TaxTMI 
TaxTMI 
2023 (1) TMI 1347
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.... the facts and in the circumstances of the case, the learned Pr. CIT has erred in not following the judicial prudence when the Coordinated ITAT bench decision should have been followed and when there is no high court order against the above issue. TAXATION OF WHOLE SALE CONSIDERATION ON SALE OF SHARES AS AGAINST CAPITAL GAIN ON SUCH SALE 3. The learned Pr. CIT has erred to hold that the assessment order was erroneous and prejudicial to the interest of revenue on issue of the taxation of whole (full) sale consideration on sale of shares as against capital gain on such sale ) and should have been added full u/s 68 of the I.T. Act including cost of acquisition to the extent of Rs.63,07,552/- (Rs.55972000-Rs.49664448) and failed to appreciate that there is adequate inquiry on the same issue and the learned AO has passed the order after application of mind and after considering relevant material and after his satisfaction. 4. In the facts and in the circumstances of the case, the learned Pr. CIT has erred to give the direction for revision u/s 263 on issue when the matter for the same issue is pending before the CIT appeals and the order cannot be revised unde....
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....xation of property rights and sale of property in spite of the fact that the learned A. O. had conducted sufficient inquiry and applied his mind. 12. In the facts and in the circumstances of the case The learned Pr. CIT has failed to appreciated that The assessee has been charged with full consideration and even cost has not been allowed as deduction irrespective of head of income and the assessee has been over taxed & The learned Pr. CIT has passed the order mechanically . 13. In the facts and in the circumstances of the case, the learned Pr. CIT has erred to give the direction for revision u/s 263 on issue when the matter for the same issue is pending before the CIT appeals and the order cannot be revised under section 263 on this issue specially when the issues is the subject matter of appeal and failed to appreciate that The issue of not allowing cost of acquisition and head of income has been appealed before cit( a) as apparent from appeal memo and failed to appreciate that The proceedings under section 263 are invalid during the pendency of an appeal as held in Aerens Infrastructure & Technology Ltd. v. CIT [2004] 271 ITR 15 (Delhi) (HC) The learned....
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....issues discussed in revision order. 17.The Pr. CIT has erred in revising an assessment order on the ground that A perusal of assessment proceedings show that while making the assessment, the Assessing Officer has failed to examine the issues properly and has not applied his mind to facts and circumstances of fhe case for the purpose of determining the genuineness of the claims and failed to appreciate that It is a subjective finding & subjective satisfaction & not based on any objective materiara of apparent from revision order. 18. The learned CIT failed to appreciate the fact that even if there was any inquiry, even inadequate, that would not by itself give occasion to the CommissioneT To" pass orders under section 263 of the Income-tax Act, 1961, merely because he had a different opinion except the inquiry mandated as per law has not been conducted .The learned Pr. CIT failed to appreciate the fact that where the assessment order has been passed by the AO after taking into account the assessee1 submissions and documents furnished by him and no material what so ever has been brought on record by the Pr. CIT which showed that there was any discrepancy or falsity ....
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....d to hold that the assessment order was erroneous and prejudicial to the interest of revenue on issue of Genuineness of Unsecured loans and creditworthiness of creditors in general without specifying nay name & when the evidence were on record in respect of the genuineness/identity/capacity of the cash creditors and once this factual completely wrong and the Pr cit has not discussed this issue at all in the revision order nor the order has been set aside on such issues. 20. In the facts and in the circumstances of the case, the learned Pr. CIT has erred to rely upon EXPLANATION 2 when basis conditions of 263 provisions are not fulfilled." 2. Briefly stated, facts of the case are that the assessee filed its return of income electronically on 08th April, 2017 declaring total income of Rs.76,26,110/-. The case of the assessee was selected for 'limited scrutiny' purpose and statutory notices under the Income-tax Act, 1961 (in short, 'the Act') were issued and complied with. The assessment under section 143(3) of the Act was completed on 28/12/2018 wherein the Assessing Officer disallowed interest on loan amounting to Rs.41,27,302/-; held long term capital gain amounting to ....
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....order can't be revised other than the reason(s) of 'limited scrutiny' assessment. On the issue of limited scrutiny assessment, the finding of Ld.PCIT are reproduced as under "9. The final contention of the assessee is that this is also a case of limited scrutiny and the order can be revised only for the issue which were before the AO. This contention is also not tenable as detailed below. Circular No.20/2015 dated 29.12.2015 and Instruction No.5/2016 dated 14.07.2016 are relevant with regards the jurisdiction of assessment proceedings in cases under Limited Scrutiny. It clearly states that even on issues other than selected under CASS, the Assessing Officer has the power to take up the assessment for comprehensive scrutiny with the approval of the Pr. CIT/DIT concerned. Therefore, in the present case also the Assessing Officer could have converted the limited scrutiny assessment into a complete scrutiny assessment by obtaining approval from the Pr. CIT/DIT concerned. The Assessing Officer having failed to convert the limited scrutiny into a complete scrutiny in itself renders the order of the Assessing Officer erroneous and prejudicial to the interest of revenue for invoki....
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....ion and in assessment, potential escapement of income. Thus it has held revision u/s 263 valid in Limited scrutiny cases where the AO did not examine the issues not forming part of CASS selection. It is also noteworthy that in this case, the judgement in Sonali M Bhavsar Vs. Pr.CIT ITA 742/M/2019), relied upon by the assessee, has also been considered before giving the judgement." 7. Before us, the Ld. Counsel of the assessee referred to page 99 of the paper book and submitted that the case was selected under 'limited scrutiny' for examination of two issues, firstly, whether the deduction against income from other sources had been correctly shown in the return of income and secondly, whether the share capital was genuine and from disclosed sources. The Ld. Counsel of the assessee submitted that In view of those two limited issues available for enquiry by the Assessing Officer, the Assessing Officer was not empowered to carry out enquiries on the other issues including penny stock, brought forward losses, provisions of section 115BBE, taxation of entry operator charges, allowance of speculation loss, taxation of property rights and sale of property and genuineness of unsecured lo....
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....e reason, that he had failed to dwell upon certain other issues which were clearly beyond the realm of the reason for which the case of the assessee was selected for limited scrutiny as per the AIR information. We thus not being able to concur with the view taken by the Pr. CIT that the order passed by the A.O under Sec. 143(3), dated 10.10.2016 is erroneous, therefore, set aside his order and restore the order passed by the A.O. As we have quashed the order passed by the Pr. CIT under Sec. 263 on the ground of invalid assumption of jurisdiction by him, therefore, we refrain from adverting to and therein adjudicating the contentions advanced by the Id. A.R on the merits of the case, which thus are left open." 8. Further, the Ld. Counsel also relied on the decision of the Delhi Bench of Tribunal in the case of Pawansut Media Services vs PCIT in ITA No.534/Del./2021 for A.Y. 2015-16 wherein it is held that if the Assessing Officer had made enquiries as per the reasons for which the case was selected for limited scrutiny and the case was not converted to full scrutiny, the Ld. PCIT was not justified in assuming the jurisdiction under section 263 of the Act. 9. The Ld.DR, on the ....
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..... In this connection you are requested to submit following documents:- (i) Financial statements including capital account, P&L account and balance sheet as on 31.03.2015 and 31.03.2016. (ii) Confi9rmations of the said parties. (iii) Ledger extract of these parties in your Bank Account as on 31.03.2015 and 31.03.2016. (iv) Bank statement for the period 01.04.2014 to 31.03.2015 and 01.04.2015 to 31.03.2016." 10.2 The Assessing Officer further issued reminder by way of notice dated 15/11/2018, a copy of which is available at pages 105 & 106 of the paper book. In response, the assessee filed details, a copy of which is available on pages 26 to 36 of the paper book. The relevant reply on page 34 of the paper book is reproduced as under:- "RE: NAGJI KESHAVJI RITA-AADPR7934H SUB: Notice u/s142(1)dt 29/10/2018&dt. 15/11/2018 for AY16-17 In response to your notice No.lTBA/AST/F/142(1)/2018-19/1013387138 (1) dated 29/10/2018& notice No. ITBA/ASST/F/142(1 )/2018-19/1013641330 (1) dated 15/11/2018, we submit as under: 1. Expenses claimed u/s 57 of the Act is with respect to Interest paid to various parties from whom loa....
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....ith details of acquisition of the shares, cost of share, demat statement, etc. The sale of shares of Inventure Growth & Securities Ltd has been held by the Assessing Officer as sale of Penny stock. In view of the above, the contention of the assessee that issue of sale of penny stock was not covered under the scope of limited scrutiny is not justified because long term capital gain on sale of the shares of Inventure Growth & Securities Ltd constitute one of the items of increase in share capital of the assessee which was one of the issues for examination under the limited scrutiny. Hence, we reject the contention of the assessee , that the issue of sale of penny stock orsale of shares of Inventure Growth & Securities Ltd was not part of limited scrutiny assessment. 10.4. As far as issues other than the issue of sale of shares in of Inventure Growth & Securities Ltd, the Ld.PCIT has referred to the Instruction No.20 /2015 dated 29/12/2015 and instruction No.5/2016 dated 14th July, 2016 regarding the jurisdiction of Assessing Officer in assessment proceedings in cases under limited scrutiny and held that the Assessing officer turned a blind eye towards those instructions of CBDT. ....
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....fined only to issues under 'Limited Scrutiny' and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to 'Complete Scrutiny' after allowing the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously intimate the taxpayer concerned regarding 'Complete Scrutiny' in such cases. 5. It is also clarified that once a case has been converted to 'Complete Scrutiny', the AO can deal with any issue emerging from ongoing scrutiny proceedings notwithstanding the fact that the reason for such issue have not been included in the Note. 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 invariable be picked up while conducting Review or Inspection by the administrative authorities. 7. The above Instruction shall be applicable from the date of its issue and wou....
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.... and (c) above shall no longer remain binding in such cases. (For the present purpose, 'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru and Ahmedabad). 4.to 5. XXXXXXXXXXXXXXXXXXXXXXXXXX Sd/- (Ankita Pandey) Under Secretary to Government of India (F.No.225/269/2015-ITA.II)" 10.6 In this case, return of income has been filed on 4th April, 2017, and notice under section 143(2) of the Act for selecting the case under 'Limited Scrutiny' was issued on 24/07/2017. The CBDT has further issued directions vide letter dated 28/112/2018 which applies to all pending cases of 'Limited Scrutiny' selected under CASS cycle of 2017. The case of the assessee falls under the category of cases mentioned in the instruction dated 28/11/2018. The relevant part of Instruction is reproduced as under: " F. No. 225/402/2018/ITA.II Government of India Ministry of Finance Department of Revenue (CBDT) North Block, New Delhi, the 28th of November, 2018 To All Principal Chief-Commissioners of Income-tax/All Principal Director-Generals of Income-tax Sir/Madam, Subject: Scope of enquir....
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....Officer shall not expand the scope of enquiry/investigation beyond the issue(s) on which the case was flagged for 'Limited Scrutiny' & issue arising from nature of information mentioned in para 2 and 3, above. 5. The following procedure shall be adopted while examining the additional issue: i. The Assessing Officer shall duly record the reasons for expanding the scope of 'Limited Scrutiny' to the extent mentioned in para 2 and 3, above; ii. The same shall be placed before the Pr. CIT/CIT concerned and upon his approval, further issue can be considered during the assessment proceeding; iii. The Assessing Officer shall issue an intimation to the assessee concerned that additional issue would also be considered during the course of pending assessment proceeding; iv. To ensure proper monitoring in these cases, provisions of section 144A of the Income-tax Act, 1961 may be invoked in suitable cases. Further, to prevent fishing and roving enquiries in these cases, it is desirable that these cases are invariably picked up for Review/Inspection by the administrative authorities. 6. The above directive shall be applicable ....
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....der 'Limited Scrutiny' were so glaring that the Assessing Officer should have considered the matter for converting limited scrutiny to comprehensive scrutiny. We find that Ld.PCIT has observed following issues , which according to her the Assessing officer was expected to examine are, as under: "1.2 Further, special rate has been calculated on Rs. 58,30,655/- @20% which is incorrect. This income ought to have been taxed as per provisions of section 115BBE. 1.3 Further, It is also seen from the case records that speculation loss of Rs. 75,47,956/- has been shown which has not been examined at all by the AO. 1.4 On perusal of the records, it is seen that rights in property at A-1006 Paramount Properties were sold during the year. This transaction has not been examined from the possibility of under declaration of income u/s 50C. Apparently, the property was not registered in the name of the assessee, in which case the rights were required to be taxed as Short Term Capital Gains. Neither of these issues has been examined by the AO. 1.5 As per capital Account, Short Term Capital Gain has been shown for sale of land at Mandvi. The AO has not examined t....
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....ement of Rs.63,07,552/-. The Ld. PCIT has given detailed finding in para 6.1to 6.5 as to why the Assessing Officer was required to consider whole of the sale consideration instead of only amount of long-term capital gain. 13. Before us, the Ld.Counsel of the assessee submitted that the Assessing Officer has considered cost of acquisition of shares and furnished explanation during assessment proceedings and taken the view for assessing only long term capital gain. This is one of the plausible views and not unsustainable in law. Therefore, action of Ld.PCIT in revising the order on this issue is not valid in law. 14. Contra, the Ld.DR relied on the order of the Ld.PCIT. 15. We have heard rival submissions of the parties on the issue under dispute and perused the relevant materials on record. We have already held in preceding paragraphs that the issue of sale of penny stock is germane to the issue of limited scrutinty of examining increase in capital of the assesee during the year. The Ld PCIT has held that the Assessing Officer has given erroneous finding on this issue of limted scrutiny. The Ld.Counsel of the assessee has relied on the decision of the Tribunal in the case o....
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....s is that as the matter for the same issue is pending before the CIT Appeals the order cannot be revised under section 263 on this issue in view of the provisions of explanation 1(c). However this is gross misreading of the said provision. Explanation 1(2) to section 263 reads as, "where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal." The conjunction 'and' (emphasized above) is very crucial. It is very clear that the matter should not only be considered but also decided by the CIT(A) to preclude the jurisdiction u/s 263. There should be no ambiguity regarding this from the clear reading of the provision. Thus merely filing an appeal before the CIT(A) does not barthe assumption of jurisdiction u/s 263. This has been spelled out in the ITAT, Pune Bench 'A' in the case of RankaJewellers v. Additional Commissioner of Income-t....
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.... The Hon'ble Gujarat High Court in the case of CIT v. Panna Knitting Industries [2002] 173 CTR (GuJ) 327 : [2002] 253 ITR 656 (GuJ) have also given the finding on the question of merger and in that case as well, it was held that if part of the claim was considered by CIT(A) and rest of the part remained undecided, then the portion of claim cannot be said to be merged with the order of CIT(A). In this precedent as well, the order of revision was upheld. 5.3 Further, as elaborated in para 1 above, there are several issues for consideration u/s 263 apart from the issues before the CIT(A). Thus the assumption of jurisdiction u/s 263 cannot be challenged on the basis of explanation 1(c) in the present case." 16.1 We have heard rival submissions of parties on the issue in dispute and perused relevant materials on record. We find that the Ld.PCIT has held that the particular issue will be out of the jurisdiction of the Ld.PCIT if the Ld.CIT(A) has considered and decided the matter by giving his finding. The Ld.PCIT has relied on the decision cited above in the case of ITAT, Pune Bench in RankaJewellers vs Addl.CIT(supra) wherein the Tribunal has held that in view of Explan....
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....d Scrutiny' case to 'Comprehensive Scrutiny' case, but no such approval has been taken by the Assessing Officer and hence the Assessing is barred from examining those issues under the mandate of limited scrutiny. Thus, the assessment order cannot be held erroneous insofar as prejudicial to the interest of Revenue for not making enquiry on those issues. The relevant grounds of the appeal of the assessee are accordingly allowed. 19. The Ground Nos. 16 to 19 of the appeal relate to the issue challenging the fining of the Ld.PCIT that Assessing Officer has failed to examine the issue properly and applied his mind. 19.1. Before us, the Ld.Counsel of the assessee has referred to various questionnaire issued by the Assessing Officer and, replies / responses submitted by the assessee. The Ld.Counsel of the assessee relied on the decision of the Coordinate bench of Tribunal (Jaipur Bench) in the case of Shri Vinay Kumar Sogani in ITA No. 444/JP/2018 for AY 2013-14 ,wherein it is held that "assessee has produced evidences which establish the genuineness of transaction being holding of shares by the assessee in demat account and purchase of the shares against the consideration paid thro....