AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (6) TMI 317
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee's case was selected for limited scrutiny 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on whose statements Department had relied upon in this 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on records by any cogent material nor it is the case of Ld AO/CIT-A that transaction done are at variance with price on given 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee, then the other grounds would became academic in nature. The Ld. Sr. Departmental Representative agreed to the proposal of the Ld. Authorized Representative. Therefore, we are proceeding to hear both the parties initially on ground 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed reliance on numerous judicial precedents wherein it had been held that the violation of CBDT Instruction governing the scrutiny u/s 143(2) of the Act would lead to the invalidation of the entire assessment. 4.3 The Ld. Authorized Representative 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 evid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the Assessing Officer ('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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. iv Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data , the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned. 3. As far as the returns selected 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s very letter, the CBDT has also highlighted the aspect of cryptic order sheet entries which according to the CBDT shows irresponsible, ad hoc and indisciplined working of an Officer of the Department. A perusal of the aforesaid instructions would show that the objective behind the issuance of these instructions is (i) to prevent possibility of fishing and roving enquiries; (ii) ensure maximum objectivity; and (iii) to enforce checks and balances upon the powers of an Assessing 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 o....