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2013 (6) TMI 501 - AT - Income TaxJurisdiction power u/s 263 by CIT(A) - no adequate enquiry was conducted by the AO with regard to the short term capital gain disclosed by the assessee - Held that - The finding of the CIT that the assessment was made without requisite enquiry is factually incorrect. His finding that the assessment was made without due application of mind is also factually incorrect because the Assessing Officer made detailed and adequate enquiries and merely because such enquiries and his opinion are not discussed in the assessment order, it cannot be presumed that the assessment was made without application of mind. He examined the transactions entered into by the assessee by calling the brokers account, party-wise trade register, delivery register, bank statements etc. He also asked the assessee to explain why the income is to be assessed as short term capital gain, in response to which, reply of the assessee furnished detailed explanation in which the assessee has pointed out that he has not borrowed any money for investment in the shares/securities. As find that in AY 2006-07, there was a short term capital loss which was disclosed by the assessee as capital loss and a request was made for the carry forward of the same. It was accepted by the Assessing Officer in the order passed under Section 143(3) for AY 2006-07. Thus it is evident that even if two views are possible and the Income Tax Officer has taken the view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. In favour of assessee.
Issues Involved:
1. Invoking of jurisdiction under Section 263 by the CIT. 2. Adequacy of enquiry conducted by the Assessing Officer regarding short-term capital gain. 3. Consistency of the Assessing Officer's view with previous and subsequent years. 4. Application of legal principles from case laws. Detailed Analysis: 1. Invoking of Jurisdiction under Section 263 by the CIT: The primary issue in this appeal is the invocation of jurisdiction under Section 263 by the CIT, which resulted in the setting aside of the assessment order passed under Section 143(3) for AY 2008-09. The assessee argued that the CIT's action was based on an incorrect premise that the Assessing Officer (AO) did not conduct adequate enquiries regarding the short-term capital gain disclosed by the assessee. The CIT's order was challenged on the grounds that it was factually incorrect and that the AO had indeed made adequate enquiries during the assessment proceedings. 2. Adequacy of Enquiry Conducted by the Assessing Officer: The assessee provided multiple replies during the assessment proceedings, dated 15.02.2010, 19.08.2010, 01.09.2010, and 16.09.2010, which were placed in the paper book. These replies included detailed explanations and supporting documents such as brokers' accounts, trade registers, transaction statements, and bank statements. The assessee contended that these documents demonstrated that the AO had conducted sufficient enquiries. The Tribunal noted that the AO had examined the transactions and the nature of the income, and had accepted the assessee's claim of capital gain based on consistent treatment in previous and subsequent years. 3. Consistency of the Assessing Officer's View with Previous and Subsequent Years: The assessee highlighted that in AY 2006-07, a short-term capital loss was accepted by the AO, and in AY 2007-08, the income from the sale of shares was accepted as capital gain. The same treatment was given in AY 2009-10. The Tribunal observed that the AO's view was consistent with the Revenue's treatment in earlier and subsequent years, and hence, it could not be considered erroneous or prejudicial to the interest of the Revenue. 4. Application of Legal Principles from Case Laws: The assessee relied on the decision of the Hon'ble Apex Court in Malabar Industrial Co. Ltd. Vs. CIT, which held that if the AO adopts one of the permissible views in law, it cannot be treated as erroneous or prejudicial to the interest of the Revenue. The Tribunal also referred to the Jurisdictional High Court's decision in CIT Vs. DLF Ltd., which emphasized that for the CIT to invoke Section 263, the assessment order must be "unsustainable." The Tribunal concluded that the AO's order was not unsustainable, as the AO had made adequate enquiries and applied his mind to the facts of the case. Conclusion: The Tribunal found that the CIT's finding of inadequate enquiry and non-application of mind by the AO was factually incorrect. The AO had conducted sufficient enquiries and had consistently treated the income as capital gain in line with previous and subsequent years. The Tribunal quashed the CIT's order under Section 263 and restored the original assessment order dated 20th December 2010. The appeal of the assessee was allowed, and the decision was pronounced in open Court on 31st May 2013.
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