TMI Blog2013 (11) TMI 1716X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,14,72,446 made in the assessment order on account of capital gain. On the facts and in the circumstances of the case, the learned CIT(A) has erred in not applying the correct law in as such as that the provision of s. 45(2) of the IT Act viz. where a capital asset is converted into stock and the sale price of such stock is to be assessed as capital gain in the year of sale, is completely omitted to be considered by him in his order. 3.1 The assessee in the present case is an individual. Although he had filed his returns of income for asst. yrs. 2004-05, 2005-06 and 2006-07 simultaneously on 31-07-2006, no return of income for the year under consideration i.e. asst. yr. 2003-04 was filed by him. The AO received certain information from his counterpart in Bikaner viz. ITO 1(3), Bikaner vide letter dt.23-12-2007 and 19-02-2008 regarding two properties of land at Bikaner sold by the assessee during the previous year relevant to asst. yr. 2003-04 for a sale consideration of ₹ 9 lakhs each against the value adopted by the Sub-Registrar for stamp duty at ₹ 27,50,000. As per the said information received by the AO, the provisions of s. 50-C of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Permission toward converting the land from agriculture to residential or commercial purposes, permission to laying of the roads, creating infrastructure in the form of sewage, providing electricity and every other requirement for converting the land into a township, district administration permission is necessary. Assessee failed to provide any of such evidences to claim that the said land was converted into stock in trade. So the claim of the assessee that the income was arising out of a real, substantial, systematic and organized activity is wrong and a futile ploy to avoid the taxation on the said land under the head capital gain. iv) On perusal of the probate it is found that there is no value mentioned for the said land at Bikaner. From the details filed it is seen that the assessee has valued the stock of land as on 01.04.1981 at Bikaner at ₹ 1,67,83,000 for both property situated at Rani Bazar and Gajner Road. It is shown to be valued at ₹ 90 per sq. ft. for Rani Bazar land and ₹ 20 per sq ft. for Gajner Road land. The value of the same land is taken as ₹ 5,28,35,145 as the opening stock in the P L A/c of the relevant assessment year. Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and selling of land was business activity. Copy of plan submitted to the AO was also filed by the assessee before the learned CIT(A) showing layout of plots, their respective plot No., parking area, road etc. It was brought to the notice of the learned CIT(A) that the total land was sub-divided into 140 plots of different sizes and the same were sold to different buyers on different dates in series of transactions over long period of time which by itself was sufficient to show that the activity of plotting and selling of plot was carried out by the assessee as an organized business activity. The details of expenses incurred right from the year 1991 were also furnished by the assessee before the learned CIT(A) to show the expenses incurred by him for leveling the land, sub-division and other incidental activity. Without prejudice to this plea, the assessee also pointed out certain mistakes in the long term capital gain computed by the AO on sale of plots of land during the year under consideration. It was pointed out in this regard that the fair market value of land as on 1-4-1991 was increased to ₹ 121 per sq.ft. as against ₹ 90 per sq.ft. due to area kept aside for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that this fact of conversion of investment into stock-in-trade was not informed by the appellant to the department. The appellant has correctly claimed that there was no requirement under the law to inform the same to the department. The same would have been informed to the department by filing return of income of earlier years. But since the income of those earlier years was not taxable, therefore, returns were not filed. The appellant has stated that the land was divided into various plots i.e more than 140 plots of various sizes which includes residential and commercial plots and for which necessary plotting charges, leveling charges, security charges were incurred and the details of which were submitted during assessment proceedings. The most important fact in favour of appellant's claim is that he started selling the plots from 31.3.2001 and continued the same for a period of 8 years. The appellant also claimed that even stock of plots was still available with him. This continuous and regular activity of selling the plots over a period of number of years shows that appellant's intention was to indulge in business and not to earn capital gain. Whether a person carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant has also filed a copy of plan submitted to the concerned authorities of Municipality of Bikaner/Town planner Bikaner. In the map, the land has been shown as divided into various plots of various sizes. The copy of this plan/map bears the date of 27.6.2005 and also bears the signature of Assistant Town Planner/Deputy Town Planner and Sr. Town Planner, Bikaner. This also proved that the appellant really intended to indulge in the business of selling of plot of lands and the map of Area submitted to municipal authorities was much prior to the initiation of proceedings under s. 148 of the Act. 7. Keeping in view of the decision rendered by him accepting the basic stand of the assessee that the income arising from the activity of sale of plot of land was business income, the learned CIT(A) did not consider it necessary to look into the alternative contention raised by the assessee pointing out the mistakes made in the computation of long term capital gain by the AO treating the land of the assessee as capital asset. 8. The learned D.R., submitted that the claim of the assessee of conversion of land held as capital asset into stock-in-trade as well as the business of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Raja J. Rameshwar Rao vs. CIT (1961) 42 ITR 179(SC), Hon'ble Karnataka High Court in the case of CIT vs. R. Ramaiah and Others (1984) 41 CTR (Kar) 307: (1984) 146 ITR 39(Kar) and Delhi Bench of ITAT in the case of ITO vs. AjitVikram Singh reported in (1984) 24 ITD 365(Del) wherein it was held that conversion of land into small plot and sale thereof over a period constitutes business activity. 10. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the two bigger plots of land inherited by the assessee in the year 1993 were claimed to be converted by him into stock-in-trade in the 1999 with the intention to sub-divide the same into small plots of land of different sizes and sell the same to various buyers. This claim of the assessee was duly supported by expenditure incurred over a period on leveling of the land, plotting etc. and even the plan showing the layout of different sizes of small plots including the provision made for road, parking space etc. was filed by the assessee before the authorities below. All the plots of land were sold by the assessee over a period starting from asst. yr. 2002-03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As agreed by the learned representatives of both the sides, the solitary issue involved in this appeal relating to addition of ₹ 1,14,72,446 made by the AO on account of capital gain and deleted by the learned CIT(A) is similar to the one involved in the appeal of the Revenue for asst. yr. 2003-04 which has already been decided by us in the foregoing portion of this order. As all the material facts relevant to this issue as well as the arguments put forth by both the sides are similar to asst. yr. 2003-04, we follow our decision rendered in asst. yr. 2002-04 on the similar issue and uphold the impugned order of the learned CIT(A) deleting the addition made by the AO on account of capital gain. The appeal filed by the Revenue is accordingly dismissed. 13. Now, we shall take up the appeal of the Revenue for asst. yr. 2007-08 being ITA No. 7790/Mum2010 which is directed against the order of learned CIT(A) 24, Mumbai dt.10-8-2010. 14. As regards the main issue involved in this appeal raised in ground No. 1 relating to addition of ₹ 53,87,420 made by the AO on account of capital gain and deleted by the learned CIT(A), the learned representatives of both the sides hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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