IN THE ITAT JODHPUR BENCH
Sunil Bhandari
versus
Assistant Commissioner of Income-tax
IT Appeal No. 122 (Jodh.) of 2011
[Assessment year 2006-07]
November 30, 2012
ORDER
Hari Om Maratha, Judicial Member
This appeal of the assessee for the A.Y 2006-07 is directed against the order of the ld. CIT-I, Jodhpur dated 17.3.2011, passed u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’, for short].
2. The assessee has been deriving income from ‘dealing in property transactions’. He filed Return of Income [ROI] for A.Y. 2006-07 on 31.07.2006 declaring total income of Rs. 11,75,085/-. The assessee also disclosed capital gain and interest income. The regular assessment was made u/s 143(3) on 19.12.2008.
3. Subsequently, the ld. CIT called for the records of this assessment order and after finding this order erroneous in so far as it is prejudicial to the interest of the Revenue, issued a show cause notice dated 22.3.2010 u/s 263 proposing to revise it. The show-cause notice issued is verbatim, as under:
“On perusal of your assessment records for the A.Y. 2006-07, it has been noticed that you have shown capital gain of Rs. 22,67,451.50 on sale of 12 plots and after deducting the investment of Rs. 14,57,522/- towards residential house at Shastri Nagar, Jodhpur the Long Term capital Gain has been declared at Rs. 8,09,929/-. The AO worked out the LTCG at Rs. 25,73,706/- by applying DLC rates and after deducting the investment of Rs. 14,57,522/- the taxable LTCG has been determined at Rs. 11,16,184/-. The AO without making proper investigation/enquiry accepted your claim that the sale consideration received by you on 12 plots as Long Term Capital Gain despite the fact that you were carrying on the business of purchase & sale of plots and have declared net profit of Rs.,65,156/- from such business. There is nothing available either in the assessment order or in the records on the basis of which it could be said that the issue was analyzed as to whether the gains arising from sale of plot are to be treated as business income or as capital gains. Merely for the reason that sale of plot was shown as investment, it cannot be said that the gains arising from sale of plot is to be taxed as capital gains. A mere stroke of pen cannot alter the correct and true nature of income. The entire facts and circumstances surrounding the case are to be looked into before coming to a conclusion as to whether the gains arising from sale of plot is to be treated as business income or as capital gains. The AO failed to look into and make inquires in this regard as stated above. You have shown sale of some plot as business activity and others as capital gain.
1.1 In view of the above, the deduction for Rs. 14,57,522/-on account of investment in residential house at Shastri Nagar as claimed/allowed is also not allowable under the provisions of Act.
ii In the balance sheet as on 31.03.2006 enclosed with the return of income you have shown following investments:-
