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2020 (8) TMI 710 - AT - Income TaxCash deposit in the bank account - sufficient cash was not in hand as per cash book - AO made an addition u/s 69 read with section 115BBE - assessee has contended before the LD. CIT (A) that without giving show cause notice and opportunity to explain the availability of cash, the addition made by the AO - CIT-A deleted the addition - HELD THAT:- AO has made the addition on the basis of copy of the cash balance in the cash book on a particular date. It is manifest from the assessment order that the AO has not issued any show cause notice to the assessee or even asked the assessee to explain the source of cash deposit in the bank account. Thus the entries made in the cash book from 14.11.2015 to 17.11.2015 were considered by the LD. CIT (A) and it was found that it was only a genuine mistake on the part of the Data Entry Operator who has made the entry of 17.11.2015 instead of 16.11.2015. As no contrary material brought before us, we do not find any error or illegality in the impugned order of LD. CIT (A). Gain on sale of land - LTCG or business income - HELD THAT:- Initially the assessee has invested in the land in question, however, subsequently when the assessee has decided to develop the residential colony on this land then the capital asset has been converted into stock-in-trade. Bifurcation of the profit arising from the sale of the plots of land ought to have been based on the FMV on the date when the assessee has decided to develop the land into residential colony. The timing and date of such conversion is taken by the LD. CIT(A) as on 1st day of financial year 2015-16 i.e. 01.04.2015. The said date is not the actual date coming from the relevant material/record. The preparation of the site plan for developing the colony shall be the actual date of conversion of the agricultural land into stock-in-trade. CIT(A) has not examined this issue as on when the capital asset was converted into stock-in-trade. The LD. CIT(A) has just taken the 1st day of previous year relevant to assessment year as the date of conversion which is not based on any documentary evidence. Computation of capital gain as well as the business income arising from the sale of land is dependent on the fair market value of the undeveloped land in question on the date when the assessee decided to develop the land. The documentary evidence on this point would be the lay out plan prepared by the assessee or any other document which was prepared by the assessee for the purpose of development of the land. Therefore, the bifurcation and computation of Long Term Capital Gain and Business income requires a proper verification and re-consideration. Accordingly we set aside this limited issue to the record of the AO for determining the actual date of conversion of the capital asset into stock-in-trade and then apply the provisions of section 45(2) of the IT Act to bifurcate the profit into Long Term Capital Gain and Business income. Deduction under section 54F - CIT (A) has not considered this issue. AO has denied the claim solely on the ground that the profit on sale of the land is Business income whereas the LD. CIT (A) has not adjudicated this issue while passing the impugned order. Accordingly the AO is directed to examine the claim of deduction under section 54F and then decide the same after giving an opportunity of hearing to the assessee. Income arising from sale of shops - CIT (A) has allowed the claim of the assessee as Income from Capital gain, we find that once the assessee has decided to develop the land by construction of shops for the purpose of sale, then a different para meter cannot be applied as applied in the case of development of land in a residential colony. Accordingly, the profit arising from the sale of shops is also required to be bifurcated as per the provisions of section 45(2) - AO has to compute the capital gain as well as the Business income in view of our observations as regards the conversion of the agricultural land into residential colony. Appeal of the revenue is partly allowed for statistical purposes.
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