Vikash Solvextracts Pvt. Ltd., Kolkata V. DCIT, Circle-5, Kolkata, Kolkata

ITA 1925/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0664 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 15-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Capital asset; Business income; Revision of order; Fair market value
• Section: 45(2); 143(3); 142(1); 263; 12; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHC, KOLKATA [BEFORE SHRI ABY. T. VARKEY, JM AND DR.A.L. SAINI, AM] I.T.A. NOS. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKAS SOLVEXTRACTS PVT. LTD.........................................................ASSESSEE 135, BIPLABI RASHBEHARI BASU ROAD, KOLKATA 700 001. [PAN: AABCV 0840 P] D.C.I.T.CIR-5, KOLKATA.........................RESPONDENT AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRISANJAY BHATTACHARYA,AR, APPEARING ON BEHALF OF THE ASSESSEE. SHRI GOULENHANGSING, CIT DR & SHRI DAVID Z. CHAWNGHTHU, ADDL. CIT DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING :OCTOBER 05, 2017 DATE OF PRONOUNCING THE ORDER :DECEMBER 20, 2017 ORDER PER DR. A.L. SAINI, AM THE CAPTIONED FIVE APPEALS FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEARS 2006-07, 2007-08, 2008-09, 2009-10 AND 2010-11, ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)VI, WHICH IN TURN ARISE OUT OF ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER U/S 143(3)/254 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2.SINCE THESE FIVE APPEALS RELATE TO THE SAME ASSESSEE, DIFFERENT ASSESSMENT YEAR, IDENTICAL ISSUES ARE INVOLVED,THEREFORE, THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING 2 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. THE ASSESSEES APPEAL IN ITA NO. 1925/KOL/2010, ASSESSMENT YEAR 2006-07, IS TAKEN AS THE LEAD CASE. 3.THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE(IN LEAD CASE IN ITA NO. 1925/KOL/2010),READS AS UNDER: 1.THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS WRONG IN HOLDING THAT THE ASSESSEES TRANSACTIONS IN RELATION TO SALE OF UNDIVIDED SHARES OF LAND TO VARIOUS FLAT BUYERS THROUGH THE DEVELOPER, HAD ALLEGEDLY CONSTITUTED BUSINESS AND PROFIT FROM SUCH TRANSACTIONS WAS ALLEGEDLY TAXABLE UNDER THE HEAD OF PROFITS AND GAINS FROM BUSINESS OR PROFESSION. 2.THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO. 1 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS WRONG IN REJECTING THE ASSESSEES CONTENTION THAT THERE HAD NOT BEEN ANY JOINT VENTURE BETWEEN THE ASSESSEE AND THE DEVELOPER. 3.THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO. 1 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THE FACT THAT THERE HAD NOT OCCURRED ANY CONVERSION BY THE ASSESSEE OF THE UNDIVIDED SHARES OF LAND INTO STOCK WHICH COULD ALLEGEDLY ATTRACT THE PROVISIONS OF SECTION 45(2). 4.THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) WAS WRONG IN HOLDING THAT THE PROVISIONS OF SECTION 28(IV) WOULD ALLEGEDLY BE APPLICABLE IN RESPECT OF THE FLATS RETAINED BY THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS. 5.THAT WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN GROUND NOS. 1 TO 4 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS WRONG IN EJECTING THE OBJECTIONS MADE BY THE ASSESSEE TOWARDS ENHANCEMENT OF INCOME ARISING FROM THE SALE OF UNDIVIDED SHARES OF LAND BY THE ASSESSEE TOVARIOUS FLAT BUYERS THROUGH THE DEVELOPER. 6.THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR WITHDRAW ANYGROUND OR GROUNDS OF APPEAL BEFORE OR AT THE HEARING OF THE APPEAL. 3 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. 4. ALTHOUGH, IN THIS APPEAL THE ASSESSEE HAS RAISED A MULTIPLE GROUNDS OF APPEALS, BUT AT THE TIME OF HEARING, THE SOLITARY GRIEVANCE OF THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE THAT THERE IS NO CONVERSION OF LAND INTO STOCK IN TRADE BY APPLYING THE PROVISIONS OF SECTION 45(2) OF THE INCOME TAX ACT. GROUND NO.4 RAISED BY THE ASSESSEE RELATING TO PROVISIONS OF SECTION 28(IV) OF THE I.T.ACT AND GROUND NO.5 RELATES TO ENHANCEMENT BY THE CIT(A), ALL THESE GROUNDS ARE INTER-RELATED, THEREFORE WE TAKE THEM TOGETHER. 5.THE BRIEF FACTS QUA THE ISSUE ARE THAT AN ASSESSMENT U/S 143(3) HAD BEEN MADE ON 27.11.2008 AT A TOTAL INCOME OF RS. 1,23,75,408/- WHICH HAD COMPRISED INCOME FROM HOUSE PROPERTY OF RS. 13,52,923/-, BUSINESS LOSS OF RS. 4,04,195/- AND LONG TERM CAPITAL GAINS OF RS. 1,14,26,980/- (AFTER DEDUCTION OF RS. 4,50,00,000 FOR CAPITAL GAINS BONDS PURCHASED). SUBSEQUENTLY, THE CIT, KOLKATA-II, VIDE HER ORDER U/S 263 OF THE ACT, DATED 14.12.2010, SET ASIDE THE SAID ASSESSMENT. THE CIT IN HER ORDER U/S 263, OBSERVED THAT THE ASSESSING OFFICER HAD FAILED TO PERFORM HIS DUTY SO FAR AS THE VERIFICATION OF THE CLAIM OF THE ASSESSEE TOWARDS CAPITAL GAINS WHICH RESULTED IN ALLEGED UNDER-ASSESSMENT OF INCOME AND CONSEQUENTIAL UNDER-CHARGE OF TAX. THE CIT WENT ON TO HOLD THAT THE ABOVE-MENTIONED FACTORS HAD RENDERED THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ON THE BASIS OF ABOVE OBSERVATIONS, THE CIT DIRECTED THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT DE NOVO. THE ASSESSEEFILED AN APPEAL, AGAINST THE ORDER U/S 263 PASSED BY THE CIT, BEFORE THE INCOME-TAX APPELLATE TRIBUNAL, THE ITAT VIDE ITS ORDER DATED 09.05.2011, DISMISSED THE ASSESSEES APPEAL AND HELD THAT THE ASSESSING OFFICER WHILE FRAMING THE FRESH ASSESSMENT ORDER SHOULD CONSIDER THE DOCUMENTS AS WOULD BE 4 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. PRODUCED BY THE ASSESSEE AND ALSO WOULD ACCORD FULL OPPORTUNITY OF HEARING TO THE ASSESSEE WITHOUT BEING INFLUENCED BY THE OBSERVATIONS OF THE CIT. THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTIONS 143(2) AND 142(1) AND ASKED FOR VARIOUS DETAILS AND EXPLANATIONS IN REGARD TO THE FRESH ASSESSMENT TO BE MADE. THE ASSESSEE DULY SUBMITTED ALL THE RELEVANT DOCUMENTS AS ASKED BY THE ASSESSING OFFICER AND ALSO THOSE WHICH WERE CONSIDERED TO BE NECESSARY FOR THE PURPOSES OF FRESH ASSESSMENT BEFORE THE ASSESSING OFFICER.THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. NAVIN HOUSING & PROPERTIES LTD. FOR TRANSFERRING ITS OWN LAND TO THE SAID COMPANY FOR DEVELOPMENT BY THE SAID COMPANY INTO A RESIDENTIAL COMPLEX. IT WAS SPECIFICALLY MENTIONED IN THE RELEVANT AGREEMENT THAT THE ASSESSEE WOULD BE PAID THE SALE PRICE OF THE LAND BY WAY OF THE SALE PROCEEDS OF THE FLATS THAT THE SAID COMPANY WOULD RECEIVE IN RELATION TO THE 50% OF THE BUILT UP AREA. THIS ARRANGEMENT FOR PAYMENT OF SALE PRICE FOR LAND WAS MADE FOR ENSURING DUE PAYMENTS TO BE MADE BY THE ABOVE-MENTIONED COMPANY FOR THE SALE PRICE OF THE LAND TRANSFERRED BY THE ASSESSEE. EVERY ACTION IN REGARD TO THE SANCTIONING OF NECESSARY PLANS FOR CONSTRUCTION AS WELL AS THE ACTUAL CONSTRUCTION HAD BEEN THE RESPONSIBILITY OF THE ABOVE-MENTIONED COMPANY AND THE ASSESSEE DID NOT HAVE ANY RESPONSIBILITY IN THESE REGARDS. THE ABOVE-MENTIONED COMPANY STARTED CONSTRUCTING THE FLATS AND AFTER COMPLETION OF THE CONSTRUCTION, COMMENCED SELLING THOSE FLATS TO DIFFERENT BUYERS SELECTED BY THE SAID COMPANY. THE PAYMENTS TO THE ASSESSEE TOWARDS THE SALE PRICE OF THE TRANSFERRED LAND WERE BEING PAID BY WAY OF SALE PROCEEDS OF EVERY ALTERNATE FLATS THAT WERE SOLD BY THE ABOVE-MENTIONED COMPANY. THE ASSESSEE DID NOT HAVE ANYTHING TO SAY AS REGARDS THE SELECTION OF BUYERS OR FLATS OR THE PRICES TO BE PAID BY THE BUYERS FOR THE FLATS, AND ALL THESE ISSUES WERE TO BE DECIDED BY THE ABOVE-MENTIONED COMPANY ABSOLUTELY IN ITS OWN DISCRETION. 5 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. THE ASSESSING OFFICER STATED IN HIS ORDER THAT THE ASSESSEE HAD GOT SELLING/OWNERSHIP RIGHT ON THE 50% OF THE BUILT UP AREA AND AS PER THE ASSESSEE THE SAID STATEMENT OF THE ASSESSING OFFICER WAS NOT CORRECT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT HE NEVER GOT SELLING/OWNERSHIP RIGHT, BUT WAS BEING PAID THE SALE PRICE OF THE LAND ON THE BASIS OF THE ALTERNATE SALES AFFECTED BY THE ABOVE COMPANY AS PER THE AGREEMENT. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD CONVERTED THE LAND INTO STOCK-IN-TRADE. ON THE BASIS OF THE ABOVE OBSERVATION THE ASSESSING OFFICER HELD THAT IN THE ASSESSEES CASE, THE PROVISIONS OF SECTION 45(2) OF THE INCOME-TAX ACT, 1961 WOULD BE APPLICABLE AND INCOMES WOULD BE ASSESSABLE BOTH AS CAPITAL GAINS AND BUSINESS INCOME. THE ASSESSING OFFICER, THEREFORE,HELD THAT SECTION 45(2) WOULD BE APPLICABLE IN THE ASSESSEES CASE, AND HE COMPUTED THE CAPITAL GAINS AS WELL AS THE BUSINESS INCOME OF THE ASSESSEE AS PER SECTION 45(2) BY ADOPTING A FAIR MARKET VALUE OF THE LAND AS PER REPORT FROM THE DVO. THE ASSESSING OFFICER COMPUTED THE LONG TERM CAPITAL GAINS AT RS. 4,31,47,708/- AND ALSO COMPUTED THE BUSINESS INCOME ARISING FROM SALE OF LAND AT RS. 62,05,051/-. 6.AGGRIEVEDBY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), WHO HAS CONFIRMED THE ORDER PASSED BY ASSESSING OFFICER AND HELD THAT THE PROVISIONS OF SECTION 45(2) OF THE ACT,FOR COMPUTING CAPITAL GAIN AND BUSINESS INCOME OF THE ASSESSEE WOULD BE APPLICABLE, THAT IS, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICERFOR COMPUTING CAPITAL GAIN AND BUSINESS INCOME OF THE ASSESSEE BY APPLYING THE PROVISIONS OF SECTION 45(2) OF THE ACT. IN ADDITION TO THIS HE ENHANCED THE ASSESSMENT BY OBSERVING THE FOLLOWINGS: HOWEVER, I FIND THAT THE ASSESSING OFFICER HAS NOT PROPERLY APPLIED PROVISION OF SECTION 45(2) OF THE ACT FOR COMPUTING 6 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. CAPITAL GAIN AND BUSINESS INCOME OF THE ASSESSEE. AS PER THE PROVISION OF SECTION 45(2), CAPITAL GAIN ON CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE SHALL BE CHARGEABLE TO INCOME TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM. THE ASSESSING OFFICER HAS, IN HIS ORDER, CHARGED THE CAPITAL GAIN ON SALE OF THE ENTIRE LAND DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE HAS NOT SOLD THE ENTIRE PIECE OF LAND AT ONE GO. AS STATED EARLIER, IT HAD GOT THE LAND DEVELOPED INTO TWO RESIDENTIAL PROJECTS CONSISTING OF A NUMBER OF FLATS WHICH WERE SOLD OVER A PERIOD OF SEVERAL YEARS. WHAT IS SOLD TO THE ULTIMATE CUSTOMER IS THE PROPORTIONATE LAND I.E. RESPECTIVE UNDIVIDED SHARE IN THE LAND. IT IS NOT THE CASE HERE, AS IF THE ASSESSEE HAD SOLD THE ENTIRE LAND TO THE DEVELOPER WHO THEN SOLD THE FLAT TO THE ULTIMATE CUSTOMER. RATHER, IN RESPECT OF THE FLATS ALLOCATED TO THE ASSESSEE, SALE DEED IS PREPARED WITH THE ASSESSEE AS SELLER AND THE FLATS CUSTOMER AS PURCHASER. IN FACT, THE LAND IS BEING SOLD NOT AT A TIME BUT ITS UNDIVIDED SHARES ARE BEING SOLD AS AND WHEN THE RESPECTIVE FLATS ARE BEING SOLD. THE PROVISION OF SECTION 45(2) STIPULATES THAT CAPITAL GAIN ON CONVERSION OF THE LAND INTO STOCK IN TRADE SHOULD ALSO BE CHARGED IN THE YEAR IN WHICH CORRESPONDING SALE TAKES PLACE. THEREFORE, CAPITAL GAIN CHARGEABLE TO TAX IN A YEAR SHALL BE THAT PROPORTION OF TOTAL CAPITAL GAIN ON CONVERSION OF TOTAL LAND INTO STOCK IN TRADE, WHICH IS THE PROPORTION OF TOTAL UNDIVIDED SHARE IN LAND OF THE FLATS SOLD DURING THE YEAR AS RATIO OF TOTAL LAND. THE SALE CONSIDERATION RECEIVED DURING THE YEAR OVER AND ABOVE THE PROPORTIONATE FAIR MARKET VALUE OF SUCH UNDIVIDED SHARE IN LAND WOULD BE CHARGEABLE AS BUSINESS INCOME. IT MAY ALSO BE MENTIONED THAT THE ASSESSEE HAS NOT SOLD ALL THE FLATS CONSTRUCTED BY THE DEVELOPER. IT IS INFORMED, THAT OUT OF THE FLATS ALLOTTED TO THE ASSESSEE IN DAYTON HEIGHTS PROJECT, 33 FLATS WERE RETAINED FOR EARNING RENTAL INCOME. THEASSESSEE HAS STATED THAT IT HAS OFFERED COST OF CONSTRUCTION OF THESE FLATS AS CAPITAL GAIN IN THE A.Y. 2011-12. IT HAS BEEN ARGUED BY THE ASSESSEE THAT IF PROVISIONS OF SECTION 45(2) ARE APPLIED NO AMOUNT IN RESPECT OF THESE FLATS CAN BE BROUGHT TO TAX AS NO SALE HAD TAKEN PLACE. IN THIS REGARD, IT IS TO BE FIRSTLY MENTIONED, THAT THIS POINT DOES NOT RELATE TO THE YEAR UNDER THE PRESENT APPEAL. HOWEVER, SINCE THE CONTENTION HAS BEEN MADE BY THE ASSESSEE TO SUPPORT ITS OVER-ALL ACCOUNTING TREATMENT, IT IS TO BE NOTED THAT THE DEVELOPMENT OF THE ENTIRE LAND WAS CARRIED OUT BY THE DEVELOPER IN PURSUANCE OF THE AGREEMENTS SIGNED WITH THE ASSESSEE. IT HAS ALREADY BEEN DISCUSSED EARLIER, THAT THE ENTIRE 7 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. ARRANGEMENT WAS IN NATURE OF A BUSINESS VENTURE ON PART OF THE ASSESSEE. IT IS TRUE THAT THE SOME OF THE FLATS CONSTRUCTED AS PART OF ONE OF THE PROJECTS WERE NOT SOLD BUT RETAINED BY THE ASSESSEE FOR PURPOSE OF EARNING RENTAL INCOME. TO THAT EXTENT, CAPITAL GAIN CANNOT BE CHARGED IN RESPECT OF THE RETAINED FLAT AS PER PROVISION OF SECTION 45(2) DUE TO THE FLATS REMAINING UNSOLD. HOWEVER, THE ASSESSEE DERIVED A TANGIBLE BENEFIT IN FORM OF DEVELOPMENT OF THE LAND INTO CONSTRUCTED FLATS WITHOUT INCURRING ANY EXPENDITURE ON ITS PART. THUS, THE ASSESSEE DERIVED A BENEFIT AMOUNTING TO COST OF CONSTRUCTION BORNE BY THE DEVELOPER IN RESPECT OF THE FLATS RETAINED BY THE ASSESSEE. THE BENEFIT WAS IN FORM OF IMPROVEMENT IN VALUE OF THE ASSESSEES PROPERTY. ALSO, THIS BENEFIT OCCURRED BECAUSE OF THE BUSINESS VENTURE CARRIED ON BY THE ASSESSEE FOR WHICH THE AGREEMENT OF DEVELOPMENT OF LAND HAD BEEN ENTERED INTO WITH THE DEVELOPER. CLAUSE (IV) OF SECTION 28 PROVIDES, THAT THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTED INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS OR GAINS OF BUSINESS OR PROFESSION. SINCE THE BENEFIT AMOUNTING TO COST OF CONSTRUCTION OF RETAINED FLATS AROSE TO THE ASSESSEE FORM ITS BUSINESS VENTURE THE SAME SHALL BE CHARGEABLE AS BUSINESS INCOME IN THE RESPECTIVE YEAR(S) IN WHICH THE ASSESSEE DECIDED TO RETAIN THE FLATS FOR OWN USE/GIVING ON RENT AND THUS RE-CONVERTED THE SAME FROM STOCK IN TRADE TO ASSET. THIS SHALL BE OVER AND ABOVE THE CAPITAL GAIN AND BUSINESS INCOME DISCUSSED IN THE PRECEDING PARAGRAPH. ACCORDING TO THE WORKING GIVEN BY THE ASSESSEE LONG TERM CAPITAL GAIN FOR THE YEAR AND BUSINESS INCOME AS PER THE AFORESAID METHODOLOGY WOULD COME TO RS. 3,71,61,417/- AND RS.1,92,65,263/-RESPECTIVELY WHICH AGGREGATE TO RS. 5,64,26,680/- WHICH IS HIGHER THAN GROSS TOTAL INCOME OF RS. 4,92,52,759/- (LTCG OF RS. 4,31,47,708/- +BUSINESS INCOME OF RS. 62,05,051/-) AS PER THE ASSESSMENT ORDER. IN THE LIGHT OF THE DISCUSSION MADE IN THE SAID PARAS, THE OBJECTIONS MADE BY THE ASSESSEE TO THE PROPOSED ENHANCEMENT ARE REJECTED. AS STATED EARLIER, AS PER THE WORKING GIVEN BY THE ASSESSEE, LONG TERM CAPITAL GAIN FOR THE YEAR AND BUSINESS INCOME AS PER THE AFORESAID METHODOLOGY WOULD COME TO RS. 3,71,61,417/- AND RS. 1,92,65,263/- RESPECTIVELY. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE WORKING WITH REFERENCE TO THE AREA AND SALE PRICE OF THE FLATS SOLD AND PROPORTIONATE COST OF LAND ETC. IN LINE WITH THE DISCUSSION IN THE PRECEDING 8 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. PARAGRAPHS. THE MISTAKE OF RS. 70,73,921/- (FOR THE ENTIRE LAND) MENTIONED BY THE ASSESSEE IN HIS REPLY TO THE SHOW CAUSE LETTER FOR ENHANCEMENT SHALL ALSO GET CORRECTED IN THE PROCESS OF VERIFICATION. CAPITAL GAIN AND BUSINESS INCOME IS TO BE ASSESSED ACCORDINGLY, SUBJECT TO SUCH VERIFICATION. 7.THEREFORE, THE LD CIT(A) HELD THAT THE LAND IS BEING SOLD NOT AT A TIME BUT ITS UNDIVIDED SHARES ARE BEING SOLD AS AND WHEN THE RESPECTIVE FLATS ARE BEING SOLD. THE PROVISION OF SECTION 45(2) STIPULATES THAT CAPITAL GAIN ON CONVERSION OF THE LAND INTO STOCK IN TRADE SHOULD ALSO BE CHARGED IN THE YEAR IN WHICH CORRESPONDING SALE TAKES PLACE. THEREFORE, CAPITAL GAIN CHARGEABLE TO TAX IN A YEAR SHALL BE THAT PROPORTION OF TOTAL CAPITAL GAIN ON CONVERSION OF TOTAL LAND INTO STOCK IN TRADE, WHICH IS THE PROPORTION OF TOTAL UNDIVIDED SHARE IN LAND OF THE FLATS SOLD DURING THE YEAR AS RATIO OF TOTAL LAND. THE SALE CONSIDERATION RECEIVED DURING THE YEAR OVER AND ABOVE THE PROPORTIONATE FAIR MARKET VALUE OF SUCH UNDIVIDED SHARE IN LAND WOULD BE CHARGEABLE AS BUSINESS INCOME. THIS WAY, THE LD CIT(A) NOT ONLY CONFIRM THE ORDER PASSED BY THE AO BUT ENHANCE THE ASSESSMENT ALSO. 8. NOT BEING SATISFIED WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH A DEVELOPER FOR DEVELOPMENT OF ITS LAND INTO A RESIDENTIAL COMPLEX. ALL WORKS INCLUDING CONSTRUCTION WERE TO BE CARRIED OUT BY THE DEVELOPER. IN ACCORDANCE WITH THE AGREEMENT, THE DEVELOPER WAS ALLOWED TO ENTER INTO THE ASSESSEES LAND AND COMMENCE CONSTRUCTION OF FLATS. THEREAFTER REGISTRATION OF CONVEYANCE DEED IN RESPECT OF THE UNDIVIDED SHARE OF LAND ALLOCABLE TO EACH OF THE FLATS, WAS MADE. AS PER THE AGREEMENT THE ASSESSEE WAS TO BE PAID THE SALE PRICE OF THE UNDIVIDED SHARE OF THE LAND COMPRISED IN THE SALE PRICE OF EACH OF 9 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. THE FLATS BY WAY OF SALE PROCEEDS OF THE FLATS THAT THE DEVELOPER WOULD RECEIVE IN RELATION TO 50% OF THE BUILT UP AREA. THE ASSESSEE DID NOT HAVE ANYTHING TO SAY AS REGARDS THE SELECTION OF THE BUYERS OR FLATS OR THE PRICES TO BE PAID BY THE BUYERS OF THE FLATS AND ALL THESE ISSUES WERE TO BE DECIDED BY THE DEVELOPER IN ITS OWN DISCRETION. DURING THE A.Y. 2006-07, THE ASSESSEE ON THE BASIS OF THE EXECUTION OF THE CONVEYANCE DEED IN RELATION TO THE UNDIVIDED SHARES OF LAND, RECEIVED RS.5,96,56,580/-. THE ASSESSEE ESTIMATED THE COST AT RS. 1,00,000 OF THE PORTIONS OF THE LAND ALLOCABLE TO FLATS (RELATING TO BOTH THE ASSESSEES SHARE AS WELL AS THE DEVELOPERS SHARE) WHICH WERE TRANSFERRED DURING THE YEAR. IN ACCORDANCE WITH THE AGREEMENT IN RESPECT OF THE SALE OF EACH FLAT ON THE ASSESSEES ACCOUNT, THE ASSESSEE HAD TO PAY TO THE DEVELOPER RS. 100/- PER SQ. FT. OF THE BUILT UPAREA TOWARDS COST OF MARKETING AND RELATED EXPENSES. IN ITS RETURN OF INCOME THE ASSESSEE REDUCED THE ESTIMATED VALUE OF THE LAND OF RS.1,00,000/-, BROKERAGE OF RS.2,70,000/- AND MARKETING EXPENSES PAID TO THE DEVELOPER OF RS. 28,59,900/- FROM THE GROSS SALE PROCEEDS OF FLATS OF RS.5,96,56,580/- WHEREBY THE LONG TERM CAPITAL GAIN CAME TO RS.5,64,26,680/-. THE ASSESSEE INVESTED IN THE PRESCRIBED BONDS AND CLAIMED DEDUCTION OF RS. 4,50,00,000/- U/S 54EC OF THE ACT. 8.1 THE LD COUNSEL SUBMITTED THAT THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER PASSED U/S 143(3)/254, ASSUMED AN ALLEGED CONVERSION OF LAND TO STOCK IN TRADE BY THE ASSESSEE AND APPLIED SECTION 45(2) OF THE INCOME TAX ACT, 1961 AND HE ASSUMED SALE OF THE ENTIRE LAND. AS A RESULT,THE ASSESSING OFFICER COMPUTED THE LONG TERM CAPITAL GAIN AT RS. 4,31,47,708/- (BEFORE DEDUCTION U/S 54EC) AND HE ALSO DETERMINED THE ALLEGED BUSINESS INCOME AT RS. 62,05,051/-. HENCE AGAINST THE ASSESSEES OFFER OF LONG TERM CAPITAL GAIN OF RS. 5,64,26,680/-, THE ASSESSING OFFICER ARRIVED AT A FIGURE OF RS. 10 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. 4,93,52,759/- COMPRISING OF LONG TERM CAPITAL GAIN OF RS.4,31,47,708/- AND THE BUSINESS INCOME OF RS. 62,05,051/-. THE ASSESSEE OBJECTED AGAINST THE ASSESSING OFFICERS ACTION OF APPLICATION OF SECTION 45(2) BY STATING THE FOLLOWING REASONS: I. THE ASSESSEES LAND HAD BEEN A CAPITAL ASSET IN ITS HANDS AND IT WAS DISCLOSED IN THE ASSESSEES BALANCE SHEET AS A CAPITAL ASSET. THE COST OF UNDIVIDED SHARE OF LAND WHICH HAD BEEN TRANSFERRED DURING THE YEAR, WAS ESTIMATED AT RS.1,00,000 AND THE SAID SUM OF RS. 1,00,000 WAS REDUCED FROM THE BOOK VALUE OF LAND AS DISCLOSED IN THE BALANCE SHEET. THERE HAD NOT OCCURRED ANY CONVERSION OF LAND INTO ANY STOCK IN TRADE BY THE ASSESSEE AND THE REMAINING LAND WAS CONTINUED TO BE SHOWN AS A FIXED ASSET. THERE CANNOT BE ANY DEEMED CONVERSION FOR APPLYING SECTION 45(2). II. THE FACT THAT THE DEVELOPER WAS TO CHARGE A SPECIFIC AMOUNT PER SQ.FT. AS THE MARKETING CHARGES IN RESPECT OF THE FLATS ON THE ASSESSEES ACCOUNT WHICH WERE SOLD THROUGH THE DEVELOPER DIRECTLY, SHOWS THAT THERE HAD NOT BEEN ANY BUSINESS RELATIONSHIP IN THE FORM OF ANY ALLEGED JOINT VENTURE IN BETWEEN THE ASSESSEE AND THE DEVELOPER. III. THE FACT THAT THE DEVELOPER HAD PAID INTEREST FREE ADVANCES TO THE ASSESSEE AT THE TIME OF ENTERING INTO THE ASSESSEES LAND FOR THE COMMENCEMENT OF THE CONSTRUCTION ALSO SHOWS THAT THE ASSESSEE AND THE DEVELOPER WERE NOT CARRYING ON BUSINESS JOINTLY. IV. THE FACT THAT IN THE EVENT OF UNDUE DELAY BEYOND A SPECIFIC PERIOD OF THIRTY-SIX MONTHS IN COMPLETING THE CONSTRUCTION, THE DEVELOPER WAS REQUIRED TO PAY A PENALTY OF RS. 5/- PER SQ.FT. PER MONTH TO THE ASSESSEE ALSO SHOWS THAT THE ASSESSEE AND THE DEVELOPER WERE NOT CARRYING ON ANY BUSINESS JOINTLY. 11 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. BASED ON THE ABOVE REASONS, THE LD COUNSEL FOR THE ASSESSEE HAS REITERATED THAT THERE HAD NEVER OCCURRED ANY CONVERSION OF ASSESSEES LAND INTO STOCK IN TRADE AND THEREFORE THERE SHOULD NOT HAVE BEEN ANY APPLICATION OF SECTION 45(2). IN THIS REGARD, THELD COUNSEL FOR THE ASSESSEE,RELIED ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF AMRIT CORP. LTD. VS. ADDL. CIT (ORDER DATED 29.04.2014) [(2014) 226 TAXMAN 1 (ALL], WHEREIN IT WAS HELD THAT TO MAKE THE PROVISION APPLICATION, THERE MUST BE A POSITIVE ACT ON THE PART OF THE OWNER OF THE CAPITAL ASSET TO TRANSFER THE ASSET BY WAY OF CONVERSION INTO STOCK IN TRADE OR TREATING SUCH CAPITAL ASSET AS STOCK IN TRADE OF A BUSINESS. IN THE ABSENCE OF SUCH A POSITIVE ACT ON THE PART OF THE OWNER OF THE CAPITAL ASSET, THE PROVISION OF SECTION 45(2) DOES NOT APPLY. IN THE PRESENT CASE, IT IS NOT THE CASE OF THE REVENUE THAT THE OWNER HAS TRANSFERRED BY WAY OF CONVERSION OF THE CAPITAL ASSET, CONVERTED THE CAPITAL ASSET INTO STOCK IN TRADE OR HAS TREATED SUCH CAPITAL ASSET AS STOCK IN TRADE OF A BUSINESS. THERE IS NO SUCH MATERIAL IN THIS REGARD ON RECORD. THE ASSESSING AUTHORITY WHILE INITIATING THE PROCEEDING UNDER SECTION 148, READ WITH SECTION 147, HAS INFERRED SUCH CONVERSION OF CAPITAL ASSET INTO THE STOCK IN TRADE AND APPLIED THE PROVISION OF SECTION 45(2) WHICH IS WHOLLY ERRONEOUS. ON THE BASIS OF THE ABOVE FACTS AND THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THERE HAD NOT OCCURRED ANY CONVERSION OF THE ASSESSEES LAND INTO STOCK IN TRADE, THERE COULD NOT BE ANY APPLICATION OF SECTION 45(2) AND THEREFORE THE ASSESSEES COMPUTATION OF LONG TERM CAPITAL GAINS IN ITS RETURN SHOULD HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT WITHOUT THERE BEING A POSITIVE ACT ON THE PART OF THE ASSESSEE TO CONVERT ITS CAPITAL ASSET VIZ., THE LAND INTO STOCK IN TRADE, THE APPLICATION OF SECTION 45(2) BY THE ASSESSING OFFICER HAD BEEN UNJUSTIFIED ANDHENCE, THERE SHOULD NOT BE ANY APPLICATION OF SECTION 45(2) IN THE ASSESSEES CASE UNDER CONSIDERATION. 9.ON THE OTHER HAND, THE LD DR FOR THE REVENUE SUBMITTED BEFORE US THAT ASSESSEE HAD CONVERTED ITS CAPITAL ASSETS INTO STOCK IN TRADE AND HENCE, INCOME WAS TO BE TAXED IN ACCORDANCE WITH PROVISIONS OF SECTION 12 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. 45(2) OF THE ACT. THE LD CIT(A) ENHANCED THE ASSESSMENT BECAUSE THE ASSESSING OFFICER HAS, IN HIS ORDER, CHARGED THE CAPITAL GAIN ON SALE OF THE ENTIRE LAND DURING THE YEAR UNDER CONSIDERATION. BUT LD CIT(A) NOTED THAT THE ASSESSEE HAS NOT SOLD THE ENTIRE PIECE OF LAND AT ONE GO. THE ASSESSEE DERIVED A BENEFIT AMOUNTING TO COST OF CONSTRUCTION BORNE BY THE DEVELOPER IN RESPECT OF THE FLATS RETAINED BY THE ASSESSEE. THE BENEFIT WAS IN FORM OF IMPROVEMENT IN VALUE OF THE ASSESSEES PROPERTY. ALSO, THIS BENEFIT OCCURRED BECAUSE OF THE BUSINESS VENTURE CARRIED ON BY THE ASSESSEE FOR WHICH THE AGREEMENT OF DEVELOPMENT OF LAND HAD BEEN ENTERED INTO WITH THE DEVELOPER. CLAUSE (IV) OF SECTION 28 PROVIDES, THAT THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTED INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS OR GAINS OF BUSINESS OR PROFESSION. SINCE THE BENEFIT AMOUNTING TO COST OF CONSTRUCTION OF RETAINED FLATS AROSE TO THE ASSESSEE FORM ITS BUSINESS VENTURE THE SAME SHALL BE CHARGEABLE AS BUSINESS INCOME IN THE RESPECTIVE YEAR(S) IN WHICH THE ASSESSEE DECIDED TO RETAIN THE FLATS FOR OWN USE/GIVING ON RENT AND THUS RE-CONVERTED THE SAME FROM STOCK IN TRADE TO ASSET. THIS SHALL BE OVER AND ABOVE THE CAPITAL GAIN AND BUSINESS INCOME. THIS WAY, LD DR FOR THE REVENUE DEFENDED THE ORDER OF ENHANCEMENT MADE BY THE LD CIT(A) IN RESPECT OF RETAIN FLATS FOR OWN USE AND RE-CONVERTED THE SAME FROM STOCK IN TRADE TO ASSET. 10.HAVING HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT F OR APPLICATION OF SECTION 45(2) OF THE INCOME TAX ACT, IT IS NECESSARY THAT THE TRANSFER BY WAY OF CONVERSION SHOULD BE BY THE OWNER OF THE CAPITAL ASSET OR BY WAY OF THE TREATMENT OF THE CAPITAL ASSET BY HIM AS STOCK-IN-TRADE OF BUSINESS. THE S ECTION 45(2) PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN SUB- SECTION (1), THE PROFITS OR GAINS ARISING FROM THE TRANSFER BY WAY OF CONVERSION BY THE OWNER OF A CAPITAL ASSET INTO, OR ITS TREATMENT BY 13 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. HIM AS STOCK-IN-TRADE OF A BUSINESS CARRIED ON BY HIM SHALL BE CHARGEABLE TO INCOME TAX. IN THE ASSESSEE`S CASE UNDER CONSIDERATION, NEITHER THE ASSESSEE HAS CONVERTED THE LAND (CAPITAL ASSET) INTO THE STOCK-IN-TRADE NOR, AT ANY POINT OF TIME, TREATED THE CAPITAL ASSET AS STOCK-IN-TRADE. IT CANNOT BE INFERRED AS STOCK-IN- TRADE. THERE SHOULD BE A POSITIVE ACT ON THE PART OF THE OWNER OF THE ASSET. SINCE IN THE PRESENT CASE THE ASSESSEE (OWNER OF THE LAND) HAS NEITHER CONVERTED THE CAPITAL ASSET AS STOCK-IN-TRADE NOR TREATED SUCH CAPITAL ASSET AS STOCK-IN-TRADE, THE PROVISION OF SECTION 45(2) OF THE ACT, IS NOT APPLICABLE. THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS CONVERTED OR TREATED SUCH LAND AS STOCK-IN-TRADE. WE NOTE THAT IN THIS CASE, THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED BY ASSESSING OFFICER ON 27.11.2008 AT A TOTAL INCOME OF RS. 1,23,75,408/-, WHICH HAD COMPRISED INCOME FROM HOUSE PROPERTY OF RS. 13,52,923/-, BUSINESS INCOME OF RS. 4,04,195/- AND LONG TERM CAPITAL GAINS OF RS.1,14,26,980/- (AFTER DEDUCTION OF RS. 4,50,00,000/- FOR CAPITAL GAIN BONDS PURCHASE). WE NOTE THAT THE ASSESSEE WAS GETTING RENTAL INCOME FROM THE FLATS WHICH HE ACQUIRED FROM THE DEVELOPER AS PER THE DEVELOPMENT AGREEMENT. THE RENTAL INCOME SO RECEIVED, HAS BEEN OFFERED BY THE ASSESSEE FOR TAXATION PURPOSE. AS AND WHEN THE ASSESSEE SELLS THE FLATS,(WHICH HE ACQUIRED FROM THE DEVELOPER), HE USED TO COMPUTE THE CAPITAL GAIN TAX AND PAID THE CAPITAL GAIN TAX. WE ARE OF THE VIEW THAT IT IS THE PREROGATIVE OF THE ASSESSEE TO DECIDE WHETHER HIS LAND IS TO BE CONVERTED INTO STOCK IN TRADE OR NOT. THE REVENUE CANNOT PRESUME THAT THE ASSESSEE HAS CONVERTED THE LAND INTO STOCK IN TRADE WITHOUT ANY POSITIVE ACT OF THE ASSESSEE AND WITHOUT COGENT EVIDENCE IN RESPECT OF THE SAID CONVERSION. IN THE ASSESSEES CASE UNDER CONSIDERATION, WE HAVE NOT OBSERVED ANY POSITIVE ACT ON THE PART OF THE ASSESSEE TO TRANSFER THE LAND BY WAY OF CONVERSION INTO STOCK 14 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. IN TRADE. WE HAVE ALSO NOT SEEN THE ACTIVITY OF THE ASSESSEE TO TREAT SUCH LAND AS STOCK-IN-TRADE OF HIS BUSINESS. WE ALSO NOTE THAT IN THE ABSENCE OF SUCH A POSITIVE ACT ON THE PART OF THE ASSESSEE, (OWNER OF LAND), THE PROVISION OF SECTION 45(2) OF THE ACT DOES NOT APPLY. THEREFORE, IN THE ASSESSEE`S CASE UNDER CONSIDERATION, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS TRANSFERRED BY WAY OF CONVERSION OF THE LAND, CONVERTED THE LAND INTO STOCK IN TRADE OR HAS TREATED SUCH LAND AS STOCK IN TRADE OF HIS BUSINESS. THERE IS NO SUCH MATERIAL IN THIS REGARD ON RECORD THAT ASSESSEE HAS CONVERTED HIS LAND INTO STOCK IN TRADE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT DEMONSTRATED ANY ACTIVITY FROM HIS SIDE WHICH SHOWS THAT THE ASSESSEE HAS CONVERTED HIS LAND INTO STOCK IN TRADE. THE ASSESSEE IN THE CASE UNDER CONSIDERATION HAS NOT CONVERTED HIS LAND INTO STOCK IN TRADE, HE HAS GIVEN HIS LAND TO THE DEVELOPER TO CONSTRUCT THE FLATS, AND AS PER THE AGREEMENT OF DEVELOPMENT THE ASSESSEE GOT (50% BUILT UP AREA), FLATS, AND OUT OF THE FLATS, SO GOT, BY THE ASSESSEE FROM DEVELOPER, HE LET OUT AS RENTAL ACCOMMODATION AND WAS GETTING RENT INCOME. THE ASSESSSEE HAS BEEN OFFERING THE RENTAL INCOME FOR TAXATION. WE ALSO NOTE THAT SOME OF THEFLATS, WERE SOLD BY THE ASSESSEE IN SUBSEQUENT YEARS AND THE ASSESSEE OFFERED THE CAPITAL GAIN TAX THEREON. THEREFORE, RE- CONVERGENCE OF STOCK IN TRADE TO CAPITAL ASSETS AS HAS BEEN ALLEGED BY THE COMMISSIONER OF INCOME TAX DOES NOT SUSTAIN IN THE EYE OF LAW, HENCE NO ENHANCEMENT IS POSSIBLE. WE NOTE THAT THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS FROM RENTAL INCOME (LETTING OF FLATS), CAPITAL GAINS AND INCOME FROM OTHER SOURCES. IN ASSESSMENT YEAR 2011-12, THE ASSESSEE SOLD SOME FLATS AND OFFERED CAPITAL GAIN IN THE YEAR OF SALE. BASED ON THE ABOVE DISCUSSION IT CAN BE 15 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. SAFELY CONCLUDED THAT THE ASSESSEE HAS NOT CONVERTED THE LAND INTO STOCK IN TRADE AND THE DEPARTMENT HAS NOT ADDUCED ANY EVIDENCE TO PROVE THAT THE LAND HAS CONVERTED INTO STOCK IN TRADE AND THE LD. CIT(A) HAS NOT ADDUCED ANY EVIDENCE TO PROVE FOR RE-CONVERGENCE OFFLATS INTO STOCK IN TRADE FOR CAPITAL ASSETS, HENCE NO ENHANCEMENT IS POSSIBLE. THE ASSESSEE AS PER THE DEVELOPMENT AGREEMENT GOT SOME FLATS FROM THE DEVELOPER AND RENTED (LET OUT) THEM TO EARN THE RENTAL INCOME AND THE SAME RENTAL INCOME IS BEING OFFERED BY THE ASSESSEE FOR TAXATION. SINCE THE ASSESSEE OFFERED THE RENTAL INCOME FOR TAXATION, THEREFORE, THE ASSESSING OFFICER CANNOT BRING THE SAID LAND INTO THE AMBIT OF TAXATION BY APPLYING THE PROVISION OF SECTION 45(2) OF THE ACT. 11. IN THE RESULT, GROUND NOS. 1. 2 AND 3 RAISED BY THE ASSESSEE, ARE ALLOWED. 12.GROUND NO. 4 RAISED BY THE ASSESSEE RELATES TO APPLICABILITY OF THE PROVISIONS OF SECTION 28(IV) OF THE ACT, IN RESPECT OF THE FLATS RETAINED BY THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS. SINCE WE HAVE ALREADY ADJUDICATED THE SOLITARY GRIEVANCE OF THE ASSESSEE, STATING THAT PROVISIONS OF SECTION 45(2) OF THE ACT DOES NOT APPLY TO THE ASSESSEE, HENCE THIS GROUND BECOMES INFRUCTUOUS AND DOES NOT REQUIRE ADJUDICATION. 13.GROUND NO.5 RELATES TO ENHANCEMENT OF INCOME ARISING FROM THE SALE OF UNDIVIDED SHARES OF LAND BY THE ASSESSEE. THAT IS, LD CIT(A) DID THE ENHANCEMENT OF INCOME BY APPLYING THE PROVISIONS OF SECTION 45(2) OF THE ACT. SINCE WE HAVE ALREADY ADJUDICATED THE SOLITARY GRIEVANCE OF THE ASSESSEE, STATING THAT PROVISIONS OF SECTION 45(2) OF THE ACT DOES NOT APPLY TO THE ASSESSEE, HENCE THIS GROUND BECOMES INFRUCTUOUS AND DOES NOT REQUIRE ADJUDICATION. 16 I.T.A. NO. 1925 TO 1929/KOL/2014 ASSESSMENT YEARS: 2006-07 TO 2010-11 VIKASH SOLVEXTRACTSPVT. LTD. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE, IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2017. SD/- SD/- (ABY. T. VARKEY) (A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20/12/2017 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. VIKASH SOLVEXTRACTSPVT. LTD., 135, BIPLABIRASHBEHARIBASU ROAD, KOLKATA 01. 2. DCIT, CIR 5, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 69. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA