Maheshwari Mega Ventures Ltd, Hyderabad V. ACIT, Circle 16(2), Hyderabad

ITA 190/HYD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6419 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 12-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2012
• Court: TRIBUNAL
• Department Lawyers: G V HEMALATHA DEVI; M SIT
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition; Date of conversion; Fair market value
• Section: 69C; 143(3); 50C; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 190/HYD/2012 2008-09 M/S. MAHESHWARI MEGA VENTURES LTD., HYDERABAD [PAN: AADCM9780D] THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-16(2) HYDERABAD 305/HYD/2012 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-16(2) HYDERABAD M/S. MAHESHWARI MEGA VENTURES LTD., HYDERABAD [PAN: AADCM9780D] 1218/HYD/2013 M/S. MAHES H WARI MEGA VENTURES LTD., HYDERABAD [PAN: AADCM9780D] THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2) HYDERABAD 1602/HYD/2014 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-16(2) HYDERABAD M/S. MAHES H WARI MEGA VENTURES LTD., HYDERABAD [PAN: AADCM9780D] FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SMT. G.V. HEMALATHA DEVI, CIT DR & SHRI M. SITARAM, DR DATE OF HEARING : 12-04-2016 DATE OF PRONOUNCEMENT : 05-07-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : S THESE ARE BATCH OF APPEALS PERTAINING TO SAME ASSESS EE IN THE SAME ASSESSMENT YEAR IN DIFFERENT PROCEEDINGS. SI NCE ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 2 -: COMMON ISSUES ARE INVOLVED, THESE ARE HEARD TOGETHER A ND DECIDED BY THIS COMMON ORDER. ITA NO. 190/HYD/2012 & 305/HY D/2012 ARE CROSS APPEALS ON THE ORDER U/S. 143(3) OF THE AS SESSING OFFICER (AO) DT. 13-12-2010 ON WHICH LD. CIT(A) PARTLY ALLOW ED THE RELIEF. ITA NO. 1218/HYD/2013 IS AN APPEAL BY ASSESSEE AGAI NST THE ORDER OF LD. CIT U/S. 263 REVISING THE ASSESSMENT ORD ER DT. 31-12- 2010. ITA NO. 1602/HYD/2014 IS THE APPEAL FILED BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS)-V, HYDERABAD GIVING RELIEF TO ASSESSEE ON THE CONSEQUEN TIAL ORDER U/S. 263 OF THE ACT. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSINES S OF REAL ESTATE CONSTRUCTING FLATS ETC., FOR THE AY. 2008-09, ASS ESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,20 ,88,896/- ON 30-09-2008. IN THE RETURN, ASSESSEE ADMITTED CAPITA L GAINS ON THE CONVERSION OF PROPERTY FROM CAPITAL ASSET TO STOCK-I N-TRADE AS ON 01-01-2008 AND BUSINESS INCOME ON SUBSEQUENT SALE OF THE SAID PROPERTY ON THE BASIS OF SALE DOCUMENT WHICH HO WEVER, WAS SUBSEQUENTLY REGISTERED IN DECEMBER, 2009. AO WHILE COMPLETING THE ASSESSMENT U/S. 143(3) VIDE ORDER DT. 31-12-2010, RE- DETERMINED THE COST OF CONSTRUCTION IN RESPECT OF ELLAR EDDYGUDA PROJECT, CHIRAG ALI LANE PROJECT AND HIMAYATHNAGAR PR OJECTS. AFTER REFERRING THE PROPERTIES FOR VALUATION BY THE DVO , AO NOTICED THAT THE VALUATION SHOWN BY ASSESSEE WITH REFERENCE TO ELLAREDDYGUDA PROJECT AND CHIRAG ALI LANE PROJECTS AR E EXCESSIVE BY AN AMOUNT OF RS. 13,81,515/- AND RS. 11,46,046/- RESPECTIVELY. AO HAS REDUCED THE COST OF CONSTRUCTION O F THE PROJECT BY THE SAID AMOUNTS WHILE COMPUTING THE BUSINES S INCOME THEREBY MAKING AN ADDITION. WITH REFERENCE TO HIMAYA THNAGAR PROJECT, THE VALUE SHOWN BY THE ASSESSEE IS LESSER B Y AN AMOUNT OF ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 3 -: RS. 30,03,740/- AS COMPARED TO THE VALUE DETERMINED B Y THE VALUATION OFFICER. THEREFORE, THE AO INVOKED THE PROV ISIONS OF SECTION 69C TO BRING IT TO TAX THE UNEXPLAINED EXPENDI TURE ON THE SAID PROJECT. IN ADDITION TO RE-FIXING THE COST OF CO NSTRUCTION WHILE COMPUTING THE BUSINESS PROFITS, THE AO RE-WORKED OUT THE LONG TERM CAPITAL GAINS OFFERED BY ASSESSEE ON THE SALE OF 2,261 SQ. YDS., OF LAND AND 15,000 SQ. YDS., OF BUILT-UP AREA AT ELLAREDDYGUDA ON CONVERSION OF SAME INTO STOCK-IN-TRA DE. COMPANY ADOPTED THE SALE CONSIDERATION OF RS. 12,02,50 ,000/- AND AFTER REDUCING THE COST OF ACQUISITION OFFERED, CA PITAL GAINS AT RS. 3,11,57,643/-. THE SALE CONSIDERATION WAS ACCEP TED BUT COST OF ACQUISITION CLAIMED BY ASSESSEE WAS EXAMINED. AO ADOPTED RS. 550/- PER SQ. FT., AS MARKET VALUE FOR 427.98 SQ.FT., AS AGAINST ASSESSEES RATE ADOPTED AT 1100/- PER SQ.FT. HE ALSO ADOPTED SAME VALUE ON THE FURTHER AREA OF 4,000 SQ.FT., CLAIME D AT 2,000 PER SQ.FT., BY ASSESSEE THEREBY DETERMINING THE EXCE SS COST OF ACQUISITION WHICH HAS ULTIMATELY INCREASED THE CAPITAL GAINS TO RS. 3,93,06,085/-. THUS, AO CONCLUDED THE ASSESSMENT, RE - DETERMINED THE TAXABLE INCOME AT RS. 3,58,74,190/-. 2.1. ASSESSEE CONTESTED THE ABOVE ISSUES BEFORE TH E LD. CIT(A). VIDE HIS ORDER DT. 12-12-2011 LD. CIT(A) HAS DELETED DETERMINATION OF COST OF CONSTRUCTION UNDER THE HEAD BU SINESS INCOME STATING THAT THE DIFFERECE BETWEEN THE VALUATION O FFICERS DETERMINATION AND BOOK VALUES IS VERY MINOR I..E, A T A PERCENTAGE OF 0.97% IN THE CASE OF ELLAREDDYGUDA PROJECT AND 5% IN THE CASE OF CHIRAG ALI LANE PROJECT AND 2.7% IN THE CASE OF HI MAYATHNAGAR PROJECT. LD. CIT(A) ALSO NOTICED THAT THE CUMULATIVE D IFFERENCE ON ALL THE PROJECTS IN THE VALUATION BETWEEN ASSESSEES B OOK VALUES AND DEPARTMENTS VALUATION WAS ONLY 0.1% AND HELD THAT THE ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 4 -: DIFFERENCE IS NEGLIGIBLE BY ALL STANDARDS. THUS, CI T(A) DELETED THE ADDITIONS/DISALLOWANCES MADE BY THE AO UNDER HEAD BU SINESS INCOME. 3. COMING TO THE ISSUE OF RE-DETERMINATION OF LONG T ERM CAPITAL GAINS, LD. CIT(A) AFTER CONSIDERING THE DETAIL ED SUBMISSIONS OF ASSESSEE, HOWEVER, SUMMARILY DIRECTE D THE AO TO ADOPT THE VALUE OF RS. 625/- PER SQ. FT AS AGAINST 550 PER SQ. FT. THUS, BOTH THE PARTIES ARE AGGRIEVED AND PREFERRED THE RESPECTIVE APPEALS IN ITA NO. 190/HYD/2012 BY THE ASSESSEE AND ITA NO. 305/HYD/2012 BY THE REVENUE. ITA NO. 305/HYD/2012: 4. THERE ARE THREE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL WHICH ARE ON THE DELETION OF RS. 25,27,561/- VALUE OF HIMAYATHNAGAR PROJECT AND CHIRAG ALI LANE PROJECT AND ADDITION U/S. 69C OF RS. 30,03,740/- IN RESPECT OF HIMAYATHNA GAR PROJECT. 5. THE OTHER GROUND IS WITH REFERENCE TO DETERMINATION OF VALUE AT RS. 625 PER SQ. FT., AS AGAINST RS. 550/- PER SQ. FT., WHICH REVENUE CONTENDS THAT THE LD. CIT(A) DOES NOT HAVE ANY B ASIS FOR CALCULATIONS. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE O F THE OPINION THAT THERE IS NO MERIT IN REVENUES APPEAL. IN FACT WHILE COMPUTING THE BUSINESS INCOME, ASSESSEE HAS CLAIMED CERTAIN COST OF CONSTRUCTION AND MOST OF THE AMOUNTS WERE SPENT IN EARLIER YEARS. INSTEAD OF VERIFYING THE EXPENDITURE I NCURRED DURING THE YEAR, THE AO UNDERTOOK THE EXERCISE OF REFERRING T HE COST OF CONSTRUCTION TO VALUATION ITSELF WHICH INDICATED CERTAIN DIFFERENCES ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 5 -: IN VALUATION. AS RIGHTLY OPINED BY THE LD. CIT(A) AS AGAINST THE BOOKS VALUES SHOWN BY ASSESSEE, THE TOTAL VALUATION BY THE VALUATION OFFICER ON ALL THE THREE PROJECTS HAS RESULTED IN A DIFFERENCE OF 0.1% WHICH IS VERY NEGLIGIBLE CONSIDE RING THE RS. 27 CRORES VALUE SHOWN BY ASSESSEE. IN VIEW OF THIS, W E DO NOT SEE ANY MERIT IN REVENUES APPEAL ON GROUND NOS. 2 & 3. 7. GROUND NO. 4 IS REGARDING DETERMINATION OF COST OF ACQUISITION WHICH ISSUE IS AGITATED BY ASSESSEE IN THE IR APPEAL AND WILL BE CONSIDERED IN THAT APPEAL. ITA NO. 190/HYD/2012: 8. AS BRIEFLY STATED ABOVE, ASSESSEE IS QUESTIONING THE DETERMINATION OF COST OF ACQUISITION AT RS. 625/-BY LD . CIT(A) WHICH WAS INCREASED FROM RS. 550/- ADOPTED BY THE AO, WHEREAS ASSESSEE HAS ADOPTED COST OF ACQUISITION AT RS. 2,000/ - PER SQ. FT., AND RS. 1100/- PER SQ. FT., ON DIFFERENT PORTIONS ACQU IRED BY ASSESSEE AT A LATER POINT OF TIME IN ORDER TO FULFILL THE TOTAL SALE. THE BRIEF FACTS PERTAINING TO THIS ISSUE AS SUBMITTED BEFORE LD.CIT(A) ARE AS UNDER: DURING THE ACCOUNTING YEAR RELEVANT FOR THE ASST. YEAR 2008- 09 THE ASSESSEE ENTERED INTO A TRANSACTION WITH M/S . MMVL HOTELS LTD VIDE DOCUMENT DATED 31.03.2008. THE PROPERTY I NVOLVED IN THE TRANSACTION IS SITUATED AT NO. 8-3-322 & 323, AMEER PET, HYDERABAD. THE SAID LAND WAS UNDER LITIGATION AND THE MATTER WAS PENDING BEFORE THE HONBLE SUPREME COURT. THE LITIGATION WAS IN BETWEEN THE ORIGINAL OWNERS I.E. (1) MOHD. KAZAM ALI KHAN & HIS FAMILY MEMBERS (2) MRS.QAISARUNNISA BEGUM AND MIS. SHASUN FINANCE LTD. AT THAT POINT OF TIME THE ASSESSEE COM PANY ENTERED INTO THE PICTURE AND AGREED FOR CERTAIN TERMS AND C ONDITIONS WHICH WERE INCORPORATED IN THE DOCUMENTS NO.1604/2000 DAT ED 31.05.2000 AND DOC.NO.855/2001 DATED 31.01.2001 RES PECTIVELY. AS PER THE TERMS AND CONDITIONS THE ASSESSEE COMPAN Y HAS TO DEVELOP THE AVAILABLE LAND OF 2261 SQ. YARDS SITE I RRESPECTIVE OF THE FACT THAT THERE WERE CERTAIN OVERLAPPING CLAIMS IN RESPECT OF EXTENT ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 6 -: OF LAND. FURTHER, AS PER THE AGREEMENT THE ASSESSEE HAS TO PROVIDE 14000 SQ. FT OF THE CONSTRUCTED AREA TO MOHD. KAZAM ALI KHAN & HIS FAMILY MEMBERS AND 2100 SQ. FT OF THE CONSTRUCT ED AREA TO MRS.QAISARUNNISA BEGUM. AS ALREADY SUBMITTED THE MATTER WAS PENDING BEFORE HON'BLE SUPREME COURT IN BETWEEN THE ABOVE MENTIONED OWNERS OF THE LAND AND M/S.SHASAN FINANCE LTD. ORIGINALLY THERE WERE S OME OTHER CLAIMANTS KNOWN AS MR.MUSTAFA ALI KHAN & OTHERS IN RESPECT OF THE SAME PROPERTY. THEY ALREADY ENTERED INTO A DEVE LOPMENT AGREEMENT WITH M/S.SHASAN FINANCE LTD. AS PER THAT DOCUMENT MIS SHASAN FINANCE LTD SHOULD ALLOT 11000 SQ FT TO MR.MUSTAFA ALI KHAN & OTHERS IN EXCHANGE OF THEIR RIGHT IN THE ABO VE MENTIONED SITE. THEREFORE, THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT OF SALE CUM IRRECOVERABLE GPA (REGISTERED DOCUMENT) DATED 14.09.2008 WITH M/S.SHASAN FINANCE LTD ALSO. AS PER THE SAID DOCUMENT IT WAS AGREED THAT THE MATTER HAS TO BE SE TTLED OUTSIDE THE COURT AND AS PER THE TERMS AND CONDITIONS THE A SSESSEE COMPANY HAS TO PAY RS.6.5 CRORES TO M/S.SHASAN FINA NCE LTD TO GIVE UP AND SETTLE ALL THE MATTERS IRRESPECTIVE OF THE FACT THAT MR. MUSTAFA ALI KHAN & OTHERS HAVE A RIGHT IN THE SITE. THUS, THE LITIGATION AS FAR AS M/S.SHASAN FINANCE LTD IS CONC ERNED CAME TO A FINALITY. WITH REGARD TO THE CLAIM OF RIGHT IN THE PROPERTY BY MR.MUSTAFA ALI KHAN & OTHERS, THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH TWO OF SIX CLAIMANTS WHO AGREED F OR A SETTLEMENT BY SURRENDERING THEIR RESPECTIVE RIGHTS IN THE CONSTRUCTED AREA OF 1571 SQ FT WITH UNDIVIDED SHARE OFLAND VIDE DOCUMENTS NOS.3757/2009 DATED 02.12.2009 AND DOC.NO . 3839/2009 DATED 03.12.2009. THUS, AS CAN BE SEEN FROM THE ABOVE DETAILS THE ASS ESSEE SETTLED THE MATTERS WITH M/S.SHASAN FINANCE LTD AND ALSO TWO OF THE SIX CLAIMANTS OF MR. MUSTAFA ALI KHAN & OTHERS. AS MENTIONED ABOVE, DURING THE ACCOUNTING YEAR RELE VANT FOR THE ASST. YEAR 200809 THE ASSESSEE ENTERED INTO A T RANSACTION WITH M/S. MMVL HOTELS LTD VIDE DOCUMENT DATED 31.03.2008 THE PROPERTY INVOLVED IN THE TRANSACTION IS THE ABOVE M ENTIONED DEVELOPED LAND I.E. 2261 SQ YARDS WITH SUPER STRUCT URE THAT ARE IN THE PROCESS OF CONSTRUCTION. IT MAY BE MENTIONED TH AT THE ASSESSEE COMPANY SOLD IN THE EARLIER ACCOUNTING YEAR I.E 200 6-07 DEVELOPED LAND OF 3550 SQ. YARDS TO THE SAME VENDEE AND THE R ESULTANT CAPITAL GAIN WAS DECLARED FOR TAX PURPOSE FOR THE A SST. YEAR 2007- 08. THUS, THE PRESENT TRANSACTION IS IN RESPECT OF THE BALANCE OF DEVELOPED LAND OF2261 SQ. YARDS WITH CONSTRUCTED AR EA. AS PER THE SALE DOCUMENTS MENTIONED ABOVE THE ASSES SEE COMPANY HAS TO PROVIDE THE LAND AREA OF 5811 SQ. YA RDS WITH SUPER STRUCTURES. HOWEVER, AS SUBMITTED EARLIER THE CLAIMANTS OF ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 7 -: THE PROPERTY I.E. MR.KAZAM ALI KHAN & OTHERS WERE H AVING A TITLE FOR CONSTRUCTED AREA TO THE EXTENT OF 14000 SQ FT. FURTHER SMT QAISARUNNISA BEGUM HAVING TITLE FOR 2100 SFT OF THE CONSTRUCTED AREA. OUT OF THE SAME THE ASSESSEE COMPANY ALREADY BROUGHT BACK RIGHT IN THE CONSTRUCTED AREA OF 10000 SQ. FT VIDE DOCUMENT DATED 31.03.2004. THEY ALSO BOUGHT BACK 2100 SFT FROM MRS.QAISARUNNISA BEGUM VIDE DOCUMENT DATED 01.02.20 01. THUS, THE ASSESSEE COMPANY HAS TO BUY BACK THE REMAINING AREA OF 4000 SQ FT FOR WHICH MR.KHAZAM ALI KHAN & OTHERS HAVE A RIGHT. FURTHER, OUT OF THE CONSTRUCTED AREA OF 11000 SFT F OR WHICH MR.MUSTAFA ALI KHAN & OTHERS WERE HAVING A RIGHT, T HE ASSESSEE BOUGHT BACK 3142 SFT VIDE DOCUMENTS NOS.3757/2009 D ATED 02.12.2009 AND DOC.N03839/2009 DATED 03.12.2009. WITH THE ABOVE BACKGROUND THE ISSUE CAME UP FOR CONSIDERATION OF THE ASSESSING OFFICER DURING THE C OURSE OF SCRUTINY ASSESSMENT PROCEEDINGS WAS WHETHER THE ASSESSEE WAS CORRECT IN ADOPTING RS.2000 PER SFT FOR 4000 SFT CONSTRUCTED A REA AND RATE OF RS.1100 PER SFT TOWARDS THE SETTLEMENT WITH THE VEN DORS OF M/S.SASHAN FINANCE. THUS, THE ASSESSEE ADOPTED THES E RATES IN THE PROCESS OF BUYING BACK THE CONSTRUCTED AREAS FR OM THE RESPECTIVE TITLE HOLDERS WHICH THE ASSESSEE ULTIMAT ELY SOLD TO M/S.MMVL HOTELS LTD. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WITH T HE RATES ADOPTED AS MENTIONED ABOVE FOR THE PURPOSE OF COMPU TATION LONG TERM CAPITAL GAIN AND ULTIMATELY ADOPTED THE RATES AT RS.550 PER SFT FOR CONSTRUCTED AREA AND REWORKED OUT THE TAXAB LE LONG TERM CAPITAL GAIN. IN THE LIGHT OF ABOVE FACTS THE ISSUE NOW FOR ADJUD ICATION BEFORE THE HON'BLE CIT(A) IS WHETHER THE ASSESSING OFFICER WAS CORRECT IN ADOPTING THE RATE AT RS.550 PER SFT IN T HE PROCESS OF BUY BACK OF THE RELEVANT PROPERTIES INSTEAD OF RATES RS .2000 PER SFT AS WELL AS RS.1100 PER SFT ADOPTED BY THE ASSESSEE COM PANY. 9. LD. CIT(A) ADOPTED VALUE OF RS.625 PER SFT. AFTER CONSIDERING THE RIVAL CONSIDERATIONS, WE DO NOT SEE ANY REASON IN THE ACTION OF THE AO AND CIT(A) IN RESTRICTING THE AMOUNTS CLAIMED BY ASSESSEE. FIRST OF ALL, ASSESSEE HAS MADE AN AGREEMENT WITH THE PARTIES FOR ACQUISITION OF THE UNDIVIDED PORTION OF THE SHARE FRO M TWO DIFFERENT UNRELATED PARTIES AT A VALUE WHICH IS NOT DIS PUTED. SINCE THE SALE OCCURRED DURING THE YEAR, ASSESSEE HAS OFFER ED LONG TERM ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 8 -: CAPITAL GAIN AND BUSINESS PROFITS ON THE TOTAL PROJECT IN CLUDING THE PORTIONS WHICH ARE ACQUIRED TO FULFILL THE SALE AN D THE ASSESSEE HAS REDUCED THE VALUES CORRESPONDINGLY TO ARRIVE AT T HE MARKET VALUE ON THE DAY OF OFFERING THE GAINS. AS SEEN FROM THE AGREEMENT OF SALE AND THE AMOUNTS PAID BY ASSESSEE W HICH ARE NOT DISPUTED BY THE REVENUE FOR THE PURPOSE OF DETERMI NATION OF CAPITAL GAINS, WE ARE OF THE OPINION THAT THE RATES ADO PTED BY ASSESSEE ARE REASONABLE. MOREOVER, IN DETERMINING THE VALUE AT RS. 550/-, THE AO ADOPTED ONLY THE VALUE OF COST OF C ONSTRUCTION ON THE STRUCTURE, IGNORING THE CORRESPONDING LAND VALU E. THEREFORE, THE VERY PREMISE ON WHICH AO HAS RESTRICTED THE AMOUNT IS NOT CORRECT. AS SEEN FROM THE ORDER OF THE C IT(A) ALSO, HE HAS DETERMINED THE AMOUNT OF RS. 625/- WITHOUT ANY JUSTIFICATION WHICH THE REVENUE IS ALSO CONTENDING IN I TS APPEAL. AFTER CONSIDERING THE EVIDENCES PLACED ON RECORD AN D THE WORKING AS ADOPTED BY ASSESSEE, WE ARE OF THE OPINION THAT THE RATE 2,000/- AND 1100/- ADOPTED BY ASSESSEE IN ARRIVING A T THE COST OF ACQUISITION FOR THE PURPOSE OF CAPITAL GAINS IS REAS ONABLE AND ACCORDINGLY, THE GROUNDS RAISED BY ASSESSEE ARE ALLO WED. SINCE ASSESSEES GROUNDS ARE ALLOWED, REVENUES CONTENTION ON THE ORDER OF THE CIT(A) IN GROUND NO. 3 ABOVE IN THEIR APPEAL B ECOME INFRUCTUOUS AND ACCORDINGLY, THE SAME IS ALSO REJECTE D. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND R EVENUES APPEAL IS DISMISSED. ITA NO. 1218/HYD/2013: 11. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER O F CIT-IV, HYDERABAD U/S. 263 DT. 26-03-2013. ON NOTICING THAT AO HAS NOT CONSIDERED THE PROVISIONS OF SECTION 50C WHILE DETERM INING THE ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 9 -: CAPITAL GAIN, LD. CIT INVOKED THE PROVISIONS OF SECTIO N 263 AND ACCORDINGLY, ISSUED A SHOW CAUSE NOTICE TO ASSESSEE WHY THE STAMP VALUATION OF RS. 14,15,60,000/- SHOULD NOT BE C ONSIDERED AS COST OF SALE INSTEAD OF RS. 12,51,00,000/- ADMITTED BY ASSESSEE. ASSESSEE SUBMITTED THAT THE PROVISIONS OF SE CTION 50C CANNOT BE INVOKED. ON THE FACTS OF THE CASE, AS ASSESS EE HAS CONVERTED THE FIXED ASSET TO WORK-IN-PROGRESS ON 01-0 1-2008 AND ON THE DATE OF CONVERSION, THE FAIR MARKET VALUE AT R S. 50,000/- PER SQ. YD., AS CERTIFIED BY THE STAMP AUTHORITY WAS CO NSIDERED THE VALUE WAS TAKEN AT RS. 12,02,50,000/-. IT WAS FURTH ER SUBMITTED THAT ASSESSEE HAS SOLD THE PROPERTY AS BUSINES S TRANSACTION ON 31-03-2008 BUT THE DOCUMENT WAS REGISTERE D MUCH LATER IN DECEMBER, 2009 AND THE VALUATION OF RS. 14,15,60,000/- PERTAINING TO DATE OF ACTUAL REGISTRATION WAS SUBSEQUENT TO THE CLOSURE OF ASSESSMENT YEAR. LD. CIT HOWEVER, DID NOT ACCEPT AND DIRECTED THE AO TO EXAMINE AND ADOPT THE VALUE AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. 12. REITERATING THE FACTS STATED BEFORE THE CIT, IT WAS SU BMITTED THAT LD. CIT FAILED TO NOTICE THAT ASSESSEE HAS OFFERED C APITAL GAINS ON CONVERSION FROM FIXED ASSETS TO WORK-IN-PROGRESS A ND PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. IT WAS ALSO SUBMITTED THAT THE TRANSACTION OF SALE ON 31-03-2008 CANNO T BE CONSIDERED U/S. 50C. FURTHER, THE VALUATION ALSO DOES NOT PERTAIN TO YEAR UNDER CONSIDERATION BUT TO A SUBSEQUENT REGISTRATI ON OF THE PROPERTY. 13. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE O F THE VIEW THAT THERE IS NO JUSTIFICATION FOR THE CIT TO INVOKE THE POWERS U/S. 263. AS NOTICED IN THE APPEALS CONSIDERED EARLIER ON THE ORDERS ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 10 -: U/S. 143(3), AO WAS VERY MUCH AWARE THAT ASSESSEE HAS CONVERTED THE FIXED ASSET INTO STOCK-IN-TRADE AS ON 01-01-2008 AN D HE HAS COMPUTED THE LONG TERM CAPITAL GAIN ON THAT DAY BY MAKI NG CERTAIN ADJUSTMENTS TO THE COST CLAIMED BY ASSESSEE. NO T ONLY THAT, AO ALSO HAS BROUGHT TO TAX THE BUSINESS PROFITS OF SUBSEQUENT SALE AND IN DOING SO, HE HAS RESTRICTED THE COST OF THE BUILDING. EVEN THOUGH THOSE ISSUES WERE SUBJECT MATTER OF EARLIER APPEALS, IT IS NOTICED THAT AO IS VERY MUCH AWARE ABOU T THE CONVERSION OF FIXED ASSETS TO WORK-IN-PROGRESS ON 01- 01-2008 AND SUBSEQUENT SALE ON 31-03-2008, CONSEQUENTLY THE TRANSA CTION DOES NOT ATTRACT THE PROVISIONS OF SECTION 50C AS DIRECT ED BY LD.CIT. IT IS ALSO TO BE NOTED THAT ASSESSEE ADOPTED TH E VALUATION AS CERTIFIED BY THE AUTHORITIES IN TAKING THE SALE CONSI DERATION ON THE DATE OF CONVERSION WHICH WAS ACCEPTED BY THE AO. IN VIEW OF THIS, QUESTION OF INVOKING THE PROVISIONS OF SECTION 50 C AS ON 31- 03-2008 DOES NOT ARISE. MOREOVER, AS SEEN FROM THE REGISTERED DOCUMENT, THE VALUE OF RS. 14.51 CRORES PERTAIN TO THE D ATE OF REGISTRATION WHICH WAS IN THE YEAR 2009 BUT NOT ON 31-0 3-2008. ON THAT FACT ALSO, THE VALUATION OF RS. 14.51 CRORES CA NNOT BE ADOPTED AS ON 31-03-2008. SINCE THE ASSET SOLD ON 31- 03-2008 IS NO LONGER A FIXED ASSET AND BEING STOCK-IN-TRADE, THE L D. CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 50C. WE ARE O F THE OPINION THAT IT IS THE CIT WHO ERRED IN CONSIDERING THE FACTS AN D THEREFORE, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF THE C IT AS THE ORDER OF AO IS NOT ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE. IN VIEW OF THIS, ASSESSEES GROUNDS ARE AL LOWED. THIS APPEAL OF ASSESSEE IS ALLOWED. ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 11 -: ITA NO. 1602/HYD/2014: 14. THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R OF THE CIT(A)-V, DT. 11-06-2014 IN GRANTING RELIEF TO ASSESS EE ON THE CONSEQUENTIAL ORDER PASSED BY THE AO AS PER THE DIRECTI ONS OF THE LD. CIT. THIS APPEAL IS IN A WAY ACADEMIC IN NATUR E AS WE HAVE CANCELLED THE ORDER U/S. 263 IN ASSESSEES APPEAL IN ITA NO. 1218/HYD/2013. HOWEVER, IT IS NOTICED THAT LD. CIT(A) ADJUDICATED THE ISSUE ON MERITS WHEN AO HAS FOLLOWED TH E DIRECTIONS OF THE LD. CIT. WE ARE OF THE OPINION THAT CIT(A) SHOULD NOT HAVE EXERCISED HIS APPELLATE POWERS ON AN ISSUE WHICH WAS SUBJECT MATTER OF CONSIDERATION BY THE CIT U/S. 263. SINCE NO DISCRETION WAS ALLOWED TO AO, WE ARE OF THE OPINION TH AT CIT(A) SHOULD NOT HAVE INTERFERED WITH THE ORDER OF THE AO. BE THAT AS IT MAY, AS WE HAVE SET ASIDE THE ORDER OF LD. CIT U/S. 263, THE CONSEQUENTIAL PROCEEDINGS BECOME AB-INITIO VOID AND ACCORDINGLY REVENUES APPEAL BECOMES INFRUCTUOUS. THIS APPEAL O F REVENUE IS DISMISSED. 15. TO SUM-UP, ITA NO. 190/HYD/2012 & ITA NO. 1218/HYD/2013 ARE ALLOWED WHILE ITA NO. 305/HYD/20 12 & ITA NO. 1602/HYD/2014 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH JULY, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 05 TH JULY, 2016 TNMM ITA NOS. 190/HYD/12, 305/HYD/12 1218/HYD/13 & 1602/HYD/14 M/S. MAHESHWARI MEGA VENTURES LTD., :- 12 -: COPY TO : 1. M/S. MAHESHWARI MEGA VENTURES LTD., HYDERABAD. C/O . B. NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, JUBILEE HILLS, HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16 (2), HYDERABAD. 3. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD. 4. COMMISSIONER OF INCOME TAX(APPEALS)-V, HYDERABAD . 5. COMMISSIONER OF INCOME TAX-IV, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.