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TMI Blog2017 (4) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeared from time to time and furnished information as called for. During the course of assessment proceedings, the assessee was asked to furnish the sources for cash deposits in the savings bank account with ING Vysya Bank Limited. The assessee has furnished a statement explaining sources for all the deposits in the bank account. It was explained that the sources for cash deposits were made out of sale proceeds of agricultural land measuring 5.11 acres received on various dates. 3. The A.O. further observed that the assessee has computed long term capital gain from sale of agricultural land measuring 5.11 acres. To ascertain the correctness of long term capital gain computed by the assessee, the A.O. issued a show cause notice and asked to explain the nature of transaction, mode of computation of long term capital gain and also to furnish the copies of documents executed for conveyance of title deeds of land. In response to show cause notice, the assessee submitted that her husband late Shri P.V. Ramaiah had entered into an un-possessory, un-registered sale agreement dated 3.12.2007 for sale of 5.11 acres of agricultural land with one Shri P.Venkata Prasad for a consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the total consideration is paid by way of cash on various dates. Though the assessee stated to have received part of sale consideration by cheques, on verification of the details filed by the assessee, it is noticed that the two cheques claimed to have received from the assessee are actually received from the buyers of the flats, but not from the agreement holder, therefore, rejected claim of the assessee and computed long term capital gain based on the sale deeds executed by the assessee to various flat buyers. The A.O. further observed that there is a difference between consideration shown in the sale deed and consideration as per the sub-registrar value, therefore, adopted market value of the property as deemed consideration for the purpose of computation of long term capital gain. 5. In so far as cost of acquisition of the property, the assessee has taken cost of acquisition of the property at Rs. 4,95,465/- as on 1.4.1981. After indexation, the indexed cost of acquisition was arrived at Rs. 28,83,306/-. During the course of assessment proceedings, the A.O. asked the assessee to justify the basis for adoption of cost of acquisition of Rs. 4,95,465/-. In response, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, by adopting guidance value of the SRO for the purpose of payment of stamp duty and computed long term capital gain of Rs. 4,39,59,996/-. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee further submitted that the A.O. was erred in rejecting the evidences filed by the assessee in toto based on the denial of agreement holder without going into the evidences filed by the assessee. The assessee further submitted that the agreement holder himself has accepted before the A.O. that they have entered agreement with the assessee but the same has been cancelled. But the facts remains that, the assessee has entered into agreement with Shri P.V. Prasad and they have formed lay out and sold to various individuals. The assessee has furnished necessary evidences in the form of agreement, supporting evidences such as affidavits from the parties who acted as witnesses for the agreement and also affidavit from Shri K. Sambi Reddy who is document writer and also father-in-law of Shri P.V. Prasad, the agreement holder. 8. The CIT(A) after considering the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.V. Prasad for a consideration of Rs. 2,65,72,000/- without appreciating the fact that the A.O. has brought out clear evidences in the form of statements from Shri P.V. Prasad, wherein he has categorically denied having entered into agreement dated 3.12.2007 with the assessee. The D.R. further submitted that during the course of cross examination of Shri P.V. Prasad, the A.R. of the assessee could not produce any evidences to prove that the copy of un-registered agreement stated to have been entered with Shri P.V. Prasad is genuine. The D.R. further submitted that the agreement itself is unregistered and also un-possessory and the consideration is fully paid in cash. Though the assessee claims to have received part of the sale consideration by cheques, the A.O. has brought out a clear fact that those cheques are received from the buyers of the flat but, not from the agreement holder. The A.O. after considering the relevant facts has rightly computed long term capital gain based on the SRO value of the flat sold and his order should be upheld. 11. On the other hand, the Ld. A.R. for the assessee strongly supported order of the CIT(A), The A.R. further submitted that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural land measuring 5.11 acres and computed long term capital gain. The assessee claims that the he had entered into unpossessory sale agreement with Shri P.V. Prasad for a consideration of Rs. 2,65,72,000/- and received sale consideration by way of cash and cheque on various dates. The assessee further contended that the agreement holder has converted land into sites and sold to various buyers, whereas he has facilitated transactions by executing sale deeds in favour of the buyers on behalf of the agreement holder. According to the A.O., the assessee has divided land into flats and sold to buyers on his own, however computed long term capital gain based on the purported un-possessory sale agreement. The A.O. further observed that the sale agreement entered with Shri P.V. Prasad is fabricated one and the party to the agreement Shri P.V. Prasad categorically denied having entered into any agreement with the assessee. The A.O. further observed that the consideration shown in the sale agreement has been fully paid in cash. Though, the assessee claims to have received part of the sale consideration by way of cheques, on verification of the bank statement filed by the assessee, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 50C of the Act for the purpose of computation of long term capital gain. We find that as per the provisions of section 50C of the Act, when the sale consideration shown in the sale deed is less than the guidance value of the property for the purpose of payment of stamp duty, the SRO value has to be considered as deemed consideration for the purpose of transfer of property. In this case, the assessee has executed sale deeds and the consideration agreed in the sale deed is less than the guidance value of the property. Therefore, we are of the view that the A.O. was right in computing the long term capital gain based on the guidance value of the property as per the SRO value. 16. In so far as cost of acquisition of the property, the assessee has taken cost of Rs. 98,600/- per acre and applied indexation from 1.4.1981. There is no dispute with regard to the date of holding of the property. The only dispute is with regard to the cost of acquisition adopted by the assessee which is based on the certificate issued by the SRO, wherein the sub registrar has certified the value of the property at Rs. 150/- per sq.yd. as on 1.1.1982. On the other hand, the A.O. has obtained a lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has converted his investment into stock in trade. The A.O. denied alternative claim of the assessee, merely on the ground that the assessee himself has computed long term capital gain on sale of land under normal provisions of the Act. It is the claim of the assessee that 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 it is income of the previous year in which such stock in trade is sold or otherwise transferred by him and for the purpose of section 48 of the Act, the fair market value of the asset on the date of such conversion shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. We find force in the arguments of the assessee, for the reason that when a capital asset is converted into stock in trade or vice-versa, the income from transfer of property has to be computed under the provisions of section 45(2) of the Act. The provisions of section 45(2) of the Act, mandates the assessing officer to compute the income from business as well as ..... 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