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2014 (12) TMI 296 - AT - Income TaxValidity of order of CIT for invoking section 263 – Assessment order in respect of assessment of income on sale of property as business income instead on capital gain declared by the assessee set aside by CIT - Held that:- In M/s Khatiza S. Oomerbhoy Vs. ITO,Mumbai [2006 (2) TMI 201 - ITAT BOMBAY-H] - the fundamental principles for judging the action of the CIT taken u/s 263 were mentioned - CIT has propounded that assessee has already been offering income from profession and business in his two proprietorship concerns, he has the basic idea to classify his income - He has classified purchase of plots under the head “Investment” and offers the income under the head” Capital Gain” - assessee had never depicted these assets as a stock in trade in the financial statements - the contention of the assessee before the CIT was that the AO has issued questionnaires and made oral discussion, but the assessee during the course of hearing failed to point out any circumstances which has been discussed by the AO to indicate that the income from sale of property is to be assessed as business income - in the past also, the assessee was offering income on purchase and sale of the property under the head “investment”. Accounting entries maintained by the assessee cannot be a guiding factor for determining the true income, but there should be strong reasons to dispel the stand of the assessee - the AO was not having any such strong reason - He, on a wrong assumption of law changed the head of income – there are certain broader tests required to be applied on any transactions for finding out, whether such transactions was a business transaction or it was a simplicitor investment - Though the tests were applied on investment in the shares, but some of the decisions can equally be applied on any other transactions - assessee in his accounts not showing the land purchased by him as stock in trade - Nowhere, from the circumstantial evidence it can be inferred that the assessee was in the business of sale and purchase of the property - therefore, there was no error in the order of the CIT - As regards the application of section 50C for computing capital gain, permission to capitalize the interest income, CIT has set aside these issues for the Assessing Officer to be looked into while determining the capital gain arisen to the assessee on sale of property – thus, the order of the CIT is upheld – Decided against assessee.
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