TMI Blog2022 (10) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... d that he had agreed to the contention of conversion of capital asset into stock-in-trade as on 02.05.2007. AO has rightly taken one view by duly considering the fact that the impugned Land was nothing but a stock in trade and can be evidenced from the financial statements of the assessee. Once the view has been taken by the AO after thorough examination any other view taken by the ld.PCIT would form change of Opinion and is not possible U/s 263 of the Act. In our view, the Pr. CIT cannot thrust upon his own thoughts, perceptions, and conclusions on the A.O. (or) direct him to pass on order in such a manner and in such a fashion as he thinks fit by setting aside the already completed assessment. Crux of the issue involved is that the AO has framed assessment u/s 147 and not under section 143(3), as it is purely re-opened for a specific reason and was concluded by accepting the submissions of assessee after duly verifying the records and the material available on record and on complete satisfaction of the Assessing Officer. Assessing Officer had applied his mind and asked the relevant question from the assessee and thereafter had completed the assessment. While, deciding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his Land into stock in trade and same was shown as closing stock in the P L account even before entering into agreement for development of the land. 8. The Ld. Pr. CIT ought to have appreciated the fact that the taxation arises only when stock in trade is sold or transferred and no such transaction has taken place during the FY 2007-08, relevant AY 2008-09. 9. The Ld. Pr. CIT erred in issuing directions to the assessing officer to examine the issue afresh without giving specific finding on the Issue. 10. The Ld. Pr. CIT erred in not affording reasonable opportunity of being heard to the appellant before setting aside the assessment. 11. The Ld. Pro CIT erred in not passing the order on the issue on which proceeding u/s 263 were initiated which makes the order passed u/s 263 'void abinitio'. 12. The assessee carves space to add, alter or modify any ground before or at the time of proceedings before the Hon ble ITAT. 2. Brief facts of the case are that the assessee is a film artist did not file his return of income for the A.Y.200809 within the time allowed u/s. 139 of the Act. Action u/s 147 of the Act was initiated and notice u/s 148 of the Act was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a letter with a request to be communicated the reasons for re-opening the assessment and also stated that he had filed a return in response to the notice issued u/s 148 of the Act. The return was filed on 2703-2016 declaring Nil income. In the P L a/c enclosed to the return, the value of purchases (conversion) and closing stock was shown at Rs. 7,61,08,450/-. 2.4. The assessee also appended a footnote to the P L a/c stating that he and his mother had decided to construct a multi-storeyed commercial complex and due to their lack of experience they had entered into the development agreement with an experienced builder and that as and when the stock in trade was converted and sold, he would be admitting capital gains u/s 45(2) of the Act. 2.5. The reasons for re-opening the assessment were communicated to the assessee on 29-03-2016. On 30-032016, the assessee filed objections against the re-opening of the assessment. It was reiterated that the land was converted into stock in trade on 02-05-2007 and that he would offer the capital gains u/s 45(2) of the Act as and when such stock in trade was sold. Notice u/s 143(2) of the Act was issued on 28-03-2016 posting the case on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights over 45% of the land falling to his share for raising loans and subsequent transfe Rs. Therefore, there was a transfer within the meaning of section 2(47)(v) of the Act on the date of the development agreement and income from capital gains is taxable for the A.Y.2008-09. Since the land was held for a period not exceeding 36 months, the income is taxable as short term capital gains. For working out the capital gains, the market value of the land fixed by the stamp duty authorities for the purpose of the. development agreement will be adopted as the full value of consideration . 3.2. He had also drawn our attention to the show cause notice issued by the PCIT, wherein in paragraph 3, 3.1, 3.2 and 4 it was mentioned as under: 3.0 On perusal of the assessment record, it: is observed that the assessee and her mother had entered into a development agreement cum GPA with Phonenix Infrastructure Pvt Ltd on 02.08.2007 vide document No. 3321/2007 registered with SRO, Banjara Hills for development of their land admeasuring 4375 Sq.Yds situated at Plot No. 573B 573C, Road No. S2, Jubilee Hills, Hvderabad. The market value of the land given for development was fixed by SRO at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what prompted the assessee to convert the land into stock in to trade, more so when he is not into construction business. This is nothing but a ploy to evade the payment of capital gains tax. The assessee has no evidence to prove that the land was converted into stock in trade except a self serving profit and loss account filed after issue of notice under section. The entire transaction is very strange that the property was acquired through a gift deed on 23.04.2007 and the land was converted into stock in trade on 02.05.2007. A statement of the assessee was recorded under section 131 of the Income Tax Act, 1961 by the Dy. Director of Income Tax(Inv), Unit1(1),Hyderabad on 28.01.2015. In this statement, when the assessee was asked why capital gains was not offered on the above transaction, it was replied to question No. 8 as under: No, we have not declared any capital gains on the transfer of the land vide the development agreement as we were not aware of the tax liability. If the assessee's contention of conversion of capital asset into stock in trade is true, he would have replied the same to the DDIT(Inv). As it is an after thought, the assessee could answer what was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry and as a matter of fact, it was specifically brought to the notice of the Ld. Assessing Officer that the interest earned was adjusted against the project expenditure. 13. Further, it is an admitted fact that in this case, the business of the assessee was commenced in this case, unlike the facts in the case of M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd.(supra). The Mumbai Bench of Tribunal while noticing the decision of jurisdictional High Court in the case of CIT vs. Sunbeam Auto Ltd, 332 ITR 167 and the case of Nagesh knitwear Pvt. Ltd., 355 ITR 135 observed that the Explanation 2 to section 263 inserted by Finance Act, 2015 w.e.f. 01.04.2015 would not impact the assessment earlier to 2014-15 and such a decision was followed by the Delhi Bench of Tribunal in the case of Arun Kumar Garg (HUF) vs. PCIT in ITA No. 3391/Del/2018 for the assessment year 2014-15 and by order dated 08.01.2019 held that Explanation 2 to section 263 of the Act is only prospective in nature. 14. In the case on hand, the ld. PCIT while reading the provisions of section 263 of the Act and the decision of Hon'ble Apex Court in the case of M/s. Tuticorin Alkali Chemicals and Fertilize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Commissioner of Income-tax vs. Sunbeam Auto Ltd., [2010] 189 Taxman 436 (Delhi)/[2011] 332 ITR 167 (Delhi) being apposite, are extracted hereafter. 12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Signature Not Verified Digitally Signed By:VIPIN KUMAR RAI Signing Date:06.07.2021 10:30:10 Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Incometax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income Signature Not Verified Digitally Signed By:VIPIN KUMAR RAI Signing Date:06.07.2021 10:30:10 either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the power, does not allow for supplanting or substituting the view of the AO. The appreciation of material placed before the AO is, exclusively within his domain which cannot be interdicted by a superior officer while exercising powers under Section 263 of the Act only on the ground that if he had appraised the said material, he would have come to a different conclusion. [See Parashuram Pottery Works Co. Ltd. v. ITO, [1977] 106 ITR 1 (SC)] 6.10 Respectfully following the decision of Delhi High Court in the matter of Brahma Centre Development Private Limited, ITA No. 116 of 2021 be quash order passed under Section 263 in the case of the Assessee . 4.2. In the light of the above said submissions, it was submitted that the order passed by the Assessing Officer was correct and the order passed by the PCIT u/s. 263 of the Act is required to be set aside. 5. Per contra, Ld.DR for the Revenue had submitted that the assessee had filed the ITR-2 (Income Tax return format meant for assessee without any business income) and no evidence was filed by the assessee before the Assessing Officer, demonstrating the conversion of the capital asset into stock in trade during the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue approval of the Range Head at Chennai. Later on, the assessee requested for transfer of the case to Hyderabad and the case was duly transferred u/s 127 to Hyderabad. 2. During the assessment proceedings, the assessee argued that he converted the land into stock in trade and hence not liable to pay capital gains tax. However, it may kindly be noted that even in the year in which he got constructed property from the developer also, he did not disclose any capital gains. The AO adopted a wrong view when two views were not possible and did not bring the capital gains to tax. In fact, the AO formed a correct view which is evident from her show cause notice dated 14/03/2016 served on the assessee on 15/03/2016. In the said notice u/s'142(1), the AO clearly stated that the claim of conversion of land into stock in trade is not supported by any corroborative evidence. She also distinguished the case laws cited by the assessee. However, in the assessment order dated 31/03/2016, she took a complete U turn without any basis despite the fact that no evidence in support of the claims of the assessee were filed before her. 3. She also completely ignored the statement of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim is nothing but an afterthought. As the AO did not verify the claim, the Pr CIT set aside the assessment u/s 263. 6. It is humbly submitted thatin the present case, as already submitted above, the AO in her notice dated 14/03/2016 expressed her mind but acted quite opposite in the order dated 31/03/2016. While doing so, the AO took a view which is contrary to the facts on record as explained her in notice dated 14/03/2016 even when no verifiable evidence was before her between 14/03/2016 to 31/03/2016. Therefore, the view taken by the AO was wrong and two views were not possible in the present case if the facts are considered, Therefore, the order of the AO was erroneous and prejudicial to the interests of Revenue. The Pr CIT assumed valid jurisdiction and the revision is also a valid revision. 7. On the point that the claim of the assessee that he was into business of real estate and converted the land into stock in trade is baseless, reliance is placed on the decision of Hon'ble Supreme Court in the case of G. Venkataswami Naidu (35 ITR 594). In the said decision, Hon'ble Supreme Court laid down certain criteria to ascertain whether a transaction is in the chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be ITO, Ward - 14(5) in a case where the assessee is challenging the decision of Pr CIT-6, Hyderabad. It is also submitted that the assessee filed a paper book containing various documents claiming that they were filed before the AO. Out of the said documents, documents at SI no: 5 to 8 are apparently not filed before the AO and in fact some of these documents were gathered by the Investigation wing and confronted to the assessee. The assessee may kindly be directed to produce proof to the fact that the said documents were filed before the AO by the assessee. 6. We have heard the rival contentions and perused the record. In this case, the ld.PCIT had issued the show cause notice to the assessee on the premise that the Assessing Officer had failed to apply his mind on the material available on record and the Assessing Officer has wrongly concluded that the land was converted into stock-in-trade on 02.05.2007. In the opinion of the ld.PCIT, the land was transferred within the meaning of section 2(47)(v) of the Act and therefore, the profit and loss of the assessee was required to be computed on the basis of the transfer of a capital asset. In fact, both the authorities namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee after duly verifying the records and the material available on record and on complete satisfaction of the Assessing Officer. 7. In support of the above, reliance is placed on the decision of the of Supreme Court in the case of MALABAR INDUSTRIAL CO. LTD. v. COMMISSIONER OF INCOME TAX (2000-(243)-ITR -0083 SC) wherein it was held as under : ...Where two views are possible and the I.T.0 has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the 170 is unsustainable in law.. 8. As mentioned herein above, AO during the assessment proceedings had called for information which was submitted from time to time by the assessee, later the assessment was completed under the provisions of section 147 of the Act vide order dated 31.03.2016. It was submitted by ld.DR that present case is a case of no enquiry conducted by the AO while completing the assessment, as clear from the list of dates and events mentioned herein above. We have gone through the paper book-II wherein detailed questionnaire given to assessee is placed and response to the same submitted by asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer was erroneous. We may fruitfully rely upon the decision in the case of Olive Hospital private limited Vs. PCIT ITA No. 770/Hyd/2017, (Para 7), decided by the Hon'ble ITAT Hyderabad Bench, wherein it was held as under: 7. The Hon'ble Madras High Court in the case of CT vs. G.R. Tangamaligai (2003) 259 ITR 129 has held that in the absence of any finding that there is loss of revenue, interference u/s 263 is not justified. Similar view was taken by the coordinate Bench of the Tribunal at Chandigarh in the case of Punjab Wool Syndicate vs. ITO (2012) 317 ITR (7) 439 (Chandigarh). Further, the Hon'ble Delhi High Court in the case of CIT vs. Ashish Rajpal (2010) 320 ITR 674 (Delhi) and also in the case of CIT vs. Vikas Polymers (2012) 341 ITR 0537 (Del.) has held that where the Assessing Officer during the scrutiny assessment proceedings has raised a query which was answered by the assessee to the satisfaction of the Assessing Officer but the same was not reflected in the assessment order, the conclusion cannot be drawn by the Commissioner that no proper enquiry with respect to the issue was made by the Assessing Officer which enabled him to assume jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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