TaxTMI 
TaxTMI 
2026 (4) TMI 345
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....dated 28.06.2022 was issued. The assessee file reply to the notice is issued stating that he has not done any business or profession during the year under consideration i.e. financial year 2020-21 and therefore does not have any income under the head 'income from business or profession' and his income comprises 'income from capital gain' and 'income from other 'sources' during financial year 2020-21 relevant to A.Y. 2021-22. During the year under consideration, the appellant-assessee derived long term capital gain ('LTCG') of Rs. 4,07,88,000/- on sale of shares of M/s. Gemini Merchandise Pvt. Ltd. in respect of which deduction u/s 54F of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was claimed towards purchase of a residential house property. Subsequently, the case was selected for limited scrutiny. Vide draft assessment order dated 31.12.2022 the ld. AO proposed to make addition of sale of shares amounting to Rs. 4,14,06,000/- treating the same to be bogus/non-genuine as unexplained money u/s 69A of the Act. Simultaneously, deduction claimed u/s 54 F of the Act was denied for non-registration of sale deed in respect of the purchase of residential house property.....
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.... name plate/letter box was seen in its name either inside or outside the premises and the local enquiry, it was learned that no such entity at the said address. With respect to some entities, the premises and the room were found locked. With respect to RGF Capital Market Ltd. in the inquiry on 28.12.2022 a peon named Balaram Singh received summons and informed that the company does not carry out business operation from the office premises and the address was just used for communication purposes. Further, a show cause notice was issued asking the assessee why the receipts amounting to Rs. 4,14,06,000/-, should not be taxed as Income from other sources in the light of purchase and sales of shares of M/s. Gemini Merchandise Pvt. Ltd. being bogus and unsubstantiated by proper creditworthiness, genuineness and identity of the parties involved in the transactions. The assessee was asked to produce documentary evidence also. In reply dated 30.12.2022 to the show cause notice, the assessee submitted that it was a genuine sale and purchase of transaction and not a bogus transaction; that the transaction has been substantiated with relevant document and related bank statements; the creditwor....
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....ly registered gift deed in A.Y. 2017-18. 5. The Ld. DRP observed that the transaction in shares under consideration pertain to the shares of M/s. Gemini Merchandise Pvt. Ltd.; 2,22,000 of these shares are stated to have been acquired by assessee on 15th September, 2009 from certain companies/ firms located in Kolkata and the remaining shares are stated to have been acquired by the assessee on 4th July, 2016 as gift from Mr. Jagbir Singh and Mr. Rajbir Singh. All these shares were sold to Mr. Gaurav Garg, Director of M/s. Gemini Merchandise Pvt. Ltd. on 14th September, 2020. It was also observed that after conducting certain inquiries by the AO and also issuing a show cause notice to the assessee, the AO reached to the conclusion that the entire transaction in purchase/sale of shares and consequent capital gains has been held to be bogus and treated as unexplained money u/s 69A of the Act. After considering the submissions on objections of the assessee, the Ld. DRP observed that during the DRP proceedings, no evidence is brought on record by the assessee; that the assessee has not produced any new material on record to specifically rebut the finding of the AO in pursuant of the i....
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.... as the time-barred share acquisition transactions by the Appellant in AYs 2010-11, 2012-13 and 2017-18 and sale of said shares in subject AY 2021-21 are beyond the legal scope of limited scrutiny Le "capital gain deduction claimed" u/s. 54F of the Act. 4. That the impugned addition of Rs. 4,14,06,000/- is legally unsustainable as shares previously held by the Appellant in M/s. Gemini Merchandise Pvt. Ltd, cannot be proceeded against u/s. 69A of the Act on account of not being "money, bullion, jewellery or other valuable article" and "nature" and "source" of sums received from Sh. Gaurav Garg via banking channels against sale of said shares stood explained and uncontroverted/accepted by Ld.AO vide impugned Assessment order dated 18.10.2023. 5. That the impugned addition of Rs. 4,14,06,000/-u/s. 69A of the Act is legally unsustainable for being based on mere conjecture, surmises, suspicion and guesswork, for alleging non-satisfaction of statutory ingredients not pertaining to said provision and for failure to consider the documentary evidence and submissions of the Appellant. 6. That the disallowance of Rs. 4,07,88,000/-claimed as deduction by the Appellan....
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....ntimation dated 27.06.2022 and notice u/s 143(2) of the Act dated 28.06.2022 placed at page 342 to 343 of the paper book that the case was selected for scrutiny assessment asking the assessee to submit evidence electronically in e-proceeding facility which means it was Computer Aided Scrutiny Selection ('CASS') and therefore categorically falls in the category of limited scrutiny assessment. Ld. AR further referred page 339 which is an Annexure-II notice u/s 142(1) of the Act dated 05.07.2022 enumerating the description of issue for scrutiny assessment as "capital gains deduction claim", as under: अनुलग्नक Annexure "आयकर अधिनियम, 1961 की धारा 142(1) के तहत निम्नलिखित खातें या दस्ताबेज या जानकारी मांगी गयी है: 1. The following....
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....corded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl. CIT concerned." 14. We have further noticed that Annexure placed at page 225 of the paper to the notice dated 17.12.2022 u/s 142(1) categorically states that it is a complete scrutiny under gone in the case of the assessee. For clarification, the said Annexure is extracted below, as under: अनुलग्नक Annexure "आयकर अधिनियम, 1961 की धारा 142(1) के तहत निम्नलिखित खातें या दस्ताबेज या जानकारी मांगी गयी है: 1. The following accounts or documents or information is/are sought under section 142(1) of the Income-t....
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.... CASS". 16. All these documentary evidence discussed above shows that the limited scrutiny assessment initiated by the Assessing Officer was converted into complete scrutiny assessment without any statutory approval by the PCIT and as thus the Assessing Officer has definitely violated the Instruction No. 7/2014 issued by the CBDT which provides that the Computer Aided Scrutiny Selection (CASS) can be converted into comprehensive scrutiny/complete scrutiny with the approval of PCIT/DIT who is required to accord the same in writing after being satisfied about the merits of the issue that necessitate wider and detailed scrutiny in the case. Admittedly there is no such approval obtained by the learned Assessing Officer before expanding scope of the limited scrutiny initiated by him in the case of the assessee. We have noticed that the ld. AR on behalf of the assessee has relied upon the case of jurisdictional Tribunal in Nisha Goel Vs. ITO in ITA No. 2768/Del/2023 order dated 04.06.2024 wherein the jurisdictional Tribunal has quashed the Assessment Order by observing in para 14 as under: "14. The AO has expanded the limited scrutiny by tinkering with cost of construction/im....
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....the present case, under the shadow of powers vested u/s. 143(3)/ 144C(13) of the Act, has unlawfully and without having any jurisdiction made impugned addition u/s. 69A of the Act on the basis of perverse findings on acquisition and gift of shares of subject company pertaining to subject assessment years. 7. In this regard, your honor's kind attention is invited to the fact that, assessment of such purchase transactions for subject years is time barred and beyond the scope of scrutiny assessment limited to AY 2021-22. 18. The Ld. AO has no jurisdiction to challenge genuineness of the purchase of the impugned shares that took place in AY 2010- 11, 2012-13 and 2017-18 as it got statutorily time barred vide Section 143(2) of the Act in the following manner: S. No. Assessment Year Date of filing ITR Time barring vide Section 143(2) of the Act 1. 2010-11 30.07.2010 31.09.2011 2. 2012-13 29.09.2012 31.09.2013 3. 2017-18 05.08.2017 31.09.2018 19. Thus, in light of the above facts, subject share acquisition transactions qua subject company executed by the Appellant in time barred AYs have attained finality and b....
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.... argued that the AO has committed no illegality in examining the purchase of the shares which are the basis of claim of long term capital gains for which the scrutiny assessment was carried out for the relevant assessment year. We are of the considered view after hearing the arguments of both the parties that section 69A of the Act creates a deeming fiction and hence the contention of the assessee does not have merit. The question No. 2 is accordingly disposed off in above terms. Question No. 3 22. This question pertains to the denial of deduction claimed u/s 54F of the Act by the ld. Assessing Officer on the direction of the ld. DRP. The appellant has earned LTCG of Rs4,07,88,000/- which he has applied towards purchase of residential house property in accordance with the provisions of section 54F of the Act. The ld. AO has denied the said deduction u/s 54F of the Act by observing in para 15 to 15.4 of the assessment order extracted below, as under: "15. ALLOWABILITY OF THE SECTION 54F To understand the allowability of deduction under section 54F, the provisions of section 54F of the IT Act. The same are as under. Capital gain on transfer of certain capital ....
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....reement, the assessee has yet not entered into an agreement to purchase the said property and still he has not executed the transfer of ownership of property by means of sales deed or registry of the property in the name of the claimant. 15.3 This clearly shows the malafide intention of the assessee to claim the benefit of section 54F, without involving actual investment of capital gain for purchasing of residential property. 15.4. In view of the above, the receipt amounting to Rs. 4,16,06,000/- is considered to add back to the net income of the assessee as unexplained money u/s 69A of IT Act. Since, the assessee failed to justify the receipts from sale of shares as capital gain, the exemption u/s 54F is irrelevant to allow." (Addition: Rs. 4,14,06,000/-) 23. Regarding the above denial of deduction u/s 54F of the Act, the ld. AR in the written arguments submitted in para 26 to 29 as extracted below, as under: "26. Apropos to the sale/ transfer of subject shares to Mr. Gaurav Garg by the Appellant for a sum of Rs. 4,14,06,000/-, the Appellant earned LTCG of Rs. 4,07,88,000/- which was applied towards purchase of residential house property in accordan....
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....ale deeds fall in the ambit of word 'purchase' used u/s 54/54F of the Act. 10. The Bench is of considered opinion that execution of the sale deed or any document of Conveyance in favour of vendee, only transfers the 'legal title' for the purpose of civil consequences. The ownership of a property is a bundle of interests and apart from the registered sale deed or any other document of conveyance, vendee can acquire interest in semblance of right of owner by documents like GPA or agreement to sell. The 'purchase' of immovable property involves acquiring all those interests in the property. Same may be by some inchoate instruments in favour of the purchaser. Non execution of a registered document of transfer of title may have civil consequences in regard to his title, qua rights between the seller and purchaser but for the purpose of benefits of Section 54/54F, the assessee shall be deemed to have 'purchased' the properties. As for the purpose of Section 54/54F of the Act, the important question is that money out of LTCG should be paid/spent by the assessee, before the end of statutory period, for claiming exemption. When the Ld. AO had not doubted the payments out of LTCG made by ass....
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....tion of the document is not mandatory for claiming depreciation on the property. In this view of the matter, we have no doubt in our mind that the learned Tribunal went wrong in holding that for the purpose of applicability of section 54, registration of document is imperative. We, therefore, answer the question in the negative, i.e., the assessee is entitled to exemption in terms of section 54." 26. The ld. DR on the other hand relied upon the Assessment Order and ld. DRP's directions and also referred following citations: * Suman Poddar Vs. ITO (2019) 112 taxmann.com 330 (SC) * Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain Vs. CIT-1 in ITA No. 18/2017 order dated 10.04.2017 (Bom. HC) * PCIT Vs. M/s Redington (India) Ltd. in TCA Nos. 590 & 591 of 2019 order dated 10.102.2020 (Madras HC) * Mrs. Madhu Sarda Vs. ITO in ITA No. 7410/Mum/2012 order dated 09.03.2018 27. On perusal of the citations, we have noticed that the case law referred by ld. DR pertains to the merit of the case and not to the legal ground raised in the appeal, hence not relevant for deciding the questions framed by us. 28. Thus respectfully following the jurisdi....