Late TRV Selvaraj Rep by Legal Heirs, CHENNAI V. ITO, Cuddalore

ITA 570/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61061 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-04-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 30-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N MUTHUKUMARAN DR YOGESH KAMAT
• Keywords: Capital asset; Business income; Date of conversion; Fair market value
• Section: 45(2); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NOS. 570, 571 & 572/MDS/2011 (ASSESSMENT YEARS : 2002-03, 2003-04 & 2004-05) LATE TRV SELVARAJ, REP BY L/HEIRS, 65, KUMBAKONAM ROAD, PANRUTTI. PAN : AUGPS3727E (APPELLANT) V. THE INCOME TAX OFFICER, WARD I (4), CUDDALORE. (RESPONDENT) APPELLANT BY : SHRI N. MUTHUKUMARAN RESPONDENT BY : DR. YOGESH KAMAT, SR. DR DATE OF HEARING : 17.04.2012 DATE OF PRONOUNCEMENT : 30.04.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS OF THE ASSESSEE FOR IMPUGNED ASS ESSMENT YEARS, DIRECTED AGAINST ORDERS DATED 28.1.2011 OF C OMMISSIONER OF INCOME TAX (APPEALS)-XII, CHENNAI. 2. GROUNDS TAKEN BY THE ASSESSEE, ASSAIL THE COMPUT ATION OF CAPITAL GAINS BY THE ASSESSING OFFICER AND ALSO NON-APPORTI ONMENT OF THE CONSIDERATION RECEIVED ON SALE BETWEEN CAPITAL GAIN S AND BUSINESS INCOME. AS PER THE ASSESSEE, SECTION 45(2) OF INCO ME-TAX ACT, 1961 (IN 2 I.T.A. NOS.570 TO 572/MDS/11 SHORT 'THE ACT') WAS IGNORED BY THE CIT(APPEALS) AN D A.O. AND THE END RESULT WAS THAT VALUE OF CAPITAL GAINS WERE WORKED OUT BASED ON CERTAIN UNCORROBORATED STATEMENTS TAKEN FROM PURCHASERS AND THAT TOO BY GENERALIZING THE RATES TAKEN FROM SUCH UNCORROBORAT ED STATEMENTS. 3. FACTS FOR ALL THE YEARS FALL WITHIN A SHORT COMP ASS. FOR ASSESSMENT YEAR 2002-03, ASSESSEE HAD FILED ITS RETURN ON 24.3 .2003 ADMITTING AN INCOME OF ` 1,87,600/-. FOR ASSESSMENT YEAR 2003-04, A RETURN WAS FILED ON 28.1.2004 ADMITTING AN INCOME ` 18,71,080/- AND FOR ASSESSMENT YEAR 2004-05, A RETURN WAS FILED ON 25.10.2004 ADMI TTING INCOME OF ` 14,50,599/-. THOUGH THERE IS NO INFORMATION AS TO THE BREAK-UP OF RETURNED INCOME IN THE ASSESSMENT ORDERS, IT SEEMS SUCH INCOME COMPRISED OF SHARE FROM PARTNERSHIP FIRMS AND CAPIT AL GAINS. A SURVEY WAS CONDUCTED UNDER SECTION 133 OF THE ACT IN THE P REMISES OF THE ASSESSEE ON 9.1.2008. DURING THE SURVEY, IT CAME O UT THAT ASSESSEE HAD CONVERTED 12.29 ACRES OF HIS LAND TO STOCK-IN-T RADE AND EFFECTED SALES THEREAFTER AS HOUSING PLOTS. AS PER THE A.O. , OUT OF SUCH AREA, ASSESSEE HAD OBTAINED APPROVAL FROM TOWN PLANNING A UTHORITIES FOR 7.15 ACRES FOR SALE AS PLOTS. ASSESSING OFFICER ALSO NO TED THAT ASSESSEE HAD DEVELOPED ROADS AND CLAIMED DEVELOPMENT CHARGES AS EXPENSES. IT SEEMS IN THE SWORN STATEMENT RECORDED DURING THE SU RVEY, ASSESSEE ADMITTED THE SALE OF PLOTS. BASED ON THESE, A.O. C AME TO A CONCLUSION THAT ASSESSEE HAD CONVERTED THE ENTIRE CAPITAL ASSE T INTO STOCK-IN-TRADE. 3 I.T.A. NOS.570 TO 572/MDS/11 PURSUANT TO THE SURVEY, NOTICE UNDER SECTION 148 WA S ISSUED FOR ALL THE YEARS. FOR ASSESSMENT YEAR 2002-03, A FRESH RETURN WAS FILED BY THE ASSESSEE IN WHICH THE INCOME ADMITTED WAS ` 1,61,630/-. FOR ASSESSMENT YEAR 2003-04, PURSUANT TO NOTICE UNDER S ECTION 148, ASSESSEE FILED A RETURN WHEREIN INCOME SHOWN WAS ` 18,71,280/-. FOR ASSESSMENT YEAR 2004-05, PURSUANT TO NOTICE UNDER S ECTION 148, INCOME ADMITTED WAS ` 14,51,390/-. IT IS SEEN FROM THE ASSESSMENT ORDER S THAT ASSESSEE HAD CLAIMED A LOSS OF ` 30,489/- FOR ASSESSMENT YEAR 2002-03, ` 13,900 FOR ASSESSMENT YEAR 2003-04 AND AN INCOME O F ` 50,910/- FOR ASSESSMENT YEAR 2004-05 UNDER THE HEAD INCOME FROM BUSINESS. SUCH AMOUNTS WERE INCLUDED IN THE DECLARED INCOME. 4. DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002-03, ASSESSEE HAD, OUT OF THE ABOVE MENTIONED LAND, SOLD A PLOT MEASURING 2100 SQ.FT. TO ONE SHRI N.S. ARUGADOSS. CAPITAL GA INS ADMITTED BY THE ASSESSEE ON THIS SALE WAS ` 86,679/-. AS PER THE SALE DEED, THE CONSIDERATION WAS ` 50,000/-. AS PER THE A.O., ASSESSEE HAD CLAIMED BUSINESS LOSS ON THIS SALE AFTER SETTING OFF DEVELO PMENT EXPENSES AND ELECTRICITY BOARD SERVICE EXPENSES. A.O. THEREAFTE R ISSUED SUMMON TO SHRI N.S. ARUGADOSS AND THE BUYER APPEARED BEFORE T HE A.O. AND STATED THAT HE HAD BOUGHT THE PLOT FOR A SUM OF ` 2 LAKHS. THEREAFTER, SAID SHRI N.S. ARUGADOSS WAS CROSS-EXAMINED BY THE ASSESSEE. AS PER THE A.O., IN SUCH CROSS-EXAMINATION, SHRI N.S. ARUGADOSS CONF IRMED PAYMENT OF 4 I.T.A. NOS.570 TO 572/MDS/11 ON-MONEY, I.E. AMOUNTS IN EXCESS OF WHAT WAS STATED IN THE REGISTERED DEED. IN THE CROSS-EXAMINATION, ASSESSEE ASKED SHR I N.S. ARUGADOSS WHETHER THERE WERE ANY DOCUMENTARY PROOF FOR PAYMEN T OF ON-MONEY AND ALSO WHETHER HE HAD INTIMATED HIS EMPLOYER, BEI NG A PUBLIC SECTOR UNDERTAKING, THE FACTUM OF PURCHASE OF PLOT. A.O. WAS OF THE OPINION THAT SUCH QUESTIONS WERE INTENDED TO THREATEN THE DEPONE NT. THE A.O. FINALLY CAME TO A CONCLUSION THAT SHRI N.S. ARUGADO SS HAD CONFIRMED THE SALE CONSIDERATION AS ` 2 LAKHS. IN OTHER WORDS, AGAINST ` 50,000/- SHOWN IN THE SALE DEED, THE AMOUNT CONSIDERED BY TH E A.O. WAS ` 2 LAKHS FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. IT IS TO BE NOTED THAT ASSESSEE HAD ADOPTED FAIR MARKET VALUE OF ` 86,679/- BASED ON STAMP VALUE WHILE WORKING OUT THE CAPITAL GAINS. THUS, U NDER THE HEAD LONG TERM CAPITAL GAINS AN AMOUNT OF ` 1,13,321/- WAS ASSESSED, IN ADDITION TO WHAT WAS RETURNED. 5. DURING ASSESSMENT YEAR 2003-04 ALSO, A.O. ISSUED SUMMONS TO BUYERS OF THE PLOTS AND LAND. AS PER THE A.O., IN RESPONSE, ONE SMT. VETRISELVI AND ONE SMT. MALARVIZHI APPEARED. IN TH E STATEMENT RECORDED, IT WAS MENTIONED BY THE SAID BUYERS THAT AGAINST SA LE PRICE MENTIONED IN THE REGISTERED DEED AS ` 1,00,800/-, WHAT WAS PAID BY THEM WAS ` 1,50,000/- AND ` 1,60,000/- RESPECTIVELY. A.O. WORKED OUT AVERAGE SQUARE FEET RATE OF THE LAND SOLD TO SMT. VETRISELV I AND SMT. MALARVIZHI AT ` 65/-. THE TOTAL AREA OF THE PLOTS SOLD IN THE PRE VIOUS YEAR RELEVANT TO 5 I.T.A. NOS.570 TO 572/MDS/11 ASSESSMENT YEAR 2003-04 CAME TO 30,400 SQ. FT. COMP RISING OF 11,400 SQ. FT. DIVIDED INTO PLOTS AND 19,000 SQ. FT. SOLD ON THE ROAD SIDE WITHOUT DIVIDING INTO PLOTS. CROSS-EXAMINATIONS WERE ALLOW ED TO BE DONE ON SMT. VETRISELVI AND ONE SMT. MALARVIZHI AND AS PER THE A .O., THE CONCERNED PERSONS HAD CONFIRMED THE PAYMENT OF ` 1,50,000/- AND ` 1,60,000/- RESPECTIVELY. HE, THEREFORE, AFTER EXCLUDING 4800 SQ. FT. SOLD TO THESE TWO PERSONS, FOR THE BALANCE LAND OF 25,600 SQ. FT., AP PLIED THE RATE OF ` 65/- PER SQ. FT. AND ARRIVED AT THE SALE CONSIDERATION. ACCORDINGLY, THE CAPITAL GAINS WERE RE-COMPUTED AND AN ADDITION OF ` 7,23,301/- WAS MADE. 6. FOR ASSESSMENT YEAR 2004-05 ALSO SUMMONS WERE IS SUED TO BUYERS OF THE PLOTS AND LAND. AS PER THE A.O., ON EXAMINATION OF SIX PERSONS, OUT OF THE VARIOUS BUYERS, WHO HAD RESPOND ED TO THE SUMMONS, IT HAD COME OUT THAT THE ACTUAL PRICE FOR WHICH PLO TS WERE SOLD WERE AS UNDER:- SL. NO. NAME OF THE BUYER SQ. FT. SOLD SALE PRICE STATED BY THE BUYERS IN THE SWORN STATEMENT ( ` ) RATE PER SQ.FT. ( ` ) SALE PRICE ADMITTED BY THE ASSESSEE ( ` ) 1. J. GIRIRAJAN 2100 1,11,732/- 53/- 1,02,500/- 2. E. VASANTHA 2400 1,64,000/- 68/- 1,17,800/- 3. K. MUTHURAMALINGAM (FATHER AND GUARDIAN OF HEMALAKSHMI) 2100 1,26,000/- 60/- 1,02,500/- 4. R. GUNABALAN 2100 1,60,000/- 76/- 1,02,500/- 5. P. SIVAKUMAR 1800 1,00,000/- 56/- 87,500/- 6. P. RAMADOSS 1800 90,000/- 50/- 87,500/- TOTAL 12300 7,51,732/- 6 I.T.A. NOS.570 TO 572/MDS/11 BASED ON THE ABOVE TABLE, A.O. WORKED OUT PER SQ. F T. RATE OF SALE CONSIDERATION AS ` 60.50. OUT OF THE ABOVE PERSONS, CROSS-EXAMINATIO N WAS ALLOWED ONLY IN THE CASE OF SMT. E. VASANTHA. A.O. DID A RE- EXAMINATION WHEREUPON ACCORDING TO HIM, SMT. E. VAS ANTHA HAD CONFIRMED THE PAYMENT OF ON-MONEY TO THE ASSESSEE F OR PURCHASE OF THE PLOT. TOTAL AREA OF PLOTS AND LAND SOLD BY THE ASS ESSEE DURING THE RELEVANT PREVIOUS YEAR, CAME TO 23,100 SQ. FT. AND AFTER EXCLUDING 12,300 SQ. FT. SOLD TO SIX PARTIES MENTIONED IN THE TABLE ABOVE, THE BALANCE, AS PER THE A.O., CAME TO 15,800 SQ. FT. AND FOR SUCH A REA ALSO, THE A.O. APPLIED AVERAGE RATE OF ` 60.50 PER SQ. FT. ON ACCOUNT OF SUCH RE- COMPUTATION, THE CAPITAL GAINS WAS ENHANCED BY ` 5,22,550/-. 7. ASSESSEE MOVED IN APPEAL BEFORE LD. CIT(APPEALS) FOR ALL THE YEARS. HOWEVER, LD. CIT(APPEALS) WAS NOT IMPRESSE D BY THE ARGUMENT OF THE ASSESSEE THAT THERE WAS NO CORROBORATION OF ON-MONEY PAYMENT MENTIONED BY THE BUYERS THROUGH ANY SUPPORTING RECO RDS. ASSESSEE ALSO ARGUED THAT THE ASSESSING OFFICER HAD MADE AN AVERAGING OF RATES OF THE AREA SOLD BASED ON DEPOSITION OF FEW OF THE PARTIES, IGNORING REGISTERED DOCUMENTS. THERE WAS ALSO A CONTENTION THAT MARKET VALUE ADOPTED FOR STAMP VALUE ALONE COULD BE CONSIDERED A ND THERE COULD BE NO PRESUMPTION REGARDING ON-MONEY RECEIPTS. LD. CI T(APPEALS), 7 I.T.A. NOS.570 TO 572/MDS/11 HOWEVER, WAS OF THE OPINION THAT EXISTENCE ON-MONEY PAYMENT IN REAL ESTATE BUSINESS WAS A COMMON KNOWLEDGE. AS PER LD. CIT(APPEALS), SUFFICIENT EVIDENCE WERE BROUGHT ON RECORD BY THE A .O. TO SHOW THAT ON- MONEY WAS PAID ON A NUMBER OF PLOTS AND HENCE, ASSE SSING OFFICER WAS RIGHT IN TAXING DIFFERENCE IN SALE CONSIDERATION BA SED ON THE RECORDED STATEMENTS OF THE BUYERS. IN SHORT, HE CONFIRMED T HE ASSESSMENTS DONE BY THE A.O. 8. NOW BEFORE US, LEARNED A.R., ASSAILING THE ORDER S OF AUTHORITIES BELOW, SUBMITTED THAT FOR ASSESSMENT YEAR 2002-03, SHRI N.S. ARUGADOSS HAD STATED IN THE CROSS-EXAMINATION THAT HE HAD NOT INFORMED HIS EMPLOYER M/S NEYVELI LIGNITE CORPORATION, WHICH IS A PUBLIC SECTOR UNDERTAKING, ON THE PURCHASE OF PLOT. AS PER THE L EARNED A.R., THE REGISTERED DOCUMENT CLEARLY MENTIONED ` 50,000/- AND THE ASSESSING OFFICER HAD COME TO A PRESUMPTION THAT ` 2 LAKHS WAS PASSED BASED ON THE STATEMENT RECORDED FROM SHRI N.S. ARUGADOSS. A CCORDING TO HIM, ASSESSEE HAD HIMSELF WORKED OUT THE GAINS BASED ON STAMP VALUE RATES ADOPTED WHICH WAS THE FAIR MARKET VALUE. FURTHER, ACCORDING TO HIM, ASSESSING OFFICER IGNORED ALL THESE AND PROCEEDED T O PRESUME THE SURPLUS CONSIDERATION, UNDER THE HEAD CAPITAL GAIN S WHEN, ADMITTEDLY, THE SALE WAS OF STOCK-IN-TRADE. LEARNED A.R. SUBMI TTED THAT SECTION 45(2) OF THE ACT WAS IGNORED BY LD. CIT(APPEALS) DE SPITE SPECIFIC GROUND RAISED IN THIS REGARD. ACCORDING TO LEARNED A.R., LAND ONCE CONVERTED 8 I.T.A. NOS.570 TO 572/MDS/11 INTO STOCK-IN-TRADE, CAPITAL GAINS COULD BE ASSESSE D ONLY FOR DIFFERENCE IN FAIR MARKET VALUE AS ON THE DATE OF CONVERSION AND ORIGINAL COST AND ANY SURPLUS REALIZED ON SALE WHEN COMPARED TO FAIR MARK ET VALUE, COULD BE CONSIDERED ONLY UNDER THE HEAD INCOME FROM BUSINES S. 9. INSOFAR AS ASSESSMENT YEAR 2003-04 WAS CONCERNED , ARGUMENT OF THE LEARNED A.R. WAS THAT ASSESSING OFFICER HAD REL IED ON THE STATEMENTS RECORDED FROM TWO PERSONS AND MADE AVERAGING BASED ON SUCH STATEMENTS FOR THE WHOLE OF THE SALE EFFECTED BY TH E ASSESSEE. ACCORDING TO LEARNED A.R., ASSESSING OFFICER HAD US ED THIS METHOD WITHOUT ANY RHYME OR REASON AND IGNORED THE VALUE M ENTIONED IN THE REGISTERED DEEDS. SPECIFIC RELIANCE WAS PLACED ON THE AFFIDAVITS PLACED AT PAPER-BOOK PAGES 24-31 FILED BY FOUR OF THE BUYE RS, NAMELY, SHRI P.K. ELUMALAI, SHRI R. SRINIVASAN, SMT. S. SARASWATHI AN D SHRI R. PONNAPPAN WHICH, ACCORDING TO HIM, CLEARLY CONFIRMED THAT NOT HING MORE THAN WHAT WAS STATED IN THE REGISTERED DOCUMENTS WERE PAID BY THE SAID PERSONS TO THE ASSESSEE. AS PER LEARNED A.R., BOTH THE AUTHOR ITIES BELOW COMPLETED IGNORED THE AFFIDAVITS FILED BY THE BUYER S AND RELIED SOLELY ON STATEMENTS OF TWO OF THE BUYERS. CROSS-EXAMINATION OF TWO OF THE BUYERS CLEARLY SHOWED THAT THE SAID PARTIES DID NOT INFORM THE EMPLOYERS WHO WERE PUBLIC SECTOR UNDERTAKINGS. 9 I.T.A. NOS.570 TO 572/MDS/11 10. INSOFAR AS ASSESSMENT YEAR 2004-05 WAS CONCERNE D, LEARNED A.R. SUBMITTED THAT TWO OF THE BUYERS, NAMELY, SHRI B. R AJAN AND SHRI KUPPUSAMY ACHARI (PAPER-BOOK PAGES 21-24) HAD CONFI RMED THAT NOTHING MORE THAN WHAT WAS MENTIONED IN THE REGISTE RED SALE DEEDS WAS PAID THROUGH THEIR RESPECTIVE APPLICATIONS. ACCORD ING TO HIM, ONLY ONE BUYER, NAMELY, SMT. E. VASANTHA WAS EXAMINED AND IN SUCH EXAMINATION, SMT. E. VASANTHA (PAPER-BOOK PAGE 7) H AD STATED THAT THE VALUE MENTIONED IN THE DOCUMENT ALONE WAS CORRECT. THUS, ACCORDING TO HIM, THE ASSESSING OFFICER FELL IN GROSS ERROR IN R ELYING ON A FEW UNCORROBORATED STATEMENTS RECORDED FROM FEW OF THE BUYERS AND GENERALIZING THE RATES BASED ON SUCH STATEMENTS FOR WHOLE OF THE SALES EFFECTED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMEN T YEAR, AND IN IGNORING SECTION 45(2) OF THE ACT WHILE COMPUTING T HE INCOME OF THE ASSESSEE. 11. PER CONTRA, LEARNED D.R., SUPPORTING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT THE ASSESSMENT ORDERS WERE BA SED ON STATEMENTS RECORDED FROM BUYERS AND ALL SUCH BUYERS ADMITTED P AYMENT OF ON- MONEY. ACCORDING TO LEARNED D.R., THE PLOTS WERE A DJACENTLY SITUATED AND THEREFORE, RATES OF SALE CONSIDERED BY THE ASSE SSING OFFICER BY TAKING THE AMOUNTS MENTIONED BY THE PERSONS, WHO HA D DEPOSED BEFORE HIM, WERE A FAIR ESTIMATE. WHEN ASSESSEE HAD CONVE RTED THE LAND INTO STOCK-IN-TRADE, IT COULD NOT BE PRESUMED THAT THE S ALE OF THE PLOTS, WITHIN 10 I.T.A. NOS.570 TO 572/MDS/11 THE SAME LAND AREA WOULD BE EFFECTED AT RATES WHICH WERE AT SUBSTANTIAL VARIANCE. ON THE OTHER HAND, ASSESSEE WOULD HAVE A DOPTED THE SAME RATES AND IF AT ALL THERE WERE ANY VARIATION IT WOU LD BE ONLY MARGINAL. ASSESSEE HAVING NOT PROVED ANY CONCESSION TO HAVE B EEN GIVEN TO ANY PURCHASER, ASSESSING OFFICERS BASIS OF COMPUTING T HE CAPITAL GAINS COULD NOT BE FAULTED. 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE TOTAL AREA OF LAND, AS PER THE A.O., CONVERTED BY THE ASSESSEE FROM CAPITAL ASSET TO STOCK-IN-TRADE, WAS 12.29 ACRES. ASSESSING OFFICER HAD OBSERVED THAT OUT OF SUCH 12.29 ACRES, 7.15 ACRES W ERE APPROVED BY THE TOWN PLANNING AUTHORITIES FOR SELLING AS PLOTS. ON CE A CAPITAL ASSET IS CONVERTED TO STOCK-IN-TRADE AND SUCH A CONVERSION I S ACCEPTED, THE METHOD OF COMPUTING CAPITAL GAINS IS GIVEN IN SECTI ON 45(2) OF THE ACT WHICH IS REPRODUCED HEREUNDER:- NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTION (1), THE PROFITS OR GAINS ARISING FROM THE TRANSFER BY WAY OF CONVERSIO N BY THE OWNER OF A CAPITAL ASSET INTO, OR ITS TREATMENT BY HIM AS STOC K-IN-TRADE OF A BUSINESS CARRIED ON BY HIM SHALL BE CHARGEABLE TO I NCOME-TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK-IN- TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND, FOR THE PURPOSES OF SECTION 48 , THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEMED TO BE THE FULL VALUE OF T HE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. THE ACT HAS LAID DOWN A CLEAR METHODOLOGY FOR ASSES SMENT WHERE THERE HAS BEEN CONVERSION OF CAPITAL ASSET INTO STOCK-IN- TRADE. THE 11 I.T.A. NOS.570 TO 572/MDS/11 METHODOLOGY PRESCRIBED MANDATES THAT WHEN SUCH A ST OCK-IN-TRADE IS SOLD, THE FAIR MARKET VALUE ON THE DATE OF CONVERSI ON SHOULD BE CONSIDERED TO BE FULL VALUE OF CONSIDERATION FOR TH E PURPOSE OF COMPUTING CAPITAL GAINS. ANYTHING IN ADDITION TO THAT, RECEI VED ON SUCH SALE, WILL BE INCOME UNDER THE HEAD BUSINESS. BOTH THE A.O. AS WELL AS LD. CIT(APPEALS) HAD NOT CONSIDERED THIS PROVISION DESP ITE CLEAR ADMISSION THAT THERE WAS A CONVERSION OF CAPITAL ASSET INTO S TOCK-IN-TRADE. FURTHER, ASSESSEE HAD FILED AFFIDAVITS OF A NUMBER OF BUYERS WHO WERE NOT EXAMINED BY THE ASSESSING OFFICER. IN SUCH AFFIDAV ITS, IT HAS BEEN CONFIRMED THAT NO MONEY IN EXCESS OF WHAT WAS STATE D IN THE REGISTERED TRANSFER DEEDS, WERE PAID. THOUGH FOR ASSESSMENT Y EARS 2003-04 AND 2004-05, ASSESSING OFFICER HAD MENTIONED THAT HE HA D SUMMONED ALL THE BUYERS, NOTHING HAS BEEN MENTIONED WHO ALL HAD APPEARED AND WHY CROSS-EXAMINATION WAS ALLOWED ONLY FOR A FEW. AS T O THE QUESTION WHETHER DEPONENTS INTIMATED THEIR EMPLOYERS REGARDI NG THE PURCHASE TRANSACTION, IN OUR OPINION, THIS IS IRRELEVANT FOR THE PURPOSE OF COMPUTATION OF THE INCOME OF THE ASSESSEE. NEVERTH ELESS, IN THE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE C OMPUTATION OF CAPITAL GAINS FOR RESPECTIVE YEARS REQUIRES A RE-LOOK. AS ALREADY MENTIONED, ASSESSEE HAD CLAIMED BUSINESS LOSS FOR ASSESSMENT Y EARS 2002-03 AND 2003-04 AND PROFITS UNDER THE HEAD BUSINESS FOR A SSESSMENT YEAR 2004-05. ATLEAST FOR ASSESSMENT YEAR 2002-03, ASSE SSING OFFICER HAD 12 I.T.A. NOS.570 TO 572/MDS/11 NOTED THAT THE LOSS RESULTED OUT OF THE CLAIM OF LA ND DEVELOPMENT EXPENSES AND ELECTRICITY BOARD SERVICE TAX. THEREF ORE, A RE-APPRAISAL OF WHOLE COMPUTATION IS REQUIRED AND INCOME OF THE ASS ESSEE SHOULD BE CORRECTLY COMPUTED IN ACCORDANCE WITH MANDATE IN TH E ACT. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELO W AND REMIT THE ISSUE OF COMPUTATION OF INCOME OF THE ASSESSEE UNDER THE HEA D CAPITAL GAINS AND UNDER THE HEAD BUSINESS INCOME BACK TO THE A. O. FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. ASSESSING OFFICER H AS TO GIVE A FAIR CHANCE TO THE ASSESSEE FOR CROSS-EXAMINATIONS OF TH E PARTIES. ASSESSING OFFICER SHALL EXAMINE ALL ASPECTS DE NOVO AND MAKE FRESH ASSESSMENTS AND PROCEED IN ACCORDANCE WITH LAW. 13. IN THE RESULT, APPEALS FILED BY THE ASSESSEE FO R ALL THE YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 30 TH APRIL, 2012. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH APRIL, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-XII, CHENNAI- 34/ CIT, PONDICHERRY/D.R./GUARD FILE