Sunil sankhala, Jaipur V. ACIT, Jaipur

ITA 390/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4856 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJAN KUMAR CIT DR DHK
• Assessee Lawyers: O P AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Opportunity of being heard; Audit objection; Cost of acquisition; Date of conversion; Fair market value; Difference of opinion; Change of opinion
• Section: 45(2); 143(3); 50C; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 390/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 SHRI SUNIL SANKHLA SHIV BHAWAN, NEAR RAJPOOT HOSTEL STATION ROAD, JAIPUR CUKE VS. THE ACIT CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ALHPS 1536 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI MANISH AGARWAL, CA & SHRI O.P. AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI RANJAN KUMAR, CIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/11/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09 /12/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF LD. PR. CIT-I JAIPUR DATED 23.02.2016 PASSED U/S 263 OF THE INCOM E TAX ACT, 1961 FOR ASSESSMENT YEAR 2011-12 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. PR. CIT I, JAIPUR HAS GROSSLY ERRED IN ASSUMING JURISDICT ION AND FURTHER ERRED IN PASSING THE IMPUGNED ORDER U/S 263 OF THE I.T. ACT, 1961 WITHOUT CONSIDERING THE SUBMISSIONS MADE AND THE FACTS ON RECORD, THUS THE IMPUGNED ORDER DESERVES T O BE QUASHED AND BE HOLD AS BAD IN LAW. ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 2 1.1 THAT, THE LD. PR. CIT-1 HAS FAILED TO ESTABLISH AS TO HOW THE SAID ORDER WAS ERRONEOUS IN SO FAR AS BEING PREJUDICIAL TO THE INTERESTS OF REVENUE. ORDER U/S 263 CANNOT BE PASSE D MERELY ON THE BASIS OF CHANGE OF OPINION, PARTICULARLY WHEN T HE AO ACCEPTED THE EXPLANATION OF ASSESSEE AFTER MAKING D UE INQUIRIES AND IT IS ALSO AN ADMITTED FACT THAT THE SUBJECT LA ND WAS SHOWN AS STOCK IN TRADE ON 01.04.2009 RELEVANT TO A.Y. 20 10-11 THEREFORE IN THE YEAR UNDER APPEAL THE SAME CANNOT BE TREATED AS CAPITAL ASSET. 1.3 THAT, THE LD. PR. CIT-1 HAS FURTHER ERRED IN IG NORING THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE AND THE LAND PURCHASED BY HIM WAS BEING KEPT BY HIM AS STOCK-IN- TRADE, AND DULY DISCLOSED THE SAME AS STOCK IN TRADE IN THE BA LANCE SHEET PREPARED SINCE ACQUISITION OF LAND THEREFORE, THE O RDER PASSED U/S 263 DESERVES TO BE QUASHED AND SET-ASIDE. 1.4 THAT, LD. PR. CIT-1 HAS FURTHER ERRED IN IGNORI NG THE FACT THAT IT IS THE INTENTION OF ASSESSEE WHICH IS MOST IMPORTAN T / RELEVANT WHICH IS APPARENT FROM THE FACTS OF THE CASE AND ME RELY BECAUSE IN THE RETURN OF INCOME UPTO A.Y. 2009-10, THE SAME WAS NOT SHOWN IN STOCK-IN-TRADE, IT CANNOT BE HELD THAT THE LAND WAS NOT STOCK-IN-TRADE OF ASSESSEE PARTICULARLY IN THE YEAR UNDER APPEAL WHEN IT IS AN ADMITTED FACT THAT THE ASSESSEE IS IN TO THE BUSINESS OF REAL ESTATE AND DULY DECLARED THE SAME AS STOCK IN TRADE IN THE RETURN FILED FOR A.Y. 2010-11 I.E. THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. 1.5 THAT, THE LD. PR. CIT-1 HAS FURTHER ERRED IN IN VOKING THE PROVISIONS OF EXPLANATION 2 TO SECTION 263 BY COMPL ETELY IGNORING THE FACT THAT COMPLETE DETAILS WERE SUBMIT TED BEFORE THE LD. AO WHO HAS DULY EXAMINED THE SAME, AND MERE LY BECAUSE THE ISSUE HAS NOT BEEN DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER, IT CANNOT BE ALLEGED THAT NO INQU IRIES WERE CONDUCTED. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED RETURN OF INCOME ON 31-07-2011 DECLARING INCOME OF RS. 27,93,750/- . THE RETURN WAS ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 3 PROCESSED U/S 143(1)(A) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2)(A) OF THE ACT ON 01-08-2012. ON THE CHANGE OF INCUMBENT, AGAIN NOTICES WERE ISSUED U/S 142(1)OF THE ACT. THE ASSESSMENT WAS MADE U/S 143(3) OF THE ACT AT RE TURNED INCOME. THE AO HAS OBSERVED IN THE ORDER THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS FOUND THAT DURING THE YEAR THE ASSESSEE HAD SOLD TWO PROPERTIES AMOUNTING TO RS. 30,00,000/- AND RS. 23, 00,000/- ON 28-12- 2010 TOTALLING TO RS. 53,00,000/-OUT OF HIS BUSINES S STOCK OF RS. 57,51,720/-. THE AO AFTER CONSIDERING THE FACTS OF THE CASE AND DETAILS FILED BY THE ASSESSEE ACCEPTED THE RETURNED INCOME AS DECLARED BY THE ASSESSEE. THEREAFTER, THE LD. PR. CIT-I CALLED FO R THE RECORDS AND DURING HIS EXAMINATION OF THE RECORD HE FOUND THAT THE ASS ESSEE HAS PURCHASED 44 BIGHA 2 BISWAS AGRICULTURE LAND IN F.Y. 2006-07 FOR RS. 19,26,610/-. ASSESSEE INCURRED RS. 5,62,040/- FOR THE CONVERSION OF LAND USE FROM AGRICULTURAL PURPOSE TO RESIDENTIAL PURPOSE. TH US, THE TOTAL COST OF ACQUISITION WAS RS. 24,88,650/-. ASSESSEE SOLD THE AFORESAID LAND FOR A TOTAL SALE CONSIDERATION OF RS. 53,00,000/- TO M/S ALLIANCE LAND DEVELOPERS PVT. LTD. ON 28.12.2010. THE VALUE OF TH IS LAND FOR THE PURPOSE OF STAMP DUTY WAS ADOPTED AT RS. 8,23,45,00 0/- ON WHICH STAMP DUTY WAS PAID BY THE PURCHASER. THIS SALE TRANSACTI ON RESULTED INTO LONG ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 4 TERM CAPITAL GAINS OF RS. 7,89,35,693/-. THE LD. CI T IS OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE IN THE CAS E BUT ASSESSEE IN THE RETURN OF INCOME FILED FOR A.Y. 2011-12 HAS REFLECT ED THE AFORESAID LAND AS STOCK-IN-TRADE AND CLAIMED THE PROFIT EARNED ON SALE OF LAND AS BUSINESS PROFIT. THE ASSESSING OFFICER ADMITTED THIS CLAIM O F THE ASSESSEE WITHOUT ANY VERIFICATION AND ENQUIRY . ACCORDINGLY, THE LD. CIT-1, JAIPUR INVOKED THE PROVISIONS OF SECTION 263 AND ISSUED THE SHOW CAUSE NOTICE FOR THE REVISION OF THE ASSESSMENT ORDER PASSED U/S 143(3) BY THE AO. THE ASSESSEE MADE SUBMISSIONS BEFORE THE LD. CIT-1 B UT THE CONTENTIONS RAISED IN ITS REPLY WERE NOT ACCEPTED BY THE LD. PR . CIT-1 AND GAVE FOR THE REVISION OF THE ASSESSMENT ORDER BY REPLACING THE S ALE CONSIDERATION FROM THE AGREED SALE CONSIDERATION TO THE VALUE DETERMIN ED BY THE STAMP AUTHORITIES FOR THE STAMP DUTY PURPOSES. THE CONCLU SIVE OBSERVATION OF THE LD. PR. CIT-1, IS AS UNDER:- 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS ESTABLISHED BEYOND DOUBT THAT THE BOOKS OF ACCOUNT OF EARLIER YEARS WERE NOT MAINTAINED BY THE ASSESSEE AND THE SAME WE RE NEVER PRODUCED BEFORE THE AO AS WELL AS DURING THE PROCEE DINGS U/S 263 OF THE ACT. THE RECORDS CLEARLY INDICATE CONTRADICTORY FACTS AND CLAIMS WHICH WERE NOT VERIFIED BY THE AO. EVEN AFTER APPAR ENT DISCREPANCIES SHOWN UP BY THE DOCUMENTS SUBMITTED BY THE ASSESSEE SUCH AS THE BALANCE SHEET OF THE EARLIER YEARS NOT TALLYING WIT H THE RETURNS FILED, THE AO FAILED TO RECONCILE AND MAKE ENQUIRIES IN THE CA SE SO AS TO DETERMINE THE GENUINENESS OF THE CLAIM OF THE ASSES SEE. EX 2 APPENDED TO SECTION 263 OF THE INCOME TAX ACT PRES CRIBES THAT THE ORDER PASSED BY THE AO SHALL BE DEEMED TO BE ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IF , IN THE OPINION OF ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 5 PRINCIPAL COMMISSIONER IS PASSED WITHOUT MAKING ENQ UIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. THE FACTS MENTIONED ABOVE SHOW THAT THE ORDER PASSED IS ERRONEOUS AS THE ORDE R WAS PASSED WITHOUT MAKING ENQUIRIES, WHICH SHOULD HAVE BEEN MA DE. 8. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE ASSESSMENT ORDER PASSED BY AO, IS HELD ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE PURPOSE OF SECTION 263 OF THE I.T. ACT. THE ASSESSMENT ORDER IS, ACCORDING LY, SET ASIDE ON THE LIMITED ISSUE DISCUSSED ABOVE. THE AO SHALL GIVE PR OPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PASSING THE ORD ER FRESH. 2.2 BEFORE US THE LD. A.R. OF THE ASSESSEE CONTEND ED THAT THE LD. PR. CIT-1 HAS PROCEEDED ON THE BASIS OF THE AUDIT OBJEC TION RAISED BY THE AG AUDIT PARTY AND THERE WAS NO ERROR IN THE ORDER PAS SED U/S 143(3) OF THE ACT BY THE AO. THE LD. AR VIDE HIS WRITTEN SUBMISS ION CONTENDED AS UNDER:- BRIEF FACTS ARE THAT THE ASSESSEE HAD DURING THE COURSE OF BUSINESS PURCHASED A PARCEL OF AGRICULTURAL LAND ADMEASURING 44 BIGHA 02 BISWA IN F.Y. 2006-07 RELEVANT TO A.Y. 2007-08 FOR A TOTAL CONSIDERATION OF RS. 19,26,610/- IN TERMS OF FOUR SALE DEEDS (APB 09 35) . THIS LAND WAS PURCHASED BY ASSESSEE IN THE COURSE OF HIS REAL ESTATE BUSINESS ACTIVITY AND SIN CE ITS PURCHASE, IT HAD BEEN HELD AS STOCK-IN-TRADE. PART OF THE SAID LAND WAS S UBSEQUENTLY SOLD BY ASSESSEE VIDE TWO SALE DEEDS DATED 20.12.2010 (APB 04-08 & 31-35) FOR A TOTAL CONSIDERATION OF RS. 53,00,000/- AND THE PROFIT ARI SING THEREON WAS OFFERED AS BUSINESS INCOME. HOWEVER, THE LD. CIT(ADMN.) IN HIS IMPUGNED ORDER H AS HELD THAT THE LAND HOLDING WAS CAPITAL ASSET IN THE HAND S OF ASSESSEE AND THAT THE SALE OF AFORESAID LAND WAS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN AND NOT AS BUSINESS INCOME AS HAS BEEN ASSESSED BY THE LD. AO. THE LD. CIT(ADMN.) FURTHER OBSERVED THAT THE VALUE OF THIS LAND FOR PAYMENT OF STAMP DUTY WAS DETERMINED AT RS. 8,23,45,000/- WHICH WAS BORNE THE BUYER AND THUS FOR THE PURPOSE OF LONG TERM CAPITAL GAIN, THE SAME SHOULD BE TREATED AS THE SALES CONSIDERATION U/S 50C OF THE INCOME TAX ACT, 1961. IN THIS REGARD IT IS SUBMITTED THAT, THE AFOREMENTI ONED LAND WAS PURCHASED BY ASSESSEE AS HIS REAL ESTATE BUSINESS TRANSACTION AN D SINCE ITS PURCHASE, IT HAD BEEN HELD AS STOCK-IN-TRADE, WHICH IS CLEARLY REFLE CTED FROM THE BALANCE SHEETS MADE FOR AND RELEVANT TO THE ASSESSMENT YEARS 2007- 08 (APB 72) , 2008-09 (APB 75) & 2009-10 (APB 76) PREPARED BASED ON THE FINANCIAL RECORDS KEPT BY ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 6 THE ASSESSEE. A BARE PERUSAL OF THESE BALANCE SHEET S WOULD REVEAL THAT THE ASSESSEE HAS CONSTANTLY BEEN RECORDING THIS LAND AS STOCK-IN-TRADE. THE INTENTION OF ASSESSEE BEHIND THE PURCHASE OF SUBJEC T LAND AND KEEP THE SAME AS GOODS IN TRADE IS APPARENT AND MANIFEST AND THERE I S NOTHING ON RECORD TO PROVE OTHERWISE. THIS ASSERTION OF THE ASSESSEE IS FURTHE R FORTIFIED FROM THE FACT THAT IMMEDIATELY AFTER THE PURCHASE OF THIS LAND, WITH T HE INTENTION TO DEVELOP A RESIDENTIAL TOWNSHIP SCHEME ON THE SAME, THE ASSESS EE HAD GOT CONVERTED ITS LAND USE AND GOT IT APPROVED FROM THE APPROPRIATE A UTHORITIES. DURING THE PROCESS OF CONVERSION OF LAND USE, A SUM OF RS. 5,6 2,040/- WAS PAID WHICH WAS DEBITED TO THE COST OF LAND, WHICH FACT HAS NOT BEE N DISPUTED BY THE LD. CIT(ADMN.) IN THE IMPUGNED ORDER. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMEN T YEAR UNDER CONSIDERATION, THE ASSESSEE HAD AVAILABLE WITH HIM AN OPENING STOC K OF LAND VALUING AT RS. 57,51,720/- DULY DISCLOSED IN THE BALANCE SHEET OUT OF WHICH PART OF THE STOCK OF LAND WAS SOLD BY THE ASSESSEE TO M/S ALLIANCE LAND DEVELOPERS P. LTD. ( IN NO MANNER RELATED TO THE ASSESSEE) FOR A TOTAL CONSIDE RATION OF RS. 53,00,000/- AND PROFIT FROM THIS TRANSACTION WAS DECLARED IN THE PR OFIT & LOSS ACCOUNT AND OFFERED FOR TAXATION AS BUSINESS INCOME UNDER THE H EAD INCOME FROM BUSINESS & PROFESSION (APB-2) . HOWEVER, BY COMPLETELY IGNORING THE ABOVE FACTUAL P OSITION, THE LD. CIT(ADMN.) SOLELY ON THE BASIS OF AUDIT OBJECTION A LLEGED THAT THE SAID LAND WAS NOT SHOWN AS STOCK-IN-TRADE IN THE INCOME TAX RETUR NS FOR A.YRS. 2007-08 TO 2009-10 AND FOR THE FIRST TIME IN THE RETURN OF INC OME FILED FOR A.Y. 2010-11, IT WAS SHOWN AS OPENING STOCK-IN-TRADE (THOUGH THE SAM E WERE RECORDED AS STOCK- IN-TRADE IN THE BOOKS OF ACCOUNTS MAINTAINED AND TH E FINAL ACCOUNT PREPARED THERE FROM ON YEAR TO YEAR BASIS). IN THIS REGARD AS SUBMITTED ABOVE, THE ASSESSEE SIN CE ACQUISITION HAD DULY SHOWN OPENING / CLOSING STOCK OF LAND IN THE FINANC IAL STATEMENTS OF ALL PRECEDING ASSESSMENT YEARS WHEREIN, THE VALUE OF SU BJECT LAND WAS UNDISPUTEDLY INCLUDED. THESE BALANCE SHEETS AND P&L ACCOUNTS OF THE PRECEDING YEARS WERE DULY SUBMITTED BEFORE THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION (APB 83) WHICH WERE EXAMINED AND SCRUTINIZED BY LD. AO WHO THEN SATISFIED WITH THE T REATMENT GIVEN BY ASSESSEE TO THE SUBJECT LAND AS STOCK-IN-TRADE AND ACCORDINGLY, ACCEPTED THE PROFIT OFFERED BY ASSESSEE ARISING ON THE SALE OF SUBJECT LAND AS BUSINESS INCOME. NEVERTHELESS, THE LD. CIT(ADMN.) HAS ALLEGED THIS A CTION OF LD. AO AS BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE MERELY BECAUSE THE OPENING / CLOSING STOCK WAS NOT SHOWN IN THE INCOME TAX RETURN FORMS FILED FOR PRECEDING YEARS. IT HAS FURTHER BEEN OBSERVED B Y THE LD. CIT(ADMN.) THAT THE BALANCE SHEETS OF THESE CONCERNED PRECEDING YEA RS DO NOT TALLY WITH THE RETURNS OF INCOME OF THE RELEVANT YEAR. MERELY BY O BSERVING SO AND REGARDLESS OF THE FACT THAT THE ASSESSEE HAS SHOWN THE VALUE O F THE SUBJECT LAND IN THE ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 7 BALANCE SHEETS OF PRECEDING YEARS, THE LD. CIT(ADMN .) HAS TREATED THE SUBJECT LAND AS CAPITAL ASSET. IN THIS REGARD, IT IS HUMBLY SUBMITTED THAT FOR ASS ESSMENT YEARS I.E. A.Y. 2007- 08 (APB 70) , 2008-09 (APB 73) THE ASSESSEE HAD FILED THE RETURNS OF INCOME IN INCOME TAX RETURN FORM NO. IV WHICH IS MEANT TO BE USED FOR FILING THE RETURNS BY A PERSON HAVING BUSINESS INCOME, HOWEVER, WHILE FILING THE SAME HIMSELF MANUALLY (WITHOUT ANY ASSISTANCE OF PROFESSIONAL), HE INADVERTENTLY AND UNMINDFULLY, BEING A LAYMAN FAILED TO PROPERLY FILL THE BALANCE SHEET IN THE ITR-IV FORM. THUS, IN VIEW OF THESE CIRCUMSTANCES I T IS CLEAR THAT THE ASSESSEE HAD CONSISTENTLY BEEN SHOWING THE SUBJECT LAND AS S TOCK-IN-TRADE SINCE ITS INCEPTION. IN OTHER WORDS, THE ASSESSEE HAD NEVER H ELD THE SUBJECT LAND AS A CAPITAL ASSET OR INVESTMENT NOR THE DEPARTMENT IS I N POSSESSION OF ANY CONTRARY RECORD OR INFORMATION TO PROVE IN ANY MANNER THAT T HE ASSESSEE HAD EVER HOLD SUCH LAND FOR INVESTMENT PURPOSES. MOREOVER, LOOKING AT THE MAGNITUDE OF THE LAND I.E. 110500 SQ. MTRS., THE FINANCIAL LEVERAGES, INVOLVEMENT OF MULTIPLICITY OF SYSTEMATIC BUSINESS OPERATIONS AND THE SURROUNDING CIRCUMSTANCES OF THE BUSINESS OF THE ASSESSEE, IT CANNOT BY ANY STRETCH OF IMAGINATION BE ASSUMED THA T THE LAND COULD HAVE BEEN HELD AS INVESTMENT AT ANY POINT OF TIME. SUBSTANCE OVER THE FORM: IT IS FURTHER SUBMITTED THAT IT IS THE SUBSTANTIAL NATURE OF THE TRANSACTION WHICH HAS TO BE LOOKED UPON FOR THE PURPOSE OF DETERMININ G AS TO WHETHER THE TRANSACTION OF SALE OF SUBJECT LAND WAS BUSINESS TR ANSACTION OR NOT. NEEDLESS TO MENTION THAT, THE FORM IS NOT ALWAYS CONCLUSIVE AND THERE ARE CASES WHERE THE SUBSTANCE MUST BE LOOKED AT IN ORDER TO ASCERTAIN T HE REAL NATURE OF THE TRANSACTION. FURTHERMORE, THE HONBLE COURTS HAVE A LWAYS UPHELD THE ASSESSEES CONTENTION THAT THE SUBSTANCE HAS TO P REVAIL AGAINST THE FORM. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS:- I) 148 ITR 72 (RAJ.) CIT VS. MAHARAJ SHRI UMMAID M ILLS II) 241 ITR 193 (MAD.) CIT VS. 21 ST SOCIETY OF IMMACULATE CONCEPTION III) 66 DTR 265 VODAFONE INTERNATIONAL HOLDINGS B.V . V/S. UNION OF INDIA AND ANR. (SC) FURTHER, THE ACCOUNTING TREATMENT GIVEN BY THE ASSE SSEE TO THE LAND SOLD HAS TO BE TAKEN INTO CONSIDERATION AND ALSO, THE EXPENSES DEBITED BY THE ASSESSEE THEREIN HAVE TO BE RELATED WITH THE SYSTEMATIC ACTI VITY DONE TO CONDUCT THE BUSINESS. A BARE PERUSAL OF THE NATURE OF THE TRANS ACTION WOULD SHOW THAT THE ASSESSEE HAS HELD AND SOLD THE SUBJECT LAND AS BUSI NESS COMMODITY / STOCK-IN- TRADE WHICH IS CLEAR FROM THE ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE TO THE SUBJECT LAND AS STOCK-IN-TRADE RECORDED IN THE BA LANCE SHEET AND OTHER RECORDS KEPT SINCE THE ACQUISITION OF LAND AND FILE D BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. NOW THE CBDT VIDE CIRCULAR NO. 6 OF 2016 HAS CLARIFIED THAT NATURE OF TRANSACTION IN CASE OF SHARES AND SECURITIES TO BE TAKEN AS DECLARED BY THE ASSESSEE EITHER CAPITAL OR BUSINESS INCOME. THIS SHOWS ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 8 THE INTENTION OF THE LEGISLATURE THAT IN SIMILAR KI ND OF TRANSACTIONS HELD IN REAL ESTATE SHOULD ALSO BE CONSIDERED IN SAME SPIRIT TO REDUCE THE LITIGATIONS. IN VIEW OF THE ABOVE FACTUAL BACKGROUND OF THE CASE , IT IS HUMBLY SUBMITTED THAT ESSENTIAL ELEMENTS NECESSITATED FOR INVOKING SECTIO N 263 ARE NOT FULFILLED. THE BASIC INGREDIENTS TO BE FULFILLED BEFORE INVOKING S ECTION 263 HAVE BEEN EXPLAINED BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT REPORTED IN 243 ITR 83 (SC) IN THE FOLLOWING WORDS:- A BARE READING OF SECTION 263 OF THE INCOME TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JUR ISDICTION BY THE COMMISSIONER SUOMOTU UNDER IT, IS THAT THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS IS SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TW IN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME TAX OFFICER IS ERRONEO US BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS N OT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. IN LIGHT OF THE ABOVE LEGAL POSITION, IT IS SUBMITT ED THAT THE ORDER OF LD. AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE WHICH HAS BEEN DEMONSTRATED AS UNDER: 1. THE ORDER OF LD. AO IS NOT ERRONEOUS: IT HAS ALREADY BEEN ESTABLISHED ABOVE THAT THE ASSE SSEE HAS DULY SHOWN THE SUBJECT LAND AS STOCK-IN-TRADE WHICH IS APPARENT FROM THE BALANCE SHEETS FILED BY ASSESSEE IN PRECEDING ASSESSMENT YEARS. THERE WA S NO POSSIBILITY OF HOLDING IT AS INVESTMENT IN VIEW OF THE FACT THAT IMMEDIATE LY AFTER ACQUISITION OF SUBJECT LAND, ITS LAND USE GOT CHANGED FROM AGRICULTURE TO RESIDENTIAL AND AS SUCH, THE CONVERSION FURTHER ESTABLISHED THE CLEAR INTENTION OF THE ASSESSEE WHO ALWAYS HELD AND DISCLOSED THE SAME AS STOCK-IN-TRADE ONLY. AND THEREFORE, THE LD. AO WAS COMPLETELY JUSTIFIED IN ACCEPTING THE INCOME FR OM SALE OF SUBJECT LAND AS BUSINESS INCOME. IT IS THEREFORE SUBMITTED THAT THE LD. AO HAS TAKEN A LEGAL AND CORRECT VIEW OF THE ENTIRE MATERIAL AVAILABLE BEFORE HIM AND AFTER MAKING APPLICATION OF MIND AS A DULY INSTRUCTED PERSON ON LAW AND FACTS AND AN Y CONCLUSION HAVING BEEN REACHED TO A REASONABLE SATISFACTION OF ACCEPTING T HE RETURNED INCOME, THUS THE ORDER OF LD. AO IS NOT ERRONEOUS ON ANY COUNT. INDEED, IN THE INSTANT CASE THE LD. AO HAS PASSED T HIS ORDER AFTER CONSIDERING ENTIRE MATERIAL AVAILABLE ON RECORD, CALLED FOR AND SUBMITTED BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS NOT THE CASE THAT THE LD. AO HAD PASSED THE ORDER WITHOUT CONDUCTING NECESSARY A ND PROPER INQUIRIES INTO THE ISSUE BEFORE HIM. AS A MATTER OF FACT, THE LD. AO HAD RAISED SPECIFIC QUERY ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 9 IN THIS REGARD AS TO HOW THE INCOME FROM THE SALE O F SUBJECT LAND HAS BEEN SHOWN AS INCOME FROM BUSINESS. TO THIS, DETAILED RE PLIES WERE SUBMITTED BEFORE THE LD. AO ALONGWITH AMPLE EVIDENCES SUCH AS VARIOU S BALANCE SHEETS FOR PREVIOUS ASSESSMENT YEARS CLEARLY DEPICTING THE TRE ATMENT GIVEN BY THE ASSESSEE TO THE LAND UNDER QUESTION AS STOCK-IN-TRADE (APB 80-81, 82, 83, 84, 85-86, 87-90) IN ITS BOOKS OF ACCOUNTS. AFTER CONSIDERING THE ENT IRE MATERIAL AVAILABLE ON RECORD IN THE SHAPE OF THE SUBMISSIONS AND DEPAR TMENTAL RECORD, THE LD. AO HAS REACHED TO THE CONCLUSION THAT THE ASSESSEE HAS RIGHTLY SHOWN THE INCOME FROM SALE OF SUBJECT LAND AS INCOME FROM BUSINESS AND ACCORDINGLY, ACCEPTED THE INCOME DECLARED BY ASSESSEE. THUS, THE ORDER OF LD. AO CANNOT AT ALL BE HELD AS ERRONEOUS AND THUS THE ACTION OF LD. CIT(AD MN.) IN PASSING THE IMPUGNED ORDER IS BAD IN LAW. IT IS FURTHER SUBMITTED THAT, THE HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. GABRIAL INDIA LTD ., REPORTED IN 203 ITR 108 , HAS HELD THAT, CIT CANNOT REVISE ORDER MERELY BECAUSE HE DISAGREES WITH THE C ONCLUSION ARRIVED AT BY THE ITO . FURTHER, IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. , REPORTED IN 227 CTR 133 , THE HONBLE DELHI HIGH COURT DREW A DISTINCTION B ETWEEN LACK OF INQUIRY AND INADEQUATE ENQUIRY AND HELD THAT, I N THE CASE OF INADEQUATE ENQUIRY, PROVISIONS UNDER SECTION 263 CANNOT BE INV OKED . IT MAY HOWEVER, BE NOTED THAT THE INSTANCE CASE IS NEITHER THE CASE OF INADEQUATE ENQUIRY NOR LACK OF ENQUIRY DURING ASSESSMENT PROCEEDINGS AS IT CAN BE SEEN THAT DUE, NECESSARY AND MOST PERTINENT ENQUIRIES TO ALL THE ISSUES EMER GING FROM THE RETURN FILED BY THE ASSESSEE WERE CONDUCTED BY THE LD. AO. THEREFOR E, IN VIEW OF SUCH LEGAL POSITION, NO ACTION U/S 263 COULD HAVE BEEN TAKEN. IT IS A WELL ESTABLISHED LAW BY NOW THAT SECTION 26 3 DOES NOT CONTEMPLATE MERE SUBSTITUTION OF THE OPINION OF AO WITH THAT OF CIT. IT HAS FURTHER BEEN HELD BY THE COURTS THAT WHERE TWO VIEWS ARE POSSIBLE IN THE MATTER AND THE AO HAS CHOSEN ANY ONE OF THEM, THEN REVISION CANNOT BE MAD E MERELY BECAUSE THE CIT IS OF THE OPINION THAT THE OTHER VIEW SHOULD HAVE B EEN TAKEN BY THE AO. 2. THE ORDER OF LD. AO IS NOT PREJUDICIAL TO THE INTER EST OF REVENUE: AT THIS JUNCTURE, ATTENTION OF THE HONBLE BENCH IS INVITED TO THE FACT THAT THE SUBJECT LAND WAS LATER ON ACQUIRED BY THE GOVERNMEN T; AND COMPENSATION WAS PAID TO THE BUYER WHO HAD PAID THE TAX ON THE DIFFE RENTIAL AMOUNT BY TAKING THE ACTUAL PURCHASE PRICE I.E. RS. 53,00,000/- AS THE C OST OF ACQUISITION, AND AT THE VALUE AS DETERMINED U/S 50C AT THE TIME OF PURCHASE S FOR THE SUBJECT LAND FROM THE APPELLANT, THUS THERE OCCURRED NO LOSS OF REVEN UE TO THE DEPARTMENT. NECESSARY COPIES OF THE INCOME TAX RETURN, AUDIT RE PORT, FORM 26AS ETC. OF THE BUYER WERE SUBMITTED BY ASSESSEE BEFORE LD. AO AS W ELL AS BEFORE LD. CIT(ADMN.) IN REVISION PROCEEDINGS (APB 108-124) . THEREFORE, SINCE THE DIFFERENTIAL AMOUNT OF TAX ALREADY STANDS PAID BY T HE PURCHASER THERE WAS NO LOSS OF REVENUE TO THE DEPARTMENT AND THEREFORE, TH E BASIC CONDITION FOR INVOKING SECTION 263 HAVE NOT BEEN FULFILLED. ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 10 IT HAS BEEN HELD IN THE CASE OF CIT V. MAX INDIA LTD. REPORTED IN 295 ITR 282 (SC) THAT EVERY LOSS OF REVENUE CANNOT BE SAID TO BE PR EJUDICIAL TO THE INTERESTS OF REVENUE, HOWEVER IN THIS CASE INTERESTINGLY, THERE HAS BEEN NO LOSS AT ALL TO THE REVENUE, ACCORDINGLY, IT CANNOT BE SAID THAT THE AC TION OF LD. AO WAS PREJUDICIAL TO THE INTEREST OF REVENUE. THIS SUBMIS SION OF ASSESSEE IS FORTIFIED FROM THE OBSERVATIONS OF HONBLE SUPREME COURT IN T HE CASE OF CIT VS. MAX INDIA (SUPRA) WHEREIN IT WAS HELD AS UNDER:- THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REV ENUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961, HAS TO BE READ IN CONJ UNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSIN G OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF T WO COURSES 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. THUS, IT IS SUBMITTED WITHOUT ADMITTING THAT THE DE FECT (IF ANY) DOES NOT IN ANYWAY LEAD TO SUPPLY THE FOUNDATION FOR REVISING A N OTHERWISE VALID ORDER WHICH CAN NEITHER BE SAID ERRONEOUS NOR PREJUDICIAL TO INVOKE SECTION 263 OF THE INCOME TAX ACT, 1961, WHICH SECTION CANNOT BE P ERMITTED TO BE BROUGHT INTO PLAY UNLESS BOTH THE CONDITIONS I.E. THE ORDER HAS TO BE PREJUDICIAL AS WELL AS ERRONEOUS BOTH, MEANING THEREBY THAT THE TWIN CONDI TIONS ARE TO BE CUMULATIVELY SATISFIED BEFORE PROCEEDING TO REVISE AN ASSESSMENT ORDER. IN LIGHT OF THE FACTS / CIRCUMSTANCES OF THE CASE, SUBMISSIONS MADE ABOVE, AND THE CASE LAWS RELIED UPON, IT IS VERY HUMBLY PRAYED THAT THE IMPUGNED REVISION ORDER OF LD. CIT(ADMN.) MAY PLEASE BE QUASHED AND H ELD BAD IN LAW, THEREBY RESTORING THE ASSESSMENT ORDER OF LD. AO. FURTHER, RELIANCE IS PLACED ON THE FOLLOWING CASE L AWS: 1. CIT VS. M/S CHAMBAL FERTILIZERS & CHEMICALS LTD. (R AJ HC) 51 TW 157 2. CIT VS. M/S DEEPAK REAL ESTATE DEVELOPERS P. LTD. ( RAJ HC) 51 TW (IV) 186 3. CIT VS. GREEN WORLD CORPORATION 314 ITR 81 (SC) 4. M/S EMGEE CABLES & COMMUNICATION LTD. VS. CIT (2014 ) 51 TW 197 WITH THE ABOVE SUBMISSIONS, THE LD. A.R. PRAYED FOR THE CANCELLATION OF THE ORDER PASSED U/S 263. FURTHER THE LD. A/R MADE HIS ALTERNATE SUBMISSION AND ARGUED THAT EVEN OTHERWISE FOR A MOM ENT IT IS ACCEPTED ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 11 THAT THE SUBJECT LAND WAS FIRSTLY SHOWN AS STOCK IN TRADE IN FY 2009-10 IN THE RETURN OF INCOME, AS PER THE PROVISIONS OF SEC TION 45(2) THERE WOULD BE NO LOSS TO REVENUE FOR WHICH IT IS SUBMITTED AS UNDER :- WITHOUT PREJUDICE TO THE SUBMISSION MADE ABOVE AND WITHOUT IN ANY MANNER ADMITTING THE ALLEGATIONS MADE IN THE IMPUGN ED REVISION ORDER, AND IN THE ALTERNATIVE IT IS SUBMITTED THAT THE LD. CIT(ADMN.) IN ITS ORD ER AT PAGE 1 PARA 2.1 LAST LINE, HAS HIMSELF OBSERVED THA T IN THE RETURN OF INCOME FILED FOR A.Y. 2010-11 ON 07.02.2011, THE OPENING S TOCK IN TRADE OF THE LAND WAS AT RS. 54,44,770/- AND CLOSING STOCK IN TRADE OF LA ND WAS SHOWN AT RS. 57,51,720/-... FROM SUCH OBSERVATIONS OF LD. CIT(ADMN.) IT IS CLEA RLY ESTABLISHED THAT IN ANY CASE THE ASSESSEE HAS DISCLOSED THE SAID LAND AS OP ENING STOCK IN THE RETURN OF INCOME FILED FOR A.Y. 2010-11 MEANING THEREBY, THE ASSESSEE HAS CONVERTED ITS INVESTMENT INTO THE STOCK IN TRADE DURING THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11, THE VALUE AT WHICH THE LAND IS CONVERTED I NTO STOCK IN TRADE IS TO BE TREATED AS THE SALE PRICE FOR COMPUTING THE CAPITAL GAIN ON SUCH CONVERSION AND WILL BE TAXED IN THE YEAR WHEN THE LAND IS SOLD AS PER THE PROVISIONS OF SECTION 45(2) OF THE INCOME TAX ACT, 1961. WITH THIS BACKGROUND, DURING THE REVISION PROCEEDIN GS, IT WAS CONTENDED BEFORE THE LD. CIT(ADMN.) THAT AS PER THE PROVISION OF SEC TION 45(2) IF THE MARKET VALUE OF THE LAND AS ON THE DATE OF CONVERSION I.E. AS ON 01.04.2009 IS COMPUTED, THE SHORT TERM CAPITAL GAIN IS WORKED OUT AT RS. 4,17,23,850/-, AND THE MARKET PRICE AS ON 01.04.2009 WOULD BE SUBSTITU TED AS THE COST OF STOCK-IN- TRADE IN THE TRADING AND PROFIT & LOSS ACCOUNT ( APB 106) . SINCE DURING THE ASSESSMENT YEAR UNDER CONSIDERATIO N I.E. IN A.Y. 2011-12 THE SAID LAND STOOD SOLD AT A CONSIDERATION OF RS. 53,0 0,000/- AND DUE TO THE FACT THAT THE SALE HAD BEEN CONVERTED AS STOCK IN TRADE IN PRECEDING ASSESSMENT YEARS, THE PROVISIONS OF SECTION 50C ARE NOT APPLIC ABLE. THEREFORE AFTER REDUCING THE SALE PRICE FROM SUCH CONVERTED VALUE O F OPENING STOCK, THE ASSESSEE HAS INCURRED GROSS LOSS OF RS. 3,89,12,500 /- AND HAVING TAKEN INTO CONSIDERATION THE INDIRECT INCOME AND EXPENSES NET LOSS WORKS OUT AT RS. 3,89,30,100/- AND WITH THE FIGURES SO ARRIVED AT IN COME OF THE ASSESSEE FOR A.Y. 2011-12 IS RECOMPUTED AND AFTER CLAIMING SET OFF OF THE LOSSES UNDER THE HEAD BUSINESS OR PROFESSION FROM THE INCOME UNDER THE HEAD INCOME FROM CAPITAL GAIN IN TERMS OF SECTION 71 OF THE INCOME TAX ACT, 1961, THE TOTAL INCOME WORKS OUT AT RS. 27,93,750/- WHICH WOULD BE EQUAL TO THE INCOME ALREADY DECLARED BY THE ASSESSEE IN ITS RETURN OF I NCOME FILED AND ASSESSED U/S 143(3) FOR THE YEAR UNDER REFERENCE. THE NECESSARY CALCULATION SHEETS AND ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 12 TRADING ACCOUNTS AS ON 31.03.2010 AND 31.03.2011 AR E PLACED AT PAPER BOOK PAGES 106 & 107 . IT IS THUS SUBMITTED THAT EVEN IN VIEW OF THE ASSUM PTIONS & PRESUMPTIONS AND THE ALLEGATIONS AND OBSERVATIONS MADE BY THE LD. CI T(ADMN.) IN THE IMPUGNED ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961, T HE ASSESSMENT ORDER AS PASSED IS CONSIDERED TO BE ERRONEOUS, IT IN NO WAY WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THUS NO ACTION U/S 263 COU LD HAVE BEEN TAKEN. THOUGH FOR THE SAKE OF CLARIFICATION AND AT THE COST OF RE PETITION IT IS SUBMITTED THAT TWIN CONDITIONS AS LAID DOWN U/S 263 I.E. ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE HAVE TO BE CUMULATIVELY SATISFIED AND I N THE ABSENCE OF ONE OF THE CONDITIONS, NOT BEING ATTRACTED THE OTHER WOULD BEC OME NONEST FOR THE PURPOSES OF REVISION. 2.3 ON THE OTHER HAND THE LD. DR SUPPORTED THE ORD ER OF THE LD. PR.CIT- 1 AND ARGUED THAT THE REVISION ORDER WAS PASSED ONL Y AFTER DUE VERIFICATION OF THE RECORDS AND WAS NOT BASED ON THE AUDIT OBJEC TION. HE FURTHER SUBMITTED THAT THE AO HAD NOT VERIFIED THE ISSUE W HETHER THE SUBJECT LAND WAS SHOWN AS STOCK IN TRADE OR INVESTMENT IN THE RE TURN OF INCOME FILED AND MERELY GOT SWAYED WHATEVER SUBMITTED BEFORE HIM . IN THE RETURN OF INCOME FILED FOR THE AY 2007-08 TO 2009-10, NO OPEN ING AND CLOSING STOCK WAS FILLED IN AND FOR THE FIRST TIME IN THE R ETURN FOR AY 2010-11, THE OPENING STOCK AS ON 1.4.2009 WAS DECLARED IN THE RE TURN OF INCOME FILED. HE THUS PRAYED FOR THE CONFIRMATION OF THE REVISION ORDER SINCE ACCORDING TO HIM THE AO HAD FAILED TO APPRECIATE THE FACT T HAT ASSESSEE NEVER DISCLOSED THE SAID LAND AS STOCK IN TRADE IN THE RE TURNS FILED AND THUS THE SALE CONSIDERATION SHOULD HAVE BEEN REPLACED BY THE FIGURE DETERMINED BY THE STAMP AUTHORITIES FOR CHARGING THE STAMP DUTY I N VIEW OF THE ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 13 PROVISIONS OF SECTION 50C OF THE ACT. THE LD. DR RE LIED ON THE FOLLOWING CASE LAWS. (1) SMT. RENU GUPTA VS. CIT (2008) 301 ITR 45 (RAJ. ) (2) MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 109 TAXMAN 66 (SC) (3) CIT, MUMBAI VS. AMITABH BACHCHAN (CIVIL APPEAL NO.5010 OF 2016 (ARISING OUT OF SLP NO. 11621 OF 2009, ORDER DATE D 11-05-2016 (SC) 2.4 WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE FACTS OF THE CA SE AND CASE LAWS RELIED ON BY BOTH THE SIDES. THE RECORDS SHOWS THAT THE A SSESSEE HAD PURCHASED THE LAND MEASURING 61,500 SQ. METER. THE MAGNITUDE WAS SO MUCH THAT IT CANNOT BE FOR CAPITAL INVESTMENT. THE ASSESSEE GOT THE LAND USE CONVERSION FROM AGRICULTURE TO RESIDENTIAL AND PAID THE NECESSARY FEE TO THE CONCERNED AUTHORITIES. SINCE THE ACQUISITION OF THE SAID LAND AND CONVERTING THE SAME INTO RESIDENTIAL WAS SHOWN IN T HE ACCOUNTS AS STOCK IN TRADE WHICH IS EVIDENT FROM THE FINANCIAL STATEM ENTS AVAILABLE IN THE PAPER BOOK AS SUBMITTED BEFORE THE AO. FURTHER IT I S SEEN THAT LD. PR.CIT- 1 HAS ALSO OBSERVED THE FACT THAT AS ON 1-4-2009 THE LAND WAS DISCLOSED AS OPENING STOCK FOR F.Y. 2009-10 I.E. RELEVANT TO AY 2010-11. THE ISSUE BEFORE US IS FOR AY 2011-12. THUS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BEFORE US THE SUBJECT LAND WAS BUSI NESS ASSET OF THE ASSESSEE. THE LD. PR.CIT-1 HAS ALSO IGNORED THIS FA CT. THIS ISSUE HAS BEEN EXAMINED BY THE AO AND ASSESSEE HAD MADE SUBMISSION DURING THE COURSE ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 14 OF ASSESSMENT PROCEEDINGS. THESE DETAILS ARE AVAIL ABLE IN THE PAPER BOOK. THE AO AFTER EXAMINING THESE DETAILS AND AFTER GOIN G THROUGH THESE FINANCIAL STATEMENTS PROCEEDED TO COMPLETE THE ASSE SSMENT BY ACCEPTING THE BUSINESS PROFIT DECLARED BY THE ASSESSEE. THE A SSESSEE HAS BEEN ABLE TO DEMONSTRATE THAT THE LAND SOLD DURING THE ASSESSMEN T YEAR WAS THE BUSINESS ASSET (STOCK IN TRADE) IN THE FINANCIAL ST ATEMENTS AND DULY APPEARING IN THE RETURN OF INCOME FILED. THE AO ACC EPTED THE CONTENTIONS OF THE ASSESSEE AND ADOPTED A VIEW. NOW PR. CIT DOE S NOT AGREE WITH THE VIEW ADOPTED BY THE AO THEN THE LAW DOES NOT PERMIT HIM TO REPLACE THE VIEW. THUS IN OUR CONSIDERED VIEW THE LD. PR.CIT-1 IS NOT JUSTIFIED TO SET ASIDE THE ORDER OF THE AO. WE SET ASIDE THE REVISIO N ORDER PASSED BY THE LD. PR.CIT-1 AND DIRECT TO RESTORE THE ASSESSMENT ORDER PASSED BY THE AO DATED 24-03-2014. WE ALSO AGREE WITH THE ALTERNATE ARGUMENT OF THE LD. AR OF THE ASSESSEE THAT THE ORDER PASSED BY THE AO SHOULD SATISFY THE TWIN CONDITIONS AS PRESCRIBED IN SECTION 263 THAT T HE ASSESSMENT ORDER SHOULD NOT ONLY BE THE ERRONEOUS BUT ALSO PREJUDICI AL TO THE INTEREST OF REVENUE. AS PER THE LD. PR.CIT-1 THE DATE OF CONVERSION OF THE INVESTME NT IN THE SUBJECT LAND TO THE STOCK IN TRADE WAS 1.4.2 009, AS APPEARING IN THE RETURN OF INCOME FOR AY 2010-11, EVEN THEN THIS PRE POSITION WILL NOT MAKE ANY ADVERSE EFFECT TO THE ASSESSED INCOME FOR THE YEAR BEFORE US IN ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 15 TERMS OF PROVISIONS OF SECTION 45(2), ACCORDING TO WHICH THE FAIR MARKET VALUE AS ON THE DATE OF TRANSFER HAS TO BE TAKEN TO COMPUTE THE DEEMED CAPITAL GAINS AS ON THE DATE OF SUCH CONVERSION AND BY TAKING SUCH VALUE THE BUSINESS PROFIT IS COMPUTED. IN THIS REGARD OUR ATTENTION WAS DRAWN BY THE LD. AR TO THE ARGUMENT PUT FORTH BEFORE THE LD. PR.CIT-1 VIDE PAPER BOOK PAGES 106 & 107 WHEREIN IT WAS ESTABLISHED THA T THERE WAS NO LOSS TO REVENUE IF THE PROVISIONS OF SECTION 45(2) ARE A PPLIED AND DEEMED CAPITAL GAINS AS ON THE DATE OF CONVERSION OF INVES TMENT INTO STOCK IN TRADE WAS COMPUTED. FURTHER BUSINESS PROFIT IS COMPUTED I N THE IMPUGNED YEAR WHEN ACTUAL SALE TAKES PLACE BY TAKING THE FAIR MAR KET VALUE AS ON THE DATE OF SUCH CONVERSION AS COST OF ACQUISITION. THIS VIE W IS DULY SUPPORTED BY THE ORDER OF THE HONBLE APEX COURT IN THE CASE OF CIT V. MAX INDIA LTD., 295 ITR 282 (SC) WHEREIN IT HAS BEEN HELD THAT EVERY LOSS OF REVENU E CANNOT BE SAID TO BE PREJUDICIAL TO THE INTERESTS O F REVENUE. AS OBSERVED ABOVE IN THE PRESENT CASE , THERE HAS BEEN NO LOSS TO THE REVENUE AND IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AO WAS PREJUDICIAL TO THE INTEREST OF REVENUE. FOR THIS PROPOSITION RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS OF THE JURISDICTIONAL HIGH COUR T: 1. CIT VS. M/S CHAMBAL FERTILIZERS & CHEMICALS LTD. (R AJ HC) (2014) 51 TW 157 2. CIT VS. M/S DEEPAK REAL ESTATE DEVELOPERS P. LTD. ( RAJ HC) (2014) 51 TW 186 ITA NO. 390/JP/2016 SHRI SUNIL SANKHLA VS. ACIT, CIRCLE- 3 JAIPUR . 16 WITH THE ABOVE OBSERVATIONS, WE ARE SETTING ASIDE T HE REVISION ORDER PASSED BY THE LD. PR.CIT-1, JAIPUR AND RESTORE THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT BY AO DATED 24-03-2014. ACCO RDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 -12- 2016. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/12/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SUNIL SANKHLA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE- 3, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 390/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR