2001 (8) TMI 1395 - AT - Income Tax

Summary

Issues Involved:
1. Nature of transaction of purchase and sale of shares.
2. Source of cash credit in the capital account.
3. Nature of income declared under the head 'Misc. income/Income from other sources'.

Summary:

Issue 1: Nature of transaction of purchase and sale of shares
The assessee's case was selected for scrutiny to verify capital gain and capital loss on the sale of shares and old gold ornaments. The Assessing Officer (AO) issued a notice u/s 143(3) requiring the assessee to furnish documentary evidence for long-term capital loss on jewelry, narration of debit/credit entries in the account with M/s Rajput Jewellers, and the source of acquisition of 27,000 equity shares. The assessee provided necessary documents, and the AO passed an order u/s 143(3) determining the total income at Rs. 1,38,960. The Commissioner, however, issued a notice u/s 263, questioning the nature of the transaction of purchase and sale of shares of Ankur International Ltd., suggesting it appeared speculative. The assessee explained the transactions were not speculative as physical delivery of shares was taken and given. The Tribunal found the AO had made necessary inquiries and accepted the explanation, thus the Commissioner's view was not justified.

Issue 2: Source of cash credit in the capital account
The Commissioner also questioned the source of a cash credit of Rs. 55,000 in the assessee's capital account with M/s Rajput Jewellers. The assessee explained the source as a gift of Rs. 30,000 from his mother-in-law and Rs. 25,000 received from LIC by way of survival benefit. This information was furnished to the AO, who felt satisfied and made no addition. The Tribunal noted that the AO had made proper inquiries and accepted the explanation, and thus the Commissioner's assumption of jurisdiction u/s 263 was not justified.

Issue 3: Nature of income declared under the head 'Misc. income/Income from other sources'
The Commissioner questioned the nature of Rs. 28,000 shown by the assessee under 'Misc. income/Income from other sources'. The assessee explained this amount was earned from various odd sources and was surrendered to be assessed as income from other sources. The Tribunal found that since the assessee had offered this amount as income, no further inquiry was required by the AO. The Tribunal concluded that the AO had made proper inquiries and the Commissioner's action u/s 263 was not justified.

Conclusion:
The Tribunal held that the Commissioner was not justified in setting aside the AO's order u/s 143(3) dated 8-5-2000. The Tribunal canceled the order passed by the Commissioner u/s 263 dated 8-3-2001 and restored the AO's order, allowing the appeal filed by the assessee.