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2022 (1) TMI 1151 - AT - Income TaxRevision u/s 263 by CIT - chargeability of capital gains as per section 45(2) - applicability of sub-section(2) of Section 45 of the Act to the case of the assessee, wherein, the assessee has sold a part of land, which was converted from capital asset to stock-in-trade during the preceding financial period - HELD THAT:- For the purpose of calculation of capital gains u/s 48 the fair market value of the assessee on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. This provision does not provide a situation where the assessee has sold a part of converted capital asset into stock in trade but at the same time, we also observe that it is also not the intention of the legislature that if the assessee is transferring a part of converted capital assets during preceding financial period, then the revenue authorities has to wait till the transfer of entire converted stock in trade for the purpose of taxing capital gains accrued to the assessee on conversion of capital asset into stock in trade. Respectfully following the principles that the right income should be taxed in the right hands in the relevant financial period, we are of the considered view that in a case also where the assessee transfers a part of converted capital asset then also profits or capital gain would be chargeable to tax in the hands of the assessee partially pertaining to part of land or property sold during relevant financial period and same shall be chargeable to tax in the previous year in which if such part of stock in trade is sold or otherwise transferred by taking a fair market value on the date of such transfer or treatment shall be deemed to be full value of the consideration received or accrued to the assessee, as a result of transfer of capital asset. In the present case, undisputedly rather admittedly, the assessee has transferred part of converted capital asset into stock in trade during the relevant financial period and the AO has failed to make any enquiry in this regard and to tax the same in the hands of the assessee partially pertaining to the part of land sold during the year. No enquiry has been conducted by the AO during the assessment p;roceedings in this regard, hence, it is clear case of no enquiry. CIT assumed valid jurisdiction to review the assessment order u/s.263 of the Act and the Pr. CIT was right and brandy in treating the assessment as erroneous so far as prejudicial to the interest of the revenue. We are unable to see any ambiguity, perversity in the order of ld Pr. CIT, which is hereby confirmed. - Decided against assessee.
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