Deputy ssistant Commissioner of Income-tax,, v. Shri Ramdas Haribhau Kakade,, Pune

ITA 60/PUN/2015 | 2010-2011
Pronouncement Date: 29-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 6024514 RSA 2015
Assessee PAN AJIPK4756C
Bench Pune
Appeal Number ITA 60/PUN/2015
Duration Of Justice 2 year(s) 10 month(s) 15 day(s)
Appellant Deputy ssistant Commissioner of Income-tax,,
Respondent Shri Ramdas Haribhau Kakade,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Department
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 29-11-2017
Date Of Final Hearing 19-09-2017
Next Hearing Date 19-09-2017
First Hearing Date 12-07-2017
Assessment Year 2010-2011
Appeal Filed On 13-01-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH PUNE BEFORE MS. SUSHMA CHOWLA JM AND SHRI ANIL CHATURVEDI AM . / I TA NO. 60/PUN/2015 / ASSESSMENT YEAR : 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 2 PUNE ....... / APPELLANT / V/S. SHRI RAMDAS HARIBHAU KAKADE SHRI HARI SMRUTI HINJEWADI MULSHI PUNE - 411 027 PAN : AJIPK4756C / RESPONDENT A PPELLANT BY : DR. VIVEK AGGARWAL DR R ESPONDENT BY : NONE / DATE OF HEARING : 19.09.2017 / DATE OF PRONOUNCEMENT : 29 .11.2017 / ORDER PER SUSHMA CHOWLA JM T HIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(APPEALS) - II PUNE DATED 18.09.2014 RELATING TO ASSESSMENT YEAR 2010 - 11 AGAINST ORDER PASSED U/S. 143(3) OF THE INCOME - TAX ACT 1961 (IN SHORT THE ACT). 2 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 2. THE NOTICE OF HEARING WAS ISSUED TO THE ASSESSEE ON VARIOUS DATES BUT THE ASSESSEE FAILED TO APPEAR ON ANY OF THE DATES OF HEARING. THEREAFTER NOTICE WAS ALSO ISSUED THROUGH THE D . R . AND THE SAME WAS SERVED UPON THE ASSESSEE. HOWEVER NONE APPEARED ON BEHALF OF THE ASSESSEE. ACCORDINGLY WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING LD. D.R FOR THE REVENUE. 3 . THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE VALUATION OF LAND ADOPTED BY THE AO WITHOUT DIRECTING THE AO TO REFER THE MATTER TO DVO. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 54B(1) & B(2) OF THE INCOME TAX ACT 1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE AMENDMENT TO THE SECTION 55A OF THE ACT I.E. THE AO MAY REFER THE VALUATION TO THE DVO IF HE IS OPINION THAT THE VALUE CLAIMED BY THE ASSESSEE IS AT VARIANCE WITH ITS FMV EFFECTIVE FROM 01/07/2012 IS PROSPECTIVE AND CANNOT BE APPLIED TO THE A.Y.2010 - 11 IS NOT JUSTIFIED AND NOT ACCEPTABLE. THE ASSESSMENT PROCEEDINGS IN THE CASE CONCLUDED ON 04.03.2013 I.E. AFTER 01/07/2012 AND HENCE THE AMENDMENT WAS ALSO APPLICABLE TO THIS CASE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT REMANDING THE AO TO REFER THE MATTER OF VALUA TION TO THE DVO FOR ASCERTAINING THE VALUE THAN DECIDING THE AMENDMENT TO THE SECTION 55A IS NOT APPLICABLE IN THIS CASE. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FAILING TO APPRECIATE THAT THE DUE DATE OF FILING OF RETURN IN THIS CASE U/S. 139(1) OF THE ACT IS 31/07/2010 AS THE ASSESSEE WAS NOT COVERED UNDER THE PROVISIONS OF SECTION 44AB OF THE ACT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT MERE WIP IN THE PREVIOUS YEAR WHICH MAY EVENTUALLY RESULT IN PROFIT AND GAINS IN LATER YEARS WILL CONSTITUTE AS SALES/ RECEIPTS/TURNOVER DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE WILL BE LIABLE FOR AUDIT U/S. 44AB. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT TH AT DURING THE YEAR THE ASSESSEE HIMSELF HAS SHOWN NIL INCOME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSIONS AND ALSO THAT DURING THE YEAR THE SALES AND RECEIPT OF THE ASSESSEE WERE NIL. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN INTERPRETING THE PROVISIONS OF SECTION 45(2) OF THE ACT WHICH CLEARLY STATE THAT ON CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE THE DATE OF CONVERSION IS TO BE TREATED AS TRANSFER BUT THE ASSESSEE IS LIABLE TO PAY TAX ON CAPITAL GAIN ONLY WHEN THERE I S A SALE. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT THE ASSESSEE CONVERTED HIS LAND IN STOCK - IN - TRADE DURING THE YEAR UNDER CONSIDERATION BUT THERE WAS NO SALE DURING THE YEAR THE CAPITAL GAIN 3 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 OFFERED BY THE ASSE SSEE AND DEDUCTION CLAIMED U/S. 54 IS AGAINST THE PROVISIONS OF THE IT ACT 1961. 10. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 4. BRIEFLY IN THE FACTS OF THE CASE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.21 93 360/ - . THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAD DECLARED INCOME FROM LONG TERM CAPITAL GAIN AT RS. 20 33 357/ - . THE ASSES SEE HAD SHARE IN AGRICULTURE LAND AT HINJEWADI WHICH WAS LITTLE OUTSIDE MUNICIPAL LIMITS OF PIMPRI - CHINCHWAD MUNICIPAL CORPORATION. THE ASSESSEE CONVERTED THE AGRICULTURE LAND AS BUSINESS ASSET AND TREATED THE SAME AS STOCK - IN - TRADE. THEREAFTER THE ASSESS EE ENTERED INTO A JOINT VENTURE WITH M/S. SHETH DEVELOPERS FOR DEVELOPMENT OF SAID LAND. THE ASSESSING OFFICER ACCEPTED CONVERSION OF AGRICULTURE LAND INTO BUSINESS ASSETS. THE SAID LAND AND SHARE OF THE ASSESSEE WAS VALUED AT RS. 1 62 50 000/ - . HE FURTHER CLAIMED THE VALUE OF LAND AS ON 01.04.1981 AT RS.7 20 000/ - AND AFTER INDEXATION THE COST OF THE SAID LAND WORKED OUT AT RS.45 50 400/ - . THE ASSESSEE DECLARED CAPITAL GAIN AT RS.1 16 99 600/ - . THE ASSESSING OFFICER NOTED THAT ASSESSEE IN SUPPORT OF CLAI M OF COST OF ACQUISITION AS ON 01.04.1981 HAD RELIED ON A VALUATION CERTIFICATE OF REGISTERED VALUER. THE ASSESSING OFFICER FURTHER NOTED THAT THE VALUER RELIED ON CERTAIN SALE INSTANCES WHICH WERE IN RESPECT OF VERY SMALL PIECES OF LAND AND WERE USED FOR NA PURPOSE. THE ASSESSING OFFICER WAS OF THE VIEW THAT LAND OF THE ASSESSEE WAS AGRICULTURAL LAND EVEN THREE YEARS BEFORE. AT THAT TIME IF IT WAS USED FOR AGRICULTURE THE VALUER SHOULD HAVE REFERRED TO SELLING RATES OF AGRICULTURAL LAND. THE ASSE SSING OFFICER ALSO NOTED THAT ASSESSEE HAD NOT FURNISHED ANY EVIDENCE ABOUT AGRICULTURAL INCOME DERIVED FROM THE SA ID LAND EVEN IN THOSE DAYS. THE ASSESSING OFFICER THUS ADOPTED THE VALUE OF ASSESSEES AGRICULTURAL LAND AT RS. 50 000/ - ESTIMATING RS. 10 000/ - PER ACRE. THE INDEXED VALUE WORKED OUT TO RS.3 16 000/ - AND LONG TERM CAPITAL GAIN WAS WORKED OUT TO RS.1 59 34 000/ - . THE SECOND ASPECT NOTED BY ASSESSING OFFICER WAS INVESTMENT OF RS. 90 00 000/ - ON 4 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 15.10.2010 IN THE NATIONALIZED BANK. THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 54B(2) OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE SAID CLAIM OF THE ASSESSEE FOR THE FOLLOWING REASONS: (A) THE CAPITAL GAIN ARISES OUT OF VOLUNTARY CONVERSION OF AGRICULTURAL LAND INTO BUSINESS ASSET. HOWEVER THE A SSESSEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THAT THE LAND WAS UNDER CULTIVATION FOR A MINIMUM PERIOD OF TWO YEARS AS SPECIFIED IN PROVISION OF SEC. 54B (1). (B) AS PER THE PROVISION OF SECTION 54B(2) THE DEDUCTION IS AVAILABLE ONLY IF THE AMOUNT OF SALE CONSIDERATION RECEIVED IS INVESTED. IN THE ASSESSEES CASE THE TRANSFER IS DEEMED TRANSFER AND MERELY BY REASON OF TRANSFER HE DID NOT GET ANY SALE CONSIDERATION AMOUNT. HENCE THIS DEDUCTION IS NOT ALLOWABLE. (C) IT IS FURTHER SPECIFIED IN THE PROVISIO N OF SEC. 54B(2) THAT THE AMOUNT IS TO BE INVESTED BEFORE DUE DATE OF FILING OF RETURN. IN THE ASSESSES CASE THE DUE DATE OF FILING WAS BEFORE 31 ST JULY 2010 AND THE AMOUNT IS INVESTED ON 15.10.2010. HENCE THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION FOR THIS REASON ALSO. (D) AS STATED EARLIER THE ASSESSEE HAS FILED A COPY OF AUDIT REPORT ALONG WITH THE RETURN OF INCOME. ALL THE COLUMNS ARE LEFT BLANK IN THE AUDIT REPORT. ASSESSEE HAD NO ACTIVITIES DURING THE ACCOUNTING PERIOD WHICH WOULD ENTITLE HIM TO AVAIL OF EXTENDED PERIOD OF FILING THE RETURN. AS STATED EARLIER THE DUE DATE OF FILING RETURN OF INCOME WAS ONLY 31 ST JULY 2010. 5. THE NEXT POINT WHICH WAS CONSIDERED BY THE ASSESSING OFFICER WAS FURTHER CLAIM OF DEDUCTION U/S. 54B OF THE ACT OF RS.5 41 030/ - . THE ASSESSEE CLAIMED TO HAVE PURCHASED ANOTHER AGRICULTURAL LAND OF RS.5 15 000/ - . HOWEVER THE ASSESSEE HAD FAILED TO PROVE THAT ORIGINAL ASSET WAS BEING USED FOR AGRICULTURAL OPERATION. THE SAID DEDUCTION CLAIMED BY THE ASSESSEE WAS REJE CTED. 6. THE NEXT ASPECT WAS THE DEPOSIT AMOUNT OF RS. 50 00 000/ - RECEIVED FROM M/S. SHETH DEVELOPERS AT THE TIME OF ENTERING INTO A DEVELOPMENT AGREEMENT. THE PLEA OF THE ASSESSEE IS THAT IT WAS SECURITY DEPOSIT TO BE ADJUSTED AGAINST FUTURE PAYMENT . T HE ASSESSEE HAD NOT MENTIONED ANY REASON FOR NOT TAXING THE SAID AMOUNT IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND THUS EXPLANATION WAS REJECT ED IN RESPECT OF RS.50 00 000/ - AND TAXED AS BUSINESS RECEIPT. 5 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 7. BEFORE THE CIT(A) THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED AT PAGE 3 TO 12 OF THE APPELLATE ORDER. THE FIRST ISSUE DECIDED WAS THE TAXABILITY OF THE SECURITY DEPOSIT OF RS. 50 00 000/ - AS BUSINESS INCOME. THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT TILL 31.03.2010 EVEN TH E MUNICIPAL SANCTION OF THE PLAN FOR CONSTRUCTION WAS NOT PASSED AND SO THERE WAS NO QUESTION OF ANY SALE OF FLATS BY THE DEVELOPER TILL 31.03.2010. THE AMOUNT RECEIVED ON ACCOUNT OF SECURITY DEPOSIT WAS THOUGH TAXABLE AGAINST SALE PROCEED BUT THEY WERE NOT BUSINESS RECEIPTS TAXABLE IN THE HANDS OF THE ASSESSEE DURING THE SAID PREVIOUS YEAR. THE CIT(A) NOTED THAT AS PER THE TERMS OF DEVELOPMENT AGREEMENT I.E. CLAUSE 11 THE ASSESSEE WAS ENTITLED TO RECEIVE 37% IN THE GROSS RECEIPTS AND FURTHER AS PER CLA USE 15 THE ASSESSEE WAS ENTITLED TO RECEIVE SECURITY DEPOSIT OF RS. 50 00 000/ - FOR PERFORMANCE OF THE OBLIGATION BY DEVELOPER AS PER THE AGREEMENT AND ANOTHER SUM OF RS. 50 00 000/ - WAS RECEIVED IN THE SUCCEEDING FINANCIAL YEAR . THE CIT(A) OBSER VED THAT NATURE OF TRANSACTIONS BETWEEN THE PARTY BY WAY OF AN AGREEMENT WAS IN THE NATURE OF DEVELOPMENT AGREEMENT AND COULD NOT BE SAID TO AGREEMENT WAS IN THE NATURE OF DEVELOPMENT AGREEMENT AND COULD NOT BE SAID TO BE SALE OF PROPERTY STRICTLY. THE CIT(A) THUS HELD THAT THE DEPOSIT OF RS. 50 00 000/ - IS NOT BUSINESS RECEIPTS IN THE HAN DS OF THE ASSESSEE. THE CIT(A) FURTHER HELD THAT INCOME WOULD ARISE IN THE HANDS OF ASSESSEE WHEN RECEIPTS ON ACCOUNT OF 37% OF THE GROSS SALE PROCEEDS FROM THE SALE OF FLATS STARTED COMING IN THE HANDS OF THE ASSESSEE. THE CIT(A) THUS DELETED THE ADDITI ON OF RS. 50 00 000/ - . 8. THE NEXT ISSUE WHICH WAS CONSIDERED BY THE CIT(A) WAS REJECTION OF THE VALUATION REPORT OF THE R EGISTERED VALUER AND AD O PTATION OF VALUATION OF LAND WITHOUT MAKING ANY REFERENCE TO THE VALUATION OFFICER IN TERMS OF SECTION 55A OF THE ACT. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE ASSESSING OFFICER ARBITRARILY ADOPTED RS. 10 000/ - PER ACRE FOR DETERMINING COST OF LAND AT ON 01.04.1981. HE FURTHER REFERRED TO THE VALUATION REPORT BASED ON WHICH COST OF LAND WAS ESTIMA TED AS ON 01.04.1981. HE FURTHER POINTED OUT THAT DURING THE ASSESSMENT PROCEEDING REGISTERED VALUER HAD AGAIN SUBMITTED A REPORT ON THE 6 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 QUERY MADE BY THE ASSESSING OFFICER JUSTIFYING THE RATE ADOPTED FOR VALUATION GIVING SALE INSTANCE ON THE BASIS OF WHI CH THE SAID REPORT HAD BEEN GIVEN. THE CIT(A) NOTED THAT THE ASSESSING OFFICER WITHOUT ANY BASI S HAD ADOPTED RATE OF RS. 10 000/ - PER ACRE AS FAIR MARKET VALUE AS ON 01.04.1981 AFTER REJECTING THE VALUATION REPORT OF THE REGISTERED VALUER FILED BY ASSESSEE. THE CIT(A) RELIED ON VARIOUS DECISIONS OF THE HON'BLE HIGH COURT REFERRING TO THE PROVISION OF SECTION 55A OF THE ACT WHICH EMPOWERED THE ASSESSING OFFICER TO DETERMINE FAIR MARKET VALUE OF ANY CAPITAL ASSET FOR THE PURPOSE OF CHAPTER IV - E. HE FURTHER REFERRED TO CLAUSE (A) OF SECTION 55A WHICH CAN BE INVOKED WHEN FAIR MARKET VALUE OF THE PROPERTY WAS MORE THAN THE VALUATION DONE BY REGISTERED VALUER AND CLAUSE (B) CAN BE INVOKED WHEN VALUATION REPORT FROM REGISTERED VALUER WAS NOT FILE D. 9. THE CIT(A) OBSERVED THAT IN THE PRESENT CASE THE ASSESSING OFFICER HAD NOT MADE ANY REFERENCE FOR VALUATION BUT MERELY ESTIMATED THE VALUE OF PROPERTY IN AD - HOC MANNER WITHOUT ANY SUPPORTING JUSTIFICATION COMPLETELY DISREGARDING THE VALUATION REPO RT AS ON 01.04.1981 FILED BY THE ASSESSEE. S UCH STAND OF THE ASSESSING OFFICER WAS NOT CORRECT. HE ALSO OBSERVED THAT REFERENCE TO DVO CAN BE MADE U/S. 55A (A) OF THE ACT ONLY WHEN THE FAIR MARKET VALUE DISCLOSED BY ASSESSEE IS LOWER AND U/S. 55A(B) WHEN I T WAS NOT SUPPORTED BY VALUERS REPORT. ACCORDINGLY THE CIT(A) REVERSED THE ORDER OF ASSESSING OFFICER IN THIS REGARD. 10. NEXT THE CIT(A) TOOK UP THE CLAIM OF DEDUCTION U/S. 54B(1) FOR INVESTMENT IN AGRICULTURAL LAND AND ALSO CLAIM OF RS. 90 00 000/ - U/ S. 54B(2) FOR DEPOSITING IN CAPITAL GAIN DEPOSIT SCHEME. BEFORE CIT(A) THE ASSESSEE FURNISHED EVIDENCE OF AGRICULTURAL OPERATION BEING CARRIED OUT ON THE ADJACENT PLOT WHICH WAS OWNED BY ASSESSEE JOINTLY WITH OTHER PERSON. HE ALSO POINTED OUT THAT AGRICUL TURAL LAND SOLD BY THE ASSESSEE WAS ANCESTRAL LAND ON WHICH BHUI MUG CROPS I.E. GROUNDNUT PULSES AND OTHER VEGETABLES WERE BEING GROWN AS EVIDENT FROM THE 7/12 EXTRACT WHICH FORMED PART OF THE REGISTERED SALE DEED. THE 7/12 EXTRACT WAS ALSO FILED BEFOR E THE 7 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO OWNED NA POTENTIAL PLOT ADJACENT TO THE SAID PLOT. THE CIT(A) TOOK NOTE THAT EVIDENCES FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDING THAT AGRICULTURAL ACTIVITIES WERE UNDERTAKE N BY THE ASSESSEE IN THE PRECEDING YEARS AND THE ASSESSEE HAD FURNISHED 7/12 EXTRACT DEPICTING AGRICULTURAL PRODUCE CULTIVATED BY THE ASSESSEE IN THE YEARS BETWEEN 2001 - 02 TO 2010 - 11. THE CIT(A) OBSERVED THAT THE SAID EXTRACT NOT ONLY SHOWS THE CROPS UNDE RTAKEN BUT ALSO INDICATE DETAILS ABOUT PART OF LAND ON WHICH SPECIFIC CROPS HAD BEEN UNDERTAKEN FOR CULTIVATION AND ALSO RE FLECTS THE NAME OF CULTIVATORS. THE CIT( A) THUS CONCLUDED THAT ASSESSEE WAS CULTIVATING THE LAND FOR MANY YEARS BEFORE THE DATE OF SALE. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER HAD NOT CONSIDERED 7/12 EXTRACT FURNISHED BY THE ASSESSEE AND HAD WITHOUT ANY MATERIAL OR BASIS CONCLU DED THAT THE ASSESSEE WAS NOT CARRY ING ON ANY AGRICULTURAL OPERATION ON THE SAID LAND. THE CIT(A) OBSERVED IN VIEW OF MATERIALS BEING BROUGHT ON RECORD AND IN VIEW OF THE CLASSIFICATION AND ASSESSMENT OF LAND BY THE LAND REVENUE AUTHORITIES C LEARLY CER TIFIED THAT THE LAND WA S BEING USED FOR BY THE LAND REVENUE AUTHORITIES C LEARLY CER TIFIED THAT THE LAND WA S BEING USED FOR AGRICULTURAL PURPOSES. MERELY BECAUSE NO SURPLUS WAS SHOWN AS AGRICULTURAL INCOME DOES NOT JUSTIFY THE ACTION OF ASSESSING OFFICER IN REJECTING THE CLAIM OF THE ASSESSEE WAS THE FINDINGS OF CIT(A). IN VIEW THEREOF THE CIT(A) HELD THAT ASSESSEE HAS SATISFIED THE CONDITIONS LAID DOWN U/S. 54B CULTIVATING THE LAND FOR TWO YEARS PRIOR TO THE DATE OF SALE. 11. THE NEXT POINT ON WHICH CLAIM WAS REJECTED WAS THAT THE ASSESSEE HAD NOT RECEIVED ANY SALE CONSIDERATION ON ENTERING INTO THE DEVELOPMENT AGREEMENT I.E. AT THE TIME OF CONVERS ION OF LAND INTO STOCK - IN - TRADE AND THE SAID TRANSFER WAS MERE DEEMED TRANSFER. IN ABSENCE OF THE SAME THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION U/S. 54B(1) AND 54B(2) OF THE ACT. THE CIT(A) AFTER TAKING NOTE TO THE SCHEME OF SECTION 45(2) OF THE ACT WHERE LEVY OF CAPITAL GAIN IS POSTPONED TILL THE CONVERTED ASSET IS ACTUALLY SOLD OR OTHERWISE TRANSFERRED AND IN THE PRESENT CASE ASSESSEE OFFERE D THE SAID CAPITAL GAIN U/S. 45 (2 ) DURING THE YEAR UNDER 8 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 CONSIDERATION. ACCORDINGLY THE ASSESSEE WAS HELD ENTITLED TO CLAIM OF DEDUCTION ON PAR T OF THE AMOUNT INVESTED U/S. 54B(1) AND 54 B(2) OF THE ACT. THE INVESTMENT WAS MADE WITHIN STIPULATED TIME FRAME OF THE ASSESSEE DOES NOT DIS ENT ITLE TO CLAIM AFORESAID DEDUCTION WAS HELD BY THE CIT(A). THUS CLAIM OF THE ASSESSEE OF PURCHAS ING ANOTHER AGRICULTURAL LAND AT RS.5 41 030/ - WAS ALLOWED. THE CIT(A) ALSO TOOK NOTE THAT THE FACT OF 7/12 EXTRACT AND INDEX - II WHICH FORMED PART OF THE AFO RESAID DEED SPECIFIED THE CHARACTER OF LAND BEING AGRICULTURAL LAND UTILIZED FOR PRODUCING RICE ETC. THUS THE CLAIM OF DEDUCTION BY THE ASSESSEE U/S. 54B(1) WAS ALLOWED. 12. THE SECOND DEDUCTION WAS WITH RESPECT TO DEPOSIT OF RS.90 00 000/ - IN TH E CAPIT AL GAINS ACCOUNT SCHEME B EFORE FILING INCOME U/S. 54(B)(2) OF THE ACT. T HE CIT(A) IN THIS REGARD HELD THAT AS PER THE PROVISION OF THE ACT THE REQUIREMENT FOR THE ASSESSEE WAS TO ACQUIRE THE AGRICULTURAL LAND WITHIN THE PERIOD OF TWO YEARS FROM THE DATE OF SALE AND NOWHERE IT WAS MENTIONED THAT THE SALE PROCEEDS RECEIVED SHOULD BE UTILIZED FOR PURCHASING THE NEW ASSET OR AMOUNT OF UNUTILIZED CAPITAL GAIN BE DEPOSITED IN THE C APITAL GAINS ACCOUNTS SCHEME BEFORE THE DUE DATE OF FILING RETURN OF INCOME . THE CIT(A) ALLOWED THIS CLAIM OF THE ASSESSEE. 13. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 14. THE FIRST ISSUE WHICH HAS BEEN RAISED I S AGAINST THE DEDUCTION O F FAIR MARKET VALUE AS ON 01.04.1981. THE SECOND ISSUE WHICH HAS BEEN RAISED IS AGAINST THE ORDER OF CIT(A) IN ALLOWING DE DUCTION U/S. 54(B)(1) AND 54(B) (2) OF THE ACT. THE REVENUE IS ALSO AGGRIEVED BY THE ORDER OF CIT(A) IN INTERP RETING THE PROVISION OF SECTION 45 (2) OF THE ACT AND IN HOLDING THAT THE CAPITAL GAIN OFFERED BY THE ASSESSEE ON THE DATE OF CONVERSION OF LAND INTO STOCK - IN - TRADE IS TO BE ASSESSED IN THE HANDS OF ASSESSEE IN THE PRESENT YEAR AND ACCORDINGLY CLAIM OF DE DUCTION U/S. 54(B)(1) 9 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 AND 54B(2) OF THE ACT IS TO BE ALLOWED IN THE HANDS OF ASSESSEE. THE REVENUE HAS ALSO RAISED THE ISSUE THAT WHERE COST OF ACQUISITION CLAIMED BY THE ASSESSEE WAS AT VARIANCE WITH ITS FAIR MARKET VALUE AS ON 01.04.1981 THEN AMENDMENT TO PROVISION S OF SECTION 55A OF THE ACT IS TO BE APPLIED AND THERE IS NO MERIT IN HOLDING THE SAME TO BE PROSPECTIVE IN NATURE. THE LD. DR FOR THE REVENUE AFTER TAKING US THROUGH THE VARIOUS FACTUAL ASPECTS OF THE CASE AND THE ORDER OF CIT(A) PARA WISE PO INTED OUT THAT WHERE THE DATE OF FILING RETURN OF INCOME IS 31.07.2010 SINCE THE ASSESSEE HAD NO BUSINESS ACCOUNT AND EVEN IF THERE WAS SOME BUSINESS ACCOUNT THERE WAS NO QUESTION OF DEPOSIT M ADE BY ASSESSEE U/S. 54(B)(2) AT RS. 90 00 000/ - . THE LD. DR FOR THE REVENUE ALSO POINTED OUT ERROR S IN VALUING THE COST OF LAND AS ON 01.04.1981 AND CONVERSION OF SAID LAND IN STOCK IN TRADE. 15. ON PERUSAL OF THE RECORD AND AFTER HEARING THE LD. DR FOR THE REVENUE AND AFTER GOING THROUGH THE ORDERS OF AUTHORITIES BELOW WE ARE OF THE VIEW THAT THE FIRST IS SUE WHICH NEEDS TO BE ADJUDICATED IN THE PRESENT CASE IS THAT WHETHER THE ASSESSEE HAS TO OFFER THE INCOME FROM LONG TERM CAPITAL GAIN ON CONVERSION OF HIS AGRICULTURAL LAND IN TO STOCK IN TRADE IN THE YEAR UNDER CONSIDERATION. IN THIS REGARD REFERENCE NEEDS TO BE MADE TO THE PROVISION OF SECTION 45 OF THE ACT. SECTION 45 OF THE ACT READS AS UNDER : (1) ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHA LL SAVE AS OTHERWISE PROVIDED IN SECTIONS 54 54B 54D 54E 54EA 54EB 54F 54G AND 54H BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. (1A) NOTWIT HSTANDING ANYTHING CONTAINED IN SUB - SECTION (1) WHERE ANY PERSON RECEIVES AT ANY TIME DURING ANY PREVIOUS YEAR ANY MONEY OR OTHER ASSETS UNDER AN INSURANCE FROM AN INSURER ON ACCOUNT OF DAMAGE TO OR DESTRUCTION OF ANY CAPITAL ASSET AS A RESULT OF ( I ) FLO OD TYPHOON HURRICANE CYCLONE EARTHQUAKE OR OTHER CONVULSION OF NATURE; OR ( II ) RIOT OR CIVIL DISTURBANCE; OR ( III ) ACCIDENTAL FIRE OR EXPLOSION; OR ( IV ) ACTION BY AN ENEMY OR ACTION TAKEN IN COMBATING AN ENEMY (WHETHER WITH OR WITHOUT A DECLARATION OF WAR) 10 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 THEN ANY PROFITS OR GAINS ARISING FROM RECEIPT OF SUCH MONEY OR OTHER ASSETS SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF SUCH PERSON OF THE PREVIOUS YEAR IN WHICH SUCH MONEY OR OTHER ASSET WAS RECEIVED A ND FOR THE PURPOSES OF SECTION 48 VALUE OF ANY MONEY OR THE FAIR MARKET VALUE OF OTHER ASSETS ON THE DATE OF SUCH RECEIPT SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF SUCH CAPITAL ASSET. EX PLANATION. FOR THE PURPOSES OF THIS SUB - SECTION THE EXPRESSION INSURER SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (9) OF SECTION 2 OF THE INSURANCE ACT 1938 (4 OF 1938). (2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (1) THE PROFITS OR GA INS 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 - T RADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND FOR THE PURPOSES OF SECTION 48 THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET. 16. AS PER SECTION 45(1) OF THE ACT A NY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD CAPITAL GAINS AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE ; SUBJECT TO VARIOUS DEDUCTION PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE ; SUBJECT TO VARIOUS DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER DIFFERENT PROVISION OF THE CHAPTER. HENCE IN OTHER WORDS WHERE THERE IS TRANSFER OF ASSET DURING PREV IOUS YEAR THEN ANY PROFITS OR GAINS ARISING THERE FROM ARE TO BE TAXED IN THE HANDS OF THE ASSESSEE IN THE SAID PREVIOUS YEAR. HOWEVER THERE ARE EXCEPTIONS TO THE RULE IN THIS REGARD. SUB - SECTION (2) OF SECTION 45 OF THE ACT PROVIDES N OTWITHSTANDING ANY THING 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 THE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEMED TO BE THE FULL VALUE OF T HE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL GAINS. 11 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 17. NOW COMING TO THE FACTS OF THE CASE THE ASSESSEE ADMITTEDLY DURING THE YEAR UNDER CONSIDERATION HAD CONVERTED HIS AGRICULTURAL LAND INTO STOCK IN TRADE AND HAD A LSO ENTERED INTO DEVELOPMENT AGREEMENT WITH THE SAID DEVELOPER FOR DEVELOPMENT OF THE SAID PROJECT. THE FIRST STEP WHICH ASSESSEE HAD TAKEN IS CONVERSION OF LAND INTO STOCK IN TRADE WHICH IS DEEMED TRANSFER AS PER SECTION 45(2) OF THE ACT. HOWEVER THE C APITAL GAINS ARISING ON SUCH TRANSFER ON CONVERSION OF AGRICULTURAL LAND INTO STOCK IN TRADE WOULD ONLY ARISE IN THE YEAR IN WHICH THE SAID ASSET I.E. STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM I.E. EITHER ASSET IS SOLD OR DEVELOPED AND THERE AFTER SOLD. IN THE PRESENT CASE ASSESSEE HAS ENTERED INTO A DEVELOPMENT AGREEMENT OF SAID LAND AND AS PER AGREEMENT TO RECEIVE 37% OF THE SALE RECEIPTS AS HIS SHARE. ADMITTEDLY TILL 31.03.2010 EVEN THE MUNICIPAL SANCTION OF THE PLAN S FOR THE SAID LAND FOR DEVELOPMENT HA D NOT BEEN RECEIVED BY ASSESSEE OR THE SAID DEVELOPER. HENCE THE PROPERTY I.E. STOCK IN TRADE WAS NOT EVE N READY FOR DEVELOPMENT. 18. THE NEXT ISSUE WHICH NEEDS TO BE ADJUDICATION IS THAT CIT(A) REFERRED TO THE PROVIS I ON OF SECTION 45(2) OF THE ACT BUT GOES ON TO SAY SINCE THE ASSESSEE HAS DECLARED INCOME FROM CAPITAL GAINS THEN THE SAME MAY BE ASSESSED IN THE HANDS OF THE ASSESSEE. HOWEVER SUCH ASSESSMENT MADE IN THE HANDS OF THE ASSESSEE IS AGAINST PROVISION OF T HE ACT ESPECIALLY WITH REFERENCE TO SECTION 45(2) OF THE ACT. IN VIEW THEREOF WE FIND NO MERIT IN THE FINDINGS OF CIT(A) IN THIS REGARD. WE ALSO FIND NO MERIT IN THE OTHER EXERCISE CARRIED OUT BY CIT(A) IN DETERMINING THE QUANTUM OF LONG TERM CAPITAL GAI N. THUS THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S. 54B(1) AND 54B(2) OF THE ACT. SINCE THE ASSESSEE WOULD BE LIABLE TO PAY TAX ON THE CAPITAL GAIN ONLY WHEN THE STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM. THEN THE QUESTION WHIC H ARISES IS WHETHER ENTERING INTO DEVELOPMENT AGREEMENT BY THE ASSESSEE WOULD RESULT IN OTHERWISE TRANSFERRING OF THE SAID LAND BY THE ASSESSEE. WE FIND NO MERIT IN THE SAME AND HO LD THAT THE DEEMED TRANSFER AS 12 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 ENVISAGED UNDER SECTION 45(2) OF THE ACT WO ULD ARISE ONLY WHEN STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND NOT IN THE YEAR IN WHICH HE CONVERTED HIS ASSET INTO STOCK IN TRADE AND FURTHER ENTERED INTO DEVELOPMENT AGREEMENT FOR DEVELOPMENT OF THE SAID LAND. THERE IS NO MERIT IN THE FINDINGS OF CIT(A) AND THE ASSESSEE S ENTITLE MENT FOR CLAIMING DEDUCTION U/S. 54B(1) AND 54B(2) OF THE ACT WOULD BE SEEN IN THE YEAR IN WHICH THE DEEMED TRANSFER I S TO BE TAXED IN THE HANDS OF THE ASSESSEE. 19. THE NEXT ISSUE WHICH ARISES IN THE PRESENT APPEAL IS COST OF ACQUISITION AS ON 01.04.1981 IN THE HANDS OF THE ASSESSEE WHILE COMPUTING LONG TERM CAPITAL GAIN ON CONVERSION OF AGRICULTURAL LAND INTO STOCK IN TRADE I.E. DEEMED TRANSFER. THE ASSESSEE FURNISH ED VALUATION REPORT FROM REGISTERED VALUER REGARDING COST OF ACQUISITION OF AGRICULTURAL LAND WHICH WAS BRUSHED ASIDE BY THE ASSESSING OFFICER AND ON AD - HOC BASIS SAME WAS VALUED AT THE RATE OF RS. 10 000/ - PER ACRE. WE FIND NO MERIT IN THE STAND OF ASSES SING OFFICER IN THIS REGARD SPECIALLY WHERE THE ASSESSEE HAD FILED VALUATION REPORT OF REGISTERED VALUER. THE ONLY OPTION AVAILABLE TO THE ASSESSING OFFICER IN THIS REGARD IS U/S. 55A OF THE ACT. HOWEVER SUB SECTION (2) OF SECTION 55A OF THE ACT IS NOT APPLICABLE SINCE THE ASSESSEE HAS FURNISHED VALUATION REPORT. IN RESPECT OF SECTION 55A (1) OF THE ACT PROVISION I S ATTRACTED WHERE VALUE DECLARED BY THE ASSESSEE WAS LESS THAN FAIR MARKET VALUE. HOWEVER IN THE PRESENT FACTS OF THE CASE ASSESSING OFFIC ER WAS OF THE VIEW THAT VALUE DECLARED AS ON 01.04.1981 WAS HIGHER THAN THE VALUE AS ON THAT DATE. IN SUCH CIRCUMSTANCES THE PROVISION OF SECTION 55A(1) OF THE ACT CANNOT INVOKE. IN THIS REGARD WE FIND SUPPORT IN THE RATIO LAID DOWN BY THE HON'BLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. PUJA PRINTS 360 ITR 697 ( BOM) WHERE IT WAS HELD THAT NO REFERENCE COULD BE MADE U/S. 55A(1) OF THE ACT TO DETERMINE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 ON THE GROUND VALUE DECLARED BY ASSESSEE WAS HIGH. THE HON'BLE HIGH COURT FURTHER HELD THAT THE AMENDMENT BROUGHT IN BY FINANCE ACT 2012 WAS PROSPECTIVE. THUS WE HOLD THAT THERE IS NO MERIT IN THE STAND OF ASSES SING OFFICER IN 13 ITA NO. 60/PUN/2015 A.Y . 2010 - 11 ADOPTING VALUE IN AD - HOC MANNER. ACCORDINGLY WE HOLD SO. THUS THE ORDER OF CIT(A) IS CONFIRMED ON THE FIRST ISSUE AND IS REVERSED ON THE SECON D ISSUE. HENCE GROUNDS OF APPEAL OF THE REVENUE ARE PARTLY ALLOWED. 20. IN TH E RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRO NOUNCED ON THIS 29 TH DAY OF NOVEMBER 201 7 . SD / - SD/ - (ANIL CHATURVEDI) ( SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 29 TH NOVEMBER 2017 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS) - II PUNE. 4. THE CIT - II PUNE. 5 . / DR ITAT B BENCH PUNE. 6. / GUARD FILE. // TRUE COPY // / BY ORDER / PRIVATE SECRETARY / ITAT PUNE .