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Shri Kumar U Ailani Versus Commissioner of Income-tax-III, Thane

Revision u/s 263 - treatment to income from sale of property - CIT revised the assessment order on the ground that income from sale of property should be assessed under the head ‘Income from capital gains’ and not under the head ‘Income from business’ - nature of property sold - Held that:- 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 .....

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ing 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 income declared by the assessee under the head ‘Income from business’. Therefore, it cannot be held that t .....

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r of the Commissioner of Income-tax-III, Thane passed u/s 263 of the Income-tax Act, 1961 for the assessment year 2008-09. 2. The brief facts of the case are that the assessee, an individual, is engaged in the business of hiring of cars and derives income from business and also income from house property and income from other sources. He filed his return of income for the assessment year 2008-09 on 31-03-2009 declaring total income at ₹ 23,63,450. The assessment was completed u/s 143(3) on .....

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sed 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 h .....

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he AO which is evident from the fact that the AO has discussed the issue in the body of the assessment order and also re-worked the profit derived from sale of property. The assessee further submitted that the shops in question are located in building which was constructed for the purpose of running a hotel. However, because of certain reasons, the same has been sold. Therefore, the profit arose from such sale is rightly assessed under the head Income from business and not income from sale of pr .....

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08, the same has been treated as Income from house property in the light of Supreme Court judgement 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 err .....

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sale of property under the head Income from business which caused prejudice to the interest of the revenue. The AO being a quasi judicial authority is expected to exercise his powers in a judicial manner to tax a particular income under appropriate head of income; however, the AO has failed to bring to tax the said income under appropriate head of income, therefore, he opined that the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue. The .....

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utation of income, the AO has not verified the issue and also not applied his mind which caused prejudice to the interest of the revenue. With these observations, he set aside the assessment order passed by the AO and directed him to redo the assessment denovo, after affording opportunity to the assessee. Aggrieved by the order of CIT, the 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 ba .....

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proceedings and after application of mind has taken one of the possible views, therefore, the same cannot be termed as erroneous insofar as it is prejudicial to the interest of the revenue. The Ld.AR further submitted that once the issues on which the CIT revised the assessment order was subject matter of verification by AO in the assessment proceedings, the same cannot be revised by holding that the enquiries conducted by the AO are insufficient or inadequate. In support of his arguments, he r .....

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10. Narain Singh vs CIT [156 ITD 275 (Chd)] 7. The Ld.DR, on the other hand, strongly supported the order of CIT and submitted that the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue as the AO has filed to apply his mind on the issues at the time of assessment which is evident from the fact that the income chargeable under the head capital gain has been assessed under the head income from business . The AO has not conducted required en .....

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he 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 assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue and hence, the CIT was right in revising the assessment order. 8. We have heard both the parties and perused the material available on record. The asses .....

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under the head Income from business . The CIT further observed that the assessee himself admitted rental receipts from the impugned property under the head Income from house property which clearly proves that the said property is a capital asset and hence, any surplus on sale of capital asset should be assessed under the head Income from capital gains . The CIT also observed that the sale consideration shown by the assessee is less than the guidance value fixed for payment of stamp duty and as .....

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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, guidance value sh .....

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