TaxTMI 
TaxTMI 
2013 (2) TMI 16
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....nt order on presumptions and guess work that the appellant has not furnished the information in the assessment proceedings. 5. The ld. CIT further erred in holding that no questionnaire was issued by assessing officer calling for the details of dates of acquisition of shares. 6. The ld. CIT erred in holding that the assessing officer omitted to examine the dates of acquisition of shares held by the appellant, while the shares were held by the appellant for more than a year, which is evident from the details filed on record. 7. The ld. CIT is not correct in holding that the assessing officer confirmed that No Demat Account had been filed by the assessee company and that the assessment was completed under scrutiny without bringing on record evidence of date of acquisition of shares. 8. The ld. CIT further is not correct in holding that exemption of capital gains was granted to the appellant u/s 10(38) of the act, without the information of date of acquisition of shares. 9. The ld. CIT failed to note that assessing officer allowed exemption based on the evidence of Demat accou....
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....e Act being bad in law requires to be vacated and cancelled. 3. Brief facts of the case are that the assessee had filed return of Income for the asst year 2006-07 on 25.11.2006 declaring total income of Rs 17,36,424/-. The Dy. Commissioner of Income Tax, Circle-16(1), Hyderabad had completed the assessment u/s 143(3) on 30.09.2008 assessing the total income at Rs. 21,01,889/-. 4. After examining the assessment records for A.Y. 2006-07, the CIT assumed the jurisdiction u/s. 263 of the I.T. Act. 1961, he had issued a notice, setting out the grounds of error and prejudice and calling upon the assessee to show cause as to why the assessment should not be revised or set aside. The grounds of proposed revision were as under. (i) The assessee had claimed exemption u/s. 10(38) of the I.T Act in respect of Long Term Capital Gains of Rs. 2,41,99,132 on transfer of equity shares of companies and units of equity oriented mutual funds. The Assessing Officer had omitted to examine the dates of acquisition of these shares and units. No questionnaire was issued by Assessing Officer calling for the details of dates of acquisition. There is no order-sheet entry or other c....
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....i.e., Rs. 2.41 Crores included (erroneously) Short Term Capital gains in respect of sale of bonus shares of IPCA Laboratories Limited. During the assessment year under consideration, the assessee happened to sell 800 bonus shares of IPCA Laboratories Limited on 26.08.2005. The 800 bonus shares were sold in two lots i.e., 20 bonus shares were sold as a part of the lot of 820 shares on 26.08.2005. The rest of the bonus shares i.e., 780 were sold on the same day i.e., 26.08.2005 for the consideration of Rs. 3,48,872/- (the cost acquisition being nil). The sale consideration in respect of 20 bonus shares works out to Rs 8,945.43 (cost of acquisition being nil). Hence, the total sale consideration in respect of 800 bonus shares works out to Rs. 3,57,817/- [Rs. 3,48,872 + 8,945]. The record date mentioned in this letter is 31.01.2005. The date of credit of bonus shares to the Demat A/c of the assessee has been stated as 01.03.05. The date of sale of the bonus shares is admittedly 26.08.05. Hence, the duration of holding of bonus shares is evidently less than one year i.e., the minimum period necessary for characterizing the transaction as 'Long Term Capital Gain'. Hence, the amount of Rs....
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....es for everyone share held in the company was the entitlement of a shareholder. Hence, the said letter evidences that the total number of bonus shares credited to the account of the assessee were stated as 16,418 (8,209 x 2). In other words, on record date i.e., 25.08.2000, the assessee had 8,209 shares as per the records of the said company i.e., Visual Soft Technologies Limited. Hence, it was allotted 16,418 bonus shares by the letter dated 20.09.2000. As the assessee's claim was 72,818 bonus shares it was called upon to produce evidence of bonus shares allotment letter in respect of rest of the bonus shares i.e., 56.400. Despite several opportunities given to the assessee by the CIT, the assessee could not produce evidence of bonus allotment letter from Visual Soft Technologies Limited in respect of alleged 56,400 bonus shares i.e., in addition to allotment letter. The authorized representative submitted that the relevant evidence has been lost. In this context, the past assessment records, going back to the asst. year 2001-02, were called for and examined with regard to the Visual Soft Technologies Limited equity. There is no dispute that the year of allotment of bonus shares o....
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....d get twice that number of bonus shares i.e., 38,309 x 2 = 76,618. Hence, as on 31.03.2001 the assessee should be having closing stock of Rs. 1,14,927 (76,618 + 38,309) i.e., as against the assessee's figure of Rs. 1,11,127. If one takes the sale of Visual Soft Technologies Limited shares in the period from 01.04.2000 to 24.08.2000 at 10,866 the closing stock would still be higher. 6. The CIT observed that thus, going by the assessee's version, there is clear evidence of unacceptable discrepancy. This discrepancy becomes serious when viewed in conjunction with the bonus shares allotment letter of Visual Soft Technologies Limited which had allotted only 16,418 bonus shares. The serious discrepancies were communicated to the assessee vide his letter dated 18.03.2011. The assessee AR miserably failed to furnish any rational, convincing and acceptable explanation. The contentions canvassed by the assessee are only two - viz., (i) that the figure of bonus shares in the assessees Demat Account maintained with Karvy are 16.418 + 56.400. A letter was addressed to Karvy Stock Broking limited Hyderabad calling for relevant information u/s 133(6) of the I.T Act i.e.: ....
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.... could be found and the assessee and the authorized representative also miserably failed to produce acceptable evidence in support of the alleged bonus shares i.e., 56.400. In the absence of reliable evidence and in view of the bonus shares allotment letter of Visual Soft Technologies limited dated 20th September, 2000 which had allotted only 16,418/- bonus shares, it has to be taken that the assessee had only got bonus shares of 16,418. As against this, the assessee claimed alleged bonus shares of 56,400/-. The only possible rational information in the given facts and circumstances would be that the assessee must have purchased the shares and not disclosed the same to the Department. It is the matter on record that the assessee's premises had been covered under search operation in 1998- 1999. (ii) It is the claim of the assessee that it has sold 60,000 bonus shares during the asst. year under consideration. Out of these 60.000 alleged bonus shares, 56,400 happen to be the alleged bonus shares for which the assessee has no evidence and the only rational inference possible is that these 56,400 shares must have been purchased by the assessee with undisclosed inv....
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....he third issue i.e., regarding interest income of Rs. 11,89,745/- the CIT observed that there is no dispute that this income falls under the head income from Other Sources'. This ought to have been assessed as income from other sources i.e., the entire amount of Rs. 11,89,745/-. But the Assessing Officer had allowed certain deduction from this income i.e., deduction of expenditure relating to exempt income. Sec 14A of the IT Act does not allow such deduction. Hence, the CIT directed the Assessing Officer to bring to tax the entire amount of Rs. 11,89,745/- as income from 'Other Sources' 9. The CIT observed that while completing the original assessment, the Assessing Officer had not at all enquired into the issues stated in the show-cause notice. He had mechanically completed the assessment on the erroneous assumption of the correctness of the assessee's claims of exemptions and deduction. He had not called for the relevant evidence regarding dates of acquisition of shares, nor the relevant Demat A/c. Etc. These serious omissions on his part have rendered the assessment not only erroneous but also prejudicial to the interest of revenue in the light of the decision of the Hon'ble ....
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....along with various details and that during the course of scrutiny Assessment Proceedings, as directed by the Assessing Officer, the assessee has filed several details and after due consideration of such details, assessment was made u/s. 143(3) of the Act. 13. The AR further submitted that among various details filed along with the Return of Income for assessment purposes include computation of Income and annexures disclosing acquisition of shares of various companies including equity shares of Visual Soft Technologies Ltd in the year 1998. Further in the course of scrutiny Assessment Proceedings as directed by the Assessing Officer the Assessee filed various details through letters dated 1st and 10th September 2008. Therefore, it is not correct to state that the assessee did not file required details relating to the date of acquisition of shares and other details. The Assessing officer was satisfied with the information filed and based on the above information assessment was completed u/s. 143(3) of the Act and the findings of the Assessing Officer are as follows: "In response to the notice and questionnaire issued, the Authorised Representative of the asse....
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....owed by the Assessing Officer. Further the ld CIT in the Revision Orders u/s 263 of the Act directed the Assessing Officer to examine/investigate the claim and allow exemption u/s 10(34) of the Act. The Assessing Officer accordingly after due verification and examination of the claim with the material on record, allowed exemption of dividends Income u/s 10(34) of the Act which is inconformity with the claim allowed in the Original Assessment Order. Copy of the consequential order passed by the Assessing Officer u/s 143(3) r.w.s. 263 of the Act dated 30.06.2011 is forming Part of Paper Book filed vide Page 50 to 52. It is submitted, in the above facts and circumstances Revision Orders u/s 263 of the Act have been passed to examine and investigate the claim in respect of dividends income originally allowed. It is settled law Revision u/s 263 of the does not survive where directions are given for examination and investigation of the issues. Revision Order is highly arbitrarily and made on presumption conjectures and suspicion and therefore is required to be vacated and cancelled. 16. The AR submitted that as regards to exemption of long term capital gain on sale of Bonus shares of ....
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....t year 2006-07 under consideration. The Bonus Shares since were held from Sept 2000 and sale in the Assessment year 2006-07 was charged to Securities Transaction Tax (STT) the Assessee claimed Exemption of Capital Gains u/s. 10(38) of the Income Tax Act. Cost of the Bonus shares since was NIL entire gross sale consideration was disclosed for Capital gains. The above information was filed on record with the Assessing Officer in the Original Assessment Proceedings through letter dated 1st & 10th September 2008 referred to above. In the scrutiny Proceedings the Assessing Officer thus got satisfied about the correctness of the Claim made in respect of long term Capital gains on sale of Bonus shares and allowed Exemption of Capital gains u/s 10(38) of the IT Act. In the above facts and circumstances, allegation of ld CIT that the assessee Company did not file details of acquisition of Bonus shares and sale of Bonus shares is not correct. 19. The AR submitted that in the course of Revision Proceedings the ld CIT made investigation in depth in respect of Sale of Bonus shares and period of acquisition of such shares with references to transactions recorded in Demat Accounts right from 1....
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....ected the AO to assess the gross sale consideration received as the undisclosed income of the Assessee for tax purposes. It may be noted that in the event the ld CIT is of the opinion that the shares sold are not Bonus Shares and such shares were acquired from out of undisclosed income, for argument sake it is submitted that the said shares having been received by the Assessee in Se pt 2000, undisclosed income if any, should have been assessed in the Assessment Year 2001-2002 and not in the year of Sale in the assessment year 2006- 07. Further the above sale in the Assessment year 2006'-07 since was charged to Securities Transaction Tax (STT) Capital gains in any event are Exempt from tax u/s. 10(38) of the Act. Considered from any point of view the action initiated by the ld CIT u/s. 263 of the Act is highly arbitrary presumptuous and requires to be vacated. 22. The AR further submitted that in the Revision Proceedings the ld CIT again interfered with the method and computation of expenditure determined by the Assessing Officer in the original assessment for disallowance u/s. 14A of the Act. The Assessing Officer segregated taxable income and the exempted income as per the CBDT....
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....o additional facts were necessary before AO for allowing exemption - Revision Order was not correct. (b) CIT vs. Giridhari Lal (258 ITR 331) (Raj) wherein held, AO after going through material on record and after considering the explanation of the assessee assessment was made. It could not be said AO had not applied his mind. ITAT was correct in cancelling the Order u/s 263 of the Act. (c) CIT vs. Arvind Jewellers (259 ITR 502) (Gauhati): Held, the assessee had produced relevant material and offered explanations in pursuance of the notices issued under section 142(1) as well as section 143(2) of the Act and after considering the material and explanations, the Income-tax Officer had come to a definite conclusion. The mere fact that different view can be taken should not be the basis for an action under section 263. The order of revision was not justified. (d) CIT vs. Gabriel India Ltd (203 ITR 108) (Bom). The decision of the AO could not be held erroneous simply because in his Order he did not make an elaborate discussion. The CIT after initiating 263 proceedings he could not state about the expenditure. CIT simply as....
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....be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. In the same category fall orders passed without applying the principles of natural justice or without application of mind. (iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case. 27. We shall now turn to the facts of the case to see whether the case before us is covered by the aforesaid principles. Perusal of the assessment order passed by the Assessing Officer does not show any application of mind on his part. He simply accepted the claim of the assessee with regard to the issues considered by the CIT. This is a case where the Assessing Officer mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry. The evidence available on record is not enough to hold that the return of the assess....
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....ssee. Thus, the formation of any view by the Assessing Officer would necessarily depend upon the results of his inquiry and conscious, and not passive, examination into the claim of the assessee. If the Assessing Officer passes an order mechanically without making the requisite inquiries or examining the claim of the assessee in accordance with law, such an order will clearly be erroneous in law as it would not be based on objective consideration of the relevant materials. It is therefore, the mere failure on the part of the Assessing Officer in not making the inquiries or not examining the claim of the assessee in accordance with law that per se renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing else is required to be established in such a case to show that the order sought to be revised is erroneous and prejudicial to the interests of the revenue. 29. We are unable to accept the submission of the learned Counsel for two other reasons also. First reason is that the view so taken by the Assessing Officer without making the requisite inquiries or examining the claim of the assessee will per se be an erroneous view and hence will be amena....
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....and evaluation has been done by the Assessing Officer that he can come to a conclusion as to what are the permissible courses available in law or what are the possible views on the issue before him. In case he comes to the conclusion that more than one view is possible then he has necessarily to choose a view, which is most appropriate on the facts of the case. In order to apply the aforesaid observations to a given case, it must therefore first be shown that the Assessing Officer has "adopted" a permissible course of law or, where two views are possible, the Assessing Officer has "taken" one such possible view in the order sought to be revised under Section 263. This requires the Assessing Officer to take a conscious decision; else he would neither be able to "adopt" a course permissible in law nor "take" a view where two or more views are possible. In other words, it is the Assessing Officer who has to adopt a permissible course of law or take a view where two or more views are possible. It is difficult to comprehend as to how the Assessing Officer can be attributed to have "adopted" a permissible course of law or "taken" a view where two or more views are possible when the order....
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....either to the assessee or to the State Exchequer or to both, the order so passed by him is liable to be corrected. As mentioned earlier, the assessee can have the prejudice caused to him corrected by filing an appeal; as also by filing a revision application under Section 264. But the State Exchequer has no right of appeal against the orders of the Assessing Officer. Section 263 has, therefore, been enacted to empower the Commissioner to correct an erroneous order-passed by the Assessing Officer which he considers to be prejudicial to the interest of the revenue. The Commissioner has also been empowered to invoke his revisional jurisdiction under Section 264 at the instance of the assessee also. The line of difference between Sections 263 and 264 is that while the former can be invoked to remove the prejudice caused to the State the later can be invoked to remove the prejudice caused to the assessee. The provisions of Section 263 would lose significance if they were to be interpreted in a manner that prevented the Commissioner from revising the erroneous order passed by the Assessing Officer, which was prejudicial to the interest of the revenue. In fact, such a course would be coun....