TaxTMI 
TaxTMI 
2011 (7) TMI 377
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....nsel Shri. P.K.R. Menon appearing for the appellant-Revenue and Shri. Anil D. Nair, learned counsel appearing for the respondent assessee. 3. The facts leading to the controversy are the following:- The assessee, a Limited Company with capital assets in the form of land valued at Rs. 1,52,909/- converted the same into stock-in-trade during the previous year relevant for the assessment year 1992-93. While converting the land into stock-in-trade, it was revalued at Rs. 18 lakhs and the profit on revaluation of Rs. 16,47,091/- was credited to the general reserve. The land was sold in pieces in the course of the assessment years 1993-94, 1994-95 & 1995-96. Even though profit on sale of the land was returned as business income for assessments,....
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.... validity of reassessment we have to necessarily consider the nature of the income that escaped assessment in the regular assessment completed under Section 143(3) of the Act. Section 45(2) which is the sole basis of reassessment under Section 147 is extracted hereunder for easy reference:- "45(2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on th....
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....ing thereon was sold by the assessee, and brought to tax the capital gain attributable to such land assessable under Section 45(2) of the Act. 6. The sole question for our consideration therefore is whether the omission of the Assessing Officer to make assessment on capital gains in the regular assessment completed under Section 143(3) is a ground justifying revision of assessment under Section 147 of the Act. The learned senior counsel appearing for the Revenue relied on the decision of the Supreme Court in Asstt.CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 and the decision of this Court in CIT v. Popular Vehicles & Services Ltd. [2010] 191 Taxman 333 and contended that reassessment initiated by issuing ....
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...., neither the assessee returned any income for assessment under section 45(2) nor the Assessing Officer had any occasion to consider assessee's liability under Section 45(2) in respect of the deemed income arising from the transfer or conversion of fixed assets into stock-in-trade. In fact, assessee's liability for payment of tax under Section 45(2) in respect of the transaction of transfer or conversion of fixed asset into stock-in-trade was brought to the notice of the Officer by the audit party. The CIT (Appeals) also has taken into account the opinion of the audit party that assessment should be revised under Section 263 of the Act. In fact the CIT (Appeals) had made a finding that there is escapement of assessable income and the recour....
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....ncome chargeable to tax and the only condition for reopening or initiating an assessment under Section 147 is reasonable belief of the Assessing Officer on escapement of income chargeable to tax. 8. In this case, admittedly, income chargeable to tax under Section 45(2) of the Act has escaped regular assessment for the assessment year 1995-96 because neither the assessee filed return of income taxable under the said provision nor the Officer assessed liability under the said section. The audit party only brought to the notice of the Assessing Officer that income chargeable to tax under Section 45(2) has not assessed for the assessment year 1995-96 because in the previous year relevant for the assessment year the assessee had sold major port....