TaxTMI 
TaxTMI 
2023 (12) TMI 267
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.... 1. That on facts and in law the Commissioner of Income Tax, Chennai - VI {hereinafter referred to as "CIT"} erred in assuming jurisdiction u/s 263 of the Income Tax Act, 1961 {hereinafter referred to as "Act"} in as much as the order dated 25th April, 2012 passed by Asst. Commissioner of Income Tax, Company Circle, Chennai {hereinafter referred to as "AO"} u/s. 143(3) of the Act was neither erroneous nor prejudicial to the interest of Revenue. 2. That on facts and in law the CIT erred in holding that the AO has not verified transaction of sale / purchase of shares offered to tax as Income from Capital Gain. 3. That on facts and in law the CIT has erred in setting aside the assessment and directing the AO to modify the same. 4. That on facts and in law the CIT erred in directing the AO to disallow deduction of Rs. 2,20,000/- claimed by the appellant u/s 35D of the Act. That the appellant prays for leave to add, alter, amend and/or vary the ground(s) of appeal at or before the time of hearing. 3. At the outset, we find that there is a delay of 1526 days in filing of the appeal before the Tribunal, for which, a petition for condonation of d....
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....ourt in the case of Vijay Vishin Meghani v. DCIT reported in [2017] 398 ITR 250 (Bom.). 3.1 The ld.CIT-DR, R.Mohan Reddy, strongly opposing the petition filed by the assessee for condonation of delay submitted that there is no merit in the petition filed by the assessee and also Affidavit filed by the CA and Director of the assessee's company, because, the assessee is a NBFC and is subject to statutory & tax audit since its incorporation. Further, the assessee was advised by qualified team of professionals. Therefore, it cannot be said that the assessee got wrong professional advice, which is reason for not filing the appeals before the Tribunal within time allowed under the Act, is vague and beyond imagination. He further referring to Affidavit filed by Mr.K.V.Srinivasan submitted that the assessee is aware of filing petition before the Hon'ble High Court & the Hon'ble Supreme Court and at the same time, claims that it does not know filing appeal before the Tribunal against the order passed u/s. 263 of the Act. Further, from the sequence of events, it is very clear that the assessee was pursuing alternate remedy available under the Act, when it does not get favourable results f....
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....e above, it is very clear that there is a merit in Affidavit filed by Mr.K.V.Srinivasan, CA, that he gave a wrong professional advice and advised his client not to file appeal against the order passed by the Ld.CIT u/s. 263 of the Act, appears to be bona fide & genuine. It is not a case of the Revenue, the assessee was not at all pursuing their case either on 263 proceedings or consequential assessment proceedings. In case, the assessee was not pursing the matter at all, then, the Revenue's contention that the assessee has filed appeals deliberately with a delay of 1526 days appears to be correct. Because, as we have already discussed in our earlier paragraphs of this order, no person would get any benefit by not filing appeal against any assessment order or order passed u/s. 263 of the Act, rather, he or she would be in adverse position, if an appeal is not filed and challenged the assessment order or 263 order passed by the Ld.CIT. Therefore, we are of the considered view that there is a merit in the reasons given by the assessee in the petition for condonation of delay in filing of the appeals and which is supported by Affidavit filed by Mr.K.V.Srinivasan, CA, who had represente....
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....atio laid down by various Courts is that no appeal should be thrown out of judicial scrutiny on technical reasons, and further, if there is a genuine reason for not filing appeals in time, the Courts and Tribunals should condone the delay and decide the appeals on merits. Therefore, we are of the considered view that the appeals filed by the assessee with a delay of 1526 days deserved to be condoned and thus, we condone the delay in filing of the appeals and admit appeals filed by the assessee for adjudication. 4. The brief facts of the case are that the assessee is a Non-Banking Finance Company (in short "NBFC") engaged in the business of investment in shares and Mutual Funds and also trading in shares & securities. The assessee company had filed its return of income for the AY 2010-11 on 08.09.2010 declaring total income of Rs. 5,77,99,170/-. The case was taken up for scrutiny and notice u/s. 143(2) of the Act, dated 05.09.2011 & notice u/s. 142(1) dated 07.02.2012, was issued calling for certain information. In response, Mr.K.V.Srinivasan, CA/Authorized Representative was present, from time to time, and furnished the information called for. The assessment has been completed u....
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....ls and the AO during assessment proceedings has verified the details filed by the assessee and has accepted 'short term capital gains' declared from purchase & sale of shares. The assessee had also submitted details with regard to deduction claimed u/s. 35D of the Act, and computation of disallowance u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962 and argued that all details have been furnished to the AO and the AO has verified the same and accepted the claim of the assessee. Therefore, it cannot be said that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. 6. The Ld.CIT after considering relevant submissions of the assessee and also taken note of certain judicial precedents, including the decision of the Hon'ble Andhra Pradesh High Court in the case of Spectra Shares & Scrips (P.) Ltd. v. CIT-III reported in [2013] 36 Taxmann.com 348 and also the Circular of CBDT dated 15.06.2007, opined that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue on the issue of assessment of profit derived from purchase & sale of shares under the head 'short ter....
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.... 10,90,174 The disallowance u/s 14-A r.w. Rule 8D is Rs. 10,90,174/-. The assessee company in its written submission has argued as under: - "During the financial year 2008-09, the assessee invested in HDFC cash management fund Saving Plan Growth. The assessee had a profit of Rs. 6,78,761/- on redemption which has been offered for tax and assessed. The profit on redemption is thus not an exempted income. Therefore, the assessee has taken opening investment as '0' and closing investment as Rs. 28,00,86,8397- arriving at average investment of Rs. 14,00,43,420/-" and hence, the assessee company had argued that the disallowance made by the assessee company in the Return of Income for the AY 2010-11 is correct. The Assessing Officer is hereby directed to verify the assessee's claim and arrive at the correct disallowance as per the provisions of Sec. 14-A of the Income Tax Act, 1961 r.w. Rule 8D of the Income Tax Rules. (iii) The assessee company has declared a sum of Rs. 6,07,02,655/-under Short-Term Capital Gain, being the gain on sale of investments. A perusal of the details filed by the assessee during the course of assessment ....
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.... order passed by the AO u/s. 143(3) of the Act, dated 25.04.2012 without appreciating the fact that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. The Ld.Counsel referring to assessment order passed by the AO and notice issued u/s. 143(2) of the Act, dated 05.09.2011 and u/s. 142(1) of the Act, dated 07.02.2012 submitted that the AO has called for various details in respect of purchase & sale of shares. The assessee has filed all details in respect of computation of 'short term capital gains' from purchase & sale of shares. The AO verified details filed by the assessee with reference to AIR information and accepted the claim of the assessee with regard to 'short term capital gains'. Therefore, it cannot be said that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. The Ld.Counsel for the assessee further submitted that the assessee is a NBFC involved in investment in shares & Mutual Funds and also trading in shares & securities right from beginning. The Department has accepted two portfolios i.e. one for investment and another for trading. The assessee is decl....
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....tion, but fact remains that the AO has not discussed the issue in light of relevant provisions of the Act and Circular of CBDT, where it has been clearly laid down procedure for verification of share transactions. In this case, the assessee has made repetitive transactions of purchase & sale of shares within the same Financial Year, which needs to be assessed under the head 'profits gains of business & profession'. The AO failed to apply his mind to relevant facts in right perspective of law which rendered the assessment order to be erroneous in so far as it is prejudicial to the interest of the Revenue, and thus, the CIT has rightly set aside the assessment order passed by the AO and their order should be upheld. 10. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The Ld.CIT has set aside the assessment order passed by the AO, u/s. 143(3) of the Act, dated 25.04.2012 in exercising his powers u/s. 263 of the Act, on the ground that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. The Ld.CIT has taken up three issues for revision proceedings....
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.... course of assessment proceedings, the AO has called for various details by issuance of notice u/s. 143(2) of the Act, dated 05.09.2011 and notice u/s. 142(1) of the Act dated 07.02.2012. In response, the assessee has submitted various details, including details of purchase & sale of shares, computation of 'short term capital gains', relevant bank statements, etc. The AO has verified the transactions reported in AIR information with reference to various details filed by the assessee and has recorded categorical findings that the assessment has been completed after examining the information furnished with reference to income declared under the head 'short term capital gains'. From the above, it is very clear that it is not a case of the Ld.CIT that the AO has not verified the issue at all. In fact, the Ld.CIT himself admits the fact that the AO called for necessary information and verified the details filed by the assessee with reference to AIR information reported in Income Tax Data Base. Therefore, we are of the considered view that the Ld.CIT erred in assuming jurisdiction u/s. 263 of the Act, because, it is not a case of lack of enquiry. No doubt, various courts, including the H....
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....sessment order passed by the AO on the issue of profit derived from purchase & sale of shares is incorrect and erroneous in so far as it is prejudicial to the interest of the Revenue. This, position is clarified by the CBDT in their Circular No.4/2007 dated 15.06.2007, where, various parameters have been prescribed for verification of share transactions and none of parameters prescribed by the Board is adversely affecting the transactions of the assessee. Further, the Board has very clearly stated that the tax payers can have two portfolios i.e. one for investment and another for trading, but there should be clearly demarcation in the books of accounts in respect of both portfolios. In this case, the assessee has filed all evidences to prove that it was having two portfolios and maintaining separate records for investment portfolios and trading portfolio. Therefore, we are of the considered view that the assessee has rightly declared 'short term capital gains' towards profit derived from purchase & sale of shares, and thus, the assumption of jurisdiction by the Ld.CIT fails on this issue. 14. At this stage, it is relevant to refer to certain judicial precedents. The assessee has....
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....n the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 13. In the said judgment, Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sarogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC), wherein it has been held that where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, the order is erroneous and prejudicial to the interest of the Revenue. After reference to these two decisions, the Delhi High Court observed:- "These two decisions show that it is not necess....
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....there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): " . . . From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue" . It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said....
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....n of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed . . . We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be " erroneous" simply because in his order he did not make an elaborate discussion in that regard."" 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand....
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....s hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase "prejudicial to the interest of Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, ....
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....ssessee had also relied upon the decision of the Hon'ble Bombay High Court in the case of CIT v. Nirav Modi reported in [2017] 390 ITR 292 (Bom.). The Bombay Hon'ble High Court in light of provisions of Sec.263 of the Act, held as under: * It is a settled position of law that powers under section 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions viz. the assessment order should be erroneous and prejudicial to the revenue. By erroneous is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no occasion to exercise powers of revision can arise. Nor can revisional power be exercised for directing a fuller inquiry to find out if the view taken is erroneous, when a view has already been taken after inquiry. This power of revision can be exercised only where no inquiry as required under the law is done. It is not open to enquire in cases of inadequate inquiry. [Para 6] * In this case, during the a....
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....equate enquiry. * It is very important to note that the Commissioner in his order under section 263 has recorded the fact that there has been no adequate inquiry. Thus, this is not a case of no inquiry, warranting order under section 263. Thus, this objection on the part of the revenue, is also not sustainable. [Para 9] * In the present facts, the Assessing Officer was satisfied, consequent to making an enquiry and examining the evidence produced by assessee, establishing the identity and creditworthiness of the donor as also the genuineness of the gift. The Commissioner in his order of revision, did not indicate any doubt in respect of the genuineness of the evidence produced by the assesses. The satisfaction of the Assessing Officer on the basis of the documents produced was not shown to be erroneous in the absence of making a further enquiry. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the Commissioner not correct, it would not permit him to exercise power under section 263. [Para 12] * In view of above, revenue's appeal is dismissed. 16. The assessee had also relied upon t....
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....her, a copy of the sale deed legal opinion obtained from his counsel regarding eligibility for exclusion of payments to charitable institutions -and-remuneration to the executor-in-computing-the -long term capital gains on sale of property. AH these documents were forwarded to the Assessing Officer through the assessee's Chartered Accountant along with their letters. After perusal of all the records placed by the assessee and after noting the submissions of the Chartered Accountant of the assessee, the assessment was completed and the stand taken by the assessee was accepted by the Assessing Officer. However, the plea raised by the assessee with regard to the cost of indexation benefit was not accepted and the Assessing Officer held that the assessee is allowed cost of indexation benefit only from the financial year 2011-12 as per Explanation (Hi) in section 48. The Commissioner had issued show cause notice under section 263. In the show cause notice, the Commissioner states that the figures mentioned by the assessee were culled out from the records, thus there was no other independent material which formed the basis of the show cause notice. The Commissioner opined that the ex....
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.... Section 263 does not visualize 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. Merely because the Commissioner is not fully satisfied with the conclusion of the Income Tax Officer, the order cannot be turned to be erroneous. On a reading of the order passed under section 263 one can easily form an opinion that the order is based upon the interpretation which the Commissioner has given to the terms and conditions of the last will and testament of the assessee's father. Thus, it is evident that the Commissioner has made a roving enquiry and substituted his view to that of the view taken by the Assessing Officer who had done so after conducting an enquiry into the matter and after calling for all documents from the assessee, one of which is the last will and testament executed by the assessee's father. Therefore, this is not a case where the Commissioner could have invoked the power under, section 263. [Para 6] " The last will and testament of the assessee's father has been gone through. He had appointed MSN. Advocate as the executor to give e....
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....eous. In the impugned order passed by the Tribunal, it has been stated that "the entire sale consideration received from the sale of immovable property absolutely to his second son i.e. KR and thereafter he said he has to distribute the sale proceeds after paying property taxes if found due and shall make payment out of the sale consideration and also said how to distribute the sale consideration". The word 'thereafter' used in the order of the Tribunal nowhere occurs in the will. However, the testator's direction to sell the property was to the executor of the will and there was a specific direction, to the executor to pay specific sums of money to the charitable institutions, clear the property tax arrears, claim his professional fee, meet the stamp duty expenses and the remaining amount shall be paid to the assessee. Therefore, the misinterpretation of the intention of the testator in his will has resulted in an erroneous order passed by the Commissioner which order was erroneously confirmed by the Tribunal by the impugned order. [Para 8] The case on hand requires to be interpreted based on the intention of the testator for which purpose we have read the wil....
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....antial question of law is answered in favour of the assessee. [Para 12] Another substantial question of law is with regard to the expenditure claimed by the assessee. The assessee had produced documents before the Assessing Officer who had scrutinized the same and accepted the genuinity of the claim and granted the benefit. The Commissioner disallowed the expenses on the ground that the Assessing Officer did not make an in-depth inquiry. As mentioned in the preceding paragraphs, the assessee has responded to the notice issued under section 142 and produced documents and records including their statement of total income wherein they had given the entire details including the receipts issued by the respective persons to whom payments were effected, all of which were through banking channels. Therefore, the finding rendered by the Commissioner was perverse which ought not to have been affirmed by the Tribunal more so for the reason that there was no evidence with regard to the expenses like professional fee, etc. The Tribunal failed to note that the assessee had produced the copies of the receipts signed by the respective party before the Assessing Officer who was satisfied w....