TaxTMI 
TaxTMI 
2021 (9) TMI 1167
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.... of Rs. 10,19,920/- for AY 2014-15 and the case was selected for scrutiny through CASS (Computer Aided Scrutiny Selection), inter alia, for the loss in shares also. According to Ld. A.R., the AO after issuing notice u/s. 143(2) dated 10.09.2015 and notice u/s. 142(1) dated 05.07.2016/25.11.2016 wherein the AO had asked for the details in respect of short term capital loss/gain/business loss on account of dealing in shares in FY 2013-14(AY 2014-15) in the format asked u/s. 142(1) of the Act with documentary evidence like demat account, contract notes and ledger account of share brokers whereby the AO asked for specific details like name of shares, opening stock, date of purchase and sales, closing stock, P & L Account, remarks, quantity, loading, total value of shares and thereafter again taking note of the detailed reply of the assessee along with the supporting documents filed along with supporting documents filed during the assessment proceedings, the AO being satisfied did not draw any adverse inference/view against the claim made by the assessee on this issue of loss in share trading (short term capital loss) and passed an assessment order dated 21.12.2016 making further an add....
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....ed by the Ld. PCIT not to have been enquired by issuing notice u/s. 142(1) of the Act on 05.07.2016 & 25.11.2016 and pursuant to which the assessee had replied on 29.07.2016 & 30.08.2016 and on 01.12.2016 along with supporting documents like demat account, contract note and ledger account of share broker etc. So, according to assessee, the AO after having through enquired and having gone through the reply of the assessee to the specific queries raised by the AO on this issue and after perusal and verification of the documents filed on the issue, and after verifying that sale/purchase of the scrips were in conformity with the market rates, transactions through registered members of stock exchange and through account payee cheques and after being satisfied the AO had accepted the transaction on which the assessee claimed the business loss as per circular No. 6 of 2016 of the CBDT dated 29th February, 2016. And therefore the action of AO cannot be termed as a case of no-enquiry on the issue of business loss on the scrips as claimed by the assessee, and so, according to assessee, the Ld. PCIT erred in his factual assumption on this issue, i.e., the AO has not conducted any enquiry of s....
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....dicator ]then in aforesaid any event the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law". 7. In....
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....etails of cheque numbers and the copy of bank statement highlighting the relevant entries evidencing the transaction. We note that the assessee had filed the reply to the AO's notice dated 25.08.2016 on 30.08.2016 which is found placed at page 27 along with supporting documents called for by the AO which evidences support transaction in shares which resulted in loss. And from a perusal of the reply of the assessee to the AO, it is noted that the assessee had filed, inter alia, the details of purchase and sale of shares in question along with copy of demat account, contract notes, bills, copy of bank statements and thus along with the reply to the notice of AO, the assessee had filed the details of loss along with supporting material. Thereafter the AO has passed the assessment order without drawing any adverse view. In the aforesaid scenario the only inference that can be drawn is that the AO having gone through the reply and the supporting material being satisfied that the assessee being an NBFC company, having main business of providing finance & trading in shares & securities had shown to have earned revenue from sale of shares of Rs. 62,39,881/- and claimed business loss of....
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....cumstances in respect of the action of AO while enquiring into the issue of loss were cited by the Ld. PCIT in his impugned order or the Ld. DR. So, we presume the fact that AO was aware of the contents of the circular of CBDT regarding penny stock and thereafter had issued notice u/s. 142(1) of the Act (supra) and has accepted the claim of business loss and in consonance with the CBDT Circular No. 6/2016 dated 29th February, 2016. Thus invoking Explanation 2(c) of section 263 of the Act is not correct in the facts and circumstances of the case. The Ld. PCIT other than referring to the CBDT order dated 16.03.2016 has not bothered to refer to any cogent material on the basis it can be said that these three scrips in question are penny stock. Therefore, the assumption of Ld. PCIT is based on surmises and conjectures and it is settled principle of law that suspicion howsoever strong cannot take the place of evidence/proof. And, it is interesting to note that in this case, the assessee an NBFC has shown revenue from sale of shares to the tune of Rs. 62,39,881/- which has not been found fault by the Ld. PCIT, whereas the loss claimed from sale of shares have been found to be at fault fo....