Shri Prakashkumar Bhagchandbhai Khatri,, Deesa v. The ACIT, B.K.Circle,, Palanpur

ITA 1827/AHD/2014 | 2010-2011
Pronouncement Date: 30-04-2015 | Result: Allowed

Appeal Details

RSA Number 182720514 RSA 2014
Assessee PAN AAGFG0311A
Bench Ahmedabad
Appeal Number ITA 1827/AHD/2014
Duration Of Justice 10 month(s) 13 day(s)
Appellant Shri Prakashkumar Bhagchandbhai Khatri,, Deesa
Respondent The ACIT, B.K.Circle,, Palanpur
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 30-04-2015
Date Of Final Hearing 24-03-2015
Next Hearing Date 24-03-2015
Assessment Year 2010-2011
Appeal Filed On 16-06-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD .. BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER 1. ./ I.T.A. NO.108/AHD/2014 AY 2010-11 2. ./ I.T.A. NO.1827/AHD/2014 AY 2010-11 1. SHRI PRAKASHKUMAR B.KHATRI VAIBHAV TENEMENT GULBANI NAGAR PART-I DEESA 385 535 2.-DO- / VS. 1.THE CIT-IV PRATAYKSHA KAR BHAWAN POLYTECHNIC AMBAWADI AHMEDABAD-380 015/ 2.ACIT BK CIRCLE PALANPUR ./ ./ PAN/GIR NO. : AAGFG 0311A ( # / APPELLANT ) .. ( $% # / RESPONDENT ) #& / APPELLANT BY : SHRI S.N. SOPARKAR $% #'& / RESPONDENT BY : SHRI T.P.KRISHNA KUMAR CIT-DR ()'* / DATE OF HEARING 24/03/2015 + -.'* / DATE OF PRONOUNCEMENT 30/04/2015 / O R D E R PER SHRI KUL BHARAT JUDICIAL MEMBER : BOTH THESE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THE SEPARATE ORDERS OF THE CIT-IV AHMEDABAD AND LD.CIT( A)-XX ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 2 - AHMEDABAD (CIT/CIT(A) IN SHORT) DATED 02/12/2013 & 29/04/ 2014 RESPECTIVELY PERTAINING TO ASSESSMENT YEAR (AY) 201 0-11. BOTH THE APPEALS WERE TAKEN UP TOGETHER FOR HEARING AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. 2. FIRST WE TAKE UP THE ASSESSEES APPEAL IN ITA NO .108/AHD/2014 FOR AY 2010-11. THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- 1 LD. CIT ERRED IN LAW AND ON FACTS IN INVOKIN G PROVISIONS OF SECTION 263 OF THE ACT HOLDING THE ASSESSMENT AS ERRONEOUS & PREJUDICIAL TO THE INTEREST OF REVENUE TO THE EXTENT OF FAILURE OF AO TO EXAMINE CHARGEABILITY OF PROFIT ON SALE OF LAND AS BUSINESS INCOME AS AGAINST LONG TERM CAPITAL GAINS. THE ORDER OF ID. CIT REVIS ING ORDER NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E DESERVES TO BE QUASHED. IT BE SO HELD NOW. 2 LD. CIT ERRED IN LAW AND ON FACTS IN NOT TA KING INTO CONSIDERATION REPLIES SUBMITTED IN RESPONSE TO THE SHOW CAUSE NOT ICE ISSUED U/S 263 OF THE ACT. LD. CIT ERRED IN NOT FOLLOWING OR DISTINGU ISHING CASE LAWS RELIED UPON BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. LD. CIT OUGHT TO HAVE TAKEN COGNIZANCE OF THE SUBMISSIONS A ND COMMENTED UPON THE SAME. 3 LD. CIT ERRED IN LAW AND ON FACTS IN DIRECT ING AO TO TREAT LAND SOLD AS STOCK IN TRADE AND TO TAX SALE TRANSACTION UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS IGNORING THE FACT THAT LAND SOLD HELD AS INVESTMENT SINCE SEVERAL YEARS WAS VALUED AT COST I N THE BALANCE SHEET. THE ORDER PASSED AFTER DUE VERIFICATION OF THE CLAI M MADE BY THE APPELLANT OUGHT TO HAVE BEEN UPHELD. IT BE SO HELD NOW. 4 LD. CIT ERRED IN LAW AND ON FACTS IN HOLDIN G THAT ORDER PASSED WITHOUT ASCERTAINING CORRECTNESS OF FACTS APPLYING INCORRECT PROVISIONS OF LAW MADE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 3 - LD. CIT WITHOUT APPRECIATING FACTS IN DETAIL ERRED IN CONCLUDING THAT THE COST OF ACQUISITION/IMPROVEMENT PARTLY FINANCED THR OUGH BORROWED FUNDS INDICATED NATURE OF HOLDING OF A BUSINESS ASS ET THOUGH SHOWN AS FIXED ASSET IN BALANCE SHEET. THIS CONCLUSION WITHO UT ANY BASIS OUGHT TO BE QUASHED. IT BE SO HELD NOW. 5 LD. CIT ERRED IN LAW AND ON FACTS IN DIRECTI NG AO TO DISALLOW CLAIM MADE BY THE APPELLANT U/S 54F OF THE ACT SINCE THE PROFIT FROM SALE OF LAND WAS TO BE TREATED AS BUSINESS INCOME & NOT CAP ITAL GAIN. LD. CIT NOTWITHSTANDING THE OBSERVATIONS THAT PROFIT FROM S ALE OF LAND BE TREATED AS BUSINESS INCOME CONTINUED TO HOLD ORDER AS PREJU DICIAL & ERRONEOUS TO INTEREST OF REVENUE ON ACCOUNT OF EXCESS CLAIM O F DEDUCTION ALLOWED BY AO U/S 54F OF THE ACT. THIS DICHOTOMY ON PART OF ID. CIT ITSELF IS INDICATIVE THAT CORRECT & PROPER ORDER PASSED IN SC RUTINY ASSESSMENT OUGHT NOT TO HAVE BEEN SUBJECTED TO REVISION U/S 26 3 OF THE ACT. IT BE SO HELD NOW. 6 LD. CIT ERRED IN FACTS AND ON LAW IN NOT APP RECIATING THE FACT THAT DETAILED ORDER BY AO CONSIDERING RELEVANT FACTS AND PROVISIONS OF LAW NOT BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE DESERVED TO BE UPHELD AND OUGHT NOT BE SUBJECTED TO REVISION AL PROCEEDINGS. IT BE SO HELD NOW. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER E DIT DELETE MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEA L AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. 2.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 11/03/2013 THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.1 42 881/- ON ACCOUNT OF DIFFERENCE IN RATE OF LAND DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.86 244/ - IN RESPECT OF THE ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 4 - MAINTENANCE OF VEHICLE. THE AO HAS ALSO MADE DISAL LOWANCE OF OTHER EXPENDITURE OF RS.7 27 477/-. THUS THE AO COMPUTE D THE INCOME OF RS.3 42 53 140/- AGAINST THE DECLARED INCOME OF RS. 3 32 96 540/-. SUBSEQUENTLY THE CIT-IV INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT REVISED THE ASSESSMENT AND MODIFIED ASSESSMENT ORDER BY DIRECTING THE AO THAT THE ASSESSEES INCOME/PROFIT GENERATED FROM SALE OF NON- AGRICULTURAL LAND COMPRISING OF SURVEY NO.11 & 1036 OF SEVASI BARODA AND TREATED AS LONG TERM CAPITAL GAIN (LTCG) BY ASS ESSEE IN THE RETURN OF INCOME IS TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS BUSINESS INCOME. HE FURTHER DIRECTED THE AO THAT THE ASSESSEES CLAIM U/S.54 OF THE ACT IS TO BE DISALLOWED AND DENIED SI NCE THE PROFIT FROM SALE OF LAND IS TO BE TREATED AS BUSINESS INCOME AND N OT AS CAPITAL GAIN. AGGRIEVED BY THE ORDER OF THE LD.CIT THE ASSESSEE IS NOW IN APPEAL BEFORE US. 3. ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD.CIT PASSED U/S.263 OF THE ACT ON THE GROUND THAT THE CIT ERRED IN LAW AND ON FACTS IN NOT TAKING INTO CONSIDERATION REPLIES SUBMITTED IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED U/S.263 OF THE ACT. THE LD.CIT ERRED IN NOT FOLLOWING THE CASE- LAWS RELIED UPON BY THE ASSESSEE. THE LD.CIT ERRED IN TREATING THE LONG- TERM CAPITAL GAIN AS BUSINESS INCOME. THE LD.CIT FAILED TO APPRECIATE THE FACT THAT THE LAND SO SOLD WAS HELD AS INVESTME NT SINCE SEVERAL YEARS WAS VALUED AT THE COST IN THE BALANCE-SHEET. THE L D.CIT FAILED TO TAKE ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 5 - NOTE OF THE FACT THAT THE AO MADE QUERIES AND AFTER VERIFYING THE CLAIM MADE ASSESSMENT. THE LD.CIT ERRED IN LAW AND ON F ACTS IN HOLDING THAT IN THE ORDER PASSED BY THE AO WITHOUT ASCERTAINING COR RECTNESS OF THE FACTS APPLYING INCORRECT PROVISIONS OF LAW MADE SUCH ORDE R IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD .CIT ERRED IN LAW IN DISALLOWING THE CLAIM MADE U/S.54F OF THE ACT. TH E LD.SR.COUNSEL FOR THE ASSESSEE SHRI S.N.SOPARKAR REITERATED THE SUBMISS IONS MADE BEFORE THE LD.CIT. HE SUBMITTED THAT THE LD.CIT FAILED TO APPRECIATE THE FACT THAT THE AO HAD MADE ELABORATE ENQUIRY AND APPLIED HIS M IND ON THE FACTS AND CIRCUMSTANCES OF THE CASE AFTER APPLYING THE MIND T HE AO ALLOWED THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT THE LD.CI T FAILED TO APPLY THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ARVIND JEWELLERS (2003) 259 ITR 502(GUJ.) WHEREIN IT HAS BEEN HELD THAT WHERE IT IS FOUND THAT THE ASSESSEE HAS PRODUCED RE LEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF THE NOTICES ISS UED UNDER S. 142(1) AS WELL AS S. 143(2) OF THE ACT AND AFTER CONSIDERING THOSE MATERIALS AND EXPLANATION THE ITO HAS COME TO A DEFINITE CONCLUS ION. AND MERELY BECAUSE THAT A DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR REVISING THE ORDER PASSED U/S. 143(3) OF THE ACT. R ELIANCE IS ALSO PLACED ON THE JUDGEMENT OF HONBLE HIGH COURT OF GUJARAT R ENDERED IN THE CASE OF CIT VS. R.K.CONSTRUCTION CO. REPORTED AT 313 ITR 65 (GUJ.). THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO PLACED RELIANC E ON THE DECISION OF THE COORDINATE BENCH (ITAT A BENCH AHMEDABAD) RENDERE D IN THE CASE OF ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 6 - MADHUSUDAN INDUSTRIES LTD. VS. CIT IN ITA NO.853/AH D/2013 FOR AY 2008-09 DATED 31/10/2013. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT TH AT THE ASSESSEE HAS BEEN TREATING THE LAND IN QUESTION AS FIXED ASSETS IN IT S ACCOUNTS. THE FACTUM OF SUCH TREATMENT WAS ALSO IN THE KNOWLEDGE OF THE REV ENUE. HE FURTHER SUBMITTED THAT THERE IS NO PROHIBITION WITH REGARD TO A PERSON CARRYING OUT BUSINESS AND AT THE SAME TIME HE CAN ALSO MAKE INV ESTMENT. THEREFORE THE LD.CIT WAS NOT JUSTIFIED IN TREATING THE TRANSA CTION AS A BUSINESS TRANSACTION AND NOT A TRANSFER OF CAPITAL ASSET. H E SUBMITTED THAT FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT THE LAW IS WELL SETTLED NOW THAT TWIN CONDITIONS ARE TO BE SATISFIED VIZ. (I) THE ORDER OF THE AO SHOULD BE ERRONEOUS AND (II) PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. HE SUBMITTED THAT THERE ARE NUMBER OF INSTANCES; WH ERE AN ORDER COULD BE ERRONEOUS BUT THAT MAY NOT BE PREJUDICIAL TO THE IN TERESTS OF THE REVENUE. SIMILARLY AN ORDER MAY BE PREJUDICIAL TO THE INTER ESTS OF THE REVENUE BUT IT MAY NOT BE ERRONEOUS. IN CASE ANY ONE OF THE C ONDITIONS IS NOT SATISFIED THEN LD.CIT CANNOT INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT. HE SUBMITTED THAT IN THE CASE IN HAND THE BA SIS FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT WHICH CAN BE I NFERRED FROM THE NOTICE ISSUED U/S.263 OF THE ACT IS THAT ON VERIFIC ATION OF THE CASE RECORD IT WAS FOUND THAT THE ASSESSEE WAS ENGAGED IN THE B USINESS OF DEVELOPMENT OF LAND AND IS A BUILDER. AND IN AY 20 09-10 THE ASSESSEE HAD OFFERED INCOME FROM SALE OF NON-AGRICULTURAL LA ND AS BUSINESS ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 7 - INCOME. THE SAID LAND SOLD IN FINANCIAL YEAR RELEV ANT TO AY 2009-10 WAS ORIGINALLY AGRICULTURE LAND AFTER CONVERSION IN TO NON-AGRICULTURAL LAND IT WAS SOLD AND THE INCOME WAS OFFERED AS BUSINESS INCOME. IN FACT ASSESSEE OBTAINED RELIEF FROM THE APPELLATE AUTHORI TY ON THE GROUND THAT THE PROVISIONS OF WEALTH TAX WERE NOT ATTRACTED ON THE SAID LAND WHICH HAD BECOME BUSINESS ASSET AFTER CONVERSION INTO NON-AGR ICULTURAL LAND. HE SUBMITTED THAT THIS REASONING OF THE LD.CIT IS ERRO NEOUS. IT IS NOT THE CASE WHERE THE LAND IN QUESTION WAS TREATED AS STOCK-IN- TRADE IN THE PAST YEARS. HE FURTHER SUBMITTED THAT THE ORDER OF LD.CIT IS CO NTRARY TO THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED I N THE CASE OF CIT VS. ARVIND JEWELLERS (2003) 259 ITR 502(GUJ.) 3.1. ON THE CONTRARY LD.CIT-DR SUPPORTED THE ORDER OF LD.CIT AND SUBMITTED THAT THE AO HAS NOT MADE ENQUIRY WITH REG ARD TO CLAIM OF THE ASSESSEE. HE FURTHER SUBMITTED THE CLAIM OF THE AS SESSEE U/S.54F OF THE ACT IS NOT ALLOWABLE. THEREFORE THE ORDER OF LD.C IT IS JUSTIFIED AS THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. HE FURTHER SUBMITTED THAT THE DEDUCTI ON WOULD BE AVAILABLE ONLY WHEN THE CONSTRUCTION IS MADE SUBSEQUENT TO TR ANSFER OF THE ORIGINAL ASSET. 3.2. IN REJOINDER THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVENUE IS NOT CLEAR WHETHER TO TREAT IT AS A BUSIN ESS INCOME OR THE GAIN ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 8 - ARISING OUT OF THE TRANSFER OF CAPITAL ASSET. HE S UBMITTED THAT BOTH CANNOT GO HAND IN HAND. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT ISSUED A NOTICE U/S.263 OF THE ACT DATED 08/08/2013 WHEREIN THE LD.CIT CALLED UPON THE ASSE SSEE AS TO WHY THE ASSESSMENT ORDER PASSED BY THE AO FOR AY 2010-11 SH OULD NOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE AND BE SET ASIDE TO THAT EXTENT. THE REASON FOR ISSUING THE N OTICE AS RECORDED BY THE LD.CIT IS REPRODUCED HEREINBELOW:- ON PERUSAL OF THE CASE RECORDS FOLLOWING FACTS AR E NOTICED: (1)(I) ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BU SINESS OF DEVELOPER & BUILDER AND IS ALSO ENGAGED IN THE WHOLESALE TRADI NG OF POTATOS. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS OFFERED TOTAL INCOME OF RS.3 32 96 540/-. IN THE TOTAL INCOME DISC LOSED ASSESSEE HAS OFFERED LONG TERM CAPITAL GAIN OF RS.1 68 89 233/- FROM SAL E OF LAND AT SURVEY NO. 11 & 1036 AT SEVASI BARODA WHICH IS WORKED OUT AS UNDER: INCOME FROM LONG TERM CAPITAL GAIN: SATE OF ITEMS AS PER LIST ENCLOSED RS.4 52 75 125/- LESS: (COST OF ACQUISITION ETC.) ; INDEXED COST OF ACQUISITION RS. 25 80 362/- INDEXED COST OF IMPROVEMENT RS. 33 90 056/- (-)RS.59 70 418/- LESS:EXEMPTIONS U/S.54B/54D/54G ETC.) CONSTRUCTION HOUSE NIL SALE RS.4 52 75 125/- NIL CONSTRUCTION DT.1.4.09 TO 15.10.10 NIL RS.2 58 18 842/- @ 57.03% NIL ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 9 - LTCG RS.3 93 04 707/- @ 57.03 RS.2 24 15 474/-( -) 2 24 15 474/- RS.1 68 89 233/- (II) FROM THE ABOVE WORKING IT IS APPARENT THAT SALE PR ICE OF LAND IS TAKEN AT RS. 4 52 75 125/- AND COST OF ACQUISITION OF LAND WITH IMPROVEMENT COST IS TAKEN AT RS. 59 70 418/-. FURTHER ASSESSEE HAS CLAIMED DEDUCTION U/S. 54F OF THE I. T. ACT FOR RS.2 24 15 474/- ON VERIFICATION OF CASE RECORD I T IS FOUND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LAND AND IS BUILD ER AND IN A. Y. 2009-10 THE ASSESSEE HAS OFFERED INCOME FROM SALE OF NON-AGRICU LTURAL LAND AS BUSINESS INCOME. THE SAID LAND SOLD IN FINANCIAL YEAR RELEVANT TO AS SESSMENT YEAR 2009-10 WAS ORIGINALLY AGRICULTURE LAND AND AFTER CONVERSION IN TO NON-AGRICULTURAL LAND IT IS SOLD AND THE INCOME IS OFFERED AS BUSINESS INCOME. IN FA CT ASSESSEE OBTAINED RELIEF FROM THE APPELLATE AUTHORITY ON THE GROUND THAT THE PROV ISIONS OF WEALTH TAX WERE NOT ATTRACTED ON THE SAID LAND WHICH HAD BECOME BUSINES S ASSET AFTER CONVERSION INTO NON-AGRICULTURAL LAND. (III) IN THE YEAR UNDER CONSIDERATION THE ASS ESSEE ONCE AGAIN CONVERTED ONE OF HIS AGRICULTURAL LAND HOLDING AT REVENUE SURVEY NO. 11 & 1036 OF SEVASI BARODA DURING THE YEAR UNDER CONSIDERATION (02/04/2009) .S INCE THE SAID LAND WAS REFLECTED UNDER THE HEAD 'AGRICULTURAL LAND' IN THE BALANCE S HEET AS ON 31/03/2009. THE ASSESSEE ALSO GOT APPROVAL FOR CONSTRUCTION ON 20/0 1/2010. THE SAID LAND WAS SOLD AT RS. 6.01 CRORE AS PER SALE DEED DATED 27/01/2010. T HE PAYMENT OF RS. 6.01 CRORE WAS RECEIVED BY ASSESSEE THROUGH CHEQUES DATED 25/01/20 10. AGAINST THE SALE PROCEEDS OF RS. 6.01 CRORE THE ASSESSEE HAS CLAIMED PAYMENT OF RS.1 24 96 320/- AS EXPENDITURE FOR CANCELLATION OF DEVELOPMENT AGREEMENT WITH VAIB HAV CORPORATION PVT. LTD. AS PER CANCELLATION OF DEVELOPMENT AGREEMENT WITH VAIB HAV CONSTRUCTION PVT. LTD. DATED 14/02/2008 ASSESSEE AGREED TO PAY RS. 1.30 C RORE FOR COST OF CONSTRUCTION AND LOSS OF PROFIT AS MUTUALLY ARRIVED AT AND AGREED UP ON. THE DEVELOPMENT AGREEMENT DATED 14/02/2008 WITH VAIBHAV CORPORATION PVT. LTD. WHICH IS SUBSTANTIALLY OWNED BY THE ASSESSEE HIMSELF CLEARLY PROVES THAT THE LAN D BEARING SURVEY NO. 11 & 1036 WAS INTENDED FOR DEVELOPMENT AND CONSTRUCTION AND T HE PROFIT EARNED ON THIS LAND EITHER THROUGH DEVELOPMENT OR ON SALE SHOULD HAVE B EEN TAXED AS BUSINESS INCOME AND NOT AS LONG TERM CAPITAL GAIN. THIS ISSUE HAS N OT BEEN EXAMINED BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND HE HAS ASSUME D WRONG FACTS AND INCORRECT APPLICATION OF LAW FOR TAXING INCOME AS LONG TERM C APITAL GAIN. (2) NOTWITHSTANDING THE ABOVE OBSERVATION THAT PRO FIT FROM SALE OF NA LAND WAS REQUIRED TO BE TAXED UNDER THE HEAD 'INCOME FROM BU SINESS' THE AO HAS PASSED US ASSESSMENT ORDER THE SAME IS PREJUDICIAL TO THE IN TEREST OF REVENUE BY ALLOWING EXCESS' DEDUCTION U/S. 54F OF THE ACT WITHOUT VERIF YING THE GENUINENESS OF SALE / INVESTMENT IN RESIDENTIAL HOUSE WHICH IS CLEAR FROM THE FOLLOWING OBSERVATION. ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 10 - (I) IT IS ALSO NOTICED THAT THE TOTAL SALE CONSIDERATIO N OF NON-AGRICULTURAL LAND IS RS. 6.01 CRORE AND THE ASSESSEE HAS TAKEN SALE CONS IDERATION TAT RS.5 77 71 445/- FOR WORKING OUT THE LONG TERM CAPITAL GAIN WHICH ITSELF IS FACTUALLY INCORRECT AND THE AO HAS NOT OBTAINED ANY CLARIFICATION FROM THE ASSE SSEE REGARDING TAKING THE SALE CONSIDERATION OF RS. 5 77 71 445/- AS AGAINST RS. 6 .01 CRORE. (II) FURTHER THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 54F OF RS.2 24 15 474/- ON ACCOUNT OF INVESTMENT IN NEW RESIDENTIAL HOUSE OUT OF CAPITAL GAIN WHICH AROSE FROM TRANSFER OF LONG TERM CAPITAL ASSET NOT BEING RESID ENTIAL HOUSE. AS PER PROVISIONS OF SECTION 54F(1) THE ASSESSEE HAS TO WITHIN A PERIOD OF 3 YEARS AFTER THE DATE OF TRANSFER OF LONG TERM CAPITAL GAIN CONSTRUCT RESIDE NTIAL HOUSE THEN ONLY DEDUCTION FROM CAPITAL GAIN CAN BE ALLOWED AS PER CLAUSE (A) & (B) OF SUB-SECTION 1 OF SECTION 54F. ON VERIFICATION OF CASE RECORD AND THE RETAILS FILED DURING THE ASSESSMENT PROCEEDINGS IT IS FOUND THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 54F ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF FARM HOUSE AT KANCHI SEVASI. TOTAL INVESTMENT IN FARM HOUSE KANCHI UP TO 15/10/2010 IS CLAIMED AT RS. 4 1 4 53 677.91. THE ASSESSEE HAS CLAIMED DEDUCTION TO THE EXTENT OF INVESTMENT DURIN G THE PERIOD FROM 01.04.2009 TO 15/10/2010 AT RS. 2 58 18 842/- IN CONSTRUCTION OF HOUSE BECAUSE OF EXTENDED DUE DATE FOR FILING OF RETURN OF INCOME U/S. 139(1) FOR A.Y. 2010-11. ON PERUSAL OF COPY OF LEDGER ACCOUNT OF CONSTRUCTION OF FARM HOUSE KANCH I IT IS FOUND THAT ASSESSEE HAD INVESTED SUM OF RS. 27.46.703/- AS ON 31/03/2007 IN THE SAID FARM HOUSE AND SUCH AMOUNT INVESTED OF RS. 1 78.43 051.42/;- UP TO 01/0 4/2009 AND INVESTMENT IN THE SAID FARM HOUSE UP TO 31/03/2010 CAME TO RS. 3 01 53 651 .91/-. IT IS ESTABLISHED FROM THE COPY OF ACCOUNT FILED DURING THE ASSESSMENT PROCEED INGS AND FROM THE BALANCE SHEET AS ON 31/03/2009 THAT THE FARM HOUSE WAS ALREADY UN DER CONSTRUCTION MUCH BEFORE SALE OF LONG TERM CAPITAL ASSET. RS.1.78 CRORE WAS ALREADY INVESTED UP TO 31/03/2009. THIS SHOWS THAT THE SAID ASSET / RESIDENTIAL HOUSE WAS PRE-EXISTING AND NOT 'A NEW ASSET' CONSTRUCTED / PURCHASED WITHIN THE PERIOD AS LAID DOWN IN CLAUSE (A) & (B) OF SUB-SECTION 1 TO SECTION 54 OF THE ACT. AS PER PROV ISIONS OF SECTION 54F IF THE RESIDENTIAL HOUSE IS CONSTRUCTED AFTER THE DATE ON WHICH TRANSFER TOOK PLACE THEN ONLY THE DEDUCTION U/S. 54F IS ALLOWABLE FOR CONSTRUCTIO N OF NEW ASSET I.E. RESIDENTIAL HOUSE. FURTHER EVEN IF THE PROVISIONS OF SECTION 5 4F ARE CONSIDERED TO BE APPLICABLE TO EXTENSION OF EXISTING HOUSE UNDER CONSTRUCTION THE ALLOWABLE CLAIM OF EXEMPTION HAS TO BE RESTRICTED TO THE EXTENT OF INVESTMENT / EXPENDITURE INCURRED IN THE SAID RESIDENTIAL HOUSE SUBSEQUENT TO THE TRANSFER OF ORI GINAL CAPITAL ASSET UNDER CONSIDERATION. AS PER ASSESSEE'S OWN SUBMISSION DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS SUCH AMOUNT INVESTED /INCURRED IN CONS TRUCTION OF PRESIDENTIAL HOUSE SUBSEQUENT TO TRANSFER OF ORIGINAL ASSET I.E. FROM 27/01/2010 TO 15/10/2010 AMOUNTED TO RS.1 67 42 135/- ONLY. HENCE THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION U/S. 54F ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 11 - OF THE I. T. ACT OR SUCH CLAIM OF DEDUCTION WAS REQ UIRED TO BE RESTRICTED TO RS.1 67 42 135/- AS AGAINST RS. 2 24 15 474/- CLAIM ED BY THE ASSESSEE IN THE RETURN OF INCOME AND ALLOWED BY THE AO WITHOUT APPLYING PROPE R PROVISIONS OF SECTION 54F OF THE ACT. THE AO HAS NOT EXAMINED THE GENUINENESS OF INVESTMENT IN RESIDENTIAL HOUSE BY EXAMINING THE BILLS OF EXPENDITURE / INVESTMENT CLAIMED. IN THE LIGHT OF ISSUE DISCUSSED ABOVE THE AO HAS INCORRECTLY ALLOWED DED UCTION U/S. 54F OF THE I. T. ACT AMOUNTING TO RS.2 24 15 474/- AND HAS ALSO IGNORED THE CORRECT SALE CONSIDERATION OF NA LAND OF RS. 6.01 CRORE BUT TAKEN WRONG SALE CONS IDERATION OF RS. 5 77 71 445/- FOR CALCULATING LTCG. 3)| (I) IT IS ALSO SEEN THAT THE CASE WAS SEL ECTED THROUGH CASS TO EXAMINE THE SOURCE OF CASH DEPOSIT IN SOME BANK ACCOUNT AS PER AIR INFORMATION. AS PER AIR INFORMATION TOTAL CASH OF RS.1 01 26 300/- WAS DEP OSITED IN SAVINGS BANK ACCOUNTS WITH INDIAN BANK ACCOUNT NO.6008 OF RS.21 08 000/- RS. 14 45 000/- IN SAVINGS BANK ACCOUNT NO. 16458 IN MIEC BANK GIDC RS.47 38 000/- IN SAVINGS BANK ACCOUNT NO. 4723 BANK OF BARODA AKOTA AND RS.18 3 5 000/- IN INDIAN BANK DURING FINANCIAL YEAR 2009-10. THE ASSESSEE HAS FILED RELE VANT CASH BOOK FOR CASH DEPOSITS EXCEPT RS. 18 35 000/-. THE AO HAS NOT OBTAINED CO PY OF BANK STATEMENT AND NOT VERIFIED THE SOURCES OF DEPOSIT IN THE BANK ACCOUN TS THROUGH CASH BOOK. NO VERIFICATION AT ALL OF SOURCE OF CASH DEPOSIT OF RS.18 35 000/- HAS BEEN MADE BY THE AO. (4) THE ASSESSING OFFICER HAS ALSO FAILED TO SEEK ANY CLARIFICATION FROM THE ASSESSEE WITH RESPECT TO THE WEALTH TAX LIABILITY FOR THE YE AR UNDER CONSIDERATION. 4.1 IN RESPONSE THERETO THE ASSESSEE MADE SUBMISSI ONS VIDE LETTER DATED 12/09/2013 AND ALSO MADE FURTHER SUBMISSIONS VIDE WRITTEN SUBMISSIONS LETTER DATED 03/10/2013. AT THE OUTSET THE CONTENTION OF THE ASSESSEE IS THAT THESE WRITTEN SUBMISSIONS WERE NOT CONSIDERED BY THE LD.CIT BEFORE PASSING THE IMPUGNED ORDER. WE FIND THAT THE GROUND FOR REVISING THE ASSESSMENT ORDER AS STATED IN THE IMPU GNED ORDER IS IN TWO FOLDS; FIRSTLY THE LD.CIT WAS OF THE VIEW THAT THE GAIN ARISING OUT OF TRANSFER OF LAND IN QUESTION OUGHT TO HAVE BEEN TRE ATED BY THE ASSESSEE AS ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 12 - BUSINESS INCOME AS THE ASSESSEE IS ENGAGED IN THE B USINESS OF DEVELOPMENT OF LAND AND IS A BUILDER AND IT IS FURT HER OBSERVED BY THE LD.CIT THAT IN THE AY 2009-10 THE ASSESSEE HAD HIM SELF OFFERED INCOME FROM SALE OF NON-AGRICULTURAL LAND AS BUSINESS INCO ME. THE SAID LAND SOLD IN FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2009- 10 WAS ORIGINALLY AGRICULTURE LAND AND AFTER CONVERSION INTO NON-AGRI CULTURAL LAND IT WAS SOLD AND THE INCOME WAS OFFERED AS BUSINESS INCOME. IT WAS OBSERVED BY THE LD.CIT THAT IN FACT ASSESSEE OBTAINED RELIEF FROM THE APPELLATE AUTHORITY ON THE GROUND THAT THE PROVISIONS OF WEAL TH TAX WERE NOT ATTRACTED ON THE SAID LAND WHICH HAD BECOME BUSINES S ASSET AFTER CONVERSION INTO NON-AGRICULTURAL LAND. THEREFORE THE LD.CIT WAS OF THE VIEW THAT IN THE YEAR UNDER APPEAL ALSO THE ASSESS EE SHOULD HAVE GIVEN THE SAME TREATMENT FOR THE TRANSACTION. HOWEVER U NDISPUTEDLY THE ASSESSEE HAS DEMONSTRATED THAT THE LAND IN QUESTION WAS IN FACT SHOWN AS FIXED ASSET. THEREFORE THE INTENTION OF THE ASSESS EE CAN BE INFERRED AS OF MAKING INVESTMENT. SECONDLY THE CONTENTION OF THE ASSESSEE IS THAT THERE IS NO PROHIBITION UNDER THE LAW THAT ANY PERSON CAN NOT MAKE INVESTMENT AND CARRY OUT BUSINESS AT THE SAME TIME. WE FIND F ORCE INTO THE CONTENTION OF THE LD.SR.COUNSEL FOR THE ASSESSEE T HAT THERE IS NO PROHIBITION UNDER THE LAW THAT AN INDIVIDUAL CAN HA VE TWO PORTFOLIOS I.E. INVESTMENT AND BUSINESS. THE REVENUE HAS NOT DEM ONSTRATED UNDER WHAT PROVISION OF LAW THE ASSESSEE CAN BE FORCED T O TREAT ITS INVESTMENT/FIXED ASSETS AS STOCK-IN-TRADE. THE DE CISION WITH REGARD TO ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 13 - TREATING A PARTICULAR ASSET AS FIXED ASSET OR ST OCK-IN-TRADE IS SOLELY LIES WITH THE ASSESSEE AND THE REVENUE HAS NO ROLE IN T HIS REGARD. PRIMARILY THE INFERENCE WITH REGARD TO WHETHER IT IS AN INVES TMENT OR BUSINESS WOULD BE BASED ON THE INTENTION OF THE INDIVIDUAL C ONCERNED. IN THE CASE IN HAND THERE IS NO DISPUTE WITH REGARD TO THE FAC T THAT THE ASSESSEE HAS BEEN TREATING THE LAND IN QUESTION AS FIXED ASSET ALTHOUGH IT IS A FACT THAT THE ASSESSEE IS ENGAGED INTO THE BUSINESS OF SALE A ND PURCHASE OF LAND AND ALSO CONSTRUCTION OF BUILDING. IT APPEARS THAT THE LD.CIT IS INFLUENCED BY THE FACT THAT IN THE EARLIER YEAR UNDER THE IDENTI CAL FACTS THE ASSESSEE HAS OFFERED THE GAIN ARISING OUT OF SUCH TRANSFER OF T HE LAND AS BUSINESS INCOME. THEREFORE IN VIEW OF THE LD.CIT THE AS SESSEE WAS CARRYING OUT BUSINESS. IT IS A SETTLED POSITION OF LAW THAT A B USINESS MAN CAN BE ENGAGED INTO A BUSINESS OF SALE AND PURCHASE OF ART ICLES GOODS AND AT THE SAME TIME HE CAN ALSO MAKE INVESTMENT IN SUCH GOODS OR ARTICLES AS AN INVESTOR. IN A CASE OF JEWELLER HE CAN BE ENGAGE D IN THE BUSINESS OF SALE AND PURCHASE OF JEWELLERY AT THE SAME TIME HE CAN ALSO MAKE INVESTMENT IN GOLD JWELLERY AND BULLION. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE REASONING OF THE LD.CIT FOR REVISING THE O RDER ON THIS BASIS CANNOT BE CONFIRMED AS TWO VIEW ARE POSSIBLE. ANOTHER REA SON GIVEN BY THE LD.CIT IS THAT THE AO ALLOWED DEDUCTION TO THE ASSE SSEE WHICH WAS OTHERWISE NOT AVAILABLE UNDER THE FACTS OF THE PRES ENT CASE. WE FIND THAT THE LD.CIT OBSERVED THAT ON VERIFICATION OF CASE RE CORD AND THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 14 - ASSESSEE HAS CLAIMED DEDUCTION U/S.54F ON ACCOUNT O F INVESTMENT IN CONSTRUCTION OF FARM HOUSE AT KANCHI SEVASI. TOTA L INVESTMENT IN FARM HOUSE KANCHI UPTO 15/10/2010 IS CLAIMED AT RS.4 14 53 677.91. THE ASSESSEE HAS CLAIMED DECUCTION TO THE EXTENT OF INV ESTMENT DURING THE PERIOD FROM 01/04/2009 TO 15/10/2010 AT RS.2 58 18 842/- IN CONSTRUCTION OF HOUSE BECAUSE OF EXTENDED DUE DATE FOR FILING OF RETURN OF INCOME U/S.139(1) FOR A.Y. 2010-11. IT IS FURTHER OBSER VED THAT IN CONSTRUCTION OF FARM HOUSE IT WAS FOUND THAT THE ASSESSEE HAD I NVESTED A SUM OF RS.27 46 703/- AS ON 31/03/2007 IN THE SAID FARM H OUSE AND SUCH AMOUNT INVESTED AMOUNTED TO RS.1 78 43 051.42 UPTO 01/04/2 009. INVESTMENT IN THE SAID FARM HOUSE UPTO 31/03/2010 CAME TO RS.3 01 53 651.91. INVESTMENT IN FARM HOUSE FROM 27/01/2010 I.E. FROM DATE OF TRANSFER OF CAPITAL ASSET TO 15/10/2010 COMES TO RS.1 67 42 135 /- INCLUDING COST OF LAND RS.34 10 106?- ON WHICH HOUSE IS CLAIMED TO HA VE BEEN CONSTRUCTED. THE SAID LAND WAS PURCHASED ON 10/11/2004 AND 26/08 /2005 WHICH IS MUCH BEFORE TRANSFER OF ORIGINAL CAPITAL ASSET ON 27/01/2010 BUT THE ASSESSEE HAS INCLUDED EVEN THIS COST IN THE COST OF CONSTRUCTION OF HOUSE. SO THE COST OF CONSTRUCTION OF HOUSE FROM 27/01/20 10 TO 15/10/2010 COMES TO RS.1 33 32 029/- ONLY AS AGAINST RS.2 58 1 8 842/- CLAIMED TO HAVE BEEN INCURRED BY ASSESSEE IN THE COMPUTATION O F INCOME FILED WITH THE RETURN OF INCOME. IT IS FURTHER ESTABLISHED FROM THE COPY OF ACCOUNT FILED DURING THE ASSESSMENT PROCEEDINGS AND FROM TH E BALANCE-SHEET AS ON 31/03/2009 THAT THE FARM HOUSE WAS ALREADY UNDER CO NSTRUCTION MUCH ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 15 - BEFORE SALE OF LONG TERM CAPITAL ASSET. THE ASSES SEE HAD OBTAINED THE PERMISSION FOR CONSTRUCTION OF FARM HOUSE ON 21/12/ 006 FOR CONSTRUCTION OF 582 SQ.METERS. AND SUBSEQUENT TO THE APPROVAL A SSESSEE INCURRED EXPENDITURE OF RS.1.78 CRORE UPTO 31/03/2009. THIS SHOWS THAT THE SAID ASSET/RESIDENTIAL HOUSE WAS PRE-EXISTING AND NOT A NEW ASSET CONSTRUCTED/PURCHASED WITHIN THE PERIOD AS LAID DOW N IN CLAUSE (A) & (B) OF SUB-SECTION 1 TO SECTION 54 OF THE ACT. IT WAS FURTHER OBSERVED THAT THE LAND ON WHICH THE FARM HOUSE WAS CONSTRUCTED FO R CLAIM OF DEDUCTION U/S.54F OF THE ACT WAS PURCHASED IN 10/11/2004 AND 26/08/2005 AND ALSO OBTAINED CONSTRUCTION APPROVAL IN DECEMBNER-2006 I .E. EVEN BEFORE THE PURCHASE OF LAND (ORIGINAL ASSET PURCHASED IN OCT OBER-2006 & FEBRUARY2007) WHICH WAS SOLD DURING THE PREVIOUS YE AR TO GENERATE LONG TERM CAPITAL GAIN. IT WAS OBSERVED BY THE LD.CIT T HAT AS PER PROVISIONS OF SECTION 54F OF THE ACT IF THE RESIDENTIAL HOUSE IS CONSTRUCTED AFTER THE DATE ON WHICH TRANSFER TOOK PLACE ONLY THEN THE DEDUCTIO N U/S.54 IS ALLOWABLE FOR CONSTRUCTION OF NEW ASSET I.E. RESIDENTIAL HOU SE. FURTHER EVEN IF THE PROVISIONS OF SECTION 54F ARE CONSIDERED TO BE APPL ICABLE TO EXTENSION OF EXISTING HOUSE UNDER CONSTRUCTION THE ALLOWABLE CL AIM OF EXEMPTION HAS TO BE RESTRICTED TO THE EXTENT OF INVESTMENT/EXPEND ITURE INCURRED IN THE SAID RESIDENTIAL HOUSE SUBSEQUENT TO THE TRANSFER O F ORIGINAL CAPITAL ASSET UNDER CONSIDERATION. SO FAR THIS REASONING IS CO NCERNED WE FIND THAT THE AO HAS ALLOWED DEDUCTION WITHOUT EXAMINING THIS ASPECT. CONTENTION OF THE ASSESSEE IS THAT THE AO HAD RAISED A SPECIFI C QUERY IN THIS REGARD ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 16 - AND AFTER CONSIDERING THE FACTS SUBMISSIONS AND CA SE-LAWS ALLOWED THE DEDUCTION. BUT NO SUCH MATERIAL IS PLACED ON RECOR D OF THIS TRIBUNAL THAT THE AO DURING THE COURSE OF HEARING RAISED QUERY WI TH REGARD TO CLAIM OF DEDUCTION OF U/S.54 OF THE ACT. THEREFORE IN THE ABSENCE OF SUCH MATERIAL WE DO NOT SEE ANY INFIRMITY INTO THE FIND ING OF LD.CIT THAT AO FAILED TO EXAMINE THE ASPECT OF ALLOWABILITY OF DED UCTION U/S.54F OF THE ACT. AFTER CONSIDERING THE TOTALITY OF FACTS WE DEEM IT APPROPRIATE TO MODIFY THE ORDER OF LD.CIT ON THIS ISSUE AND RESTOR E THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S.54F OF THE ACT TO THE FILE OF AO FOR DECISION AFRESH. THUS GROUNDS RAISED IN THE ASSESSEES APP EAL ARE ALLOWED FOR STATISTICAL PURPOSES. 5. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO. 1827/AHD/2014 FOR AY 2010-11. THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. LD.CIT(A) ERRED IN LAW AND ON FACTS IN DISMISSIN G APPEAL FILED BY THE APPELLANT HOLDING THE SAME TO BE BEYON D JURISDICTION OF APPELLATE PROCEEDINGS BEFORE HIM. LD.CIT(A) OUGHT TO HAVE CONSIDERED WRITTEN SUBMISSIONS; DOCUMENTARY EVIDENC E AND CASE- LAWS RELIED UPON BY THE APPELLANT AND OUGHT TO HAVE DECIDED ISSUE UNDER APPEAL WHICH FELL VERY MUCH UNDER HIS JURISDI CTION. IT BE SO HELD NOW. 2. LD.CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN HOLDING THAT REVISIONARY ORDER BEING AN APPEALABLE ORDER BEFORE THE HONBLE ITAT NEITHER THE AO NOR THE APPELLATE OFFICE COULD DECIDE ISSUES ON MERITS AND THAT IT COULD ONLY BE CHALLENGED AND DECIDED BY ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 17 - HONBLE ITAT. THIS ERRONEOUS OBSERVATION OF LD.CIT (A) DESERVES TO BE QUASHED. IT BE SO HELD NOW. 3. LD.CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING T HAT AO IS NOT EXPECTED TO GIVE ANY DECISION ON THE MERITS OF THE ISSUE ALREADY DECIDED BY CIT PASSED PROPER AND CORRECT ORDER WHIL E GIVING EFFECT TO THE ORDER U/S.263 OF THE ACT. LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DIRECTION TO PASS APPROPRIATE ORDERS AFTER PROVIDING OPPORTUNITY TO APPELLANT MEANT TO DECIDE ISSUES ON MERITS WITHOUT BLINDLY FOLLOWING DIRECTIONS AS BIND ING. IT BE SO HELD NOW. 4. LD.CIT(A) ERRED IN LAW AND ON FACTS IN DISMISSIN G GROUNDS CHALLENGING NATURE OF INCOME AS TO WHETHER BUSINESS INCOME OR LONG TERM CAPITAL GAIN AND CLAIM MADE U/S.54F OF TH E ACT HOLDING THEM TO BE NOT SUSTAINABLE. LTD.CIT(A) OUGHT TO HA VE ADJUDICATED ISSUES ON MERITS. IT BE SO HELD NOW. 5. LD. CIT(A) ERRED IN LAW ON FACTS IN NOT ADJUDIC ATING GROUND CHALLENGING CHARGING OF INTEREST U/S.234 OF THE AC T BY AO WHEN DEMAND NOTICE DATED 27.01.2014 IS STATED TO BE PART OF ASSESSMENT ORDER PASSED ON 23.01.2014. 6. LEVY OF INTEREST U/S.234 A/B/C & D OF THE ACT I S NOT JUSTIFIED. 7. INITIATION OF PENALTY PROCEEDINGS IS NOT JUSTIF IED. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER ED IT DELETE MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF OR BEFORE THE HEARING OF THE APPEAL. 5.1. AT THE OUTSET LD.COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN CASE THE ASSESSEE SUCCEEDS IN ITA NO.108/AHD/2014 FOR AY 201 0-11(SUPRA) THEN THE ORDER OF THE LD.CIT WOULD NOT SURVIVE AS THE OR DER IN APPEAL BEFORE ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 18 - LD.CIT WAS IN CONSEQUENCE OF THE ORDER PASSED BY TH E LD.CIT. IN CASE THE ORDER OF THE LD.CIT IS SET ASIDE OR MODIFIED IN THAT EVENTUALITY THE IMPUGNED ORDER IN THE PRESENT APPEAL WOULD ALSO NOT SURVIVE. SINCE WE HAVE MODIFIED THE ORDER OF LD.CIT IN ASSESSEES OWN CASE I.E. ITA NO.108/AHD/2014 FOR AY 2010-11(SUPRA) THE ORDER AS SAILED IN THIS APPEAL IS HEREBY SET ASIDE. THE ISSUE OF ALLOWABIL ITY OF DEDUCTION UNDER SECTION 54F OF THE ACT IS RESTORED TO FILE OF AO FO R DECISION AFRESH. 6. IN THE COMBINED RESULT BOTH THE APPEAL OF THE A SSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THURSDAY THE 30 TH DAY OF APRIL 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/ 04 /2015 2*.. (.../ T.C. NAIR SR. PS ITA NOS.108 & 1827 /AHD/2014 PRAKASH KUMAR B. KHATRI VS. CIT/ACIT ASST.YEAR 2010-11 - 19 - !'#$%$&' / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-XX AHMEDABAD 5. 7(8 $45 *45. 3 / DR ITAT AHMEDABAD 6. 8:;<) / GUARD FILE. / BY ORDER %7$ //TRUE COPY // / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD 1. DATE OF DICTATION .. 12&28.4.15 (DICTATION-PAD 28+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..17/29.4.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30.4.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.4.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER