN MADE IN A HURRIED WAY WITHOUT ANY SCRUTINY WAS SUPERFICIAL. 22 . IN THE CASE OF CIT V. GABRIA L INDIA LTD. [1993] 203 ITR 108 (BOM), THE SCOPE OF SECTION 263 OF THE ACT WAS AGAIN EXAMINED AND THEIR LORDSH I PS OF THE BOMBAY HIGH COURT HAVE HELD THAT THE ORDER SOUGHT TO BE REVISED MUST BE ERRONEOUS AND ALSO BY VIRTUE IT IS BEING ERRONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVENUE. SECTION 263 OF THE ACT DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME TAX OFFICER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. ORDER IS ERRONEOUS WHEN IT IS NOT IN ACCORDANCE WITH LAW AND IS PREJUDICIAL WHERE IT IS CAUSED LOSS OF REVENUE. THERE MUST BE MATERIAL BEFORE THE CIT TO SATISFY HIM PRIMA - FACIE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. THE RELEVANT OBS ERVATIONS OF THEIR LORDSHIPS OF HON'BLE BOMBAY HIGH COURT ARE EXTRACTED HEREUNDER: - THE POWER OF SUO MOTU REVISION UNDER SUB - S. (1) OF S. 263 IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE : - 40 - : POWE R OF REVISION UNDER THIS SUB - SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM THE OR DER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISSIONER FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF T HE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND, LEFT TO THE COMMISSIONER, HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMMISS IONER WITH POWER TO RE - EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE T ERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS : - 41 - : PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSEL F WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN ALSO TH E POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE SUBJECT - MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULL Y EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. THERE MUST BE MATERIAL AVAILABLE ON RECORD CALLED FOR BY THE COMMISSIONER TO S ATISFY HIM, PRIMA FACIE, THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE HAS NO AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWER OF SUO MOTU REVISION UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL - SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORDS TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE COURT, IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. ANY OTHER VIEW IN THE MATTER WILL AMOUNT TO GIVING UNBRIDLED AND ARBITRARY POWER TO REVISING AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION IN EVERY CASE AND START RE - EXAMINATION AND FRESH ENQUIRIES IN MATTERS WHICH HAVE ALREADY BEEN CONCLUDED UNDER : - 42 - : THE LAW. IT IS QUASI - JUDICIAL POWER HEDGED WITH LIMITATION AND HAS TO BE EXERCISED SUBJ ECT TO THE SAME AND WITHIN ITS SCOPE AND AMBIT. SO FAR AS CALLING FOR THE RECORDS AND EXAMINING THE SAME IS CONCERNED, UNDOUBTEDLY IT IS AN ADMINISTRATIVE ACT, BUT ON EXAMINATION, 'TO CONSIDER', OR IN OTHER WORDS, TO FORM AN OPINION THAT THE PARTICULAR ORD ER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS A QUASI - JUDICIAL ACT BECAUSE ON THIS CONSIDERATION OR OPINION THE WHOLE MACHINERY OF REEXAMINATION AND RECONSIDERATION OF AN ORDER OF ASSESSMENT, WHICH HAS ALREADY BEEN CONCL UDED AND CONTROVERSY ABOUT WHICH HAS BEEN SET AT REST, IS AGAIN SET IN MOTION. IT IS AN IMPORTANT DECISION AND THE SAME CANNOT BE BASED ON THE WHIMS OR CAPRICE OF THE REVISING AUTHORITY. THERE MUST BE MATERIALS AVAILABLE FROM RECORDS CALLED FOR BY THE COMM ISSIONER . 23 . RELYING UPON VARIOUS JUDGMENTS OF THE APEX COURT AND THE HIGH COURTS, THE TRIBUNAL IN THE CASE OF GIRDHARI LAL B. ROHRA VS. CIT, 86 TTJ 177 HAS ALSO OBSERVED THAT IN ORDER TO ASSUME JURISDICTION UNDER SECTION 263 OF THE ACT, THE CIT MUST SATISFY HIMSELF PRIMA - FACIE THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE. SUCH SATISFACTION MUST BE BASED ON THE MATERIAL ON RECORD. ASSUMPTION OF JURISDICTION UNDER SECTION 263 OF THE ACT CANNOT BE MADE IN A CASUAL AND ARBITRARY MANNER AND IF THERE IS NO MATERIAL ON RECORD TO SATISFY PRIMA - FACIE THAT THE AFORESAID CONDITIONS ARE PRESENT, THEN PROVISIONS OF SECTION 263 OF THE ACT CANNOT BE INVOKED. 24 . WE HAVE ALSO EXAMINED THE JUDGMENTS REFERRED BY THE REVENUE ON A PLEA THAT WHERE THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND PROPERLY TO THE FACTS OF THE CASE, HIS ORDER WOULD BE ERRONEOUS. : - 43 - : 25 . IN THE CASE OF CIT V. SHRI. BHAGWAN DAS [2005] 272 ITR 367 (ALL), THE JURISDICTIONAL HIGH COURT HAS HELD THAT AN OR DER WHICH HAS BEEN PASSED WITHOUT APPLICATION OF MIND, WILL ALSO FALL UNDER THE EXPRESSION ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE O RDER BEING ERRONEOUS . 26 . IN ANOTHER CASE OF CIT V. DEEPAK KUMAR GARG [2008] 299 ITR 435 (M.P), IT WAS HELD BY THE MADHYA PRADESH HIGH COURT THAT THE ASSESSMENT ORDER PASSED WITHOUT PROPER ENQUIRY IS AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IT WAS ALSO HELD THAT NO RULE OF UNIVERSAL APPLICATION CAN BE LAID DOWN FOR THE EXERCISE OF ORIGINAL POWERS UNDER SECTION 263 OF THE ACT. IT WILL DEPEND ON THE FACTS OF EACH CASE, BUT THE CIT MUST BE SATISFIED THE EXISTENCE OF THE TWIN CONDITIONS, VIZ., THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND THAT IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 27 . WE HAVE ALSO EXAMINED THE JUDGMENT OF THE APEX COURT IN THE CASE OF RADHASOAMI SATSANG V. CIT 193 ITR 321 (SC), IN WHICH IT HAS BEEN HELD THAT RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. THOUGH EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASS ESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. WHILE MAKING THES E OBSERVATIONS, THE APEX COURT HAS MADE IT CLEAR THAT THE DECISION IS CONFINED TO THE FACTS OF THE CASE AND MAY NOT BE TREATED AS AN AUTHORITY ON ASPECTS WHICH HAVE BEEN DECIDED FOR GENERAL APPLICATION. : - 44 - : 28 . WE HAVE ALSO EXAMINED FOLLOWING JUDGMENTS REFERRED BY THE ASSESSEE ON THE SUBJECT: - 1 . CIT V. JAWAHER BHATTACHARJEE, 342 ITR 74. 2 . CIT V. BHAGWAN DAS, 272 ITR 367 3 . CIT V. DEEPAK KUMAR GARG, 299 ITR 435 29 . TURNING TO THE FACTS OF THE CASE, WE FIND THAT IN ASSESSMENT YEAR 2004 - 05 , THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE REGISTERED VALUERS REPORT IN ORDER TO DETERMINE THE FAIR MARKET VALUE AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN THOUGH HIS ORDER WAS NOT APPROVED BY THE LD. CIT(A). BUT AT THE TIME WHEN THE IMPUGNED ASSESSMENT OR DER WAS PASSED, THERE WAS NO CONTRARY FINDING AVAILABLE BEFORE THE ASSESSING OFFICER. THE ONLY AVAILABLE MATERIAL WAS THE REGISTERED VALUERS REPORT AND THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05 IN WHICH FAIR MARKET VALUE AS ON 1.4.1981 WAS ACCEPTE D BY THE ASSESSING OFFICER ON THE BASIS OF THE REGISTERED VALUERS REPORT @ ` 95 PER SQ. FT. RELYING UPON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05, THE ASSESSING OFFICER HAS COMPUTED THE LONG TERM CAPITAL GAIN AS PER PROVISIONS OF SECTION 45(2) OF THE ACT ON THE BASIS OF THE FAIR MARKET VALUE AS ON 1.4.1981 DECLARED BY THE ASSESSEE AS PER REGISTERED VALUERS REPORT. BY THAT TIME , AN APPEAL AGAINST THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05 WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) THOUGH IT WAS NOT DISPOSED OF, BUT THE STAND OF THE ASSESSEE WAS CLEAR TO THE ASSESSING OFFICER THAT ACCORDING TO HIM LONG TERM CAPITAL GAIN IS TO BE COMPUTED AS PER PROVISIONS OF SECTION 45(2) OF THE ACT IN THE YEAR IN WHICH THE ASS E TS TRANSFERRED TO STOCK - IN - TRADE ARE SOLD OUT AND NOT IN THE YEAR IN WHICH THE ASSETS ARE TRANSFERRED TO STOCK - IN - TRADE. THE ASSESSING OFFICER HAS ALSO EXAMINED THE ISSUE IN HIS ASSESSMENT ORDER IN PARAS 2 & 3. THEREFORE, IT : - 45 - : CANNOT BE SAID THAT THE ASSES SING OFFICER HAS NOT APPLIED HIS MIND TO THE FACTS OF THE CASE. 30 . IF WE EXAMINE THE MATERIAL AVAILABLE BEFORE THE LD. CIT WHILE EXERCISING HIS JURISDICTION UNDER SECTION 263 OF THE ACT, WE WOULD FIND THAT THE MATERIAL AVAILABLE BEFORE THE CIT IS THE ASSESSME NT ORDER FOR ASSESSMENT YEAR 2004 - 05, LD. CIT(A)S ORDER FOR ASSESSMENT YEAR 2004 - 05 IN WHICH IT WAS HELD THAT THE LONG TERM CAPITAL GAIN IS TO BE COMPUTED AS PER PROVISIONS OF SECTION 45(2) OF THE ACT IN THE YEAR IN WHICH THE ASSETS TRANSFERRED TO STOCK - I N - TRADE WAS SOLD AND NOT IN THE YEAR IN WHICH IT WAS CONVERTED TO STOCK - IN - TRADE , THE ASSESSMENT ORDER AND THE ORDER OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2008 - 09 IN WHICH THE LD. CIT(A) HAS ACCEPTED THE FAIR MARKET VALUE OF THE IMPUGNED LAND WHICH IS TRA NSFERRED TO STOCK - IN - TRADE AS ON 1.4.1981 AS DECLARED BY THE ASSESSEE ON THE BASIS OF THE REGISTERED VALUERS REPORT @ ` 95 PER SQ. FT. BESIDE THESE INFORMATIONS, THE AVAILABLE INFORMATION BEFORE THE CIT IS ONLY THE CIRCLE RATE NOTIFIED BY THE DISTRICT MAG ISTRATE FOR THE PURPOSE OF STAMP DUTY AS ON 1.4.1981. IN ASSESSMENT YEAR 2008 - 09 , THE LD. CIT(A) WHILE ADJUDICATING THE APPEAL OF THE ASSESSEE HAS DEALT WITH ALL THE ARGUMENTS OF THE ASSESSEE IN THE LIGHT OF CIRCLE RATE NOTIFIED BY THE DISTRICT MAGISTRATE AND FINALLY CONCLUDED THAT THE RATES ADOPTED BY THE ASSESSEE AS ON 1.4.1981 ON THE BASIS OF THE REGISTERED VALUERS REPORT IS TO BE ADOPTED FOR COMPUTING THE CAPITAL GAIN AS PER SECTION 45(2) OF THE ACT. THEREFORE, WHILE EXERCISING HIS JURISDICTION UNDER SECTION 263 OF THE ACT, NO OTHER MATERIAL WAS AVAILABLE WITH THE CIT FOR DRAWING A CONCLUSION THAT THE ASSESSMENT ORDER FOR THE IMPUGNED ASSESSMENT YEAR IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. COMPARING THE IMPUGNED ASSESSMENT ORDER WITH THE ORDER OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2008 - 09, WE WOULD FIND THAT THE FINDINGS OF THE ASSESSING OFFICER ARE IN CONSONANCE WITH THE VIEW TAKEN BY : - 46 - : THE LD. CIT(A) FOR ASSESSMENT YEAR 2008 - 09. MEANING THEREBY THAT THE VIEW TAKEN BY THE ASSESSI NG OFFICER IS A PLAUSIBLE VIEW AND IT CANNOT BE REVISED BY THE CIT ONLY FOR THE REASON THAT THE VIEW TAKEN BY THE ASSESSING OFFICER DOES NOT APPEARS TO BE CORRECT TO THE CIT. 31 . THE ARGUMENTS ON BEHALF OF THE REVENUE THAT PRINCIPLE OF RES JUDICATA ARE NOT APP LICABLE TO THE INCOME - TAX PROCEEDINGS DO NOT HOLD GOOD AS THE PROPERTY IS THE SAME, OF WHICH FAIR MARKET VALUE AS ON 1.4.1981 WAS DETERMINED IN DIFFERENT ASSESSMENT YEARS. IF ONE RATE IS ADOPTED IN ONE YEAR, IT CANNOT BE CHANGED IN DIFFERENT ASSESSMENT YE ARS. MOREOVER, IT HAS BEEN REPEATEDLY HELD THAT THOUGH PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE T O THE INCOME - TAX PROCEEDINGS, BUT RULE OF CONSISTENCY MUST BE FOLLOWED UNLESS AND UNTIL SOME CONTRARY ARE ESTABLISHED . 32 . KEEPING IN VIEW THE TOTALITY OF THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS TAKEN A VIEW IN THE LIGHT OF THE SURROUNDING CIRCUMSTANCES WHICH CANNOT BE CALLED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THE LD. CIT HAS EXERCIS ED HIS JURISDICTION UNDER SECTION 263 OF THE ACT WITHOUT HAVING SUFFICIENT MATERIAL WITH HIM. THEREFORE, WE FIND NO MERIT IN HIS ORDER AND ACCORDINGLY SET ASIDE HIS ORDER. 33 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7.8.2012. S D/ - S D/ - [ S. V. MEHROTRA ] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7.8.2012 *SINGH1906 JJ: 1107 : - 47 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR