TaxTMI 
TaxTMI 
2006 (2) TMI 201
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....e income chargeable to tax under the head 'Capital gains' was examined by the Assessing Officer during the course of reassessment proceedings. On this issue, the Assessing Officer has recorded the following findings in the assessment order for the assessment year 1997-98: "It is explained that the assessee had 20 undivided share in a plot of land with structure thereon along with the four other corners with equal shares to co-owners sold their 20 per cent share to M/s. United Builders. During the previous year relevant to assessment year 1997-98, the assessee converted her share in the plot of land and structure standing thereon into stock-in-trade and development and concession (sic) of building started jointly with M/s. United Builders as per the agreement entered into by them. It was agreed by the assessee and the other co-owners that they would contribute towards the cost of construction of the building in the ratio of their interest in the property i.e., 20 per cent each. The balance 40 per cent would be borne by M/s. United Builders. It is further explained that the development agreement entered into M/s United Builders the assessee was entitled to F....
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....ndicated as under: "You have computed the value of the land converted into stock in trade at Rs. 1,61,21,100. From this, indexed cost of Rs. 46,36,000 has been reduced. The net capital gain computed is Rs. 1,14,85,100. As the assessee has retained flats measuring 1764 sq.ft., the value of them amounting to Rs. 1,12,89,600 has been claimed as benefit under section 54 of the Act and the balance amount of Rs. 1,95,500 has been offered as long-term capital gain. The first error in the computation is the claim under section 54 of the Income-tax Act. You have paid towards the cost of flat only. However, you have calculated the land price also in it. The land was already owned by you and no investment has been made in the land. The land component in this calculation will be Rs. 76,73,400 (1,764 X 4,350). In other words, the Assessing Officer has granted excess benefit under section 54 of the Act amounting to Rs. 76,73,400. The cost of construction has been taken at Rs. 2,260 sq. ft. based on a letter from a C.A. This is abnormal cost. Even as on the date of the cost of construction of a building ranges between 400 to 800 per sq. ft. depending on the quality of c....
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....efore the Assessing Officer as also before the ld. CIT. Inviting our attention to the show-cause notice issued under section 263, the ld. counsel submitted that the first ground indicated in the aforesaid notice is that deduction under section 54 of the Act was not correctly worked out and the component of land price was also added to the cost, which is not permissible. It is submitted that complete details regarding deduction available under section 54 were filed before the Assessing Officer and proper explanation was also submitted in response to the show-cause notice issued by the CIT. It was explained to the CIT that the entire transaction has to be considered from the development activity angle. The assessee converted her 20 per cent share into stock-in-trade. The assessee would have sold her 20 per cent share and thereafter could have purchased the flat for her use and in that case, the cost of the flat would have included cost of construction as well as the cost of land. For the purpose of section 54, cost of flat is always inclusive of cost of land. The second objection raised by the CIT was with regard to the cost of construction. The ld. counsel submitted that this issue ....
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....t year 1997-98 assessee along with other co-owners converted her share in plot of land and structures standing thereon into stock-in-trade. Thereafter, she has started business of development of real estate and construction and has undertaken a project to construct a building on the said plot of land. The assessee has claimed deduction under section 54 of the Act as she has undertaken to construct new house within a period of three years from the date of transfer of original house property known as 'Baug Roohi'. Out of the total constructed area of 3706 sq.ft., she has retained 1764 sq.ft. for self-occupation and thereby complied with the conditions of section 54. A detailed working of capital gains arising as a result of conversion of land into stock-in-trade is enclosed herewith. As per the provisions of section 54, capital gains arising on conversion of an asset into stock-in-trade is taxable in the year when the stock-in-trade is sold. Accordingly, assessee has offered for taxation capital gains in the year which flats (stock-in-trade) were sold. During the year assessee offered proportionate share of estimated total profit on the area sold du....
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....No. 802 of 535 sq. ft. Out of the above, the assessee had decided to keep flat Nos. 1101 and 1102 for her own residence and other 3 flats were sold as under: Flat No. Date of sale Name of Purchaser Total Sale consideration Text Removed Amount received Amount receivable 802 1/3^rd share 3-3-1997 Sheriton Properties Ltd. 12,12,667 10,91,400 1,21,267 801 3-3-1997 -do- 59,97,600 53,97,840 5,99,760 302 Assessment year 1999-2000 -do- 62,50,000 62,50,000 NIL 134,60,267 127,39,240 7,21,027 The copies of agreement with Sheriton Properties are already furnished and copy of agreement for flat No. 302 will be filed separately. (vi) The land was jointly owned by five co-owners equally viz. Rashid Oomerbhoy, Afzal Oomerbhoy, Imtiaz Oomerbhoy, Salim S. Oomerbhoy and Khatiza S. Oomerbhoy (assessee) having 20 per cent rights each. Two of the co-owners i.e., Rashid S. Oomerbhoy and Afzal S. Oomerbhoy sold their 20 per cent share to United Builders @ Rs. 4,350 per sq.ft. after obtaining approval from appropriate authority. This being the market rate, has been adopted by the....
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....laced reliance on the following cases: (i) Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) (ii) CIT v. Gabrial India Ltd. [1993] 203 ITR 108 (Bom.) (iii) Girdharilal B. Rohra v. CIT [2004] 86 TTJ (Mum.) 177 (iv) Triveni Engg. Works Ltd. v. Dy. CIT [2004] 87 TTJ (Delhi) 93 (v) ITAT Mumbai 'I' Bench order dated 24-3-2004 in the case of Atlanta Agencies [IT Appeal No. 671 (Mum.) of 2003] (vi) ITAT, Mumbai 'H' Bench order dated 31-3-2005 in the case of Bipin P. Shah v. ITO [IT Appeal No. 5992 (Mum.) of 2003] (vii) ITAT, Mumbai 'H' Bench order dated 31-3-2004 in the case of Ambalal B. Patel [IT Appeal No. 5993 (Mum.) of 2003] (viii) ITAT, Mumbai 'A' Bench order dated 27-4-2004 in the case of Ausia Properties Development Ltd. [IT Appeal No. 3653 (Mum.) of 2003]. 10. The ld. DR strongly relied on the order passed by the ld. CIT under section 263. He contended that various relevant and important issues have not been examined by the Assessing Officer at all. His main focus was on the issue as to whether the income by way of capital gain should be brought to the charge of tax ....
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.... the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the ITO is erroneous but is hot prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to....
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....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 higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. This is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself would not be enough to vest the Commissioner with the power to suo motu revision because the first requirement, namely, that the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interests of the Revenue, then the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement must be fulfilled. ....
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....ssessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Commissioner, while exercising his power under section 263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. (viii) The CIT, before exercising his jurisdiction under section 263, must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in....
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....ve, cannot be extended to confer unrestricted and unfettered powers on the CIT to set aside or modify an assessment merely on the basis of difference of opinion. The jurisdiction under section 263 cannot obviously be utilized as an instrument for reopening concluded proceedings on flimsy grounds or on mere subjective notions of the CIT. The CIT is not entitled to assume revisional jurisdiction merely because he is not happy with the quality of the assessment or the drafting of the assessment order. The CIT cannot invoke section 263 for upsetting a concluded assessment framed by the Assessing Officer merely because he feels that a particular line of investigation which would have been effective and useful for the Revenue has not been adopted by the Assessing Officer. The conditions enacted under the provisions of section 263 are obviously intended to avoid element of pure subjectivity or arbitrariness on the part of the CIT in taking resort to revisional powers under section 263." 16. The various other cases relied upon by the ld. counsel for the assessee only reiterate the basic principles which have been stated by us above. 17. The facts of the present case may now be examin....