NATHU LAL, Jaipur V. CIT, Kota

ITA 421/JPR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74833 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHUBHASH CHANDRA
• Keywords: Capital asset; Business income; Additional evidence
• Section: 143(3); 54B; 54F; 2(14); 147; 148; 263; 144; 15

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI H.M. MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER) I.T.A. NO. 421/JP/2013 ASSTT. YEAR- 2007-08 SHRI NATHU LAL COMMISSIONER OF INCOME TAX, S/O- SHRI RAM CHANDRA VRS. C.R. BUILDING, RAWA TBHATA ROAD, VILLAGE- BORKHERA, KOTA. KOTA. PAN: BEVPK5088N (APPELLANT) (RESPONDENT) I.T.A. NO. 422/JP/2013 ASSTT. YEAR- 2007-08 SHRI RAM SUKH COMMISSIONER OF INCOME TAX, S/O- SHRI RAM CHANDRA VRS. C.R. BUILDING, RAWA TBHATA ROAD, VILLAGE- BORKHERA, KOTA. KOTA. PAN: BEVPK5140K (APPELLANT) (RESPONDENT) I.T.A. NO. 423/JP/2013 ASSTT. YEAR- 2007-08 SHRI GOPI LAL COMMISSIONER OF INCOME TAX, S/O- SHRI RAM CHANDRA VRS. C.R. BUILDING, RAWA TBHATA ROAD, VILLAGE- BORKHERA, KOTA. KOTA. PAN: BEVPK5139Q (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI P.C. PARWAL DEPARTMENT BY :- SHRI SHUBHASH CHANDRA DATE OF HEARING : 21/01/2014 DATE OF PRONOUNCEMENT : 26/02/2014 ITA 421 TO 423/JP/2013 2 O R D E R PER: N.K. SAINI, A.M. THESE THREE APPEALS BY THE THREE ASSESSEES ARE DIRE CTED AGAINST THE SEPARATE ORDERS EACH DATED 06/03/2013 OF COMMISSION ER OF INCOME TAX, KOTA. SINCE THE FACTS INVOLVED IN THESE APPEALS ARE IDENT ICAL AND THE APPEALS WERE HEARD TOGETHER, SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL DEAL WITH THE ITA NO. 421/JP/2013, FOLLOWING GROUNDS HAS BEEN RAISED IN THIS APPEAL. 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDER PASSED U/S 263 BY LD. COMMISSIONER OF INCOME TAX IS ILLEGAL AND BA D IN LAW AND BE QUASHED SINCE THE LD. CIT HAS NOT CALLED FOR AND EXAMINED THE RECORD HIMSELF BEFORE INITIATION OF PROCEEDINGS U/S 263 BUT HAS INITIATED SUCH PROCEEDINGS ON THE BASIS OF PROPOSAL RECEIVED FROM D.CIT, CIRCLE- SAWAI MADHOPUR STATING THAT THE ORDE R PASSED BY HIS PREDECESSOR ASSESSING OFFICER WAS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. 2. THE LD. COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND IN LAW IN SETTING ASIDE THE ORIGINAL ASSESSMENT ORDER WITH THE DIRECTION TO THE ASSESSING OFFICER TO FRAME IT DENOVO AFTER MAKI NG PROPER ENQUIRY AND VERIFICATION OF BOOKS OF ACCOUNTS AND O THER RECORDS/DOCUMENTS EVEN WHEN THE SAME WAS EXAMINED B Y THE ASSESSING OFFICER IN ORIGINAL ASSESSMENT PROCEEDING S. HE HAS FURTHER ERRED IN HOLDING THAT ASSESSING OFFICER IN ORIGINAL ASSESSMENT PROCEEDINGS HAS NOT EXAMINED THE CLAIM O F DEVELOPMENT CHARGES AND DEDUCTION CLAIMED U/S 54F AND 54B AND W RONGLY ALLOWED THE SAME WHEN THE TRANSACTION IS AN ADVENTU RE IN THE NATURE OF TRADE. 3. THE LD. COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND IN LAW IN TREATING THE ORDER PASSED BY THE ASSESSING OFFIC ER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BY INCOR RECTLY STATING THAT TOTAL INCOME AS PER ASSESSMENT ORDER IS TAKEN AT RS . 6000/- AS ITA 421 TO 423/JP/2013 3 AGAINST TOTAL INCOME COMPUTED BY ASSESSEE AT RS. 46 ,900/- IGNORING THAT TOTAL INCOME AS PER ASSESSMENT ORDER IS RS. 2, 11,770/-. 4. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 5. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSIN G OFFICER CAME TO KNOW THAT THE ASSESSEE ALONGWITH TWO OTHER CO-OWNERS HAD SOLD LAND AND RECEIVED HIS SHARE OF RS. 82.50 LACS IN DECEMBER, 2006. ACCORDING TO H IM, THE GROUP HAD CONVERTED THEIR ANCESTRAL AGRICULTURAL LAND INTO VARIOUS SMAL L PLOTS BEFORE SELLING THE SAME TO DIFFERENT PERSONS AND THEREFORE THE SELLING ACTI VITIES WERE CLEARLY AN ADVENTURE IN THE NATURE OF TRADE. THE NATURE AND VOLUME OF TR ANSACTIONS INDICATED THAT THE ASSESSEE WAS ENJOYING THE TAXABLE INCOME DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION BUT HAD NOT FI LED ANY RETURN OF INCOME. HE, THEREFORE, INITIATED THE PROCEEDINGS U/S 147 OF TH E I.T. ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) BY ISSUING NOTICE U/S 148 OF T HE ACT ON 29/10/2009. SINCE THE ASSESSEE FAILED TO COMPLY WITH THE NOTICE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT PROCEE DINGS IN HIS CASE SHOULD NOT BE FINALIZED AS PER THE PROVISIONS OF SECTION 144 O F THE ACT. THE ASSESSEE REQUESTED TO CONSIDER THE RETURN OF INCOME FILED BY HIM ON 04/3/2010 BEFORE THE I.T.O. WARD 2(1), KOTA, IN RESPONSE TO THE NOTICE I SSUED TO HIM U/S 148 OF THE ACT. THE ASSESSING OFFICER FRAMED THE ASSESSMENT AT AN INCOME OF RS. 2,11,770/- IN THE FOLLOWING MANNER:- ITA 421 TO 423/JP/2013 4 INCOME FROM OTHER SOURCES AS DISCLOSED RS. 6,000/- INCOME FROM CAPITAL GAIN SALE CONSIDERATION RS. 82,49,996/- COST OF LAND 40,000/100*519 RS. 207600/- 9,57,314/497*519 RS. 9,99,690/- RS. 12,07,290/- RS. 70,72,706/- DED U/S 54B RS. 54,11,935/- DED U/S 54F RS. 14,25,000/- RS. 68,36,935/- RS. 2,05,771/- TOTAL INCOME RS. 2,11,771/- R/O RS. 2,11,770/- AGRICULTURAL INCOME RS. 91,500/- 4. THEREAFTER THE DCIT, CIRCLE- SAWAI MADHOPUR PROP OSED ACTION U/S 263 OF THE ACT ON THE FOLLOWING POINTS:- (1) THE SALE CONSIDERATION OF ANCESTRAL AGRICULTURA L LAND SITUATED AT VILLAGE BORKHEDA, KOTA HAS BEEN SHOWN AT RS. 824 9996/- (1/3 RD SHARE) AND AFTER CLAIMING DEVELOPMENT CHARGES AND D EDUCTION U/S 54F AND 54B GROSS TOTAL INCOME IS SHOWN AT RS. 4690 0/- ONLY. THE ASSESSEE HAS CLAIMED DEVELOPMENT CHARGES AT RS. 125 0000/- AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER HAS CONSIDERED TOTAL INVESTMENT ON THE ENTIRE LAND AT RS. 2871940/- AND ALLOWED SHARE OF THE ASSESSEE AT RS. 957314/-, DESPITE THE FACT THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENC E REGARDING CONSTRUCTION WORK. SIMILARLY, DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 54F AND 54B AT RS. 1159669/- AND RS. 5411935/- WAS WRONGLY ALLOWED AS THE SALE TRANSACTION OF THE LAND WAS AN ADVENTURE IN THE NATURE OF TRADE TO EARN PROFIT. (2) THE ASSESSEE HAS SHOWN TOTAL INCOME AT RS. 4690 0/- AS PER COMPUTATION WHEREAS AS PER ASSESSMENT ORDER TOTAL I NCOME IS TAKEN AT RS. 6000/-. 5. ON RECEIPT OF THE PROPOSAL U/S 263 OF THE ACT, T HE LD. CIT ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE. IN RESPONSE TO THE SA ID NOTICE, THE ASSESSEE VIDE ITA 421 TO 423/JP/2013 5 WRITTEN SUBMISSION DATED 28/1/2013 AS INCORPORATED IN PARA 4 OF THE IMPUGNED ORDER SUBMITTED AS UNDER:- (I) DEVELOPMENT CHARGES RS. 1250000/- (1/3 RD OF RS. 3750000/-):- THE ASSESSEE HAS PREPARED A PLAN WITH DESIGNING, MA P, LEVELING OF AGRICULTURE LAND THAN AFTER HE HAS STARTED OF BOOKI NG WITH ADVANCE AND PAYMENT IN INSTALLMENTS. THE ASSESSEE HAS START ED ROAD AND OTHER WORK AT SITE DURING THE BOOKING PERIOD SO AS ENABLE TO PREPARE THE AGRICULTURE LAND FOR SALE AS RESIDENTIAL PLOTS. IN SUPPORT OF DEVELOPMENT OF ROAD, WE HAVE SUBMITTE D FURTHER EVIDENCES REGARDING ANALYSIS OF DEVELOPMENT EXPENSE S- WE HAVE SUBMITTED G-SCHEDULE FOR COST OF ROAD. AS PER DISCUSSION WITH THE CONTRACTOR THERE ARE 3 PHASE OF WORKING. 1. LEVELING, CLEANING. 2. SOIL- NORMAL AND YELLOW AND PREPARE ROAD WITH CO NCRETE ONLY TO CHECK AS SOLID ROAD FOR TRANSPORTATION. 3. DAMAR.---- THERE WAS NORMAL COST OF AROUND RS. 50 PER SQ. FTS DURING FINANCIAL YEAR 2006-07. ON THE BASIS OF ABOVE MENTIONED FACTS THE ASSESSEE HAS NOT ONLY PRODUCED THE RECORDS AS AVAILABLE BUT HE HAS ALSO PRODUCED ADDITIONAL EVIDENCES, HOWEVER, THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS NOT CONSIDERED THE GENUINE FACTS BUT DIRECTED THE INSPE CTOR OF THE DEPARTMENT WHETHER ANY DEVELOPMENT OR NOT. THE INSPECTOR SB. HAS PHYSICALLY VERIFIED THE SITE AND PRODUCED THE REPORTS AND DURING THE PHYSICAL VERIFICATION THERE WAS SOME DIFFERENCES DUE TO CONSIDERABLE TIME PERIOD OF 4 YEARS FROM CONSTRUCTI ON AND PHYSICAL VERIFICATION. WE HAVE SUBMITTED FOLLOWING EXPLANATI ONS: LAND AND DEVELOPMENT AS PER ASSESSEE: I) THE ASSESSEE HAS PREPARED ROAD ETC. FOR THE PURP OSE OF BREAK UP THE AREA FOR PLOT PURPOSE. WE HAVE SUBMITTED MAP AND TH E COST OF ROAD. THE ASSESSEE HAS CREATED AS AN EXPENDITURE OF RS. 1 250000/- (1/3 OF RS. 3755100/-). II) AS PER MAP THERE WAS ROAD OF AROUND 30 FTS AND 40 FTS AND DAMAR ROAD PREPARE AROUND 20 FTS ON THE ROAD OF 30 FTS AN D 26 FTS ON ROAD OF 40 FTS. ITA 421 TO 423/JP/2013 6 III) AROUND 20 FTS ON THE ROAD OF 30 FTS AND 26 FT S ON ROAD OF 40 FTS. AS PER PHYSICAL VERIFICATION BY THE INSPECTOR SB OF THE DEPARTMENT: A) THERE WAS 2 FTS HEIGHTS OF THE ROAD. B) THERE WAS 25-26 FTS WIDTH ON THE ROAD OF 40 FTS . C) THERE WAS AROUND 17-18 FTS WIDTH OF ROAD OF 30 FTS. EXPL: THERE MAY BE SOME MISUNDERSTANDING REGARDING DAMAR ROAD AND THE OTHER ROAD. THERE WAS ROAD BUT THE KARIGAR MAY HAVE NOT COMPLETED THE DAMAR ROAD ON THAT SPACE AND/OR DURING THIS LON G PERIOD OF 4 YEARS THE SIDE ROAD MAY BE BROKEN. AS SUCH THERE MAY BE NORMA L DIFFERENCE IN PHYSICAL VERIFICATION AFTER 4 YEARS. PLEASE CONSIDER THE FACTS OF THIS NORMAL DIFFERENCE S IN PHYSICAL VERIFICATION AFTER THE CONSIDERABLE PERIOD OF TIME. THE ASSESSEE HAS SUBMITTED THE INFORMATION ON THE BASIS OF PLANNING AND PAYMENT TO THE LABOUR. D) LIGHT POLES: I) THE ASSESSEE WAS IN SURPRISE TO SEE THAT THERE W AS CEMENT POLES OF 22 NOS. IN SPITE OF 42 NOS. WHICH HAS BEEN INSTALLED. IRON POLES 5 NOS. IN SPITE OF 12 POLES. EXPL: IN FACTS THE ASSESSEE HAS INSTALLED THE POLES AS PER REQUIREMENT, WE HAVE MENTIONED IN PREVIOUS REPLY. HOWEVER, THERE WA S NO DEVELOPMENT OF HOUSE ETC. STILL ONLY PLOTS ARE THERE. NO ONE IS LI VING THERE. AS PER DISCUSSION WITH THE PEOPLE NEAR TO THAT PLACE. THE ASSESSEE HAS COME TO KNOW THE FACTS THAT SOME PERSON KABADI/SMOKING ARE REGULAR ACTIVATE THEFT ACTIVITY AND NO ONE IS LIVING THERE. THERE IS OPEN SPACE ANY ONE CAN GO, NO CONTROL IS THERE, THERE IS INTERVAL OF AROUND 4 YEA RS SO DUE TO SOME THEFT BY SOME PEOPLE AND/OR MAY BE BROKEN DUE TO RAIN, FAILU RE IN INSTALLATION ETC. THERE ARE DIFFERENCES IN THE NUMBER OF POLES. THE ASSESSEE HAS SUBMITTED THE JUSTIFIED EXPLANATIO NS AND INFORMATION BUT THE DEPUTY COMMISSIONER OF INCOME TAX HAS CONSIDERE D THE DEVELOPMENT EXPENDITURE RS. 999690/-. AS SUCH THERE IS ADDITION IN TOTAL INCOME OF RS. 250310 (RS. 1250000-999690) AROUND 20% ONLY ON THE BASIS OF PHYSICAL VERIFICATION AFTER LONG INTERVAL OF TIME PERIOD ARO UND 4 YEARS. PLEASE CONSIDER THE FACTS AND IN SPITE OF CONSIDERA BLE ADDITION ON THE BASIS OF PHYSICAL VERIFICATION IN TOTAL INCOME IT IS NOT JUSTIFIED TO SAY NO EVIDENCES. (II) TRADE BUSINESS INCOME/CAPITAL GAINS:- THE LEAR NED DEPUTY COMMISSIONER OF INCOME TAX HAS ALSO RAISED THE SAME QUESTION FROM THE ASSESSEE AND WE HAVE PRODUCED AS FOLLOWS:- ITA 421 TO 423/JP/2013 7 DEDUCTION U/S 54B AND 54F OF THE I.T. ACT., 1961: I) THE ASSESSEE HAS PURCHASED AN AGRICULTURE LAND O UT OF SALES CONSIDERATION OF AGRICULTURE LAND. II) THE ASSESSEE HAS ALSO PURCHASED A RESIDENTIAL H OUSE ON THE BALANCE AMOUNT OF SALES CONSIDERATION. BASIS OF DEDUCTION:- THE ASSESSEE IS A FARMER, HE HAS UTILIZED THAT LAND FOR CULTIVATION ONLY BEFORE TO SALE. THERE WAS SOME FIN ANCIAL REQUIREMENT/BETTER OPTION TO UTILIZE THE SALES CONS IDERATION I.E. TO TAKE OTHER AGRICULTURE LAND (MORE AREA AND MORE FERTILIT Y- MAY ON DISTANCE FROM THE CITY) AND A RESIDENTIAL HOUSE SO AS TO LIVE IN HOUSE IN SPITE OF TO LIVE AT THE HOUSE ON THAT AGRICULTURE LAND. IN RESPONSE TO OUR LETTER DATED 10/11/2010 REGARDIN G REASON FOR ISSUE OF NOTICE U/S 148, WE HAVE RECEIVED A COPY OF REASON F OR THE SAME. IN THE COPY OF THAT LETTER, YOU HAVE MENTIONED:- I) SALES PROCEEDS RS. 82.50 LACS (1/3 RD OF RS. 247.50 LACS) THE ASSESSEE IS ACCEPTING THE SAME. AS FURTHER EVID ENCE WE ARE ENCLOSING HEREWITH THE RELEVANT DOCUMENTS. (II) ASSESSEE GROUP CONVERTED ANCESTRAL AGRICULTURE LAND INTO STOCK IN TRADE, THEREFORE PROVISION OF SECTION 54B & 54F ARE NOT APPLICABLE. A) IN OUR OPINION, IT IS UNJUSTIFIED ON THE BASIS O F THE FOLLOWING REASON: I) THE ASSESSEE HAS UTILIZED THE AGRICULTURE LAND F OR AGRICULTURE PURPOSE ONLY. THE ASSESSEE WAS A FARMER AND STILL H E IS FARMER ONLY. HE WAS NOT INVOLVED IN ANY BUSINESS ACTIVITY BEFORE AND/OR AFTER THE SALE OF THAT LAND. THE ASSESSEE HAS NOT CONVERTED T HAT LAND FOR RESIDENTIAL AND/OR ANY OTHER PURPOSE BEFORE TO SALE OF THE SAID LAND. HE WAS NOT INVOLVED IN ANY TYPE OF BUSINESS ACTIVIT Y AND/OR INVOLVE AS REAL ESTATE DEALER/BROKER/COLONIZERS. II) THERE WAS SOME FINANCIAL REQUIREMENT AND FEELS THAT OUT OF SALES CONSIDERATION THEY ARE ABLE TO PURCHASES OTHER AGRI CULTURE LAND WHICH HAS AREA MORE THAN EXISTING LAND MAY BE IN DI STANCE FROM THE CITY AND THEY WILL ALSO PURCHASE THE RESIDENTIAL HO USE SO AS TO LIVE IN BETTER CONDITION. III) TO IMPLEMENT THE ABOVE PLAN THEY HAVE DISCUSSE D IN THE MARKET TO SALE THE AGRICULTURE LAND IN EXISTING CONDITION BUT THERE WAS NOT JUSTIFIED SALES CONSIDERATION SO AS ABLE TO PURCHAS E THE AGRICULTURE LAND EQUAL TO AND/OR MORE THAN THE EXISTING AREA AN D PURCHASE OF A ITA 421 TO 423/JP/2013 8 RESIDENTIAL HOUSE. AFTER DISCUSSION IN THE MARKET T HEY HAVE FOUND THAT THEY WILL BE ABLE TO GET BETTER RESULT IF THEY WILL DEVOTE SOME TIME, INVEST SOME AMOUNT TO DEVELOP THE LAND, CONST RUCT THE ROAD TO APPROACH TO THE DESIRED SPACE ETC. THAN THEY WILL B E ABLE TO SALE THE LAND IN PARTITION. ON THE BASIS OF THAT JUST TO GET BETTER SALES PRICE THEY HAVE DEVOTED THEIR TIME, INVESTED MONEY, KEEP CONTACT IN THE MARKET-BROKER ETC. IV) ON THE BASIS TO KEEP PATIENCE TO GET BETTER RES ULT, THE ASSESSEE HAS RECEIVED MORE THAN EXPECTATION SALES CONSIDERATION OF RS. 82.50 LACS. HE HAS PURCHASED IRRIGATE AGRICULTURE LAND IN RS. 5411935/- MORE THAN DOUBLE AREA IN COMPARISON TO EXISTING AND PURCHASE A RESIDENTIAL HOUSE OF RS. 1511250/-. AS SUCH WITHOUT ANY INTENTION TO START BUSINESS ACTIVITY BUST JUST IN EXPECTATION TO GET THE LAND AND RESIDENTIAL HOUSE THEY HAVE UTILIZED THERE MIND POW ER. THE ASSESSEE IS STILL A FARMER HE IS NOT INVOLVED IN ANY BUSINES S ACTIVITY. V) ON THE BASIS OF SALES OF PARENTAL AGRICULTURE LA ND, THE ASSESSEE HAS DISCLOSED INCOME AS CAPITAL GAIN AND CLAIM DEDUCTIO N U/S 54B OF THE INCOME TAX ACT, 1961 AND ON THE PURCHASE VALUE OF N EW AGRICULTURE LAND AND CLAIM THE DEDUCTION U/S 54F ON THE PURCHAS E PRICE OF THE RESIDENTIAL HOUSE. B) IN SUPPORT OF CONSIDERING THE CAPITAL GAIN (NO BUSINESS ACTIVITY). THERE ARE SO MANY CASE LAWS IN SUPPORT OF THE ASSES SEE, HOWEVER, WE ARE SUBMITTING FOLLOWING CASE LAWS IN FAVOUR OF THE ASSESSEE: I) IN CIT V. A MOHAMMED MOHIDEEN (1988) 74 CTR (MAD ) 129, THE MADRAS HIGH COURT HELD THAT PLOTTING AND DEVELOPING OF LAND BEFORE SALE BY ITSELF WOULD NOT ESTABLISH THE PERSON CONC ERNED WAS INDULGING IN A TRADING ACTIVITY. IT MAY BE THAT FOR REALISMS THE MAXIMUM PRICE, HE UNDERTAKES CERTAIN ACTS WHICH ANY OTHER OWNER WOULD UNDERTAKE. REVENUE HAS TO ESTABLISH BY POSITI VE EVIDENCE THAT THE PURCHASE AND SALE OF PROPERTY WAS WITH THE VIEW TO EARNING PROFITS THROUGH TRADING TRANSACTION. IN THE PRESENT CASE, CIRCUMSTANCES RELIED ON BY REVENUE ONLY THROW SUSPI CION ON THE ASSESSEES ACT OF PURCHASING A PROPERTY WHICH DID N OT IMMEDIATELY YIELD INCOME, BUT THERE ARE NO MATERIALS TO FURTHER PROVE THAT ASSESSEE INTENDED TO INDULGE IN A TRADING ACTIVITY. TRANSACTION OF ASSESSEE IN PURCHASING AND SELLING THE PROPERTY DID NOT, THEREFORE, AMOUNT TO AN ADVENTURE IN THE NATURE OF TRADE. ITA 421 TO 423/JP/2013 9 II) IN THE CASE OF B. NARSIMHA READY V. ITO (1993) 47 ITD 308 (HYD- TRB) THE DIVISION BENCH OF TRIBUNAL, HYDERABAD A BE NCH, HAS HELD THAT ASSESSEE PLOTTING OUT ITS ANCESTRAL AGRICULTUR AL LAND AND SELLING THEM AT THE RATE OF PER SQUARE YARD AFTER GETTING A PPROVAL FOR THE LAY OUT FROM GRAM PANCHAYAT. IT WAS HELD THAT ASSESSEE NEVER DEALT IN PURCHASE AND SALE OF REAL ESTATE. LAND WAS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) READ WITH SECTION 2(1A) BE ING SITUATED WITHIN 8 KMS OF MUNICIPAL LIMIT. TRANSACTION WAS TH EREFORE, TO REALIZE THE MAXIMUM FROM OUT OF CAPITAL ASSET. PROF ITS, THEREFORE, WAS NOT INCOME FROM ADVENTURE IN THE NATURE OF TRAD E BUT CAPITAL GAINS. III) IN CIT VS SURESH CHAND GOYAL (2007) 16 (I) ITC L 331 (MP HIGH COURT), THE ASSESSEE RECEIVED THE LAND BY WAY OF GI FT DEED DATED 2/9/1947. ORIGINALLY, IT WAS AGRICULTURE LAND AND T HEREAFTER ASSESSEE GOT IT CONVERTED INTO NON-AGRICULTURAL LAND. LATER ON, THE LAND WAS DEVELOPED BY THE ASSESSEE AND IN ALL 40 PLOTS IN TH E NAME OF GOYAL COLONY. THE ASSESSEE HAD ALSO UNDERTAKEN THE DEVELO PMENT WORK OF THE COLONY LIKE MAKING ROADS, PROVIDING PIPELINES O F WATER, DRAINAGE SYSTEM ETC. IT WAS HELD THAT THE MAIN EARN ING ON THE SALE OF THE LAND WAS IN THE NATURE OF CAPITAL GAIN AND THER EOF NOT ASSESSABLE AS INCOME FROM BUSINESS. IV) IN CIT VS SOHAN KHAN (2008) ITCI 0478 (2008) 30 4 ITR 0194 (2008) 007 DTR 0361. IN THE RAJASTHAN HIGH COURT: T HE ASSESSEE HAS SOLD NUMBER OF PLOTS THE ASSESSING OFFICER HAS CONSIDERED AS BUSINESS INCOME BUT THE CIT/TRIBUNAL HAS CONSIDERED AS LONG TERM CAPITAL GAINS. THE RAJASTHAN HIGH COURT HAS ALSO HE LD THE SAME JUDGMENT AND DISMISS THE APPEAL OF THE CIT. ON THE BASIS OF ABOVE MENTIONED FACTS, WE ARE OF TH E OPINION THAT IT IS UNJUSTIFIED TO OPEN THE CASE ON THE BASIS OF CONSID ERING BUSINESS INCOME IN SPITE OF LONG TERM CAPITAL GAIN. WE REQUEST TO YOUR GOOD SELF TO HONOR THE DECISION OF THE UPPER COURTS AND ACCEPT THE DEDUCTI ON U/S 54B AND 54F OF THE INCOME TAX ACT, 1961. IN RESPONSE TO OUR PREVIOUS LETTER DATED 08/3/2010/ 10/11/2010 WE HAVE COME TO KNOW THE FOLLOWING REASON TO ISSUE NOTICE U /S 148 OF THE I.T. ACT, 1961: THE FACTS ON RECORD FURTHER REVEAL THAT THE ASSESSE E GROUP CONVERTED THEIR ANCESTRAL LAND INTO STOCK IN TRADE (VARIOUS SMALL P LOTS) BEFORE SELLING THE ITA 421 TO 423/JP/2013 10 SAME TO DIFFERENT PERSONS. AS PER FACTS ON THE RECO RDS THE SELLING ACTIVITY IS CLEARLY AN ADVENTURE IN THE NATURE OF TRADE. THEREF ORE, THE PROVISIONS OF SECTION 54B AND 54F ARE NOT APPLICABLE IN THEIR CAS E. I) WE ARE SUBMITTING OUR REPLY ON SEPARATE SHEETS, THIS IS NOT A BUSINESS INCOME BUT IT IS A CAPITAL GAIN ONLY. II) IT IS BEYOND THE LAW THAT YOU HAVE MENTIONED TH AT GROUP OF PERSON (MEANS-ASSOCIATION OF PERSON/PARTNERSHIP FIRM. BODY OF INDIVIDUALS ETC.) HAVE CONVERTED INTO STOCK IN TRADE. THE ASSES SEE IS NOT ABLE TO TAKE THE BENEFIT UNDER SECTION 54B AND 54F OF THE I NCOME TAX ACT, 1961. PLEASE KEEP ATTENTION ON THE FOLLOWING FACTS THAT IN THAT CIRCUMSTANCES. WE CAN DIVIDE THE INCOME OF THE ASSE SSEE IN TWO PARTS- A) CAPITAL GAINS:- CAPITAL GAINS AMOUNT WILL BE CON SIDERED AS SALES CONSIDERATION OF THE ASSETS AS RECORDED IN THE BOOK S OF ACCOUNT OF THE FIRM/AOP ETC. PLEASE KEEP ATTENTION ON THE FACT S THAT AS PER SECTION 45(3) OF THE INCOME TAX ACT, 1961. AS PER SECTION 45, CAPITAL GAINS. [(3)- THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY A PERSON T O A FIRM OR OTHER ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS (NOT BEING A COMPANY OR A CO-OPERATIVE SOCIETY) IN WHICH HE IS OR BECOME S A PARTNER OR MEMBER, BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE , SHALL BE CHARGEABLE TO TAX AS HIS INCOME OF THE PREVIOUS YEA R IN WHICH SUCH TRANSFER TAKES PLACE AND, FOR THE PURPOSES OF SECTI ON 48, THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM, ASSOC IATION OR BODY AS THE VALUE OF THE CAPITAL ASSET SHALL BE DEEMED TO B E THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET.] B) BUSINESS INCOME:- THE SALE CONSIDERATION IN EXCE SS OF THE STOCK IN TRADE AS RECORDED IN THE BOOKS OF ACCOUNTS VIA CRED ITED TO CAPITAL ACCOUNT. HOWEVER, WE ARE IN CONFIDENCE THAT THERE WILL BE TH E INCOME OF THE CAPITAL GAINS ONLY AS PER VARIOUS CASE LAWS AS MENT IONED IN OUR SEPARATE LETTERS BUT WE FURTHER SUBMITTING THE ENCLOSED COMPUTATION/RECO RDS FOR YOUR KIND REFERENCE THAT THERE WILL NOT BE ANY TAX LIABI LITY IN BOTH THE WAY. ITA 421 TO 423/JP/2013 11 III) TOTAL INCOME RS. 46900/RS. 6000: THERE IS NO W HERE ANY MISTAKE IN ASSESSMENT ORDER THE ASSESSEE HAS DISCLOSED INCOME AS FOLLOWS: CAPITAL GAINS RS. 40900 AND OTHER INCOME RS. 6000=R S. 46900/-, HOWEVER, THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS CALCULATED THE CAPITAL GAINS SEPARATELY SO THEY HAVE ADDED ONL Y RS. 6000/- TO CONSIDER TOTAL TAXABLE INCOME. NO WHERE ANY PART OF MISTAKE. ON THE BASIS OF ABOVE MENTIONED JUSTIFIED EVIDENCES , WE ARE OF THE OPINION THAT THE ORDER PASSED BY THE LEARNED DEPUTY COMMISSIONER WAS IN FAVOUR OF THE REVENUE ONLY, SO IT IS NOT JUSTIFIED TO RAISE ANY OBJECTION/QUESTION. 6. THE LD. CIT DID NOT FIND MERIT IN THE SUBMISSION S OF THE ASSESSEE AND OBSERVED THAT THE ASSESSING OFFICER COMPLETED THE A SSESSMENT IN A ROUTINE MANNER AND IT WAS NOT THE CASE OF LACK OF VERIFICAT ION BUT ALSO MISTAKEN VIEW OF LAW WHICH HAD MADE THE ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THE LD. CIT ALSO OBSERVED THAT IN THE PRES ENT CASE, ESSENTIAL FACTS RELATED TO THE VARIOUS CLAIMS AS MENTIONED BELOW HA D NOT BEEN VERIFIED/ANALYZED BY THE ASSESSING OFFICER WHILE PASSING THE ASSESSME NT ORDER DATED 30/12/2010:- (1) THE SALE CONSIDERATION OF ANCESTRAL AGRICULTURA L LAND SITUATED AT VILLAGE BORKHEDA, KOTA HAS BEEN SHOWN AT RS. 82 49996/- (1/3 RD SHARE) AND AFTER CLAIMING DEVELOPMENT CHARGES AND DEDUCTION U/S 54F AND 54B GROSS TOTAL INCOME IS SHO WN AT RS. 46900/- ONLY. THE ASSESSEE HAS CLAIMED DEVELOPM ENT CHARGES AT RS. 1250000/- AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS CONSIDERED TOTAL INVESTMENT ON THE ENTIRE LAND AT R S. 2871940/- AND ALLOWED SHARE OF THE ASSESSEE AT RS. 957314/-, DESPITE THE FACT THAT THE ASSESSEE HAS FAILED TO FU RNISH ANY EVIDENCE REGARDING CONSTRUCTION WORK. SIMILARLY, DE DUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 54F AND 54B A T RS. 1159669/- AND RS. 5411935/- WAS WRONGLY ALLOWED AS THE ITA 421 TO 423/JP/2013 12 SALE TRANSACTION OF THE LAND WAS AN ADVENTURE IN TH E NATURE OF TRADE TO EARN PROFIT. (2) THE ASSESSEE HAS SHOWN TOTAL INCOME AT RS. 4690 0/- AS PER COMPUTATION WHEREAS AS PER ASSESSMENT ORDER TOTAL I NCOME IS TAKEN AT RS. 6000/-. 7. THE LD. CIT DIRECTED THE ASSESSING OFFICER TO FR AME THE ASSESSMENT DE NOVO AFTER MAKING PROPER ENQUIRY BY OBSERVING IN PA RA 9 OF THE IMPUGNED ORDER AS UNDER:- 9. THE JURISDICTION U/S 263 OF THE IT ACT 1961 HAS BEEN CONFERRED TO THE COMMISSIONER OF INCOME TAX TO REVISE THE ORDER OF ASSESSING OFFICER WHICH HE FINDS TO BE ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE, ONLY BECAUSE THERE IS NO APPEA L FILED BY THE DEPARTMENT AGAINST THE ORDER OF ASSESSING OFFICER. SO THE PRIMARY OBJECTIVES OF THE PROVISIONS OF THIS SECTION ARE TO VEST SOME CORRECTIVE POWERS IN THE HANDS OF THE COMMISSIONER OF INCOME TAX TO MODIFY OR CANCEL ANY ORDER BY ASSESSING OFFICER IF IT IS FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. IT IS CLEAR FROM THE FACTS APPARENT FROM RECORDS TH AT THE ASSESSING OFFICER HAD PASSED AN ORDER U/S 143(3)/147 WITHOUT DUE AND PROPER ENQUIRIES WHICH HE IS EXPECTED TO MAKE AS AN INVEST IGATOR AS HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. I, THEREFORE, IN THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE AND RESPECTFULLY F OLLOWING THE ABOVE REFERRED JUDGMENTS, CONSIDER IT FIT TO SET AS IDE THE ASSESSMENT WITH A DIRECTION TO THE ASSESSING OFFICER TO FRAME IT DENOVO AFTER MAKING PROPER ENQUIRY AND VERIFICATION OF BOOKS OF ACCOUNTS AND OTHER RECORDS/DOCUMENTS AND AFTER FOLLOWING THE DIR ECTIONS GIVEN ABOVE. NOW THE ASSESSEE IS IN APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT AND FURTHER SUBMITTED THAT THE LD. CIT INITIATED THE PROCEEDINGS U/S 263 OF THE ACT NOT BY CALLING AND EXAMINING THE REP ORTS BUT ON PROPOSAL MOVED BY THE ASSESSING OFFICER TO REVISE THE ORDER DATED 13/12/2010 PASSED U/S ITA 421 TO 423/JP/2013 13 147/143(3) OF THE ACT, WHICH COULD NOT HAVE A BASIS FOR REVISION OF THE ASSESSMENT ORDER. THE RELIANCE WAS PLACED ON THE FO LLOWING CASE LAWS:- (I) RAJIV ARORA VS. CIT (2011) 131 ITD 58 (JP) (TR IB) (II) JEENDU RAM VS. CIT (2011) 7 ITR (TRIB.) 463 ( TRIB) (LUCKNOW). (III) MS. BINA INDRA KUMAR VS. ITO (2012) 137 ITD 238/80 DTR 180 (MUM.) (TRIB.) IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT HAVING TAXABLE INCOME, THEREFORE, NO RETURN OF INCOME WAS FILED, HOWEVER, THE ASSESSING OFFICER ISSUED A NOTICE U/S 148 OF THE ACT BY RECORDING THE FOLLOW ING REASONS: THE FACTS ON RECORDS FURTHER REVEAL THAT THE ASSE SSEE GROUP CONVERTED THEIR ANCESTRAL LAND INTO STOCK IN TRADE (VARIOUS S MALL PLOTS) BEFORE SELLING THE SAME TO DIFFERENT PERSONS. AS PER THE FACTS ON RECORD, THE SELLING ACTIVITY IS CLEARLY AN ADVENTURE IN THE NATURE OF T RADE. THEREFORE, THE PROVISIONS OF SECTION 54B AND 54F ARE NOT APPLICABL E IN THEIR CASE. 9. IT WAS CONTENDED THAT IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED AS UNDER:- - ASSESSEES WITH A MOTIVE TO REINVEST THE SALE PRO CEEDS RECEIVED ON SALE OF THEIR ANCESTRAL AGRICULTURAL LAND IN PURCHA SE OF ANOTHER AGRICULTURAL LAND (BEING MORE FERTILE, MORE AREA TH AN THE EXISTING, AT A DISTANT PLACE FROM THE CITY ETC.) AND A RESIDE NTIAL HOUSE WAS IN SEARCH FOR BUYERS FROM WHOM THEY CAN FETCH THE MAXI MUM/BEST PRICE.) - ON APPROACHING VARIOUS BUYERS IN THE MARKET, IT C AME TO THEIR KNOWLEDGE THAT IF SOME TIME IS DEVOTED/AMOUNT IS IN VESTED IN DEVELOPING THE AGRICULTURAL LAND, CONSTRUCTING THE APPROACHABLE ROADS TO THE DESIRED SPACE ETC., THE AGRICULTURAL L AND COULD BE SOLD IN PIECEMEAL/PARTITIONS/PLOTS TO VARIOUS BUYERS. AC CORDINGLY, A PLAN WAS PREPARED WITH DESIGNING, MAPPING AND LEVELING O F THE AGRICULTURAL LAND AND BOOKINGS WITH ADVANCES WERE S TARTED. - FOR IMPLEMENTATION OF THE ABOVE PLAN, DEVELOPMENT EXPENDITURE OF RS. 37,51,000/- COMPRISING OF RS. 36,00,000/- (9000 SQ FT* 40) ON DEVELOPMENT OF ROADS, RS. 71,000/- ON POLES FOR LIG HT CONNECTION AND RS. 80,000/- ON OTHER MISCELLANEOUS WORK WAS IN CURRED DURING FINANCIAL YEAR 2005-06. IN SUPPORT OF SAME, THE DET AIL OF THE ITA 421 TO 423/JP/2013 14 DEVELOPMENT EXPENSES AS ALSO G-SCHEDULE FOR THE COS T OF ROADS WAS SUBMITTED (PB 22-25). - AS A RESULT OF THE ABOVE DEVELOPMENT EXPENDITURE, ASSESSEES COULD FETCH CONSIDERATION OF RS. 82.50 LACS FROM SALE OF THEIR ANCESTRAL AGRICULTURAL LAND. THE AMOUNT SO RECEIVED WAS INVES TED IN PURCHASE OF AN AGRICULTURAL LAND AND A RESIDENTIAL HOUSE AND DEDUCTION U/S 54B AND U/S 54F RESPECTIVELY WAS CLAIMED BY THE AS SESSEE. - FROM THE ABOVE, IT CAN BE NOTED THAT THERE WAS NO CONVERSION OF THE ANCESTRAL AGRICULTURAL LAND FOR RESIDENTIAL/ANY OTH ER PURPOSE PRIOR TO ITS SALE. THE ASSESSEES WERE NEITHER INVOLVED I N ANY TYPE OF BUSINESS ACTIVITY NOR WERE REAL ESTATE DEALERS/BROK ERS/COLONIZERS. ONLY WITH A MOTIVE TO FETCH THE MAXIMUM PRICE ON SE LLING THE AGRICULTURAL LAND WHICH WAS POSSIBLE ONLY IF THE LA ND WAS SOLD IN PIECEMEAL/PARTITIONS/PLOTS, DEVELOPMENT EXPENDITURE WAS INCURRED. THEREFORE, THE SELLING ACTIVITY IS NOT AN ADVENTURE IN THE NATURE OF TRADE AND THUS DEDUCTION U/S 54B AND 54F HAS BEEN R IGHTLY CLAIMED. RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS WAS ALS O PLACED. - AN ALTERNATIVE ARGUMENT WAS ALSO SUBMITTED THAT I N CASE THE AGRICULTURAL LAND IS TREATED AS BEEN CONVERTED INTO STOCK IN TRADE, THEN ALSO THERE WOULD NOT BE ANY TAX LIABILITY FOR WHICH A CALCULATION WAS SUBMITTED TO THE ASSESSING OFFICER VIDE REPLY DATED 18/11/2010 (PB 14-17) 10. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFF ICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, WORKED OUT THE CAPITAL GAIN BY APPLYING HIS MIND AND ALSO DID NOT ALLOW TRANSFER EXPENSES OF RS. 1,2 4,560/- AND HELD VIDE ORDER DATED 30/12/2010 THAT THE PROFIT AND SALE OF AGRICU LTURAL LAND WOULD GIVE RISE TO CAPITAL GAIN ONLY. IT WAS ALSO SUBMITTED THAT THE L D. CIT ON THE PROPOSAL OF THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT AND ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER PASSED, SHOULD NOT BE CANCELLED BEING ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE ON THE GROUND THAT DEVELOPMENT EXPENDITURE OF RS. 28,71,94 0/- HAD BEEN ALLOWED BY THE ASSESSING OFFICER DESPITE THE FACT THAT NO EVID ENCE WAS FURNISHED AND ITA 421 TO 423/JP/2013 15 DEDUCTION U/S 54B AND 54F OF THE ACT HAD WRONGLY BE EN ALLOWED AS THE SALE TRANSACTION OF THE LAND WAS AN ADVENTURE IN NATURE OF TRADE TO EARN PROFIT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E SOLD THE ANCESTRAL AGRICULTURAL LAND AND THE ISSUE REGARDING THE DEVEL OPMENT EXPENDITURE WAS THOROUGHLY EXAMINED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 147/143(3) OF THE ACT AND EVEN THE REASON FOR REOPENING THE ASSESSMENT ITSELF STATED THAT THE FACTS ON RECORDS FURTHER REVEAL THAT THE ASSESS EE GROUP CONVERTED THEIR ANCESTRAL LAND INTO STOCK IN TRADE (VARIOUS SMALL PLOTS) BEFORE SELLING THE SAME TO DIFFERENT PERSONS. AS PE R THE FACTS ON RECORD, THE SELLING ACTIVITY IS CLEARLY AN ADVENTURE IN THE NAT URE OF TRADE. THEREFORE, THE PROVISIONS OF SECTION 54B AND 54F ARE NOT APPLICABL E IN THEIR CASE . IT WAS CONTENDED THAT ON THE REASON TO BELIEF SO FRAMED B Y THE ASSESSING OFFICER FOR ISSUE OF NOTICE U/S 148 OF THE ACT, THE ASSESSEE HA D GIVEN DETAILED EXPLANATION AND ONLY AFTER CONSIDERING THE SAME, THE ASSESSING OFFICER HELD THAT THE PROFIT AND SALE OF AGRICULTURAL LAND WOULD GIVE RISE TO CA PITAL GAIN AND DEVELOPMENT EXPENDITURE AS CLAIMED BY THE ASSESSEE WAS REDUCED . THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER U/S 147/143(3) OF T HE ACT COULD NOT BE HELD TO BE ERRONEOUS FOR WANT OF ENUIRY AND THE LD. CIT PAS SED THE ORDER U/S 263 OF THE ACT FOR DE NOVO ASSESSMENT ON THE POSSIBILITY OR GU ESSWORK BASED ON HIS SUBJECTIVE SATISFACTION WITHOUT ANY OBJECTIVE MATER IAL AND WITHOUT CONSIDERING THE MATERIAL AND EVIDENCES BEFORE HIM. IT WAS STATE D THAT TO WHAT EXTENT, THE ITA 421 TO 423/JP/2013 16 ASSESSING OFFICER SHOULD MAKE AN INVESTIGATION WAS A MATTER LEFT TO THE WISDOM OF THE ASSESSING OFFICER U/S 143(3) OF THE ACT. THE REFORE, THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT FOR MAKING FURTHER E NQUIRY WAS NOT VALID IN LAW. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- (I) SPECTRA SHARES & SCRIPS (P) LTD. VS. CIT (2013) 354 ITR 35/91 DTR 289 (AP) (HC). (II) CIT VS. NEW DELHI TELEVISION LTD. (2013) 94 DTR 21 (DEL.) (HC) (III) ITO VS. D.G. HOUSING PROJECTS LTD. (2013) 343 ITR 3 29 (DEL.) (HC) (IV) CIT VS. AMIT CORPN. (2013) 213 TAXMAN 19 (GUJ.) (HC ) (MAG.) (V) CIT VS. LEISURE WEAR EXPORTS LTD. (2011) 341 ITR 16 6 (DELHI) (HIGH COURT) (VI) PRADEEP BANDHU VS. CIT (2013) 81 DTR 289 (JD) (TRIB .). (VII) MAHISH KUMAR VS. CIT 134 ITD 27/17 ITR (TRIB.) 324 (INDORE) (TRIB.) (VIII) RAMPYARI DEVI SARAOGI VS. CIT 67 ITR 84 (SC) (IX) SMT. TARA DEVI AGARWAL VS. CIT 88 ITR 323 (SC) (X) CIT VS. SOHAN KHAN (2008) 304 ITR 194 (RAJ.) (HIGH COURT). (XI) CIT VS. A. MOHAMMED MOHIDEEN 176 ITR 393 (MAD.) (HI GH COURT). (XII) B. NARASIMHA REDDY VS. ITO (1994) 48 TTJ 329/47 ITD 11. IN HIS RIVAL SUBMISSIONS, THE LD. D.R. SUPPORTE D THE ORDER OF THE LD. CIT AND REITERATED THE OBSERVATIONS MADE ON THE IMPUGNE D ORDER. IT WAS FURTHER STATED THAT THE LAND WAS SOLD IN PIECEMEAL, SO IT W AS AN ADVENTURE IN TRADE. HOWEVER, THE ASSESSING OFFICER DID NOT EXAMINE THIS ISSUE THOROUGHLY, THEREFORE, THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS SUCH, THE LD. CIT WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE AC T AND DIRECTING THE ASSESSING OFFICER TO FRAME THE ASSESSMENT DE NOVO. ITA 421 TO 423/JP/2013 17 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN T HE PRESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER ISSUED THE NOTICE U/S 14 8 OF THE ACT DATED 29/10/2009 ONLY ON THIS BASIS THAT THE ASSESSEE SOLD THE LAND IN VARIOUS SMALL PLOTS TO DIFFERENT PERSONS, SO IT WAS AN ADVENTURE IN NATURE OF TRADE, THEREFORE, THE PROVISIONS OF SECTION 54B AND 54F OF THE ACT WERE N OT APPLICABLE. THEREAFTER, THE LD. CIT ON THE PROPOSAL DATED 04/03/2011 MOVED BY THE DCIT, CIRCLE- SAWAI MADHOPUR ISSUED A SHOW CAUSE NOTICE DATED 01/ 1/2013 AND CONSEQUENTLY PASSED THE ORDER U/S 263 OF THE ACT ON 06/3/2013. 13. IN THE PRESENT CASE, THE LD. CIT EXERCISED HIS REVISIONARY POWERS OF THE LD. CIT U/S 263 OF THE ACT. THE SAID POWERS MAY BE SUMMARIZED AS UNDER:- (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AN D EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCOR RECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREMENT OR ORDER BEING ERR ONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PRE JUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE AO HAS ADOPTED O NE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS AR E POSSIBLE AND ITA 421 TO 423/JP/2013 18 THE AO HAS TAKEN ONE VIEW -WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE AO EXAMIN ES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER S. 263, IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE AO. (VII) THE AO EXERCISES QUASI-JUDICIAL POWER VESTED IN HIM AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARR IVES AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S. 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE AO HAS MADE ENQUIRIES DURING THE COURS E OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE AO ALLOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF TH E ASSESSEE, THE DECISION OF THE AO CANNOT BE HELD TO BE ERRONEOUS S IMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSI ON IN THAT REGARD. 14. IN THE PRESENT CASE, THE ASSESSING OFFICER DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, MADE THE ENQUIRIES RELATING TO THE SAL E OF ANCESTRAL AGRICULTURAL LAND BY THE ASSESSEE & THE CO-OWNERS AND THOROUGHLY EXAM INED THIS FACT AS TO WHETHER IT WAS ADVENTURE IN NATURE OF TRADE FOR SAL E OF CAPITAL ASSET. THE ISSUE REGARDING THE DEVELOPMENT EXPENDITURE WAS ALSO THOR OUGHLY EXAMINED BY THE ITA 421 TO 423/JP/2013 19 ASSESSING OFFICER, THE ABOVE SAID FACT IS ALSO CLEA R FROM THE REASON FOR REOPENING THE ASSESSMENT ITSELF, AS MENTIONED AT PAGE NOS. 1 AND 2 OF THE ASSESSMENT ORDER, WHICH READ AS UNDER:- THE GROUP HAS CONVERTED THEIR ANCESTRAL AGRICULTUR AL LAND INTO VARIOUS SMALL PLOTS BEFORE SELLING THE SAME TO DIFFERENT PE RSONS AND THEREFORE THE SELLING ACTIVITIES WERE CLEARLY AN ADVENTURE IN THE NATURE OF TRADE. THE NATURE AND VOLUME OF TRANSACTIONS INDICATED THAT TH E ASSESSEE WAS ENJOYING THE TAXABLE INCOME DURING THE PREVIOUS YEA R RELEVANT TO ASSESSMENT. YEAR 2007-08 HOWEVER, HE HAD NOT FILED ANY RETURN OF INCOME FOR THE A.Y. 2007-08. THEREFORE, PROCEEDINGS U/S 14 7 OF THE INCOME TAX ACT, 1961 WERE INITIATED IN HIS CASE BY ISSUING NOT ICE U/S 148 ON 29/10/2009. 15. IN THE INSTANT CASE, AFTER ISSUING THE NOTICE U /S 148 OF THE ACT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE THE PROPER ENQUIRIES, DISCUSSED THE SUBMISSIONS OF THE ASSESSE E AND EXAMINED THE CIRCUMSTANCES IN WHICH THE LAND WAS OLD IN PIECES. HE ALSO EXAMINED THE CLAIM OF THE ASSESSEE FOR DEVELOPMENT CHARGES INCURRED ON THE LAND AND THEREAFTER COMPUTED THE INCOME OF THE ASSESSEE. SO, IT CAN BE SAID THAT THE ASSESSING OFFICER AFTER MAKING PROPER ENQUIRY AND EXAMINING T HE CASE, FRAMED THE ASSESSMENT U/S 147/143(3) OF THE ACT. 16. ON A SIMILAR ISSUE, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SOHAN KHAN (2008) 304 ITR 194 (RAJ.) HELD A S UNDER:- THAT THE MOST SIGNIFICANT CONSIDERATION TO CONCLUD E WHETHER THE TRANSACTION GAVE RISE TO CAPITAL GAINS OR NOT WOULD BE THE REGULARITY OF TRANSACTIONS OF PURCHASE AND SALE. TH E MERE FACT THAT THERE WAS A SERIES OF TRANSACTIONS OF SALE ONL Y BY SELLING PART OF THE LAND, PURCHASED IN ONE GO, OR PURCHASED ONC E UPON A TIME, PIECEMEAL, WOULD NOT RENDER THE ACTIVITY OF SALE A DVENTURE IN THE ITA 421 TO 423/JP/2013 20 NATURE OF TRADE. THERE WAS NOTHING TO SHOW THAT TH E LAND WAS PURCHASED WITH THE INTENTION TO SELL IT AT A PROFIT , OR WITH REQUISITE INTENTION, TO BRING IT WITHIN THE PARAMETERS OF ST OCK-IN-TRADE. IT WAS ALSO NOT SHOWN THAT THE ASSESSEE WAS A REGULAR DEALER IN REAL ESTATE. THE TRANSACTION WAS TO A CAPITAL ASSET ONLY AND NOT A TRANSACTION OF ANY STOCK-IN-TRADE. THEREFORE, THE SALE PROCEEDS WERE LIABLE TO BE TAXED AS CAPITAL GAINS. IN THE PRESENT CASE ALSO, THE LAND IN QUESTION WAS AN ANCESTRAL LAND AND WAS NOT CONVERTED AS STOCK IN TRADE. THE ASSESSEE AFTER MAK ING CERTAIN DEVELOPMENT, SOLD THE LAND IN PIECES TO FETCH MAXIMUM PRICE AND THE A SSESSING OFFICER AFTER PROPER EXAMINATION AND ON BEING SATISFIED, WAS OF THE VIEW THAT IT WAS NOT AN ADVENTURE IN TRADE. HE ALSO REDUCED THE CLAIM OF THE ASSESSEE FOR DEVELOPMENT EXPENDITURE AND AFTER TAKING A POSSIBLE VIEW WORKED OUT THE CAP ITAL GAIN. THE SAID VIEW WAS IN CONSONANCE WITH THE RATIO LAID DOWN BY THE HON'B LE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASE, THEREFORE, IT CA NNOT BE SAID THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS EITHER ER RONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE ARE OF THE VIEW THAT THE LD. CIT BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT WAS NOT JUSTIF IED IN SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. A CCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE AND THE ASSESSMENT ORDER FRAMED BY THE ASSESSING OFFICER IS RESTORED. 17. IN OTHER APPEALS I.E. ITA NOS. 422 & 423/JP/201 3, THE FACTS ARE SIMILAR EVEN THE ASSESSEES ARE CO-OWNER OF THE LAND IN QUES TION AND THE BROTHERS OF SHRI ITA 421 TO 423/JP/2013 21 NATHU LAL, WHOSE APPEAL HAS BEEN ADJUDICATED IN ITA NO. 421/JP/2013 IN THE FORMER PART OF THIS ORDER, THEREFORE, OUR FINDINGS IN THE CASES OF THESE ASSESSEES SHALL APPLY MUTATIS MUTANDIS. 18. IN THE RESULT, APPEALS OF THE ASSESSEES ARE ALL OWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 26/02/2014) SD/- SD/- (HARI OM MARATHA) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26/02/2014 * RANJAN COPY FORWARDED TO :- 1. APPELLANTS I. SHRI NATHU LAL, KOTA. II. SHRI RAM SUKH, KOTA. III. SHRI GOPI LAL, KOTA. 2. RESPONDENT- THE CIT, KOTA. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NOS. 421, 422 & 423/JP/2013) BY ORDER, AR ITAT JAIPUR.