TaxTMI 
TaxTMI 
2020 (6) TMI 317
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....utiny with respect to long term capital gains but it was noticed that the assessee had claimed a short term capital loss of Rs. 4,20,94,764/- which had been adjusted against long term capital gains. As per the Assessing Officer, the loss claimed by the assessee appeared to be suspicious in nature primarily due to the reason that the loss could possibly have been created to reduce the incidence of tax on Long Term Capital Gains shown by the assessee. The Assessing Officer further stated in the assessment order that in order to verify this aspect, approval of the Ld. Principal Commissioner of Income Tax (PCIT) was taken to convert the case from limited scrutiny to complete scrutiny and that the assessee was also intimated about the change in status of the case. As noted in the assessment order, the statement of Shri Rohit Verma, Director of the company was recorded u/s 131 of the Act on 27.11.2017 wherein Shri Rohit Verma is said to have stated that the assessee company had purchased shares from four brokers namely M/s Rochak Vinimay Pvt. Ltd., Ekaparnik Vintrade Pvt. Ltd, Rochi Dealcom Pvt. Ltd. & Duari Marketing Pvt. Ltd. As per the Assessing Officer, since all these brokers were K....
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.... respect. Thus, the allowance of short term capital gains of Rs. 4,20,94,764/- was upheld along with the addition of Rs. 8,41,895/- made on account of alleged unexplained commission expenditure. However, the Ld. CIT (A) deleted the addition of Rs. 1,93,20,000/- on account of long term capital gains as the same was based on incorrect computation. 2.4 Now, the assessee has approached this Tribunal challenging the order of the Ld. CIT (A) and has raised the following grounds of appeal: "1. That order passed by Ld AO dated 30/12/2017 and further order passed by Ld GIT A dated 18/06/2019 are bad in law in as much as mechanical notice u/s 143(2) on basis of CASS is not in accordance with jurisdictional conditions stipulated under the Act so it shows grave and patent non application of mind on part of Ld AO in issuing notice u/s 143(2) and accordingly all subsequent proceeding including orders passed by Ld AO and Ld CIT-A are void ab initio. 2. That order passed by Ld AO dated 30/12/2017 and further order passed by Ld CIT A dated 18/06/2019 are bad in law in as much as admitted from para 3 of assessment order that case was primarily selected for limited scrutiny only on limited issu....
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....iven date on stock exchange (v) fifthly case set up by Ld AO/CIT-A to disallow stated loss on ground of probability, suspicion, would fall the fowl of test of live nexus where there is no live nexus between inference of accommodation entry and disallowance loss vis a vis sale/purchase of shares vi) sixthly no material worth name in form of statement implicating assesses or its transaction in question has been confronted/cross examined to assessee in manner known to law except general allegations being made vii) lastly no case specific and transaction specific material is brought on records to dislodge evidence of genuine share sale loss claim of assessee. In view of above we pray for outright disallowance of loss as made by Ld AO and as mechanically sustained by Ld CIT-A where Ld CIT-A has just mechanically applied general sermons without giving any specific finding on our assail lodged before him. 5. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the action of Ld AO in making loss disallowance of Rs. 42936.659/- without appreciating that burden to prove that transaction is bogus/sham has remained, un-discharged from side o....
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....round Nos.1 & 2. 4.0 The Ld. Authorized Representative submitted that the assessment order passed by the Assessing Officer was bad in law because, admittedly, the case was selected for limited scrutiny on the limited issue of long term capital gains and it was converted to a complete scrutiny only on a mere suspicion and for the purposes of verification only on the basis of an invalid approval by the Ld. Pr. Commissioner of Income Tax. It was submitted that the conversion from limited scrutiny to complete scrutiny in the instant case was not as per the instructions issued by the CBDT viz. Instruction No.19 & 20/2015 dated 29.12.2015 and, therefore, the entire assessment was void ab initio. The Ld. Authorized Representative vehemently argued that the conversion from limited scrutiny to complete scrutiny was itself bad in law. The Ld. Authorized Representative drew our attention to the notice issued by the Department dated 11.04.2016 for limited scrutiny and also letter dated 17.10.2017 issued by the Department informing the assessee of converting the limited scrutiny into complete scrutiny. The Ld. Authorized Representative also drew our attention to the computation of income by th....
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....sentative also submitted that the impugned addition had been made only by making some reference of the report of the Investigation Wing which the assessee was not confronted with and further the assessee's prayer for granting opportunity for cross examining those persons on whose statements the Department had relied upon was also denied. It was argued that it was apparent that the de hors the material relied upon by the Department, the addition had no feet to stand. In this regard also, the Ld. Authorized Representative placed reliance on numerous judicial precedents and submitted that where there was no material available with the Department except the so called investigation report, the Department cannot be allowed to improve upon the reasoning of the Assessing Officer and the Ld CIT (A) . 4.4 The Ld. Authorized Representative also submitted that there was an inordinate delay in getting the case converted to complete scrutiny which was evident from the fact that information dated August, 2015 of the Investigation Wing is purportedly made the basis of conversion of the case from limited scrutiny to complete scrutiny in October, 2017 whereas the case was selected for scrutiny in A....
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....icer ('AO') shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under 'Complete Scrutiny'. In this regard, the monetary limits and requirement of administrative approval from Pr. CIT/CIT/Pr. DIT/DIT, as prescribed in Para 3(d) of earlier Instruction dated 29.12.2015, shall continue to remain applicable. 3. Further, while forming the reasonable view, the Assessing Officer would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 6. To ensure proper monitoring in cases which have been converted from 'Limited Scrutiny' to 'Complete Scrutiny', it is suggested, that provisions of section 144A of the Act may be invoked in suitable cases. To prevent possibility of fishing and roving enquiries in such cases, it is desirable that these cases should invariably be picked up while conducting Review or Inspection by the administrative authorities. 7. The above Instru....
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....cted for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year - one is 'Limited Scrutiny' and other is Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in 'Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under: a. In 'Limited Scrutiny ' cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142( 1) of the Act in 'Limited Scrutiny ' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny . Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny ' issues. c. These cases shall be completed expeditiously in a limited number of hearings. d. During the course of assessment proceedings in ' Limited Scrutiny ' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exce....
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....sessing Officer. 6.3 We have also gone through the proposal drafted by the Assessing Officer on 05.10.2017 for converting the case from limited scrutiny to complete scrutiny. This reads as under: "....4. In this regard it may be mentioned here that the assessee has shown a short term capital loss on sale of shares purchased on 09.07.2014 and sold on 15.02.2015 . The purchase price of these shares has been stated at Rs. 499,98,440 and sale price has been mentioned at Rs. 79,03,676. The resultant loss of Rs. 420,94,764 has been set off by the assessee against long term capital gains. This transaction appears to be suspicious in nature and probably this loss has been created to reduce the incidence of tax on long term capital gains discussed in para 3. This issue needs to be thoroughly examined to ascertain the genuineness of this loss" 6.4 We have also through the original order sheet entries, as were present in the assessment records and which had been submitted for our perusal by the Ld. Sr. Departmental Representative under our directions and it shows that there is not an iota of any cogent material mentioned by the Assessing Officer which enabled him to have reached the concl....