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TMI Blog2019 (12) TMI 1552X X X X Extracts X X X X X X X X Extracts X X X X ..... king the provisions of Section 45(2) of the Act, there would be no change in the tax liability of the assessee and hence the order passed by the AO cannot be said prejudicial to the interest of the Revenue. It is undisputed proposition of law that for exercising the power u/s 263 of the Act, the Commissioner has to satisfy itself that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. Without satisfaction of the twin conditions that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue, the provisions of Section 263 cant be invoked. Therefore, in the case in hand, when there will be no Revenue loss even if provisions of section 45(2) is applied then in such a situation the Commissioner is not allowed to exercise its power u/s 263 of the Act merely because the AO has accepted the capital gains declared by the assessee. Hence, in the facts and circumstances of the case, the impugned ex-parte order passed by the ld.PR. CIT without proper opportunity of hearing to the assessee and without establishing the order of the AO is prejudicial to the interest of the Revenue is not sustainable in law and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally permissible view. The original order cannot be liable to be visited with a revisionary order by the PR. CIT having different opinion. - Malabar Industrial Co. Ltd. Vs CIT 243 ITR 83(SC) 6. Where Two views Passable :- That on the facts and in the circumstances of the case Ld. Pr. CIT Alwar has grossly erred in law and facts in where two are passable one which is beneficial to the assesssee was to be taken while deciding the issue in terms of the decision. - CIT Vs Vegetable Products Ltd. (1973)88ITR 192(SC) 7. No Proper Opportunity was Provided :- That on the facts and in the circumstances of the case Ld. Pr. CIT Alwar has grossly erred in law and facts in not providing an opportunity to represent his case which is also specifically mandated u/s 236 of the Act and the principle of natural justice has been violated. 8. Proper Enquiry was Conducted :- That on the facts and in the circumstances of the case Ld. Pr. CIT Alwar has grossly erred in law and facts in holding that Ld. AO has not conducted proper enquiry / investigation before accepting the statement of the assessee. 2.1 The assessee is an individual and filed E-Return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the cost of stock in trade would be same as sale consideration being the fair market price. If the valuation u/s 50C is applied then the cost of stock in trade u/s 45(2) would be ₹ 10,08,25,150/- which is equivalent to the sale consideration. Therefore, there would be nil business income. Thus the ld.AR of the assessee submitted that even after applying the provisions of Section 45(2) of the Act, there would be no Revenue effect and consequently the order passed by the AO would not be prejudicial to the interest of Revenue. The ld.AR of the assessee further contended that the issue of treating the ancestral property sold by the assessee as business transaction or sale of capital assets is debatable issue. The ld.AR further contended that since it was a sale of ancestral property by the assessee for realizing the maximum price. If the assessee has sold the property in various plots instead of one piece of land then the same would not change the character of the property which is a capital asset to trading activity. Thus even on merits of the issue, once the AO has accepted the transactions of sale of the property as sale of capital asset which is one of the possible views t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od, you had sold your ancestral property and got your share amounting to ₹ 1,08,28,148/- whereon you had computed capital gain. Thereafter, you had purchased a property i.e. D-15-A Prem Colony Kachhi Basti, Pani Pech, Jaipur for ₹ 23.00 lakhs on 11-02-2015 and claimed deduction u/s 54F thereon. You had also invested ₹ 50.00 lakhs in NHAI Bonds on 31-03- 2015 and claimed deduction u/s 54EC thereon separately. It is perused from the record that you had sold your ancestral property by plotting to 59 different persons and offered capital gain thereon for taxation, however, in view of the Judgement of Hon'ble Apex Court in the cas e of Raja J Rameshwawr Rao vs Commissioner of Income Tax (1961) 42 ITR 179 (SC) the nature of such transaction should have been judged as business income instead of capital gain, after computing capital gain u/s 45(2) of the I.T. Act, 1961 on conversion of capital assets into stock in trade. Thus it is clear that the ld. Pr.CIT invoked the provisions of Section 263 of the Act only in respect of capital gains declared by the assessee from the sale of ancestral property as the AO has not applied the provisions of Section 45(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 45(2) of the Act would be Nil being the cost of acquisition of stock in trade and the sale consideration of the said property is the same. Therefore, even after invoking the provisions of Section 45(2) of the Act, there would be no change in the tax liability of the assessee and hence the order passed by the AO cannot be said prejudicial to the interest of the Revenue. It is undisputed proposition of law that for exercising the power u/s 263 of the Act, the Commissioner has to satisfy itself that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. Without satisfaction of the twin conditions that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue, the provisions of Section 263 cant be invoked. Therefore, in the case in hand, when there will be no Revenue loss even if provisions of section 45(2) is applied then in such a situation the Commissioner is not allowed to exercise its power u/s 263 of the Act merely because the AO has accepted the capital gains declared by the assessee. Hence, in the facts and circumstances of the case, the impugned ex-parte order passed by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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