TaxTMI 
TaxTMI 
TaxTMI 
2010 (1) TMI 900
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad filed details as per Annexure-2 of his letter dated 5/12/2006 which consist of his Demat Account running into more than 50 pages with each page containing nearly 14 transactions of purchase and sale of shares/securities. He observed that the assessee is engaged in share trading and has a high volume, frequency and consistency of transaction. The assessee had dealt in nearly 60 scrips consisting of 134 transactions (approx.) with purchase of Rs.31.78 crores (approx.) and sale of about Rs.35.62 crores resulting in a gain of Rs.3.84 crores. These activities are incidental to the main business of the assessee. The assessee has also borrowed funds for the purpose of undertaking these activities. Therefore, these activities of the assessee according to the learned CIT amount to business whereas the A.O has wrongly treated the assessee as investor and brought to tax the amount of Rs.3,89,30,516/- as short term capital gain instead of business income. He, therefore, issued a notice on 3/3/09 asking the assessee to show cause as to why short term capital gain of Rs.3,89,30,516/- should not be treated as business income. 3. The assessee submitted that the order passed by the CIT u/s. 263....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he treatment of shares in the books of the assessee is concerned, it was submitted that the same was shown as investment and not as stock-in-trade and the assessee has not claimed any expenses under section 30-43A and the assessee has lent more funds than it had borrowed for which the assessee has earned interest income of Rs.95,55,017/-. 5. However, the Ld. CIT was not satisfied with the arguments advanced by the assessee. He observed that although copies of balance sheet and other details furnished by the assessee have been kept on record, no verification of any kind seems to have been made by the Assessing Officer. The Assessing Officer had not conducted any enquiry to find out the real nature of the transaction vis-a-vis multiplicity and frequency of the transaction. Had the Assessing Officer given a correct finding in the current year, the profit arising out of several transactions would have been taxed as business income and then question of adjusting the brought forward loss under the head short term capital gain against this business income would not have been arisen. Relying on the decision of the Hon'ble Allahabad High Court in the case of CIT vs. Bhagwan Das reported in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quiry was made, he referred to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd., and submitted that the Hon'ble Court in the said decision has held that the Assessing Officer while passing the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. One has to see from the record as to whether there was application of mind before allowing the claim made by the assessee. It was held in the said decision that there is a distinction between "lack of enquiry" and "inadequate enquiry". If there was any enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order u/s. 263 of the Act merely because he has different opinion in the matter. It is only in case of lack of enquiry that such a course of action would be open. Since in the instant case admittedly the Assessing Officer had made enquiries, elicited replies and thereafter passed the assessment order, therefore, it cannot be said that it is a case of lack of enquiry. Therefore, the order passed by the CIT u/s. 263 of the Act has been quashed. 9. Referring to the decision of the Hon'ble Bombay High Court in the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of law and facts. He submitted that the facts of every year have to be gone through by the Assessing Officer and the principles of res judicata do not apply to incometax proceedings. However, in the impugned assessment year there is non application of mind by the Assessing Officer and he has passed a stereotypic order. Referring to a number of decisions, he submitted that incorrect assumption of facts and incorrect assumption of law will make an order erroneous as well as prejudicial to the interest of the revenue. Referring to the reply of the assessee to the Assessing Officer vide para 3 in his letter dated 5th December, 2006, a copy of which is placed at Paper Book page 15, he submitted that the Assessing Officer accepted the contention of the assessee blindly without proper application of mind. Referring to page 105 of the Paper Book which contains the submission of details before the Assessing Officer where the assessee has submitted that the assessee is an investor in shares and securities and that the Hon'ble ITAT has quashed the order u/s. 263 for the A.Y. 2003-03, he submitted that the Assessing Officer never examined the factual position of transactions. Therefore, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor in shares and securities and has been doing investment activities since 1989 onwards consistently. It was stated in the said letter that action u/s. 263 has been made by the CIT-4, Mumbai for the A.Y. 2002-03 and A.Y. 2003-04 and the ITAT has quashed the orders u/s. 263 of CIT-4, Mumbai for the A.Y. 2002-03 and the appeal against the order u/s. 263 for the A.Y. 2003-04 is pending before the Tribunal. It was further stated in the said letter that the facts and circumstances of the case in the impugned assessment year are exactly similar to the A.Y. 2002-03 and earlier years. Based on this and various arguments advanced by the assessee, the Assessing Officer passed the order allowing the claim of the assessee. Therefore, in our opinion, it cannot be said that the Assessing Officer has not made proper enquiries. 14. We find the Hon'ble Delhi High Court in the case of CIT vs. Sunbeam (I) Ltd. (supra) relying on the decision of the Hon'ble Bombay High Court in the case of Gabriel (I) Ltd., has held as under: "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. (see Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10). From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply6 because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgement of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, ....