2014 (6) TMI 369

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....me on 07/10/2008 declaring total income of Rs. 60,64,590/- including professional income of Rs. 60,19,257/-. The assessee had entered into an agreement of sale on 20/03/1997 with one Sri R. Dhananjaya Reddy for purchasing a plot being No. 169-Phase-1, admeasuring 2110 sq.yds. at Road No. 13, Jubilee Hills, Hyderabad for a consideration of Rs. 1,13,94,000/-. As per the terms of agreement of sale assessee also paid a sum of Rs. 25 lakhs as advance to the vendor with the understanding to pay the balance sale consideration by the end of 31/05/1997 or latest by 30/06/1997 or at the time of registration whichever is earlier. As it appears, since the agreement of sale was not acted upon by the vendor, the assessee filed a suit for specific perform....

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....an amount of Rs. 44,73,748/- out of the professional expenditure claimed. So far as long term capital gain is concerned, the Assessing Officer after verifying the details came to the conclusion that assessee is not entitled for exemption u/s 54F of the Act. Accordingly, Assessing Officer completed the assessment u/s 143(3) of the Act vide order dated 29/12/2010 determining total income at Rs. 2,12,02,600/-. 4. The CIT exercising his power u/s 263 of the Act called for the assessment records of the assessee for the assessment year under consideration and after verifying the same was of the view that the amount received by the assessee from the land owner Sri Dhananjaya Reddy being a windfall gain should have been assessed as income from o....

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....ing the Assessing Officer to assess the surplus received by the assessee from Sri R. Dhananjaya Reddy on settlement of the dispute as 'income from other sources'. 7. The learned AR challenging the order of the CIT both on jurisdiction as well as on merit submitted that during the assessment proceeding the Assessing Officer has specifically examined the issue of taxability of the amount received from Sri R. Dhananjaya Reddy by calling for various informations and details relating to the transaction. In response to the queries raised by the Assessing Officer, the assessee has submitted all informations and details relating to the transaction before the Assessing Officer. In this context, the learned AR drew our attention to the order sheet....

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....rces. Therefore, the CIT was justified in revising the assessment order u/s 263 of the Act. In support of his contention, the learned DR relied upon a decision in case of CIT Vs. J. Dalmia, 149 ITR 215 (Del.) 9. We have heard the parties and perused orders of the revenue authorities as well as other materials on record. We have also applied our mind to the decisions placed before us. At the outset it needs to be stated that law is fairly well settled that for exercising powers u/s 263 of the Act two conditions have to be satisfied cumulatively. The conditions are (i) the order sought to be revised must be erroneous, and ii) it must be prejudicial to the interests of the revenue. In absence of both or even any one of these conditions, the....

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....application of mind. Even the CIT neither in the show cause notice nor in the order passed u/s 263 of the Act has alleged lack of enquiry or non-application of mind by the Assessing Officer. In this context, it needs to be examined, whether the decision of the Assessing Officer to assess the receipts as capital gain is erroneous and prejudicial to the interests of revenue. For this purpose it is relevant to look into the meaning of the expression 'transfer' as envisaged u/s 2(47) of the Act, which reads as under: ["transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ;....

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....ndent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;]" As can be seen from the aforesaid provision, relinquishing or extinguishing one's right over a capital asset also amounts to transfer. It is a fact on record that assessee has not only entered into an agreement of sale for purchase of plot but has also paid an amount of Rs. 25 lakhs to the vendor. Thus, in this process the assessee acquired right, though may be to a limited extent, over the property in question. Therefore, when the assessee, as per terms of the MoU, gave up his claim over the property against consideration received, certainly it can be interpreted that the assessee has relinquished or extinguished his rig....