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This is an appeal filed by the Assessee as against the Revision order dated 03.03.2020 passed by the Principal Commissioner of Income Tax-1, Vadodara under section 263 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') relating to the Assessment Year (A.Y) 2015-16.

Parimal Chandrakant Zaveri vs. Pr.CIT

2. The registry has noted that there is a delay of 548 days in filing the appeal by the assessee. This appeal is filed by the assessee on 01.11.2021 which was immediate after the under the Covid-19 period wherein Hon'ble Supreme Court in M.A. No. 665 of 2021 in SMW(C) No. 3 of 2020 dated 23.09.2021 passed the following orders:

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2.1. Thus there is no delay in filing the above appeal by the assessee.

3. The brief facts of the case is that the assessee is an individual and is engaged in the business of import, export, manufacturing and trading of precious & semiprecious gemstones in the name of Harshil Jewellers. The assessee is also engaged in the business of giving premises on lease and license basis. The assessee filed its Return of Income on 22/10/2015 declaring total income of Rs. 98,39,760/-. The case was selected for scrutiny and assessment was completed u/s. 143(3) of the Act on 26/07/2017 making an Parimal Chandrakant Zaveri vs. Pr.CIT addition of Rs. 1494/- on account of interest u/s. 244A thereby assessed the total income at Rs. 98,41,250/-.

3.1. Perusal of the above assessment order by the Ld. PCIT, the assessee had sold a residential flats in Mumbai on 20.12.2014 for a consideration of Rs. 2.66 crores jointly with others and assesee's 20% share was Rs. 53,20,000/-. The assessee has not offered the long term capital gain on sale of the aforesaid property in his Return of Income, no addition was made on account of capital gain while completing the assessment order u/s. 143(3) by the Assessing Officer.

3.2. Therefore a show cause notice dated 20.01.2020 under section 263 was issued by ld. PCIT that the capital gain of Rs. 53,20,000/- has escaped assessment which rendered the assessment order as an erroneous order and prejudicial to the interest of the Revenue. The assessee replied that he had accounted all the entries pertaining to his share of sale of property, after deducting the cost of acquisition of the property namely Rs. 49,31,580/- and the net profit on sale of the property of Rs. 3,88,500/- was being shown on credit side on the profit and loss account and applicable tax thereon is already paid by the assessee. The assessee has provided all the details about the profit on sale of this property while scrutiny proceedings in response to 142(1) notices issued by the Assessing Officer. Thus the assessment order passed by the Assessing Officer is not an erroneous order and not prejudicial to Parimal Chandrakant Zaveri vs. Pr.CIT the interest of the Revenue. Therefore requested to drop the revision proceedings.

4. After considering the above reply by the Ld. PCIT, it is observed that the assessee has declared the profit of Rs. 3,88,500/- in his profit and loss account for the financial year 2014-15. However this is not acceptable since the assessee in his audited report furnished for the present assessment year as well as earlier assessment years this asset is not declared by the assessee. Further the assessee is engaged in the business of import, export, manufacturing and trading of precious & semiprecious gemstones in the name of Harshil Jewellers. It is nowhere submitted by the assessee that he is engaged in business of real estate or carries out the sale and purchase of immovable property, therefore he cannot be allowed to treat the aforementioned net profit of Rs. 3,88,500/- on sale of flats as his business income. Even, if it is accepted that the aforesaid immovable property was used by the assessee for his business purpose then the same acquires the character of depreciable asset and was required to be shown in the depreciation statement and the profit on the sale of the same should have been treated as short term capital gain and offered to taxation u/s. 50 of the Act. However this was not done by the assessee. The assessee also not produced any valuation report in support of his claim of cost of acquisition of the aforesaid immoveable property. Thus the Ld. PCIT held that the assessment order passed by the Assessing Officer is an erroneous order and has not conducted necessary Parimal Chandrakant Zaveri vs. Pr.CIT inquiries on the vital aspects which is an erroneous order and prejudicial to the interest of the Revenue.