ACIT, Cir.-5, Pune V. Shri Rahul H. Shah, Pune

ITA 261/PUN/2010

• Counselvise Citation: 26124514 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Business expenditure; Cost of acquisition; Date of conversion; Fair market value; Valuation report; Revised return
• Section: 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NOS. 261/PN/2010 (ASSTT. YEAR: 2006-07) ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIRCLE-5, PUNE PMT BLDG., 3 RD FLOOR, SWARGATE, PUNE 411 037 V. SHRI RAHUL H SHAH, RESPONDENT 125 NEW TIMBER MARKET, BHAWANI PETH, PUNE 411 042 PAN: NOT AVAILABLE ITA NOS. 262/PN/2010 (ASSTT. YEAR: 2006-07) ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIRCLE-5, PUNE PMT BLDG., 3 RD FLOOR, SWARGATE, PUNE 411 037 V. SHRI MANOJ H SHAH, RESPONDENT 125 NEW TIMBER MARKET, BHAWANI PETH, PUNE 411 042 PAN: NOT AVAILABLE C.O. NO. 18/PN/2011 (ARISING OUT OF ITA NO. 262/PN/2010) (ASSTT. YEAR: 2006-07) ASST. COMMISSIONER OF INCOME TAX, ... CROSS OBJECTOR CIRCLE-5, PUNE PMT BLDG., 3 RD FLOOR, SWARGATE, PUNE 411 037 V. SHRI MANOJ H SHAH, RESPONDENT 125 NEW TIMBER MARKET, BHAWANI PETH, PUNE 411 042 PAN: NOT AVAILABLE ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 2 C.O. NO. 17/PN/2011 (ARISING OUT OF ITA NO. 261/PN/2010) (ASSTT. YEAR: 2006-07) ASST. COMMISSIONER OF INCOME TAX, ... CROSS OBJECTOR CIRCLE-5, PUNE PMT BLDG., 3 RD FLOOR, SWARGATE, PUNE 411 037 V. SHRI RAHUL H SHAH, RESPONDENT 125 NEW TIMBER MARKET, BHAWANI PETH, PUNE 411 042 PAN: NOT AVAILABLE ITA NOS. 311/PN/2010 (ASSTT. YEAR: 2006-07) SHRI MANOJ H SHAH, APPELLANT 125 NEW TIMBER MARKET, BHAWANI PETH, PUNE 411 042 PAN: NOT AVAILABLE V. ADDL. COMMISSIONER OF INCOME TAX, RESPONDENT RANGE 5, PUNE ITA NOS. 312/PN/2010 (ASSTT. YEAR: 2006-07) SHRI RAHUL H SHAH, APPELLANT 125 NEW TIMBER MARKET, BHAWANI PETH, PUNE 411 042 PAN: NOT AVAILABLE V. ADDL. COMMISSIONER OF INCOME TAX, RESPONDENT RANGE 5, PUNE ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 3 ASSESSEE BY : SHRI. M.K. KULKARNI DEPARTMENT : SHRI S.K. AMBASTHA DATE OF HEARING : 24.8 .2011 DATE OF PRONOUNCEMENT : ORDER PER I.C. SUDHIR, JM ITA NOS. 261 & 262/PN/2010 IN THE APPEALS PREFERRED BY THE REVENUE, THE FIRST APPELLATE ORDER HAS BEEN QUESTIONED ON THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS CONTR ARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE SUBJECT LAND WHICH HAS BEEN TREATED AS STOCK-IN -TRADE GIVING RISE TO BUSINESS INCOME BE TREATED AS CAPITAL ASSETS GIVING RISE TO CAPITAL GAINS WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT IN THE ASSESSMENT ORDER. 3. THE LEARNED CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN NOT CORRECTLY APPRECIATING THE FACTUAL ASPECTS CLEARLY BROUGHT OUT IN PARAGRAPH 4 OF THE ASSESSMENT ORDER. 4. THE LEARNED CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE ASSESSEE HAS EXECUTED THE SAI D RESIDENTIAL PROJECT IN A SYSTEMATIC, ORGANIZED AND BUSINESS-LIKE MANNER AND, THEREFORE, IN VIEW OF THE RATIO DECENDI OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF P.M. MOHAMMAD MEERAKHAN VS. CIT [73 ITR 735](SC) ACTIVIT Y OF THE ASSESSEE MAY BE HELD TO BE AN ADVENTURE IN NATURE OF TRADE. 2. THE RELEVANT FACTS ARE THAT ASSESSEES ARE BROTH ERS WHO HAD INHERITED LAND IN EQUAL SHARES FROM THEIR FATHER ON HIS DEMISE IN THE YEAR 1996. THE LAND WAS PURCHASED BY THEIR FATHER IN THE YEAR 1980. THE VA LUATION OF THE SAID PLOT AT BUND GARDEN ROAD WAS GOT DONE BY THE APPROVED VALUER AT RS. 1,97,00,000/- AS ON 7.6.2011 AND THE SAID PLOT WAS CONVERTED AS STOCK-I N-TRADE BY MAKING ONE AFFIDAVIT DT. 7.6.2001. CONVERSION CONSIDERATION WAS SHOWN A T RS. 1,97,73,000/- WHICH WAS CLAIMED TO BE THE COST OF LAND AS ON 7.6.2001. IN SUPPORT OF THEIR CLAIM, THE ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 4 ASSESSEES ATTACHED APPROVED VALUERS REPORT DATED 7 .6.2001 WITH RETURNED INCOME FOR THE A.Y. 2006-07. IN RETURN OF INCOME, THE ASS ESSEES HAD SHOWN BUSINESS INCOME ON ACCOUNT OF PROFIT ON THE SALE OF FLATS IN A CONSTRUCTION PROJECT UNDERTAKEN BY ASSESSEES ON THEIR LAND AT BUND GARDEN ROAD. TH E ASSESSEES HAD ALSO SHOWN LONG TERM CAPITAL GAIN ON ACCOUNT OF CLAIMED CONVER SION OF THE CAPITAL ASSET INTO STOCK-IN-TRADE ON 7.6.2001. THE ASSESSEES HAD FUR THER CLAIMED DEDUCTION U/S. 54F OF THE ACT AGAINST THE SAID CAPITAL GAIN, THEREBY SHOWING A NET CAPITAL GAIN IN THE RETURN. 3. ON EXAMINATION OF ASSESSEES RECORDS FOR EARLIER YEARS, THE A.O FOUND THAT THE ASSESSEES HAD NOT SHOWN LAND CLAIMED TO BE CONVERTE D INTO STOCK-IN-TRADE IN THEIR BALANCE SHEET FROM YEAR TO YEAR AFTER THE SAID LAND WAS CLAIMED TO BE CONVERTED INTO STOCK-IN-TRADE RAISING A DOUBT AS TO WHETHER T HE SAID CONVERSION HAD ACTUALLY TAKEN PLACE. IT IS OBSERVED FURTHER THAT THE COST OF CONVERSION, CLAIMED AS BUSINESS EXPENDITURE APPEARED TO BE AT VERY HIGH SIDE, HAVI NG THE FACT OF REDUCING THE TAXABLE BUSINESS INCOME. THE A.O ALSO OBSERVED THA T THE ASSESSEE HAD ALSO NOT ENCLOSED THE SAID VALUATION REPORT ALONG WITH THE R ETURN FOR THE A.Y. 2002-03, THE YEAR WHICH, THE SAID CONVERSION, AS PER THE CLAIM O F ASSESSEE, TOOK PLACE. THE A.O OBSERVED FURTHER THAT THE VALUATION RATE IN THE VAL UERS REPORT, WAS ADOPTED AT RS. 2,350/- PER SQ.FT. WHICH WAS UNREALISTICALLY HIGH. HE ALSO OBSERVED THAT EVEN THOUGH SALES ON ACCOUNT OF FLATS AS SHOWN IN THE A.Y. 2006 -07 WERE EXCEEDING THE PRESCRIBED LIMIT, THE ACCOUNTS WERE NOT AUDITED AS PER THE PROVISION OF SECTION 44AB. 4. THE A.O CALLED FOR EXPLANATION FROM THE ASSESSE E AS TO WHY THE CLAIMED CONVERSION OF LAND INTO STOCK-IN-TRADE AS ON 7.6.20 01 COULD NOT BE DISREGARDED IN ABSENCE OF EVIDENCE IN SUPPORT. THE ASSESSEE RESP ONDED THERETO BUT THE A.O WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASS ESSEE. THE A.O OBSERVED THAT THE VALUATION REPORT FILED BY THE ASSESSEE IS A SELF SE RVING DOCUMENT SINCE THE CLAIMED ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 5 CONVERSION INTO STOCK-IN-TRADE HAS NOT BEEN REFLEC TED IN ASSESSEES BALANCE SHEET FOR THE A.Y. 2002-03 WHICH IS THE RELEVANT YEAR IN WHICH THE CONVERSION IS CLAIMED AS WELL AS FOR SUBSEQUENT YEARS; ACCOUNTS ARE NOT A UDITED AS REQUIRED UNDER THE PROVISIONS OF SECTION 44AB, AND THE VALUATION AT WH ICH THE CONVERSION INTO STOCK-IN- TRADE IS CLAIMED IS UNREALISTICALLY HIGH AS IT IS N OT IN ACCORDANCE WITH READY RECKONER RATES BROUGHT OUT BY THE GOVERNMENT AS PER WHICH TH E RATE OF OPEN LAND FOR BUND GARDEN ROAD WAS RS. 678/-PER SQ. FT. AS AGAINST TH E RATE OF RS. 2350/- PER SQ.FT. ADOPTED BY THE ASSESSEES. WITH THESE OBSERVATIONS, THE A.O CAME TO THE CONCLUSION THAT THE CLAIM OF THE ASSESSEES FOR CONVERSION OF LAND INTO STOCK-IN-TRADE HAS BEEN MADE WITH THE OBJECTIVE OF TAX AVOIDANCE. THE A.O. ACCORDINGLY REJECTED THE CLAIM OF CONVERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE AND COMPUTED THE INCOME OF THE ASSESSEES FROM THE SAID RESIDENTIAL PROJECT AS BUSI NESS INCOME BY DEDUCTING EXPENDITURE OF RS.4,26,54,391/- INCURRED ON THE SAI D PROJECT AND THE COST OF LAND AT RS.6,60,186/- FROM THE SALES OF RS. 6,85,03,000/- . WHILE COMPUTING THE BUSINESS INCOME AS ABOVE, THE A.O REJECTED ASSESSEES CLAIM MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE ACTUAL EXPENDITUR E INCURRED ON THE PROJECT WAS RS.4,42,49,824/- INSTEAD OF RS. 4,26,54,391/- CLAIM ED IN THE RETURN. IN THIS REGARD, THE A.O PLACED RELIANCE UPON THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF GOETZE (I) LTD., 284 ITR 323 (SC) HOLDING THAT ANY CLAIM OF DEDUCTION WHICH HAS THE EFFECT OF REDUCING THE TAXABLE INCOME CAN BE MADE O NLY BY WAY OF REVISED RETURN. THUS, THE A.O TREATED THE CLAIMED LONG TERM CAPITA L GAIN ON CONVERSION OF THE SAID LAND INTO STOCK-IN-TRADE AT RS. NIL. SINCE A S PER HIM, THERE WAS NO LONG TERM CAPITAL GAIN, A.O. DID NOT ALLOW ASSESSEES CLAIM OF DEDUCTION U/S. 54F. THE A.O. ALSO COMPUTED THE BUSINESS INCOME ON ACCOUNT OF PRO FIT ARISING FROM RESIDENTIAL PROJECT IN THE MANNER DISCUSSED ABOVE. 5. THE LD CIT(A) AFTER DISCUSSING THE CASES OF THE PARTIES, ACCEPTED THE CLAIM OF CONVERSION OF LAND INTO STOCK-IN-TRADE AS ON 7/6/20 01. HE, HOWEVER, DID NOT FIND ANY FAULT IN ACTION OF THE A.O IN REJECTING THE VAL UATION AT WHICH THE CONVERSION INTO ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 6 STOCK-IN-TRADE HAS BEEN CLAIMED BY THE ASSESSEES, A FTER MAKING OBSERVATION THAT NOT ONLY THE SAME IS NOT SUPPORTED WITH ANY CONTEM PORARY COMPARABLE TRANSACTION BUT IS ALSO AT GREAT VARIANCE WITH THE RATES MENTIO NED IN THE READY RECKONER. THE LD CIT(A) DID NOT AGREE WITH THE INSTANCES SHOWN BY T HE ASSESSEE SINCE AS PER HIM, THESE WERE NOT COMPARABLE. REGARDING ASSESSEES CL AIM OF DEDUCTION OF EXPENDITURE AT RS.4,42,49,824/- IN PLACE OF RS.4,26,54,391/-, T HE LD CIT(A) ALSO AGREED WITH THE VIEW OF THE A.O THAT IN THE LIGHT OF THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF GOETZE (I) LTD., (SUPRA), ANY CLAIM OF DEDU CTION WHICH HAS THE EFFECT OF REDUCING THE TAXABLE INCOME OF THE ASSESSEE, CAN BE MADE ONLY BY WAY OF FILING A REVISED RETURN. 6. THE REVENUE HAS QUESTIONED ABOVE ACTION OF THE L D CIT(A) WHEREBY RELIEF HAS BEEN GIVEN TO THE ASSESSEES BY HIM, ACCEPTING THE C LAIMED CONVERSION OF THE LAND IN QUESTION INTO STOCK-IN-TRADE AS ON 7.6.2001 ON THE ABOVE GROUNDS. 7. IN THE CROSS OBJECTIONS, THE ASSESSEE HAVE OBJEC TED THE ACTION OF THE LD CIT(A) IN CONFIRMING THE ACTION OF THE A.O THAT TH E VALUATION ON THE DATE OF CONVERSION OF LAND INTO STOCK-IN-TRADE AS ON 7.6.20 01 SHOULD HAVE BEEN RESTRICTED TO RS.678/- PER SQ.FT. ON THE BASIS OF READY RECKONER. 8. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW, MATERI AL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON BY THEM. 9. IN SUPPORT OF THE GROUNDS, THE LD. D.R. HAS BASI CALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE SUBMITTED THAT THERE WAS NO E VIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEES THAT THE CONVERSION OF LAND INTO S TOCK-IN-TRADE TOOK PLACE AS ON 7.6.2001. NEITHER THE FATHER NOR THE SONS WHO CLAI MED TO HAVE INHERITED THE LAND FROM THEIR FATHER HAD EVER FILED WEALTH-TAX RETURNS . DESPITE APPRECIATING THIS ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 7 MATERIAL FACT THAT THE VALUATION REPORT FILED BY TH E ASSESSEES IS A SELF SERVING DOCUMENT AND DOES NOT CONCLUSIVELY PROVE THAT THE P LOT OF LAND WAS CONVERTED INTO STOCK-IN-TRADE AS ON 7.6.2001, YET, THE LD CIT(A) H AS ACCEPTED THE CLAIM OF ASSESSEE THAT THE SAID CONVERSION TOOK PLACE ON 7.6.2001. 10. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE RELIEF GIVEN BY THE LD CIT(A) TO THE ASSESSEE BY ACCEPTING THE DATE OF CON VERSION OF THE LAND INTO STOCK-IN- TRADE AS ON 7.6.2001. REGARDING THE RATE OF LAND R ESTRICTED TO RS. 678/- PER SQ.FT. ON THE BASIS OF READY RECKONER FOR TAKING THE VALUATIO N OF CONVERSION OF LAND INTO STOCK- IN-TRADE AS ON 7.6.2001, THE LD. A.R. SUBMITTED THA T THE READY RECKONER IS FOR THE PURPOSE OF STAMP DUTY VALUATION. THUS, IN FACT TH E LD CIT(A) HAS CONFIRMED THE ACTION OF THE A.O TAKEN BY HIM IN CONSONANCE WITH THE PROVISION OF 50C OF THE ACT WITHOUT APPRECIATING THAT THE SAME CAME INTO EFFECT FROM 1.4.2003 AND WAS THUS NOT APPLICABLE TO THE FACTS OF THE CASE. HE SUBMITTED THAT THE PROVISIONS OF SECTION 50C ARE ALSO NOT APPLICABLE WHERE FAIR MARKET VALUE AS ON THE DATE OF CONVERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE IS SHOWN MORE AND NOT LESS. THE LD. A.R. SUBMITTED FURTHER THAT THE LD CIT(A) OUGHT TO HAVE APPRECIATED THE LEGAL POSITION THAT ONCE THE APPROVED VALUERS REPORT WAS SUBMIT TED, THE ASSESSEE HAD DISCHARGED THE BURDEN THAT LAY UPON HIM. ON THE CO NTRARY, THE A.O HAS NOT DISCHARGED THE BURDEN WHICH HAD SHIFTED UPON HIM ON FURNISHING OF THE APPROVED VALUERS REPORT BY THE ASSESSEE. HE PLACED RELIANC E ON THE DECISION IN THE CASE OF JAHANGANJ COLD STORAGE VS. ACIT (2010) 133 TTJ (AGR A) TM 278. 11. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE A.O HAS DOUBTED THE CONVERSION OF THE LAND INTO STOCK-IN-TRADE, CLAIMED TO BE MADE ON 7.6.2001 ON THE BASIS THAT IT WAS NOT SUPPORTED WITH EVIDENCE AND T HE REPORT OF THE APPROVED VALUER DT. 78.6.2001 IS A SELF SERVED EVIDENCE. HE ALSO DOUBTED CONVERSION CLAIMED TO BE ON 7.6.2001 ON THE BASIS THAT THE CLAIMED CONVERSIO N OF THE LAND INTO STOCK-IN-TRADE ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 8 HAD NOT BEEN REFLECTED IN ASSESSEES BALANCE SHEET FOR THE A.Y. 2002-03 WHICH IS THE RELEVANT YEAR IN WHICH THE CONVERSION IS CLAIME D AS WELL AS FOR SUBSEQUENT YEARS. THE ASSESSEE HAS TRIED TO MEET OUT ALL THESE OBJECT IONS BY CIRCUMSTANTIAL EVIDENCE WHICH HAS BEEN ACCEPTED BY THE LD CIT(A). WE FULLY CONCUR WITH THE VIEW OF THE LD CIT(A) THAT IT IS AN ESTABLISHED PROPOSITION OF LAW THAT IN ABSENCE OF DIRECT EVIDENCE, CIRCUMSTANTIAL EVIDENCE CAN ALSO BE TAKEN INTO ACCO UNT TO DRAW A JUSTIFIABLE INFERENCE. THE LD CIT(A) HAS ALSO DRAWN AN INFEREN CE FROM THE ACTION OF THE A.O THAT THE A.O BY HIS ACTION OF DEDUCING THE COST OF LAND WHILE COMPUTING ASSESSEES INCOME FROM THE BUSINESS OF SALE OF FLATS HAS IMPL IEDLY ADMITTED, THE CONVERSION OF LAND INTO STOCK-IN-TRADE. WE DO NOT HAVE REASON TO QUESTION SUCH INFERENCE DRAWN BY THE LD CIT(A) SINCE THERE IS NO DISPUTE THAT WIT HOUT ACCEPTING THE CONVERSION OF LAND INTO STOCK-IN-TRADE, IT SHALL NOT BE POSSIBLE TO DEDUCT THE COST OF LAND FROM THE TOTAL CONSIDERATION RECEIVED FROM SALE OF FLATS, FO R THE PURPOSE OF COMPUTING THE BUSINESS INCOME OF THE ASSESSEE BY THE A.O. THE AC TION OF THE A.O IN NOT ALLOWING INDEXATION OF COST AND IN DEDUCTING THE COST OF LAN D FROM THE BUSINESS RECEIPTS AS WELL AS IN COMPUTING THE CAPITAL GAIN AT NIL ALSO REFLECTS HIS PRESUMPTION THAT THE LAND IN QUESTION HAS BEEN CONVERTED INTO STOCK-IN- TRADE FROM SAME DATE WHEN THE PLOT WAS ACQUIRED. NOW WE HAVE TO EXAMINE THE CIRC UMSTANTIAL EVIDENCE TO VERIFY THE CLAIMED CONVERSION ON 7.6.2001. UNDISPUTEDLY, THERE IS NOTHING ON RECORD TO SHOW THAT PRIOR TO THE YEAR 2001, THE ASSESSEES WER E IN THE REAL ESTATE BUSINESS AND THEREFORE, THERE WAS NO REASON FOR THE ASSESSEES T O CONVERT ITS LAND INTO STOCK-IN- TRADE. THE ASSESSEES HAVE EARNED BUSINESS INCOME FROM SALE OF FLATS FOR THE FIRST TIME BY CARRYING OUT CONSTRUCTION PROJECT AT THE PL OT WHICH WAS STARTED IN THE YEAR 2001 AND WE THUS AGREE WITH THE INFERENCE DRAWN BY THE LD CIT(A) THAT THERE IS EVERY REASON TO ACCEPT THAT AS PER THE NEED OF THE HOUR, THE ASSESSEES BROUGHT ITS CAPITAL ASSET INTO BUSINESS AS STOCK-IN-TRADE IN TH E YEAR OF COMMENCEMENT OF THE CONSTRUCTION PROJECT I.E. 2001. THE ACTION OF THE ASSESSEES OF OBTAINING THE VALUERS REPORT IN THE YEAR 2001 IS ALSO SUGGESTIVE OF THE F ACT THAT ASSESSEES FELT THE NEED OF ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 9 CONVERTING THE PLOT OF LAND INTO STOCK-IN-TRADE IN THE YEAR 2001. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT CIRCUMSTANTI AL EVIDENCE IN THE PRESENT CASE WAS SUFFICIENT TO DRAW AN INFERENCE THAT THE CLAIM OF CONVERSION OF LAND INTO STOCK- IN-TRADE WAS MADE IN THE YEAR 2001. MERELY BECAUSE THE LAND WAS NOT DISCLOSED AS STOCK-IN-TRADE IN THE BALANCE SHEET, IN OUR VIEW I S NOT SUFFICIENT TO IGNORE THE ABOVE DISCUSSED CIRCUMSTANTIAL FACTS. WE ARE THUS OF THE VIEW THAT THE LD CIT(A) HAS RIGHTLY ACCEPTED THE CLAIMED CONVERSION OF LAND INTO STOCK-IN-TRADE AS ON 7.6.2001. IN ABSENCE OF ANY SPECIFIC ADVERSE FIND ING SUPPORTED WITH EVIDENCE BROUGHT BY THE A.O ON RECORD, THE FIRST APPELLATE O RDER TO THIS EFFECT IS THUS UPHELD. THE GROUNDS OF THE APPEALS PREFERRED BY THE REVENUE ARE THUS REJECTED. 12. IN RESULT, APPEALS PREFERRED BY THE REVENUE AR E DISMISSED. C.O NOS. 17 & 18/PN/2011 13. SO FAR AS THE ISSUE RAISED IN CROSS OBJECTIONS IS CONCERNED, WE DO NOT FIND SUBSTANCE THEREIN AS THE A.O HAS NOT INVOKED THE PR OVISIONS OF SECTION 50C OF THE ACT TO VALUE THE ASSET ON THE DATE OF CONVERSION IN TO STOCK-IN-TRADE AS ON 7.6.2001. HE HAS ONLY PREFERRED TO ACCEPT THE RATE OF RS. 678 /- PER SQ. FT. ON THE BASIS OF READY RECKONER MEANT FOR STAMP DUTY VALUATION IN AB SENCE OF ANY COMPARABLE INSTANCES FURNISHED BY THE ASSESSEE OR THEIR APPROV ED VALUER. THE LD CIT(A) HAS ALSO DISCUSSED THE COMPARATIVE INSTANCES FURNISHED BY THE ASSESSEE AND HAS NOT AGREED TO THE SAME ON THE BASIS THAT NEITHER THE RA TES OF THOSE COMPARATIVE INSTANCES WERE RELATED TO THE PLACE WHERE ASSESSE ES LAND IS SITUATED NOR TO THE TIME WHEN ASSESSEES LAND WAS CONVERTED INTO STOCK- IN-TRADE. SINCE THE ASSESSEE HAS NOT IMPROVED ITS CASE IN THIS REGARD BEFORE US , WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER ON THE ISSUE. IT IS NOT THE CASE OF THE ASSESSEE THAT A.O HAS INVOKED THE PROVISIONS OF SECTION 50C TO VALUE THE COST OF LAND ON THE DATE OF ITS ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 10 CONVERSION INTO STOCK-IN-TRADE OR HAS REFERRED THE MATTER TO THE DVO FOR DETERMINING THE COST ON THE DATE OF CONVERSION. A.O HAS ONLY A DOPTED THE AVAILABLE RATE OF LAND AS ON THE DATE, IN ABSENCE OF COMPARABLE INSTANCES, WHICH HAS BEEN UPHELD BY THE LD CIT(A). THUS, THERE IS NO SUBSTANCE IN THE ARGU MENT OF THE LD. A.R. TO THIS EFFECT THAT THE PROVISIONS OF SECTION 50C WERE NOT APPLICA BLE DURING THE A.Y. 2002-03 WHEN THE CONVERSION TOOK PLACE AND FURTHER THAT PROVISIO NS OF SECTION 50C CANNOT BE INVOKED WHERE THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF TRANSFER OF AN ASSESSEE OF CAPITAL ASSET IS LESS THAN THE VALUE A DOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER. WE HAVE ALSO GONE THROUGH THE APPROVED VALUERS REPORT. HE HAS NOT GIVEN ANY COMPARABLE INSTANCES FOR ARRIV ING AT THE VALUE AT RS. 2350/- PER SQ.FT. IN THE AREA AND FURTHER THAT THE VALUE SHOWN BY THE APPROVED VALUER AT RS. 2350/- PER SQ.FT. IS THE EXPECTED VALUE WHICH C AN BE FETCHED IN TERMS OF THE SALEABLE BUILT UP AREA IN THE LOCALITY. WE THUS DO NOT FIND INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD IN ADOPTING TH E VALUE OF THE LAND ON THE DATE OF CONVERSION OF IT INTO STOCK-IN-TRADE AT RS. 678/- PER SQ. FT. AS PER THE READY RECKONER 2001. THE DECISION OF THE TRIBUNAL IN THE CASE OF JAHANGANJ COLD STORAGE VS. ACIT (SUPRA) IS NOT HELPFUL TO THE ASSESSEE ON THE ISSUE AS THEREIN THE A.O HAD APPLIED THE RATE OF AGRICULTURAL LAND TO DETERMINE THE COST OF ACQUISITION, WHEREAS THE LAND IN QUESTION WAS COMMERCIAL PURPOSES. THE T RIBUNAL HELD THE RATE ADOPTED BY THE A.O AS NON-COMPARABLE. THE ISSUE RAISED IN THE CROSS OBJECTIONS IS, ACCORDINGLY, DECIDED AGAINST THE ASSESSEE. 14. IN RESULT, THE CROSS OBJECTIONS ARE REJECTED. ITA NOS. 311 & 312/PN/2010 ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 11 15. THE ASSESSEES HAVE QUESTIONED THE FIRST APPELLA TE ORDER ON THE GROUND THAT THE LD CIT(A) HAS ERRED IN NOT ACCEPTING THE FAIR M ARKET VALUATION OF GOVERNMENT APPROVED VALUER FOR CONVERSION OF THE LAND IN QUEST ION INTO STOCK-IN-TRADE AT RS.1,97,00,000/- (GROUND NO. 1), AND SECONDLY, IN NOT ALLOWING THE ACTUAL EXPENSES AT RS. 4,42,49,824/- IN PLACE OF RS.4,26,54,391/- T HOUGH THE SAME WERE FULLY SUPPORTED BY THIRD PARTY VOUCHERS (GROUND NO.2).. 16. SO FAR AS GROUND NO. 1 IS CONCERNED, WE HAVE AL READY DECIDED HEREINABOVE ( CO NOS. 17 & 18/PN/2011) THE CONNECTED ISSUE REGARD ING VALUATION OF THE LAND ON THE DATE OF CONVERSION AT THE RATE OF RS. 678/- PE R SQ.FT. AS JUSTIFIED, WE DO NOT FIND SUBSTANCE IN THE GROUND AS THE COST SHOWN AT RS.1,9 7,00,000/- IS BASED UPON THE APPROVED VALUERS REPORT ADOPTING THE VALUE AT RS. 2350/- PER SQ.FT. WITHOUT ANY BASIS. THE GROUND NO. 1 IS, ACCORDINGLY REJECTED. GROUND NO. 2 17. THE RELEVANT FACTS ARE THAT AS AGAINST SALE OF FLATS, AT RS. 6,85,03,000/-, THE ASSESSEE CLAIMED EXPENDITURE OF RS. 4,26,54,391/- I NCURRED FROM 2001-02 TO 2006, SHOWN IN THE RETURN OF INCOME FOR A.Y. 2006-07. VI DE LETTER DATED 21.11.2008, THE ASSESSEE CLAIMED THAT THE ACTUAL EXPENSES ARE RS. 4 ,42,49,824/- INSTEAD OF RS.4,26,54,391/-. IN SUPPORT, IT WAS SUBMITTED THA T ALL THESE EXPENSES ARE FULLY SUPPORTED BY THIRD PARTY ACCOUNT EXTRACT AND /OR V OUCHERS. IT WAS SUBMITTED THAT THE MAJOR EXPENDITURE IS TOWARDS PAYMENT OF KAMDAR CONSTRUCTION AND KUMAR PROPERTIES (P) LTD. IT WAS SUBMITTED THAT THE PLOT WAS ACQUIRED IN 1986 FOR RS.5,50,000/-. REGISTRATION FEES WERE PAID AS PE R RECEIPT OF 24/10/1986 AT RS.10,186/- AND STAMP DUTY WAS PAID ON 24.10.1986 A S PER THEIR STAMP AND SEAL AT RS. 1,00,000/- TOTALING TO RS.6,60,186/-. FOR CAPI TAL GAIN PURPOSES, THE SAME WAS TAKEN AT RS. 7,00,000/- UNDER PRESUMPTION OF OTHER EXPENSES AT RS. 40,000/-. IT ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 12 WAS SUBMITTED THAT THE MISTAKE IS APPARENT AND SHOU LD HAVE BEEN CORRECTED DURING THE ASSESSMENT PROCEEDINGS ITSELF. THE A.O DID NOT AGREE ON THE BASIS THAT AS PER DECISION OF HONBLE SUPREME COURT IN THE CASE OF G OETZE (I) LTD., 284 ITR 323 (SC) HOLDING THAT ANY CLAIM OF DEDUCTION, WHICH HAS THE EFFECT OF REDUCING TAXABLE INCOME CAN BE MADE ONLY BY WAY OF REVISED RETURN AND HENC E NOT AFTER THE TIME FOR FILING REVISED RETURN HAS LAPSED. THE SAME HAS BEEN UPHEL D BY THE LD CIT(A). 18. IN VIEW OF THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF GOETZE (I) LTD. (SUPRA), FOLLOWED BY THE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT THE ISSUE IS FULLY COVERED, HENCE, GROUND NO. 2 IS NOT TENABLE. THE SAME IS REJECTED AS SUCH. 19. IN RESULT, APPEALS ARE DISMISSED. 20. IN SUMMARY, APPEALS PREFERRED BY THE REVENUE AN D ASSESSEE AS WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23RD SEPTEMBER 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 23RD SEPTEMBER, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -III, PUNE 4. THE CIT(A)- III, PUNE ITAS. NO 311, 262, 261, &312/PN/2010,AND C.O. NOS. 17 & 18/PN/2011 MANOJ H SHAH, RAHUL H. SHAH ETC.,. A.Y. 2006-07 PAGE OF 13 13 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE