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2017 (8) TMI 362
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.... the interests of the Revenue without any finding with respect to the nature of error and the consequential loss which is prejudicial to the interests of the Revenue. 3. Because the learned Commissioner of Income-tax has failed to appreciate that all the relevant facts were before the Assessing Officer and have been duly examined by him as well as the learned Commissioner of Income-tax and the assessment order cannot be set aside for re-examination of the issues already examined and adjudicated by the learned Assessing Officer. 4. Because the order passed by the learned Commissioner of Income-tax is based on the irrelevant considerations and without appreciating the facts on records." 2. The only issue involved, as per the grounds of appeal, is that the order passed by the Assessing Officer was not erroneous and prejudicial to the interests of the Revenue as the Assessing Officer has passed the assessment order after considering all the details and the documents, it is not a case of lack of inquiry. 3. The facts of the case, in brief, are that the Principal Commissioner of Income-tax, after examining the record of the assessment which was completed under sec....
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....nvestment in shares in their names from April 1, 2010 to January 15, 2011. The trust has not given any detail and also not furnished any details regarding the purchase of Zee shares from January 15, 2011 to March 31, 2011. So, it is a fact that any Zee shares were not purchased during this period so could not be transferred/owned in the name of any trustee. The trust has shown 17,00,000 Zee shares received as 'bonus' in its balance-sheet as on March 31, 2011. In the assessment year 2012-13, the assessee-trust shown Rs. 34,00,000 as dividend received on Zee shares and filed a photocopy of letter of Sharepro Service (India) Pvt. Ltd. dated August 19, 2011. In this letter it is mentioned that shares of Zee Entertainment Ltd. was registered in the name of Smt. Asha Gopal Gupta and not in the name of the assessee-trust. Since the bonus shares were issued in the name of Smt. Asha Gupta, it proves that the original shares were also purchased and registered in the name of Smt. Asha Gupta and not in the name of assessee-trust. As per the details given on the BSE, the record date of entitlement of bonus share for Zee Entertainment Ltd. was fixed on November 12, 2010 and no delivery p....
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....nce, it would be presumed that you have no objection for the proposed actions and the proceedings would be finalised accordingly." 3.1 The assessee submitted a detailed reply in respect of all the above allegations which are reproduced in brief as under : "1. The appellant had not sold any Zee shares during April 1, 2010 to September 15, 2010. 2. The observation is misplaced as the amended the trust deed was executed on January 17, 2011 with effect from January 15, 2011. 3. The appellant had not purchased any Zee shares from January 15, 2011 to March 31, 2011. 4. The learned Assessing Officer had verified that all the Zee shares were purchased in the name of trust and all the contract notes-cum- invoice for purchase and sales were in the name of the trust. It was brought to the notice of the learned Principal Commissioner of Income-tax that as per the provisions of section 153 of the Companies Act, 1956 a trust cannot hold shares its own name but the same can be held in the name of the trustees and accordingly National Securities Depository Ltd. had issued directive to open d-mat account in the name of trustee in the case of trust. Because of ....
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....ng the year. In respect of each of the observations of the Commissioner of Income-tax, he submitted the detailed arguments for set off of loss on sale of ZEE Entertainment Limited (ZEEL) shares against the profit of sale of Cebbco shares. It was submitted the loss of Rs. 26,54,79,866 has been incurred by the assessee on the sale of 17 lakhs ZEEL equity shares. Thus, the loss has been set off against the profit on the sale of Cebbco equity shares. The Commissioner of Income-tax has incorrectly observed that the Assessing Officer has not called for the de-mat account of the trust and its beneficiaries, contract notes in respect of sale and purchase of 17 lakhs ZEEL shares and the ownership of trust of those ZEEL shares as well as not verified that the entries of these sale and purchase transactions of shares were not found/routed through the bank account of the trust. During the assessment proceedings, the assessee has submitted the details of purchase and sale of ZEEL shares, loan agreement with JM Financial Services Ltd. for purchase of ZEEL shares and this fact has been accepted by the Assessing Officer. The assessee has produced complete books of account, other documents and all ....
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....the sale of securities. It shall not be liable for any loss arising to you due to the sale or transfer of such securities arising out of its right to sell under the master loan agreement. In view of the above facts and circumstances our broker JM Financial Ltd. had sold the said shares on loss to recover the loan provided by him to us. Hope this clarifies the position and satisfied to 'your honour' with the submission of details/explanation given herein above." 4.2 Thus, it was submitted that it is incorrect to say that the Assessing Officer has not noticed that the trust has not offered any capital gain/loss of ZEEL shares prior to November 9, 2010 pertaining to the period April 1, 2010 to September 15, 2010. ZEEL shares were not sold prior to November 9, 2010. They were sold during the period November 15, 2012 to November 18, 2012 hence, prior to the date, no question of any capital gain or loss arise. The Assessing Officer has duly examined the claim of loss adjustment of the capital gain in accordance with the provisions of section 70(2) of the Act. The Assessing Officer after examining the above legal provisions and after applying his mind has correctly all....
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....unt with depository participants including de-mat account etc. to hold shares, debentures and securities on behalf of the 'trust'." 4.4 Thus, on the basis of this clause, it was submitted that the trustees are empowered to hold the shares of the trust in its own name and also have the power to open de-mat account for the trust in its own name. These clauses have also been incorporated in the amended trust deed executed on January 15, 2011 at clauses Nos. 9.1(f), (g) and (i) for which our attention was drawn towards the copy of the amended trust deed. It was further submitted that the Commissioner of Income-tax has incorrectly concluded that the ZEEL shares during the period from November 4, 2012 to November 9, 2012 were purchased and registered/transferred in the name of Smt. Asha Gupta and not in the name of the trust, which is contrary to clause 9(p) of the trust deed dated September 1, 2009. No doubt, the shares are held in the name of the trustee on behalf of the trust but that was not contrary to clause 9(p) of the trust deed dated September 1, 2009. In this regard, our attention was drawn towards clause 9(p) of the trust deed which reads as under : "(p) to....
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....eement for the sale of shares of Cebbco along with two other investors with Tata Capital Mutual Fund and in this agreement the name of the shareholders has been mentioned as of the trustee in accordance with the law of the land. The assessee has also entered into a loan agreement for the purchase of shares of ZEEL in the name of the trust with JM Financial Services Ltd. and from the money so borrowed, the assessee has purchased the shares of ZEEL. The assessee has paid Rs. 21 crores to JM Financial Services Ltd. as its contribution and margin money for purchase of ZEEL shares from the bank account of the trust. All the contract notes and invoice for the purchase and sale of shares of ZEEL are in the name of the trust for which our attention was drawn towards pages 50 to 68 as well as 88-94 of the paper book. The assessee has paid the interest on the borrowed money for acquisition of the ZEEL shares after deduction of TDS. This fact is apparent from the copy of the account the assessee has with JM Financial Services Ltd., the copy of which is duly submitted during the course of hearing before the Assessing Officer and is available at pages 88 to 94 of the paper book. The money recei....
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....order passed by the Assessing Officer. Our attention was also drawn in respect of the verification of the capital gain amounting to Rs. 41,40,175 by the Assessing Officer. The assessee has duly submitted the details in response to the notice issued under section 142(1) dated December 10, 2013 in which the Assessing Officer has specifically asked the assessee to produce and verify the original documents regarding schedule III to the income and expenditure. Our attention was also drawn towards schedule III which relates to the determination of working of capital gain amounting to Rs. 41,40,156. Thus, it was contended that it is a case where the Assessing Officer has duly made the inquiry. This is not a case of non-examination as desired by the Commissioner of Income-tax. The inquiry made by the Assessing Officer may be inadequate in the opinion of the Commissioner of Income- tax but it is not a case of lack of inquiry. Reliance was placed in this regard towards the decision of the hon'ble Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi). Our attention was also drawn towards the decision of the hon'ble Delhi High Court in the case of CIT v. V....
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.... hand relied on the order of the Commissioner of Income-tax and vehemently contended that it is a case where there is a lack of inquiry. The Commissioner of Income-tax has clearly mentioned while setting aside the assessment that the Assessing Officer has not made various inquiries as were required to be made. Reliance was placed on the decision of the hon'ble Delhi High Court in the case of Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 (Delhi). The Assessing Officer has not made proper inquiry. This is not a case of possible view being taken by the Assessing Officer after examining the case. Since there was lack of inquiries on the various issues as stipulated by the Commissioner of Income-tax, the Commissioner of Income-tax was right in holding that the order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. 7. We have heard the rival submissions and carefully considered the same along with the order of the tax authorities below before deciding the order passed by the Commissioner of Income-tax under section 263 is valid or not, it is necessary to discuss the provisions of section 263 which are stipulated a....
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....ief without inquiring into the claim ; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 ; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was 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 Appel late 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 injunct....
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....aw". "Erroneous assessment" refers to an assessment that deviates from the law and is therefore invalid, and is defect that is jurisdictional in its nature and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court but contrary to law, upon mistaken view of law, or upon erroneous application of the legal principles". Thus, an order can be said to be erroneous if there is incorrect assumption of facts or incorrect application of law by the Assessing Officer. If the Assessing Officer after making the enquiries and examining the records taken one of the possible views, it cannot be said that the order passed by the Assessing Officer was erroneous until and unless the view taken by the Assessing Officer is unsustainable in law. If the Assessing Officer has not carried out any enquiry, it can be said that the order passed is erroneous as due process of legal principles have not been followed. From the show-cause notice of the Commissioner of Income-tax, it is apparent that the Commissioner of Income-tax has treated the order to be erroneous as....
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....sactions of shares of Zee from October 25, 2010 to November 30, 2010 enclosed) our broker had sold the said shares on loss to recover the loan ; provided by him to us as per the loan agreement clause 'right of sale/immediate sale of securities' as under : 'If the margin falls below the specified percentage or the circumstances arise or likely to arise which may in the company's sole opinion jeopardise its interest and expose it or is likely to expose it to any financial loss and damage then and in such case the company shall have a right to demand repayment of the loan balance or immediately and without any reference or intimation to you liquidate all or any of the securities by sale or otherwise and forthwith transfer the proceeds towards satisfaction of the loan balance.' The company shall have the sole authority to decide the mode, manner and the price at which to the effect the sale of securities. It shall not be liable for any loss arising to you due to the sale or transfer of such securities arising out of its right to sell under the master loan agreement. In view of the above facts and circumstances our broker J. M. Financial Lt....
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....mes of its trustees being individuals, corporations, companies or societies registered under the Societies Registration Act, 1860, without the addition of the statement that they are trustees. Shares cannot be held in the name of the trust as such unless it is a separate legal entity such as a registered society. Companies are requested that wherever necessary their share registers should be rectified so as to comply with law as explained above." 10.3 We have also gone through the guidelines of NSDL for opening the account with NSDL in the case of the trust and we do not find any illegality or error in the order of the Assessing Officer while accepting the shares held in the name of Smt. Asha Gupta as proprietor of the trust. The shares were purchased out of the payment being made through the banking channel of the assessee-trust. Even the sale consideration has also come to the assessee-trust. The shares did appear in the balance-sheet of the assessee-company as investment. The Assessing Officer made the inquiry in respect of the sale of the shares and the loss incurred by the assessee on the sale of shares of ZEEL. This fact is apparent from the letter dated February 10, 2014 ....
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.... Officer to be erroneous. If the Assessing Officer had made the inquiry and duly considered the evidence as submitted and on the basis of such inquiry he has taken the view in favour of the assessee, that does not empower or clothe the Principal Commissioner of Income-tax to invoke the jurisdiction under section 263 of the Act unless the view taken by the Assessing Officer is unsustainable in law. This is not a case of lack of inquiry. There is a difference between the lack of inquiry and inadequacy of enquiry. The allegation of the Commissioner of Income-tax is that there is no examination by the Assessing Officer. 10.4 So far the professional and consultancy fees of Rs. 73,03,812 on the basis of which the Commissioner of Income-tax invoked the jurisdiction under section 263, we noted that the Assessing Officer has duly asked from the assessee vide notice issued under section 142(1), complete break up of the expenditure of the assessee in reply thereto has given the break up of the expenditure as per page 44 of the paper book. Thus, this is also not a case where the Assessing Officer did not make the inquiry. Similarly, in respect of the claim of the assessee for the expenditur....
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....or verification should have been carried out by the Assessing Officer in this regard and how examination of those were necessary by the Assessing Officer while making the assessment and dealing with the issue. Since the Principal Commissioner has not suggested the basis of the inquiry or verification to be carried out by the Assessing Officer and its relevancy with the setting off of the short-term capital gain against the short-term loss, the order passed by the Assessing Officer cannot be deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue. 12. Coming to the contention of the learned authorised representative that it is not necessary that the Assessing Officer to discuss in the order of the contentions of the assessee, we do agree with the learned authorised representative that there is no provision in the Income-tax Act which provides that the Assessing Officer should pass the assessment order in the manner so that all the queries raised by him as well as the submission made by the assessee should be incorporated in the assessment order. In our opinion, where the Assessing Officer do not agree with the assessee he should discuss the same in t....
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....n that merely because the Income-tax Officer had not written lengthy order, it would not establish that the assessment order passed under section 143(3)/148 of the Act is erroneous and prejudicial to the interests of the Revenue without bringing on record specific instances, which in the present case, the Commissioner of Income-tax has failed to do." 14. A perusal of the order passed by the Commissioner of Income-tax indicated that the assessment order passed by the Assessing Officer was cancelled on the ground that the Assessing Officer has not made proper enquiry and verification in respect of the issue as discussed above. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making the assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be touchstone of assessment order passed by him. No cogent material or evidence was brought to our knowledge by the learned Departmental representative which may prove that view taken by the Assessing Officer in the case of the assessee was unsustainable in law. Therefore, we are of the view that the order passed by the Commissioner of Income-tax is il....
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....neous and prejudicial to the interests of the Revenue." 16. In the case of CIT v. R. K. Construction Co., the hon'ble Gujarat High Court [2009] 313 ITR 65 (Guj) as confirmed by the Supreme Court, confirming the order of the Income-tax Appellate Tribunal for which the undersigned was the author, has held as under : "The details of sub-contractors examined by the Assessing Officer as per the directions of the Commissioner of Income-tax in revision proceedings, inter alia, include the names of these sub-contractors, their permanent account numbers, their permanent addresses, amount given to them, name of work entrusted to them, nature of such work and statements recorded by the Assessing Officer, etc. These details reveal that during the course of examination under section 131, no question was put to many of these sub-contractors as to the variation in their signatures. Similarly, no question was put to them for the reasons of discounting with the shroff. It is the stand of the assessee right from the beginning that all these sub-contractors were mainly working for the assessee and they did not have any office set up and since they were working for the assessee, they h....
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....e basis of evidence produced before him. On the basis of the said material and materials which were collected by the Commissioner of Income-tax in revisional proceedings, the Commissioner of Income- tax has taken a different view. However, in the revisional proceedings under section 263, it is not open for the Commissioner of Income-tax to take such a different view. No substantial questions of law arise out of the order of the Tribunal and hence, the appeal filed by the Revenue deserves to be dismissed.-CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj) ; [2002] 177 CTR (Guj) 546 and Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) ; [2000] 159 CTR (SC) 1 relied on)." In our opinion, the impugned case is duly covered by this decision also. 17. The hon'ble Supreme Court in the case of CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) has held as under (headnote) : "The phrase 'prejudicial to the interests of the Revenue' in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot....
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....o invest Rs. 20 lakhs and accordingly no addition was made on this account. In this assessment order the Assessing Officer had also noted that during the year share application money was increased by Rs. 47 lakhs. In order to verify the genuineness of share application money summonses under section 131 of the Act were issued to persons on random basis and their statements were recorded for confirming these investments made by them in the assessee-company. The Commissioner under section 263 of the Act directed the Assessing Officer to conduct further enquiries in respect of the share application money of Rs. 47 lakhs. He also held that the Assessing Officer had erred in determining the loss after issue of notice under section 148 of the Act. He mentioned lacunas and defects in the statements of the seven share applicants and the manner in which they were recorded. Accordingly, he held that the Assessing Officer had failed to make necessary verification and enquiries, which were required. The Tribunal quashed the order under section 263 of the Act passed by the Commissioner. On appeal : Held, dismissing the appeal, that the Tribunal had held that the order of the Assessing O....
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.... elaborately. Section 263 does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer who passed the order unless the decision is held to be erroneous. Where the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. The assessee was a manufacturer of car parts. Its return for the assessment year 2001-02 was taken up for scrutiny and assessment was completed. In revisional proceedings, the solitary objection of the Commissioner was that the expenditure on tools and dyes aggregating to Rs. 10 56,69,367 was allowed as revenue expenditure without a detailed investigation. After considering all the materials furnished by the assessee the Commissioner took the view that the acc....