Sh. Sameer Arora, Amritsar. V. The Income Tax Officer, Amritsar.

ITA 216/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5676 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BEHL
• Keywords: Capital asset; Business income; Depreciation; Salary income; Cost of acquisition
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. I.T.A. NO.216(ASR)/2010. (ASSESSMENT YEAR: 2005-06) SHRI SAMEER ARORA, THE INCOME TAX OFFICER, 96, GREEN AVENUE, WARD 5(4), AMRITSAR. AMRITSAR. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI PADAM BEHL, C.A. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT-II, AMRITSAR PASSED UNDER SECTION 263 OF THE IN COME TAX ACT, 1961 (IN SHORT, THE ACT) FOR THE ASSESSMENT YEAR 2005-06. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. THAT THE CIT-II, AMRITSAR HAS GROSSLY ERRED IN SETTING ASIDE THE ORDER DATED 26-9-2007 PASSED BY THE INCOME TAX OFFICER, WARD 5(4), AMRITSAR U/S.143(3) OF THE INCOME TAX AC T, 1961. 2. THAT THE CIT-II, AMRITSAR HAS GROSSLY ERRED IN N OT APPRECIATING THAT THE ASSESSMENT WAS FRAMED BY THE A.O. AFTER GO ING THROUGH COMPLETE DETAILS OF THE TRANSACTIONS BY THE ASSESSE E. 3. THAT THE CIT-II, AMRITSAR HAS GROSSLY ERRED IN N OT APPRECIATING THE FULL FACTS AND IN HOLDING THAT THE ORDER PASSED BY THE A.O. TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF RE VENUE. 2 4. THAT THE CIT(-II, AMRITSAR HAS GROSSLY ERRED IN RELYING UPON CERTAIN JUDGMENTS, WHICH ARE TOTALLY DISTINGUISHABL E ON FACTS FROM ASSESSEES CASE. 5. THAT THE CIT-II, AMRITSAR HAS GROSSLY ERRED IN R EJECTING THE CASE LAWS RELIED UPON BY THE ASSESSEE TO SHOW THAT THERE WAS NO ERROR IN THE ORDER OF THE A.O. 3. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE ACTION OF THE CIT-II, AMRITSAR PASSED UNDER SECTION 263 O F THE ACT HOLDING THAT THE ASSESSMENT ORDER DATED 26-9-2007 PASSED UNDER SECTI ON 143(3) OF THE ACT BY THE I.T.O., WARD 5(4), AMRITSAR IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF REVENUE. 4. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE TH AT HE ASSESSEE FILED THE RETURN OF INCOME DECLARING AN INCOME OF RS.3,98,371 /- ON 30-3-2006. THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) ON 3 1-3-2007. THE CASE WAS, HOWEVER, SELECTED FOR SCRUTINY. NOTICE UNDER SECTI ON 143(3) WAS ISSUED ON 1-8-2006. IN RESPONSE TO NOTICES UNDER SECTIONS 1 43(2)/142(1), THE ASSESSEE FURNISHED THE REQUIRED INFORMATION. THE ASSESSEE D ERIVED INCOME FROM SALARY, BUSINESS INCOME, SHORT TERM AND LONG TERM C APITAL GAIN INCOME AND INTEREST INCOME. THE ASSESSEE HAS SOLD SHOPS OUTSI DE HALL GATE, SARAI SANT RAM MARKET AFTER CONSTRUCTION. THE ASSESSEE HAD S HOWN NET PROFIT OF RS.1,52,130/- APPLYING THE PROVISIONS OF SECTION 44 AD OF THE ACT STATING THAT THE NET PROFIT IS MORE THAN 8%. FOR CONSTRUCTION, T HE ASSESSEE HAS MADE CASH WITHDRAWALS FROM THE BANK AT RS.8,09,100/-. THE A. O. OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED ANY ACCOUNT. AFTER DISC USSION, A LUMPSUM ADDITION OF RS.20,000/- WAS MADE IN THE CONSTRUCTIO N ACCOUNT. 5. VIDE PARA 2 OF THE ORDER, THE CIT-II, AMRITSAR, HAS OBSERVED THAT VIDE LETTER DATED 9-1-2009, THE JCIT, RANGE-V, AMRITSAR SUBMITTED A PROPOSAL FOR 3 ACTION U/S.263 OF THE ACT, SINCE THE AFORESAID ASSE SSMENT ORDER APPEARED TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST S OF REVENUE. SUBSEQUENTLY, THE PROPOSAL OF THE RANGEHEAD WAS EXAMINED BY THE C IT-II, AMRITSAR AND ALSO EXAMINED THE RECORDS OF THE ASSESSEE. NOTICE U/S.263 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 15-7-2009 BY THE THEN CIT -II, AMRITSAR. NO REPLY WAS FILED IN RESPONSE TO THE ABOVE NOTICE. HOWEVER , DUE TO CHANGE OF INCUMBENT, ANOTHER SHOW CAUSE NOTICE U/S.263 WAS I SSUED TO THE ASSESSEE VIDE LETTER DATED 5-10-2009. A NOTICE DATED 5-10-2 009 ISSUED BY THE COMMISSIONER READS AS UNDER:- ON GOING THROUGH THE CASE RECORDS, IT WAS OBSERVED THAT A PER CAPITAL ACCOUNT FILED WITH THE RETURN OF INCOME AN AMOUNT O F RS.18,48,480/- WAS CREDITED AS LONG TERM CAPITAL GAIN ON SALE OF P ROPERTY. HOWEVER IN THE COMPUTATION OF INCOME, THE LONG TERM CAPITAL GAIN ON SALE OF PROPERTY WAS DECLARED AS RS.14,55,418/-, AGAINST AN AMOUNT OF RS.14,60,000/- WAS STATED TO HAVE INVESTED IN REC B ONDS AND DEDUCTION OF RS.14,55,418/- WAS CLAIMED U/S.54EC. T HIS WAS ALLOWED BY THE A.O. THE WORKING ANNEXED WITH THE RETURN W AS AS UNDER:- TOTAL RECEIPTS ON SALE OF PLOT NO.6,7,8 AND 15B RS.22,39,500/- INDEXED COST OF ACQUISITION. DATE COST PRICE (RS.) INDEX INDEXED COST (RS.) 14.12.89 218500 172 609767 21.12.95 317775 281 542819 20.11.99 61077 389 75366 24.1.02 34296 326 38643 TOTAL 631648 1266594 PROPORTIONATE INDEXED COST OF ACQUISITION (1266594*13121) RS.7,64,082/- LONG TERM CAPITAL GAIN ON SALE OF PROPERTY RS.14, 55,418/- LESS INVESTED IN REC CAPITAL BONDS RS.14,60,000/ - BALANCE GAIN NIL 4 2.1 YOU HAVE PURCHASED THE LAND IN DIFFERENT YEARS AND PART OF IT WAS SOLD DURING THE RELEVANT PREVIOUS YEAR. VIDE YOUR REPLY DATED 11-9-2007 YOU YOURSELF HAVE ADMITTED THAT YOU DEMARCATED THE LAND INTO SMALL PLOTS, HAVE DONE SOME CONSTRUCTION/DEVELOPMENT WORK TO MAXIMIZE PROFIT. IT CLEARLY INDICATES THE INTENTION WAS TO MAKE PROFIT BY DOING ACTIVITY OF SALE/PURCHASE OF LAND. 2.2 IT IS SEEN THAT IN THE RETURN OF INCOME FILED B Y YOU, THE PROFITS ARISING OUT OF CONSTRUCTION ON THESE PLOTS; CARRIED OUT BY YOU ONLY; IS DECLARED AS BUSINESS INCOME. THEN THE SALE OF LAND IS PROVE D BY YOU OWN CONDUCT TO BE A PART OF A BUSINESS WHEREIN ORIGINAL PIECE OF LAND IS CONVERTED INTO SMALL TRADABLE PLOTS AND CONSTRUCTIO N HAS BEEN DONE ON THE SAME AND BUSINESS HAS BEEN CONDUCTED. 3.1 IN THE CASE OF RAJA J. RAMESHWAR RAO VS. CIT 42 ITR 179 (SC) HONBLE SUPREME COURT HAS HELD THAT WHEN A LAND HAS BEEN ACQUIRED, DEVELOPED, LAID OUT IN PLOTS AND THEN SOLD, IT IS A DVENTURE IN THE NATURE OF TRADE. THUS THE INCOME SHOULD HAVE BEEN ASSESSE D AS BUSINESS INCOME AND NOT INCOME FROM LONG TERM CAPITAL GAIN. SAME VIEW HAS BEEN TAKEN BY THE HONBLE PUNJAB AND HARYANA HIGH C OURT IN THE CASE OF HARBANS SINGH VS. CIT, 132 ITR 77 (1981). 4. IN VIEW OF THE ABOVE FACTS OF THE CASE AND THE D ECISION OF HONBLE SUPREME COURT AND THE JURISDICTIONAL HIGH COURT, TH E ASSESSMENT ORDER U/S.143(3) DATED 26-9-2007 FOR A.Y. 2005-06 P ASSED BY THE ITO, WARD 5($), AMRITSAR APPEARS TO BE TO BE ERRONE OUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGL Y, I PROPOSE TO SET ASIDE THIS ORDER AS PER PROVISIONS OF SECTION 263 O F THE INCOME TAX ACT, 1961. 5.1 IN RESPONSE TO THE ABOVE NOTICE, THE ASSESSEE F ILED REPLY DATED 12-10-2009 AND THE RELEVANT PARA OF THE REPLY READS AS UNDER:- THE ASSESSEE HAS PURCHASED LAND UNDER CONSIDERATIO N ON 14-12-1989 AND AFTER HOLDING THE SAME FOR OVER 14 YEARS, WAS S OLD AFTER SUBDIVIDING THE SAME INTO SMALLER PLOTS AS TO ENHAN CE THE VALUE OF LAND AS THE ENTIRE LAND WAS NOT SALEABLE IN ONE GO. IT WAS EXPLAINED TO THE AO DUNG THE COURSE OF ASSESSMENT PROCEEDINGS THAT T HE ASSESSEE TRIED TO SELL THE LAND AS SUCH BUT COULD NOT FIND ANY BUY ER BECAUSE OF 5 DISADVANTAGEOUS LOCATION AND OTHER ADVERSE FACTORS. AFTERWARDS, THE ASSESSEE TRIED TO SELL THE LAND IN PARTS BUT AGAIN BECAUSE OF NO APPROPRIATE APPROACH ROAD AND OTHER ADVERSE FACTORS , HE COULD NOT SELL THE SAME AND UNDER THESE CIRCUMSTANCES, HE HAS TO S ELL THE LAND BY RAISING SIMPLE STRUCTURES SO AS TO HELP IN DEVELOPM ENT OF THE AREA AN THEREBY ENHANCE THE REALIZATION OF REMAINING LAND. THE ASSESSEE WAS NEITHER IN BUSINESS OF CIVIL CONSTRUCTION WORK NOR IN BUSINESS OF BUYING & SELLING OF IMMOVABLE PROPERTIES AND ONLY A N INVESTOR. THE ASSESSEE HAS MADE SIMPLE INCOMPLETE CONSTRUCTION ON THE SAID PIECES OF LAND JUST TO REALIZE THE OLD INVESTMENT LYING DE AD/VERY LITTLE APPRECIATION. THE ASSESSEE DO NOT HAD ANY OFFICE, ANY STAFF, ANY CURRENT BANK ACCOUNT AND OTHER SET UP REQUIRED FOR A BUSINESS TO BE CARRIED ON WELL EVIDENT FROM THE FACT THAT NO DEDU CTION FOR THE SAME HAVE BEEN CLAIMED. CONSIDERATION CHARGED WAS SEPAR ATE FOR THE LAND PART AND THE STRUCTURE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS THE LAND IN QUESTION WAS A CAPITAL ASSET, AS SUCH GAIN ARISING ON THE SAID LAND WAS SH OWN AS BUSINESS INCOME. THUS, THE ASSESSMENT FRAMED BY THE ASSESSI NG OFFICER IS IN ACCORDANCE WITH THE FACTS OF THE CASE AND LEGAL POS ITION. SIR, YOUR VIEW THAT THE LONG TERM CAPITAL GAIN ON S ALE OF LAND SHOULD HAVE BEEN ASSESSED AS BUSINESS INCOME IS NOT IN ACC ORDANCE WITH THE FACTS OF THE CASE AND THE DECISIONS RELIED UPON BY YOUR HONOUR ARE ON DIFFERENT FACTS AND ARE CLEARLY DISTINGUISHABLE AND ACCORDINGLY, ARE NOT APPLICABLE TO THE FACTS OF THE CASE. 5.2 AS REGARDS THE DECISIONS RELIED UPON BY THE CIT IN THE CASE OF RAJA J. RAMESHWAR RAO V. CIT (1961) 42 ITR 179 (SC) AND HARBANS SINGH VS. C.I.T. (1981) 132 ITR 77 (P&H), THE ASSESSEE MA DE THE FOLLOWING SUBMISSIONS:- THE ABOVE TWO DECISIONS RELIED UPON BY YOUR HONOUR ARE NOT APPLICABLE TO THE CASE BEFORE YOUR GOODSELF AS THE FACTS OF THOSE CASES ARE CLEARLY DIFFERENT FROM THE FACTS OF THIS CASE. THE ASSESSEE HAS PURCHASED THE LAND ON 14-12-89 WHEN HE WAS A STUDEN T JUST 19 YEARS OLD AND NO BUSINESS HAS BEEN BY THE ASSESSEE FROM 1 989-2004. THE INCOME OF THE ASSESSEE IN ALL THOSE YEARS WAS INVES TMENT INCOME BESIDES SALARY AND THEREFORE, IT CANNOT BE SAID THA T THE ASSESSEE INTENDED AT THE TIME OF PURCHASE TO START A BUSINES S VENTURE ON THE SAID 6 LAND. THE CRUX OF THE DECISIONS ON THE ISSUE INVOL VED IS THE INTENTION AT THE TIME OF THE PURCHASE OF LAND. THE ASSESSEE HAS HELD THE LAND FOR OVER 14 YEARS WHEREAS IN THE CASES REFERRED TO BY YOUR HONOUR, THE DEVELOPMENT OF LAND & SALE WAS MADE IMMEDIATELY AFT ER ITS PURCHASE AND THE INTENTION TO DEVELOP THE LAND AND SELL IT O UT BY PARCELING WAS EVIDENT FROM THE VERY BEGINNING ITSELF. 5.3 THE ASSESSEE ALSO SUBMITTED IN HIS REPLY STATI NG THAT HE HAS FILED HIS WEALTH-TAX RETURNS FOR THE ASSESSMENT YEARS 1990-91 , 1991-92 AND 1992-93, WHEREIN THIS INVESTMENT WAS SHOWN AS CAPITAL ASSET, WEALTH TAX WAS PAID AS APPLICABLE AND HAD THE ASSESSEE CONSIDERED THIS INV ESTMENT AS BUSINESS VENTURE-STOCK IN TRADE, HE WOULD NOT HAVE BEEN LIAB LE TO WEALTH TAX ON THE SAID LAND WHICH PROVED BEYOND DOUBT THAT THE INVES TMENT BY THE ASSESSEE WAS A CAPITAL INVESTMENT. THE ASSESSE ALSO SUBMITT ED COPIES OF STATEMENT OF WEALTH ALONGWITH COPIES OF WEALTH TAX PAID CHALLANS WITH COPIES OF ASSESSMENT ORDERS. 5.4 THE ASSESSEE ALSO CONTENDED BEFORE THE CIT-II , AMRITSAR THAT THE GAIN ARISING ON SALE OF LAND IS LONG TERM CAPITAL GAIN A ND NOT INCOME FROM BUSINESS VENTURE. IN SUPPORT OF THE ABOVE CONTENTI ON, THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS:- 1. KAUR SINGH VS. CIT (1983) 144 ITR 756 (P&H). 2. CIT VS. SUSHILA DEVI JAI (2003) 259 ITR 671 (P& H). 3. DEEP CHAND & CO. VS. CIT (1977) 107 ITR 716 (AL L.) 5.5 IN HIS REPLY, THE ASSESSEE ALSO SUBMITTED BEFOR E THE CIT-II, AMRITSAR THAT THERE ARE GOOD NUMBER OF DECISIONS WHERE IT HA S BEEN HELD THAT EVEN IN COMPOSITE SALE OF LAND & BUILDING, LAND AND BUILDI NG ARE TO BE CONSIDERED SEPARATELY FOR THE PURPOSE OF COMPUTATION OF CAPITA L GAIN IN THE NORMAL COURSE. THE DECISIONS CITED IN SUPPORT OF THE ABOV E CONTENTION ARE AS UNDER:- 1. ITC LTD. VS. DEPUTY CIT 80TTJ (CALCUTTA-TM-2003 ) 7 2. CIT VS. ESTATE OF OM PRAKASH JHUNJHUNWALA, (2002 ) 172 CTR 325 (CAL.) 3. THE STATESMAN LTD. VS. ACIT 112 TTJ 593 (KOLKAT A-2007) 5.6 IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITTED BE FORE THE CIT-II, AMRITSAR THAT THESE CASE LAWS, SALE PRICE OF LAND A ND SALE PRICE OF CONSTRUCTION HAS BEEN SEPARATELY SPECIFIED IN THE A GREEMENTS TO SELL ITSELF AND AS SUCH IN THE LIGHT OF ABOVE DECISIONS, THE GAIN O N THE SALE OF LAND PART HAD RIGHTLY BEEN ASSESSED AS LONG TERM CAPITAL GAIN AND CONSTRUCTION PART HAS BEEN ASSESSED TO INCOME. 6. THE LEARNED CIT-II, AMRITSAR REJECTED THE CONTEN TIONS/ARGUMENTS OF THE ASSESSEE FOR THE FOLLOWING REASONS:- I) THE UNDISPUTED FACT IS THAT THE ASSESSEE HAD PU RCHASED A BIG PLOT OF LAND AND CARVED OUT SEVERAL SMALL PLOTS OUT OF T HIS PIECE OF LAND AND SOLD THESE SHOPS TO VARIOUS PERSONS. II) THE ASSESSEE HAS HIMSELF DECLARED THE PROFIT ON THE CONSTRUCTION ON THE PLOTS OF LAND AS BUSINESS INCOME. IT PROVES BEYOND ANY DOUBT THAT THE ASSESSEE HAD STARTED A VENTURE FOR D EVELOPMENT OF LAND CARVING OUT SMALL PLOTS AND CONSTRUCTING SHOPS THEREON WITH A VIEW TO EARN PROFIT ON THE SAME. III) THE CONTENTION OF THE ASSESSEE IS THAT HE HAD NO INTENTION TO CARRY OUT A VENTURE ON THE PLOT OF LAND PURCHASED BY HIM. HOWEVER, THE ASSESSEE HAS FAILED TO FILE ANY EVIDEN CE TO PROVE HIS CONTENTION. IV) IN VIEW OF THE FACTS MENTIONED ABOVE, HEAVY ONUS LA Y ON THE ASSESSEE TO PROVE THAT HE HAD PURCHASED THE PLOT OF LAND WITH A VIEW TO EARN CAPITAL GAINS ON THE SAME AND NOT TO E ARN BUSINESS INCOME BY CARVING OUT SMALL PLOTS OF LAND AND CONST RUCTING SHOPS THEREON. THE ASSESSEE HAS FAILED TO DISCHARG E THIS ONUS. V) THE ASSESSEE HAS ALSO FAILED TO PROVE THAT THE P LOT OF LAND PURCHASED BY HIM COULD BE SOLD ONLY BY CARVING OUT SMALL PLOTS OUT OF THAT PROPERTY AND THAT TOO AFTER CONSTRUCTIN G SHOPS 8 THEREON. ON THE OTHER HAND, THE FACT THAT THE ASSES SEE HAD CARVED OUT SMALL PLOTS OUT OF THE PROPERTY PURCHASED BY HI M AND CONSTRUCTED SHOPS THEREON WHICH WERE SUBSEQUENTLY S OLD, INDICATES THAT THE ASSESSEE HAD CARRIED OUT A VENTU RE AND THEREFORE, THE ENTIRE PROFIT ON SALE OF LAND AND BU ILDING IS ASSESSABLE UNDER THE HEAD PROFITS & GAINS OF BUSIN ESS. IN SUPPORT OF THIS, RELIANCE IS PLACED ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF RAJA J. RAMESHWAR RAO VS. CIT 42 ITR 179 (SC) AND THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF HARBANS SINGH VS. CIT, 132 ITR 77 (1981). VI) VIDE REPLY DATED 11-9-2007 FILED BY THE ASSESSE E DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HIMS ELF ADMITTED THAT HE HAD DEMARCATED THE LAND INTO SMALL PLOTS AND DONE SOME CONSTRUCTION/DEVELOPMENT WORK THEREON TO MAXIMIZE THE PROFITS. IT CLEARLY INDICATES THAT TH E INTENTION OF THE ASSESSEE WAS TO MAKE PROFIT BY ENGAGING HIMSELF IN THE VENTURE OF PURCHASE OF LAND AND SALE THEREOF AFTER DEVELOPING THE LAND AND CARRYING OUT CONSTRUCTION. 6.1 IN VIEW OF THE ABOVE REASONS, THE CIT-II, AMRIT SAR REACHED AT THE CONCLUSION THAT THE A.O. FAILED TO MAKE PROPER ENQU IRY DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN ORDER TO ASCERTAIN WHETHE R THE PROFITS DECLARED BY THE ASSESSEE ON SALE OF SMALL PLOTS OF LAND CARVED OUT OF A BIG PIECE OF LAND IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS OR PROFI TS & GAINS OF BUSINESS. HE, THEREFORE, HELD THAT THE ASSESSMENT ORDER DATED 26-9-20907 PASSED UNDER SECTION 143(3) OF THE ACT BY THE INCOME TAX OFFICER , WARD 5(4), AMRITSAR WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERES TS OF THE REVENUE SINCE THE RATE OF TAX ON INCOME UNDER THE HEAD CAPITAL GAINS IS MUCH LOWER THAN THE RATE OF TAX ON INCOME ASSESSABLE UNDER THE HEAD PR OFITS & GAINS OF BUSINESS 7. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L AGAINST THE ORDER OF THE CIT-II, AMRITSAR. 9 8. BEFORE US, SHRI PADAM BEHL, C.A., THE LEARNED CO UNSEL FOR THE ASSESSEE, SUBMITTED THAT THE A.O. HAS THOROUGHLY EX AMINED THE ISSUE AND THE ASSESSEE FURNISHED ALL THE DETAILS ALONGWITH PROPER EXPLANATION, WHICH WAS ACCEPTED BY THE A.O. WHILE TAKING THE POSSIBLE VIEW AND, THEREFORE, THE PROVISIONS OF SECTION 263 OF THE ACT ARE NOT APPLIC ABLE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- (1) MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR83 (SC). (2) CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC ) 8.1 IT WAS FURTHER SUBMITTED THAT THE VIEW TAKEN BY THE A.O. WAS IN CONSONANCE WITH THE VIEW TAKEN BY THE I.T.A.T. IN THE CASE OF ITC LTD. VS. DY.C.I.T. 92003) 80 TTJ (KOL) (TM) 15, WHEREIN THE TRIBUNAL HELD THAT THE LAND AND BUILDING ARE SEPARATE ASSETS AND IN THE NO RMAL COURSE THEY HAVE TO BE SEPARATELY CONSIDERED FOR THE PURPOSE OF DEPRECI ATION AS ALSO FOR COMPUTATION OF CAPITAL GAINS. IT WAS ALSO SUBMITTE D BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE VIEW TAKEN BY THE A.O. WA S FULLY SUPPORTED BY THE DECISIONS OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. ESTATE OF OMPRAKASH JHUNJHUNWALA (2002) 172 CTR (CAL) 325 AND ALSO THAT OF I.T.A.T., KOLKATTA IN THE CASE OF THE STATESMAN LTD. VS. ASSTT. C.I.T. (2007) 112 TTJ (KOL) 593. 8.2 SHRI PADAM BEHL, C.A., THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE CIT HAS SET-ASIDE THE ASSESSMENT ORDER ON THE GROUND THAT THE A.O. FAILED TO MAKE PROPER ENQUIRIES DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS IN ORDER TO ASCERTAIN WHETHE R THE PROFITS DECLARED BY THE ASSESSEE ON SALE OF SMALL PLOTS OF LAND CARVED OUT OF A BIG PIECE OF LAND IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS OR PROFI TS & GAINS OF BUSINESS. 8.3 SHRI PADAM BEHL, C.A., THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE A.O. HAD EXAMINED THE FACTS SUBM ITTED BY THE ASSESSEE 10 WHILE ACCEPTING THE GAIN FROM THE TRANSACTION IN Q UESTION AS LONG TERM CAPITAL GAINS. HE, THEREFORE, SUBMITTED THAT THE O RDER OF THE CIT MAY BE SET- ASIDE AND ACCEPT THE APPEAL OF THE ASSESSEE. 9. IN HIS RIVAL SUBMISSIONS, SHRI TARSEM LAL, THE L EARNED D.R., STRONGLY SUPPORTED THE ORDER OF THE CIT AND FURTHER SUBMITTE D THAT THE A.O. HAD NOT PROPERLY EXAMINED THE ISSUE AND FAILED TO MAKE PROP ER ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN ORDER TO ASCERT AIN WHETHER THE PROFITS DECLARED BY THE ASSESSEE ON SALE OF SMALL PLOTS OF LAND CARVED OUT OF A BIG PIECE OF LAND IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS OR PROFITS & GAINS OF BUSINESS. ACCORDING TO THE LEARNED D.R, THE ASSESSMENT ORDER PASSED BY THE A.O. WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT WAS ALSO SUBMITTED BY THE LEARNED D.R . THAT THE A.O. PASSED THE ORDER WITHOUT MAKING PROPER ENQUIRIES AND, THEREFO RE, THE LEARNED CIT HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 263 OF TH E ACT AND DIRECTED THE A.O. TO REFRAME THE ASSESSMENT AFTER MAKING PROPER VERIFICATION AND EXAMINATION. HE, THEREFORE, SUBMITTED THAT THE ORD ER OF THE CIT MAY BE UPHELD. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE LEARNED CIT WHILE TAKING THE ACTION UNDER SECTION 263 OF THE ACT CONS IDERED THE ASSESSMENT ORDER PASSED BY THE A.O. UNDER SECTION 143(3) OF TH E ACT DATED 26-9-2007 AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE ON THE BASIS OF THE FOLLOWING REASONS:- THAT THE A.O. FAILED TO MAKE PROPER ENQUIRIES DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS IN ORDER TO ASCERT AIN WHETHER THE PROFITS DECLARED BY THE ASSESSEE ON SALE OF SMA LL PLOTS OF 11 LAND CARVED OUT OF A BIG PIECE OF LAND IS ASSESSABL E UNDER THE HEAD CAPITAL GAINS OR PROFITS & GAINS OF BUSINES S. 10.1 IT IS APPARENT FROM THE RECORD THAT THE ASSES SEE HAD PIECE OF LAND BEARING NOS.6, 7, 8, 14 AND 15B IN SARAI SANT MARK ET, O/S HALL GATE, AMRITSAR SINCE 1989-1990. THE ASSSSEE PAID HIS SHA RE OF DEVELOPMENT AND OTHER CHARGES TO THE MUNICIPAL CORPORATION, AMRITSA R IN THE YEAR 1995, 1999 AND 2002 AGAINST THIS LAND. THIS PROPERTY WAS SOLD PARTLY DURING THE YEAR AND THE BALANCE IN THE SUCCEEDING YEARS AFTER DIVID ING INTO SMALLER PLOTS AND CARRYING OUT CONSTRUCITON THEREON. THE ASSESSEE HA S CHARGED SEPARATELY AGAINST THE SALE OF LAND AND SALE OF INCOMPLETE CON STRUCTION THEREON. THE SALE HAS BEEN SHOWN UNDER THE HEAD LONG TERM CAPITAL GA INS AND SALE OF STRUCTURE AS BUSINESS INCOME. IT IS OBSERVED THAT ENTIRE LONG TERM CAPITAL GAINS STAND INVESTED IN REC CAPITAL GAIN BONDS AND ACCORDINGLY EXEMPTION HAS BEEN CLAIMED UNDER SECTION 54EC OF THE ACT. IT IS ALSO OBSERVED THAT AT THE TIME OF SALE THE CONSTRUCTION WAS INCOMPLETE, W HICH IS EVIDENT FROM THE COPIES OF AGREEMENTS, WHICH CLEARLY STATED THAT ELE CTRIC WORK, PLUMBERING, FLOORING, PAINT WHITEWASHING AND SHUTTERS ETC. WER E/ TO BE DONE/INSTALLED BY THE BUYERS. THE CIT RELYING ON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF RAJA J.RAMESHWAR RAO VS. CIT (SUPRA) AND THAT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARBANS SINGH (SUPRA). IN THE CASE OF RAJA J.RAMESHWAR RAO VS. CIT (SUPRA), THE HONBLE SUPREME COURT HELD THAT WHEN A PERSON ACQUIRES LAND WITH A VIEW T O SELLING IT LATER AFTER DEVELOPING IT, HE IS CARRYING ON AN ACTIVITY RESULT ING IN PROFIT, AND THE ACTIVITY CAN ONLY BE DESCRIBED AS A BUSINESS VENTURE. IN TH E CASE OF HARBANS SINGH (SUPRA). THE ASSESSEE PURCHASED 35 KANALS OF AGRICU LTURAL LAND IN THREE LOTS DURING THE PERIOD 1962-64 AND 48 KANALS 13 MARLAS IN FOUR LOTS DURING THE YEAR 1963-64. SOON AFTER THE PURCHASE, HE DEVELOPE D THE SAID LAND INTO PLOTS 12 AND STARTED SELLING THEM IN THE YEA 1964. IN THIS CASE, THE HONBLE HIGH COURT HELD THAT THE TRANSACTION OF THE ASSESSEE AMO UNTED TO AN ADVENTURE IN THE NATURE OF TRADE BECAUSE SOON AFTER PURCHASING T HE LAND, HE DEVELOPED IN INTO RESIDENTIAL SITES AND STARTED SELLING THE PLOT S WITHIN 2 YEARS OF ITS PURCHASE. IN OUR OPINION, THE DECISIONS RELIED UPO N BY THE LEARNED CIT ARE DISTINGUISHABLE ON FACTS AND HENCE NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE. IN THE INSTANT CASE, THE ASSESSEE HAS PURCHA SED THE LAND ON 14-12-1989 WHEN HE WAS A STUDENT - JUST 19 YEARS OLD AND NO BUSINESS HAS BEEN DONE BY THE ASSESSEE FROM 1989-2004. IT IS SEEN THAT THE I NCOME OF THE ASSESSEE IN ALL THOSE YEARS WAS INVESTMENT INCOME BESIDES SALARY AN D, THEREFORE, IT CANNOT BE HELD THAT THE ASSESSEE INTENDED AT THE TIME OF P URCHASE TO START A BUSINESS VENTURE ON THE SAID LAND. IN THE INSTANT CASE, THE ASSESSEE HAS HELD THE LAND FOR OVER 14 YEARS WHEREAS IN THE CASES REFERRED TO BY THE CIT, THE DEVELOPMENT OF LAND & SALE WAS MADE IMMEDIATELY AFT ER ITS PURCHASE AND THE INTENTION TO DEVELOP THE LAND AND SELL IT OUT B Y PARCELING WAS EVIDENT FROM THE VERY BEGINNING ITSELF. THERE IS A DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE, I.E. KAUR SIN GH VS. CIT (1983) 144 ITR 756 (P&H). IN THAT CASE, THE ASSESSEE, ALONGWI TH HIS TWO BROTHERS PURCHASED TWO BUNGALOWS. ONE BUNGALOW WITH 8 BIGHAS OF LAND WAS PURCHASED IN 1965 AND THE OTHER BUNGALOW WITH 174 K ANALS OF LAND WAS PURCHASED IN 1967. BOTH THE BUNGALOWS WERE RENTED OUT BY THE CO-OWNERS. THE ASSSSEE, INSTEAD O DECLARING HIS INCOME FROM PR OPERTY AT 1/3 RD OF THE TOTAL AMOUNT, CLAIMED THAT HIS SHARE IN THE INCOME WAS 1/ 9TH, BECAUSE IN HIS 1/3 RD SHARE THERE WERE 3 CO-OWNERS, VIZ., THE ASSESSEE HI MSELF AND HIS TWO SONS. THE A.O. ALSO FOUND THAT OUT OF THE AGRICULTURAL L AND OF ABOUT 65 BIGHAS ATTACHED TO ONE OF THE BUNGALOWS, A BIG PIECE OF LA ND HAD BEEN CONVERTED INTO CERTAIN PLOTS OUT OF WHICH SEVEN PLOTS WERE SO LD DURING THE RELEVANT 13 PREVIOUS YEAR FOR A CONSIDERATION OF RS.18,500/-. T HE A.O., THEREFORE, HELD THAT THE ASSESSEE HAD ENTERED INTO AN ADVENTURE IN THE NATURE OF TRADE AND ADDED A SUM OF RS.7,000/- AS THE ASSESSEES INCOME. THE A.A.C. DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAD MADE O NLY AN INVESTMENT IN THE PURCHASE OF THE PROPERTY AND IF THERE WAS ACCRETION ON THE SALE OF A PART OF SUCH INVESTMENT, SUCH ACCRETION, IF ANY, COULD NOT BE TREATED AS THE ASSESSEES INCOME. ON APPEAL BOTH BY THE ASSESSEE AND THE REVE NUE, THE TRIBUNAL UPHELD THE ADDITION OF THE SUM OF RS.7,000/- AS INC OME OF THE ASSESSEE FROM AN ADVENTURE IN THE NATURE OF TRADE. ON A REFERENC E BY THE TRIBUNAL, THE HONBLE HIGH COURT HAS HELD (HEAD NOTES) AS UNDER:- (I) THAT THE TRIBUNAL HAD TAKEN INTO CONSIDERATION THE DECREES AND AWARDS PASSED BY THE CIVIL COURT AND HAD COME TO THE CONCLUSION THAT THE ASSESSEE HAD FAILED TO PROVE THAT HIS TWO SONS ALSO HAD A SHARE IN HIS 1/3 RD SHARE. THE FINDING OF THE TRIBUNAL WAS JUSTIFIED. (II) THOUGH EVEN A SINGLE VENTURE MAY BE REGARDED AS A TRADE OR BUSINESS, YET THERE HAVE TO BE CIRCUMSTANCES WHICH MAY GIVE RISE TO SUCH A CONCLUSION. NO HARD AND FAST RULE CAN BE LAID DOWN. THE DECISION OF A CASE MUST TURN ON ITS OWN FACTS. FOR ARRIVING AT THE FINDING THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE , THE TRIBUNAL WAS MAINLY INFLUENCED BY THE FACT THAT OUT OF THE LAND ATTACHED TO ONE OF THE BUNGALOWS, 42 PLOTS HAD BEEN EARMARKED FOR SALE, THAT, IN THE RELEVANT YEAR, SEVEN PLOTS WERE SOLD AND THAT ADVANCES HAD BEEN RECEIVED IN RESPECT OF OTHER PLOTS. ON THE BASIS OF THESE FACTS ALONE, NO INFERENCE COULD BE DRAWN THAT THE TRANSACTION WAS A VENTURE IN THE NATURE OF TRADE. THE ASSESSEE HAD PURCHASED THE PROPERTY IN THE YEAR 1967 AND THE REVENUE HAD NOT BROUGHT ANY EVIDENCE TO SHOW THAT AT THE TIME OF PURCHASE, THE ASSESSEE HAD AN 14 INTENTION TO SELL THE PROPERTY. THE MERE FACT OF CARRYING OUT THE PLOTS IN A PORTION OF THE LAND, WITHOUT PROOF OF ANYTHING MORE, COULD NOT GIVE RISE TO THE CONCLUSION THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF TRADE. THEREFORE, THE TRIBUNAL WAS NOT RIGHT IN HOLDING THAT THE INCOME DERIVED BY THE ASSESSEE FROM THE SALE OF PLOTS WAS FROM AN ADVENTURE IN THE NATURE OF TRADE. IN THE ABOVE CASE, THE PROPERTY WAS PURCHASED IN TH E YEAR 1967 AND THE HONBLE HIGH COURT HELD THAT THE REVENUE H AD NOT BROUGHT ANY EVIDENCE TO SHOW THAT AT THE TIME OF PU RCHASE, THE ASSESSEE HAD INTENTION TO SELL THE PROPERTY. IN TH E INSTANT CASE, THE ASSESSEE HELD THE LAND FOR OVER 14 YEARS AND TH E REVENUE HAD NOT BROUGHT ANY EVIDENCE TO SHOW THAT AT THE TI ME OF PURCHASE, THE ASSESSEE HAD ANY INTENTION TO SELL TH E PROPERTY LATER. IN THAT VIEW OF THE MATTE ALSO, THE ORDER O F THE CIT IS NOT TENABLE, EVEN OTHERWISE ALSO, FOR ARGUMENT SAKE, IT IS ADMIT TED THAT THE VIEW TAKEN BY THE CIT IS ONE POSSIBLE VIEW AND THE VIEW TAKEN BY THE AO IS ALSO CORRECT AND SUSTAINABLE. THE OR DER OF THE A.O. CANNOT BE HELD AS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE WILL DISCUSS THIS PROPOSITION OF LAW IN DETAIL IN SUCCEEDING PARAGRAPHS. 10.2 IN THIS CASE, THE CIT HAS OPINED THAT SALE OF PLOTS OF LAND CARVED OUT OF A BIG PIECE OF LAND IS TO BE ASSESSED UNDER THE HEA D CAPITAL GAINS OR PROFITS & GAINS OF BUSINESS AND THE A.O. HAS FAIL ED TO MAKE PROPER ENQUIRIES IN THIS REGARD. 11. AS REGARDS TO THE ISSUE AS TO WHETHER THE A.O. MADE THE PROPER ENQUIRIES AND EXAMINED THE CASE IS CONCERNED, THE A .O. WHILE MAKING THE 15 ASSESSMENT ASKED THE ASSESSEE VIDE LETTER DATED 1-8 -2007 (COPY OF WHICH IS PLACED AT PAGE 101 OF THE ASSESSEES COMPILATION) T O FURNISH THE FOLLOWING:- (1) NATURE OF BUSINESS CARRIED ON AND COMPLETE ADDR ESS OF THE BUSINESS PREMISES. (2) DETAIL OF PROPERTIES CONSTRUCTED AND SOLD. (3) DETAIL OF PROPERTIES PURCHASED WITH COPIES OF T HE PURCHASE DEEDS. FILE COPY OF PURCHASE DEEDS FOR THE BUILDIN G PURCHASED AND YEAR-WISE ACCOUNT OF THE CONSTRUCTION CARRIED O UT UPTO DATE. (4) EVIDENCE OF PURCHASE AND SALE OF SHARES SHOWN U NDER THE HEAD CAPITAL GAIN. (5) DETAIL AD BASIS OF INCOME SHOWN AT RS.1,60,059/-. (6) COPY OF BANK ACCOUNT WITH RECONCILIATION, IF AN Y. 11.1 FROM THE ABOVE LETTER, IT IS CLEAR THAT THE A. O. HAS REQUIRED THE ASSESSEE TO FURNISH THE INFORMATION/DOCUMENT. 11.2 THE ASSESSEE IN RESPONSE TO THE ABOVE SAID LET TER REPLIED VIDE PARA 1 OF THE LETTER DATED NIL (COPY FILED AT PAGE 100 OF THE ASSSESSEES COMPILATION), WHICH READS AS UNDER:- AS ALREADY STATED, ASSESSEE OWNED PIECE OF LAND BE ARING PRIVATE NOS.6,7,8,14 & 15 IN SARAI SANT RAM OUTSIDE HALL GA TE, AMRITSAR SINCE 1989-1990.ASSESSEE PAID HIS SHARE OF DEVELOPM ENT AND OTHER CHARGES TO MUNICIPAL CORP.,AMRITSAR IN THE YEAR 199 5, 1999 AND 2002 AGAINST THIS LAND AS PER DETAIL ALREADY GIVEN IN TH E COMPUTATION OF LONG TERM CAPITAL GAIN FILED WITH THE RETURN. PHOT OCOPIES OF REQUISITE DOCUMENTS HAVE ALREADY BEEN FILED. THIS PROPERTY W AS SOLD PARTLY DURING THE YEAR AND THE BALANCE IN SUCCEEDING YEARS AFTER DIVIDING INTO SMALLER PLOTS AND CARRYING OUT CONSTRUCTION THEREON . ASSESSEE HAS CHARGED SEPARATELY AGAINST SALE OF LAND AND SALE OF INCOME HAS BEEN SHOWN UNDER THE HEAD LONG TERM CAPITAL GAIN AND SAL E OF STRUCTURE AS 16 BUSINESS INCOME. THE ENTIRE LONG TERM CAPITAL GAIN STAND INVESTED IN REC CAPITAL GAIN BONDS AND ACCORDINGLY EXEMPTION S HAS BEEN CLAIMED U/S.54EC AS PER DETAILED WORKING ALREADY G IVEN IN THE STATEMENT OF INCOME FILED WITH RETURN. IT IS FURTHE R SUBMITTED THAT AT THE TIME OF SALE THE CONSTRUCTION WAS INCOMPLETE WELL EVIDENT FROM THE COPIES OF AGREEMENTS WHICH CLEARLY STATES THAT ELEC TRIC WORK, PLUMBERING, FLOORING, PAINT WHITEWASHING AND SHUTTE RS ETC. WERE TO BE DONE/INSTALLED BY THE BUYERS. THE CONSTRUCTION WAS SIMPLE AND NET PROFIT RETURNED IS MORE THAN 8% - THE MINIMUM REQUI RED U/S.44AD. 11.3 WE FIND THAT THE ABOVE REPLY OF THE ASSESSEE I S SELF-SPEAKING. 11.4 THE ASSESSEE HAS ALSO FURNISHED ANOTHER REPLY DATED 11-9-12007 IN REFERENCE TO QUESTIONNAIRE DATED 1-8-2007 (COPY PLA CED AT PAGES 98 AND 99 OF THE ASSESSEES PAPER BOOK), WHICH READS AS UNDER :- 2. DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE HAS DONE CIVIL CONSTRUCTION WORK ON PART TIME BASIS TO MAXIMIZE TH E SALE OF LAND WHICH HE WAS HOLDING SINCE LONG. ASSESSEE OWN ED PIECE OF LAND IN SARAI SANT RAM ACQUIRED IN THE YEA 1989 AND TO GET BETTER SALE PRICE, THE ASSESSEE DEMARKETED THE SAID PIECE OF LAND INTO SMALL PLOTS AND SOLD THE SAME AFTER CONSTRUCTI ON. COST OF CONSTRUCTION AND REALISATION AGAINST CONSTRUCTION H AS BEEN SHOWN AS BUSINESS INCOME AND REALISATION AGAINST LA ND HAS BEEN SHOWN UNDER THE HEAD LONG TERM CAPITAL GAIN. THE ASSESSEE ALSO PURCHASED ADJOINING LAND BEARING PRIVATE NO.12 & 13 OUT OF WHICH PART OF PLOT NO.12 (EARMARKED NO.12B) AND THE REMAINING WAS SHOWN AS STOCK IN TRADE. DETAILS AR E GIVEN IN CONSTRUCTION A/C ALREADY FILED. THE ASSESSEE WAS N OT HAVING ANY BUSINESS PREMISES AND THE SAME WAS OPERATED FRO M THE SITE. NO DAY TO DAY BOOKS OF ACCOUNTS WERE KEPT. NET INCO ME SHOWN IS AT RS.152130/- AGAINST RECEIPTS OF RS.1626500/- WHICH WORKS OUT TO 9.35% WHICH IS WELL ABOVE THE PERCENTAGE OF 8% PROVIDED U/S.44AD. 3. ASSESSEE SOLD PROPERTIES ON PLOT BEARING PRIVATE NOS.6,7, 8 AND PART OF PLOT NO.15 (GIVEN PROPERTY NO.15B) BESIDES PART OF PROPERTY ON PLOT NO.12, (GIVEN PROPERTY NO.12B). C ONSTRUCTION ON REMAINING PORTION OF PLOT NO.12, 15 & 13 WAS IN PROGRESS, THE COST OF WHICH INCLUDING PROPORTIONATE COST OF L AND OF PLOT 17 NO.12 & 13 HAS BEEN SHOWN AS CLOSING STOCK AND WORK IN PROGRESS . 4. PHOTOCOPY OF RECEIPT IN RESPECT OF PLOT BEARING NO.12 & 13 PURCHASED FOR RS.950000/- DURING THE YEAR UNDER POW ER OF ATTORNEY IS ENCLOSED. IN ADDITION TO ABOVE ASSESSE E HAS PURCHASED ONE PROPERTY ON PLOT AREA 78 SQ. YDS BEAR ING NO.210, RAKBA TUBG PIEN, SUBURBAN ABADI, NEW PAWAN NAGAR FO R RS.2,50,000/- ON 19-5-2004 WHICH WAS SOLD ON 2-8-20 04 FOR RS.275000/- SHORT TERM GAIN OF RS.25000/- STAND INC LUDE IN TOTAL INCOME. COPY OF RECEIPT IN RESPECT OF PURCHASE (PU RCHASED UNDER POWER ATTORNEY) AND SALE DEED ARE ENCLOSED HE REWITH. 11.5 IT IS ALSO SEEN THAT IN RESPONSE TO THE QUERY OF THE A.O., THE ASSESSEE HAS ALSO FURNISHED PURCHASE DEED DATED 14-12-1989 ( COPY OF THE SAME IS ENCLOSED AT PAGES 21 TO 26 OF THE ASSESSEES COMPIL ATION). 11.6 THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF PAYMENT MADE TO THE MUNICIPAL TOWN PLANNER, MUNICIPAL CORPORATION, RELA TING TO THE ABOVE SAID PROPERTY (COPIES OF THE SAME ARE AVAILABLE AT PAGES 38 TO 41 OF THE ASSESSEES COMPILATION). 11.7 WE ALSO FIND THAT THE ASSESSEE HAS FURNISHED D ETAILS OF PROPERTY BEARING NOS.6, 7, 8 AND 15B ALONGWITH AGREEMENT DEE DS BEFORE THE A.O. (COPIES OF THE SAME ARE AVAILABLE AT PAGES 42 TO 97 OF THE ASSESSEES COMPILATION). 11.8 WE FIND THAT AFTER EXAMINING THE DETAILS FURNI SHED BY THE ASSESSEE, THE A.O. ACCEPTED THE TRANSACTIONS IN QUESTION, RESULTE D IN LONG TERM CAPITAL GAINS. THE VIEW TAKEN BY THE AO WAS IN CONSONANCE WITH THE VIEW TAKEN BY THE ITAT IN THE CASE OF ITC LTD. VS. DCIT (2003) 80 TTJ (CAL) (TM) 15, WHEREIN IT HAS BEEN HELD THAT THE LAND AND BUILDING ARE SEPARATE ASSETS AND IN THE NORMAL COURSE THEY HAVE TO BE SEPARATELY CONSID ERED FOR THE PURPOSE 18 DEPRECIATION AS ALSO FOR COMPUTATION OF CAPITAL GAI NS. SIMILARLY, IN THE CASE C.I.T. VS. ESTATE OF OMPARKASH JHUNJHUNWALA (SUPRA) , THE HONBLE CALCUTTA HIGH COURT HELD THAT IF THE INTEREST IN THE LEASEHO LD PLOT WAS HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS, THE SALE PROCEE DS OF THAT INTEREST WOULD BE ASSESSABLE AS LONG TERM CAPITAL GAIN, WHILE THE SALE PROCEEDS OF THE STRUCTURE WOULD BE TAXABLE AS SHORT TERM CAPITAL GA IN IF IT WAS SOLD BEFORE THE EXPIRY OF THREE YEARS. IT IS SEEN THAT THERE ARE A GOOD NUMBER OF DECISIONS WHERE IT HAS BEEN HELD THAT EVEN IN COMPOSITE SALE OF LAND AND BUILDING ARE TO BE CONSIDERED SEPARATELY FOR THE PURPOSE OF COMPUTA TION OF CAPITAL GAINS IN THE NORMAL COURSE. IN OUR OPINION, THE VIEW TAKEN BY THE A.O. WAS ONE OF THE POSSIBLE VIEW. IT IS WELL SETTLED LAW THAT WHE RE MORE THAN ONE POSSIBLE VIEWS ARE POSSIBLE AND THE A.O. HAS TAKEN ONE OF TH E POSSIBLE VIEWS, THE PROVISIONS OF SECTION 263 OF THE ACT ARE NOT APPLI CABLE AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX IN DIA LTD., (2007) 295 ITR 282 (SC), WHEREIN IT HAS BEEN OBSERVED AS UNDER :- THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IN SECTION 263 OF THE INCOME TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSE SSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TA KEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 11.9 IN THE INSTANT CASE, CONSIDERING THE RATIO LAI D DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. (SUPRA), IT CAN SAFELY BE HELD THAT THE LEARNED CIT HAS WRONGLY INVOKED TH E PROVISIONS OF SECTION 19 263 OF THE ACT CONSIDERING THE FACTS OF THE PRESENT CASE. FURTHERMORE, WE HAVE ALSO HELD THAT THE A.O. HAS EXAMINED THE RECOR DS AND DETAILS SUBMITTED BY THE ASSESSEE WHILE ASSESSING THE GAIN ON SALE OF LAND PART AS LONG TERM CAPITAL GAIN AND CONSTRUCTION PART AS BUSINESS INC OME. THEREFORE, WE HOLD THAT THE ORDER OF THE A.O. WAS NOT ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. 11.10 IN VIEW OF THE ABOVE DISCUSSION, WE QUASH THE ORDER PASSED BY THE LEARNED CIT UNDER SECTION 263 OF THE ACT. 12. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 24 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE : SHRI SAMEER ARORA, 94, GREEN AVENUE, ASR. (2) THE ITO, WARD 5(4), ASR. (3) THE CIT-II, ASR. (4) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.