M/s. Khialdas Construction Pvt. Ltd., Bhopal V. The A.C.I.T., Bhopal

ITSSA 36/IND/2010

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 8852 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Search and seizure; Fair market value; Competent authority
• Section: 50C; 133A; 153A; 132; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AADCK3822A I.T (SS) .A.NO. 36/IND/2010 A.Y. : 2006 - 07 M/S.KHIALDAS CONSTRUCTION PVT.LTD., GANDHI NAGAR, ITARTSI VS. ACIT, 1(1), BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI S. S. DESHPANDE, C. A. RESPONDENT BY : SHRI R. A. VERMA, SR. DR DATE OF HEARING : 16 . 01 .201 3 DATE OF PRONOUNCEMENT : . 0 2 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A) DATED 10 TH DECEMBER, 2009, PASSED U/S 153C/153A/143(3) OF THE INCOME-TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - -: 2: - 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, IT BE HELD THAT THE INITIATION OF THE PROCE EDINGS U/S. 153C ARE BAD IN LAW AND WITHOUT JURISDICTION AND, THEREFORE, THE ORDER OF ASSESSMENT BE HELD AS NULL AND VOID. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, IT BE HELD THAT THE LAND IN ISSUE WAS ACQUI RED FOR THE PURPOSE OF CARRYING OUT BUSINESS ACTIVITIES AND, TH EREFORE, THE SAID LAND WAS A STOCK-IN-TRADE OF THE ASSESSEE AND HENCE THE INCOME ARISING ON ITSELF IS ASSESSABLE AS INCOME U/S. 28 OF THE I.T. ACT. THE LEARNED AUTHORITIES BE LOW ARE UNJUSTIFIED IN THEIR FINDINGS THAT THE SAID LAND WA S A CAPITAL ASSET AND, THEREFORE, THE INCOME ARISEN FROM ITS SA LE WAS CHARGEABLE AS INCOME U/S. 45 OF THE ACT. SUCH FINDI NGS OF THE LEARNED LOWER AUTHORITIES BE QUASHED AND THE IN COME FROM SALE OF LAND BE HELD AS INCOME CHARGEABLE U/S. 28 OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, AND WITHOUT PREJUDICE TO GROUND NO. (2) AT ANY EVENT IF IT IS HELD THAT THE SAID LAND WAS A CAPITAL ASSE TS AND ITS INCOME IS CHARGEABLE U/S.45 OF THE LT. ACT THEN THE A.O. -: 3: - 3 ERRED IN LAW IN NOT FOLLOWING THE PROCEDURE LAID DO WN IN SECTION 50C OF THE LT. ACT. THE FINDINGS OF THE LEA RNED CIT(A) ON THIS ISSUE ARE WHOLLY UNJUSTIFIED AND NOT LAWFUL. THE ASSESSMENT OF INCOME AT RS. 5840082 (MODIFIED B Y C1T(A) TO RS. 5839760) IS UNLAWFUL AND NOT JUSTIFIE D HENCE BE QUASHED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY. SEARCH AND SEIZURE OPERATI ON U/S 132 WERE CARRIED OUT ON 15.11.2006 AT THE RESIDENTI AL PREMISES OF SHRI CHANDRABHAN J. LALCHANDANI. SIMULTANEOUSLY, SURVEY U/S 133A WAS ALSO CARRIED OU T AT THE BUSINESS PREMISES OF M/S. LAXMI AGENCIES AND THE OF FICE PREMISES OF M/S. KHIALDAS CONSTRUCTION PVT.LTD. DUR ING THE SEARCH AND SEIZURE OPERATIONS U/S 132, DOCUMENTS BE LONGING TO THE ASSESSEE, M/S. KHIALDAS CONSTRUCTIONS PVT. L IMITED, WERE ALSO SEIZED. THE ASSESSING OFFICER RECORDED TH E SATISFACTION ENUMERATING THEREIN THE DOCUMENTS BELO NGING TO THE ASSESSEE COMPANY FOUND AND SEIZED DURING THE CO URSE OF -: 4: - 4 SEARCH AND, THEREAFTER, ISSUED NOTICE U/S 153C R.W. S. 153A. IN RESPONSE TO NOTICE U/S 153C ISSUED ON 19.5.2008 FOR ASSESSMENT YEAR 2006-07, THE ASSESSEE FURNISHED RET URN OF INCOME ON 16.6.2008 DECLARING A TOTAL INCOME OF RS. 1,32,519/-. THE ASSESSMENT U/S 153C R.W.S. 153A WAS COMPLETED ON 30.12.2008 DETERMINING TAXABLE INCOME AT RS. 58,40,080/-. THE ASSESSEE HAS CHALLENGED THE VALIDI TY OF ASSESSMENT MADE U/S 153C R.W.S. 153A OF THE INCOME- TAX ACT, 1961, IN ADDITION TO THE MERITS OF ADDITION. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT EVEN IF INT IMATION HAS BEEN ISSUED U/S 143(1)(A) THEN THE ASSESSMENT IS NO T PENDING AND IT DOES NOT ABATE. FOR THIS PURPOSE, RELIANCE W AS PLACED ON THE DECISION OF SUN CITY ALLOYS, 121 TTJ 674. LD. A UTHORIZED REPRESENTATIVE FURTHER CONTENDED THAT IF NO INCRIM INATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH IN RE SPECT OF ISSUE, THEN NO ADDITION IS WARRANTED IN THE ASSESSM ENT U/S 153A AND THAT ONLY UNDISCLOSED INCOME CAN BE ASSED U/S 153A/153C AND FOR THIS PURPOSE RELIANCE WAS ALSO PL ACED ON THE DECISION OF ABHAY KUMAR SHROFF, 290 ITR 114. -: 5: - 5 4. ON THE OTHER HAND, IT WAS CONTENDED BY THE LD. SR. DR, SHRI R. A. VERMA, THAT DETAILED SATISFACTION HAS BE EN RECORDED BY THE ASSESSING OFFICER U/S 153C AND TO INDICATE T HAT VARIOUS DOCUMENTS WERE SEIZED PERTAINING TO THE ISSUE DURIN G THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF ITS DIRECTORS, ACCORDINGLY, THE ASSESSING OFFICER HAS VALIDLY INIT IATED PROCEEDINGS U/S 153C. 5. ON MERITS, IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE WAS ENGAGED IN BU SINESS OF CONSTRUCTION AND THE LAND SO PURCHASED WAS HELD IN STOCK OF TRADE, ACCORDINGLY, PROFIT ARISING ON ITS SALE WAS LIABLE TO BE TAXED AS BUSINESS INCOME AS PLEADED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND TAXED THE PROFI T AS CAPITAL GAINS. 6. THE LD. SR. DR ARGUED THAT THE ASSESSEE ITSELF HAS OFFERED THE GAIN ON SALE OF LAND AS CAPITAL GAINS A ND THEREAFTER CHANGING ITS STAND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH SHOULD NOT BE PERMITTED. -: 6: - 6 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO DELIBERATED ON THE CASE LAWS CITED BY LD. AUTHORIZE D REPRESENTATIVE AND LD. SENIOR DR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD, WE FOUND THAT THE ASSESSEE WAS ENGAGED IN BUSINESS OF CONSTRUCTION AS PER THE MAIN CLAUSE IN ITS MEMORANDUM & ARTICLES OF ASSOCIA TION. THE LAND SO SOLD WAS PURCHASED BY THE ASSESSEE IN THE A SSESSMENT YEAR 2000-01 AND SINCE THEN CONTINUOUSLY SHOWN AS S TOCK IN TRADE IN THE AUDITED BALANCE SHEET OF VARIOUS YEARS UP TILL THE ASSESSMENT YEAR 2006-07. EVEN THOUGH IN THE RETURN OF INCOME, THE ASSESSEE HAS OFFERED PROFIT ARISING OUT OF SALE OF LAND AS CAPITAL GAINS BUT DURING COURSE OF ASSESSME NT ITSELF, THE ASSESSEE CONTENDED THAT LAND WAS HELD AS STOCK IN TRADE, THEREFORE, GAIN ARISING OUT OF ITS SALE WAS LIABLE TO BE TAXED AS BUSINESS INCOME AND PROVISIONS OF SECTION 50-C WAS NOT APPLICABLE. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE AND FOUND THAT THE STAMP VALUATION AUTHORITY HAS ASSESS ED THE CONSIDERATION OF THE PROPERTY AT HIGH FIGURES AS AG AINST THE VALUE DECLARED BY THE APPELLANT AND OTHER TWO OWNE RS IN THE -: 7: - 7 SALE DEED REGISTERED. THIS SALE DEED WAS REGISTERED IN RESPECT OF SALE OF 1.2 ACRES LAND CONSISTING OF 1.01 ACRE OF THE APPELLANT M/S. KHIALDAS CONTRACTIONS PVT. LTD. AND 0.095 ACRE S EACH OF SHRI NITIN LALCHANDANI AND SHRI RATAN LALCHANDANI. AS PER THE VALUE OF THE PROPERTY INFORMED BY THE REGISTRA R OFFICE THE FULL VALUE OF THE CONSIDERATION OF THE PROPERTY BE LONGING TO THE ASSESSEE WAS WORKED OUT AS AGAINST THE VALUE DECLAR ED BY THE ASSESSEE. THE ASSESSING OFFICER TAXED THE GAINS ON SALE OF STOCK IN TRADE AS LONG TERM CAPITAL GAIN AND ALSO I NVOKED PROVISIONS OF SECTION 50C. 8. SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS AS UNDER, WHICH ALSO FIND PLACE IN THE ORDER OF CIT (A) :- THE COMPANY WAS INCORPORATED ON 01.06.1997 FOR CARRYING ON THE BUSINESS OF ACQUIRING LAND FOR COMMERCIAL EXPLOITATION INCLUDING CONSTRUCTION OF RESIDENTIAL, COMMERCIAL BUILDINGS, FLATS, APARTMENT S ETC. WITH THESE OBJECTS IN MIND, THE LAND IN QUESTI ON WAS ACQUIRED IN THE F.Y. 1999-2000 AND THEREFORE, THE LAND WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AS STOCK IN HAND. HE HAS ALSO FURNISHED A COPY OF -: 8: - 8 BALANCE SHEET FOR F. Y. 1999-2000. THUS, IT WAS ARGUED THAT THE LAND WAS ACQUIRED WITH THE EXPRESS INTENTION OF COMMERCIAL EXPLOITATION AND ACCORDINGL Y REFLECTED AS STOCK IN HAND BY THE APPELLANT COMPANY IN THE BOOKS OF ACCOUNT AND IT WAS BEING ALL ALONG TREATED AS STOCK IN TRADE TILL IT WAS FINALLY SOLD OUT. IN SUPPORT, HE HAS FILED BALANCE SHEETS OF THE SUBSEQUENT PERIOD ALSO. IT WAS FURTHER SUBMITTED TH AT THE LAND IN QUESTION ADMEASURING 1.01 ACRES AT CHUNA BHATTI, BHOPAL WAS PURCHASED FROM ONE MR. ANIL SEETHA, POWER OF ATTORNEY HOLDER OF THE ORIGIN AL OWNERS MRS. MAYA MITRA AND MRS. BEENA BOSE. AS PER THE LAND USE, 40 % WAS FOR THE GREEN BELT AND T HE BALANCE 60 % WAS FOR RESIDENTIAL PURPOSES. SHORTLY AFTER THE PURCHASE, THE APPELLANT MOVED AN APPLICATION WITH THE COMPETENT AUTHORITY FOR MUTATI ON IN THE NAME OF THE APPELLANT. HOWEVER, A HOUSING SOCIETY NAMED GOURI GRAH NIRMAN SAHAKARI SANSTHAN LTD, FILED AN APPLICATION BEFORE THE SAID AUTHORITY CLAIMING OWNERSHIP OF THE SAID LAND HAVIN G -: 9: - 9 PURCHASED IT FROM THE ORIGINAL OWNER MRS. MAYA MITR A AND MRS. BEENA BOSE AND REQUESTING FOR REJECTION OF THE APPLICATION FOR MUTATION IN FAVOUR OF THE APPEL LANT COMPANY. SINCE, THE PROPERTY WAS DISPUTED, IT WAS DECIDED BY THE ASSESSEE NOT TO GO IN FOR COLONIZATI ON BUT TO DISPOSE OF THE PROPERTY AT THE EARLIEST AT T HE BEST AVAILABLE PRICE FOR THE REASON THAT IN VIEW OF THE DISPUTE IT WOULD BE DIFFICULT FOR THE ASSESSEE TO TRANSFER CLEAR TITLE TO THE BUYERS OF THE HOUSES CONSTRUCTED ON THE SAID PROPERTY. SINCE, THIS WAS T O BE THE MAIDEN VENTURE OF THE ASSESSEE COMPANY, IT WOULD TARNISH ITS IMAGE AND REPUTATION IN THE MARKE T. EFFORTS WERE MADE TO DISPOSE OF THE PROPERTY AND ON E SH. SHAILESH GUPTA AGREED TO BUY THE LAND AND GAVE AN ADVANCE OF RS.3,00,000/- AS A BAYANA DURING THE FINANCIAL YEAR 2000-01, THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2001-02. SINCE, SH. GUPTA HAD NOT PAID THE FULL PRICE, THE SALE DEED WAS NOT EXECUTED IN THIS FAVOUR. DURING THE INTERVENING PER IOD, THE ASSESSEE COMPANYS APPLICATION FOR MUTATION WAS -: 10: - 10 REJECTED TWO TIMES BY THE COMPETENT AUTHORITY AS TH E OTHER PERSON CAME INTO THE PICTURE CLAIMING OWNERSHIP OF THE LAND. THE SAID PROPERTY IS STILL IN DISPUTE AND THE MATTE R IS BEFORE THE HON'BLE MADHYA PRADESH HIGH COURT UNDER A PETITION FILED BY THE ORIGINAL OWNERS MRS. MAYA MITRA AND MRS. BEENA BOSE CLAIMING THAT THEY HAD RESCINDED THE POA IN FAVOUR OF SH ANIL SEETHAN IN JUNE 1999 AND THAT THE SAID POA WAS NOT AUTHORISED TO SELL THE PROPERTY. HOWEVER, IN MARCH , 2006, THE ASSESSEE RECEIVED AN OFFER FOR THE PROPER TY AND SOLD IT ON AN AS IS WHERE IS BASIS, AFTER INFOR MING THE BUYER OF ALL THE LEGAL DISPUTES. IT WAS SUBMITT ED THAT IN THE RETURN FILED IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 153C, THE ASSESSEE HAD OFFERED UNDER A BONA FIDE BELIEF O F LAW, THOUGH MISTAKEN THAT THE PROFIT ON SALE OF ANY LAND IS ASSESSABLE AS CAPITAL GAINS. HOWEVER, SUBSEQUENTLY, DURING THE ASSESSMENT PROCEEDINGS, -: 11: - 11 THE ASSESSEE REALIZED THAT THE LAND IS ITS STOCK IN TRADE AND THE PROFIT ARISING FROM THE SALE OF SUCH LAND, UNDER THE LAW, IS ASSESSABLE AS THE INCOME U/ S 28 AND NOT U/S 45 OF THE IT ACT. THEREFORE, LETTERS WERE FILED ON 15.12.2008 AND 22.12.2008 IN THIS REGARD BEFORE THE ASSESSING OFFICER. IT WAS CONTEND ED THAT THE LAND WAS ITS STOCK-IN-TRADE AND, THEREFORE , THE PROFIT ARISING FROM SALE OF SUCH LAND WAS ASSESSABLE U/S 28 AS CLAIMED BEFORE THE ASSESSING OFFICER. THUS, IT WAS ARGUED THAT THE ASSESSEE'S INCOME FROM THE SALE OF LAND COMPRISING STOCK IN TRADE IS ASSESSABLE AS BUSINESS INCOME U/S 28 OF THE IT ACT. IT IS NOT ASSESSABLE U/S 45 OF THE IT A CT. IT WAS PRAYED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO ASSESS THE INCOME AS BUSINESS INCOME U/S 28 AND PROVISIONS OF SECTION 50C ARE NOT APPLICABLE I N COMPUTATION OF BUSINESS INCOME. . ' I -: 12: - 12 9. HOWEVER, THE CIT(A) DID NOT ACCEPT THE ASSESSEE S CONTENTION AND UPHELD THE ACTION OF THE ASSESSING O FFICER FOR TREATING THE GAIN ARISING ON SALE OF LAND AS CAPITA L GAINS. 10. IT IS CLEAR FROM THE DOCUMENTS PLACED BEFORE THE LO WER AUTHORITIES THAT THE ASSESSEE COMPANY WAS ENGAGED I N THE BUSINESS OF CONSTRUCTION AND REAL ESTATE AND WHATEV ER LAND WAS PURCHASED WAY BACK IN THE YEAR 1999-2000 WAS WI TH THE OBJECT OF USING THE SAME IN ITS BUSINESS OF REAL ES TATE AND CONTINUOUSLY HELD AND TREATED AS ITS STOCK IN TRADE AND SHOWN IN THE AUDITED BALANCE SHEET UNDER THE HEADING CURR ENT ASSETS, LOANS AND ADVANCES. THE ASSESSEE HAD NO INTENTION O F PURCHASE OF LAND AS INVESTMENT. HAD THE ASSESSEE IN TENTION TO PURCHASE OF LAND AS INVESTMENT AND TREATED THE SAME AS ITS CAPITAL ASSET AND NOT AS STOCK-IN-TRADE, PROFIT ARI SING OUT OF ITS SALE WAS LIABLE TO BE TAXED AS CAPITAL GAINS, BUT W HERE THE ASSESSEE HAD NO OBJECT OF HOLDING THE SAME AS INVES TMENT AND WHICH HAS BEEN ACQUIRED WITH THE OBJECT OF USING IT AS STOCK IN TRADE AND CONTINUOUSLY SHOWN AS STOCK IN TRADE, NOT ONLY IN THE YEAR OF SALE IN FINANCIAL YEAR 2005-06 BUT RIGH T FROM THE YEAR OF ITS PURCHASES IN FINANCIAL YEAR 1999-2000, ANY PROFIT -: 13: - 13 ARISING ON ITS SALE IS ESSENTIALLY LIABLE TO BE TAX ED AS BUSINESS PROFIT U/S 28 OF THE INCOME-TAX ACT, 1961. ONCE IT IS HELD THAT LAND SO PURCHASED WAS ITS STOCK IN TRADE, THERE IS NO REASON TO TREAT SUCH LAND AS ASSESSEES CAPITAL ASSET SO AS T O BRING TO TAX PROFIT ON ITS SALE AS CAPITAL GAIN. THE FACT THAT T HE ASSESSEE HAS NOT GOT ANY CONSTRUCTION ON LAND, WAS DUE TO DISPUT E IN THE LAND AND FOR WHICH LITIGATION WAS GOING ON IN THE H IGH COURT, ACCORDINGLY, THE SAME CANNOT BE MADE REASON FOR TRE ATING THE STOCK IN TRADE AS CAPITAL ASSETS. LAND WHICH WAS HE LD AS STOCK IN TRADE WHETHER SOLD AS IT IS OR AFTER CONSTRUCTIO N OF BUILDING THEREON, THE NATURE OF INCOME SO ACCRUING ON ITS SA LE WILL REMAIN TO BE BUSINESS INCOME AND NOT CAPITAL GAIN. IN CASE OF INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS INCOM E PROVISIONS OF SECTION 50C IS NOT APPLICABLE. SECTIO N 50C IS A SPECIAL PROVISION FOR TAKING FULL VALUE OF CONSIDER ATION IN CASE OF TRANSFER OF CAPITAL ASSETS BEING LAND OR BUILDIN G, WHILE COMPUTING CAPITAL GAIN U/S 45 READ WITH SECTION 48. HOWEVER, IN CASE THE PROPERTY IS TREATED AS BUSINESS ASSETS, THE PROVISIONS OF SECTION 50C IS NOT APPLICABLE IN SO F AR AS PROFIT ON ITS SALE IS DETERMINED U/S 28 TO 44 OF INCOME-TA X ACT, 1961. -: 14: - 14 MOREOVER, AFTER INTRODUCTION OF SECTION 50C BY FINA NCE ACT, 2002, THE C.B.D.T. ISSUED A CIRCULAR NO. 8 OF 2002 DATED 27 TH AUGUST, 2002, REPORTED AT 258 (STATUTE) ITR 13, CLA RIFYING THE PROVISIONS OF FINANCE ACT, 2002, RELATING TO DIRECT TAXES IN RESPECT OF NEWLY INSERTED SECTION 50C IN THE EXPLAN ATORY NOTE. THE C.B.D.T. HAS EXPLAINED THE PURPOSE BEHIND INTRO DUCING SECTION 50C AS UNDER :- 37. COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANSACTIONS : 37.1 THE FINANCE ACT, 2002, HAS INSERTED A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDE RATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. 37.2 IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED O R ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF TH E CONSIDERATION, AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY U/S 48 OF THE INCOME-TAX ACT. -: 15: - 15 37.3 IT IS FURTHER PROVIDED THAT WHERE THE ASSESSE E CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, AND HE HAS NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR REFERENCE BEFORE ANY AUTHORIT Y OR COURT, THE ASSESSING OFFICER MAY REFER THE VALUATIO N OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORD ANCE WITH SECTION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES , THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VAL UE TO BE THE FULL VALUE OF CONSIDERATION. HOWEVER, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES, THE ASSESSING OFFICER SHALL NOT ADOP T SUCH FAIR MARKET VALUE AND SHALL TAKE THE FULL VALU E OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. -: 16: - 16 37.4 THIS AMENDMENT WILL TAKE EFFECT FROM APRIL 1, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO T HE ASSESSMENT YEAR 2003-04 AND SUBSEQUENT YEARS. IT IS ABUNDANTLY CLEAR FROM THE EXPLANATION GIV EN IN THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR THAT THE BASIC INTENTION TO INSERT SECTION 50C IS FOR THE PURPOSE OF DETERMINING FULL VALUE OF SALE CONSIDERATION FOR TH E PURPOSE OF COMPUTATION OF CAPITAL GAINS IN REAL EST ATE TRANSACTION U/S 48 OF THE ACT. 11. HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. THIRUVENGADAM INVESTMENT PRIVATE LIMITED, 320 ITR 3 45, HELD THAT WHERE PROPERTY IS TREATED AS BUSINESS ASSETS A ND NOT AS CAPITAL ASSETS, THERE IS NO QUESTION OF INVOKING PR OVISIONS OF SECTION 50C. RESPECTFULLY FOLLOWING THE DECISION OF MADRAS HIGH COURT, WE HOLD THAT PROVISIONS OF SECTION 50C CANNOT BE INVOKED WHERE PROFIT IS ASSESSABLE AS BUSINESS INCO ME. ACCORDINGLY, THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN TREATING PROFIT ON SALE OF LAND WHICH WAS HELD AS STOCK IN T RADE, AS CAPITAL GAIN AND INVOKING PROVISIONS OF SECTION 50C . -: 17: - 17 12. IN VIEW OF ABOVE DISCUSSION, THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECT ION TO COMPUTE BUSINESS INCOME IN RESPECT OF PROFIT ARISING ON SAL E OF LAND UNDER THE HEAD PROFIT AND GAINS OF BUSINESS U/S 2 8 OF THE INCOME-TAX ACT, 1961, PART D OF CHAPTER IV. AS THE GAIN IS NOT ASSESSABLE UNDER THE HEADS OF CAPITAL GAINS U/S 45 PART E OF CHAPTER IV, THE ASSESSEE IS NEITHER ENTITLED FOR BE NEFIT OF INDEXATION NOR PROVISIONS OF SECTION 50C IS APPLICA BLE. WE DIRECT ACCORDINGLY. 13. WITH REFERENCE TO THE LEGAL GROUND TAKEN BY THE ASSESSEE AGAINST FRAMING OF ASSESSMENT U/S 153C, WE FOUND THAT INCRIMINATING DOCUMENTS WERE FOUND DURING COUR SE OF SEARCH AT THE RESIDENTIAL PREMISES OF SHRI CHANDRAB HAN J. LALCHANDANI ON 15.11.2006, DURING SEARCH U/S 132, DOCUMENTS BELONGING TO THE ASSESSEE M/S. KHIALDAS CONSTRUCTION COMPANY LIMITED WERE ALSO SEIZED, WHIC H INDICATED SALE OF THE IMPUGNED LAND. ACCORDINGLY, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF ASSESSING OFFICE R FOR INITIATING PROCEEDINGS U/S 153C OF THE INCOME-TAX ACT, 1961. -: 18: - 18 ACCORDINGLY, LEGAL GROUND TAKEN BY THE ASSESSEE IS HEREBY DISMISSED. 14. IN THE RESULT, THE APPEAL IS ALLOWED IN PART IN TER MS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH FEBRUARY, 2013. CPU* 1624.1.26.2