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2017 (9) TMI 730

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..... rty should be assessed under the head ‘Income from capital gains’. Further, while computing capital gains, if the sale consideration is less than the guidance value, as per the provisions of section 50C, guidance value shall be the full value of consideration for the purpose of computation of long term capital gain. The law is very clear. AO, ignoring all the facts, has simply accepted the income declared by the assessee towards sale of property under the head ‘Income from business’. Though the AO has conducted certain enquiries, but failed to apply his mind to the facts of the present case in the light of provisions of the Act. The AO ought to have assessed the surplus under the head ‘Income from capital gains’. However, he accepted in .....

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..... der passed by the AO shall not be revised u/s 263 of the Income-tax Act, 1961 for the reasons discussed in the show cause notice. The CIT proposed to revise the assessment order on the ground that the AO has not carried out required enquiries in respect of income declared by the assessee towards sale of property under the head Income from Long Term Capital Gain (LTCG) as the assessee has held the property as capital asset but not as stock in trade. The AO, without examining the issue of taxability of surplus arose from sale of property under appropriate head of income, has merely accepted the income declared by the assessee under the head Income from business which caused prejudice to the interest of the revenue and hence he opined that .....

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..... nt in the case of Shambu Investments Pvt Ltd vs CIT 263 ITR 143 (SC). Therefore, mere declaration of income under the head Income from house property in one particular year cannot be the basis for treating the asset as capital asset for the purpose of determination of income on sale of house property. 5. The CIT, after considering the assessment order passed by the AO held the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue as the AO has failed to appreciate the facts in the right perspective in the light of the clear provisions of the Act. The CIT further observed that the assessee himself has admitted income from the impugned property under the head Income from house property which clearly s .....

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..... he assessee is in appeal before us. 6. The Ld.AR for the assessee submitted that the CIT erred in invoking jurisdiction u/s 263 to revise the assessment order based on the proposal sent by the AO. The CIT has to independently examine the record and apply his mind before being taken up the case for revision. Since the CIT has revised the assessment as per the proposal submitted by the AO, the revisionary proceedings are invalid. The Ld.AR further submitted that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the revenue as the issue of taxation on sale of property has been examined by the AO in the assessment proceedings and after application of mind has taken one of the possible views, theref .....

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..... quiries on the issue which caused prejudice to the interest of the revenue. The assessee has sold the property and the consideration shown in the sale deed is less than the guidance value fixed for payment of stamp duty. As per the provisions of section 50C, if the consideration shown in the sale deed is less than the guidance value, then the guidance value should be taken as full value of consideration for purpose of computation of capital gain. The assessee has taken the consideration as per the sale deed and also assessed the same under the head Income from business even though the rental income from the said property has been treated as Income from house property . These aspects have not been examined by the AO. Therefore, the assess .....

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..... e AO failed to examine the issue in the light of the provisions of the Act, which caused prejudice to the interest of the revenue. 9. There is no dispute with regard to the nature of property. The assessee, though claims the impugned property is a business asset, the rental income from the said property has been assessed under the head Income from house property . The asset has been considered as capital asset in the books of account of the assessee. Once the property has been treated as capital asset, any surplus from sale of such property should be assessed under the head Income from capital gains . Further, while computing capital gains, if the sale consideration is less than the guidance value, as per the provisions of section 50C, .....

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