Madanlal Bastimal Chordiya, Nashik V. Assistant Commissioner of Income tax,

ITA 2944/PUN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2223 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Capital asset; Business income; Cost of acquisition; Date of conversion; Fair market value
• Section: 45(2); 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 2944 /P U N/201 6 / ASSESSMENT YEAR : 20 13 - 14 SHRI MADANLAL BASTIMAL CHORDIYA, 151, MUMBAI AGRA ROAD, MUKANE, IGATPURI, NASHIK 422403 . / APPELLANT PAN: A FNPC1849P VS. THE ASST. COMMISSIONER OF INCOME TAX, CI RCLE - 1, NASHIK . / RESPONDENT / APPELLANT BY : SHRI SANKET JOSHI / RESPONDENT BY : SHRI M.K. VERMA / DATE OF HEARING : 06 . 0 6 .201 9 / DATE OF PRONOUNCEMENT : 27 . 0 6 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 1 , NASHIK , DATED 18 . 1 0 .201 6 RELATING TO ASSESSMENT YEAR 20 13 - 14 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DI SA LLOWANCE U/S 40A(3) OF RS.26,46,185/ - IN RESPECT OF THE PAYMENTS MADE FOR PURCHASE OF LAND BEFORE SUB - REGIST RAR I.E. GOVT. AUTHORITY ON THE GROUND THAT THE SAID PAYMENTS WERE NOT COVERED UNDER THE EXCEPTIONS SPECIFIED U/R 6DD OF THE I.T. RULES. ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 2 2] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SAID PAYMENTS WERE CONFIRMED BEFORE THE SUB - REGISTRAR I.E. THE GOVT . AUTHORITY AND THE GENUINENESS OF THE PAYMENTS AND IDENTITY OF PAYEES WERE NOT DOUBTED AND HENCE, CONSIDERING THE INTENTION OF LEGISLATURE B EHIND INTRODUCING THE PROVISIONS OF SECTION 40A(3) , THE DISALLOWANCE MADE BY THE A.O. WAS NOT JUSTIFIED. 2.1] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ABOVE PAYMENTS WERE MADE TO RURAL FA RM ERS TOWARDS PURCHASE OF AGRICULTURAL LANDS WHO INSISTED ON CASH PAYMENTS SINCE THEY WERE NOT PRONE TO BANKING ACTIVITIES AND THEY DID NOT KNOW THE ASSESSEE PERSONALLY A ND HENCE, THE DISALLOWANCE U/S 40A(3) WAS NOT ATTRACTED IN RESPECT OF THE SAID CASH PAYMENTS MADE OF BUSINESS EXPEDIENCY ESPECIALLY IN VIEW OF THE FACT THAT THE GENUINENESS OF THE SAME WAS NOT DOUBTED. 3] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESS EE SUBMITS THAT NONE O F THE ABOVE CASH PAYMENTS TOTALING TO RS.26,46,185/ - WERE MADE IN THIS YEAR AND HENCE, THERE WAS NO REASON TO MAKE ANY DISALLOWANCE U/S 40A(3) IN THE YEAR UNDER CONSIDERATION. 4] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE S UBMITS THAT THE IMPUGNED AGRICULTURAL LANDS PURCHASED IN THE EARLIER YEARS WERE HELD AS INVESTMENT AT THE TIME OF PURCHASE AND NOT AS STOCK IN TRADE AND THE SAID FACT HAS ALSO BEEN ACCEPTED BY THE A.O. AND HENCE THE PROVISIONS OF SECTION 40A(3) ARE NOT APP LICABLE IN RESPECT OF CASH PAYMENTS MADE TOWARDS PURCHASE OF CAPITAL ASSET. 5] THE LEARNED CIT(A) FURTHER ERRED IN NOT ADJUDICATING THE GROUND NOS.3 & 4 PERTAINING TO THE QUANTUM OF BUSINESS INCOME TO BE ASSESSED IN RESPECT OF SALE OF AGRICULTURAL LANDS B Y HOLDING THAT THE SAID GROUNDS DID NOT EMANATE FROM THE ASST. ORDER AND THEREBY DISMISSING THE SAME. 5.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE SAID CLAIM WAS RAISED BY THE ASSESSEE EVEN IN THE COURSE OF THE ASST. PROCEEDINGS BY FILING LETTERS DATED 28.08.2015 AND 29.01.2016 AND HENCE, MERELY BECAUSE THE SAID CLAIM WAS NOT CONSIDERED BY THE A.O., THERE WAS NO REASON TO REJECT THE SAME EVEN IN THE APPELLATE PROCEEDINGS. 5.2] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT IN VIEW OF THE RATIO LAID DOWN BY HON'BLE BOMBAY H.C. IN THE CASE OF PRUTHVI STOCK BROKERS [349 ITR 336], THE APPELLATE AUTHORITIES ARE EMPOWERED TO CONSIDER FRESH CLAIMS WHICH ARE NOT RAISED IN THE RETURN OF INCOME AND HENCE, THE SAID CLAIM SHOULD HAVE BEEN ADJUDICATED ON ME RITS OF THE CASE. 5.3] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE BUSINESS INCOME ON SALE OF AGRICULTURAL LANDS SHOULD HAVE BEEN ASSESSED AT RS.9,14,984/ - AS AGAINST THE BUSINESS INCOME OF RS.78,04,184/ - WRONGLY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. 5.4] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE AGRICULTURAL LANDS SOLD DURING THE YEAR WERE HELD AS INVESTMENT FOR VARIOUS YEARS AND THE SAME WERE CONVERTED INTO STOCK IN TRADE ONLY ON 01.04.2012 AND HENCE, IN VIEW OF THE PRO VISIONS OF SECTION 45(2), THE BUSINESS INCOME ON SALE OF THE SAID LANDS IN THIS YEAR SHOULD HAVE BEEN COMPUTED BY CONSIDERING THE FAIR MARKET VALUE AS ON 01.04.2012 AS COST AND THUS, THE BUSINESS INCOME SHOULD HAVE BEEN REWORKED AT RS.9,14,984/ - . ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 3 3. THE I SSUE RAISED VIDE GROUNDS OF APPEAL NO.1 TO 4 IS AGAINST DISALLOWANCE OF 26,46,185/ - MADE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF PAYMENT MADE FOR PURCHASE OF LAND IN CASH. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE IS AN INDIVIDUAL DERIVIN G INCOME FROM HOUSE PROPERTY, BUSINESS OR PROFESSION AND OTHER SOURCES. THE CASE OF ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SOLD VARIOUS PLOTS OF LAND DURING THE YEAR TO VARIOUS PARTIES. THE LIST OF PLOTS SO LD IS ENLISTED AT PAGE 2 OF ASSESSMENT ORDER. THE ASSESSING OFFICER FURTHER NOTED THAT EXPENDITURE IN RESPECT OF PURCHASE OF THESE LAND PLOTS WAS MADE IN PREVIOUS YEARS BUT WAS CLAIMED DURING THE YEAR AS THE PLOTS WERE NOT PART OF TRADING ACCOUNT IN THE P REVIOUS YEAR S . THE ASSESSEE HAD NOT INCLUDED THE PLOTS OF LAND IN THE STOCK OF PREVIOUS YEARS. IT WAS FURTHER NOTED BY ASSESSING OFFICER THAT PURCHASE IN RESPECT OF SAID PLOTS OF LAND WERE MADE IN CASH AND NOT THROUGH ACCOUNT PAYEE CHEQUES. HE THUS, WAS OF THE VIEW THAT THERE WAS VIOLATION OF SECTION 40A(3) OF THE ACT. THE CONTENTION OF ASSESSEE IN THIS REGARD WAS THAT THESE PLOTS OF LAND WHEN THEY WERE PURCHASED WERE IN THE NATURE OF INVESTMENT AND THE SAID INVESTMENTS WERE CONVERTED INTO STOCK - IN - TRAD E , SOLD AS BUSINESS TRANSACTION DURING THE YEAR AND HENCE, PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT ATTRACTED. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF ASSESSEE AS THERE WERE NO ENTRIES IN THE BOOKS OF ACCOUNT OF CONVERSION OF INVEST MENT INTO STOCK - IN - TRADE. FURTHER, THERE WAS NO ESTIMATION OF FAIR MARKET VALUE AS ON THE DATE OF CONVERSION OF INVESTMENT INTO STOCK - IN - TRADE IN THE BOOKS OF ACCOUNT OF ASSESSEE. HENCE, THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED AND ADDITION OF 26,46,185/ - WAS MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 4 5. THE CIT(A) REFERRED TO THE BACKGROUND OF INTRODUCTION OF SECTION 40A(3) OF THE ACT AND EXCEPTIONS PROVIDED IN RULE 6DD OF INCOME TAX RULES, 1962 (IN SHORT THE RULES) A ND HELD THAT WHERE THE ASSESSEE HAD FAILED TO SHOW THAT THE PAYMENTS MADE BY IT WERE COVERED BY ANY OF THE EXCEPTIONS PROVIDED UNDER RULE 6DD OF THE RULES, THEN THE CASH PAYMENTS MADE BY ASSESSEE WERE DISALLOWABLE UNDER SECTION 40A(3) OF THE ACT. 6. THE A SSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED VIDE GROUNDS OF APPEAL NO.1 TO 4 WAS AGAINST DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT. FURTHER ISSUE RA ISED VIDE GROUNDS OF APPEAL NO.5 TO 5.4 WAS AGAINST NON - ADJUDICATION OF GROUNDS OF APPEAL NO.3 AND 4 RAISED BEFORE THE CIT(A) PERTAINING TO ASSESSABILITY OF QUANTUM OF BUSINESS INCOME IN RESPECT OF SALE OF AGRICULTURAL LAND AND FURTHER DETERMINATION OF INC OME FROM LONG TERM CAPITAL GAINS. THE SAID CLAIM WAS NOT MADE IN THE RETURN OF INCOME. HOWEVER, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FURNISHED LETTERS ASKING THE ASSESSING OFFICER TO ADJUDICATE THE BUSINESS INCOME TO BE ASSESSED IN T HE HANDS OF ASSESSEE AS AGAINST BUSINESS INCOME OF 78,04,184/ - WRONGLY DECLARED BY ASSESSEE IN THE RETURN OF INCOME AND ALSO TO WORK OUT THE INCOME FROM LONG TERM CAPITAL GAINS I.E. ON ACCOUNT OF CONVERSION OF INVESTMENT INTO STOCK - IN - TRADE. HOWEVER, TH E ASSESSING OFFICER DID NOT DISCUSS THE SAID ISSUE AND THE CIT(A) DISMISSED GROUNDS OF APPEAL NO.3 AND 4 AS NOT EMANATING FROM THE ASSESSMENT ORDER. OUR ATTENTION WAS DRAWN TO THE STATEMENT OF FACTS WHICH WERE ENCLOSED WITH THE MEMO OF APPEAL FILED BEFORE THE CIT(A), IN WHICH THE ASSESSEE HA D ENUMERATED THE DATE OF PURCHASE OF ALL THE PLOTS OF LAND OF DIFFERENT PLOTS OF LAND SOLD BY IT, WHICH DID NOT FALL WITHIN THE ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 5 ACCOUNTING PERIOD UNDER CONSIDERATION. THE SAID PLOTS WERE PURCHASED ON VARIOUS DATES STAR TING FROM 2008 TO 2011 EXCEPT FOR ONE PLOT WHICH WAS PURCHASED ON 09.01.2013 I.E. LAND IN GAT NO.419, MANIKKHAMBH, TAL. IGATPURI, DIST. NASHIK FOR 12,66,605/ - , WHICH WAS SOLD FOR 12,25,000/ - ON 22.01.2013, RESULTING IN LOSS OF ( - ) 41,605/ - . IT WAS F URTHER POINTED OUT THAT IN THE STATEMENT OF FACTS, THE ASSESSEE HAD ALSO DECLARED MARKET VALUE AS ON 01.04.2012 I.E. THE DATE ON WHICH CONVERSION OF AGRICULTURAL LAND WAS MADE INTO STOCK - IN - TRADE AND THE TABULATED DETAILS WERE FILED IN RESPECT OF EACH OF T HE DATES OF LAND INDICATING THE DAYS OF HOLDING THE LAND FOR TWO PURPOSES I.E. FIRST, FOR THE PURPOSE OF COMPUTING CAPITAL GAINS AND SECONDLY, DAYS OF HOLDING THE LAND UPTO 31.03.2012 FOR WORKING OUT THE PROPORTIONATE INCREASE IN VALUE OF THE SAID LAND UPT O 31.03.2012. THE ASSESSEE POINTED OUT THAT HE HAD INADVERTENTLY SHOWN THE COST OF PURCHASE OF AGRICULTURAL LANDS HELD AS INVESTMENT, INSTEAD OF MARKET VALUE OF SAID LANDS AS ON THE DATE OF CONVERSION I.E. 01.04.2012. THE ASSESSEE ALSO REFERRED TO LETTER S FILED BEFORE THE ASSESSING OFFICER DATED 20.08.2015 AND 29.01.2016 IN WHICH THE CLAIM WAS MADE OF DEEMED CONVERSION OF CAPITAL ASSET I.E. AGRICULTURAL LAND HELD AS INVESTMENT INTO STOCK - IN - TRADE AS ON 01.04.2012 AND THE CONSEQUENT COMPUTATION OF BUSINESS INC OME AT 9,14,984/ - AS AGAINST BUSINESS INCOME SHOWN AT 70,04,184/ - . THE SECOND ISSUE WHICH WAS RAISED IN THE SAID STATEMENT OF FACTS IS AGAINST DISALLOWANCE MADE UNDER SECTION 40A (3) OF THE ACT , WHEREIN THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASS ESSEE STRESSED THAT THE SAID LANDS WERE PURCHASED AS INVESTMENT AND THAT ALSO IN EARLIER YEARS AND HENCE, THERE WAS NO MERIT IN THE AFORESAID DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. IN ANY CASE, WHERE THE CASH PAYMENTS WERE MADE / CONFIRMED BEFORE T HE SUB - REGISTRAR I.E. GOVERNMENT AUTHORITY AND SINCE THE PAYMENT WAS ACTUALLY MADE AND WAS GENUINE, THERE ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 6 WAS NO JUSTIFICATION FOR MAKING THE AFORESAID DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENU E ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US HAS RAISED GROUNDS OF APPEAL NO.1 TO 4 AGAINST DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE AC T. FURTHER, GROUNDS OF APPEAL NO.5 TO 5.4 ARE INTERLINKED TO THE FIRST ISSUE RAISED OF DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. VIDE GROUND OF APPEAL NO.5, THE ASSESSEE HAS RAISED WORKING OF QUANTUM OF BUSINESS INCOME TO BE ASSESSED IN THE HANDS OF ASSESSEE IN RESPECT OF AGRICULTURAL LAND SOLD WHICH WAS CONVERTED INTO STOCK - IN - TRADE BY THE ASSESSEE BUT BY AN INADVERTENT ERROR, THE SAID BIFURCATION WAS NOT DECLARED IN THE RETURN OF INCOME AND THE TOTAL INCOME ARISING FROM THE TRANSACTION WAS OFFERED A S BUSINESS INCOME. THE TWO ISSUES ARE INTERLINKED AND HENCE, WE PROCEED TO DECIDE THE SAME TOGETHER. THE ASSESSEE HAS FURNISHED THE DETAILS OF LAND TRANSACTION S UNDERTAKEN BY HIM OVER A PERIOD OF TIME BY WAY OF TABULATED CHART IN THE STATEMENT OF FACTS. THE SAID CHART READS AS UNDER: - PARTICULARS OF AGRICULTURAL LAND DATE OF PURCHASE COST OF PURCHASE (INCLUDING STAMP DUTY AND REGD. CHARGES) DATE OF SALE SALE CONSIDERATI ON FMV AS ON CONVERSION OF INVESTMENT INTO STOCK IN TRADE I.E. ON 01.04.2012 INCOME A SSESSABLE AS CAPITAL GAINS AS PER SECTION 45(2) WITHOUT INDEXATION BUSINESS INCOME GAT 714, MANIKKHAMB 27.03.2008 1,55,785 20.10.2012 11,28,000 10,09,679 8,53,894 1,18,321 GAT 132, MANIKKHAMB 29.09.2008 8,26,200 24.09.2012 10,55,500 10,27,682 2,01,482 27 ,818 GAT 540, MANIKKHAMB 09.04.2008 1,42,740 24.09.2012 1,94,500 1,88,876 46,136 5,625 GAT 655, MANIKKHAMB 26.09.2008 1,27,390 20.10.2012 4,72,000 4,24,892 2,97,502 47,108 GAT 809, MANIKKHAMB 26.09.2008 8,24,550 24.09.2012 14,90,000 14,09,270 5,84,720 8 0,730 GAT 114, BALWANT NAGAR 23.07.2009 2,28,500 02.07.2012 4,68,750 4,47,966 2,19,466 20,784 GAT 437, 16.02.2010 1,00,100 20.10.2012 1,75,000 1,59,437 59,337 15,563 ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 7 BALWANT NAGAR GAT 165/B, BALWANT NAGAR 30.12.2010 11,76,000 30.05.2012 52,00,000 47,33, 000 35,57,000 4,67,000 GAT 170, NANDGAON 09.05.2011 1,40,920 11.03.2013 1,50,000 1,45,338 4,418 4,662 GAT 164, BALWANT NAGAR 20.04.2011 11,57,400 30.05.2012 51,02,500 45,19,480 33,62,080 5,83,020 TOTAL - 48,79,585 - 1,54,36,250 1,40,65,620 91,86,035 13, 70,630 10. THE PERUSAL OF CHART WOULD REFLECT THAT THE ASSESSEE HAD PURCHASED DIFFERENT PLOTS OF LAND ON DIFFERENT DATES RANGING FROM MARCH, 2008 TO MAY, 2011 AND THE VALUE OF SAID PIECES OF LANDS WE RE DIFFERENT. ADMITTEDLY, ALL THESE PURCHASES WERE MAD E IN CASH BY THE ASSESSEE. THE ASSESSEE HAS ALSO ENCLOSED THE COPIES OF REGISTERED PURCHASE DEEDS IN RESPECT OF AFORESAID AGRICULTURAL LAND S BEFORE US IN THE PAPER BOOK AT PAGES 63 TO 186. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, T HE ASSESSEE FROM THE SALE CONSIDERATION REDUCED THE COST OF ACQUISITION AND HAD OFFERED BALANCE INCOME AS ITS BUSINESS INCOME. HOWEVER, BY WAY OF SUBMISSIONS BEFORE THE ASSESSING OFFICER DATED 20.08.2015, COPY OF WHICH IS PLACED AT PAGES 10 TO 13 OF PAPER BOOK , THE PLEA OF ASSESSEE THAT BUSINESS INCOME HAS NOT BEEN CORRECTLY SHOWN. THE ASSESSEE CLAIMS THAT AS ON 01.04.2012 THE SAID ASSETS WERE CONVERTED INTO STOCK IN TRADE AND HENCE TWO TRANSACTIONS AROSE DURING THE YEAR I.E. (A) CAPITAL GAINS UNDER SECTI ON 45(2) OF THE ACT, WHEREIN INVESTMENT HAS BEEN CONVERTED INTO STOCK IN TRADE AND (B) GAIN ARISING ON THE SALE OF AFORESAID STOCK IN TRADE . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT IT HAD FURNISHED DETAILS OF FAIR MARKE T VALUE AS ON THE CONVERSION OF INVESTMENT INTO STOCK IN TRADE I.E. 01.04.2012 AND THE INCOME ASSESSABLE UNDER SECTION 45(2) OF THE ACT AND IT HAS ALSO WORKED OUT THE BUSINESS INCOME FOR THE YEAR UNDER CONSIDERATION. BUT THESE SUBMISSIONS OF ASSESSEE HAVE NOT BEEN ADDRESSED BY ANY OF THE AUTHORITIES EITHER BY ASSESSING OFFICER OR BY CIT(A). WHILE MAKING ASSESSMENT IN THE HANDS OF ASSESSEE, IT IS INCUMBENT UPON THE REVENUE AUTHORITIES TO COMPUTE CORRECT INCOME IN THE HANDS OF ASSESSEE. ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 8 MERELY BECAUSE THE ASSESSEE HAS OFFERED CERTAIN INCOME TO TAX UNDER PARTICULAR HEAD OF INCOME BUT IF IT HAS NOT BEEN CORRECTLY WORKED OUT THEN, THE ASSESSING OFFICER HAS ALL THE AUTHORITY TO RE - COMPUTE INCOME IN THE HANDS OF ASSESSEE. IT MAY BE FAIR TO POINT OUT THAT ASSESS ING OFFICER IN HIS ORDER HAS STATED THAT THE PLEA OF ASSESSEE CANNOT BE ACCEPTED AS THE BOOKS OF ACCOUNT DO NOT REFLECT ANY ENTRY OF CONVERSION OF INVESTMENT INTO STOCK IN TRADE AS ON 01.04.2012 ON THE BASIS OF FAIR MARKET VALUE , BUT ON THE OTHER HAND ASSE SSED INCOME AS BUSINESS INCOME . HOWEVER, THE ASSESSEE PLEADS OTHERWISE. IN FAIRNESS, WE ARE OF THE VIEW THAT THIS ASPECT NEEDS CONFIRMATION IN THE HANDS OF ASSESSEE. THE FIRST POINT WHICH IS TO BE KEPT IN MIND IS THAT THE INVESTMENT IN DIFFERENT PLOTS O F LAND HAVE NOT BEEN SHOWN AS STOCK IN TRADE BY ASSESSEE IN EARLIER YEARS AND IF THAT BE SO, THEN THE GAIN ARISING THEREFROM CANNOT BE ASSESSED AS BUSINESS INCOME. BUT THE ASSESSEE HAS DECLARED PROFITS ON SALE OF LAND AS ITS BUSINESS INCOME. SO THE EXERC ISE OF WORKING FAIR MARKET VALUE AS ON THE DATE OF CONVERSION INTO STOCK IN TRADE AND CONSEQUENT CAPITAL GAINS TO BE ASSESSED ON THE DATE OF CONVERSION AND THE BUSINESS INCOME TO BE ASSESSED ON THE DATE OF SALE OF STOCK IN TRADE NEED TO BE COMPUTED AND ASS ESSED IN THE HANDS OF ASSESSEE. THE ASSESSEE ALSO CLAIMS THAT SIN CE IT IS THE AGRICULTURAL LAND WHICH IS CONVERTED INTO STOCK IN TRADE, THEN CAPITAL GAINS IS ASSESSABLE UNDER SECTION 45(2) OF THE ACT. THIS ASPECT ALSO NEEDS VERIFICATION BY ASSESSING OFFICER. CONSEQUENTLY, WE REMIT THIS ISSUE BACK TO THE FILE OF ASSESS ING OFFICER TO CARRY OUT NECESSARY VERIFICATION AND ALSO DIRECT THE ASSESSEE TO FURNISH COMPLETE INFORMATION BEFORE THE ASSESSING OFFICER IN ORDER TO ENABLE HIM TO FIRST DETERMINE THE FAIR MARKET VALUE OF PROPERTY AS ON THE DATE OF CONVERSION I.E. 01.04.20 12 AND TO SEE WHETHER THE CAPITAL GAINS ARISES ON THE SALE OF AFORESAID AGRICULTURAL LAND IN THE HANDS OF ASSESSEE OR NOT . FURTHER, BUSINESS INCOME ON THE SALE OF STOCK IN TRADE IS ALSO TO BE COMPUTED IN THE HANDS OF ASSESSEE ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 9 TAKING INTO ACCOUNT THE FAIR MARKET VALUE OF PROPERTY AS ON 01.04.2012. THE ASSESSING OFFICER SHALL COMPLETE ENQUIRY IN THIS REGARD AND COMPUTE THE INCOME ACCORDINGLY, IN THE HANDS OF ASSESSEE. REASONABLE OPPORTUNITY OF HEARING SHALL BE GRANTED TO THE ASSESSEE IN THIS REGARD. 11. N OW, COMING TO THE LINKED ISSUE OF DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT. ADMITTEDLY, PURCHASE PRICE OF VARIOUS PLOTS OF LAND WAS PAID BEFORE THE REGISTERING AUTHORITIES ON DIFFERENT DATES AND NONE OF THE SAME FALL WITHIN ACCOUNTING PERIOD EXCE PT THE ONE ON WHICH THE ASSESSEE HAD INCURRED LOSS. IN SUCH CIRCUMSTANCES, WHERE THE AMOUNT OF CASH HAS BEEN PAID FOR PURCHASING PLOTS OF LAND IN EARLIER YEARS, THEN NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(3) OF THE ACT DURING THE YEAR , AS NO SUCH P URCHASES WERE MADE DURING THE YEAR. IN ANY CASE, PURCHASE PRICE HAS BEEN PAID BEFORE THE SUB - REGISTRAR AND THE TRANSACTION BEING GENUINE, THERE IS NO MERIT IN MAKING ANY DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. ACCORDINGLY, WE REVERSE THE ORDER OF C IT(A) IN THIS REGARD AND DELETE THE ADDITION OF 26,46,185/ - MADE UNDER SECTION 40A(3) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 12 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF JUNE , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 27 TH JUNE , 201 9 . GCVSR ITA NO. 2944 /P U N/ 20 1 6 SHRI MADANLAL BASTIMAL CHORDIYA 10 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 , NASHIK ; 4. THE PR. CIT - 1 , NASHIK ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE