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TMI Blog2019 (2) TMI 1899X X X X Extracts X X X X X X X X Extracts X X X X ..... land forming stock-in-trade of assessee was transferred as a capital contribution by assessee therefore profits or gains arising from transfer of this asset would be chargeable to tax as assessee's income of previous year in which such transfer has taken place. Lower authority has failed to make any reference to the Valuation Officer u/s 55A of the act to determine the fair market value of the asset we direct the assessing officer to adopt rate of ₹ 900/- per sq. mts for the value of the impugned land as determined by the Ld.CIT(A) in his order dated 21st July 2010.Accordingly this ground of appeal of the assessee is partly allowed. - ITA No. 1222 /Ahd/2016 - - - Dated:- 12-2-2019 - Shri Amarjit Singh, Accountant Member And Ms. Madhumita Roy, Judicial Member Revenue by: Ms. Anupma Singla, Sr. D.R. Assessee by: Shri Hiren Vepari, A.R. ORDER Amarjit Singh, This assessee s appeal for A.Y. 2004-05, arises from order of the CIT(A), Valsad dated 03-03-2016, in proceedings under section 143(3) r.w.s. 254 of the Income Tax Act, 1961; in short the Act . 2. The assessee has raised following grounds of appeal:- (I) Reopening of assessment: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on 26th August, 2008. The assessee was also provided with the reason for reopening the assessment which is reproduced as under:- In this case the assessee filed return of income on 30/10/2004 declaring total income at Rs. Nil On verification of the return of income it is seen that the assessee has converted 14300 Sq. Mtrs of Agriculture land into Non Agriculture Land on 25/5/2000 and thereafter converted the same into stock in trade. Out of this land 4960 Sq. Mtrs of Land., has been transferred to the Partnership Firm M/s. C.N. Builders Developers, Siivassa on 18/10/2003, as capital contribution. As per Section 45(2) r.w.s 2(47), conversion of property into stock-in-trade-and thereafter transfer of such property as the capital contribution amounts-to -transfer within the meaning of Section 2(47) liable for Long Term Capital Gain. The land in question for this year was become the property of the assessee before 1981 and therefore, provisions of Section 55(2)(b)(i) which reads as under are applicable to the assessee:- (i) where the capital asset became the property of the assessee before 1st day of April, 1981 , means the cost of acquisition of the asset to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to transfer within the meaning of section 2(47) which is liable to long term capital gain. The assessee has responded that the transfer of stock of land to the firm does not amount to transfer and therefore not liable to capital gain tax. The assessing officer has not accepted the explanation of the assessee and stated that the assesee was liable to pay capital gain tax on conversion of land into stock in trade. The value of consideration would be the fair market value as on date of conversion of the land into stock in trade. The payment of capital gain tax would be the previous year in which such stock in trade was sold or otherwise transferred by the assessee. Assessing officer has stated that the assessee has transferred the land to the firm as capital contribution and the firm in turn has constructed a building on the said land and sold the same in subsequent years. It is also stated that the firm has also claimed deduction u/s. 80IB(10) of the income tax act and section 45(2) clearly speaks out that when the stock in trade is either sold or otherwise transferred would make the assessee liable for capital gain tax. The assessee has responded that the value of asset record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Ltd. vs. CIT 268 ITR 48 and M M Export Vs. DCIT 23 DTR 356 (Gujarat). 7. Thereafter, the assessing officer had made assessment u/s. 143(3) r.w.s. 254 of the act on 9th March, 2015 reiterating the same facts and determined the total income from capital gain at same amount at ₹ 83,23,674/- in the set aside assessment proceedings. 8. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of assessee. 9. During the course of appellate proceedings, the ld. counsel has submitted paper book containing submission made before the assessing officer and ld. CIT(A). It was also contended that the value of the asset recorded in the books as capital introduction by the assessee was taken as nil which was not liable for any income tax. He has also raised objection for reopening of assessment by the assessing officer stating that the reopening was done on verification of the return of income. He has further stated that even if consideration were to be considered for introduction of land it can be ₹ 600 per sq. mt. and not ₹ 2000 per sq. mt. as adopted by the assessing officer. He has also mentioned that while disposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on this issue is dismissed. 11. Regarding 2nd and 3rd grounds of appeal of the assessee, the assessing officer has held that non-agricultural land of 4960 kg mtrs held as stock in trade by the assessee was brought as capital contribution to the firm M/s. C.N. Builders and Developer on 18-10-2003. With the assistance of representatives of both the sides we have gone through the material on record and gist of the facts observed are as under:- (a) The assessee has transferred land to the partnership firm as his capital introduction in the firm. The said land was property of the assessee which he has converted into stock in trade in the earlier 2002 prior to assessment year 2004-05. (b) The transfer of land into stock in trade was not reflected in the balance sheet of the assessee for the year 2002 when the said conversion was made. The said disclosure was made in notes of accounts only in assessment year 2004-05 and this fact was never disclosed prior to assessment year 2004-05. (c) The assessee had converted the land into stock in trade but the assessee was neither engaged in any business of trading of land or dealing in land till date of conversion. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the [Assessing] Officer under sub-section (1) of section 16A of that Act. Explanation.-In this section, Valuation Officer has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957) The assessee has submitted a report from a registered valuer who determining the fair market value of the aforesaid land at ₹ 6,00 per square meters. However the assessing officer has adopted the fair market value of the said land at ₹ 2,000 per square meters on the ground that assessee had sold the similar land in the nearest vicinity for an average price of 2180/- per sq. mt in subsequent years. Assuming a 5% increase in fair market value the assessing officer has stated that the fair market value of the land for assessment year 2004-05 would come to 2000/- per sq. met, therefore, he has determined the fair market value of land 4960 sq. mt to the amount of ₹ 99,20,000/-. After considering the above facts we are of the view that assessing officer has not made efforts to adopt the actual fair market value pertaining to th ..... 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