SMT. ASHA SUSHIL AGARWAL,,PUNE vs. PRINCIPAL COMMISSIONER OF INCOME-TAX : 5,,

आदेश / ORDER PER R.S.SYAL, VP :

This appeal by the assessee is directed against the order dated 30-03-2016 passed by the Pr.CIT-5, Pune u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2011-12.

2 ITA No.1149/PUN/2016 Smt. Asha Sushil Agarwal

assessment order passed by the Assessing Officer (AO) was

erroneous as well as prejudicial to the interest of the Revenue

on the ground that the assessee claimed long term capital gain

in respect of certain commercial shops transferred to third

persons, which were earlier transferred by her proprietorship

concern to self, and the same ought to have been taxed as

`Business income’. Apart from that, the ld. Pr. CIT also held

the assessment order to be erroneous on account of non-

charging of interest. The assessee’s submissions did not find

favour with the ld. Pr. CIT, who concluded the assessment

order to be erroneous as well as prejudicial to the interest of the

Revenue. The assessment order was set-aside and the matter

was restored to the file of AO for framing the assessment afresh

after allowing opportunity of hearing to the assessee.

material on record. The assessee is a proprietor of “Goyal

Developers”. A development agreement was signed between

Pimpri Chinchwad Municipal Corporation (PCMC) and Goyal

Developers on 13-09-2002, under which the assessee got the

right to develop commercial properties on a certain piece of

land allotted to her. The assessee was liable to pay certain

3 ITA No.1149/PUN/2016 Smt. Asha Sushil Agarwal

amount at a specified rate on per sq.ft. basis to PCMC and 4000

sq.ft. of built up area. In lieu of that, the assessee was to get

possession of the developed complex. The assessee purchased

and executed a sale deed between Goyal Developers (her own

proprietorship concern) and herself on 06-03-2007 for 11 shops

in the commercial complex developed on the PCMC land for a

sum of Rs.1.30 crore, which amount was credited to the Profit

and loss account. During the year under consideration, the

assessee sold such 11 shops for a sum of Rs.5.35 crore. In the

return filed for the year under consideration, the assessee

computed long term capital gain on transfer of such shops, after

applying indexation, at Rs.2,72,53,656/-. These shops which

would otherwise have been transferred as stock in trade by the

assessee resulting into generation of business income, were

shown to have been sold as capital asset. We are unable to

comprehend as to how a person can sell certain property to

himself/herself. In order to carry out a sale, it is necessary that

there should be two parties viz, one the buyer and the other

seller. Under no such circumstances, both the buyer and the

seller can be one and the same person. Here is a case in which

the proprietorship concern of Mrs. Asha Sushil Agarwal

(assessee), transferred such shops to herself, namely, Mrs. Asha

4 ITA No.1149/PUN/2016 Smt. Asha Sushil Agarwal

Sushil Agarwal. In our considered opinion, the execution of

such a registered sale deed between the same persons is illegal

and the resultant showing Rs.1.30 crore to the credit side of the

Profit and loss account for the A.Y. 2007-08 is inconsequential.

Further, the ld. AR could not point out that the credit to the

Profit and loss account for the A.Y. 2007-08 was on market

price basis. In this exercise, the full sale value of Rs.5.35 crore

which would have otherwise been shown as business income in

the instant year got squeezed to a mere long term capital of

Rs.2.72 crore. The AO ought to have examined the transaction,

which he miserably failed to do. There is no reference

whatsoever of this transaction in the assessment order. The

Hon’ble Supreme Court in Malabar Industrial Company Ltd.

Vs. CIT (2000) 243 ITR 83 (SC) has held that where AO does

not apply his mind before completing the assessment, the

revisional order passed u/s.263 has to be held as valid.

2015 w.e.f. 01-06-2015 has inserted Explanation (2) to section

263 deeming the assessment order to be erroneous in so far as it

is prejudicial to the interest of the Revenue, if in the opinion of

the Pr. CIT, inter alia, : `the order is passed without making

5 ITA No.1149/PUN/2016 Smt. Asha Sushil Agarwal

inquiries or verification which should have been made’ or `the

order is passed allowing any relief without inquiring into the

claim’. In the hue of the above mandatory statutory

prescription, which is applicable to the facts and circumstances

of the instant case, we have no hesitation in ruling that the ld.

Pr. CIT was fully justified in holding the assessment order to be

erroneous as well as prejudicial to the interest of the Revenue

thereby setting aside the same. We, therefore, uphold the

impugned order.

Sd/- Sd/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 09th April, 2019 सतीश

6 ITA No.1149/PUN/2016 Smt. Asha Sushil Agarwal

आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “B” / DR ‘B’, ITAT, Pune; 4. गाड� फाईल / Guard file. // True copy //

आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 08-04-2019 Sr.PS 2. Draft placed before author 08-04-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *