TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 548
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....ee has filed its return of income on 28.9.2010 declaring total income at Rs. 9,100/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Income Tax Act was issued upon the assessee on 5.9.2011. He passed an assessment order under section 143(3) on 31.10.2012. The ld.AO has accepted the returned income of the assessee. On perusal of the record, the ld.commissioner harboured a belief that the AO did not examine the issues properly, and therefore, he took cognizance under section 263 of the Income Tax Act. He issued show cause notice to the assessee on 18.9.2014. The show cause notice issued by the ld.Commissioner reads as under: "OFFICE OF THE COMMISSIONER OF INCOME-TAX, AHMEDABAD-II 1st Floor, Navjeevan Trust Building B/h. Gujarat Vidyapith, Ahmedabad 380 014. No.CIT-II/ABD/Tech/263/07/2014-15 Date :18th September, 2014 To, Principal Officer Jay Agriculture & Horticulture Products P. Ltd. Ambuja Tower, Opp. Memnagar Satation Vijay Char Rasta Navrangpura Ahemdabad. Sir, Sub: Notice u/s.263 of the I.T.Act 1961 A.Y.2010-11. Kindly refer to the above. 1. The assessee filed its return of income for A.Y.20....
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....he only revenue generating transaction in its books of a/cs) are listed hereunder : i) Assessee has stated that the equity shares in question were acquired on 31.12.2004 but the assessee company itself was incorporated on 06.06.2006. ii) There were no verification/inquiry or at least calling for the information and supporting evidence w.r.t the 'cost of acquisition' of shares in question, iii) No verification/inquiry was made w.r.t the 'buyback' offer price at which assessee claimed to have sold partial equity holding. iv) No inquiry was made w.r.t the 'cost' of equity share in Indian currency nor the 'sale price' in Indian currency and the Exchange rate applied by assessee in this regard. v) No inquiry was made to check veracity of assessee's claim w.r.t the date and quantity of acquisition of shares or w.r.t the date and quantity of buyback offer in the company in which assessee claimed to have purchased equity shares, vi) Since the acquisition of shares pertained to foreign company, inquiry ought to have been made w.r.t the source of investment and whether such investment was made with RBI approval and on what terms and condi....
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....n the matter of Buyback of shares dated 26-06-09 16 11 Copy of FIRC issued by PNB dated 07-07-09 17 12 Copy of intimation filed by company for buyback of shares to RBI in compliance to FEMA dated 08-07-09 18 13 Copy of abstract of article of DTAA 19&20 14 Copy of computation of income, tax challans and Form no. 26AS 21 to 26 6. After analysis of the record, the ld.Commissioner has held that the AO failed to carry out adequate inquiry, and therefore, the assessment order is erroneous and prejudicial to the interest of the Revenue. Accordingly, the ld.Commissioner has set aside the assessment order with direction to the AO to pass a fresh assessment order determining the total taxable income of the assessee. While impugning the order of the ld.Commissioner, ld.counsel for the assessees has raised three fold submissions, viz. - (a) That there is a distinction between inadequacy or lack of inquiry. The inadequacy of inquiry cannot be a ground to take action under section 263 of the Income Tax, because if the AO after conducting an inquiry adopted one of the possible views in law than that view cannot be disturbed. But, if there is a total lack of inquiry, only t....
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.... sent by Royale Exports Ltd. through SBI, Colombo. A copy of the letter dated 23.6.2009 with regard to inward remittance of US dollar 5,07,935 was forwarded by the assessee to Punjab National Bank, which is placed at page no.16 of the paper book. The assessee intimated RBI about such buy-back vide letter dated 8.7.2009. In response thereto, certificate of foreign inward remittance was received from PNB as per which, a sum of Rs. 2,46,38,132/- was credited against inward remittance made by Royale Exports Ltd. The cost of 6,25,074 shares sold by assessee work out to Rs. 29,08,205/-, and hence profit on sale of such shares as per the book is Rs. 2,17,29,927/-. The long term capital gain on such shares as per DTAA was taxable in Sri Lanka and not in India. Hence, the assessee was not liable for any capital gain on sale of shares held in Sri Lankan Company. While filing the return of income, the assessee has disclosed all these facts. It offered income at book profit, because, under the regular provision no capital gain was to be taxable in the hands of the assessee. The ld.AO had issued a show cause notice under section 143(2)/142(1) of the Income Tax Act on 9.8.2012. A copy of this no....
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....ttention towards Article 13(4) and (5) of the DTAA between Republic of India and Republic of Sri Lanka. On strength of this Article, he submitted that gain from alienation of stock/shares of the company may be taxed in the contracting State in which they have been issued. Thus, the gain from buy-back of shares of Sri Lankan is taxable in the country in which they have been issued. Had the ld.Commissioner has considered this issue, then, probably, he would not have set aside the assessment order and restore this issue to the file of the AO, because, ultimately, even after carrying out the whole exercise the result will be the same, which will be adopted by the AO. No long term capital gain would be taxable in the hands of the assessee. In support of his contentions, the decision of the Hon'ble Karnataka High Court in the case of CIT vs. D.G. Gopala Gowda, 354 ITR 501 was brought to our notice. 11. On the other hand, the ld.CIT-DR relied upon the order of the CIT and contended that the AO has not carried any inquiry, therefore, CIT was justified in taking cognizance under section 263 of the Income Tax. 12. On our query with regard to the proposition of applicability of DTAA on the ....
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....s passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 14. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an or....
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....aw or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held....
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.... ITR page 375, the Hon'ble court has expounded the approach of ld. Assessing Officer while passing assessment order. The observation of the Hon'ble court on pages 386 of journal read as under:- "... it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very diffident from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only on adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but called for further inquiry. It is his duty to ascertain the truth of the facts stated in the retur....
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...., details of the land lord and submit a copy of rental agreement, if any. 3. The case is fixed for hearing on 22.8.2012 at 1.00, PM. You are requested to submit all the same date. I am also enclosing a notice u/s 142(1) of the IT Act, notice u/s 143(2) of the IT Act dated 5.9.2011 and you are requested to submit any details/explanations/evidences which you want to product in support of various claimed by you in the R/I filed on the same date. Kindly note this is time barring case and hence no adjournment will be granted. In case of non/partial compliance of the notice u/s.142(1), the case will be decided on the facts available on the record. Yours faithfully, Sd/- ITO 18. During the course of the assessment proceedings, the assessee further submitted the details vide letter dated 22.10.2012. It reads as under: "Pramodkumar Dad & Associates CHARTERED ACCOUNTANTS "KAISER" 110-112, Ashwamegh Avenue Nr. Mithakhali Under Bridge Navrangpura, AHMEDABAD 380 009 Phone No. (O) 26466027, Fax: (079) 26447906 Mobile: 98240-31207 Email:[email protected] ------------------------------------------------------------------------------------------------------- 22-10-2....
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.... ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous." 20. On due consideration of these facts, we are of the view that the AO has examined the issue, though not discussed elaborately in the assessment order. But on record, he has called for informat....
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.... building before execution of sale deed with the help of the funds provided by the purchaser. On 22-11-2000 the assessee executed a sale deed in favour of the purchaser for a consideration of Rs. 1,38,00,000/-. The assessee received a sum of Rs. 40,00,000/- at the time of agreement. The total cost of construction was Rs. 1,04,30,425/-. Thereafter, the assessee purchased another property at Koramangala. The Assessing Officer computed the income from the long term capital gains at Rs. 22,17,940/- for the sale of the property. However, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property at Koramangala. The Commissioner of Income Tax issued notice under Section 263 of the Act stating that the Assessing Officer was not justified in treating the sale as long term capital gain and according to him, it should have been treated as short term capital gain. The assessee filed his reply to the show cause notice. Thereafter, the Commissioner proceeded to pass the order setting aside the order of assessment on the ground that it is prejudicial to the interest of the revenue. Aggrieved by the said order, the assessee preferred an appeal....
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....resh consideration. This is not the way, the revisional authority should exercise their power under Section 263 of the Act. The order of revisional authority should indicate the error committed by the Assessing Authority and consequential prejudice caused to the revenue because of the erroneous order. Unless these two conditions exist, the revisional authority does not get jurisdiction to pass any order under Section 263 of the Act. Once these two conditions are set out in the order, then it is open to the revisional authority to consider the case on merits and pass final order or in its view, requires some adjudication or enquiry, the matter can be remanded to Assessing Authority. But such remand should be only after setting out the facts which show erroneous nature of the order and the consequential prejudice to the revenue which confer jurisdiction on the revisional authority. Seen from that angle, in the impugned order though we could make out what is the error committed by the revisional authority, certainly there is no iota of evidence to show how it is prejudicial to the interest of the revenue. On the contrary, in the reply to the notice, the assessee had filed a statement.....
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.... inquiry, therefore, he took cognizance under section 263 of the Income Tax Act on 11.12.2014. The contents of the notice issued by the ld.Commissioner read as under: "OFFICE OF THE COMMISSIONER OF INCOME-TAX, AHMEDABAD-2 1st Floor, Navjeevan Trust Building B/h. Gujarat Vidyapith, Ahmedabad 380 014. No.CIT-2/ABD/Tech/263/20/2014-15 Date :11th December, 2014 To, Principal Officer Jay Infra & Properties P. Ltd. Ambuja Tower, Opp. Memnagar Station Vijay Char Rasta Navrangpura Ahmedabad. Sir, Sub : Notice u/s 263 of the I. T. Act 1961 for A.Y. 2010-11 PAN: AABCJ6891L Kindly refer to the above 1. The assessment u/s 143(3) of the IT Act was finalized on 31/10/2012 by the ITO, Ward-2(1)(2), Ahmedabad, by accepting the returned income as assessed income at Rs. 6,10,690/- 2. On verification of the records it has been observed that the Company was incorporated with the object of construction and acquiring and its related incidental and ancillary activities. The assessee company was intended to perform "instruction business. But, during this year under consideration, the assessee company had not performed any business activity. During the period un....
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....ii) Notice u/s.143(2) of the IT Act, dated 5.9.2011. Kindly refer to the above. 2. Please find herewith the formal/statutory notice u/s 142(1) of the IT Act 1961, calling for details enclosed with this letter. You are requested to submit the following details in respect of your assessment for A.Y. 2010-11 relevant to F.Y. 2009-10. (a) Copy of Capital Account, Balance Sheet, Profit and Loss Account etc. along with Audit Report (if applicable) along with its enclosures. (b) Copy of return of income. (c) Statement of Total Income. (d) Complete details of all the bank accounts maintained by the assessee, viz. the Account No., Name and addresses of the bank, along with the Dr./Cr. Balances as on 31.03.2010. (e) Details of immovable/movable property held by you with supporting evidences. (f) Director's details along with share holding, PAN etc. (g) Copy of Memorandum/Article of Association. (h) Complete details of addresses of all the business premises occupied by the assessee, viz. office/factory /godown/warehousing premises. Explain whether these premises are owned by the assessee or taken on rent. If the same is taken on rent, then kindly submit for e....