DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR V. M/S MAN PRAKASH TALKIES PVT. LTD., JAIPUR

ITA 407/JPR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5035 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: H M SINGHVI CA DHK
• Keywords: Capital asset; Business income; Audit objection; Cost of acquisition; Date of conversion; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings; Set aside; Capital Gains
• Section: 45(2); 143(3); 142(1); 133(6); 250; 292BB; 139(1); 271B; 44AB; 48; 13; 22; 147; 148; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 406/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE DCIT CIRCLE 2 JAIPUR CUKE VS. M/S. MAN PRAKASH TALKIES PVT. LTD. UPPER GROUND FLOOR, A-8,GOLCHA TRADE CENTRE, M.I. ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 6213 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 11/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 406/JP/2018) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. MAN PRAKASH TALKIES PVT. LTD. UPPER GROUND FLOOR, A-8,GOLCHA TRADE CENTRE, M.I. ROAD, JAIPUR CUKE VS. THE DCIT CIRCLE 2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 6213 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 407/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 THE DCIT CIRCLE 2 JAIPUR CUKE VS. M/S. MAN PRAKASH TALKIES PVT. LTD. UPPER GROUND FLOOR, A-8,GOLCHA TRADE CENTRE, M.I. ROAD, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 6213 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 2 C.O. NO. 12/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 407/JP/2018) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 M/S. MAN PRAKASH TALKIES PVT. LTD. UPPER GROUND FLOOR, A-8,GOLCHA TRADE CENTRE, M.I. ROAD, JAIPUR CUKE VS. THE DCIT CIRCLE 2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 6213 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA, CIT-DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI H.M. SINGHVI, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20/12/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 20 /02/2020 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE REVENUE AND EQUAL NUMBERS OF CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-1, JAIPUR BOTH DATED 25-01-2018 FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 RESPECTIVELY. 2.1 FIRST OF ALL, WE TAKE UP THE APPEAL OF THE REVE NUE FOR ADJUDICATION WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUND S IN ITA NO. 406/JP/2018 FOR THE A.Y. 2008-09 (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN QUASHIN G THE RE- ASSESSMENT PROCEEDINGS WITHOUT APPRECIATING THE FAC TS THAT ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 3 MERE OMISSION OF SOME WORDS DOES NOT QUASH THE ENTI RE PROCEEDINGS. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN APPRECIATING THE LAW LAID DOWN BY THE HON'BLE SUPRE ME COURT IN THE CASE OF M.V. VALI PERO VS FERNANDEO LOPEX, AIR 1989 (SC) 2206 WHEREIN IT HAS BEEN HELD THAT TH E OUTCOME AD FAIRNESS OF THE PROCEDURE HAVE BEEN FORW ARDED, THERE IS NO REASON TO DISCARD THE RESULT SIMPLY BEC AUSE CERTAIN DETAILS WHICH HAVE NOT PREJUDICIALLY AFFECTED THE R ESULT HAVE BEEN INADVERTENTLY OMITTED IN A PARTICULAR CASE. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED WIT HOUT APPRECIATING THAT THE ASSESSEE MADE TRANSFER AS PER SECTION 2(47) OF THE ACT WHILE MAKING TREATMENT OF ITS CAPI TAL ASSET I.E. LAND OF CINEMA HALL INTO STOCK IN TRADE OF THE BUSINESS OF SELLING OF SHOPS U/S 45(2) OF THE ACT 3.1 THE GROUND NO. 1 AND 2 OF THE REVENUE ARE REGAR DING REOPENING OF THE ASSESSMENT WHICH WAS QUASHED BY LD. CIT(A) ON T HE GROUND THAT THE SAME IS HIT BY THE PROVISO TO SECTION 147 OF THE AC T AND THE AO HAS REOPENED THE ASSESSMENT AFTER 04 YEARS WITHOUT ANY NEW MATERIAL OR INFORMATION SO AS TO HOLD THAT THE ASSESSEE HAS FA ILED TO DISCLOSE FULLY AND TRULY ALL THE FACTS NECESSARY FOR ASSESSMENT. 3.2 THE ASSESSEE IS PRIVATE LIMITED COMPANY AND WAS EARLIER ENGAGED IN THE BUSINESS OF EXHIBITING FILMS IN THE CINEMA H ALL KNOWN AS MAN PRAKASH. IN THE F.Y. 1999-2000, THE ASSESSEE DECIDE D TO DISMANTLE THE CINEMA HALL BUILDING AND TO DEVELOP A COMMERCIAL CO MPLEX ON THE LAND. ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 4 THE ASSESSEE ALSO OBTAINED THE PERMISSION FROM JAIP UR DEVELOPMENT AUTHORITY (FOR SHORT JDA) FOR CHANGE OF USE OF THE LAND FROM CINEMA HALL TO MULTISTORIED COMMERCIAL COMPLEX COMPRISING OF SHOPS, SHOWROOMS AND OTHER COMMERCIAL SPACE. THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT DATED 12-12-2001 WITH M/S. G OLCHA BUILDTECH PVT. LTD. (FOR SHORT GBT). AS PER TERMS AND CON DITIONS OF THE SAID AGREEMENT , THE ASSESSEE HAS CONTRIBUTED THE LAND T O THE PROJECT WHEREAS THE DEVELOPER HAS AGREED TO BEAR ALL THE COSTS OF C ONSTRUCTIONS INCLUDING OBTAINING THE NECESSARY APPROVALS AND PERMISSIONS F ROM THE LOCAL AUTHORITIES. THE PARTIES HAVE AGREED TO HAVE 50% 50% SHARES IN THE CONSTRUCTED COMMERCIAL COMPLEX AND WERE FREE TO SEL L THE SAME. THE ASSESSEE ALSO RECEIVED INTER ALIA A SUM OF RS. 2.00 CRORES AS ON THE DATE OF AGREEMENT WHICH IS NON-REFUNDABLE. THE COMMERCIAL C OMPLEX WAS COMPLETED DURING THE YEAR UNDER CONSIDERATION AND T HERE WAS SALE OF SHOPS AND SHOWROOMS BY THE ASSESSEE. THE ASSESSEE F ILED ITS RETURN OF INCOME ON 29-03-2010 AS BELATED RETURN U/S 139 OF T HE ACT AND DECLARED THE TOTAL INCOME AT RS. 2,00,29,760/-. THE ASSESSME NT WAS COMPLETED U/S 143(3) OF THE ACT ON 3-12-2010 WHEREBY THE AO ACCE PTED THE RETURNED INCOME OF THE ASSESSEE. THEREAFTER THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT ON 31-03-2015. IN RESPONSE, THE ASSESSEE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 5 VIDE LETTER DATED 18-05-2015 SUBMITTED THAT RETURN OF INCOME FILED ON 29- 03-2010 SHOULD BE TREATED AS RETURNED INCOME FILED IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT. THE AO COMPLETED THE REA SSESSMENT ON 30-03- 2016 WHEREBY ADDITION ON ACCOUNT OF LONG TERM CAPIT AL GAIN OF RS. 9,69,04,854/- U/S 45(2) OF THE ACT WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. THE AO HAS ALSO ASSESSED THE BUSINESS INC OME OF THE ASSESSEE AT RS. 2,32,10,026/- AS AGAINST BUSINESS INCOME DECLA RED BY THE ASSESSEE AT LOSS (-) OF RS. 1,80,968/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND ALSO RAISED THE OBJECTION AGAINST THE VALIDITY OF THE REOPENING OF THE ASSESSMENT. THE LD. CIT(A) DEC IDED THE ISSUE OF REOPENING OF THE ASSESSMENT IN FAVOUR OF THE ASSESS EE AND QUASHED THE REOPENING OF THE ASSESSMENT. THE LD. CIT(A) ALSO DE CIDED THE ISSUE OF ASSESSMENT OF LONG TERM CAPITAL GAIN U/S 45(2) OF T HE ACT IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THERE WAS NO CONVERSIO N OF CAPITAL ASSET INTO STOCK IN TRADE BY VIRTUE OF DEMOLITION OF CINEMA HA LL BUILDING AND CONVERSION OF LAND USE AS WELL AS ENTERING INTO DEV ELOPMENT AGREEMENT DATED 12-12-2001 WITH GBT. SINCE REOPENING OF THE A SSESSMENT WAS QUASHED BY THE LD. CIT(A), THEREFORE, OTHER GROUNDS RAISED BY THE ASSESSEE AGAINST THE VALIDITY OF THE REASSESSMENT ORDER ON THE GROUND OF PROPER SERVICE OF NOTICE U/S 148 OF THE ACT WAS NOT ADJUDI CATED UPON BY THE LD. ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 6 CIT(A). THUS AGGRIEVED BY THE ORDER OF THE LD. CIT( A), THE REVENUE HAS FILED THIS APPEAL AND THE ASSESSEE HAS FILED THE C. O. ON THE ISSUE OF VALIDITY OF SERVICE OF NOTICE U/S 148 OF THE ACT. 3.3 THE LD. DR HAS SUBMITTED THAT THE LD. CIT(A) HA S QUASHED THE REASSESSMENT BY HOLDING THAT THE SAME IS HIT BY THE PROVISO TO SECTION 147 OF THE ACT WITHOUT CONSIDERING THE RELEVANT FACTS W HICH WERE SUBSEQUENTLY DETECTED BY THE DEPARTMENT AS WELL AS BY THE AO BY CONDUCTING AN ENQUIRY AND ON THE BASIS OF OUTCOME OF SUCH ENQUIRY AND THE FACTS POINTED OUT BY THE AUDIT TEAM/ DEPARTMENT, THE AO HAS FORME D BELIEF THAT INCOME ASSESSABLE TO TAX BEING LONG TERM CAPITAL GA IN IN PURSUANCE OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE, HA S ESCAPED ASSESSMENT. THE LD. DR HAS POINTED OUT THAT THERE WAS DETAILED ENQUIRY CONDUCTED BY THE AUDIT TEAM AND AUDIT OBJECTION, POINTING OUT TH E FACT THAT THE ASSESSEE HAS ACTUALLY CONVERTED ITS CAPITAL ASSET INTO STOCK IN TRADE BY CONVERTING THE LAND USE AFTER DEMOLITION OF CINEMA HALL BUILDI NG AND ENTERED INTO A DEVELOPMENT AGREEMENT FOR CONSTRUCTION OF MULTISTOR IED COMMERCIAL COMPLEX. THEREFORE, THE PROVISIONS OF SECTION 45(2) ARE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. AFTER RECEIPT OF AUD IT OBJECTIONS , THE AO HAS ALSO CONDUCED THE ENQUIRY BY ISSUING NOTICES / LETT ERS DATED 01-09-2014 AS WELL AS 25-09-2014 U/S 133(6) OF THE ACT . THUS THE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 7 INFORMATION GATHERED BY THE AO FROM THE AUDIT OBJEC TION AS WELL AS THROUGH ENQUIRY CONDUCTED, CONSTITUTES THE TANGIBLE MATERIAL TO FORM THE BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED AS SESSMENT. THE LD. DR FURTHER CONTENDED THAT THE LD. CIT(A) HAS FAILED TO IGNORE THESE FACTS WHILE ARRIVING TO THE CONCLUSION THAT REOPENING OF THE AS SESSMENT IS BASED ON SAME FACTS AND MATERIAL ALREADY AVAILABLE IN THE AS SESSMENT RECORD. THUS THE LD. DR HAS SUBMITTED THAT ORDER PASSED BY THE L D. CIT(A) IGNORING THE RELEVANT MATERIAL FACTS IS NOT SUSTAINABLE IN LAW. THE LD. DR HAS REFERRED TO REASONS RECORDED BY THE AO AS WELL AS THE AUDIT OBJECTION AND SUBMITTED THAT THERE WAS A TANGIBLE MATERIAL WHICH CAME TO THE KNOWLEDGE OF THE AO TO SHOW THAT THE ASSESSEE HAD CONVERTED T HE CAPITAL ASSET INTO STOCK IN TRADE AND THEREBY THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. 3.4 ON THE OTHER HAND, THE LD.AR HAS SUBMITTED THA T DURING THE COURSE OF ORIGINAL SCRUTINY ASSESSMENT, THE AO HAD ISSUED THE NOTICE U/S 142(1) ON 23-09-2010 CALLING INFORMATION FROM THE ASSESSEE . IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED LETTER DATED 4 TH OCT. 2010 AND FURNISHED ALL THE RELEVANT INFORMATION SOUGHT BY THE AO REGARDING CAPITAL GAINS ARISING FROM TRANSFER OF LAND IN QUESTION AS WELL AS THE SA LE OF THE SHOPS. THE ASSESSEE IN THE RETURN OF INCOME HAS CLEARLY DECLAR ED THE LONG TERM ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 8 CAPITAL GAIN ON ACCOUNT OF TRANSFER OF LAND IN QUES TION AND SHORT TERM CAPITAL GAIN ON ACCOUNT OF SALE OF SHOPS IN THE COM MERCIAL COMPLEX. THEREFORE, THE ASSESSEE FURNISHED ALL THE RELEVANT DETAILS AND MATERIALS WHICH WERE NECESSARY FOR ASSESSMENT AND CONSEQUENTL Y THE REOPENING OF THE ASSESSMENT AFTER 04 YEARS FROM THE END OF THE A SSESSMENT YEAR UNDER CONSIDERATION IS NOT VALID WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR ASSESSMENT. THE LD.AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO ON THE SATISFACTION OF THE REPLY FILED BY THE ASSESSEE HAS ACCEPTED THE RETURNED INCOME, WHILE PASSING THE ASSESSMENT ORDER DATED 03 -12-2010. IN SUPPORT OF HIS CONTENTIONS, THE LD.AR OF THE ASSESSEE RELIE D ON FOLLOWING DECISIONS. (I) RITU INVESTMENTS LTD. VS DCIT 51 DTR 162 (DEL.) (II) CIT VS EICHER LTD. (2007) 294 ITR 310 (DEL.) (III) CIT VS KELVINATOR INDIA LTD, 256 ITR 1 (DEL.) (IV) CIT VS JET SPEED AUTO (P) LTD. (2015) 372 ITR 762 (BOM.) (V) CIT VS BHANJI LAVJI (1972) 79 ITR 582 (SC) THUS THE LD.AR OF THE ASSESSEE SUBMITTED THAT REOPE NING OF ASSESSMENT BASED ON CHANGE OF OPINION IS NOT VALID AS THE AO H AS NO JURISDICTION TO INITIATE PROCEEDINGS U/S 147/148 OF THE ACT TO CORR ECT THE ERROR OF ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 9 JUDGEMENT WHILE PASSING THE ORIGINAL ASSESSMENT ORD ER. THUS THE LD.AR OF THE ASSESSEE SUPPORTED THE IMPUGNED ORDER OF THE LD . CIT(A). 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE ON THE FACTS THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 3 -12-2010 WHEREBY THE AO HAS ACCEPTED THE RETURN OF INCOME OF THE AS SESSEE. THE AO ISSUED NOTICE U/S 148 OF THE ACT ON 31-03-2015 WHICH IS C LEARLY AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR UNDE R CONSIDERATION. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING O F THE ASSESSMENT ON THE GROUND THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR ASSESSM ENT AND CONSEQUENTLY THE PROVISO TO SECTION 147 IS APPLICABLE. THE ASSES SEE ALSO REFERRED TO THE NOTICE ISSUED BY THE AO U/S 142(1) OF THE ACT AND R EPLY THERETO. IT IS PERTINENT TO NOTE THAT THE AO WHILE PASSING THE ORI GINAL ASSESSMENT U/S 143(3) OF THE ACT ON 3-12-2010 HAS TAKEN UP THE ISS UE IN THE SCRUTINY ONLY REGARDING THE INTEREST INCOME FROM THE BUSINESS OF LOANS AND ADVANCES. THEREFORE, THE BARE READING OF THE ASSESSMENT ORDER DATED 3-12-2010 DOES NOT REVEAL THAT ANY ENQUIRY WAS CONDUCTED BY THE AO ON THE ISSUE OF NATURE OF INCOME ARISING FROM THE ARRANGEMENT OF DE VELOPMENT OF COMMERCIAL COMPLEX AFTER DEMOLITION OF CINEMA HALL BUILDING ON THE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 10 LAND IN QUESTION. FOR READY REFERENCE, WE REPRODUCE THE ASSESSMENT ORDER DATED 3-12-2010 PASSED U/S 143(3) AS UNDER:- THE ASSESSEE E-FILED RETURN OF INCOME WITHOUT DIGIT AL SIGNATURES FOR ASSESSMENT YEAR 2008-09 ON 29.03.201 0, WHICH WAS SUBSEQUENTLY PHYSICALLY FILED WITH 'THE DEPARTMENT ON 06.04.2010 DECLARING INCOME OF RS. 2,00,29,760.00.THE RETURN O F INCOME WAS PROCESSED U/S 143 (1) AND WAS PICKED UP FOR SCRUTIN Y BY ISSUING NOTICE U/S 143 (2) OF THE I.T. ACT,1961. THE JURISDICTION OVER THIS CASE HAS BEEN ASSIGNED FROM THE ASSTT. COMMISSIONER OF INCOM E-TAX, CIRCLE-2, JAIPUR TO THE, UNDERSIGNED (ASSTT. COMMISSIONER OF INCOME-TAX (OSD), UNDER THE ADMINISTRATIVE CENTRAL OF ADDL. CIT, RANG E-2, JAIPUR) BY THE COMMISSIONER OF INCOME-TAX, JAIPUR-I IN EXERCISE OF POWER CONFERRED BY SUB-SECTION (1) OF SECTION 127 OF THE INCOME-TAX ACT, 1961 VIDE HIS ORDER NO. CIT-I / ITO (HORS) / JPR / U/S 127 (1) / 2010-11 / 302 DATED 15/10/2010. IN COMPLIANCE TO THE STATUTORY NO TICES SHRI. R. C. VERMA, C. A. & A. R. ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED NECESSARY DETAILS / INFORMATION / DOCUMENTS E TC. AS REQUIRED AND PRODUCED BOOKS OF ACCOUNTS WHICH WERE EXAMINED ON T EST ON THE BASIS AND THE CASE WAS DISCUSSED WITH HIM. THE ASSESSEE IS A PRIVATE LIMITED COMPANY HAVING IN COME FROM INTEREST, DIVIDEND, LONG TERM AND SHORT TERM CAPITA L GAIN ON SHARES, CAPITAL GAIN ON SALE OF SHOPS ETC. DURING THE COURSE OF SCRUTINY IT WAS REVEALED THAT THE ASSESSEE IS DOING THE BUSINESS OF ADVANCING LOANS TO PARTIES AND YIELDING INTEREST INCOME THEREON. DURING THE YEAR UNDER, CON SIDERATION THE ASSESSEE HAD EARNED AN INTEREST INCOME OF RS. 57,48 ,187.57 WHICH IS DULY REFLECTED IN THE PROFIT AND LOSS ACCOUNT OF TH E ASSESSEE. AS SUCH THE TURNOVER OF THE ASSESSEE GOT EXCEEDED THE LIMIT PRESCRIBED BY THE SECTION 44AB OF INCOME TAX ACT, 1961. THE ASSESSEE HAD NOT FURNISHED THE TAX AUDIT REPORT AS REQUIRED BY SECTION 44AB OF THE INCOME TAX ACT, 1961. AS SUCH I AM SATISFIED THAT THE PENALTY PROVISIONS UNDER SECTION 271B OF INCOME TAX ACT, 1961 ARE APPLICABLE AGAINST THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271B OF THE INCO ME TAX ACT, 1961 ARE INITIATED SEPARATELY. IT WAS FURTHER NOTICED DURING THE COURSE OF SCRUTIN Y THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 29.03.20 10 AND WAS HAVING A TAXABLE INCOME FOR THE RELEVANT ASSESSMENT YEAR. BY VIRTUE TO THIRD PROVISO TO SECTION 139(1) OF INCOME TAX ACT, 1961 T HE ASSESSEE WAS REQUIRED TO FILE ITS RETURN OF INCOME ON OR BEFORE 30 TH SEPTEMBER, 2008 BUT THE ASSESSEE HAD FILED RETURN BELATEDLY. THEREF ORE I AM SATISFIED THAT ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 11 THE PENALTY PROVISIONS UNDER SECTION 271F OF INCOME TAX ACT, 1961 ARE APPLICABLE AGAINST THE ASSESSEE. PENALTY PROCEEDING S U/S. 271F OF THE INCOME TAX ACT, 1961 ARE INITIATED SEPARATELY. AFTER DISCUSSION RETURNED INCOME IS ACCEPTED. ASSESSED AT RS. 2,00,29,760.00. ISSUE DEMAND NOTICE AND CHALLAN. ISSUE NECESSARY FORMS. ITNS 150 IS PART OF THIS ORDER. PE NALTY PROCEEDINGS UNDER SECTION 271B AND 271F ARE BEING INITIATED SEPARATEL Y. SD/- (K.C. GUPTA) ASSTT. COMMISSIONER OF INCOME TAX (OSD),JAIPUR ON PERUSAL OF THE ABOVE SCRUTINY ASSESSMENT ORDER D ATED 3-12-2010, IT IS CLEAR THAT THE AO HAS TAKEN UP ONLY TWO ISSUES OF N OT FURNISHING TAX AUDIT REPORT AS REQUIRED U/S 44AB OF THE ACT AND FILING B ELATED RETURN OF INCOME AND CONSEQUENTLY INITIATED PENALTY PROCEEDINGS U/S 271B AND 271F OF THE ACT RESPECTIVELY. APART FROM THESE TWO ISSUES, THE AO HAS NOT MADE ANY REFERENCE TO ANY REPLY FILED BY THE ASSESSEE. THUS IT IS MANIFEST FROM THE SAID ASSESSMENT ORDER THAT THE AO HAS NOT CONDUCTED THE BARE MINIMUM ENQUIRY ON THE ISSUE OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE. IT IS A VERY BRIEF AND CRYPTIC ASSESSMENT ORDER PASSED SU MMARILY. FROM THE SAID ASSESSMENT ORDER, IT REVEALS THAT THE AO HAS N OT TAKEN UP ANY ISSUE FOR THE SCRUTINY ASSESSMENT OR APPLIED HIS MIND ON THE ISSUE OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE AND THEREBY, R ESULTING THE INCOME OF LONG TERM CAPITAL GAIN. THUS THE SAID ORDER DOES NO T EXHIBIT ANY THOUGHT ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 12 PROCESS OF THE AO ON THE ISSUE. WE FURTHER NOTE THA T IN THE CASE IN HAND AFTER SCRUTINY ASSESSMENT ORDER PASSED DATED 3-12-2 010, THERE WAS AN AUDIT OBJECTION GIVING ELABORATE POINT WISE FACTUAL DETAILS REGARDING THE ISSUE OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE AS RESULT OF CONVERTING THE LAND USE AND ENTERING INTO A DEVELOP MENT AGREEMENT FOR CONSTRUCTION OF MULTISTORIED COMMERCIAL COMPLEX ON THE LAND. THE AUDIT PARTY HAS CONDUCTED A THOROUGH ENQUIRY OF RELEVANT FACTS PERTAINING TO THE ENTIRE EXERCISE OF CONVERSION OF LAND USE FROM CINE MA HALL BUILDING TO DEVELOPMENT OF COMMERCIAL COMPLEX. WE FURTHER NOTE THAT THE AO HAS ALSO CONDUCTED AN ENQUIRY BY ISSUANCE OF NOTICES U/ S 133(6) DATED 01-09- 2014 AND 25-09-2014 WHICH ARE NOT IN DISPUTE. THE ASSESSEE HAS ALSO RESPONDED TO THOSE NOTICES BY FILING THE REPLY DATE D 7-10-2014. ALL THESE DOCUMENTS ARE PART OF THE PAPER BOOK FILED BY THE A SSESSEE. THEREFORE, THE QUESTION ARISES WHETHER THE FACTS POINTED OUT BY TH E AUDIT PARTY AS WELL AS ENQUIRY CONDUCTED BY THE AO BY ISSUING NOTICES U/S 133(6) OF THE ACT CONSTITUTE A TANGIBLE MATERIAL REVEALING THE FACTS WHICH WERE NOT DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED U/S 1 39 OF THE ACT AS WELL AS DURING THE ORIGINAL SCRUTINY ASSESSMENT. AS FAR AS SCRUTINY ASSESSMENT PROCEEDINGS ARE CONCERNED, WE HAVE ALSO DISCUSSED T HIS ASPECT IN THE FOREGOING PART OF THIS ORDER AND NOTED THAT THE AO HAS NOT EVEN TAKEN UP ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 13 ANY SUCH ISSUE FOR SCRUTINY. FURTHER NO REFERENCE W AS MADE BY THE AO TO THE ALLEGED REPLY FILED BY THE ASSESSEE WHICH ARE T HE BASIS FOR RAISING OBJECTION AGAINST THE VALIDITY OF REOPENING OF THE ASSESSMENT. IN ORDER TO VERIFY THIS FACT, THE BENCH DIRECTED THE LD. DR TO FILE COPIES OF THE NOTE SHEET OF THE ORIGINAL SCRUTINY ASSESSMENT. WE FIND THAT THE PROCEEDINGS UPTO 8-10-2010 WERE CONDUCTED BY THE ACIT, CIRCLE 2, JAIPUR AND THEREAFTER THE JURISDICTION OF THE CASE WAS TRANSFE RRED TO ACIT (OSD) JAIPUR VIDE ORDER DATED 15-10-2010 BY CIT (HQ.) PAS SED U/S 127(1) OF THE ACT. AFTER TRANSFER OF THE CASE TO ACIT (OSD), NO F URTHER ENQUIRY WAS CONDUCTED BUT THE ASSESSMENT ORDER WAS PASSED ACCEP TING THE RETURNED INCOME. THEREFORE, THE QUESTION OF CONDUCTING ANY E NQUIRY ON THIS ISSUE DOES NOT ARISE THE LD. CIT(A) HAS DECIDED THIS ISSU E BY PRESUMING THE FACT THAT NO NEW FACTS WERE BROUGHT TO THE KNOWLEDGE OF THE AO AFTER COMPLETING THE SCRUTINY ASSESSMENT U/S 143(3) OF TH E ACT. THE RELEVANT CONCLUDING PARAS NOS. (XII) AND (XIII) OF LD. CIT( A)S ORDER ON THIS ISSUE ARE AS UNDER:- (XII) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION A ND LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE C ASE, IT IS HELD THAT THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT BY THE AO FOR THE YEAR UNDER CONSIDERATION WAS NOT IN CONFORMITY WITH THE PROVISIONS OF SECTION 147 OF THE ACT. FURTHER, THE ASSESSMENT WAS REOPENED AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, WHICH WAS EARLIER COMPLETED U/S 143(3) OF THE ACT, THEREFORE, PROVISO TO THE SECTION 147 OF THE ACT IS CLEARLY APPLICABLE TO THE FACTS OF TH E INSTANT CASE UNDER ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 14 CONSIDERATION. THE AO HAS NEITHER STATED THAT THERE WAS DEFAULT ON THE PART OF THE APPELLANT TO DISCLOSE MATERIAL FACTS TR ULY AND FULLY, WHICH ARE NECESSARY FOR ITS ASSESSMENT NOR IT IS DISCERNI BLE FROM THE REASONS RECORDED BY THE AO. FURTHER, THE AO HAS NOT STATED IN THE REASONS RECORDED FOR REOPENING THE CASE OF THE APPELLANT, W HAT MATERIAL FACTS WERE NOT DISCLOSED BY THE APPELLANT AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. (XIII) THEREFORE, IT COULD BE CONCLUDED THAT THE RE ASSESSMENT PROCEEDINGS UNDER CONSIDERATION WERE INITIATED ON T HE BASIS OF RE- APPRECIATION OF THE SAME SET OF FACTS AVAILABLE ON RECORD AND IS NOTHING BUT MERELY CHANGE OF OPINION WHICH COULD NO T BE ALLOWED IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCEMENTS AS DISC USSED EARLIER IN THIS ORDER. FURTHER, SINCE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE REASSESSMENT PROCEEDINGS WERE INITIATED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSES SMENT YEAR, THE PROVISO TO SECTION 147 OF THE ACT IS ALSO APPLICABL E. FURTHER, THERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE , TRULY AND FULLY ALL MATERIAL FACTS, WHICH ARE NECESSARY, FOR ITS ASSESS MENT FOR THE YEAR UNDER CONSIDERATION AT THE TIME OF ORIGINAL ASSESSM ENT PROCEEDINGS, IT IS HELD THAT THE CONDITIONS REQUIRED FOR INITIATION OF REASSESSMENT PROCEEDINGS, AS STIPULATED IN THE PROVISO TO SECTION 147 OF THE ACT WERE NOT SATISFIED. HENCE, IN VIEW OF THE ABOVE DISCUSSION, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE REAS SESSMENT PROCEEDINGS INITIATED BY THE AO UNDER CONSIDERATION WERE BAD IN LAW AND CONSEQUENTLY, THE ASSESSMENT ORDER BASED ON SUCH BAD INITIATION CANNOT BE ALLOWED TO BE SUSTAINED AN D THUS, HEREBY QUASHED. TO AVOID UNNECESSARY BURDENING OF THE ORDER, WE HAV E REPRODUCED ONLY THE CONCLUDING PART OF THE FINDINGS OF THE LD. CIT(A). HOWEVER, WE HAVE CAREFULLY PERUSED THE ENTIRE FINDI NGS OF THE LD. CIT(A) QUA THIS ISSUE AND FOUND THAT THE LD. CIT(A) HAS DECIDED THIS ISSUE BY PRESUMING THE FACT THAT REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF RE-APPRECIATION OF T HE SAME SET OF ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 15 FACTS AVAILABLE ON RECORD AND IS NOTHING BUT MERELY CHANGE OF OPINION WHEREAS THE FACTS REGARDING THE AUDIT OBJEC TIONS POINTING OUT CERTAIN FACTS BASED ON THE ENQUIRY AS WELL AS T HE ENQUIRY CONDUCTED BY THE AO BY ISSUING NOTICES U/S 133(6) O F THE ACT WERE NOT CONSIDERED BY THE LD. CIT(A). THEREFORE, IGNORI NG THE RELEVANT FACTS WHICH ARE NECESSARY TO ARRIVE TO THE CONCLUSI ON WHETHER SUBSEQUENT ENQUIRY AND AUDIT OBJECTION WOULD CONSTI TUTE A TANGIBLE MATERIAL TO FORM THE BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT, WOULD RENDER THE IMPUGNED ORDER OF THE LD. CIT(A) AS NOT SUSTAINABLE. ACCORDINGLY, IN THE FACT S AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE LD. CIT(A) TO RE-ADJUDICATE THE SAME AFTER CON SIDERING THE AUDIT OBJECTION AS WELL AS ENQUIRY CONDUCTED BY THE AO BY ISSUING NOTICES U/S 133(6) OF THE ACT. NEEDLESS TO SAY THAT THE REVENUE BE GIVEN APPROPRIATE OPPORTUNITY OF HEARING OF APPEAL BEFORE PASSING THE FRESH ORDER. THUS GROUND NO. 1 AND 2 OF THE REVENU E ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 16 4.1 THE GROUND NO. 3 OF THE REVENUE IS REGARDING TH E ADDITION MADE BY THE AO U/S 45(2) OF THE ACT ON ACCOUNT OF CONVER SION OF CAPITAL ASSET INTO STOCK IN TRADE WHICH WAS DELETED BY THE LD. CI T(A). 4.2 THE LD. DR HAS SUBMITTED THAT WHEN THE ASSESSEE WAS HAVING THE BUSINESS ASSETS IN THE FORM OF CINEMA HALL AND WAS ENGAGED IN EXHIBITING THE FILMS THEN THE DECISION TAKEN BY THE ASSESSEE T O DISCONTINUE THE EARLIER BUSINESS BY DISMANTLING THE CINEMA HALL BUILDING AN D CONVERTING THE LAND USE FOR DEVELOPMENT OF COMMERCIAL COMPLEX AMOUNTS T O CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE. THE LD. DR FURTH ER CONTENDED THAT IN THE YEAR 2000-01, THE ASSESSEE HAD ENTERED INTO AN AGRE EMENT DATED 12-12- 2001 WHICH WAS A CLEAR DECISION OF CESSATION OF CAP ITAL ASSET AND CONVERTING THE SAME TO STOCK IN TRADE IN THE FORM O F COMMERCIAL COMPLEX TO BE SOLD BY THE ASSESSEE. THE LD. DR FURTHER SUBM ITTED THAT EVEN AT THE TIME OF ENTERING INTO THE AGREEMENT, THE ASSESSEE H AS RECEIVED THE CONSIDERATION WHICH IS NON-REFUNDABLE AND THEREFORE , THE INTENTION OF THE PARTIES TO USE THE LAND IN QUESTION AS STOCK IN TRA DE IS MANIFEST FROM THE TERMS AND CONDITIONS OF THE DEVELOPMENT AGRE EMENT. THE LD. DR THUS RELIED ON THE ORDER OF THE AO AND SUBMITTED TH AT ALL THESE UNDISPUTED FACTS ESTABLISH THE CONVERSION OF CAPITAL ASS ET INTO STOCK IN TRADE AND THEREFORE, AS PER PROVISIONS OF SECTION 45(2 ) OF THE ACT WHEN THE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 17 ASSESSEE HAS FINALLY SOLD THE SHOPS AND SHOWROOMS I N THE COMMERCIAL COMPLEX THEN THE PROFIT FROM SAID TRANSACTIONS OF S ALE SHALL HAVE TWO COMPONENTS, ONE IS CAPITAL GAIN IN RESPECT OF CONVE RSION OF LAND FROM CAPITAL ASSET INTO STOCK IN TRADE AND ANOTHER IS BU SINESS INCOME BY SALE OF THE STOCK IN TRADE. THEREFORE, THE AO HAS RIGHTLY A SSESSED THE INCOME OF THE ASSESSEE UNDER TWO HEADS, ONE IS LONG TERM CAPI TAL GAIN AND ANOTHER IS BUSINESS FROM SALE OF SHOPS AS WELL AS OTHER COM MERCIAL SPACE. THE LD. CIT(A) HAS GIVEN THE FINDINGS IGNORING ALL THESE FA CTS EMERGING FROM THE RECORD THAT THE ASSESSEE HAS DECIDED TO STOP THE BU SINESS OF EXHIBITING THE FILMS AND DEMOLISH THE CINEMA HALL BUILDING AND THE REBY CONVERTED THE CAPITAL ASSET INTO STOCK IN TRADE TO EARN THE PROFI T FROM THE ACTIVITIES OF DEVELOPMENT OF COMMERCIAL COMPLEX AND SALE OF THE S AME WHICH IS NOTHING BUT ENDURING IN NATURE. 4.3 ON THE OTHER HAND, THE LD. AR FURTHER SUBMITTED THAT CONSTRUCTION OF COMMERCIAL COMPLEX ON THE LAND ON WHICH CINEMA HALL WAS BUILT REMAINED AS CAPITAL ASSET. THE CHANGE IN USE OF THE LAND FROM CINEMA HALL TO COMMERCIAL COMPLEX DOES NOT TANTAMOUNT THE CONVE RSION INTO STOCK IN TRADE. THE LAND REMAINED AS CAPITAL ASSET BECAUSE THE ASSESSEE HAS SHOWN THE SAME AS CAPITAL ASSET IN THE BOOKS OF ACCOUNT. THEREFORE, THE PROVISIONS OF SECTION 45(2) CANNOT BE INVOKED WHEN THE ASSESSEE HAS NOT ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 18 CONVERTED THE LAND IN QUESTION INTO STOCK IN TRADE. IN THE BALANCE SHEET AS ON 31-03-2007, THE ASSESSEE HAS SHOWN THE LAND AS W ELL AS SHOPS/ OFFICES UNDER THE HEAD INVESTMENT. SIMILARLY, IN THE BALANC E SHEET AS ON 31-03- 2001, THE CINEMA HALL BUILDING WAS SHOWN AS FIXED A SSET. THE ACTIVITIES OF THE ASSESSEE OF CONSTRUCTION OF COMMERCIAL COMPLEX AND SALE OF SHOPS/ OFFICES ARE NOT IN THE NATURE OF TRADE OR BUSINESS BUT IT IS IN THE NATURE OF CAPITAL ASSET. SECTION 45(2) OF THE ACT IS APPLIC ABLE IN A SITUATION WHERE THERE IS TRANSFER BY WAY OF CONVERSION BY OWNER OF CAPITAL ASSET INTO STOCK IN TRADE OF BUSINESS OR THE OWNER HAS TREATED SUCH CAPITAL ASSET AS STOCK IN TRADE OF BUSINESS. THEREFORE, TO ATTRACT THE PROVIS IONS OF SECTION 45(2), THERE MUST BE A POSITIVE ACT ON THE PART OF THE OWN ER TO TRANSFER THE ASSET BY WAY OF CONVERSION INTO STOCK IN TRADE OR TREATIN G SUCH CAPITAL ASSET AS STOCK IN TRADE OF BUSINESS. IN THE ABSENCE OF SUC H POSITIVE ACT ON THE PART OF THE OWNER OF THE CAPITAL ASSET, THE PROVISION OF SECTION 45(2) DOES NOT APPLY. THERE IS NO SUCH MATERIAL IN THIS REGARD ON RECORD TO SHOW THAT THE ASSESSEE HAS TRANSFERRED THE CAPITAL ASSET BY CONVE RSION OF THE SAME INTO STOCK IN TRADE OR HAS TREATED SUCH CAPITAL ASSET AS STOCK IN TRADE OF BUSINESS. IN SUPPORT OF HIS CONTENTIONS, THE LD.AR OF THE ASSESSEE RELIED ON FOLLOWING DECISIONS. ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 19 (I) CIT VS EXPRESS NEWS PAPERS LTD , 53 ITR 250 (SC) (II) CIT VS MOHAN, SOHAN KHAN 304 ITR 194 (RAJ.) (III) CIT VS SURESH CHAND GOYAL, 298 ITR 277 (M.P.) (IV) CIT VS MLM MAHALINGAM CHETTIAR. 107 ITR 236 (MAD.) (V) CIT VS PAI PROVISION STORES,203 TAXMAN 196 (KAR.) (VI) AMRIT CORP LTD. VS ADDL. CIT THE LD.AR OF THE ASSESSEE THUS SUPPORTED THE IMPUGN ED ORDER OF THE LD. CIT(A). 4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT BUSIN ESS OF EXHIBITING FILMS IN THE CINEMA HALL WAS CEASED TO EXIST WHEN THE ASS ESSEE DECIDED TO DEMOLISH THE BUILDING AND CONVERTED THE LAND USE FO R DEVELOPMENT OF COMMERCIAL COMPLEX. IN ORDER TO DEVELOP THE COMMERC IAL COMPLEX ON THE LAND, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREE MENT DATED 12-12- 2001 WITH GBT. THE ASSESSEE ALSO OBTAINED THE PERMI SSION TO CHANGE THE LAND USE FROM CINEMA HALL TO COMMERCIAL COMPLEX WHI CH ESTABLISHES THE INTENTION OF THE ASSESSEE NOT TO USE THE LAND IN QU ESTION FOR ITS ERSTWHILE BUSINESS OF EXHIBITING FILMS. TO ASCERTAIN THE TRUE AND REAL INTENTIONS OF THE PARTIES TO THE DEVELOPMENT AGREEMENT DATED 12-1 2-2001, IT IS ESSENTIAL TO CONSIDER VARIOUS CLAUSES OF THE SAID A GREEMENT. THE PURPOSE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 20 AND OBJECT OF THE CONVERSION OF LAND USE FOR DEVELO PMENT OF MULTISTORIED COMMERCIAL COMPLEX IS STATED IN CLAUSE 2 OF THE REC ITAL OF THE AGREEMENT AS UNDER:- 2. WHEREAS LOOKING TO THE DEMAND FOR SHOWROOM AND OFFICES IN MULTISTORIED BUILDINGS SITUATED AT A GOO D LOCATION, OWNER HEREIN DECIDED TO DEVELOP A MULTISTORIED COMM ERCIAL COMPLEX ON THE SAID PLOT OF LAND IN ACCORDANCE WITH THE RULES, REGULATION AND BUILDING BYE LAWS OF THE LOCA L AUTHORITIES, AND THE STATE GOVERNMENT. THUS THE ASSESSEE DECIDED TO DEVELOP THE MULTISTORI ED COMMERCIAL COMPLEX ON THE SAID PLOT OF LAND TO CATER THE DEMAN D OF OFFICES/ SHOWROOMS IN THE MULTISTORIED BUILDING AT GOOD LOCA TION. THE CLAUSE 2 OF THE TERMS AND CONDITIONS OF THE SAID AGREEMENT DESC RIBES THE CONSIDERATION TO BE PAID OR RECEIVED BY THE PARTIES . FOR READY REFERENCE, THE CLAUSE 2 OF THE SAID AGREEMENT IS REPRODUCED A S UNDER:- 2. THAT THE DEVELOPER HAS AGREED TO KEEP WITH THE OWNER A SUM OF RS. 2.50 CRORES (RUPEES TWO CRORES A ND FIFTY LACS) BY WAY OF INTEREST FREE SECURITY DEPOSI T TOWARDS PROPER COMMENCEMENT AND TIMELY COMPLETION AND DEVELOPMENT OF THE PLOT AS PER THE STIPULATION MADE IN THE AGREEMENT AND TO SECURE DUE PERFORMANCE OF THE DEVE LOPERS OBLIGATIONS UNDER THIS AGREEMENT. THE SECURITY DEPO SIT SHALL BE REFUNDED ON COMPLETION OF THE NEW BUILDING AND M AKING OVER OF THE OWNERS ALLOCATION TO THE OWNER INHABIT ABLE CONDITION IN THE NEW BUILDING OR BUILDER WILL ADJUS T THIS SECURITY AMOUNT OF RS. 2.50 CRORES BY WAY OF BUY-BA CK OF THE PART OF THE OWNERS ALLOCATION IN THE PROPERTY AT T HE RATE MUTUALLY SETTLED BETWEEN PARTIES. DEVELOPER HAS ALS O AGREED ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 21 TO PAY TO OWNER A SUM OF RS. 2.00 CRORES (RUPEES TW O CRORES ONLY) AS CONSIDERATION MONEY (NON ADJUSTABLE , NON REFUNDABLE). THE DEVELOPER HAS GIVEN A SUM OF RS. 2.50 CRORES TO THE ASSESSEE BY WAY OF INTEREST FREE SECURITY DEPOSIT AS PERFORMANCE SE CURITY/ GUARANTEE. HOWEVER, THE SAID SECURITY WAS TO BE REFUNDED ON CO MPLETION OF THE PROJECT/ COMPLEX. APART FROM THE SAID SECURITY, A S UM OF RS. 2.00 CRORES WAS ALSO PAID BY THE DEVELOPER TO THE ASSESSEE TOWA RDS THE CONSIDERATION OF TRANSFER OF LAND IN QUESTION IN FAVOUR OF THE DE VELOPER. AS PER CLAUSE 11 OF THE AGREEMENT, THE PARTIES WERE TO SHARE THE CONSTRUCTED AREA IN THE MANNER SPECIFIED THEREIN WHICH IS REPRODUCED AS UND ER 11. THAT THE OWNER AND DEVELOPER WILL SHARE BUILT UP AREA IN THE NEW BUILDING AND CAR/TWO WHEELER PAR KING SPACE AND SPACE FOR PUTTING UP HOARDINGS, BILL BOAR DS ETC. FLOORWISE, INCLUDING THE ROOF AND OTHER AREAS, IN T HE RATIO OF 50:50 RESPECTIVELY. THE LEFT HALF OF THE BUILDING W ILL BE EARMARKED FOR AND BELONG TO OWNERS (OWNERS ALLOCAT ION) AND RIGHT HALL OF THE BUILDING WILL BE FOR AND BELO NG TO THE DEVELOPER (DEVELOPERS ALLOCATION). HOWEVER, WHEN T HE FINAL PLANS ARE APPROVED BY THE CONCERNED AUTHORITIES ACT UAL AREAS WILL BE DEMARCATED ACCORDING TO THE ABOVE THEME BY DIFFERENT COLOURS IN THE APPROVED BUILDING PLANS I. E. OWNERS ALLOCATION SHALL BE MARKED IN RED COLOUR AND THE DEVELOPERS ALLOCATION SHALL BE MARKED IN GREEN COL OUR. HOWEVER, IT IS FURTHER MADE CLEAR THAT BEFORE COMPLETION OF THE STRUCTURE, NO SALE DEED WILL BE E XECUTED OF THE DEVELOPERS SHARE. ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 22 THUS THE CLAUSE 11 OF THE AGREEMENT SET OUT THE MAN NER IN WHICH THE CONSTRUCTED COMMERCIAL COMPLEX WILL BE DIVIDED BETW EEN THE ASSESSEE AND THE DEVELOPER. THE SHARE OF EACH PARTY WAS ALSO PROPOSED TO BE MARKED IN DIFFERENT COLOUR OF RED AND GREEN. APART FROM THE CONSTRUCTED AREA, THE ASSESSEE ALSO RECEIVED RS. 2.00 CRORES AS CONSIDERATION. AS PER CLAUSE 12 OF THE SAID AGREEMENT, THE ASSESSEE WAS F REE TO SELL / TRANSFER ITS SHARE IN THE BUILT UP AREA OF NEW BUILDING INCLUDIN G THE PARKING SPACE AND SPACE FOR HOARDINGS, BILL BOARDS ETC. SIMILARLY, TH E DEVELOPER WAS ALSO FREE TO SELL OR TRANSFER ITS SHARE OF 50% IN THE BUILT U P AREA INCLUDING PARKING SPARE, SPACE FOR HOARDING, BILL BOARDS ETC. THEREFO RE, IT IS NOT AN AGREEMENT OF MERE DEVELOPMENT OF THE LAND OWNED BY THE ASSESSEE BUT THE ASSESSEE AND DEVELOPER ENTERED INTO THIS VENTURE OF DEVELOPMENT AND SALE OF DEVELOPED SPACE IN THE SHAPE OF SHOPS/ OFFICES A ND OTHER COMMERCIAL SPACE INCLUDING PARKING AND SPACE OF HOARDING, BILL BOARDS ETC. THE INTENTION OF THE PARTIES IS APPARENT AND CLEAR FROM THE TERMS AND CONDITIONS OF THE AGREEMENT THAT COMMERCIAL COMPLEX WAS DEVELOPED ONLY FOR SALE / RESALE PURPOSES. THERE IS NO DISPUT E THAT THE SAID COMPLEX WAS STOCK IN TRADE IN THE HANDS OF THE DEVELOPER. S IMILARLY, THE ASSESSEE ONCE DECIDED TO DISCONTINUE THE BUSINESS OF EXHIBIT ING THE FILMS AND CONVERTED THE LAND USE FOR DEVELOPMENT OF COMMERCIA L COMPLEX AND SALE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 23 THE SPACE IN THE COMPLEX THEN SAID LAND WAS NO MORE REMAINED AS BUSINESS ASSET OR CAPITAL ASSET TO BE USED FOR BUSI NESS OF THE ASSESSEE OR AS INVESTMENT OF THE ASSESSEE. IT IS NOT A CASE OF EX PLOITATION OF THE CAPITAL ASSET FOR CARRYING OUT THE BUSINESS BUT IT IS A CAS E OF SELLING OF THE PROPERTY IN QUESTION ITSELF AFTER DEVELOPING IT AND THEN SEL LING THE SHOPS/OFFICES AND OTHER SPACE INDIVIDUALLY AS AN INDEPENDENT UNIT AND NOT THE ENTIRE SHARE OF THE ASSESSEE IN COMMERCIAL COMPLEX AS ONE UNIT. THE REFORE, THE ENTIRE ARRANGEMENT AND EXERCISE OF CONVERTING THE LAND USE FOR DEVELOPMENT OF COMMERCIAL COMPLEX AND SALE OF THE SAME IS NOTHING BUT ACTIVITY IN THE NATURE OF TRADE AND BUSINESS INVOLVING RISKS AND RE WARDS TO BE BORNE BY THE ASSESSEE, AS A RESULT OF SUCH EXERCISE. THUS EN TERING INTO SUCH VENTURE OF DEVELOPING COMMERCIAL COMPLEX IS ENDURING IN NAT URE AND THEREFORE, IT CANNOT BE REGARDED AS INVESTMENT ON THE PART OF THE ASSESSEE. THE ASSESSEE AND THE DEVELOPER WERE HAVING THEIR OWN EXCLUSIVE A ND INDEPENDENT RIGHT TO SELL EACH AND EVERY SHOPS/OFFICES AS WELL AS OTH ER COMMERCIAL SPACE. HENCE, THE INTENTION OF THE ASSESSEE IS ESTABLISHED THAT THE ASSESSEE DECIDED TO SELL THE LAND IN QUESTION NOT AS A CAPIT AL ASSET BUT BY CONVERTING THE SAME INTO STOCK IN TRADE IN THE SHAPE OF DEVELO PING A COMMERCIAL COMPLEX COMPRISING OF SHOPS/OFFICES AND EACH SHOPS/ OFFICES WAS TO BE SOLD INDEPENDENTLY. THUS THE ENTIRE SEQUENCE OF DEV ELOPMENT OF THE LAND ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 24 IN QUESTION AS CARVED OUT BY THE PARTIES UNDER THE DEVELOPMENT AGREEMENT MANIFEST THE SUBSTANTIAL AND MATERIAL FACTS OF DOIN G THE ACTIVITY OF ADVENTURE AND THEREFORE, IT WAS NEVER THE INTENTION OF THE ASSESSEE TO KEEP THE COMMERCIAL COMPLEX SO DEVELOPED WITH ITSELF OR TO EXPLOIT THE SAME BY MAINTAINING OR USE AS AN APPARATUS FOR EARNING T HE INCOME. EVEN IT WAS NOT THE INTENTION OF THE ASSESSEE TO SELL THE COMME RCIAL COMPLEX AS THE CAPITAL ASSET UNDER THE DEVELOPMENT AGREEMENT. THE PARTIES WERE TO SELL EACH AND EVERY SHOP/ OFFICE AS WELL AS OTHER SPACE AS A SEPARATE UNIT. THE EXERCISE OF DEVELOPMENT OF MULTISTORIED COMMERCIAL COMPLEX WAS A WELL PRE-PLANNED VENTURE OF THE ASSESSEE AND DEVELOPER W HICH SHOWS THE ADVENTUROUS ACT ON THE PART OF THE ASSESSEE EXCEPT THE ACTIVITY OF DEVELOPMENT AND SELLING OF SHOPS/ OFFICES AND OTHER SPACE OF COMMERCIAL COMPLEX, THERE WAS NO OTHER BUSINESS ACTIVITY OF TH E ASSESSEE. THEREFORE, ALL THESE UNDISPUTED FACTS OF CONVERSION OF LAND US E, DEMOLITION OF CINEMA HALL BUILDING AND DISCONTINUE OF BUSINESS OF EXHIBI TING FILMS AND DEVELOPMENT OF COMMERCIAL COMPLEX FOR THE PURPOSE O F SALE OF SHOPS/ OFFICES AND OTHER COMMERCIAL COMPLEX ESTABLISHES TH E FACT THAT THE ASSESSEE HAD CONVERTED THE CAPITAL ASSET INTO STOCK IN TRADE WITH THE MOTIVE TO EARN THE MAXIMUM PROFIT OUT OF THE SAID V ENTURE. THUS ENTERING INTO DEVELOPMENT AGREEMENT AND SELLING OF CONSTRUCT ED SHOPS/ OFFICES OF ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 25 THE MULTISTORIED COMMERCIAL COMPLEX CONSTITUTES THE BUSINESS ACTIVITY OF THE ASSESSEE. THE ASSESSEE ALSO EXECUTED THE POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPER AUTHORIZING HIM TO EXECUTE THE SAL E DEED AND OTHER ACTS IN THIS REGARD TO THE EXTENT OF 50% OF SHARES IN TH E SAID COMMERCIAL COMPLEX. THEREFORE, ALL THESE FACTS CLEARLY ESTABL ISH THE INTENTION OF THE ASSESSEE OF NOT KEEPING THE SAID LAND AND COMMERCIA L COMPLEX AS CAPITAL ASSET BUT THE VERY PURPOSE OF DEVELOPMENT OF THE LA ND RIGHT FROM THE BEGINNING WAS TO SELL THE SAME AS THERE WAS A DEMA ND OF SHOPS/ OFFICES AT SUCH GOOD LOCATION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IT WAS A CASE OF CONVERSION OF B USINESS ASSET INTO STOCK IN TRADE AND THEREBY THE PROFIT ON SALE OF THE SAID LAND AND SHOPS / OFFICES CONTAINS TWO COMPONENTS OF INCOME I.E. ONE IS CAPIT AL GAIN ON ACCOUNT OF CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE U/S 45(2) OF THE ACT AND ANOTHER IS BUSINESS INCOME ON ACCOUNT OF SALE OF ST OCK IN TRADE. THE COMPUTATION OF CAPITAL ACCOUNT WOULD BE BASED ON TH E CONSIDERATION BEING FAIR MARKET PRICE AS ON THE DATE OF CONVERSION BEI NG IN THE YEAR 2001 THOUGH THE SAME WILL BE ASSESSED TO TAX IN THE YEAR UNDER CONSIDERATION WHEN THE ASSESSEE HAS FINALLY SOLD THE STOCK IN TRA DE. THEREFORE, THE SAID FINDING OF THE LD. CIT(A) IS CONTRARY TO THE UNDISP UTED MATERIAL FACTS OF DISCONTINUE THE EXISTING BUSINESS OF EXHIBITING FIL MS IN THE CINEMA HALL, ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 26 DEMOLITION OF CINEMA HALL BUILDING AND CONVERSION OF LAND USE TO COMMERCIAL COMPLEX FOR SALE CONSTITUTE A POSITIVE ACT ON THE PART OF THE ASSESSEE TO ESTABLISH THE CONVERSION OF CAPITAL ASS ET INTO STOCK IN TRADE. 4.4.1 DURING THE COURSE OF HEARING, IT WAS NOTED TH AT AS PER DEVELOPMENT AGREEMENT DATED 12-12-2001, THE LAND IN QUESTION WA S TRANSFERRED IN THE NAME OF THE ASSESSEE BY THE JDA IN THE YEAR 1995 WH EREAS THE INDEX COST WAS CLAIMED BY THE ASSESSEE BY TAKING THE DATE OF A CQUISITION AS PRIOR TO 01-04-1981. THIS POINT WAS SPECIFICALLY PUT TO THE ASSESSEE FOR CLARIFICATION AND IN RESPONSE THE LD.AR OF THE ASSE SSEE SUBMITTED THAT LAND IN QUESTION WAS ORIGINALLY ALLOTTED TO THE DIRECTOR S/ SHAREHOLDERS OF THE COMPANY WHO WERE PARTNERS AND ON DISSOLUTION OF THE PARTNERSHIP FIRM, THE LAND WAS ACQUIRED / OWNED BY THE ASSESSEE COMPA NY. HOWEVER, WE FIND THAT EVEN IF IT IS PRESUMED FOR THE SAKE OF AR GUMENT THAT THE ASSESSEE COMPANY HAS ACQUIRED THE LAND ON DISSOLUTION OF THE PARTNERSHIP FIRM, THE SAME DOES NOT FALL IN THE MODES OF ACQUISITION AS SPECIFIED U/S 49(1) OF THE ACT SO AS TO DEEM THE COST OF ACQUISITION OF TH E ASSET IN THE HANDS OF THE PREVIOUS OWNER OF THE PROPERTY. HOWEVER, WITHOU T GOING INTO THE MERIT OF THE ISSUE, WE NOTE THAT THIS FACT WAS NOT AT ALL BROUGHT INTO THE NOTICE OF THE AUTHORITIES BELOW AND THEREFORE, FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN THE ACTUAL DATE OF ACQUI SITION IS REQUIRED TO BE ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 27 DETERMINED BY CONSIDERING ALL THESE FACTS AS WELL A S CLAIM OF THE ASSESSEE. ACCORDINGLY, THE LIMITED ISSUE OF INDEXED COST OF A CQUISITION IS SET ASIDE TO THE RECORD OF THE LD. CIT(A ) . WE ARE CONSCIOUS ABOUT THE FACTS THAT THE AO HAS NOT DISTURBED THE INDEXED COST OF ACQUISITIO N AS CLAIMED BY THE ASSESSEE, HOWEVER, IT IS A MATTER OF FACT THAT AS P ER DEVELOPMENT AGREEMENT THE ASSESSEE HAS CLAIMED TO HAVE ACQUIRED THE LAND IN THE YEAR 1995. THEREFORE, WHEN THIS IS PART AND PARCEL OF SUBJECT MATTER OF ASSESSMENT OF CAPITAL GAINS WHICH IS THE SUBJECT MA TTER OF THE APPEAL FILED BY THE REVENUE THEN THE ISSUE OF COMPUTATION OF CAP ITAL GAINS IS REQUIRED TO BE DECIDED BASED ON TRUE AND CORRECT FACTS. SINC E WE HAVE ALREADY SET ASIDE THE ISSUE OF REOPENING TO THE RECORD OF THE L D. CIT(A), THEREFORE, THIS ISSUE IS ALSO SET ASIDE TO THE RECORD OF THE LD. CI T(A) AND CONSEQUENTLY THE LD. CIT(A) IS DIRECTED TO COMPUTE THE CAPITAL GAINS BY TAKING THE CORRECT INDEXED COST OF ACQUISITION. NEEDLESS TO SAY THAT T HE ASSESSEE BE GIVEN APPROPRIATE OPPORTUNITY OF HEARING OF APPEAL BEFORE PASSING THE FRESH ORDER. THUS THE GROUND NO. 3 OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 5.1 IN THE C.O. NO. 11/JP/2018 FOR THE ASSESSMENT Y EAR 2008-09, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 28 (1) BECAUSE THE DEPARTMENTAL APPEAL IS BAD IN L AW AS WELL AS ON FACTS AND IS LIABLE TO BE DISMISSED. (2) BECAUSE THE LD. CIT(A) ERRED IN NOT DECIDING TH E GROUND NO. 6 RELATING TO THE SERVICE OF NOTICE U/S 148 AND LD. CIT(A) ERRED IN PARA 3.2.2. PAGE74 THAT IT IS AN AC ADEMIC IN NATURE. (3) BECAUSE THE LD. CIT(A) ERRED IN NOT DECIDING TH E GROUND NO. 3 RELATING TO NOT PROVIDING THE COPY OF THE REASONS RECORDED BY AO BEFORE ISSUE OF NOTICE U/S 1 48 IN SPITE OF THE REQUEST. 6.1 THE ASSESSEE HAS RAISED THE ISSUE OF VALIDITY O F SERVICE OF NOTICE U/S 148 OF THE ACT AS WELL AS THE COPY OF THE REASONS W AS NOT SUPPLIED TO THE ASSESSEE. 6.2 WE HAVE HEARD THE LD.AR AS WELL AS THE LD. DR A ND CONSIDERED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE GRIEVAN CE OF THE ASSESSEE IS AGAINST NON-ADJUDICATION OF THESE ISSUES BY THE LD. CIT(A). AS REGARDS THE SERVICE OF NOTICE ISSUED U/S 148 OF THE ACT, WE NOT E THAT THE AO ISSUED NOTICE THROUGH REGISTERED POST AND ASSESSEE HAS FIL ED THE COPY OF THE NOTICE ISSUED U/S 148 OF THE ACT DATED 31-03-2015 A LONGWITH POSTAL RECEIPT. THEREFORE, AS FAR AS THE ISSUANCE OF NOTIC E IS CONCERNED, THE SAME IS NOT IN DISPUTE WHEN THE AO HAS ISSUED THE SAID N OTICE AND SENT THE SAME THROUGH REGD.POST ON 31-03-2015. ONLY DISPUTE IS RE GARDING SERVICE OF NOTICE. PARTIES HAVE TAKEN THEIR RESPECTIVE STANDS ON THIS ISSUE. HOWEVER, ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 29 THERE IS NO DISPUTE THAT THE ASSESSEE IN RESPONSE T O SAID NOTICE HAS FILED THE RETURN OF INCOME AND ALSO PARTICIPATED IN THE REASS ESSMENT PROCEEDINGS, THEREFORE, THE ISSUE HAS TO BE DECIDED AFTER CONSID ERING THE PROVISIONS OF SECTION 292BB OF THE ACT. SINCE THE LD. CIT(A) HAS NOT ADJUDICATED UPON BOTH THESE ISSUES, THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. ARE SET ASIDE TO THE RECORD OF THE LD. CIT(A) FOR A DJUDICATION AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE AS SESSEE. THUS THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. 7.1 IN THE ITA NO. 407/JP/2018 FOR THE ASSESSMENT YEAR A.Y. 2009- 10, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW TH8E LD. CIT(A) HAS ERRED IN DELETI NG THE ADDITION MADE BY THE AO WITHOUT APPRECIATING THAT T HE ASSESSEE MADE TRANSFER AS PER SECTION 2(47) OF THE ACT WHILE MAKING TREATMENT OF ITS CAPITAL ASSET I.E. LAND OF CINEMA HALL INTO STOCK IN TRADE OF THE BUSINESS FOR SELLING OF SHOPS U/S 45(2) OF THE ACT. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETIN G THE ADDITION OF RS. 2,06,71,225/- ON ACCOUNT OF BUSINES S INCOME AND RS. 66,76,744/- ON ACCOUNT OF LONG TERM CAPITAL GAIN WITHOUT DECIDING IT ON MERIT. 7.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. THE ONLY ISSUE RAISE D BY THE REVENUE IN ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 30 THIS APPEAL IS REGARDING THE ASSESSMENT ON LONG TER M CAPITAL GAIN U/S 45(2) OF THE ACT WHICH WAS DELETED BY THE LD. CIT(A ) AS WELL AS THE ASSESSMENT OF BUSINESS INCOME WAS ACCEPTED BY THE L D. CIT(A) AS CAPITAL GAIN. THIS ISSUE IS COMMON TO THE ISSUE RAISED BY T HE REVENUE IN GROUND NO. 3 OF THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 . IN VIEW OF OUR FINDINGS ON THIS ISSUE FOR THE ASSESSMENT YEAR 208- 09, THIS APPEAL OF THE REVENUE STANDS ALLOWED SUBJECT TO THE ISSUE OF INDE XED COST OF ACQUISITION, IF ANY, WHICH IS SET ASIDE TO THE RECO RD OF THE LD. CIT(A). THUS THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2 009-10 IS ALLOWED. 8.1 IN THE C.O. NO. 12/JP/2018 FOR THE ASSESSMENT Y EAR 2009-10, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND. (1) BECAUSE THE DEPARTMENTAL APPEAL IS BAD IN L AW AS WELL AS ON FACTS AND IS LIABLE TO BE DISMISSED. 8.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. IT IS CLEAR THAT THE ASSESSEE HAS NOT RAISED ANY INDEPENDENT ISSUE BUT SIMPLY SUPPORTED THE ORDE R OF THE LD. CIT(A). IN VIEW OF OUR FINDINGS ON THE APPEAL OF THE REVENU E, THE C.O. OF THE ASSESSEE STANDS DISMISSED ITA NO.406/JP/2018 THE DCIT, CIRCLE 2, JAIPUR VS M/S. MAN PRA KASH TALKIES PVT.LTD. JAIPUR 31 9.0 IN THE RESULT, THE APPEAL OF THE REVENUE FOR TH E ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, APPEAL FOR THE ASSESSMENT YEAR 2009-10 IS ALLOWED AND C.O. OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IS ALLOWED FOR STATISTICAL PURPOSES AND C.O. FOR THE ASSESSMENT YEAR 2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 /02/2 020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20 /02/ 2020 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE 2, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. MAN PRAKASH TALKIES PVT. LTD. , 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.406/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR