TMI Blog2015 (7) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the business profit earned and the sale of shops. The AO specifically asked the assessee to show cause as to why the interest should not be allowed proportionately with reference to actual sale of shops as reduced by the gross profit. Accordingly, interest on loans and income from business was worked out. The ld. CIT had not doubted allowable interest worked out by the AO, therefore, he was not justified in observing that the AO accepted the business income without making proper inquiry. Moreover, the ld. CIT had not pointed out how and in what manner the assessment order was erroneous and prejudicial to the interest of the Revenue. He simply stated that the AO had not made the proper inquiry but did not point out which inquiries were to be made but had not been made by the AO. Therefore, by considering the totality of the fact we are of the view that the ld. CIT was not justified in setting aside the assessment order dated 22.12.2010 and directing the AO to frame fresh order. He was also not right in holding that the sale price of the shop should have been taken at circle rate in accordance with the provision of Section 50C of the Act instead of actual sale price disclosed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom indirect sources at ₹ 65,37,491/- on wholly fallacious and untenable premises which must be quashed. 8. That the order of the Commissioner of Income-tax in partly revising and partly setting aside is wholly wrong and unsustainable and must be quashed while the order of the assessment as framed by the Assessing Officer u/s 143(3) of the act on 22.12.2010 must be restored. 3. From the above grounds it is gathered that the grievance of the assessee relates to the action of the ld. CIT u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act) in considering the assessment order passed by the AO as prejudice to the interest of the Revenue 4. Facts of the case in brief are that the assessee filed his return of income on 13.01.2009 declaring an income of ₹ 29,43,650/- which was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny. During the course of assessment proceedings the assessee filed a revised computation of income declaring total income at ₹ 11,43,005/- after set off of loss from business and other sources. The AO observed that the various details as asked for in support of income and expenses claimed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O whereas from the perusal of records it is seen that neither the double taxation avoidance agreement has been filed by you nor the AO has asked to file the same. The AO has not verified the status of the NRI. (iii) You have claimed expenditure of ₹ 34,56,187/- against interest income of ₹ 34,20,438/-. AO has accepted the same without proper inquiry on the basis of the plea that you have taken loans to earn interest income. No nexus has been established between loan taken and interest income. 6. The ld. CIT also asked the assessee to furnish and explain the following: Details of shop project, land purchase, MOU and contracts with parties involved in construction of shops. Sale deed of all the shops, purchase price and cost of construction, how profit has been worked out. Why profit has not been shown on all the shops. If not sold, no money from sale received, how cost of land purchased and construction debited, how worked out and why expenses in interest and other costs are debitable to the assessee against merely 05 shops stated to have been sold out. Fair market price of shops sold. How circle rate worked out? Why sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the same? Nature of services rendered to PRS Transportation (USA) of which Relief u/s 90 of the Act has been claimed. To produce entire bank statements, books of a/cs (if and to whatever extent maintained) with complete bills, vouchers, MOU, contract agreements, employment letters for salaries, sale deeds for all purchases and sales executed or relevant from the year under consideration. Why IT Return in US filed in joint names with wife? Whether income accrued to her? Whether assessee s salary is reflected in such return is not clear. 7. The ld. CIT after considering the various documents and the explanation furnished by the assessee was of the view that the assessee grossly suppressed its income under different heads and had claimed the expenses which were not allowable. The ld. CIT was of the view that the order passed by the AO was erroneous and prejudicial to the interest of the Revenue, since at the time of assessment, the AO was duty bound to call for such details and to examine those. He further observed that the AO accepted the version of the assessee without any inquiry or verification whereas it is very well settled that mere failure t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of registration of sale deeds. He also pointed out that the assessee argued that section 50C of the Act had no application in his case because the profits had not been under the head capital gain but are the business profits. According to the ld. CIT the assessee could not explain as to how the market rate of shops at which the business assets had been sold to have been lesser than the Circle rate since generally invariably the market rate of properties are higher than the Circle rate thereof. The ld. CIT considered the sale value of shops at the Circle rate of ₹ 69,72,402/- as the most reasonable rate. As regards to the cost of construction of the shops, the ld. CIT pointed out that the assessee had debited entire cost of construction on a multi storied building out of which merely five shops on the ground floor out a large numbers of shops were only sold. The ld. CIT referred to the instance of various properties sold at Vasundhara property and came to the conclusion that the area of land sold by the assessee was 1170 sq. ft. Accordingly, the rate of area sold per sq. ft. was worked out of ₹ 5959 per sq. ft. The ld. CIT was of the view that the minimum margin in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO inquired the issue in detail and only thereafter he accepted the profits shown by the assessee, therefore, the ld. CIT was not justified in alleging that the proper inquiries were not made by the AO. It was further submitted that the ld. CIT had not pointed out any error in the order of the AO and also no incorrectness was pointed out, therefore, the ld. CIT was not justified in setting aside the assessment order dated 22.12.2010 framed by the AO. 12. In his rival submissions the ld. DR strongly supported the order of the ld. CIT and further submitted that the AO in the assessment order has not pointed out what were the details furnished by the assessee and he had also not properly inquired the issue and had also not examined how the sale rate was less than the circle rate. Therefore, the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue and the ld. CIT was justified in setting aside the same. 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the ld. CIT while setting aside the assessment order dated 22.12.2010 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng fiction provided under Section 50C without admitting so, it was not in dispute that the plot was held as stock in trade and therefore sale thereof gives rise to the business income and not to capital gain. 15. On a similar issue the Hon ble Jurisdictional High Court in the case of CIT Vs Kan Construction and Colonizers (P.) Ltd. 208 Taxman 478 (supra) has held as under: Section 50C also uses the words 'capital asset'. For applicability of section 50C, the essential requirement is that an asset should be capital asset. Whether sale of land is sale of capital asset or stock-in-trade is essentially a question of fact. There is no rule of thumb to address the said issue. Several principles have been evolved in the judicial decisions, but these are more in the nature of guidelines. The question has to be answered in each case having regard to the circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them in a process of evolution. The inference has to be drawn on a cumulative consideration. [Para 12] In the present case, the assessee is a builder. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it enables the learned CIT to call for and examine the records of any proceeding under the Act. It empowers the learned CIT to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by AO is erroneous insofar as it is prejudicial to the interests of the Revenue. The only limitation on his power is that he must have some material(s) which would enable him to form a prima facie opinion that the order passed by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. Once he comes to the above conclusion on the basis of the 'material' that the order of the AO is erroneous and also prejudicial to the interests of the Revenue, the learned CIT is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in s. 263 of the Act. But the learned CIT does not have unfettered and unchequred discretion to revise an order, he is required to exercise revisional power w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be erroneous simply because the CIT does not feel satisfied with the conclusion. (viii) The CIT, before exercising his jurisdiction under Section 263 of the Act, must have material on record to arrive at a satisfaction. In such type of cases, if the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation be a letter in writing and the AO allowed the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 18. In the instant case, the assessee furnished all the details relating to the business profit earned and the sale of shops. The AO specifically asked the assessee to show cause as to why the interest should not be allowed proportionately with reference to actual sale of shops as reduced by the gross profit. Accordingly, interest on loans and income from business was worked out. The ld. CIT had not doubted allowable interest worked out by the AO, therefore, he was not justified in observing that the AO accepted the business income withou ..... 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