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2019 (7) TMI 22 - AT - Income TaxAssessment of income - bifurcation of income as business income & capital gain - mistakenly assessee shown entire income as business income - sale of agricultural land kept as investment in earlier year after converted into stock-in-trade - HELD THAT:- The first point which is to be kept in mind is that the investment in different plots of land have not been shown as stock in trade by assessee in earlier years and if that be so, then the gain arising therefrom cannot be assessed as business income. But the assessee has declared profits on sale of land as its business income. So the exercise of working fair market value as on the date of conversion into stock in trade and consequent capital gains to be assessed on the date of conversion and the business income to be assessed on the date of sale of stock in trade need to be computed and assessed in the hands of assessee. The assessee also claims that since it is the agricultural land which is converted into stock in trade, then capital gains is assessable u/s 45(2). This aspect also needs verification by Assessing Officer. Consequently, we remit this issue back to the file of Assessing Officer to carry out necessary verification Disallowance u/s 40A(3) - payments made for purchase of land before sub-registrar i.e. Govt. Authority on the ground that the said payments were not covered under the exceptions specified u/r 6DD of the I.T. Rules - HELD THAT:- Admittedly, purchase price of various plots of land was paid before the Registering Authorities on different dates and none of the same fall within accounting period except the one on which the assessee had incurred loss. In such circumstances, where the amount of cash has been paid for purchasing plots of land in earlier years, then no disallowance can be made u/s 40A(3) during the year, as no such purchases were made during the year. In any case, purchase price has been paid before the Sub-Registrar and the transaction being genuine, there is no merit in making any disallowance u/s 40A(3). Accordingly, we reverse the order of CIT(A) in this regard and delete the addition made u/s 40A(3). Grounds of appeal raised by assessee are thus, allowed.
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