TaxTMI 
TaxTMI 
2016 (11) TMI 292
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.... Drawing support from the provisions of Section 263 of the Act, the Principal CIT issued a show-cause notice dated 19.02.2015. The relevant parts of the notice read as under:- "3. It is observed that you have admitted by your own that the transaction in shares were made with a motive to earn profit and therefore the nature of these transaction cannot be that of investment and same should be treated as business transaction. As a result of same the profit arising out of these transactions should be taxed as profit and gains of business and profession. Since you have claimed short term capital gain amounting to Rs. 1.94 crores for the AY 2010-11, the assessment looks erroneous so far as the short term capital gain is concerned. Further during the year under consideration you have taken loan amounting to Rs. 3.4 crore from M/s. Sheetal Bio Agritech Limited. On verification of bank account of M/s. Sheetal Bio Agretec Ltd., it is noticed that cash was deposited on the date of transfer of the funds in your account. Neither the return of income nor any confirmation was filed by M/s. Sheetal Bio Agrotech Limited. 4. In view of the above facts, the assessment order u/s 143(3) dated 26.0....
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....investment in shares is doubtful. The nature of borrowings are also suspicious, because Shri Pratik R. Shah, the Director of the company M/s. Sheetal Bio Agrotech Ltd. stated that he was providing accommodation entries only." 7. The first thing which has to be considered is whether the Principal CIT has rightly assumed the power under section 263 of the Act. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio:- "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The ....
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....e got 2.10 crores shares at Rs. 1/- each. Between 02.02.2010 and 31.03.2010, the assessee sold 1.02 crores shares at profit. 10. The aforementioned transactions were questioned by the ADIT. Necessary replies were filed before the ADIT and all the relevant details with documents were submitted. The assessee also submitted details of queries raised by the ADIT at the time of hearing. On 12.02.2013, the DCIT, Circle (11), Ahmedabad issued a show-cause notice which reads as under:- "On perusal of the details submitted by you and the information available on record, it is seen that you have invested Rs. 3.87 crores in M/s Radhey Developers ( India ) Ltd by acquiring 2,10,000 shares. In this regards, you have submitted that the sources of these investments were loans received from M/s Shital Bio Agritech Ltd, whose account pay cheques drawn on Bhuj Mercantile Cooperative Bank on 29-06-2009. The investment was made on 30-06-2009 and further you have submitted that the loan of Rs. 3.40 lacs was repaid by you after selling these shares before 30-03-2010. On further perusal it is noted that you have made investment of Rs. 38.07 lacs that is 10 per cent of total investment Rs. 3.87 crores ....
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....t regard...........". This is further fortified by the observation of the Assessing Officer in his order which reads as under:- "In response to the notices, Shri Gautam N. Shah, CA attended with the assessee Shri Shital P. Shah and filed the details called for. The details submitted by the assessee have been verified and kept on record. The assessee is an individual and deriving income from business, house property, capital gains and income from other sources..." And the returned income was accepted as such. 13 The Assessing Officer has taken a view which may be different from the view of the ld. Principal CIT and assuming that the view taken by the Assessing Officer is a loss to the Revenue, but the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) has held that "every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue". 14. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is ....
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....g Officer having made inquiries and when two views are possible, revisional powers could not be exercised, called for no interference. Since with respect to computation and assertions of other aspects of deduction under section 54F of the Act, the Tribunal has remanded the proceedings, nothing stated in this order would affect either side in considerations of such claim. 7. No question of law arises. Tax Appeals are dismissed." 15. As mentioned elsewhere, the elaborate enquires were made not only before the assessment proceedings started but also during the course of the assessment proceedings and the assessee has fully complied with all queries raised by the Revenue Authorities. The contention that the present Assessing Officer did not make full enquiry is not acceptable, because when the assessment records were transmitted from one DCIT to another DCIT, the other DCIT was well aware of the queries raised during the course of proceedings. The Officer was also aware of all the replies filed by the assessee, supported by relevant documentary evidences. 16. Considering the facts in totality in the light of the judicial decisions discussed hereinabove, in our understanding of la....