ACIT, CIRCLE- 2(2), NEW DELHI V. ANANT RAJ LTD., NEW DELHI

ITA 5677/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1442 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 05-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY GOEL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Depreciation; Business expenditure; Earning of tax free income; Fair market value; Bad and doubtful debts; Unabsorbed depreciation; Revenue expenditure; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 50C; 201; 191; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. NO. 5169/DEL/2017 ASSESSMENT YEAR: 2013-14 M/S ANANT RAJ LIMITED, E-2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI-110055 V. ACIT, RANGE-2, CIRCLE-2(2), NEW DELHI TAN/PAN: AABCA3927B (APPELLANT) (RESPONDENT) I.T.A. NO. 5677/DEL/2017 ASSESSMENT YEAR: 2013-14 ACIT, RANGE-2, CIRCLE-2(2), NEW DELHI V. M/S ANANT RAJ LIMITED, E-2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI-110055 TAN/PAN: AABCA3927B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V.K. BINDAL, CA, MS. SWEETY KOTHARI, CA MS. RINKI SHARMA, CA RESPONDENT BY: SHRI SANJAY GOEL, CIT-DR DATE OF HEARING: 18 02 2020 DATE OF PRONOUNCEMENT: 11 05 2020 O R D E R PER AMIT SHUKLA, JM; THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST I.T.A. NOS.5169 & 5677/DEL/2017 2 IMPUGNED ORDER DATED 02.06.2017, PASSED BY LD. CIT (APPEALS)-I, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S. 143(3) FOR THE ASSESSMENT YEAR 2013-14. 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS: - I. THAT WITHIN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND LAW ON THE POINT, THE IMPUGNED ORDER DATED JUNE 02, 2017 FRAMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, NEW DELHI [LEARNED CIT(A)], SUSTAINING THE ASSESSMENT ORDER WITH REGARD TO DISALLOWANCE OF CLA IM OF BAD DEBT MADE BY THE APPELLANT AND THE ADDITION MAD E UNDER SECTION 50C OF THE ACT, IS BAD IN LAW, AND IM PUGNED ORDER THEREFORE, DESERVES TO BE SET ASIDE, AND THE ASSESSMENT IN CASE OF THE APPELLANT OF BEING HEARD IN THE MATTER. II. THAT WITHIN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW ON THE POINT, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING DISALLOWANCE OF CLAIM OF BAD DEBT OF RS.77,98,88,400/- CAUSED BY LEARNED ASSESSING OFFIC ER UNDER SECTION 36(1)(VII) OF THE ACT READ WITH SECTI ON 36(2) OF THE ACT UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION, AS CLAIMED BY THE APPELLANT, AND INSTE AD UPHOLDING THE AMOUNT OF CLAIM OF THE APPELLANT AS ASSESSED BY THE LEARNED ASSESSING OFFICER UNDER THE HEAD INCOME FROM CAPITAL GAINS. III. THAT WITHIN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW ON THE POINT, THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ADDITION OF AN AMOUNT OF RS.3,31,49,744/ - PERTAINING TO SALE OF A PROPERTY BY THE APPELLANT A S PER THE PROVISIONS OF SECTION 50C OF THE ACT WITHOUT CONSID ERING THE REASONS SUBMITTED BY THE APPELLANT, AND THEREFORE, THE IMPUGNED ADDITION CONFIRMED BY THE LEARNED CIT(A) DESERVES TO BE SET-ASIDE AND THE INCOME ON ACCOUNT OF SALE OF THE PROPERTY HE REASSESSED AFTER GIVING AN ADEQU ATE OPPORTUNITY TO THE APPELLANT TO REPRESENT AND BEING HEARD IN THE MATTER. I.T.A. NOS.5169 & 5677/DEL/2017 3 IV. THAT THE GROUNDS OF APPEAL SUBMITTED HEREINABOVE BE READ WITH PREJUDICE TO ONE ANOTHER IN CASES AND CIRCUMST ANCES WHEREVER THE CONTEXT SO REQUIRES. 3. THE BRIEF FACTS AND THE BACKGROUND OF THE CA SE, APROPOS THE ISSUES RAISED IN THE GROUNDS OF APPEAL ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF R EAL ESTATE WHEREIN IT UNDERTAKES CONSTRUCTION AND DEVELOPMENT OF SPACES FOR USE OF HOUSES, RESIDENTIAL, COMMERCIAL AND HOSP ITALITY, TOWNSHIPS, ITPS ETC. APART FROM ITS REAL ESTATE BUS INESS, ASSESSEE AS A PART OF ITS BUSINESS ACTIVITIES ALSO OBTAINS P ERMISSIONS FOR CLUS (CHANGE LAND USE) AND OTHER DEVELOPMENT PERMIS SIONS FROM GOVERNMENTAL AND LOCAL AUTHORITIES. ALL THESE ACTIVITIES WERE PART OF CORE BUSINESS OF THE ASSESSEE. THE ASSESSEE COMPANY ALONGWITH ITS NUMBER OF SUBSIDIARY COMPANIES WERE E NGAGED IN THE SAME REAL ESTATE BUSINESS. AS PER THE GOVERNMEN T REGULATIONS, IN THE STATE OF HARYANA, IF A COMPANY INTENDS TO DEVELOP A TOWNSHIP, THEN THE MINIMUM REQUIREMENT FO R ACQUIRING THE LAND FOR THE SAID PURPOSE IS 50 ACRES. HOWEVER, AS PER SECTION 4 OF HARYANA URBAN LAND CEILING ACT, 1975, THE HOLD ING OF THE LAND IS RESTRICTED TO 7.25 HECTARE, I.E., 17.95 ACR E BY A SINGLE ENTITY. TO OVERCOME SUCH RESTRICTIONS, THE ASSESSEE ACQUIRED LANDS IN THE NAME OF ITS SUBSIDIARY COMPANIES SO TH AT THE MINIMUM REQUIREMENT OF 50 ACRES OF LAND REQUIRED FO R DEVELOPING TOWNSHIP CAN BE MET, THAT IS, BY ACQUIRING PLOTS AN D LAND IN THE NAME OF VARIOUS SUBSIDIARY COMPANIES. ONCE ALL THE PLOTS OF LAND ARE ACQUIRED IN THE NAME OF SUBSIDIARY COMPANIES, T HEN THE DEVELOPMENT RIGHTS ARE TRANSFERRED BY THE SUBSIDIAR Y COMPANY TO I.T.A. NOS.5169 & 5677/DEL/2017 4 THE ASSESSEE COMPANY AND THE INCOME EARNED ON ACCOU NT OF DEVELOPMENT OF PLOTS OF LAND HAS ALWAYS BEEN DECLAR ED AS BUSINESS INCOME. IT HAD BEEN STATED THAT, THIS IS T HE STANDARD TRADE PRACTICE IN THIS INDUSTRY AND ACCEPTED BY THE GOVERNMENT, WHERE VARIOUS COMPANIES TOGETHER APPLY FOR THE LAND USE CHANGE (CLU) WHICH IS GRANTED BY THE STATE AUTHORITIES. 4. FURTHER, IT HAS CLARIFIED THAT, SINCE THE INVE STMENT MADE IN THE EQUITY SHARE CAPITAL OF THE SUBSIDIARIES HAS TO BE DECLARED UNDER THE HEAD LONG TERM INVESTMENTS AS PER PROVI SION OF THE COMPANIES ACT, THE SAME WAS DECLARED BY THE ASSESSE E COMPANY UNDER THE SAID HEAD THOUGH THE SUBSIDIARIES OWNED L AND BANK AND WERE INCORPORATED ONLY TO ACQUIRE PLOTS OF LAND AS PART OF THE REAL ESTATE BUSINESS. FACTUALLY THE SAME WAS TREATE D AS BUSINESS INVESTMENT. 5. AS REGARDS THE PARTICULAR ISSUE INVOLVED IN THE PRESENT APPEAL, THE ASSESSEE COMPANY HAD ACQUIRED EQUITY SH ARES OF ITS SUBSIDIARY COMPANY, SILVER TOWN INN AND RESORTS PVT. LTD. AS PART OF BUSINESS VENTURE AS THE SAID COMPANY OWNED TWO CONTIGUOUS PLOTS OF LAND AT VILLAGE KHERKI DAULA, T EHSIL MANESAR, GURGAON, HARYANA HAVING COMMERCIAL PROSPECTS. ASSES SEE HAS CLARIFIED THAT SHARES WERE NOT ACQUIRED FOR THE PUR POSE OF INVESTMENT TO EARN DIVIDENDS, ALBEIT FOR PURE BUSIN ESS PURPOSE. THE ASSESSEE PURCHASED THE ENTIRE EQUITY SHARE CAPI TAL OF THE SAID COMPANY BEING 50,000 EQUITY SHARES OF RS 10/- EACH AT RS. 18,19,20,452/-, I.E., AT A SIGNIFICANT PREMIUM CONS IDERING THE DEVELOPMENT / BUSINESS PROSPECTS OF THE PLOTS OF LA ND HELD BY THE I.T.A. NOS.5169 & 5677/DEL/2017 5 SAID COMPANY. THE ASSESSEE AGREED TO SELL THE SAID CONTIGUOUS PLOTS OF LAND OWNED BY SILVERTOWN BY WAY OF TRANSFE RRING THE SAID TOTAL SHARES TO M/S KAUSAR LEASING LTD. (HEREINAFTER REFERRED TO AS KAUSAR). AS AGREED WITH THE SAID BUYER, THE AS SESSEE WAS TO OBTAIN CLU AND OTHER CLEARANCES FOR THE SAID PLOTS OF LAND. THIS FACT IS CLEARLY EVIDENT FROM THE CORRESPONDENCE BET WEEN THE ASSESSEE AND KAUSAR AS POINTED OUT BY THE LD. COUNS EL, WHERE IT HAS BEEN CLEARLY MENTIONED THAT CLU AND OTHER CLEAR ANCES WAS TO BE OBTAINED BY THE ASSESSEE AND NOT BY SILVERTOWN W HICH WAS THE MAIN SUBJECT MATTER OF THE SAID SALE TRANSACTION AN D THE ASSESSEE COMPANY WAS TO OBTAIN ALL THE REQUISITE CLEARANCES AND BALANCE PAYMENT WAS TO BE RECEIVED BY THE ASSESSEE ONLY AFT ER HANDING OVER VARIOUS CLEARANCES AND APPROVALS IN RESPECT OF THE SAID PLOTS OF LAND TO THE BUYER WHO WANTED TO DEVELOP A MOTEL THEREON. IT HAS STATED THAT ANY PLOT OF LAND WITH CLU AND OTHER CLEARANCES HAS MUCH HIGHER VALUE AS COMPARED TO PURE AGRICULTU RAL LAND AND THE SAME CAN BE DEVELOPED ONLY WHEN SUCH CLEARA NCES FROM GOVERNMENT AND OTHER AUTHORITIES ARE AVAILABLE AS A BUSINESS VENTURE. THUS, THE TOTAL SALE CONSIDERATION OF RS. 93 CRORES WAS EMBEDDED IN THE VALUE OF THE AGRICULTURAL PLOTS OF LAND ALONG WITH NECESSARY CLU AND CLEARANCES IN RESPECT OF THOSE LA NDS FROM THE GOVERNMENT AUTHORITIES FOR COMMERCIAL USAGE. IN VIE W OF THESE FACTS, THE ASSESSEE WAS TO RECEIVE THE TOTAL AMOUNT OF RS. 93 CRORES AGAINST THE FOLLOWING TWO TRANSACTIONS: A) AGAINST THE SALE VALUE OF AGRICULTURAL LAND THROUGH SALE OF SHARES OF SILVERTOWN AS CAPITAL GAINS; AND I.T.A. NOS.5169 & 5677/DEL/2017 6 B) AGAINST THE SERVICES RENDERED FOR OBTAINING THE CLU AND OTHER CLEARANCES IN RESPECT OF THE PLOTS OF LAND OW NED BY SILVERTOWN AS BUSINESS INCOME. 6. THUS, OUT OF THE AGGREGATE AMOUNT OF RS. 93 CRORES, ONLY RS. 15 CRORE WAS PAYABLE AT THE TIME OF AGREEMENT A ND THE BALANCE AMOUNT OF RS. 77,98,88,400/- WAS PAYABLE SU BJECT TO AND UPON THE RECEIPT OF VARIOUS PERMISSION INCLUDIN G CLU. SINCE, THE ENTIRE AMOUNT WAS PAYABLE AS PER THE AGREEMENT SUBJECT TO VARIOUS CONDITIONS, ACCORDINGLY, THE ASSESSEE HAS D ECLARED THE ENTIRE AMOUNT AND PROFIT OF RS. 71,84,37,748/- WAS WORKED AND ASSESSEE PAID THE TAX AS LONG-TERM CAPITAL GAIN AMO UNTING TO RS. 14.37 CRORES IN THE RETURN OF INCOME FOR THE AS SESSMENT YEAR 2010-11. THE ASSESSEE HAS BEEN FURTHER BROUGHT ON R ECORD THAT ASSESSEE AFTER THE RECEIPT OF INITIAL AMOUNT OF RS. 15 CRORES MADE AN APPLICATION ON 25.08.2009 TO THE DIRECTOR TOWN A ND COUNTRY PLANNING FOR THE GRANT OF CLU PERMISSION FOR CONSTR UCTION OF HOTEL/RESTAURANT. IN THE MEANTIME, A MAJOR PORTION OF THE SAID LAND WAS ACQUIRED BY THE GOVT. AND OUT OF THE TOTAL LAND ADMEASURING 10243.52 SQ. MTR AND 4790 SQ. MTR. THER EOF, CAME UNDER ROAD WIDENING AND 4906 SQ. MTR AREA UNDER WID E GREEN BELT. THE ONLY AREA OF 493.52 SQ. MTR. REMAINED WIT H THE ASSESSEE. IN SUPPORT, ASSESSEE HAS ALSO FILED THE NECESSARY D OCUMENTS AND THE SKETCH PLAN WHEREIN THE AREA HAS BEEN DEMARCATE D UNDER THE ROAD WIDENING OF LAND FALLING UNDER THE GREEN BELT. THE ASSESSEES GRANT FOR CLU WAS THUS REJECTED BY THE GOVERNMENT A UTHORITIES. THUS, BY THE STROKE OF SUCH GOVERNMENTAL ORDERS, TH E ASSET OF SILVER TOWN RESORT PVT. LTD. HAD DRASTICALLY REDUCE D FROM I.T.A. NOS.5169 & 5677/DEL/2017 7 10243.52 SQ. MTR TO 493.52 SQ. MTR. IN THE WAKE OF SUCH EVENT, THE BUYER REFUSED TO PAY THE BALANCE AMOUNT AND EVE N THE ASSESSEE COMPANY FAILED TO OBTAIN REQUISITE SANCTIO N AND CLU PERMISSION ON THE ACQUISITION OF MAJOR PORTION OF L AND. ASSESSEE COMPANY WAS ALSO UNABLE TO PERSUADE THE BUYER TO CO MPLY WITH ITS OBLIGATION. SINCE ASSESSEE HAS SHOWN THE ENTIRE AMOUNT OF RS. 93 CRORES IN THE BOOKS OF ACCOUNT, HENCE ASSESSEE H AS WRITTEN OFF THE BALANCE RECEIVABLE AMOUNT OF RS. 77.98 CRORES I N THE BOOKS DURING THE FINANCIAL YEAR 2012-13 RELEVANT TO ASSES SMENT YEAR 2013-14. THE ASSESSEES CONTENTION BEFORE THE AO IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES WERE AS UNDER: A) THAT THE ASSESSEE IS IN REAL ESTATE BUSINESS, WHER EIN SALE AND PURCHASE OF LAND IS PART OF ONE OF THE MAIN BUS INESS ACTIVITIES; SINCE THE LAND, WHICH WAS SOLD WAS IN T HE NAME OF A SUBSIDIARY COMPANY OF THE ASSESSEE, BY THE UNDERLYING TRANSACTION WAS PURELY A BUSINESS ACTIVI TY OF THE ASSESSEE. B) IN THE SUBJECT CASE, THE ASSESSEE SOLD LAND, AGAINS T WHICH THE CONSIDERATION WAS PARTLY RECEIVED AND THE BALAN CE RECEIVABLE BECAME DEBTORS IN THE BOOKS OF THE ASSES SEE. C) NOW, SINCE, THE DEBTORS COULD NOT BE RECOVERED AND HAVE BECOME IRRECOVERABLE BECAUSE OF THE REASONS EXPLAIN ED IN ABOVE PARAS, THE ASSESSEE HAS WRITTEN OFF THE DEBTO RS; D) IT IS ALSO EVIDENT FROM THE CIRCUMSTANCES AND FACTS OF THE TRANSACTION THAT IT WAS PURELY A BUSINESS ACTIVITY AND THE ASSESSEE HAD PRUDENTLY PERFORMED THE TRANSACTION; I.T.A. NOS.5169 & 5677/DEL/2017 8 E) HAD THIS SALE NOT HAPPENED, THE ASSESSEE WOULD THEN HAVE TO WRITE OFF ITS INVESTMENTS IN ITS BOOK OR WO ULD THEN HAVE TO SELL IT AT A VERY LOW PRICE AND WOULD, IN A NY CASE, HAVE INCURRED BUSINESS LOSSES; F) IN FACT, THE ASSESSEE HAS NOT EARNED ANYTHING OUT O F THIS TRANSACTION; RATHER PAID UNDUE TAXES ON PROFITS, WH ICH WERE ACTUALLY NOT REALIZED. HENCE, IT IS EVIDENT FROM ABOVE THAT THE BAD DEBTS CLAIMED BY THE ASSESSEE ARE IN THE NATURE OF ITS BUSINESS ACTI VITIES AND ARE ALLOWABLE UNDER THE PROVISIONS OF THE INCOME TA X ACT. 7. HOWEVER, THE ASSESSING OFFICER DID NOT ACCE PT THE ASSESSEES EXPLANATION ON THE GROUND THAT, FIRSTLY, THE AMOUNT RECEIVABLE FROM M/S. KAUSHAL LEASING LTD IS CAPITAL IN NATURE AND HENCE CANNOT BE ALLOWED TO CHARGED TO REVENUE; AND SECOND LY, SUM OF RS.77.98 CRORE IS NOT A BAD DEBT AS CONTEMPLATED IN SECTION 36(2) AS THE CONDITIONS ARE NOT FULFILLED IN AS MUCH AS T HE ASSESSEE DID NOT INCLUDE THE SAME IN THE RECEIPT/INCOME OF ANY E ARLIER YEARS. HE FURTHER OBSERVED THAT, IN THE INSTANT CASE, THE AMOUNT SAID TO BE CLAIMED AS BAD DEBT IS NOT TRADE RECEIVABLE BUT IT IS SALE OF SHARES WHICH IS CAPITAL IN NATURE AND THE SHARES SO LD WERE HELD AS INVESTMENT AND NOT IN STOCK-IN-TRADE. WITHOUT PR EJUDICE, HE ALSO HELD THAT THE SAME IS NOT ALLOWABLE AS REVENUE EXPENDITURE OR LOSS AND ASSESSEE CANNOT BE PERMITTED TO CHARGE NON RECEIPT ANY AMOUNT TO THE REVENUE ACCOUNT AND IT HAS BEEN R IGHTLY SHOWN AS CAPITAL IN THE EARLIER YEARS. THE ASSESSEE HAS EARNED PROFIT AT RS.71.84 CRORE AS CAPITAL GAIN IN THE EAR LIER YEAR AND I.T.A. NOS.5169 & 5677/DEL/2017 9 SOUGHT TO WRITE OFF AS A REVENUE AMOUNT OF RS.77.98 CRORE IN P&L ACCOUNT AS BUSINESS EXPENSES WHICH IS NOT PERMISSIB LE. THUS, HE DISALLOWED THE ENTIRE CLAIM AND ADDED THE AMOUNT AT RS.77,98,88,400/-. 8. LD. CIT (A) HAS CONFIRMED THE ADDITION MADE BY THE AO INTER ALIA ON FOLLOWING REASONING: - I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLANT AN D THE LEGAL POSITION AVAILABLE ON THE ISSUE AND IT IS HEL D THAT: 1) THE APPELLANT HAD ALREADY DECLARED LONG TERM CAPITA L GAIN IN ITS RETURN OF INCOME, DISCLOSING THE SALE OF SHARES HAVING BEEN MADE AS SALE OF ITS INVESTMENT. THE APPELLANT HAD C OMPUTED LONG-TERM CAPITAL GAIN ON THE SAID SALE OF SHARES A T RS.71,84,37,748/- AND PAID TAXES THEREON. 2) THE AMOUNT THAT APPELLANT DID NOT RECEIVE FROM KAUS AR LEASING LTD. WAS RS.77,98,88,400/- WAS CAPITAL RECE IPT- CAPITAL LOSS. 3) IN THE SUBSEQUENT YEAR, THE SAID AMOUNT WAS WRITTEN OFF, HOWEVER, THE SAID BAD DEBT IS NOT OUT OF ANY TRANSA CTION ON ACCOUNT OF BUSINESS OR VENTURE, THEREFORE, THE SAID LOSS WAS DECLARED BY THE APPELLANT ITSELF AS LOSS OF AN INVE STMENT TRANSACTION. 4) XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXX FROM THE READING OF ABOVE SECTION, IT IS CLEAR THAT BAD DEBT IN THE CASE OF APPELLANT WAS RELATED TO ITS INVESTMENT TRANSACTIONS AND NOT RELATED TO ANY TRADE OR BUSINE SS TRANSACTIONS. IN OTHER WORDS, THE TRANSACTIONS RELA TING TO BAD DEBT IN THE APPELLANT CASE WAS NEVER INCLUDED IN TH E INCOME OF APPELLANT IN ANY PREVIOUS YEAR I.E. TO SAY THAT THE AMOUNT RECEIVABLE SHOULD BE ON ACCOUNT OF TRADE RECEIVABLE S AGAINST SALES MADE OR SERVICES RENDERED. BUT IN THE INSTANT CASE, THE I.T.A. NOS.5169 & 5677/DEL/2017 10 AMOUNT SOUGHT TO BE CLAIMED AS BAD DEBT REPRESENTS THE AMOUNT RECEIVABLE ON ACCOUNT OF SALE OF SHARES AND SAME IS CAPITAL IN NATURE. THE APPELLANT HAS ITSELF ADMITTE D THAT THE AMOUNT RELATED TO SALE OF SHARES WAS CAPITAL IN NAT URE AND LONG-TERM GAIN WAS COMPUTED ON SUCH SALE OF SHARES AND REQUISITE TAX WAS PAID BY THE APPELLANT. THE CASE LAWS RELIED UPON BY THE APPELLANT IN ITS S UBMISSION ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. AS REGARDS APPELLANTS CLAIM THAT IT SHOULD BE ALLOWED SET OFF OF THE AMOUNT OF THE LOSS ON SALE OF SHARES AGAINST FU TURE INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN, IT IS OBSERVED THAT ASSESSING OFFICER HAS ALLOWED CARRY FORWARD OF SUCH CAPITAL LOSS TO BE SET OFF AGAINST THE FUTURE PROFI TS VIDE PARA 2.4 OF THE IMPUGNED ASSESSMENT ORDER. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT AP PELLANT IS NOT ENTITLED TO SET OFF CAPITAL LOSS OCCURRED TO IT ON SALE OF SHARES AS BAD DEBT. HENCE, GROUND NO. 2 OF THE APPELLANT I S DISMISSED. HOWEVER, IT MAY BE MENTIONED HERE THAT A PPELLANT IS ENTITLED TO CARRY FORWARD SUCH CAPITAL LOSS WHIC H ASSESSING OFFICER HAS ALREADY ALLOWED VIDE PARA 2.4 OF THE AS SESSMENT ORDER. 9. BEFORE US, LD. COUNSEL FOR THE ASSESSEE, MR. VINOD KUMAR BINDAL AFTER EXPLAINING THE ENTIRE FACTS AND BACKGR OUND OF THE CASE SUBMITTED THAT IT IS WELL SETTLED LAW THAT INC OME EARNED FROM ACTIVITIES UNDERTAKEN DURING NORMAL COURSE OF BUSIN ESS IS TO BE ASSESSED AS BUSINESS INCOME AND IN SUPPORT, HE ST RONGLY RELIED UPON THE JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF: (A) KARAM CHAND THAPAR AND BROS. (P.) LTD. [1969] 74 I TR 26 (SC). (B) KARANPURA DEVELOPMENT CO. LTD. VS. COMMISSIONER OF INCOME-TAX [1962] 44 ITR 362 (SC). I.T.A. NOS.5169 & 5677/DEL/2017 11 (C) CHENNAI PROPERTIES & INVESTMENTS LTD. [2015] 56 TAXMANN.COM 456 (SC). HE FURTHER SUBMITTED THAT ONE HAS TO BE EXAMINE THE SUBSTANCE OF THE TRANSACTION WHICH HERE IN THIS CAS E CLEARLY SHOWS THAT SALE CONSIDERATION INCLUDED CONSIDERATIO N FOR SALE OF SHARES AND INCOME FOR SERVICES RENDERED IN CONNECTI ON WITH THE CLU AND OTHER CLEARANCE BEING A BUSINESS ACTIVITY O F THE ASSESSEE WHICH IS ENGAGED IN THE REAL ESTATE BUSINESS. EVEN IF THE ASSESSEE HAS INCORRECTLY DECLARED THE ENTIRE AMOUNT AS CAPIT AL GAIN IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2010 -11, INSTEAD OF BUSINESS INCOME AND EVEN IF THE ENTIRE AMOUNT WA S DECLARED AS INCOME THOUGH SAME DID NOT ACCRUE TO THE ASSESSEE D URING THE YEAR, EVEN THOUGH AT THAT TIME ONLY THE BUYER HAD C ATEGORICALLY REFUSED TO PAY THE ENTIRE AMOUNT VIDE LETTER DATED 18.01.2010. HOWEVER, IT DOES NOT MEAN THAT IN THE YEAR IN WHICH THE ACTUAL LOSS HAS BEEN INCURRED THE ASSESSEE CANNOT CLAIM UN DER THE CORRECT HEAD WHICH HERE IN THIS CASE WAS BUSINESS INCOME/BUSINESS LOSS. THE INCOME CAN BE SAID TO ACC RUE ONLY WHEN THE RIGHT TO RECEIVE HAS ARISEN AND, IN THIS C ASE, RIGHT TO RECEIVE THE INCOME WAS DEPENDED UPON GETTING THE CL U AND OTHER CLEARANCES FOR THE AGRICULTURAL PLOT OF LAND OWNED BY THE SILVER TOWN, THE INCOME CANNOT BE BROUGHT TO TAX. SINCE, T HE ASSESSEE COULD NOT GET THE CLU AND OTHER CLEARANCES FROM THE GOVERNMENT DURING THE ASSESSMENT YEAR 2010-11, THE RIGHT TO RE CEIVE THE BALANCE AMOUNT DID NOT ARISE IN THE FAVOUR OF THE A SSESSEE. HE FURTHER POINTED OUT FROM THE RECORDS AND THE LETTER S EXCHANGED, THAT IT WAS THE SOLE RESPONSIBILITY OF THE ASSESSEE TO GET THE CLU I.T.A. NOS.5169 & 5677/DEL/2017 12 AND OTHER CLEARANCES WHICH WAS PART OF ITS BUSINESS VENTURE AND WAS NOT THAT OF ITS SUBSIDIARY, SILVER TOWN. NOW WH EN THE MATTER GOT SETTLED WITH KAUSHAL LEASING FINALLY, THAT NO A MOUNT WILL BE PAYABLE IN THE RELEVANT ASSESSMENT YEAR 2013-14, TH EN ONLY THE SAID NON RECEIPT OF INCOME WAS DECLARED AS BAD DEBT S IN THE BOOKS OR ALTERNATIVELY IT SHOULD HAVE BEEN ALLOWED AS BUSINESS DEDUCTION/LOSS IN THE RETURN OF INCOME. 10. MR. BINDAL FURTHER SUBMITTED THAT THE AUTHORI TIES BELOW HAVE REJECTED THE CLAIM OF BAD DEBTS ALLEGING THE S AME TO BE CAPITAL LOSS OR NON REALISATION OF SALE PROCEEDS OF A CAPITAL ASSET AND NOT AS BUSINESS LOSS. HE SUBMITTED THAT THERE I S NO EMBARGO OR BAR IN LAW THAT IN THE YEAR IN WHICH ASSESSEE IS CLAIMING ANY LOSS OR DEDUCTION ASSESSEE CANNOT CLAIM IN CORRECT HEAD. IT IS ALWAYS OPEN TO THE ASSESSEE TO POINT OUT THAT THE S AME IS TO BE ASSESSED OR ALLOWED UNDER THE CORRECT HEAD OF INCOM E AND THE ASSESSING OFFICER IS DUTY BOUND TO ASSES THE CORREC T INCOME AS PER THE PROVISIONS OF LAW. RELYING UPON VARIOUS JUD GMENTS, HE SUBMITTED THAT EVEN WHERE ASSESSEE UNDER SOME WRONG IMPRESSION OF LAW OR HAS APPLIED WRONG PROVISIONS O F THE ACT WHILE FILING THE RETURN OF INCOME, THEN AO IS DUTY BOUND TO ASSESS UNDER THE CORRECT PROVISIONS AND ASSESS THE INCOME AS PER LAW. ESPECIALLY, WHEN ASSESSEE POINTS OUT AND BROUGHT TO THE NOTICE OF THE AO. EVEN IF THE ASSESSEE HAS DECLARED THE INCOM E AS CAPITAL GAIN IN THE ASSESSMENT YEAR 2010-11, BUT THE SAME C OULD HAVE ONLY BEEN ASSESSED AS BUSINESS INCOME WHICH WAS THE CORRECT POSITION IN ACCORDANCE WITH LAW. HOWEVER, IF THE SA ME HAS NOT I.T.A. NOS.5169 & 5677/DEL/2017 13 BEEN SHOWN, THEN IT CAN ALWAYS BE POINTED OUT IN TH E YEAR OF CLAIM OF LOSS OR INCOME. IN SUPPORT HE STRONGLY REF ERRED AND RELIED UPON THE FOLLOWING JUDGMENTS: (A) S.S. GADGIL VS LAL AND CO. 53 ITR 231(SC) (B) CIT V. SHELLY PRODUCTS [2003] 261 ITR 367 (SC) (C) VIJAY GUPTA [2016] 68 TAXMANN.COM 131 (DELHI) (D) ABDUL QAYUME VS CIT (1990) 184 ITR 404 (ALL) (E) KEDARNATH JUTE MFG. CO. LTD.VS CIT 82 ITR 363 ( SC) (F) CIT VS BHARAT GENERAL REINSURANCE CO. LIMITED. 81 ITR 303 (DELHI) (G) R. SESHAMMAL VS ITO 237 ITR 185 (MADRAS) (H) CIT VS BHAWANI SINGHJI [2018] 99 TAXMANN.COM 338 (D ELHI) (I) SHRI VIPUL P. DALAL VS. DCIT - 12(2) 2016-LL-06 03-1]- ITAT MUMBAI (J) DCIT VS. LAB INDIA INSTRUMENTS (P) LTD., 93 ITD 120 / 2005- TIOL-49-ITAT-PUNE (K) RAGHAVAN NAIR [2018] 89 TAXMANN.COM 212 (KERALA ) 11. THUS, HE SUBMITTED THAT EVEN IF THE INCOME HA S BEEN INCORRECTLY ASSESSED IN THE WRONG HEAD UNDER T HE ASSESSMENT YEAR 2010-11, THE SAME CANNOT BE IMPEDIMENT FOR ASSESSING THE INCOME UNDER THE CORRE CT PROVISIONS OF THE LAW. IN SUPPORT, HE STRONGLY RELI ED UPON THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. MANMOHAN DAS (DECEASED) [1966] 59 ITR 699, WHEREIN IT WAS HELD THAT IT IS FOR THE ITO OF THE SUBSEQUENT YEAR TO DETERMINE WHETHER THE LOSS OF I.T.A. NOS.5169 & 5677/DEL/2017 14 THE PREVIOUS YEAR MAY BE SET OFF AGAINST THE PROFIT S OF THAT YEAR. A DECISION RECORDED BY THE ITO WHO COMPUTES THE LOS S IN THE PREVIOUS YEAR THAT THE LOSS CANNOT BE SET OFF AGAIN ST THE INCOME OF THE SUBSEQUENT YEAR IS NOT BINDING ON THE ASSESSEE IN THE SUBSEQUENT YEAR. THE HONBLE APEX COURT HELD THAT:- ON A CAREFUL CONSIDERATION OF THE COVENANTS AR E OF THE VIEW THAT THE TREASURER WAS NOT A SERVANT OF THE ALLAHAB AD BANK UNDER THE TERMS OF THE AGREEMENT DATED 02/04/1931AN D THE REMUNERATION RECEIVED BY HIM WAS NOT SALARIES WIT HIN THE MEANING OF S. 7 OF THE IT ACT. BUT THAT IS NOT SUFF ICIENT TO CONCLUDE THE MATTER IN FAVOUR OF THE ASSESSEE. THE BENEFIT OF S. 24(2) OF THE INDIAN ACT MAY BE AVAILED OF BY THE AS SESSEE ONLY IF THE LOSS SOUGHT TO BE SET OFF WAS SUFFERED UNDER THE HEAD PROFIT AND GAINS . . . IN ANY BUSINESS, PROFESSION OR VOCATION. IT IS DIFFICULT TO REGARD THE OCCUPATION OF THE TREASU RER UNDER THE AGREEMENT AS A PROFESSION, FOR A PROFESSION INVOLVE S OCCUPATION REQUIRING PURELY INTELLECTUAL OR MANUAL SKILL, AND THE WORK OF THE TREASURER UNDER THE CONTACT CANNOT BE SO REGARDED. OCCUPATION OF A TREASURER IS NOT ONE OF THE RECOGNIZED PROFESS IONS, NOR CAN IT BE SAID THAT IT PARTAKES OF THE CHARACTER OF A BUSI NESS OR TRADE. IN PERFORMING HIS DUTIES UNDER THE AGREEMENT, THE A SSESSEE EXERCISED HIS SKILL AND JUDGMENT IN MAKING PROPER APPOINTMENTS AND MADE ARRANGEMENTS FOR SUPERVISING THE WORK DONE BY THE STAFF IN THE CASH DEPARTMENT OF THE BAN KS BRANCHES. THE REMUNERATION RECEIVED BY HIM WAS FOR DUE PERFORMANCE OF THE DUTIES AND ALSO FOR THE GRANTEE AGAINST LOSS ARISING TO THE BANK OUT OF THE ACTS OR OMISSIONS OF THE CASH AND I.T.A. NOS.5169 & 5677/DEL/2017 15 OTHER STAFF OF THE BANK. TAKING INTO CONSIDERATION THE NATURE OF DUTIES PERFORMED, AND THE OBLIGATION UNDERTAKEN, TO GETHER WITH RIGHT TO REMUNERATION SUBJECT TO COMPENSATION FOR L OSS ARISING TO THE BANK FROM HIS OWN ACTS AND OMISSION OR, OF THE SERVANTS INTRODUCED BY HIM INTO THE BUSINESS OF THE BANK, TH E ASSESSEE MAY BE REGARDED AS FOLLOWING A VOCATION. THE REMUNE RATION MUST THEREFORE COMPUTED UNDER S. 10 OF THE IT ACT A ND LOSS OF PROFIT SUFFERED IN THAT VOCATION IN ANY YEAR MAY BE CARRIED FORWARD TO THE NEXT YEAR AND BE SET OFF AGAINST THE PROFIT OF THE SUCCEEDING YEAR. HE FURTHER RELIED UPON THE CATENA OF OTHER JUDGMENT S IN HIS WRITTEN SUBMISSIONS WHICH FOR THE SAKE OF RE ADY REFERENCE ARE REPRODUCED HEREIN BELOW AS WE WILL BE REFERRING IT EXTENSIVELY HEREIN AFTER: - 1. NEW JEHANGIR VAKIL MILLS CO. LTD. VS CIT (1963) 49 ITR 0137 (SC) WHEREIN IT WAS HELD AS UNDER: 8. ON THE PRINCIPLE STATED ABOVE, IT SEEMS TO US T HAT IT WAS OPEN TO THE TAXING AUTHORITIES TO CONSIDER THE POSI TION OF THE ASSESSEE IN 1943 FOR THE PURPOSE OF DETERMINING HOW THE GAINS MADE IN 1944 SHOULD BE COMPUTED, EVEN THOUGH THE SUBJECT OF THE ASSESSMENT PROCEEDINGS WAS THE COMPU TATION OF THE PROFITS MADE IN 1944. THE CIRCUMSTANCE THAT IN AN EARLIER ASSESSMENT RELATING TO 1943, THE ASSESSEE W AS TREATED AS AN INVESTOR WOULD NOT IN OUR OPINION EST OP THE ASSESSING AUTHORITIES FROM CONSIDERING, FOR THE PUR POSE OF COMPUTATION OF THE PROFITS OF 1944, AS TO WHEN THE TRADING ACTIVITY OF THE ASSESSEE IN SHARES BEGAN. THE ASSES SING AUTHORITIES FOUND THAT IT BEGAN IN 1943. ON THAT FI NDING THE PROFITS WERE CORRECTLY COMPUTED AND THE ANSWER GIVE N BY THE HIGH COURT TO THE QUESTION OF THE COMPUTATION OF TH E PROFITS WAS CORRECTLY GIVEN. I.T.A. NOS.5169 & 5677/DEL/2017 16 2. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS WESTERN INDIA OIL DISTRIBUTING CO. LTD. (2001) 249 ITR 0517 (SC) CONFIRMED THE ORDER OF THE BOMBAY HIGH COURT IN THE CASE OF WESTERN INDIA OIL DISTRIBUTING CO. LTD. VS CIT (198 0) 126 ITR 0497 (BOM.) WHEREIN RELYING UPON THE JUDGMENT IN THE CASE OF MANMOHAN DAS, IT WAS OBSERVED AS UNDER: 11. OUR ATTENTION WAS THEN DRAWN BY COUNSEL OF THE ASSESSEE TO CIT VS CIT V. MANMOHAN DAS [1966] 59 IT R 699 (SC) IF THIS DECISION BE PROPERLY ANALYSED, IT WOULD SEEM THAT THE APPLICATION OF THE PRINCIPLE OF FINAL ITY, WHICH HAS BEEN SUBMITTED FOR OUR ACCEPTANCE BY COUNSEL FO R THE REVENUE AND WHICH FOUND FAVOUR WITH THE TRIBUNAL HA S BEEN REJECTED BY THE SUPREME COURT IN A SUBSTANTIALLY SI MILAR SET UP WHEN IT OPINED THAT THE DECISION OF THE ITO IN T HE PRECEDING YEAR THAT THE LOSS CANNOT BE SET OFF AGAI NST THE INCOME OF THE SUBSEQUENT YEAR IS NOT BINDING ON THE ASSESSEE DESPITE THE FACT THAT HE HAS RESTED CONTENT WITH TH AT DECISION AND NOT CARRIED FURTHER THE MATTER BY WAY OF APPEAL . ONCE THE CORRECT PRINCIPLE FLOWING FROM MANMOHAN DA S CASE (SUPRA) IS REALISED, IT WOULD APPEAR THAT IF IN AN EARLIER YEAR IT HAS BEEN HELD THAT THE CORRECT HEAD OF INCOME APPLI CABLE TO THE ASSESSEES CASE IS UNDER S. 12, I.E., INCOME F ROM OTHER SOURCES AND BY THAT REASON THE BENEFIT OF CARRYING FORWARD OF UNABSORBED DEPRECIATION IS DENIED TO THE ASSESSEE, SUCH A DECISION WILL NOT BIND THE ASSESSEE IN THE SUBSEQUE NT YEAR IN WHICH HE WANTS TO CLAIM THE SET-OFF. HE CAN HAVE TH E QUESTION DETERMINED IN THE LATER YEAR ALTHOUGH IN THE EARLIE R YEAR IN WHICH THE DECISION WAS GIVEN THE ASSESSEE RESTED CO NTENT WITH THE ORDER OF THE ITO AND DID NOT CARRY THE MAT TER FURTHER. 3. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS BHAWANI SINGH JI (2018) 99 TAXMANN.COM 338 (DEL) HELD 28. CALCUTTA DISCOUNT CO. LTD. V. ITO [1961] 041 ITR 191 (SC) IS A DECISION FOR THE PROPOSITION THAT IT IS FOR T HE ASSESSING OFFICER (AO) TO DRAW THE CORRECT CONCLUSI ONS, REGARDLESS OF THE POSITION OF THE ASSESSEE: 'IT IS FOR HIM TO I.T.A. NOS.5169 & 5677/DEL/2017 17 DECIDE WHAT INFERENCES OF FACTS CAN BE REASONABLY D RAWN AND WHAT LEGAL INFERENCES HAVE ULTIMATELY TO BE DRAWN. IT IS NOT FOR SOMEBODY ELSE FAR LESS THE ASSESSEE TO TELL THE ASSESSING AUTHORITY WHAT INFERENCES WHETHER OF FACTS OR LAW S HOULD BE DRAWN. INDEED, WHEN IT IS REMEMBERED THAT PEOPLE OF TEN DIFFER AS REGARDS WHAT INFERENCES SHOULD BE DRAWN F ROM GIVEN FACTS, IT WILL BE MEANINGLESS TO DEMAND THAT THE ASSESSEE MUST DISCLOSE WHAT INFERENCES-WHETHER OF F ACTS OR LAW-HE WOULD DRAW FROM THE PRIMARY FACTS'. THEREFO RE, IT IS NOW ESTABLISHED THAT REGARDLESS OF WHAT AN ASSESSEE CLAIMS, IF THE CORRECT POSITION DEDUCIBLE FROM PRIMARY FACT S IS OTHERWISE, THE AO HAS TO ADOPT THAT CORRECT POSITIO N. CONSEQUENTLY, IT IS HELD THAT MERELY BECAUSE THE LA TE ASSESSEE (SAWAI MAN SINGH) REPEATEDLY CLAIMED INDIV IDUAL STATUS WHILE FILING HIS RETURNS, THE CORRECT LEGAL STATUS WAS AS AN INDIVIDUAL AND NOT HUF. THEREFORE, IN THE OPINIO N OF THIS COURT, THERE WAS NO LEGAL IMPEDIMENT FOR THE LEGAL REPRESENTATIVES OF THE ASSESSEE TO CLAIM THAT THE S UCCESSION WAS OF THE HUF, UPON THE DEATH OF SAWAI MAN SINGH. 4. THE APPELLANT RELIED ON THE DECISION IN THE CASE OF GAJENDRA KUMAR T. AGARWAL VS ITO [2011] 11 TAXMANN.COM 231 (MUM) WHEREIN RELYING UPON THE JUDGMENT OF THE WESTERN INDIA OIL (SUPRA) IT HAS BEEN HELD AS UNDER: 19. HONBLE SUPREME COURT'S JUDGMENT DID NOT SPECI FICALLY REFLECT WHETHER REVENUE HAD TAKEN ANY OBJECTION TO RE- DETERMINATION OF CHARACTER OF AN INCOME, WHICH WAS EARNED IN AN EARLIER ASSESSMENT YEAR, AND WHEN CHARACTERIZATI ON SO ASSIGNED HAD RECEIVED FINALITY. ONE COULD HAVE ENTE RTAINED A LITTLE DOUBT WHETHER MANMOHAN DAS JUDGMENT (SUPRA) MAY OR MAY NOT BE VIEWED AS AN AUTHORITY FOR THE PROPOSITI ON THAT SUCH AN OBJECTION, WHEN TAKEN, CAN BE REJECTED. HOW EVER, HON'BLE JURISDICTIONAL HIGH COURT'S JUDGMENT IN THE CASE OF WESTERN INDIA OIL DISTRIBUTING CO. LTD. V. CIT [1980] 126 ITR 497 (BOM.) (AS APPROVED BY HON'BLE SUPREME COURT IN THE JUDGMENT REPORTED AS CIT V. WESTERN INDIA OIL DISTR IBUTING CO. LTD. [2001] 249 ITR 517) , WHILE INTERPRETING THE SCOPE OF HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE OF MAN MOHAN DAS (SUPRA), SET THESE DOUBTS AT REST, AND THUS NIP PED THIS I.T.A. NOS.5169 & 5677/DEL/2017 18 POSSIBLE CONTROVERSY IN THE BUD, BY OBSERVING AS FO LLOWS : IF THIS DECISION [HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE OF MANMOHAN DAS (SUPRA)] BE PROPERLY ANALYSED, IT WOULD SEEM THAT THE APPLICATION OF THE PRINCIPLE OF FINALITY, WHICH HAS BEEN SUBMITTED FOR OUR ACCEPTAN CE BY COUNSEL FOR THE REVENUE AND WHICH FOUND FAVOUR W ITH THE TRIBUNAL HAS BEEN REJECTED BY THE SUPREME COURT IN A SUBSTANTIALLY SIMILAR SET UP WHEN IT OPINED THAT THE DECISION OF THE ITO IN THE PRECEDING YEAR THAT THE LOSS CANNOT BE SET OFF AGAINST THE INCOME OF THE SUBSEQU ENT YEAR IS NOT BINDING ON THE ASSESSEE DESPITE THE FAC T THAT HE HAS RESTED CONTENT WITH THAT DECISION AND NOT CA RRIED FURTHER THE MATTER BY WAY OF APPEAL. TO PUT IT IN O THER WORDS, IN THE ASSESSMENT YEAR 1950-51, THE ITO, DEALING WITH THE ASSESSEE'S CASE, HELD THAT THERE W AS A NET LOSS BUT THAT THIS COULD NOT BE CARRIED FORWARD INASMUCH AS THE INCOME RECEIVED BY THE ASSESSEE WAS NOT FROM THE PURSUIT OF ANY BUSINESS, PROFESSION OR VOCATION. FOR THE SUCCEEDING YEAR 1951-52, THE ASSESSEE CONTENDED THAT HIS INCOME WAS FROM PURSUIT OF BUSINESS, PROFESSION OR VOCATION AND SOUGHT TO SET OFF THE PRECEDING YEAR'S LOSS AGAINST THE INCOME FOR TH E SUCCEEDING YEAR. THIS CONTENTION WAS URGED DESPITE THE FACT THAT IN THE PRECEDING YEAR THE INCOME HAD BEEN HELD TO BE FROM A SOURCE OTHER THAN A BUSINESS, PROFESSI ON OR VOCATION, AND ON THAT GROUND THE CARRYING FORWARD O F THE LOSS HAD NOT BEEN ALLOWED. IT WAS HELD BY THE COURT THAT THE INCOME OF THE ASSESSEE FOR BOTH THE YEARS MUST PROPERLY BE REGARDED AS HAVING ARISEN FROM THE PURS UIT OF A VOCATION AND, FURTHER, THAT BECAUSE OF THIS TH E ASSESSEE WAS LIABLE TO HAVE THE PRECEDING YEAR'S LO SS SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 1951-52. IT BRUSHED ASIDE THE ARGUMENT OF THE REVEN UE THAT THE PRECEDING YEAR'S DECISION BY THE ITO HAD BECOME FINAL AND BY REASON OF SUCH FINALITY THE ASSESSEE IN 1951-52 WOULD NOT BE ENTITLED TO SET OF F THE LOSS INCURRED IN 1950-51, ALTHOUGH THE CORRECT LEGA L POSITION WAS THAT THE INCOME WAS FROM THE PURSUIT O F A BUSINESS, PROFESSION OR VOCATION AND THAT, IF THIS WAS SO, I.T.A. NOS.5169 & 5677/DEL/2017 19 THE ASSESSEE WAS ENTITLED TO CARRY FORWARD THE LOSS . 20 . IN OUR HUMBLE UNDERSTANDING, HON'BLE SUPREME COURT 'S JUDGMENT IN MANMOHAN DAS'S CASE (SUPRA), READ WITH HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN THE CASE OF WESTERN INDIA OIL DISTRIBUTING CO. LTD. (SUPRA), IS THUS AUTHORIT Y FOR THREE SIGNIFICANT PROPOSITIONS. THESE PROPOSITIONS ARE SU MMED UP AS FOLLOWS: I. FIRST, THAT THE CALL, AS TO WHETHER A PARTICULAR BU SINESS LOSS, SPECULATIVE OR NON-SPECULATIVE, INCURRED BY THE ASS ESSEE IN AN EARLIER YEAR IS ELIGIBLE FOR SET OFF AGAINST BUS INESS INCOME IN A SUBSEQUENT YEAR, IS TO BE TAKEN IN THE COURSE OF PROCEEDINGS IN THE SUBSEQUENT ASSESSMENT YEAR, I.E. THE ASSESSMENT YEAR IN WHICH SET OFF IS CLAIMED. HON'BL E SUPREME COURT HAS SET OUT THIS PROPOSITION AND THIS PROPOSI TION WAS LATER CLARIFIED, IN UNAMBIGUOUS WORDS, BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF WESTERN IN DIA OIL DISTRIBUTING CO. LTD. (SUPRA), WHICH WAS APPROVED B Y HON'BLE SUPREME COURT IN THE JUDGMENT REPORTED AS WESTERN I NDIA OIL DISTRIBUTING CO. LTD. (SUPRA). II. SECOND, THAT SECTION 24(2) OF THE 1922 ACT, WHICH I S THE SAME AS SECTION 73(2) IN ALL MATERIAL RESPECTS, CONFERS 'A STATUTORY RIGHT UPON THE ASSESSEE WHO SUSTAINS A LOSS OF PROF ITS IN ANY YEAR IN ANY BUSINESS, PROFESSION OR VOCATION TO CAR RY FORWARD THE LOSS AS IS NOT SET OFF UNDER SUB-SECTION (1) TO THE FOLLOWING YEAR, AND TO SET IT OFF AGAINST HIS PROFITS AND GAI NS, IF ANY, FROM THE SAME BUSINESS, PROFESSION OR VOCATION FOR THAT YEAR'. THE PROPOSITION THAT IS SET OUT IS INFACT IN THE WO RDS EMPLOYED BY THEIR LORDSHIPS AND IT DOES NOT NEED ANY ELABORA TION. ONCE THIS STATUTORY RIGHT IS RECOGNIZED, IT IS A NA TURAL COROLLARY OF THAT RECOGNITION THAT WHEN AN ASSESSEE INCURS A LOSS IN A BUSINESS, SPECULATIVE OR NON-SPECULATIVE, IN AN YEA R, SUCH LOSS HAS TO BE, SUBJECT TO FULFILMENT OF OTHER PREC ONDITIONS, IS TO BE SET OFF AGAINST THE PROFITS OF THE SAME BUSIN ESS IN SUBSEQUENT YEAR. III. THIRD, THAT IN THE COURSE OF PROCEEDINGS OF THE SUB SEQUENT ASSESSMENT YEAR, I.E. THE ASSESSMENT YEAR IN WHICH SET OFF OF I.T.A. NOS.5169 & 5677/DEL/2017 20 LOSS IS CLAIMED, IT IS OPEN TO EVEN DECIDE THE TRUE NATURE AND CHARACTER OF LOSS INCURRED IN THE EARLIER RELEVANT ASSESSMENT YEAR. IN OTHER WORDS, EVEN A FINDING ABOUT THE NATU RE OF LOSS, IN THE ASSESSMENT YEAR IN WHICH LOSS IS INCURRED, D OES NOT BIND THE ASSESSEE, AND THAT ASPECT OF THE MATTER CA N BE DECIDED AFRESH IN THE COURSE OF PROCEEDINGS IN THE ASSESSMENT YEAR IN WHICH SET OFF IS CLAIMED. AS NOT ED IN THIRD PARAGRAPH OF HON'BLE SUPREME COURT'S JUDGMENT ITSEL F, 'IN MAKING HIS ORDER OF ASSESSMENT FOR THE YEAR 1950-51 , THE INCOME-TAX OFFICER DECLARED THAT THE LOSS COMPUTED IN THAT YEAR COULD NOT BE CARRIED FORWARD TO THE NEXT YEAR UNDER SECTION 24(2) OF THE INCOME-TAX ACT, AS IT WAS NOT A BUSINESS LOSS' AND YET, WHILE DEALING WITH THE ASSESSMENT PR OCEEDINGS FOR THE ASSESSMENT YEAR 1951-52, IT WAS HELD THAT L OSS INCURRED BY THE ASSESSEE IN 1950-51 WAS 'BUSINESS L OSS' IN NATURE. SIMILARLY, AS HELD BY HON'BLE BOMBAY HIGH C OURT IN THE CASE OF WESTERN INDIA OIL DISTRIBUTING LTD. (SU PRA) AND AS CONFIRMED BY HON'BLE SUPREME COURT, LOSSES DETERMIN ED UNDER THE HEAD 'INCOME FROM OTHER SOURCES', WHICH H AD ATTAINED FINALITY, WERE SUBSEQUENTLY TREATED AS 'BU SINESS LOSSES' - THOUGH FOR THE LIMITED PURPOSES OF ELIGIB ILITY FOR SET OFF AGAINST PROFITS FROM SAME ACTIVITY IN SUBSEQUENT YE ARS. 12. ON THE OTHER HAND, LD. CIT-DR RELYING UPON TH E OBSERVATIONS AND THE FINDINGS OF THE AO AND LD. CIT (A), SUBMITTED THAT HERE IN THIS CASE, IT IS AN ADMITTED FACT THAT ASSESSEE ITSELF HAS TREATED THE TRANSACTION RE LATING TO TRANSFER OF SHARES AS LONG TERM CAPITAL GAIN AND THE SAID SHARES WERE SOLD TO OTHER PARTIES. ONCE, THE CHARACTER OF INCOME IS IN THE NATURE OF CAPITAL, ASSESSABLE UNDER THE HEAD CAPITAL GAIN, THEN SAME CHARACTER CANNOT BE CHANGED. THE AO HAS ACCEPTED TH E LONG-TERM CAPITAL GAIN @ 20% IN ASSESSMENT YEAR 201 0- 11, AND THEREFORE, WITH REGARD TO SAME NATURE OF TRANSACTION, THE ASSESSEE CANNOT SAY THAT IT WAS ON I.T.A. NOS.5169 & 5677/DEL/2017 21 REVENUE ACCOUNT ASSESSABLE UNDER THE HEAD BUSINESS INCOME. THE CHARACTER OF INCOME CANNOT BE CHANGED BY ANY SUBSEQUENT CONDUCT TO FULFILL THE CONDITION OF ANY AGREEMENT. IN FACT, IT CANNOT BE THE CASE OF BAD DE BT BECAUSE ASSESSEE HAD NOT SHOWN ANY BUSINESS INCOME IN THE ASSESSMENT YEAR 2010-11. FURTHER, THE ASSESSEE HAD NEVER REVISED THE COMPUTATION OF RETURN OF INCOME I N THE ASSESSMENT YEAR 2010-11 AND HAS OFFERED THE LONG-TE RM CAPITAL GAIN @ 20% INSTEAD OF 30% WHICH IS RATE APPLICABLE FOR BUSINESS INCOME. THUS, THERE IS NO INFIRMITY IN THE ORDER OF THE AO AND LD. CIT (A) AN D SAME SHOULD BE CONFIRMED. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS AS W ELL AS MATERIAL REFERRED TO BEFORE US. THE FACT AND THE BACKGROUNDS OF THE CASE HAVE ALREADY BEEN DISCUSSED IN DETAIL HEREINABOVE. TO PUT IN A SUCCINCT MANNER, TH E ASSESSEE COMPANY WHICH IS ENGAGED IN REAL ESTATE BUSINESS HAD VARIOUS SUBSIDIARIES THROUGH WHICH IT HAD ACQUIRED LAND/PLOTS, AND THEY HAND OVER SUCH LAND A ND PLOT FOR THE DEVELOPMENT AND GIVE ALL THE DEVELOPME NT RIGHTS TO THE ASSESSEE COMPANY TO DEVELOP PROJECTS, TOWNSHIPS, COMMERCIAL ESTABLISHMENTS, ETC. THE ASSE SSEE THEREAFTER AS A PART OF ITS BUSINESS VENTURE APPLIE S FOR CHANGE LAND USE CLU AND OTHER PERMISSION FROM THE GOVERNMENT TO START THE DEVELOPMENT PROJECT. THOUGH THE I.T.A. NOS.5169 & 5677/DEL/2017 22 INVESTMENTS WERE MADE IN THE EQUITY SHARE CAPITAL O F THE SUBSIDIARY, HOWEVER, THE UNDERLYING ASSET WAS LAND AND THE PURPOSE WAS TO ACQUIRE THE LAND AND DEVELOP THE SAME TO EARN BUSINESS INCOME. SINCE INVESTMENT WAS MADE IN EQUITY SHARE CAPITAL, THEREFORE, AS PER THE DISCLOSURE NORMS UNDER THE COMPANIES ACT, SAME WERE DECLARED AS LONG-TERM INVESTMENTS. THE ASSESSEE I N PURSUANCE OF ITS BUSINESS OBJECTS HAD MADE INVESTME NT IN ONE OF ITS SUBSIDIARY COMPANY, SILVER TOWN INN A ND RESORTS PVT. LTD. FOR RS.18,47,45,452/- AS IT OWNED AGRICULTURAL/PLOT OF LAND. THE ASSESSEE WAS TO UNDE RTAKE THE DEVELOPMENT OF THE SAID LAND AND CLU WAS TO BE OBTAINED FOR COMMERCIAL USE, I.E., FOR MOTEL/RESTAU RANT BY THE ASSESSEE AND NOT BY SILVERTOWN. SINCE ASSESS EE COMPANY AS A PART OF BUSINESS VENTURE DECIDED TO DISPOSE-OFF THE SAID INVESTMENT AND NEGOTIATED WITH THE INVESTORS WHO WERE INTERESTED IN MAKING THE INVESTM ENT EVEN THOUGH THE ASSET OF THE COMPANY WAS MERELY 2.5 3 ACRES OF AGRICULTURAL LAND. HOWEVER, THE AGGREGATE CONSIDERATION AS AGREED BETWEEN THE PARTIES WAS TOT ALLY DEPENDED UPON THE CONDITION THAT IF THE ASSESSEE CO ULD GET CLU AND OTHER CLEARANCES BY THE GOVERNMENT, THE N ONLY THE PRICE WOULD BE PAID WHICH WAS AGREED AT RS . 93 CRORES. SINCE, THE AGGREGATE CONSIDERATION OF RS. 9 3 CRORES WAS SUBJECT TO VARIOUS CONDITIONS, THAT ASSE SSEE SHALL APPLY AND OBTAIN VALID AND LEGAL PERMISSION F OR CHANGE IN LAND USE AND OTHER REQUISITE PERMISSION F OR THE I.T.A. NOS.5169 & 5677/DEL/2017 23 FSI AND DEVELOPMENT OF THE PROJECT ON THE SAID LAND . AS PER THE AGREEMENT WITH THE BUYER FOR SUM RS.93 CROR E, RS.15 CRORE WAS INITIALLY PAYABLE AND THE BALANCE A MOUNT OF RS. 77,98,88,400/- WAS PAYABLE SUBJECT TO ASSESS EE GETTING VARIOUS PERMISSION. SINCE, THE AGREEMENT FO R TRANSFER OF SHARES WAS ENTERED IN THE FINANCIAL YEA R 2009- 10, THE ASSESSEE OFFERED THE ENTIRE AMOUNT OF RS. 9 3 CRORES ON ACCRUAL BASIS UNDER THE HEAD LONG TERM CAPITAL GAIN. AS STATED ABOVE, THERE WERE CERTAIN T URN OF EVENTS THAT THE ADJACENT LAND AND THE PART OF THE L AND UNDER THE ASSESSEES PROJECT WAS ACQUIRED BY THE GOVERNMENT FOR WIDENING OF THE NATIONAL HIGHWAYS AN D CERTAIN AREAS WERE DECLARED AS GREEN BELT. DUE TO T HIS GOVERNMENTAL ORDER, THE ENTIRE PROJECT HAD FAILED A ND CLU AND OTHER LEGAL PERMISSION OSTENSIBLY COULD NOT BE OBTAINED. AS BROUGHT ON RECORD BY THE LD. COUNSEL, LATER ON, THE SAID PIECE OF PLOT/LAND WAS SOLD AT A MEAGR E SUM OF RS.5,60,00,000/- AS COMPARED TO THE AGGREGATE CONSIDERATION OF RS. 93 CRORES, HAD ALL THE CONDITI ONS WOULD HAVE BEEN FULFILLED AND THE PROJECT COULD HAV E BEEN STARTED BY THE BUYER. IN THE RELEVANT FINANCIAL YEA R 2012-13, I.E., RELEVANT FOR THE ASSESSMENT YEAR 201 3-14, IT BECAME CLEAR THAT THE BUYER WILL NOT PAY THE AMO UNT AND SINCE THE ASSESSEE HAD ALREADY DECLARED THE SAI D INCOME IN THE ASSESSMENT YEAR 2010-11, THE SAME HAS BEEN CLAIMED AS BUSINESS LOSS/WRITTEN OFF AS BAD DE BT. I.T.A. NOS.5169 & 5677/DEL/2017 24 14. NOW, THE CORE ISSUE BEFORE US IS, WHETHER IN THIS YEAR THE SAID CLAIM OF LOSS SHOULD BE ALLOWED AS B USINESS LOSS OR LONG TERM CAPITAL LOSS. THERE IS NO DISP UTE THAT ASSESSEE DID INCUR LOSS OF RS.77,98,88,400/-. FIRST OF ALL, IF THE ASSESSEE COMPANY IS CARRYING OUT PURELY REAL ESTATE BUSINESS AND GETTING OF CLU/FSI ON LAND AND PROJECT AND OTHER GOVERNMENTAL CLEARANCE, IS PART OF ITS CORE B USINESS ACTIVITIES. HENCE, ANY SUCH INCOME OR LOSS ARISING FROM SUCH ACTIVITIES OSTENSIBLY IS ASSESSABLE UNDER THE HEAD BUSINESS OR PROFESSION. THE SUBSTANCE OF THE TRANSACTION OF SHARES WAS THE UNDERLYING ASSET OF S ALE VALUE OF AGRICULTURAL LAND AND MORE IMPORTANTLY, TH E SERVICES OF CLU WHICH HAS MADE THE ASSET MORE VALUABLE. THE SAL E CONSIDERATION OF THE SHARES IN ASSESSMENT YEAR 2010 -11 WAS IN FACT PROFIT /INCOME FOR THE SERVICES RENDERE D IN CONNECTION WITH OBTAINING THE CLU AND OTHER CLEARAN CE BECAUSE THE VALUE OF THE AGRICULTURAL LAND OF 2.53 ACRE COULD NOT HAVE FETCH PRICE OF RS. 93 CRORES, AS ITS VALUE WAS ONLY DEPENDENT UPON OBTAINING THE CLUS FOR COMMERCIAL USE AND OTHER GOVERNMENTAL PERMISSION. T HE SAID LAND COULD HAVE BEEN CHANGED FOR COMMERCIAL US E ONLY BY GETTING CLU FOR WHICH SUCH A HUGE PRICE WAS NEGOTIATED WHICH WAS ALMOST 20 TIMES THE VALUE OF A CTUAL LAND, BECAUSE AS BROUGHT ON RECORD ULTIMATELY THE S AID LAND WAS SOLD LATER ON AT RS. 5.6 CRORES ONLY. IF T HE ASSESSEE IN THE ASSESSMENT YEAR 2010-11 HAS OFFERED THE INCOME OF RS. 93 CRORE ON TRANSACTION OF SHARES WHI CH I.T.A. NOS.5169 & 5677/DEL/2017 25 WAS MAINLY HAD THE VALUE PURELY DUE TO ITS BUSINESS VENTURE AND CORE BUSINESS ACTIVITIES, AND IF SUCH A N INCOME HAS ACCRUED IN PURSUANCE OF AN AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE BUYER, THEN OSTENSIBLY, SAME WAS ASSESSABLE UNDER THE HEAD BUSINESS INCOME. THE REVENUES CASE IS THAT ONCE THE CHARACTER OF INCOME DECLARED BY THE ASSESSEE WAS ON CAPITAL ACCOUNT AND HAS OFFERED THE INCOME UNDER TH E HEAD LONG TERM CAPITAL GAIN, THEN ANY LOSS CLAIME D ON THE SAME VERY TRANSACTION CANNOT BE ALLOWED AS BUSI NESS LOSS. 15. IN A CLASSICAL JUDGMENT IN THE CASE OF NEW JAHANGIR VAKIL MILLS COMPANY LTD. VS. CIT (SUPRA), THE HONBLE APEX COURT HELD THAT IF THE ASSESSEE WAS TR EATED AS AN INVESTOR IN THE EARLIER YEAR WOULD NOT STOP T HE AUTHORITIES FOR COMPUTING THE INCOME AS A PROFIT IN THE SUBSEQUENT YEAR. FURTHER, HONBLE APEX COURT IN THE CASE OF CIT VS. MANMOHAN DAS (SUPRA) HELD THAT IT IS FOR THE ITO IN THE SUBSEQUENT YEAR TO DETERMINE WHETHER THE LOSS OF THE PREVIOUS YEAR MAY BE SET OFF AGAINST THE PRO FIT OF THAT YEAR. THE DECISION RENDERED BY THE ITO WHO COMPUTED THE LOSS IN THE PREVIOUS YEAR THAT THE LOS S CANNOT BE SET OFF AGAINST THE INCOME OF THE SUBSEQU ENT YEAR IS NOT BINDING ON THE ASSESSEE IN THE SUBSEQUE NT YEAR. THE RELEVANT OBSERVATION OF THE APEX COURT HA S ALREADY BEEN QUOTED ABOVE. FOLLOWING THE SAME RATIO AND I.T.A. NOS.5169 & 5677/DEL/2017 26 THE PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT I N THE CASE OF CIT VS. WESTERN INDIA OIL DISTRIBUTING COMPANY LTD. (SUPRA), WHEREIN THEIR LORDSHIPS HAVE CONFIRMED THE ORDER OF THE HONBLE BOMBAY HIGH COUR T OBSERVED THAT ONCE THE CORRECT PRINCIPLE FLOWING FR OM MANMOHAN DASS CASE IS REALISED, IT WOULD APPEAR THAT IF IN AN EARLIER YEAR IT HAS BEEN HELD THAT CORRECT HE AD INCOME APPLICABLE TO THE ASSESSEES CASE WAS UNDER THE HEAD INCOME FROM OTHER SOURCES AND BY THAT REASON THE BENEFIT OF CARRYING FORWARD OF DEPRECIATION IS DENI ED TO THE ASSESSEE, THEN SUCH A DECISION WILL NOT BIND TH E ASSESSEE IN THE SUBSEQUENT YEAR IN WHICH HE WANTS T O CLAIM THE SET OFF AGAINST THE BUSINESS INCOME. 16. THE PRINCIPLE ENUNCIATED BY THE HONBLE SUPR EME COURT CLEARLY CLINCHES THE ISSUE THAT, IF THE ASSES SEE IN THE EARLIER YEARS HAS OFFERED THE INCOME OR LOSS UN DER THE DIFFERENT HEAD OF INCOME EITHER UNDER AN ERRONEOUS PRESUMPTION OF LAW OR BY MISTAKE, THEN IT DOES NOT ACT AS AN ESTOPPEL OR BAR THE ASSESSEE TO POINT OUT THAT S AME WAS ASSESSABLE UNDER THE DIFFERENT HEAD IF IT IS FO UND THAT INCOME WAS ACTUALLY ASSESSABLE UNDER THE DIFFE RENT HEAD AS CLAIMED BY THE ASSESSEE. ACQUIESCENCE BY TH E ASSESSEE CANNOT DETERMINE THE HEAD IN WHICH THE INC OME IS TO BE ASSESSED. THE INCOME IS TO BE ASSESSED UND ER THE CORRECT PROVISIONS OF THE LAW AND IT HAS BEEN HELD SO BY VARIOUS JUDGMENTS AS REFERRED AND RELIED UPON BY TH E LD. I.T.A. NOS.5169 & 5677/DEL/2017 27 COUNSEL AS INCORPORATED ABOVE. THE ASSESSEE IS REQU IRED TO DISCLOSE WHOLLY AND TRULY ALL MATERIAL FACTS ABO UT HIS INCOME AND RECEIPTS, AND THEN ASSESSING OFFICER IS REQUIRED TO DRAW THE CORRECT CONCLUSION REGARDLESS OF THE POSITION OF THE ASSESSEE BECAUSE IT IS FOR HIM TO D ECIDE WHAT INFERENCE OF FACT AND LEGAL INFERENCES CAN BE DRAWN. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BHAWAR SINGH JI (SUPRA) FOLLOWING THE RATIO AND PRINCIPLE LAID DOWN BY THE HONBLE CONSTITUTIONAL BENCH IN THE CAS E OF CALCUTTA DISCOUNT CO. LTD. VS. ITO [1961] 41 ITR 19 1, WHEREIN PROPOSITION WAS LAID DOWN THAT IT IS FOR TH E AO TO DRAW THE CORRECT CONCLUSIONS, REGARDLESS OF THE POS ITION OF THE ASSESSEE AND HELD THAT IS NOW WELL ESTABLISH ED LAW THAT REGARDLESS OF WHAT AN ASSESSEE CLAIMS, IF THE CORRECT POSITION DEDUCTIBLE FROM THE PRIMARY FACT EITHER TH E ASSESSING OFFICER HAS TO ADOPT THAT CORRECT POSITIO N AND THERE IS NO LEGAL IMPEDIMENT FOR CORRECTING THE COR RECT POSITION. ONCE AGAIN, REITERATING THE SAME PRINCIPL E LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF MANMOHAN DAS IN THE CASE OF WESTERN OIL DISTRIBUTING CO. LTD. (SUPRA) WHEREIN ALMOST IN A SIMILAR POSITION WHERE IN THE CASE OF THE ASSESSEE IN THE ASSESSMENT YEAR 1950-51 THE ITO HELD THAT THERE WAS A NET LOSS BUT THIS COULD NOT BE CARRIED FORWARD AS INASMUCH AS THE INC OME RECEIVED BY THE ASSESSEE WERE NOT FROM ANY BUSINESS OR PROFESSION OR VOCATION FOR THE SUCCEEDING YEAR 1951 -52. THE ASSESSEE CONTENDED THAT HIS INCOME FROM PURSUIT OF I.T.A. NOS.5169 & 5677/DEL/2017 28 BUSINESS, PROFESSION OR VOCATION SHOULD BE ALLOWED TO SET OFF ALL THE PRECEDING YEARS LOSS AGAINST THE INCOM E FOR THE SUCCEEDING YEAR. THIS CONTENTION WAS URGED ON T HE FACT THAT IN THE PRECEDING YEAR THE INCOME HAS HELD TO BE FROM THE SOURCES OTHER THAN BUSINESS AND ON THAT GR OUND THE CARRIED FORWARD OF THE LOSS WAS NOT ALLOWED. TH E HONBLE SUPREME COURT HELD THAT INCOME OF THE ASSES SEE FOR BOTH THE YEARS MUST PROPERLY BE RECORDED AS HAV ING ARISEN FROM THE PURSUIT OF THE AUCTION AND THUS ASS ESSEE WAS LIABLE TO SET OFF PRECEDING YEARS LOSS AGAINST THE INCOME OF THE ASSESSMENT YEAR 1951-52. THE HONBLE SUPREME COURT BRUSHED ASIDE THE ARGUMENT OF THE REVENUE THAT IN THE PRECEDING YEAR, THE ORDER HAS BECOME FINAL AND REASON OF SUCH FINALITY, THE ASSES SEE WAS NOT ENTITLED TO SET OFF THE LOSS INCURRED IN TH E EARLIER YEARS EVEN THOUGH THE CORRECT LEGAL POSITION WAS TH AT INCOME WAS ALWAYS FROM THE PURSUIT OF BUSINESS OR PROFESSION. THE ITAT MUMBAI BENCH IN THE CASE OF GAJENDRA KUMAR T. AGARWAL VS. ITO (SUPRA) HAS SUM UP THE PROPOSITION OF HONBLE APEX COURT IN THE FOLLOW ING MANNER: I. FIRST, THAT THE CALL, AS TO WHETHER A PARTICULAR BU SINESS LOSS, SPECULATIVE OR NON-SPECULATIVE, INCURRED BY THE ASS ESSEE IN AN EARLIER YEAR IS ELIGIBLE FOR SET OFF AGAINST BUS INESS INCOME IN A SUBSEQUENT YEAR, IS TO BE TAKEN IN THE COURSE OF PROCEEDINGS IN THE SUBSEQUENT ASSESSMENT YEAR, I.E. THE ASSESSMENT YEAR IN WHICH SET OFF IS CLAIMED. HON'BL E SUPREME COURT HAS SET OUT THIS PROPOSITION AND THIS PROPOSI TION WAS I.T.A. NOS.5169 & 5677/DEL/2017 29 LATER CLARIFIED, IN UNAMBIGUOUS WORDS, BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF WESTERN IN DIA OIL DISTRIBUTING CO. LTD. (SUPRA), WHICH WAS APPROVED B Y HON'BLE SUPREME COURT IN THE JUDGMENT REPORTED AS WESTERN I NDIA OIL DISTRIBUTING CO. LTD. (SUPRA). II. SECOND, THAT SECTION 24(2) OF THE 1922 ACT, WHICH I S THE SAME AS SECTION 73(2) IN ALL MATERIAL RESPECTS, CONFERS 'A STATUTORY RIGHT UPON THE ASSESSEE WHO SUSTAINS A LOSS OF PROF ITS IN ANY YEAR IN ANY BUSINESS, PROFESSION OR VOCATION TO CAR RY FORWARD THE LOSS AS IS NOT SET OFF UNDER SUB-SECTION (1) TO THE FOLLOWING YEAR, AND TO SET IT OFF AGAINST HIS PROFITS AND GAI NS, IF ANY, FROM THE SAME BUSINESS, PROFESSION OR VOCATION FOR THAT YEAR'. THE PROPOSITION THAT IS SET OUT IS IN FACT IN THE W ORDS EMPLOYED BY THEIR LORDSHIPS AND IT DOES NOT NEED AN Y ELABORATION. ONCE THIS STATUTORY RIGHT IS RECOGNIZE D, IT IS A NATURAL COROLLARY OF THAT RECOGNITION THAT WHEN AN ASSESSEE INCURS A LOSS IN A BUSINESS, SPECULATIVE OR NON-SPE CULATIVE, IN AN YEAR, SUCH LOSS HAS TO BE, SUBJECT TO FULFILMENT OF OTHER PRECONDITIONS, IS TO BE SET OFF AGAINST THE PROFITS OF THE SAME BUSINESS IN SUBSEQUENT YEAR. III. THIRD, THAT IN THE COURSE OF PROCEEDINGS OF THE SUB SEQUENT ASSESSMENT YEAR, I.E. THE ASSESSMENT YEAR IN WHICH SET OFF OF LOSS IS CLAIMED, IT IS OPEN TO EVEN DECIDE THE TRUE NATURE AND CHARACTER OF LOSS INCURRED IN THE EARLIER RELEVANT ASSESSMENT YEAR. IN OTHER WORDS, EVEN A FINDING ABOUT THE NATU RE OF LOSS, IN THE ASSESSMENT YEAR IN WHICH LOSS IS INCURRED, D OES NOT BIND THE ASSESSEE, AND THAT ASPECT OF THE MATTER CA N BE DECIDED AFRESH IN THE COURSE OF PROCEEDINGS IN THE ASSESSMENT YEAR IN WHICH SET OFF IS CLAIMED. AS NOT ED IN THIRD PARAGRAPH OF HON'BLE SUPREME COURT'S JUDGMENT ITSEL F, 'IN MAKING HIS ORDER OF ASSESSMENT FOR THE YEAR 1950-51 , THE INCOME-TAX OFFICER DECLARED THAT THE LOSS COMPUTED IN THAT YEAR COULD NOT BE CARRIED FORWARD TO THE NEXT YEAR UNDER I.T.A. NOS.5169 & 5677/DEL/2017 30 SECTION 24(2) OF THE INCOME-TAX ACT, AS IT WAS NOT A BUSINESS LOSS' AND YET, WHILE DEALING WITH THE ASSESSMENT PR OCEEDINGS FOR THE ASSESSMENT YEAR 1951-52, IT WAS HELD THAT L OSS INCURRED BY THE ASSESSEE IN 1950-51 WAS 'BUSINESS L OSS' IN NATURE. SIMILARLY, AS HELD BY HON'BLE BOMBAY HIGH C OURT IN THE CASE OF WESTERN INDIA OIL DISTRIBUTING LTD. (SU PRA) AND AS CONFIRMED BY HON'BLE SUPREME COURT, LOSSES DETERMIN ED UNDER THE HEAD 'INCOME FROM OTHER SOURCES', WHICH H AD ATTAINED FINALITY, WERE SUBSEQUENTLY TREATED AS 'BU SINESS LOSSES' - THOUGH FOR THE LIMITED PURPOSES OF ELIGIB ILITY FOR SET OFF AGAINST PROFITS FROM SAME ACTIVITY IN SUBSEQUENT YE ARS. 17. ERGO, THE KEY SEQUITUR OF THE AFORESAID PRIN CIPLES LAID DOWN BY THE HONBLE APEX COURT AND OTHER RULIN GS ARE THAT, IF EITHER THE ASSESSEE HAS OFFERED INCOME OR THE ASSESSING OFFICER IN THE EARLIER ASSESSMENT YEAR HA S ASSESSED THE INCOME UNDER THE PARTICULAR HEAD WHICH ORIGINALLY WAS ASSESSABLE IN A DIFFERENT HEAD, I.E. , CAPITAL GAIN, EVEN THOUGH THE SAME WAS LIABLE TO BE ASSESSE D UNDER THE HEAD BUSINESS OR PROFESSION, THEN THERE IS NO EMBARGO EITHER ON THE ASSESSING OFFICER OR ON THE ASSESSEE TO SHOW THE INCOME OR LOSS UNDER THE HEAD BUSINESS OR PROFESSION IN THE SUBSEQUENT YEAR. TH E ASSESSEE CAN ALWAYS POINT OUT IN THE SUBSEQUENT YEA R IN WHICH IT IS CLAIMING ANY DEDUCTION OR LOSS THAT THE INCOME OFFERED IN THE EARLIER YEARS WAS NOT SHOWN U NDER THE CORRECT HEAD AND IN THIS YEAR THE SAME IS ASSES SABLE UNDER THE CORRECT HEAD WHICH HERE IN THIS CASE WAS INCOME OR LOSS FROM THE BUSINESS OR PROFESSION. I.T.A. NOS.5169 & 5677/DEL/2017 31 ACQUIESCENCE BY THE ASSESSEE BY OFFERING ANY INCOME UNDER DIFFERENT HEAD CANNOT ACT AS AN ESTOPPEL AGAI NST THE ASSESSEE OR THERE IS ANY EMBARGO ON HIS CLAIM T HAT INCOME IS TAXABLE OR NOT TAXABLE UNDER THE PARTICUL AR HEAD. THE HONBLE ANDHRA PRADESH AND TELANGANA HIGH COURT IN THE CASE OF PREFAB GRATINGS LTD. (SUPRA) OBSERVED THAT THE FINDING CAN BE REVERSED IN THE SUBSEQUENT YEARS AND IT IS COMPETENT FOR AN ITO TO DEAL WITH THE SAME INDEPENDENTLY BY RELYING UPON THE JUDGMENT IN THE CASE OF MANMOHAN DAS (SUPRA). 18. THUS, WE ARE ALSO OF THE OPINION THAT CLAIM REGARDING THE ALLOWABILITY OF THE BAD DEBTS OR BUSI NESS LOSS HAS TO BE DETERMINED BY THE ASSESSING OFFICER IN THE YEAR IN WHICH THE LOSS HAS CLAIMED IN P&L ACCOUNT A ND THE ASSESSMENT OF THE CORRESPONDING INCOME AS CAPIT AL GAIN IN AN EARLIER YEAR WILL NOT BE BINDING ON THE ASSESSEE AND IT IS ALWAYS OPEN FOR THE ASSESSEE TO POINT OUT THAT IT IS TO BE ASSESSED UNDER THE CORRECT HEA D, THAT IS BUSINESS INCOME. THE FACT THAT DECLARATION AND ASSESSMENT OF THE CORRESPONDING INCOME HAS BEEN ASSESSED AS CAPITAL GAIN AND ACCEPTED IN THE EARLIE R YEAR WILL NOT HAVE ANY IMPACT AND WILL NOT BIND THE ASSE SSEE AND SAME HAS TO BE DETERMINED AGAIN IN THE ASSESSME NT YEAR 2013-14 IN THE LIGHT OF THE PRINCIPLE LAID DOW N BY THE HONBLE APEX COURT AS DISCUSSED HEREINABOVE. TH E AO AS WELL AS THE APPELLATE AUTHORITIES UNDER THE L AW I.T.A. NOS.5169 & 5677/DEL/2017 32 CAN REVIEW THE FACTS OF THE CASE AND REDETERMINED T HE TAXABILITY OF INCOME AND THE CLAIMS TO BE ALLOWED A GAINST THE SAME IN THE SUBSEQUENT YEARS AND IF CERTAIN MIS TAKE OR WRONG DECISIONS HAS BEEN RENDERED IN THE EARLIER YEARS, THE SAME CANNOT BE PERPETUATED FOR SUBSEQUEN T YEAR AND IT WILL NOT BE A LEGAL IMPEDIMENT EVEN THO UGH THE ASSESSMENT FOR THE EARLIER YEARS HAS ATTAINED F INALITY. FURTHER, ANOTHER IMPORTANT THING IS THAT THE CLAIM OF INCOME OR LOSS OR ANY DEDUCTION HAS TO BE EXAMINED AFRESH IN THE YEAR IN WHICH IT IS CLAIMED. THUS, TH E LAW AS CULLED OUT FROM THE AFORESAID JUDGMENT IS THAT T HE BAD DEBT OR LOSS WHICH IS CLAIMED IN THIS YEAR HAS TO B E DETERMINED IN THIS YEAR ONLY WITHOUT DISTRIBUTING T HE EARLIER ASSESSMENT WHICH HAS ATTAINED FINALITY, AND THEREFORE, WE HOLD THAT THE CLAIM OF LOSS MADE IN T HIS YEAR IS ALLOWABLE AS BUSINESS LOSS. 19. NOW COMING TO THE ISSUE WHERE ONE OF THE CONTENTIONS RAISED BY THE DEPARTMENT THAT THE AMOUN T WRITTEN OFF DURING THE YEAR CANNOT BE ALLOWED AS A BAD DEBT, BECAUSE THE INCOME WHICH HAS ACCRUED TO THE ASSESSEE IN THE EARLIER YEAR WAS NOT ASSESSABLE UND ER THE SAME HEAD, I.E., INCOME FROM THE BUSINESS OR PROFES SION. WE FIND THAT PRECISELY THE SAME ISSUE NOW STANDS CO VERED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. HYBRID FINANCIAL SERVICES LTD. VIDE JUDGMENT AND ORDER DATED 11 TH FEBRUARY, 2020 IN ITA I.T.A. NOS.5169 & 5677/DEL/2017 33 NO.1265 AND 1469 OF 2017 , WHEREIN THE HONBLE HIGH COURT AFTER INTERPRETING THE SECTION 36(1)(VII) AND SECTION 36(2) AND RELYING UPON THE JUDGMENT OF HONBLE SUPR EME COURT IN THE CASE OF TRF LTD. VS. CIT, 323 ITR 397 OBSERVED THAT, FIRSTLY, ASSESSEE NEED NOT REQUIRED TO ESTABLISH/APPROVE THAT DEBT HAS IN FACT BECOME IRRECOVERABLE AND IT IS SUFFICIENT THAT IF THE BAD DEBT IS WRITTEN OFF IRRECOVERABLE IN THE ACCOUNT OF THE ASS ESSEE; AND SECONDLY, THE COURT OBSERVED THAT THERE IS NO REQUIREMENT UNDER THE ACT THAT THE BAD DEBT HAS TO ACCRUE OUT OF INCOME UNDER THE SAME HEAD INCOME FR OM BUSINESS OR PROFESSION TO BE DEDUCTED AS INCOME. T HE RELEVANT OBSERVATION FOR THE LATER PROPOSITION READ S AS UNDER: 19. IF THAT BE THE POSITION, THEN THERE IS COMPLIA NCE TO THE REQUIREMENT OF SECTION 36(1)(VII) OF THE ACT AND THE AMOUNT COVERED BY THE BAD DEBTS WOULD BE ENTITLED TO BE DEDUCTED VIDE COMPUTING INCOME UNDER SECTION 28 OF THE ACT. FURTHER, IT IS NOT NECESSARY, RATHER THERE IS NO REQUIREMENT UNDER THE ACT THAT THE BAD DEBT HAS TO ACCRUE OUT OF INCOME UNDER THE SAME HEAD I.E. INCOME FROM BUSINESS OR PROFESSION TO BE ELIGIBLE FOR DEDUCTION. THAT IS NOT A REQUIREMENT OF LAW. ALL THAT IS REQUIRED IS THAT THE DEBT IN QUESTION MUST BE WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AS IRRECOVERABLE . 20. THUS, SUCH A CONTENTION RAISED BY THE REVENUE DOES NOT HOLD GROUND. I.T.A. NOS.5169 & 5677/DEL/2017 34 21. ONE VERY IMPORTANT FACT WHICH WEIGHS HERE IN T HIS CASE IS THAT, ASSESSEE HAS INCURRED GENUINE LOSS OF RS. 77.98 CRORES AS DISCUSSED HEREIN ABOVE AND HAS PAID TAXES IN THE EARLIER YEARS, ALBEIT SHOWN IN DIFFERE NT HEAD. ONE FUNDAMENTAL PRINCIPLE WHILE DECIDING SUCH KIND OF MATTERS IS THAT, TAX DUE SHOULD BE COLLECTED AS ENS HRINED IN THE TAXING STATUTE AND WHICH IS ALSO THE MANDATE OF THE CONSTITUTION OF INDIA. HERE ASSESSEE IS FASTENE D WITH TAX LIABILITY ON A HYPOTHETICAL INCOME WHICH DID NO T MATERIALIZE /RECEIVED AND IN THIS SITUATION A JUSTI CE ORIENTED APPROACH IS WARRANTED WHEN ASSESSEE HAS, O N ONE HAND INCURRED HUGE LOSS AND ON OTHER, TAX ON RS . 77.98 CRORES IS CHARGED MERELY ON TECHNICALITY THAT , SINCE ASSESSEE HAD OFFERED THE TAX UNDER ONE PARTIC ULAR HEAD WHICH IT IS CLAIMING IN THIS YEAR TO BE SET-OF F IN THE OTHER HEAD, IS PRECLUDED FROM DOING SO. WHEN ASSESS EE ITSELF HAS POINTED OUT ITS BONAFIDE AND LEGAL CLAIM BEFORE THE ASSESSING OFFICER THAT CORRECT HEAD IN WHICH IT IS ASSESSABLE IS BUSINESS INCOME, THEN ACQUIESCENCE BY THE ASSESSEE IN EARLIER YEAR CANNOT BE THE GROUND T O TAX THE SAME OR DENY ANY LEGAL CLAIM. HONBLE SUPREME C OURT IN A RECENT JUDGMENT, IN THE CASE OF DALMIA POWER LTD. (2020) 420 ITR 399, REITERATED THIS PRINCIPLE BY HOLDING THAT RULES OF PROCEDURE HAVE BEEN CONSTRUED TO BE HANDMAIDEN OF JUSTICE. KAILAS V. NANKU (2005) 4SCC 480; STATE OF PUNJAB V SHAMAL MURARI (1976) 1 SCC 719. THE PURPOSE OF ASSESSMENT PROCEEDINGS IS TO I.T.A. NOS.5169 & 5677/DEL/2017 35 ASSESS THE TAX LIABILITY CORRECTLY IN ACCORDANCE WI TH LAW. NATIONAL THERMAL POWER CO. LTD. V CIT (1998) 229 ITR 383 (SC) THIS JUSTICE-ORIENTED APPROACH HAS EARLIER BEEN ORDAINED IN CIT V. SHELLY PRODUCTS (2003) 26I ITR 367 (SC) ALSO. THE AFORESAID PRINCIPLE CAN ALSO BE APPLIED HERE. 22. ACCORDINGLY, WE HOLD THAT THE CLAIM FOR THE A MOUNT OF RS. 77,98,88,400/- AS BUSINESS LOSS OR BAD DEBT IS ALLOWABLE IN REVENUE ACCOUNT IN THIS YEAR AND IS AL LOWED TO BE SET-OFF IN THE REVENUE ACCOUNT AS CLAIMED BY THE ASSESSEE AND NOT AS A CAPITAL LOSS. 23. IN THE RESULT, THE GROUND NO.2 RAISED BY THE A SSESSEE IS ALLOWED. 24. IN SO FAR AS THE ISSUE OF ADDITION OF RS.3,31,49,744/- PERTAINING TO SALE OF PROPERTY IN TERMS OF SECTION 50C. THE FACTS IN BRIEF ARE THAT THE ASS ESSEE HAS SOLD THE PROPERTY SITUATED AT BUDH SINGH PURA, JAIPUR FOR A SALE CONSIDERATION OF RS. 12,61,00,00 0/- DURING THE YEAR, WHEREAS THE STAMP DUTY VALUATION OF THE SAID PROPERTY WAS RS. 15,92,49,744/-. THE AO MADE THE ADDITION OF RS. 3,31,49,744/- U/S 50C OF THE ACT ALLEGING THAT THE ASSESSEE DID NOT CONTEST THE VALUATION OF THE SAID PROPERTY BEFO RE THE STAMP DUTY VALUATION AUTHORITIES. 25. LD. COUNSEL POINTED OUT THAT, THE APPELLANT S PECIFICALLY OBJECTED TO THE PROPOSITION OF APPLICATION OF THE S ECTION 50C OF THE I.T.A. NOS.5169 & 5677/DEL/2017 36 ACT AND EXPLAINED THAT THE CIRCLE RATES IN JAIPUR W ERE HIGHER THAN THE PREVAILING MARKET RATE. BESIDES, THERE WAS A CR EMATORIUM GROUND IN FRONT OF THIS PROPERTY WHICH ALSO AFFECTE D THE MARKET RATE OF THE PROPERTY SIGNIFICANTLY AND THEREFORE, T HIS PROPERTY FETCHED A LOWER MARKET VALUE. IT WAS FOR THE BUYER TO AGITATE THE MATTER OF THE VALUATION BEFORE THE VALUATION AUTHOR ITIES AS THE BUYER HAD TO PAY THE STAMP DUTY. THE APPELLANT ALS O REQUESTED THE CIT (A) TO REFER THE SAID PROPERTY FOR VALUATIO N. 26. BEFORE THE LD. CIT (A), THE ASSESSEE SUBMITTE D THAT THE LAND WAS SITUATED NEAR THE CREMATION GROUND AND IT WAS ACQUIRED BY THE ASSESSEE AT THE AUCTION AND THE ASSESSEE WAS GIVEN ASSURANCE BY THE GOVERNMENT AUTHORITIES TO SHIFT THE CREMATION GROUND AND THE S AME WAS NOT DONE AND THE ASSESSEE WAS IN NEED OF MONEY TO INVEST IN BUSINESS DURING THE RELEVANT PREVIOUS YEA R WHICH LEAD TO THE SALE OF THE LAND AT A BELOW CIRCL E RATE. THEREFORE, UNDER THESE FACTS AND CIRCUMSTANCES THE VALUATION AS PER THE STAMP VALUE SHOULD NOT BE TAKE N AS A SALE CONSIDERATION. ALTERNATIVELY, AND WITHOUT PR EJUDICE IT WAS SUBMITTED THAT THE MATTER CAN BE REFERRED TO THE DVO FOR ASCERTAINING THE CORRECT VALUATION LOOKING TO THE FACTS THAT THE LAND WAS SITUATED ADJACENT TO THE CREMATION GROUND, AND THEREFORE, IT COULD NOT FETCH THE CIRCLE RATE PRICE. HOWEVER, THE CIT (A) CONFIRMED THE ADDITION STATING NO EVIDENCE HAS BEEN SUBMITTED BY THE ASSES SEE TO SUBSTANTIATE ITS CONTENTION WITHOUT MAKING ANY REFE RENCE TO THE I.T.A. NOS.5169 & 5677/DEL/2017 37 DVO THOUGH SPECIFICALLY REQUESTED FOR. 27. LD. COUNSEL SUBMITTED THAT, IT IS A SETTLED LAW THAT WHEN AN ASSESSEE DISPUTES THAT THE STAMP DUTY VALUATION EXC EEDS THE FAIR MARKET VALUE THEN THE INCOME-TAX AUTHORITIES ARE BO UND TO REFER THE SAME TO DVO FOR VALUATION OF THE SAID PROPERTIE S AS HAS AUTHORITIES AS PER NOTE ENCLOSED. IN SUPPORT HE RE LIED UPON SUNIL KUMAR AGARWAL VS CIT (2015) 372 ITR 83 (CAL ) THAT THE ASSESSING OFFICER IS DUTY BOUND TO REFER TO VALUATI ON IF THE ASSESSEE DISPUTES THE SALE CONSIDERATION EVEN IF NO PRAYER IS MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. THUS, THE AUTHORITIES BELOW WERE DUTY BOUND TO REFER THE SAME FOR VALUATION. THE APPELLANT SPECIFI CALLY HAD STATED BEFORE THE CIT(A) THAT THE FMV OF THE SAID PLOT WAS LOWER DUE TO A NEARBY CREMATION GROUND, WHICH BY ITSELF BECOMES RA ISING AN OBJECTION TO THE VALUE AND THE CIT(A) MUST HAVE REF ERRED THE SAME TO THE DVO FOR VALUATION. THUS, FAILURE TO REFER MU ST LEAD TO DELETION OF THIS ADDITION. ALTERNATIVELY, IN THE IN TEREST OF JUSTICE, HE SUBMITTED THAT THE MATTER SHOULD BE REFERRED BAC K TO THE ASSESSING OFFICER WITH A DIRECTION TO REFER THE SAI D PROPERTY FOR VALUATION TO DETERMINE THE FAIR MARKET VALUE OF THE SAID PROPERTY. 28. AFTER HEARING BOTH THE PARTIES AND ON PERUSA L OF THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AN D THE MATERIAL PLACED BEFORE US, WE FIND THAT BEFORE THE APPELLATE AUTHORITY, THE ASSESSEE HAS CATEGORICALLY STATED THAT THOUGH THE CIRCLE RATE OF THE VICINITY AREA WA S HIGHER THAN PREVAILING MARKET RATE BUT THE LAND IN QUESTIO N I.T.A. NOS.5169 & 5677/DEL/2017 38 WHICH WAS SOLD WAS ADJACENT TO CREMATION GROUND WHI CH ADVERSELY AFFECTED THE MARKET RATE OF THE PROPERTY, AND THEREFORE, THE PROPERTY COULD NOT BE FETCHED THE CI RCLE RATE AND WAS SOLD AT THE LOWER RATE THAN THE CIRCLE RATE. FURTHER, IT WAS THE BUYER WHO HAS TO CONTEST THE ST AMP VALUE OF THE PROPERTY BEFORE THE VALUATION AUTHORIT Y IN WHICH ASSESSEE HAS NO CONTROL. IN ANY CASE, WHEN TH E ASSESSEE HAS DISPUTED THE STAMP DUTY VALUATION BECA USE OF CLINCHING CIRCUMSTANCES, THEN IN OUR OPINION MAT TER SHOULD HAVE BEEN REFERRED TO DVO FOR THE VALUATION OF THE SAID PROPERTY. ACCORDINGLY, WE REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL REFER THE M ATTER FOR THE VALUATION OF THE PROPERTY TO THE DVO AND ASSESS EE WILL SUBSTANTIATE ITS CASE BEFORE THE ASSESSING OFF ICER OR DVO TO JUSTIFY THE SALE PRICE. ACCORDINGLY, THIS GR OUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 29. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 30. IN THE REVENUES APPEAL, THE ADDITION OF DISALLOWANCE OF RS.1,60,30,344/- U/S.14A HAS BEEN CHALLENGED. THE FACTS IN BRIEF ARE THAT THE ASSESSE E HAS RECEIVED DIVIDEND OF RS29,707/- DURING THE YEAR ON DIVIDEND YIELDING INVESTMENT OF RS.4,54,065/-. ACCORDINGLY, ASSESSEE MADE SUO MOTU DISALLOWANCE OF RS.2196/- BEING 0.5% OF RS.4,54,065/- WHILE FILING THE RETURN OF INCOME. THE AO HELD THAT SINCE NO SATISFA CTORY I.T.A. NOS.5169 & 5677/DEL/2017 39 BASIS HAS BEEN PROVIDED BY THE ASSESSEE FOR SUO MOTU DISALLOWANCE, THEREFORE, HE PROCEEDED TO MAKE THE DISALLOWANCE IN ACCORDANCE WITH RULE 8D AND WORKED OUT THE DISALLOWANCE OF RS.1,60,32,530/- BEING 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT. 31. THE ASSESSEES CASE BEFORE THE LD. CIT (A) W AS THAT IT HAS MADE INVESTMENT IN THE SUBSIDIARY COMPANIES DUE TO BUSINESS EXPEDIENCY AND HAD ONLY MADE INVESTMENT OF RS.4,54,065/- IN MUTUAL FUNDS. LD. CIT (A) AGREED W ITH THE CONTENTION OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE BY THE AO. 32. BEFORE US, THE LD. COUNSEL SUBMITTED THAT, F IRST OF ALL HERE IN THIS CASE THE EXEMPT INCOME IS ONLY RS.29,707/- AND IF AT ALL DISALLOWANCE HAS TO BE MA DE THEN SAME CANNOT BE MADE EXCESS OF THE EXEMPT INCOM E AND IN SUPPORT HE RELIED UPON THE JUDGMENT OF PCIT VS. CRF BUILDERS AND CONSTRUCTION, (2019)112 TAXMANN.COM 322 SC. APART FROM THAT, IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014-15, ORDER DAT ED 31.12.2019, ITA NO.5678/DEL/2017, THE TRIBUNAL HELD THAT THE AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME SHALL ONLY BE CONSIDERED FOR THE PURP OSE OF DISALLOWANCE U/S.14A 33. LD. CIT-DR, ON THE OTHER HAND, RELIED UPON TH E ORDER OF THE ASSESSING OFFICER. I.T.A. NOS.5169 & 5677/DEL/2017 40 34. IT IS AN ADMITTED FACT THAT FIRSTLY THE DIVID END YIELDING INVESTMENT WERE ONLY RS.4,54,065/- AND DISALLOWANCE @ 0.5% WORKED OUT TO RS.2196/- WHICH H AS BEEN SUO MOTU OFFERED FOR DISALLOWANCE IN THE RETURN OF INCOME. THIS TRIBUNAL IN ASSESSEES OWN CASE FOLLOW ING THE JUDGMENT OF ITAT SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT PVT. LTD., (2017) 165 ITD 27 (DT) (SB) HELD THAT AVERAGE VALUE OF INVESTMENT WHICH HAS YIELDED INCOME DURING THE YEAR SHALL ONLY BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S.14A, AND THEREFORE, RESPECTFULLY FOLLOWING THE SAME NO ADDITION OVER AN D ABOVE CAN BE MADE. IN ANY CASE, THE DIVIDEND INCOME RECEIVED BY THE ASSESSEE IS MERELY RS.29,070/- WHIC H IN ANY CASE THE DISALLOWANCE COULD NOT HAVE BEEN EXCEE DED THE EXEMPT INCOME. THUS, THE ORDER OF THE LD. CIT(A ) IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE IS DISMISSED. 35. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MAY, 2020. SSD SD/ - SD DSD SD/ - [DR. B.R.R. KUMAR] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH MAY, 2020 PKK