TaxTMI 
TaxTMI 
2024 (10) TMI 1774
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....eturn was filed on 29.03.2019 at an income of Rs. 36,18,36,450/-. Thereafter, assessment was completed u/s 143(3) of the Act on 08.03.2021 at an income of Rs. 39,76,74,478/-. Following this assessment order, a notice u/s 263 of the Act was issued on 30.11.2022 and thereafter an order under this section was passed on 27.02.2023, setting aside the order u/s 143(3) of the Act dated 08.03.2021 on the following grounds: (a) Treatment of gain from transfer of 34 unquoted preference shares of ICICI Bank Ltd as long-term capital gain (hereafter 'LTCG') of Rs. 12,97,56,648/- instead of business profit of Rs. 18,48,26,280/-, ostensibly on the ground that in the audited accounts these investments were classified as "stock-in-trade". (b) Set off of the LTCG against the brought forward long-term capital loss of AY 2012-13, which could only be Rs. 12,10,75,318/-, being the figure of loss surviving after assessment u/s 143(3) of the Act for the AY 2012-13, and not Rs. 12,97,56,648/-, as claimed by the appellant. (c) Allowing of Rs. 96,65,106/- towards loss on disposal of property, plant and equipment, even when, allegedly, this was not allowable, being capital in nature....
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....rejudice, the learned PCIT erred in holding that the AO had not gone through the CBDT instruction no. F. NO 225/12/2016/ITA.II dated 2nd May 2016 for examining the situation in which the instruction is not applicable, even though the same was duly submitted by the Appellant Company during the course of original assessment proceedings u/s 143(3) of the Act. Relief Prayed: The proceedings u/s 263 of the Act in respect of sale of Unlisted Preference Shares should be quashed. Without prejudice the treatment adopted by the Appellant Company and confirmed by the AO during the scrutiny assessment proceedings should be accepted. Ground No. 2: Reduction in Set off of brought forward Long-Term Capital Loss with Long Term Capital Gain of Rs. 86,81,330/-. (a) That on the facts and in the circumstances of the case, the Ld. PCIT erred in making the set off of Long-Term Capital Gain of Rs. 12,10,75,318/- with assessed brought forward Long- Term Capital Loss of Rs. 12,10,75,318/- of AY 2012-13 instead of returned brought forward Long-Term Capital Loss of Rs. 12,97,56,648/- Relief Prayed: Set off of brought forward Long-Term Capital Loss with Long Term C....
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....f AY 2012-13 In respect of the above transaction, kindly submit the following: i. The FMV of this asset has not been stated in the ITR. You are required to submit the FMV of the asset as per the provision of the Act along with supporting evidence. ii. Further from Balance sheet it is seen that the value of non-current investment has not reduced. You are required to justify the same with supporting documents in respect of the same and kindly reconcile the same with Balance Sheet iii. In this regard kindly justify your claim of LTCG along with documents of sale, purchase and relevant portions of Bank statement highlighting this transaction of sale and purchase of the said asset." In response to this query by the Ld. AO, the Ld. AR relied on the detailed response submitted before the Ld. AO (as available in the paper book filed before us at pages 132-144 and again at pages 149-167). Through this response the appellant laid out the conspectus of facts surrounding this issue and also placed reliance on CBDT Instruction dated 02.05.2016 (supra) to canvass the point that this Instruction directs the Assessing Officer to treat gain arising from transf....
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....reat the Ld. AO's order as being erroneous or prejudicial to the interest of Revenue. 3. The Ld. DR relied on the impugned order and pointed out that the appellant had all along treated the said investments as "stock-in-trade" and when it suited his convenience, he switched over to treating them as capital investments. The Ld. DR also relied on written arguments which were placed on record by him. The Ld. DR painstakingly took us through the audited accounts of the assessee wherein such investments in securities were listed as "stock-in-trade". It was also pointed out that these audited accounts would necessarily have been approved by the Board of Directors before being adopted. The Ld. DR also averred that on the one hand the audited accounts show them as stock-in-trade but conveniently for tax purposes the gain has been booked under 'Capital Gain', to avail of the benefit of setting off the capital loss. The Ld. DR also pointed out that the Ld. AO's order was not indicative of any conscious acceptance of the assessee's arguments, in as much as there is no visible discussion in the assessment order regarding the applicability of Instruction dated 02.05.2016 (supra). The Ld. DR ....
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....ng officers are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (and therefore giving rise to capital gain) or as stock-in-trade (and therefore giving rise to business profits) The Assessing Officers are further advised that no single principle would be decisive and the total effect of all the principles should be considered to determine whether, in a given case, the shares are held by the assessee as investment or stock-in-trade." (ii) Circular No. 6/2016 (F. No. 225/12/2016-ITA-II), dated 29.02.2016 "3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it. difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (1.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a v....
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....ents, it was instructed that income arising from transfer of listed shares and securities, which are held for more than twelve months would be tased under the head Capital Gain' unless the taxpayer itself treats these as its stock-in-trade and transfer thereof as its business income. It was further stated that in other situations, the issue was to be decided on the basis of existing Circulars issued by the CBDT on this subject. 2. Similarly, for determining the tax-treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, a need has been felt to have a consistent view in assessments pertaining to such income. It has, accordingly, been decided that the income arising from transfer of unlisted shares would be considered under the head Capital Gain', irrespective of period of bolding, with a view to avoid disputes/litigation and to maintain uniform approach. 3. It is, however, clarified that the above would not be necessarily applied in the situations where: i. the genuineness of transactions in unlisted shares itself is questionable; or ii. the transfer of unlisted shares is related to an is....
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.... legally sustainable was examined by the tribunal and in our considered view after taking note of the various decisions of the Hon'ble Supreme Court it was rightly pointed out that section 263 of the Act does not permit substituting one opinion for another (emphasis added). That apart, the tribunal has specifically recorded a factual finding that the assessee had produced all necessary details of the purchase, sales, audited books of accounts, quantity details, etc... Further, the tribunal found that the assessee's books of accounts were audited by the Chartered Accountant, the quantity details were given in respect of opening stock, purchase, sales, closing stock, etc. Furthermore, the tribunal pointed out that no discrepancy was found between the purchase shown by the assessee and the sales decline. Thus, on facts, the tribunal concluded that assumption of jurisdiction by the PCIT under section 263 of the Act was erroneous. In our considered view, there is no error in the order passed by the tribunal nor there is any perversity in its approach for us to interfere. We find that there is no question of law, much less substantial question of law arising in this appeal. Conse....