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Bhangire Kamalabai Ramlal Versus The Income Tax Officer, Ward 4, Ahmednagar

Revision u/s 263 - Assessing Officer ought to have assessed the income arising to the assessee on the sale of plots under the head “business income” instead of assessing the same under the head “capital gains” - Held that:- The Assessing Officer has accepted the claim of the assessee under the head “capital gains” based on pertinent facts. The assessee has never purchased the impugned agricultural land or any other land in her life time as stated by her. The property was bestowed upon her by suc .....

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e process to assert his own view which is not permissible under section 263 of the Act. We do not find any error per se in taxing the income resulting from sale of plots impugned under the head “capital gains”. The Commissioner has also failed to take note of section 45(2) which helps the case of the assessee in the alternative. In our considered view, section 263 of the Act cannot be invoked only on any slightest pretext to chase a will-ň-the-wisp. - Decided in favour of assessee. - ITA No.869/ .....

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aised the following grounds of appeal :- 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax has erred in passing the order u/s 263 of the Income Tax Act, 1961 without considering appellant s contention in this regard. The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time of hearing, in the interest of natural justice. 3. The facts, in brief, are that for the assessment year 2005-06, the asse .....

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information, the Assessing Officer reopened the assessment of the assessee. In response to the notice under section 147/148 of the Act, the assessee filed return of income declaring therein long term capital gains of ₹ 7,92,404/-. The re-assessment was completed under section 143(3) r.w.s. 147 of the Act vide order dated 29.11.2010, accepting the returned income. This order of the Assessing Officer is subject-matter of action under section 263 of the Act by the Commissioner. 4. On subseque .....

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essing the same under the head capital gains . The Commissioner observed that the Assessing Officer committed error in making the assessment of the income under the round head. He alleged that this aspect of taxability income arising from sale of plots under the head business income did not cross the mind of the Assessing Officer at all, since no query has been raised about the head of income at all. The Commissioner observed that such income also got under assessed which has resulted in a reven .....

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nor purchased even a single piece of land in her life. As she was not having any source of income she decided to sell some portion of the inherited land. As the land was agricultural land within the Municipal limit and the law does not allow to sell portion of the land in piecemeal, she was constrained to covert the same into non-agricultural land so that she could get the required permission for sale and would also get maximum consideration for sale. Therefore, in this background, the assessee .....

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of mind by the Assessing Officer on the issue. The Commissioner considered the judicial decisions cited by the assessee, during the course of hearing, as noted in para 6.2 and 6.3 of his order and held that question whether profit resulting from transaction could be assessed under the head capital gains or business would depend on the facts and circumstances of a given case and the intention of the assessee emerging from such facts and circumstances. In the present case, it is apparent that the .....

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es of few bills in respect of work carried out before the plots were sold out. These included preparing lay-out, filling the land, leveling the land, etc.. This in itself shows that after the land was converted into non-agricultural, the same was developed through a series of efforts. These types of activities are normally carried out by a person trading and dealing in land. It do not occur to the Assessing Officer if such activities would have any bearing on the nature of transaction comprised .....

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r making requisite enquiries. 7. Aggrieved by the aforesaid order of the Commissioner, the assessee is in appeal before us. 8. The Ld. Authorized Representative for the assessee submitted that the relevant facts pertaining to the case were duly placed before the Assessing Officer in the course of assessment proceedings. The assessee is an old lady and during her life time she has not purchased any property including the property on which the impugned capital gain has arisen. The property has bee .....

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ed by the assessee that the afore-cited decisions would squarely apply to the facts of the present case. Inprinciple, the Ld. Authorized Representative for the assessee emphasized the decision in the case of Premji Gopalbhai (supra) wherein after considering the ratio of the decision of Apex Court in the case of G. Venkatswami Naidu vs. CIT, 35 ITR 594 (SC), it was held that profits arising on sale of ancestral agricultural land after conversion into non-agricultural land and then division into .....

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ttempt to replace the view of the Assessing Officer with his own view, which may probably result in better assessment from revenue perspective. The mere substitution of plausible view by another view is not permissible in exercise of power conferred under section 263 of the Act. For this proposition, he relied upon the judicial decisions in the case of CIT vs. Max India Ltd., (2007) 295 ITR 282 (SC); CIT vs. Gabriel India Limited, 203 ITR 108 (Bom); and, CIT vs. Premji Gopalbhai, 113 ITR 785 (Gu .....

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Act void ab-initio. Thus, the assessment order would itself become a nullity. 10. Without prejudice, the Ld. Authorized Representative for the assessee further submitted that the agricultural land was an ancestral property which was converted into non-agricultural land and then sub-divided into smaller size of plot in the assessment year 2005-06 itself, immediately prior to sale. Therefore, in view of section 45(2) of the Act, the profit upto the date of conversion based on fair market value of .....

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hat the action of the Commissioner in invoking section 263 of the Act is primafacie without authority of law and deserves to be quashed. 12. The Ld. Departmental Representative for the Revenue, on the hand, heavily relied upon the order of the Commissioner under section 263 of the Act. He submitted in furtherance that the bare perusal of the assessment records would show that the Assessing Officer has not examined the issue at all as to whether the income generated from sale of plot is business .....

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s of the authorities below and perused the decisions cited. Jurisdiction under section 263 of the Act has been invoked on the ground that the acceptance of income generated from sale of plots as capital gains which has lower incidence of taxation as compared to taxability under the head business income is erroneous as well as prejudicial to the interest of the Revenue. It is seen that the relevant facts have been placed before the Assessing Officer in the assessment proceedings. The facts have b .....

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on-agricultural land and dividing the same into smaller plots for convenience and to overcome regulatory hurdles cannot be characterized as adventure in the nature of business under section 2(13) of the Act. We find that in the similar facts, the Hon ble Supreme Court in the case of Sarojkumar Mazumdar (supra) have clearly held in favour of the assessee. Therefore, the view taken by the Assessing Officer cannot be faulted on the face of it. Notably, the assessment has been framed under section 1 .....

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