Shri Chandrabhan Singh Choudhary, Chhindwara V. The DCIT 1(2), Bhopal

ITA 170/IND/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5751 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M JAVED
• Keywords: Capital asset; Gift; Business income
• Section: 143(3); 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE , .., BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER ITA NO.170/IND/2014 ASSESSMENT YEAR: 2008-09 SHRI CHANDRABHAN SINGH CHOUDHARY S/O LATE KUBER SINGH CHOUDHARY, NEAR ALKA TALKIES CHHINDWARA, M.P. / VS. DCIT 1(2) BHOPAL, M.P. (APPELLANT) (REVENUE ) P.A. NO.AZOPS3300G APPELLANT BY SHRI PANKAJ SHAH, CA REVENUE BY SHRI M. JAVED (CIT-DR) DATE OF HEARING: 22.03.2017 DATE OF PRONOUNCEMENT : 31.03 . 201 7 / O R D E R PER CHANDRAMOHAN GARG, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-1, BHOPAL [IN SHORT CIT(A)], DATED 23.12.2013 PASSED IN FIR ST APPEAL NO. CIT(A)-I/BPL/IT-558/10-11 U/S 143(3) OF THE INCOME TAX ACT [(IN SHORT (THE ACT)] FOR THE A.Y. 2008-09. SHRI CHANDRABHAN SINGH CHOUDHARY 2 2. THE GROUNDS RAISED BY THE ASSESSEE READS AS FOLLOW S: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPE ALS)- 1, BHOPAL ERRED IN CONFORMING THAT THE TRANSACTION OF SALE OF LAND BY THE ASSESSEE WAS IN THE NATURE OF ADVENT URE IN THE OF TRADE AND NOT A CAPITAL GAIN TRANSACTION AS CLAIMED BY THE ASSESSEE IN HIS RETURN AND THEREBY TREATING RS.26,84,744/- AS BUSINESS INCOME OF THE ASSESSEE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APP EALS)- 1 BHOPAL ERRED IN NOT ACCEPTING THE ASSESSEES CLAI M OF DEDUCTION U/S 54F ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE OUT OF THE LONG T ERM CAPITAL GAINS FROM THE SALE OF LAND. 3. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBU NAL, INTER ALIA, ASSESSMENT ORDER, FIRST APPELLATE ORDER ALONG WITH PAPER BOOK FILED BY THE ASSESSEE SPREAD OVER 27 PAGES AND REPORT OF THE INCOME TAX INSPECTOR DATED 25.08.2016 PLACED ON THE RECORD BY THE LD. SENIOR DR ON 22.03.2017. FIRST OF ALL, WE MAY POINT OUT THAT ON THE DIRECTION OF THE TRIBUNAL TO VERIFY OF THE STATUS OF THE LAND IN QUESTION MEASURING 22,364 SQ.FT. WHICH WAS SOLD BY THE ASSESSEE AFTER DIVERSION, HAS BEEN PLACED ON RECORD BY THE LD. SENIOR DR AND COPY OF T HE SAME WAS PROVIDED TO THE LD. ASSESSEES REPRESENTATIVE(A R). THE LD. AR SUBMITTED THAT THE ASSESSE DOES NOT WANT TO RAIS E ANY OBJECTION TO VERIFICATION AND STATUS REPORT SUBMITT ED BY THE INCOME TAX INSPECTOR DATED 25.08.2016 AND LD. SENIO R DR ALSO SUBMITTED THAT THE AO HAS NOTHING TO SAY ON TH IS REPORT AND THE SAME MAY BE TAKEN ON RECORD FOR CONSIDERATI ON. SHRI CHANDRABHAN SINGH CHOUDHARY 3 4 . THE LD. AR SUBMITTED THAT THE APPELLANT IS AN AGR ICULTURIST AND BESIDES HAVING TAXABLE INCOME AS ALLOWANCES RE CEIVED AS MLA HE ALSO HAVING AGRICULTURAL INCOME FROM OWN LAN D AS WELL AS FROM THE ANCESTRAL AGRICULTURAL LAND RECEIVED IN FAMILY PARTITION LONG BACK ON 08.09.1970. THE LD. AR FURTH ER SUBMITTED THAT THE IMPUGNED OWN AGRICULTURAL LAND S ITUATED AT VILLAGE IMALIA BOHTA WAS PURCHASED ON 03.06.1988 ME ASURING TOTAL AREA OF 5.15 HECTARES AND THE ASSESSEE WAS CO NTINUOUSLY USING SAID LAND FOR CULTIVATION BEING THE MAJOR SOU RCE OF HIS INCOME. THE LD. AR FURTHER SUBMITTED THAT CONSIDERI NG HIS REQUIREMENTS OF FUNDS THE ASSESSEE PLANNED TO MATER IALIZE SUITABLE PORTION OF HIS INVESTMENT AND ACCORDINGLY, HE GET THE SMALL PART PORTION OF THE LAND MEASURING 0.201 HECT ARES DIVERTED IN 2007 BY SDO(REVENUE) VIDE ORDER DATED 27.02.2007 FOR NON-AGRICULTURE PURPOSES AND CONTINU ED CULTIVATION ON REMAINING PORTION OF LAND. THE LD. A R FURTHER ELABORATED THAT OUT OF THE TOTAL DIVERTED LAND AREA OF 22,364 SQ. FTS., TOTAL SALEABLE AREA WAS 21,600 SQ. FT. WH ICH WAS SOLD BY WAY OF 3 REGISTERED SALE DEEDS AFTER LEAVING THE SPACE FOR ROAD, ENTIRE DIVERTED LAND WAS SOLD. 5 . THE LD. AR FURTHER SUBMITTED THE DIVERSION OF LAN D WAS CARRIED OUT ONLY BECAUSE THE AREAS OF LAND WAS BIG IN SIZE, FINDING A BUYER TO SOLD OUT SUCH A BIG PIECE OF LAN D WAS TOUGH AND ON TOP OF THAT THE ASSESSEE WAS NO IN NEED OF T HAT MUCH MONEY SO HE DECIDE TO DIVERT A LIMITED PORTION OF T HE LAND AS PER HIS MONETARY REQUIREMENTS AND CONTINUE HIS REGU LAR AGRICULTURE ACTIVITIES ON REST OF THE MAJOR PART. T HE LD. AR SHRI CHANDRABHAN SINGH CHOUDHARY 4 FURTHER SUBMITTED THAT THE DIVERTED LAND BEING CAPI TAL ASSET, THE SAID LAND TRANSACTION IS COVERED UNDER CAPITAL GAINS HEAD AS PER PROVISIONS OF THE ACT, AND ACCORDINGLY, THE ASSESSEE OFFERED INCOME OUT OF TRANSACTION OF SALE OF LAND T O TAX AS LONG TERM CAPITAL GAINS. THE LD. AR VEHEMENTLY POINTED OUT THAT ACCORDING TO THE ASSESSING OFFICER THE INCOME ACCRU ED TO THE ASSESSEE FROM SALE OF LAND GETS COVERED UNDER THE H EAD OF PROFITS AND GAINS FROM BUSINESS & PROFESSION AS T HE TRANSACTION CARRIED OUT BY THE ASSESSEE IS AN ADVEN TURE IN NATURE OF TRADE AND THE ASSESSEE FAILED TO JUSTIFY OR SUBSTANTIATE THAT THE LAND WAS DIVERTED AND SOLD IN PIECES WITH THE VIEW TO SECURE BETTER PRICE OR IN OTHER SENSE, BETTER REALIZATION OF HIS INVESTMENT. 6. THE LD. AR PLACING RELIANCE ON THE VARIOUS DECISIO NS OF HONBLE SUPREME COURT, HONBLE HIGH COURT AND COORD INATE BENCHES OF THE TRIBUNAL INCLUDING JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT V. SURESH CHAND GOYAL (2008) 298 ITR 277(MP) SUBMITTED THAT THE ASSESSEES SOLE ACTIVITIES OF SA LE OF LAND DID NOT CONSTITUTE BUSINESS OR ADVENTURE IN NATURE OF T RADE, AND THE INCOME ARISING FROM SALE PROCEED OF THE SAID LA ND WAS ONLY CAPITAL GAIN. HE WAS FURTHER SUBMITTED THERE IS NO REGULAR ACTIVITY OF SELLING AND PURCHASING OF THE LAND, THE RE IS NOTHING ON THE RECORD TO SHOW THAT THE AGRICULTURAL LAND WA S PURCHASED FOR THE PURPOSES OF SELLING INTO PLOTS. T HE LAND WAS ALSO NOT FULLY DEVELOPED AS REQUIRED UNDER TOWN AND COUNTRY ACT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE OUT OF SHRI CHANDRABHAN SINGH CHOUDHARY 5 5.15 HECTARES OF LAND PURCHASED IN 1988, AFTER 19 Y EARS SIMPLY DIVERTED A PIECES OF LAND AND SOLD THE SAME IN 3 PI ECES WITH THE VIEW TO SECURE BETTER PRICE AND BETTER REALIZAT ION OF HIS INVESTMENTS. 7. THE LD. AR VEHEMENTLY POINTED OUT THAT THE ONLY AN D ISOLATED ACTIVITY SALE OF LAND CANNOT COME WITHIN T HE PURVIEW OF ADVENTURE IN THE NATURE OF TRADE AND BUSINESS. THER EFORE, THE EARNING/INCOME ON THE SALE OF LAND WAS NOTHING BUT LONG TERM CAPITAL GAIN AND THEREFORE, THE ASSESSEE CORRECTLY AND PROPERLY OFFERED THE SAME FOR TAXATION UNDER THE HEAD OF LO NG TERM CAPITAL GAIN. 8. THE LD. AR FURTHER SUBMITTED THAT EVEN THE FIRST A PPELLATE AUTHORITY DID NOT PROPERLY APPRECIATED THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND DISMISSED APPEAL OF THE ASSESSEE BY CONSIDERING IRRELEVANT FACTS AND HE WRO NGLY HELD THAT IMPUGNED TRANSACTIONS OF SALE OF LAND IS IN TH E NATURE OF TRADE AND PROFITS ACCRUED THEREFROM WERE ASSESSABLE AS BUSINESS PROFITS. THE LD. AR LASTLY, DREW OUR ATT ENTION TOWARDS PARA 15 OF THE JUDGMENT OF HONBLE HIGH COU RT IN THE CASE OF CIT VS. SURESH CHAND GOYAL (SUPRA) AND SUBM ITTED THAT THE WORD BUSINESS HAS BEEN DEFINED UNDER SEC TION 2(13) OF THE ACT, WHICH INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR NAY ADVENTURE IN THE NATURE OF TRADE , COMMERCE OR MANUFACTURE. AN ISOLATED TRANSACTION OR ACTIVITY CANNOT BE A PART OF BUSINESS AND THUS, AS PER RATIO OF THIS DECISION THE APPEAL OF THE ASSESSEE MAY KINDLY BE A LLOWED. SHRI CHANDRABHAN SINGH CHOUDHARY 6 9. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPRES ENTATIVE (DR) SUPPORTING THE ASSESSMENT ORDER AS WELL AS FIR ST APPELLATE ORDER CONTENDED THAT THE ASSESSEE SOLD 3 PLOTS OF L AND MEASURING 22,364 SQ. FT. AFTER DIVERSION ON 27.07.2 007 FOR RS.27,50,000/- AT CHHINDWARA AND INCOME THEREFROM W AS WRONGLY OFFERED TO TAX AS LONG TERM CAPITAL GAIN. T HE LD. DR SUBMITTED THAT THE PLOT OF LAND WAS DIVERTED BY THE ORDER OF SDO(REVENUE) ORDER DATED 27.02.2007 AND LAND WAS D IVERTED FOR NON-AGRICULTURE PURPOSES. THE LD. DR FURTHER SU BMITTED THAT AFTER 5 MONTHS OF DIVERSION ON 27.07.2007, THE ASSESSEE SOLD ENTIRE DIVERTED LAND IN TO THREE PLOTS. THUS, THE MAIN INTENTION OF THE ASSESSEE WAS TO CUT THE PLOTS IN S IZES AND TO SALE THE SAME IN OPEN MARKET ON HIGHER PRICES AND H E ALSO DID SO. THEREFORE, THE ACTIVITY OF THE ASSESSEE GETTING THE LAND DIVERTED AND IMMEDIATELY AFTER DIVERSION SELLING IT INTO PLOT WAS NOTHING BUT AN ACTIVITY OF ADVENTURE IN THE NATURE OF TRADE, THEREFORE, THE AO WAS QUITE JUSTIFIED AND CORRECT I N TREATING INCOME FROM SALE OF LAND AS BUSINESS INCOME INSTE AD OF LONG TERM CAPITAL GAIN AS OFFERED TO TAX BY THE ASSESSE E UNDER THE WRONG HEAD. THE LD. DR PLACING RELIANCE ON THE DECI SION OF HONBLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT V. SURESH CHAND GOYAL, DECISION IN HONBLE SUPREME COURT IN THE CASE OF RAJA J. RAMESHWAR RAO VS. CIT 42 ITR 1 79 (SC) & DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. B. NARASIMHA REDDY 150 ITR 347(KAR ) SUBMITTED THAT WHEN LAND IS SITUATED IN A VILLAGE, BUT LOCATE D WITHIN THE URBANIZED AREA AND KEPT IT UNCULTIVATED FOR SEVERAL YEARS AND SHRI CHANDRABHAN SINGH CHOUDHARY 7 AFTER OBTAINING PERMISSION TO CONVERT THE LAND FOR NON- AGRICULTURAL PURPOSES, LAYOUTS FOR HOUSE SITES WERE FORMED SOME OF THEM WERE SOLD, THEN TAKING INTO CONSIDERAT ION THE CUMULATIVE EFFECT OF THE ENTIRE ACTIVITIES UNDERTAK EN BY THE ASSESSEE FOR REALIZING HIGH VALUE OF LAND IS NOTHIN G TO ADVENTURE IN THE NATURE OF TRADE AND BUSINESS. THER EFORE, PROFIT AROSE THEREFROM ON THE SALE OF SUCH LAND/PLO TS WAS ASSESSABLE AS BUSINESS PROFITS AND THE AO WAS RIG HT AND QUITE JUSTIFIED IN TREATING THE SAME AS BUSINESS I NCOME AND THUS THE FIRST APPELLATE AUTHORITY UPHOLD THE ASSES SMENT ORDER ON CORRECT PREMISES. 10. PLACING REJOINDER TO THE ABOVE SUBMISSIONS OF THE LD. DR, THE ASSESSEES REPRESENTATIVE(AR) SUBMITTED THAT EV EN IN THE CASE OF CIT VS. SURESH CHAND GOYAL (SUPRA) WHICH HA S ALSO BEEN RELIED BY THE LD. DR, IT HAS BEEN EXPLICITLY H ELD THAT TO CONSIDER QUESTION OF BUSINESS, THERE MUST BE REGULA R ACTIVITY OF PURCHASING AND SELLING OF LAND AND THERE IS NOTHING ON THE RECORD TO SHOW THAT THE ASSESSEE IS CONTINUOUSLY IN THE ACTIVITY OF PURCHASE AND SALE OF LAND AS AN ADVENTURE IN TH E NATURE OF TRADE AND BUSINESS. THE LD. AR STRONGLY POINTED OUT THAT EXCEPT IMPUGNED TRANSACTION ON SALE OF LAND THAT TO O AFTER 19 YEARS OF PURCHASE OF BIG LAND, THERE IS NO EARLIER OR SUBSEQUENT TRANSACTION OF PURCHASE OR SALE OF LAND BY THE ASSE SSEE DURING PRECEDING AND SUBSEQUENT PERIOD TILL DATE. THEREFOR E, SOLE TRANSACTION OF SALE OF LAND CANNOT BE TREATED AS AD VENTURE IN THE NATURE OF TRADE BUSINESS AND THEREFORE, THE INC OME OF THE ASSESSEE FROM SALE OF PLOTS/LAND CANNOT BE ASSESSED AS SHRI CHANDRABHAN SINGH CHOUDHARY 8 BUSINESS INCOME AND THE SAME WAS RIGHTLY OFFERED TO TAX AS LONG TERM CAPITAL GAIN BY THE ASSESSEE. 11. AT THE VERY OUTSET, ON CAREFUL PERUSAL OF THE DECI SION OF HONLBE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS. SURESH CHAND GOYAL(SUPRA), WE OBSERVE THAT THEIR LO RDSHIP SPEAKING FOR THE JURISDICTIONAL HIGH COURT HELD THU S: CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE ALSO OF THE VIEW THAT THE SELLING OF O WN LAND AFTER PLOTTING IT OUT IN ORDER TO SECURE BETTER PRI CE, IS NOT AN ADVENTURE IN THE NATURE OF TRADE OR BUSINESS. THE W ORD BUSINESS HAS BEEN DEFINED UNDER SECTION 2(13) OF THE INCOME TAX ACT, 1961, WHICH INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR NAY ADVENTURE OR CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. AN IS OLATED TRANSACTION OR ACTIVITY CANNOT BE PART OF BUSINESS. TO CONSIDER THE QUESTION OF BUSINESS, THERE MUST BE RE GULAR ACTIVITY OF PURCHASING AND SELLING. IN THIS CASE, T HERE IS NOTHING OR RECORD TO SHOW THAT THE LAND WAS PURCHAS ED, FOR THE PURPOSE OF SELLING INTO PLOTS. BASICALLY, IT IS A GIFTED LAND AND THE LAND WAS DEVELOPED AND WAS SOLD AFTER CONVERTING INTO THE PLOTS WITH A VIEW TO SECURE THE BETTER PRICE, THEREFORE, THE ISOLATED ACTIVITY CANNOT COME WITHIN THE PURVIEW OF ADVENTURE IN THE NATURE OF TRADE AND BUSINESS. THE MAIN EARNING ON THE SALE OF THE LAND WAS IN THE NATURE OF CAPITAL GAIN AND, THEREFORE, NOT ASSE SSABLE HIS INCOME FROM BUSINESS AND THIS QUESTION IS ESSENTIALLY A QUESTION OF FACT. 12. IN VIEW OF ABOVE RATIO, WHEN WE LOGICALLY ANALYSED THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THEN, FIRST OF ALL, WE MAY POINT OUT THAT ON SPECIFIC QUERY FROM THE BENCH THE LD. DR FAIRLY ACCEPTED THAT THERE WAS SOLE TRANSACTION OF SALE OF LAND BY THE ASSESSEE DURING F.Y. 2007-08 PERTAINING TO A.Y. 2008-09 WHICH WAS UNDERTAKEN BY THE ASSESSEE BY WAY OF EXECUTION FOR SALE DEED OF THREE PLOTS ON 27.07.200 7. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE OWNS VARIOUS AGRIC ULTURAL SHRI CHANDRABHAN SINGH CHOUDHARY 9 LAND AND OUT OF THESE LAND THE ASSESSEE GET DIVERTE D A PIECE OF LAND MEASURING 22,364 SQ. FT. ON 27.02.2007, BY THE COMPETANT AUTHORITY I.E. SDO(REVENUE), WITH AN INTE NTION TO LIQUIDATE HIS CAPITAL ASSET/INVESTMENTS ON HIGHER P RICE AND TO SATISFY HIS NEED OF FUNDS. AT THIS JUNCTURE, IT IS ALSO RELEVANT TO NOTE THAT THE PIECE OF LAND WHICH WAS SOLD BY THE A SSESSEE WAS A SMALL PORTION OF TOTAL AREA OF 5.15 HECTARE OF LA ND WHICH WAS PURCHASED BY THE ASSESSEE ON 03.06.1988 I.E. ABOUT 19 YEARS BEFORE THE SALE OF LAND. THERE IS NO ANOTHER TRANSA CTION OF SALE OF LAND BY THE ASSESSEE AND AS PER RETURN OF INCOME FILED BY THE ASSESSEE FOR A.Y.2008-09. IT IS AMPLY CLEAR THA T THE ASSESSEE ONLY OFFERED TO TAX THE ALLOWANCE RECEIVED BY HIM AS MEMBER OF STATE LEGISLATIVE ASSEMBLY AND THERE IS N O OTHER TO TAXABLE INCOME UNDER ANY HEAD, EXCEPT EXEMPT AGRICU LTURAL INCOME ACCRUED TO THE ASSESSEE FROM THE AGRICULTURA L ACTIVITIES UNDER TAKEN ON THE LAND OWNED BY HIM. 13. IN VIEW OF ABOVE, WE ARE UNABLE TO AGREE WITH THE CONTENTION OF THE AO AS WELL AS OBSERVATIONS OF THE LD. CIT(A) THAT THE SALE OF LAND IMMEDIATELY AFTER 5 MONTHS OF DIVERSION IS AN ACTIVITY OF ADVENTURE IN THE NATURE OF TRADE AND BUSINESS BECAUSE AS PER RATIO LAID DOWN BY HONBLE HIGH COUR T OF MADHYA PRADESH IN THE CASE OF CIT VS. SURESH CHAND GOYAL (SUPRA), AS REPRODUCED HEREINABOVE, SECTION 2(13) OF THE ACT, DEFINES THE WORD BUSINESS WHICH INCLUDES ANY TRAD E, COMMERCE OR MANUFACTURE OR ANY OTHER ADVENTURE OR CONCERNED IN THE NATURE OF TRADE, COMMERCE OR MANUF ACTURE. THEIR LORDSHIP CLEARLY HELD THAT AN ISOLATED TRANSA CTIONS OR SHRI CHANDRABHAN SINGH CHOUDHARY 10 ACTIVITY CANNOT BE A PART OF BUSINESS AND TO CONSID ER THE QUESTION OF BUSINESS THERE MUST REGULAR ACTIVITY OF PURCHASING AND SELLING. IN THE PRESENT CASE THERE IS NO IOTA O F EVIDENCE ON THE RECORD TO SHOW THAT THE ASSESSEE WAS REGULAR IN THE BUSINESS OF PURCHASE AND SALE OF LAND OR PLOTS, THE REFORE, CONCLUSION DRAWN BY THE AO AND UPHOLD BY THE LD. CI T(A) CANNOT BE HELD AS VALID AND SUSTAINABLE AS PER PROV ISIONS OF THE ACT, AS WELL AS IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF SURESH CHAND GOYA L(SUPRA). THUS, RESPECTFULLY FOLLOWING THE SAME GROUND NO.1 O F THE ASSESSEE IS ALLOWED, AND THE AO IS DIRECTED TO TREA T THE INCOME ACCRUED TO THE ASSESSEE FROM SALE OF LAND/PLOTS AS LONG TERM CAPITAL GAIN. ACCORDINGLY, GROUND NO.1 IS ALLOWED. 14. GROUND NO.2 OF THE ASSESSEE : APROPOS THIS GROUND THE LD. AR SUBMITTED THAT THE AO AS WELL AS LD. CIT(A) ERRED IN NOT ACCEPTING THE ASSESSES CLAIM OF DEDUCTION U/S 54F ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF RESIDENTIAL HOUSE OUT OF THE LONG TERM CAPITAL GAINS FROM THE SALE OF LAND. THE LD. AR SUBMITTED THAT THE CLAIM OF THE ASSESSEE WAS DISMIS SED AT THE THRESHOLD BY TREATING THE INCOME FROM SALE OF LAND AS BUSINESS INCOME AND IN THE SIMILAR MANNER THE LD. CIT(A) ALS O DID NOT CONSIDER THE CLAIM OF ASSESSEE FOR EXEMPTION U/S 54 F OF THE ACT. THE LD. AR LASTLY, POINTED OUT THAT AO MAY KIN DLY BE DIRECTED TO ALLOW DEDUCTION U/S 54F OF THE ACT, ON THE AMOUNT OF INVESTMENT MADE BY THE ASSESSEE FOR CONSTRUCTION OF RESIDENTIAL HOUSE BY USING THE AMOUNT OF LONG TERM CAPITAL GAIN. ALTERNATIVELY, HE PRAYED THAT AS THE AO AS WE LL AS LD. SHRI CHANDRABHAN SINGH CHOUDHARY 11 CIT(A) HAVE NOT ADJUDICATED THE ISSUE PROPERLY, THE REFORE, THE SAME MAY KINDLY BE RESTORED TO THE FILE OF AO FOR A FRESH ADJUDICATION. 15. REPLYING TO THE ABOVE, LD. DR SUBMITTED THAT WHEN THE AUTHORITIES BELOW DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE INCOME ACCRUED TO HIM FROM SALE O F LAND/PLOTS WAS LONG TERM CAPITAL GAIN, THEN THERE W AS NO POINT TO GRANT EXEMPTION/DEDUCTION U/S 54F OF THE ACT TO THE ASSESSEE, THEREFORE, THERE IS NO ADJUDICATION ON TH IS ISSUE BY THE AO AS WELL AS BY THE LD. CIT(A). 16. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, ASSESSMENT ORDER AND THE IMPUGNED FIRST APPELLATE O RDER, IT IS CLEARLY DISCERNABLE THAT THE AUTHORITIES BELOW, AFT ER TREATING THE INCOME AS BUSINESS INCOME OF THE ASSESSEE, PREC EDED TO FRAME ASSESSMENT AND THE ISSUE OF EXEMPTION/DEDUCTI ON U/S 54F OF THE ACT WAS NOT PROPERLY ADJUDICATED BY THEM . SINCE BY THE EARLIER PART OF THIS ORDER, WE HAVE ALLOWED GRO UND NO.1 OF ASSESSEE AND WE HAVE DIRECTED THE AO TO TREAT THE I NCOME FROM SALE OF PLOTS/LAND AS LONG TERM CAPITAL GAIN. THERE FORE, CONSEQUENTLY, THE ASSESSEE IS ENTITLED TO CLAIM EXE MPTION U/S 54F OF THE ACT, ON THE EXPENDITURE INCURRED FOR CON STRUCTION OF RESIDENTIAL HOUSE. HOWEVER, SINCE THERE IS NO ADJUD ICATION EITHER BY THE AO OR BY THE LD. CIT(A) ON THIS ISSUE REQUIRES PROPER EXAMINATION AND VERIFICATION AT THE END OF T HE AO. THEREFORE, THE ISSUE IS RESTORED TO THE FILE OF THE AO WITH A DIRECTION THAT THE CLAIM OF ASSESSEE FOR EXEMPTION U/S 54F OF SHRI CHANDRABHAN SINGH CHOUDHARY 12 THE ACT, SHALL BE ADJUDICATED AFRESH AFTER PROPER V ERIFICATION AND EXAMINATION OF CLAIM OF THE ASSESSEE AND AFTER ALLOWING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDI NGLY, GROUND NO.2 OF THE ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSES WITH THE DIRECTION TO THE AO AS MENTIONED HEREINABO VE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED ON GROUND NO.1 AND PARTLY ALLOWED FOR STATISTICAL P URPOSES ON GROUND NO.2. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31.03.201 7 SD/- (O.P. MEENA) SD/- ( CHANDRA MOHAN GARG ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER INDORE; DATED :31/ 03/2017 PATEL, P.S/. . .