B.L. Chhibber, A.M. - (1.) BY this petition, the petitioner requires this Tribunal to grant interim stay directing the assessing officer not to proceed with the assessment having regard to the order of the Commissioner passed under section 263 of the Income Tax Act, 1961.
(2.) The petitioner is a partnership firm, and was formed with the objective of acquiring land and making development thereon. The partnership-firm had three group partners namely, (1) Choithramall Group-40 per cent; (2) Advani Group-40 per cent, and (3) Gidwani Group-20 per cent. By an agreement dated 29-3-1973, the firm purchased a plot of land admeasuring 33,339 sq. mtrs. In the balance sheet, the said land bought by the firm was shown under the heading as 'plot'. On 11-7-1974, notice for acquisition was issued by the Inspecting Assistant Commissioner (Acq.) acquiring the said land. The acquisition proceedings continued till the year 1990. In February 1976, the Urban Land Ceiling Act came into force. Under section 6 of the Urban Land Ceiling Act, the firm had to file a statement declaring the area of land held together with exemption application, if any. The whole land belonging to the firm was declared by the competent authority as surplus land required for public purpose. In view of the above, the competent authority directed that no development could be done on the said land and was deemed as acquired by the Government of Maharashtra, since then land was retained as a passive asset in hands of the firm. In 1976 several disputes arose between the partners of the firm. Several suits were filed with the city civil court by one of the partners namely, Narain M. Gidwani against the other group of partners in the matter of a sister concern M/s. Shantinagar Builder. In view of the land ceiling, acquisition and dispute with the other partners, the firm decided not to continue with any business activity. The bank account of the firm was also closed by the bank as there was no operation in the said account and this account was inoperative from 1977.
(3.) IN the year 1996, the partners of the firm got offers for sale of land. Since there were suspicion and disputes between the said partners, it was mutually decided that each group would separately sell their individual interest to one M/s. Amar Avinash Associates. Upon receiving the sale proceeds legal opinion was sought as to whether the sale proceeds were capital gains or business income and in view of the facts, the partners were advised that since the partnership had not carried on any business activity and there was a decision taken not to do business with each other because of the disputes, the sale proceeds would be taxable under the head 'Capital gains'. Accordingly, some of the sale proceeds were invested in specified accounts under sections 54EA and 54EB in the name of the partner namely, Mr. N.R. Gidwani. The firm disclosed the sale consideration received by two partners as capital gains in the hands of the firm and paid tax thereon. IN the original return the amounts invested in various bonds eligible for benefit under sections 54EA and 54EB were not included. However, the firm subsequently revised its return and included the consideration received by Mr. Gidwani and claimed benefit of exemption under sections 54EA and 54EB. The assessing officer completed the assessment under section 143(3) and taxed the income on sale as capital gain but denied the benefit under sections 54EA and 54EB. The assessing officer in his order also rejected the claim for allowance of separate interest for the purpose of sale.;