TaxTMI 
TaxTMI 
2025 (7) TMI 1841
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....s. 14,84,766/-. (3). The Learned CIT(A) has erred in upholding the validity of disallowance of claim under section 54F of the Act, made by the Assessing officer which is beyond the scope of limited scrutiny under CASS. (4) The assessee craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal. 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee has filed his return of income on 31.08.2015, declaring therein total income of Rs. 6,14,880/-. The return of income was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter, 'the Act'). The assessee`s case was selected for scrutiny through CASS for limited scrutiny with reasons, namely : (i) Large deduction u/s. 54B, 54C, 54D, 54G, 54A, (ii) Sale consideration of property in ITR is less then consideration reported in Form No. 26QB. (iii). Substantial increase in capital in a year. 4. Accordingly, a notice u/s 143(1) of the Act was issued on 19.09.2016 and duly served upon the assessee. The notices u/s 142(1) of the Act, calling for various details were issued and served upon the assessee. In response to the aforesaid stat....
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....eduction u/s. 54F be not withdrawn. The assessee was also asked to show- cause as to why his activity of entering a pre-determined receipt of Rs. 3,00,000/- per each flat, should not be treated as adventure in the nature of trade. 5. In response to the above notice of the Assessing Officer, the assessee submitted before the Assessing Officer, that notional profit arising from transfer by way of capital assets into stock in trade is chargeable to tax in the year in which stock -in- trade is sold/transferred. The provision of section 45(2) of the Act, provides that although such a conversion of capital assets into stock-in-trade of a business, carried on by the assessee, will be a transfer in the previous year, in which the assets is so converted, but actual capital gain will not arise in the previous year in which assets is converted into stock- in- trade, however, the capital gain arises in the year in which the asset is sold or otherwise transferred. Further, only sale price minus market value as on sale of conversion shall be treated as business income and can be taxed under the head " Profits and gain of business and profession." The assessee, for the year under consideration....
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.... business stock -in- trade and the same was therefore treated by the assessing officer, as adventure in the nature of trade. 7. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal, before ld CIT(A), who has confirmed the action of the Assessing Officer. The learned CIT(A) has not given any finding from his side, however, he has narrated the facts stated in the assessment order ( which we have already noted in our earlier para of this order) and then confirmed the addition made by the assessing officer. 8. Aggrieved by the order of the learned CIT(A), the assessee is in further appeal before us. 9. Shri Vijay Mehta, Learned Counsel for the assessee, vehemently argued that Section 2(47) of the Income-tax Act, provides that any conversion of capital asset into stock-in-trade shall be regarded as a transfer. This transfer arises in the year in which such conversion takes place and, accordingly, capital gain would normally arise in that very year. However, section 45(2) of the Act, postpones the assessment of such capital gains to the year in which the stock-intrade is actually sold or otherwise transferred by the assessee. In the assessee....
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.... 12. We note that in the ground No.3, the assessee has challenged the jurisdiction of the Assessing Officer in rejecting the claim of exemption u/s 54F of the Act, while completing the proceedings, under the limited scrutiny assessment. The ground No.3, raised by the assessee, is reproduced below for ready reference: "(3). The Learned CIT(A) has erred in upholding the validity of disallowance of claim under section 54F of the Act, made by the Assessing officer which is beyond the scope of limited scrutiny under CASS." 13. We have gone through the assessment order. As it is evident from the recital of the Assessing Officer, on page no. 1 of his order, stating that : "the case was selected for limited scrutiny assessment on the issues of (i) Large deduction u/s 54B, 54C, 54D, 54G, 54A (ii) sale consideration of property in ITR is less than consideration reported in Form 26QB and (iii) substantial increase in capital in a year." The above issues of the limited scrutiny assessment have also been communicated to the assessee, vide letter of the Assessing Officer, dated 09-01-2017, the deduction claimed by the assessee u/s 54B, 54C, 54D, 54G or 54A of the Act. How....