TaxTMI 
TaxTMI 
2025 (1) TMI 826
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....capital gain and other sources. 4. On 30 September 2015, petitioner filed his return of income for Assessment year 2015-16 under section 139 of the Act declaring total income of Rs.69.68 crore which consisted of long-term and short-term capital gains. 5. On 19 September 2016, petitioner's case was selected for limited scrutiny by issuing notice under section 143 (2) for examining long-term capital gain. The petitioner responded to the notice and filed return of income, audit report, financial statements, etc. including working of long term capital gain and short term capital loss. On 13 December 2017, the assessing officer converted the limited scrutiny to complete scrutiny after taking prior approval from Principal Commissioner Of Income Tax, Pune to more particularly examine the transaction of sale and purchase of shares resulting into capital gain. 6. On 29 December 2017, an assessment order under section 143 (3) of the Act came to be passed assessing income about Rs.72.84 crore. In the assessment order, addition/ disallowance was made on account of deemed rent, disallowance of commission, profit from sale of shares, withdrawal of long term capital gain, etc. 7. The petition....
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....rder u/s 143 (3), A.O. treated Long Term Capital Gain as business income but allowed Short Term Capital loss of Rs. 13,18,27,767/- to be set off. On going through the records, it is seen that the assessee has carried out Purchase and Sale of large quantity of shares of HCL Technology, Persistent Systems and Tech Mahindra in the month of March 2015. In all these Shares, companies had declared 1:1 Bonus and Shares were purchased about 8-10 days before the record date and sold within one week from the record date. The details of these transactions are tabulated in table no. 1:- Table No. 1 Sr.No. Name of the Company No. of Shares Record date for bonus shares has been taken from money control.com Date of Bonus & Ratio of Bonus shares allowed Date of Acquisition (in Rs.) Cost of Acquisition Date of transfer Net Sale consideration (in Rs.) Capital Gain/Loss (in Rs.) 20/03/2015 1. Tech Mahindra 13,432 1:1 09.03.2015 19356430 25.03.2015 8836528 -10519902 20/03/2015 2. Tech Mahindra 16,942 1:1 11.03.2015 24466130 25.03.2015 11145656....
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....reate Short Term Capital Loss during F.Y. 2015-16 to avoid payment of taxes on the entire Long Term Capital Gain. Supreme Court case of "McDowell And Co. Vs CTO 154 ITR 148 (SC)" is clearly applicable to the facts of this case. The Apex Court has held that colorable devices cannot be permitted to be part of tax planning and it is wrong to encourage or entertain the belief that payment of tax can be avoided by resorting to dubious methods. In view of the above, Short-Term Capital Loss of Rs. 13,18,27,767/- should have been disallowed. Thus resulted in under assessment of income by Rs. 13,18,27,767/-. 4. Enquiries made by the AO as sequel to information collected/received:- This office has perused the details available on record and found that the assessee has created a Short-Term Capital Loss within a span of two weeks with a view to reduce its tax liability by setting off against Long Term Capital Gain which was taxable @ 20% and bonus shares held for one year and could be sold there after by showing Long Term Capital Gain without paying any taxes. These facts clearly shows that the large-scale purchase and sale of shares during March 2015 have been carried out only with a vi....
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....ement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India:- N.A. 8. Findings of the AO on true and full disclosure of the material facts necessary for assessment under Proviso to section 147: As discussed in para 2 to 6, it is proved that the failure was on the part of the assessee in disclosing fully and truly all material facts before the AO which was necessary for the relevant assessment. Therefore, the income of the assessee chargeable to tax to the extent at Rs.13,18,27,767/- has been escaped assessment as per information gathered for the A.Y. 2015-16. 9. Applicability of the provisions of section 147 / 151 to the facts of the case:- In this case, a return of income was filed for the year under consideration and regular assessment u/s 143 (3) was made on 29.12.2017 by assessing income at Rs. 72,84,98,920/-. Since 4 years from the end of the relevant year have expired in this case, the requirements to initiate proceeding u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and trul....
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....oceedings on the ground more particularly set out therein. 13. On 25 March 2022 petitioner also filed his reply to the draft assessment order and requested the Assessing Officer not to proceed with the assessment till the objections to reopening the case are decided. 14. On 27 March 2022, the Assessing Officer passed a brief one page order rejecting the objections filed by the petitioner and immediately thereafter within three days on 30 March 2022 passed the impugned order assessing income at Rs.86.03 Crores. 15. Mr. Naniwadekar, learned counsel for the petitioner submits that the reasons recorded do not disclose what were material facts which the petitioner failed to disclose so as to satisfy the conditions provided under first proviso to Section 147 of the Act. Mr. Naniwadekar further submitted that the Assessing Officer furnished the reasons recorded at the fag end of the assessment getting time barred and thereafter, within 3 days passed the impugned assessment order which is contrary to various decisions of this Court. Mr. Naniwadekar further submitted that all the facts were disclosed in the assessment proceedings, and same has been admitted in the reasons recorded for re....
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....tion allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:" Explanation 1. Production before the Assessing Officer of account books or other vidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. 21. As per the first proviso to section 147 of the Act an assessment made under Section 143 (3) of the A....
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.... transactions of capital gains. The petitioner in the course of the assessment proceedings gave the details of long term capital gain and short term capital loss including the date of acquisition and date of transfer. The petitioner also gave details of loss on transfer of mutual funds. It is only after examining all the details relating to capital gain and capital loss that an assessment order came to be passed under Section 143 of the Act. In our view, based on these very details, the present proceedings have been initiated which is impermissible since it does not satisfy the pre-condition prescribed under the first proviso to Section 147 of the Act, it would amount to review of the assessment order which is not permissible. 25. Reliance placed by the Respondents on Explanation 1 is misconceived in the light of decision of the Co-ordinate Bench in the case of Imperial Consultants and Securities Ltd. (supra), wherein Co- ordinate Bench had an occasion to examine this very argument made and the Co-ordinate Bench observed as under:- "45. Now coming to Mr. Suresh Kumar's contentions, we do not find ourselves in agreement with Mr. Suresh Kumar relying on "Explanation 1" below S....