PRADEEP BRAHMWAR, Ajmer V. ITO, Ajmer

ITA 858/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4841 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRITHAVIRAJ MEENA
• Assessee Lawyers: SUBHASH PORWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Additional evidence; Cost of acquisition; Fair market value; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 45(2); 43CA; 143(3); 50C; 147; 148; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 858/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 PRADEEP BRAHMWAR, 204, HARIBHAU UPADHYAY NAGAR, EXTENSION, AJMER- 305001. CUKE VS. I.T.O., WARD 1(3), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ALFPB 6046 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SUBHASH PORWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI PRITHAVIRAJ MEENA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/09/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 05/09/2017 VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD CIT(A), AJMER DATED 30/09/2014 PERTAINING TO THE A. Y. 2010-11, WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : UNDER THE FACTS AND CIRCUMSTANCES THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ISSUES BELOW:- 1. NOT CONSIDERING THE CONVERSION OF CAPITAL ASSE T INTO STOCK IN TRADE IN TERM OF PROVISION OF SECTION 45(2) OF INCO ME TAX ACT, 1961. ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 2 2. NOT CONSIDERING THE SALE OF LAND (STOCK) AS BUS INESS SALE AND WRONGLY APPLYING THE PROVISIONS OF LONG TERM CAPITA L GAIN. 3. APPLYING THE PROVISION OF SECTION 50C WHEREAS T HE MATTER IS SUB JUDICIOUS IN COURT OF LAW BY PURCHASER. 4. NON GRANTING THE BENEFIT OF COST OF IMPROVEMENT AT RS. 3,50,000.00 AS INCURRED BY PREM KUMARI. 2. THE APPEAL WAS EARLIER DISMISSED VIDE ORDER OF T HE COORDINATE BENCH DATED 16.12.2016, SUBSEQUENTLY RECALLED VIDE ORDER DATED 08.06.2017 AND NOW HAS COME UP FOR HEARING BEFORE T HIS BENCH. 3. AT THE OUTSET, THE LD AR SUBMITTED THAT HE DOES NT WISHES TO PRESS GROUND NO. 3 RELATING TO APPLICABILITY OF SECTION 5 0C. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. REGARDING OTHER GROUNDS OF APPEAL NO. 1, 2 AND 3 , THE LD AR REITERATED THE WRITTEN SUBMISSION WHICH ARE REPRODU CED AS UNDER: 1. THAT THE ASSESSEE SHRI PRADEEP BRAHMWAR HAD REC EIVED HALF SHARE IN THE ANCESTRAL PROPERTY SITUATED AT THOK MA LIYAN - III, AJMER SARHAD, NARELI, AJMER ON DEATH OF HIS FATHER LATE SHRI MADAN SINGH IN APRIL1973. FURTHER HIS MOTHER, SMT. PREM KUMARI HAD RELINQUISHED HER RIGHT IN THE SAID PROPE RTY (1/2 SHARE) AS PER NOMINATION NO. 255 ON 21.01.2003 IN F AVOR OF HIS SON SHRI PRADEEP BRAHMAWAR SMT. PREM ALSO BECAM E OWNER OF 'A SHARE IN APRIL1973 ON DEATH OF HUSBAND . THUS THE ASSESSEE RECEIVED IN TOTAL LAND MEASURING 36 BI GHA AND 5 ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 3 BISWA AT KHATA NO. 1707 THOK MALIYAN, NEAR NARELI V ILLAGE, AJMER. 2. THE FAIR MARKET OF THE LAND AS ON 01.04.1981 WAS ESTIMATED AT RS. 3,50,000.00 AS COST TO THE PREVIOUS OWNERS S INCE ASSET IS ANCESTRAL AND WAS ACQUIRED BY PREVIOUS OWNERS PR IOR TO 01.04.1981 IN TERMS OF SECTION 149. 3. THE PREVIOUS OWNER (SMT. PREM KUMARI) ALSO SPENT RS. 3,50,000.00 FOR MAKING FENCING AND OTHER DEVELOPMEN T EXPENDITURE RELATED TO SAID LAND IN THE FINANCIAL Y EAR 2002- 03. 4. THE SAID LAND WAS CONVERTED INTO STOCK IN TRADE BY ASSESSEE ON 31.03.2003 FOR RS. 7,50,000.00 AND TAKEN INTO BO OKS BY CONVERTING IN STOCK IN TERMS OF PROVISIONS OF SECTI ON 45(2) OF INCOME TAX ACT, 1961. 5. NOW THE SAID STOCK OF LAND IS SOLD ON 07.10.2009 FOR RS. 10,00,000.00. THUS IN THE FINANCIAL YEAR 2009-10 TH E GAIN ON SALE OF LAND AS PER THE PROVISIONS OF SECTION 45(2) I.E. (AFTER CONVERSION) OF CAPITAL ASSET INTO STOCK IN TRADE SH ALL BE AS UNDER:- (A) BUSINESS PROFIT FROM TRADING OF LAND (AS PER SECTION 44AD) SALE PRICE (BEING PRICE OF REGISTRY) 1000000.00 LESS: COST OF LAND TAKEN AS STOCK IN - 750000.00 TRADE ON 31.03.03 - --------------- BUSINESS PROFIT FROM SALE OF LAND 250000.00 ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 4 (B) CAPITAL GAIN SALE PRICE BEING PRICE OF CONVERSION OF 750000.0 0 CAPITAL ASSETS INTO STOCK IN TRADE LESS: COST OF ACQUISITION BEING FAIR -350000.00 MARKET VALUE AS ON 01.04.1981 LESS: COST OF IMPROVEMENT BEING COST OF -350000.00 FANCING AND OTHER EXPENDITURE INCURRED BY PREVIOUS OWNER SMT. PREM KUMARI (IN TERMS OF SECTION 49) ------------- CAPITAL GAIN ON SALE OF LAND 50000.00 MOREOVER THE PROVISIONS OF SECTION 50C WERE APPLICABLE ONLY ON CAPITAL ASSET AND ONLY W.E.F. 01.04.2003.THUS THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE TO THE SAID TRANSACTION SINCE CAPITAL ASSETS CONVERTED IN STOCK IN TRADE ONLY ON WHILE THE PROVISIONS OF SECTION 50C ARE APP LICABLE W.E.F. 01.04.2003. THUS NO QUESTION OF APPLICABILIT Y OF PROVISIONS OF SECTION 50C ARE THERE ON CONVERSION O F CAPITAL ASSET INTO STOCK AS ON 31.03.2003. FURTHER ONCE CAPITAL ASSET CONVERTED INTO STOCK E .G. BUSINESS ASSET THE PROVISION OF SECTION 50C ON SUCH BUSINESS ASSET ARE NOT APPLICABLE. REFER IT HAS BEE N RECENTLY HELD BY ITAT MUMBAI IN CASE OF NEELKAMAL REALTORS & ERECTORS INDIA PRIVATE LIMITED V/S DCIT (ITA NO. 1143/MUM/2013) THAT PROVISIONS SECTION 50C ARE APPLICABLE ON C APITAL ASSETS AND NOT APPLICABLE ON ASSETS HELD AS STOCK IN TRADE AND THAT TOO PROSPECTIVELY. MOREOVER WITH THE INSERTION OF SECTION 43CA IN THE FINANCE ACT, 2013 APPLICABLE FOR ASSESSMENT YEAR 2014-15 IT HAS FURTHER BEEN CLARIFIED THAT THE CONSIDERATION FOR T RANSFER OF ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 5 ANY ASSETS (OTHER THAN CAPITAL ASSETS )CANNOT BE LE SS THAN THE STAMP DUTY VALUE (I.E 50C VALUE). THUS BASED ON ABOVE FACTS THE A.O. HAS ISSUED NOTIC E U/SEC. 148 & HAS NOT ACCEPTED THE CLAIM OF ASSESSEE FOR TW O REASONS:- A. THAT CLAIM OF PROPERTY BEING CONVERTED INTO STOC K IN TRADE IS NOT SUBSTANTIATED. B. FURTHER THIS TRANSACTION OF CONVERSION & SALE IS A SINGLE TRANSACTION IS ALSO NOT JUSTIFIED SINCE AFTER CONVE RTING INTO STOCK THE INTENTION OF BUSINESS DO NOT JUSTIFIES. IN VIEW OF ABOVE; THE A.O. HAS REJECTED THE OBJECT IONS; WHEREAS:- A. THIS IS A SINGLE TRANSACTION OF THE TRANSACTING PARTY FOR SALE OF PROPERTY WHEREAS AS PER PROVISIONS OF SECTION 45(2) THE ASSESSEE IS AT LIBERTY TO CONVERT HIS CAPITAL ASSET INTO STOCK IN TRADE AT ANY TIME. BUT THE VALUE OF SUCH CONVERS ION WOULD BE AT FMV AS ON DAY OF CONVERSIONS IN TERMS OF SECT ION 48. THUS AS PER LAW THERE IS NO PROVISION FOR ANY INTIM ATION, REGISTRATION WITH ANY AUTHORITY OF SUCH CONVERSION AND THUS THE FIRST REASON TO BELIEF DOES NOT VALID. B. SECONDLY THE AO HAS HELD THIS TRANSACTION AS A S INGLE TRANSACTION IS ALSO NOT JUSTIFIED SINCE AFTER CONVE RTING INTO STOCK THE ASSESSEE HAS PLANNED TO MAKE SALE OF THIS ASSET INTO PIECEMEAL. BUT SINCE COULD NOT GET THE PROPER REALIZATION HENCE PREFERRED TO MAKE SALE AT A LUMP SUM. THUS AN Y SINGLE ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 6 TRANSACTION DOES NOT MEAN IT IS NOT A BUSINESS OR ENTREPRENEURSHIP. EVEN ADVENTURE IS A NATURE OF TRA DE AS PER SECTION 2(13) IS PART OF BUSINESS WHERE TRADE, CO MMENCE, MANUFACTURE ANY ADVENTURE, CONCERN IN THE NATURE OF TRADE IS ALL DEFINED AS BUSINESS AND THUS THE ALLEGATION / R EASONS TO BELIEF HOLD BY AO DOES NOT HOLD JUSTIFIED. THUS MERE CHANGE OF OPINION CANNOT FORM THE BASIS - REFER CIT V/S BHANJI LAVJI (1971) 79 1TR 582 (SC) WHERE IT HA S BEEN HELD THAT WHEN THE PRIMARY FACTS NECESSARY FOR ASSESSMEN T ARE FULLY AND TRULY DISCLOSED, THE ITO WILL NOT BE ENTITLED O N CHANGE OF OPINION TO COMMENCE PROCEEDINGS FOR REASSESSMENT. S IMILARLY, IF HE HAS RAISED A WRONG LEGAL INFERENCE FROM THE FACT S DISCLOSED, HE WILL NOT, ON THAT ACCOUNT, BE COMPETENT TO COMME NCE REASSESSMENT PROCEEDINGS - C1T V. BHANJI LAVJI (197 1) 79 ITR 582 (SC). HAVING SECOND THOUGHTS ON THE SAME MATERIAL, AND OM ISSION TO DRAW THE CORRECT LEGAL PRESUMPTION DURING ORIGINAL ASSESSMENT DO NOT WARRANT THE INITIATION OF A PROCEEDINGS UNDE R SECTION 147 - ITO V. NAWAB MIR BARKAT ALI KHAN BAHADUR (1974) 9 7 ITR 239 (SC.) IN VIEW OF ABOVE FACTS THE NOTICE AS ISSUED U/SEC. 148 & PROCEEDINGS THEREOF IS REQUESTED TO BE CONSIDERED V OID LEGALLY. HONOURABLE SUPREME COURT IN CASE OF G. VENKATASWAMI NAIDU & COMPANYS CASE (1959) 35 ITR 594 THAT IF THE PURCHA SE OF ASSET WAS MADE SOLELY AND EXCLUSIVELY WITH AN INTENTION T O RESELL IT AT ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 7 PROFIT, IT WOULD BE A STRONG FACTOR INDICATING THAT THE TRANSACTION IS IN NATURE OF TRADE. MOREOVER THAT PROVISIONS OF SECTION 50C ARE APPLICA BLE ONLY ON CAPITAL ASSET AND ONLY W.E.F. 01.04.2003. THUS THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE TO THE SAID TRANSACT ION SINCE CAPITAL ASSET CONVERTED IN STOCK IN TRADE ONLY ON 3 1.03.2003 WHILE THE PROVISIONS OF SECTION 50C ARE APPLICABLE W.E.F. & THUS NO QUESTION OF APPLICABILITY OF PROVISIONS OF SECTI ON 50C ARE THERE ON CONVERSION OF CAPITAL ASSET INTO STOCK. FURTHER ONCE CAPITAL ASSET CONVERTED INTO STOCK E.G. BUSINESS ASSET THE PROVISIONS OF SECTION 50C ON SUCH BUSINESS ASSET ARE NOT APPLICABLE. AS HELD IN CASE OF ITAT MUMBAI IN CASE OF NEELKAMAL REALTORS & ERECTORS IND IA (P) LTD V/S DCIT (ITA NO. 1143)MUM/2013) THAT PROVISIONS OF SECTION 50C ARE APPLICABLE ON CAPITAL ASSETS AND NOT APPLICABLE ON ASSETS HELD AS STOCK IN TRADE AND THAT TOO PROSPECTIVELY. THE DECISION AS CITED BY A.O. OF HONBLE GUJRAT HIG H COURT - CIT V/S PREMJI GOPALBHAI 113 ITR 785 (GUJ.) IS ALSO IN FAVOR OF ASSESSEE & GROSSLY LIES ONUS ON DEPARTMENT TO PROVE OTHERWISE. THUS MERELY SUSPICIOUS, SINGLE TRANSACTION, CANNOT MAKE LIABLE THE CHANGE IN ASSESSEES CLAIM UNTIL NOT PROVED BY ACT. A SINGLE TRANSACTION CANNOT BE CONSIDERED AS BUSINESS ACTIV ITY IS AGAIN A WRONG MISCONCEPTION SINCE SECTION 28 HAS DEFINED THE BUSINESS CONCEPT:- ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 8 ACTIVITY MUST BE REAL, SUBSTANTIAL AND ORGANIZED CO URSE OF ACTIVITY SYSTEMATIC AND ORGANIZED OR CONDUCT WITH A SET PURPOSE. THE EXPRESSION BUSINESS IS A WELL KNOWN EXPRESSION IN INCOME TAX LAW. CIT V/S DISTRIBUTORS (BARODA) (P) LTD. (1972) 83 IT R 377 (SC) NARAIN SWADESHI WVG. MILLS V/S CEPT (1954) 26 ITR 7 65 (SC) CIT V/S ADMIRALTY FLATS MOTEL (1982) 133 ITR 895 (M AD.) BUSINESS ACTIVITY CAN SOMETIMES BE QUIESCENT; NOT N ECESSARILY BE CONTINUOUS. CIT V/S CALCUTTA NATIONAL BANK LTD. (1959) 37 ITR 171 (SC.) THE LD. CIT(A) IN APPEAL ORDER NO. DEALING THE ISSU E HAS MENTIONED AS BELOW & HAS REJECTED THE CLAIM OF ASSE SSEE CHALLENGING THE NOTICE U/SEC. 148. THE ASSESSEE HAS CLAIMED THAT THE A.O. HAS REOPENED THE ASSESSMENT DUE TO CHANGE OF OPINION AND DUE TO WRON G LEGAL INFERENCE FROM THE FACTS DISCLOSED. HOWEVER, IT MAY BE MENTIONED THAT ORIGINAL RETURN FILED BY THE ASSESSE E FOR ASST, YEAR 2010-11 WAS PROCESSED U/SEC. 143(1) OF THE INC OME TAX ACT, AND WHILE PROCESSING THE RETURN, IT CANNOT BE SAID THAT A.O. HAS FORMED ANY PARTICULAR OPINION. SO IN THIS CASE, THERE IS NO QUESTION OF CHANGE OF OPINION INVOLVED WHILE REOPEN ING THE ASSESSMENT. FURTHER, THE PRIMA FACIE THERE EXISTED THE MATERIAL ON BASIS OF WHICH THE A.O. REOPENED THE ASSESSMENT. THE SUFFICIENCY OF THE BELIEF OF THE A.O. CANNOT BE CHA LLENGED AT THIS STAGE. MOREOVER, IT IS NOT A CASE WHERE THE EARLIER ASSESSMENT ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 9 WAS MADE U/SEC. 143(3) OR 147 OF THE INCOME TAX ACT , AND REOPENING WAS DONE BEFORE THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. SO THE PROVISO TO SECTI ON 147 IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. ACCORDINGLY , REOPENING OF THE CASE BY WAY OF ISSUE OF NOTICE U/SEC. 148 IS UP HELD AND THIS GROUND OF APPEAL IS DISMISSED. WITH RESPECT TO CONVERSION OF CAPITAL ASSET TO BUSINESS STOCK THE CIT(A) HAS FURTHER STATED THAT IT HAS BEEN MENTIONED BY THE A.O. THAT THIS WAS THE ANCEST RAL LAND OF THE ASSESSEE INHERITED ON 08.03.1988 AND 21.01.2003 WHICH HAS BEEN SIMPLY SOLD AS SUCH ON 05.11.2009 WITHOUT CARR YING OUT ANY ACTIVITY IN THE NATURE OF DEVELOPMENT OR HOLDIN G IT AS A STOCK IN TRADE. THIS WAS A INHERITED LAND BY THE ASSESSE SO FROM THE TIME OF ACQUISITION TO THE SALE, THERE WAS NO CHANG E IN STATUS OF LAND AND NOTHING INDICATES THAT THE SAID LAND WAS C ONVERTED IN STOCK IN TRADE FOR PURPOSE OF BUSINESS. FURTHER, NO FREQUENCY OF PURCHASE AND SALE OF THE PROPERTY HAS BEEN NOTICED AND ASSESSEE IS NOT IN THE REAL ESTATE BUSINESS. THE WH OLE OF THE INHERITED LAND HAS BEEN SOLD IN A SINGLE TRANSACTIO N TO SMT. KIRAN BRAHMWAR. FROM THE ABOVE FACTS, IT IS CLEAR THAT ASSESSEE HAS SOLD THE INHERITED ANCESTRAL LAND IN A SINGLE TRANSACTION. T HE ASSESSEES CLAIM THAT HE HAS CONVERTED IT INTO THE STOCK IN TR ADE ON 3103.2003 AS PER PROVISIONS OF SECTION 45(2) AND SO LD THE LAND AS STOCK IN TRADE WHILE CARRYING OUT THE REAL ESTAT E BUSINESS, IS NOT SUPPORTED BY ANY EVIDENCE TO THIS EFFECT. IN FA CT THE WORD BUSINESS CANNOT SOME REAL SUBSTANTIAL AND SYSTEMATIC OR ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 10 ORGANIZED COURSE OF ACTIVITY WITH A SET PURPOSE. IN THE CASE OF ASSESSEE, THE ASSESSEE HAS MERELY INHERITED THE LAN D AND SOLD IT AS SUCH WITHOUT ANY DEVELOPMENTAL ACTIVITY ON THE S AID LAND. THIS IS A SOLITARY TRANSACTION OF INHERITING THE LA ND AND SELLING IT WITHOUT ANY DEVELOPMENT AFTER A SUBSTANTIAL PERIOD OF TIME AND IT CANNOT BE SAID TO BE BUSINESS ACTIVITY. IN FACT ASSESSEE IS NOT CARRYING OUT ANY REAL ESTATE BUSINESS. THE ASSESSEE HAS ONLY REITERATED THE CONTENTIONS MADE BEFORE THE A.O. AND THE FINDINGS OF THE A.O. HAVE NOT BEEN CONTROVERTED. AS SUCH, THE FINDINGS OF THE A.O. HOLDING IT TO BE A CAPITAL ASS ET LIABLE TO APPLICATION OF SECTION 50C OF THE INCOME TAX ACT, I S UPHELD. THUS THE FACTS WERE VERY MUCH MADE CLEAR IN VOLUNTA RILY RETURN FILED, REPLYING TO NOTICE U/SEC. 148 & LATER DETAIL ED SUBMISSION WITH LEGAL INFERENCES. THERE IS NO RULE OR INTIMATION SYSTEM IN ACT TO INTIMATE THE A.O. OR ANY OTHER AUTHORITY OF SUCH INTENTION FOR CONVERSION OF CAPITAL ASSET INTO BUSINESS ASSET . THUS THE ACT OF ASSESSEE IS MORE IMPORTANT & THAT H AS BEEN ENTRUSTED WITH VOLUNTARILY FILING THE RETURN. ONCE THE ASSESSEE HAS DECLARED ASSET AS BUSINESS ASSET PROVISIONS OF SECTION 45(2) OF ACT ARE APPLICABLE & AFTER CONVERS ION TO BUSINESS ASSET NO PROVISIONS OF SECTION 50C ARE APP LICABLE. WE PRAY FOR JUSTICE. ALTERNATIVELY; EVEN IF AOS VIEW FOR LONG TERM CAPI TAL GAIN IS SUSTAINED; THAN THE COST OF ACQUISITION OF SAID LAND SHOULD BE TAKEN IN TERMS OF SECTION 49(1) E.G. THE COST TO THE PREVIOUS ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 11 OWNERS IS DEEMED TO BE THE COST OF ACQUISITION TO T HE ASSESSEE. (FROM THE PREVIOUS OWNER FATHER LATE MADAN SINGH RECEIVED RIGHTS ON 08.03.1985 (REFER RELEASE DEED). HOWEVER LATE. MADAN SINGH ACQUIRED THIS LAND PRIOR TO 01.04 .1981 (SINCE EXPIRED IN APRIL 1973). THUS IN TERMS OF SECTION 4 9(L)(C)(I) BY SUCCESSION, IN HERITANCE OR DEMOLITION & THUS THE C OST OF ACQUISITION OF SAID CAPITAL ASSET WOULD BE TAKEN AT FAIR MARKET VALUE AS ON 01.04.1981 / SECTION 55(2) OR DATE OF A CQUISITION BY PREVIOUS OWNER BEING OR ON BEFORE 01.04.1981 SO FMV AS ON 01.04.1981. SINCE THE LAND WAS ACQUIRED BY LATE MADAN SINGH BEF ORE 01.04.1981 HENCE THE INDEXATION COST SHOULD ALSO HA VE BEEN GRANTED FROM THAT DATE IN VIEW OF PROVISIONS IN ACT BELOW:- WHEN THE ASSET WAS ACQUIRED UNDER THE CIRCUMSTANCES GIVEN BY SECTION 49(1) IF AN ASSET WAS ACQUIRED BY GIFT OR WILL (OR UNDER ANY CIRCUMSTANCES GIVEN BY SECTION 4 9(1)), INDEXED COST OF ACQUISITION AT THE TIME OF ITS TRAN SFER SHALL BE CALCULATED AS FOLLOWS COST OF ACQUISITION * COST INFLATION INDEX (CII) FO R THE YEAR IN WHICH THE ASSET IS TRANSFERRED / CII FOR THE YEAR I N WHICH ASSET WAS FIRST HELD BY THE PREVIOUS OWNER OR (1981-82), WHICHEVER IS LATER. THE BOMBAY HIGH COURT IN THE CASE OF CIT V/S MANJUL A J. SNAH (2012) 204 TAXMAN 691 HAS HELD THAT INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO YE AR IN WHICH PREVIOUS OWNER FIRST HELD ASSET (AND NOT YEAR IN WH ICH THE ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 12 ASSESSEE BECAME OWNER OF ASSET). A SIMILAR RULING I S GIVEN BY THE DELHI HIGH COURT IN CASE OF ARUN SHUNGLO TRUST V. CIT (2012) 2065 TAXMAN 456. PRACTICAL PROBLEMS ARE SOLV ED IN THE RECKONER ON THE BASIS OF THESE HIGH COURT RULINGS. THUS IT IS REQUESTED TO DIRECT THE A.O. TO CORRECTL Y CALCULATE THE CII VALUE TAKING COST BEING F.M.V. INDEX AS ON 01.0 4.1981. APPLYING THE PROVISION OF SECTION 50C. THAT ONCE IT IS A BUSINESS ASSET AS DECLARED BY ASSESSEE HIS INTENTION IN TERMS OF SECTION 45(2) IT BECOMES IMMATERIAL THAT WHETHER ASSESSEE SALE IT AS A WHOLE, IN PIECEM EAL OR IN A DEVELOPED SITUATION. THE INTENTION OF ASSESSEE IS I MPORTANT & THUS THE PROVISIONS OF SECTION 50C CANNOT APPLY; SI NCE NOT A CAPITAL ASSET. NOTE: THE HONBLE RAJASTHAN KAR BOARD VIDE APPEAL N O. 1700/2013/ AJMER DATED 30.12.2014 HAS DECIDED IN FA VOUR OF ASSESSEE THAT FOR REGISTRATION & STAMPS PURPOSE THE DLC VALUE OF LAND SHALL BE TAKEN AT RS. 43,86,250.00 INSTEAD VALUED AT RS. 1,52,17,300.0 BY COLLECTOR STAMPS. IT IS REQUESTED TO CONSIDER THE FACTS. NON GRANTING THE BENEFIT OF COST OF IMPROVEMENT AT RS. 3,50,000.00 AS INCURRED BY PREM KUMARI. THE ASSESSEE DURING COURSE OF ASSESSMENT & WHILE FI LLING THE RETURN OF INCOME CLAIMED THAT A SUM OF RS. 3,50,000 .00 WAS FURTHER INCURRED FOR FENCING & OTHER EXPENDITURE BY MOTHER ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 13 (SMT. PREM KUMARI) WHO RELEASED HER RIGHTS IN FAVOU R OF ASSESSEE & CLAIMED FOR COST OF IMPROVEMENT IN TERMS OF SECTION 49. THE A.O. WITHOUT ASKING OR VERIFICATION FOR FACTS H AS NOT COMMENTED ANYTHING IN HIS ORDER FOR SAID CLAIM & NO R HAS GIVEN CREDIT FOR SAME. THE LD. CIT(A) HAS SIMPLY DENIED THE CLAIM THAT NO DOCUMENT FILED OR PROOF FILED AS MENTIONED BY A.O. IN HIS OR DER; WHEREAS THE FACT IS THAT A.O. HAS NOT COMMENTED ANYTHING TH EREON. THUS THE LD. CIT(A) HAS ALSO NOT DEALT THE ISSUE IN A PO SITIVE ASPECT. SINCE SMT. PREM KUMARI (MOTHER) HAS EXPIRED ON 05.0 2.2004; HENCE NOW WE ARE SUBMITTING THE SWORN AFFIDAVIT OF SMT. KIRAN BRAHMWAR WHERE SHE HAS CONFIRMED THAT AGR. LAND SO PURCHASED WAS PROPERLY & DENSLY FENCED WITH BARBERE D STEEL WIRE & PILLARS & SAME ARE STILL THERE ON SITE. THE ESTIMATED VALUE THEREOF IS AROUND RS. 3,00,000.00 TO RS. 3,50,000.0 0 IT IS REQUESTED TO CONSIDER THE FACTS & EVIDENCES. IF THIS SWORN AFFIDAVIT OF BUYER IS CONSIDERED AS ADDITIONAL EVIDENCES THAN A SEPARATE APPLICATION UNDER RULE 29 IS FILED. IT IS REQUESTED TO CONSIDER THE FACTS & GIVE CREDIT FOR COST OF IMPROVEMENT . 5. THE LD DR VEHEMENTLY ARGUED THE MATTER AND RELIE D ON THE ORDER OF THE LOWER AUTHORITIES. HE SUBMITTED THAT THE AS SESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THAT THE LAND IN QUESTION WAS CONVERTED INTO STOCK IN ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 14 TRADE AND HENCE, THE PROVISIONS OF CAPITAL GAINS HA VE RIGHTLY BEEN INVOKED BY THE AO. REGARDING COST OF IMPROVEMENT, T HE LD DR SUBMITTED THAT THE MATTER MAY BE SET-ASIDE TO THE FILE OF THE AO TO EXAMINE THE SAID CLAIM. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE CONTENTI ON OF THE LD AR IS THAT THE ASSESSEE HAD SOLD THE LAND IN QUESTION ON 07/10 /2009 FOR RS. 10.00 LACS. IT WAS CONTENDED THAT THE LAND WAS CONVERTED INTO STOCK- IN- TRADE BY THE ASSESSEE ON 31/3/2003 FOR RS. 7.50 LACS AND TAKEN INTO BOOKS BY CONVERTING IT IN STOCK-IN-TRADE IN TERMS OF PROVISI ONS OF SECTION 45(2) OF THE ACT. IT WAS ACCORDINGLY CONTENDED THAT THE ASS ESSEES INCOME SHOULD BE DETERMINED AS CAPITAL GAINS UPTO DATE OF CONVERS ION INTO STOCK-IN- TRADE AND THEREAFTER, AS BUSINESS PROFITS FROM SALE OF LAND. WE FIND FORCE IN THE CONTENTIONS OF THE LD DR THAT THE ASSESSEE I S UNABLE TO SUBSTANTIATE ITS CLAIM THAT THE LAND IN QUESTION WA S CONVERTED INTO STOCK- IN- TRADE. THE ASSESSEE HAS MERELY INHERITED THE LA ND AND SOLD IT AS SUCH WITHOUT ANY DEVELOPMENTAL ACTIVITY. IT WAS A SOLIT ARY TRANSACTION OF INHERITING THE LAND, HOLDING IT FOR A SUBSTANTIAL P ERIOD OF TIME AND THEN SELLING IT OUT. IN ABSENCE OF RELEVANT MATERIAL, W E ARE NOT INCLINED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE, THEREFORE, THE GROUNDS 1 & 2 ARE ITA 858/JP/2014_ PRADEEP BRAHMWAR VS ITO 15 DISMISSED. THE SURPLUS ON SALE OF LAND WILL BE LIA BLE FOR TAX UNDER THE HEAD CAPITAL GAINS. 5. REGARDING GROUND NO.4 RELATING TO COST OF IMPRO VEMENT OF RS 3.5 LACS, WE ARE SETTING ASIDE THE MATTER TO THE FILE O F THE AO WHO SHALL CONSIDER THE AFFIDAVIT OF SMT KIRAN BRAHMWAR AND DE CIDE THE SAME AS PER LAW. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/09/2017. SD/- SD/ - DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05/09/2017 * SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRADEEP BRAHMWAR, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- THE I.T.O., WARD 1(3), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 858/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR