TaxTMI 
TaxTMI 
2020 (4) TMI 778
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....s not quash the entire proceedings. (ii) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in appreciating the law laid down by the Hon'ble Supreme Court in the case of M.V. 'Vali Pero'' vs Fernandeo Lopex, AIR 1989 (SC) 2206 wherein it has been held that the outcome ad fairness of the procedure have been forwarded, there is no reason to discard the result simply because certain details which have not prejudicially affected the result have been inadvertently omitted in a particular case. (iii) Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred without appreciating that the assessee made transfer as per Section 2(47) of the Act while making treatment of its capital asset i.e. land of Cinema Hall into stock in trade of the business of selling of shops u/s 45(2) of the Act 3.1 The Ground No. 1 and 2 of the Revenue are regarding reopening of the assessment which was quashed by ld. CIT(A) on the ground that the same is hit by the proviso to Section 147 of the Act and the AO has reopened the assessment after 04 years without any new material or information so as to hold that th....
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....ity of the reopening of the assessment. The ld. CIT(A) decided the issue of reopening of the assessment in favour of the assessee and quashed the reopening of the assessment. The ld. CIT(A) also decided the issue of assessment of Long Term Capital Gain u/s 45(2) of the Act in favour of the assessee by holding that there was no conversion of capital asset into stock in trade by virtue of demolition of Cinema Hall Building and conversion of land use as well as entering into Development Agreement dated 12-12-2001 with GBT. Since reopening of the assessment was quashed by the ld. CIT(A), therefore, other grounds raised by the assessee against the validity of the reassessment order on the ground of proper service of notice u/s 148 of the Act was not adjudicated upon by the ld. CIT(A). Thus aggrieved by the order of the ld. CIT(A), the Revenue has filed this appeal and the assessee has filed the C.O. on the issue of validity of service of notice u/s 148 of the Act. 3.3 The ld. DR has submitted that the ld. CIT(A) has quashed the reassessment by holding that the same is hit by the proviso to Section 147 of the Act without considering the relevant facts which were subsequently detected ....
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....of land in question and Short Term Capital Gain on account of sale of shops in the commercial complex. Therefore, the assessee furnished all the relevant details and materials which were necessary for assessment and consequently the reopening of the assessment after 04 years from the end of the Assessment Year under consideration is not valid when there is no failure on the part of the assessee to disclose fully and truly all materials facts necessary for assessment. The ld.AR of the assessee has submitted that the AO on the satisfaction of the reply filed by the assessee has accepted the returned income, while passing the assessment order dated 03-12-2010. In support of his contentions, the ld.AR of the assessee relied on following decisions. (i) Ritu Investments Ltd. vs DCIT 51 DTR 162 (Del.) (ii) CIT vs Eicher Ltd. (2007) 294 ITR 310 (Del.) (iii) CIT vs Kelvinator India Ltd, 256 ITR 1 (Del.) (iv) CIT vs Jet Speed Auto (P) Ltd. (2015) 372 ITR 762 (Bom.) (v) CIT vs Bhanji Lavji (1972) 79 ITR 582 (SC) Thus the ld.AR of the assessee submitted that reopening of assessment based on change of opinion is not valid as the AO has no juris....
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....(Hors) / JPR / U/s 127 (1) / 2010-11 / 302 dated 15/10/2010. In compliance to the statutory notices Shri. R. C. Verma, C. A. & A. R. attended the proceedings from time to time and filed necessary details / information / documents etc. as required and produced books of accounts which were examined on test on the basis and the case was discussed with him. The assessee is a Private Limited Company having income from interest, dividend, long term and short term capital gain on shares, capital gain on sale of shops etc. During the course of scrutiny it was revealed that the assessee is doing the business of advancing loans to parties and yielding interest income thereon. During the year under, consideration the assessee had earned an interest income of Rs. 57,48,187.57 which is duly reflected in the profit and loss account of the assessee. As such the turnover of the assessee got exceeded the limit prescribed by the section 44AB of Income Tax Act, 1961. The assessee had not furnished the tax audit report as required by section 44AB of the Income Tax Act, 1961. As such I am satisfied that the penalty provisions under section 271B of Income Tax Act, 1961 are applicable a....
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....Complex on the land. The Audit party has conducted a thorough enquiry of relevant facts pertaining to the entire exercise of conversion of land use from Cinema Hall Building to Development of commercial complex. We further note that the AO has also conducted an enquiry by issuance of notices u/s 133(6) dated 01-09- 2014 and 25-09-2014 which are not in dispute. The assessee has also responded to those notices by filing the reply dated 7-10-2014. All these documents are part of the paper book filed by the assessee. Therefore, the question arises whether the facts pointed out by the audit party as well as enquiry conducted by the AO by issuing notices u/s 133(6) of the Act constitute a tangible material revealing the facts which were not disclosed by the assessee in the return of income filed u/s 139 of the Act as well as during the original scrutiny assessment. As far as scrutiny assessment proceedings are concerned, we have also discussed this aspect in the foregoing part of this order and noted that the AO has not even taken up any such issue for scrutiny. Further no reference was made by the AO to the alleged reply filed by the assessee which are the basis for raising objection ag....
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....er four years from the end of the relevant assessment year, the proviso to section 147 of the Act is also applicable. Further, there was no failure on the part of the appellant to disclose, truly and fully all material facts, which are necessary, for its assessment for the year under consideration at the time of original assessment proceedings, it is held that the conditions required for initiation of reassessment proceedings, as stipulated in the proviso to sect ion 147 of the Act were not satisfied. Hence, in view of the above discussion, looking to the facts and circumstances of the case, it is held that the reassessment proceedings initiated by the AO under consideration were bad in law and consequently, the assessment order based on such bad initiation cannot be allowed to be sustained and thus, hereby quashed. ' ' To avoid unnecessary burdening of the order, we have reproduced only the concluding part of the findings of the ld. CIT(A). However, we have carefully perused the entire findings of the ld. CIT(A) qua this issue and found that the ld. CIT(A) has decided this issue by presuming the fact that reassessment proceedings were initiated on the basis of re-appreciatio....
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....to stock in trade and therefore, as per provisions of section 45(2) of the Act when the assessee has finally sold the shops and showrooms in the commercial complex then the profit from said transactions of sale shall have two components, one is capital gain in respect of conversion of land from capital asset into stock in trade and another is business income by sale of the stock in trade. Therefore, the AO has rightly assessed the income of the assessee under two heads, one is Long Term Capital Gain and another is business from sale of shops as well as other commercial space. The ld. CIT(A) has given the findings ignoring all these facts emerging from the record that the assessee has decided to stop the business of exhibiting the films and demolish the cinema hall building and thereby converted the capital asset into stock in trade to earn the profit from the activities of development of commercial complex and sale of the same which is nothing but enduring in nature. 4.3 On the other hand, the ld. AR further submitted that construction of commercial complex on the land on which cinema hall was built remained as capital asset. The change in use of the land from cinema hall to com....
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....e commercial complex on the land, the assessee entered into a Development Agreement dated 12-12- 2001 with GBT. The assessee also obtained the permission to change the land use from cinema hall to commercial complex which establishes the intention of the assessee not to use the land in question for its erstwhile business of exhibiting films. To ascertain the true and real intentions of the parties to the Development Agreement dated 12-12-2001, it is essential to consider various clauses of the said agreement. The purpose and object of the conversion of land use for development of multistoried commercial complex is stated in clause 2 of the recital of the agreement as under:- ''2. WHEREAS looking to the demand for showroom and offices in multistoried buildings situated at a good location, Owner herein decided to develop a multistoried commercial complex on the said plot of land in accordance with the rules, regulation and building bye laws of the local authorities, and the State Government.'' Thus the assessee decided to develop the multistoried commercial complex on the said plot of land to cater the demand of offices/ showrooms in the multistoried building at goo....
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....d in Green Colour. However, it is further made clear that before completion of the structure, no sale deed will be executed of the Developers share.'' Thus the clause 11 of the agreement set out the manner in which the constructed commercial complex will be divided between the assessee and the Developer. The share of each party was also proposed to be marked in different colour of Red and Green. Apart from the constructed area, the assessee also received Rs. 2.00 crores as consideration. As per clause 12 of the said agreement, the assessee was free to sell / transfer its share in the built up area of new building including the parking space and space for hoardings, bill boards etc. Similarly, the developer was also free to sell or transfer its share of 50% in the built up area including parking spare, space for hoarding, bill boards etc. Therefore, it is not an agreement of mere development of the land owned by the assessee but the assessee and developer entered into this venture of development and sale of developed space in the shape of shops/ offices and other commercial space including parking and space of hoarding, bill boards etc. The intention of the parties is ap....
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....s other space as a separate unit. The exercise of development of multistoried commercial complex was a well pre-planned venture of the assessee and developer which shows the adventurous act on the part of the assessee except the activity of development and selling of shops/ offices and other space of commercial complex, there was no other business activity of the assessee. Therefore, all these undisputed facts of conversion of land use, demolition of cinema hall building and discontinue of business of exhibiting films and development of commercial complex for the purpose of sale of shops/ offices and other commercial complex establishes the fact that the assessee had converted the capital asset into stock in trade with the motive to earn the maximum profit out of the said venture. Thus entering into Development Agreement and selling of constructed shops/ offices of the multistoried commercial complex constitutes the business activity of the assessee. The assessee also executed the Power of Attorney in favour of the Developer authorizing him to execute the sale deed and other acts in this regard to the extent of 50% of shares in the said commercial complex. Therefore, all these fact....
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.... was not at all brought into the notice of the authorities below and therefore, for the purpose of computing the capital gain the actual date of acquisition is required to be determined by considering all these facts as well as claim of the assessee. Accordingly, the limited issue of indexed cost of acquisition is set aside to the record of the ld. CIT(A). We are conscious about the facts that the AO has not disturbed the indexed cost of acquisition as claimed by the assessee, however, it is a matter of fact that as per Development Agreement the assessee has claimed to have acquired the land in the year 1995. Therefore, when this is part and parcel of subject matter of assessment of capital gains which is the subject matter of the appeal filed by the Revenue then the issue of computation of capital gains is required to be decided based on true and correct facts. Since we have already set aside the issue of reopening to the record of the ld. CIT(A), therefore, this issue is also set aside to the record of the ld. CIT(A) and consequently the ld. CIT(A) is directed to compute the capital gains by taking the correct indexed cost of acquisition. Needless to say that the assessee be g....