2015 (3) TMI 528 - AT - Income Tax

Revision order u/s. 263 - ingenuine Long Term Capital Gains - Held that - rom this finding, it is clear that all the information are available before the AO during the course of assessment proceedings and he has formed an opinion on the issue of Long Term Capital Gains and held to be genuine. From the facts narrated above by Ld. counsel, it is clear that the share premium cannot be questioned under the provisions of the Act in the relevant assessment year but the amendment in section 56(2) of the Act in acquisition of shares and securities at below the fair market value is brought in w.e.f. 01.10.2009 by the Finance (No.2) Act, 2009. The transaction of the assessee is prior to 01.10.2009 and there is no scope for the AO to go into FMV of sale of shares. As regards the acquisition of shares of SBT Consultants Pvt. Ltd., these were acquired in FY 2004-05 relevant to AY 2005-06 and for that the enquiry is to be conducted in AY 2005-06, which is beyond the scope of revision proceedings under consideration. Even the very basis of selection for scrutiny under CASS was to enquire into investment in REC Bonds as demonstrated by the Ld. counsel before us from the very first notice issued for scrutiny assessment the source of investment of ₹ 25,00,000/- in REC Bonds u/s. 54EC of the Act by the assessee is out of the sale proceeds of shares of SBT Consultants Pvt. Ltd. at entire long term capital gains of ₹ 24,68,655/- was invested. The AO has examined the sale value of the above shares with reference to the bank statement produced before him and the transactions are through account payee cheques to prove the genuineness of the transactions. AO has not examined the loan taken from M/s. Daymark & Sons (HUF) - Held that - In respect to second issue of loan received by assessee from M/s. Daymark & Sons (HUF) is a carried forward loan and this cannot be questioned in this AY i.e. 2009-10. AO has not examined the squared up transaction of loan of ₹ 2 lacs from Shri Vikash Choudhury - Held that - In respect to the third issue of loan from Bikash Chowdhury of ₹ 2 lacs through an account payee cheque on 05.05.2008, the same was refunded on 27.06.2008 and both the transactions are recorded in assessee s Canara Bank A/c. and which was examined by the AO during the course of assessment proceedings. Even the investment of Rs./70000/- being deposit in PPF A/c. is withdrawal out of the saving bank account maintained with Canara Bank. All these information were made available to the AO during the course of assessment proceedings and he has examined all the aspects of the case and the same is evident from the order sheet entries of the assessment proceedings. Thus examining the entire assessment records and details filed before the AO by the assessee, which clearly proves that the AO has applied his mind. The records of the assessment including the order sheet entries show that the AO has made appropriate enquiry after hearing the assessee from time to time. Thus the revision order passed by the CIT is without any legal and factual basis and hence, the same is quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Verification of the genuineness of the transaction of shares, particularly regarding the existence of the company STB Consultants Pvt. Ltd.
2. Examination of the loan taken from M/s. Daymark & Sons (HUF) amounting to Rs. 3 lacs.
3. Examination of the squared-up transaction of a loan of Rs. 2 lacs from Shri Vikash Choudhury.
4. Obtaining the cash flow statement to verify the cash investments made by the assessee.

Issue-wise Detailed Analysis:

1. Verification of the Genuineness of the Transaction of Shares:
The CIT-IX, Kolkata, issued a revision order under Section 263 of the Income-tax Act, 1961, questioning the genuineness of the transaction involving the sale of shares of STB Consultants Pvt. Ltd. The assessee had declared a long-term capital gain of Rs. 24,68,655 from the sale of 71,400 shares, which were claimed to have been purchased in the year 2004-05 at Rs. 2 per share and sold at Rs. 38 per share. The CIT argued that the AO failed to examine the genuineness of the transactions, including the existence of the company, its net worth, and the book value of each share. However, the assessee provided detailed documentation during the assessment proceedings, including the computation of total income, Income & Expenditure Account, and broker bills for the sale of shares, which were reviewed by the AO. The Tribunal concluded that the AO had indeed examined the transactions and found no basis for the CIT's revision order.

2. Examination of the Loan from M/s. Daymark & Sons (HUF):
The CIT contended that the AO did not examine the source of a loan of Rs. 3 lacs taken from M/s. Daymark & Sons (HUF). The assessee clarified that this was a brought-forward loan from the previous financial year, as reflected in the Balance Sheet for FY 2007-08. The Tribunal noted that the source of this loan could only be questioned in the earlier year, not in the assessment year under consideration (AY 2009-10). Therefore, the Tribunal found that the AO's assessment was not erroneous in this regard.

3. Examination of the Squared-up Transaction of Loan from Shri Vikash Choudhury:
The CIT raised concerns about a squared-up transaction involving a loan of Rs. 2 lacs from Shri Vikash Choudhury. The assessee provided the Canara Bank account statement showing the receipt of Rs. 2 lacs on 05.05.2008 and repayment on 27.06.2008. The Tribunal observed that the AO had examined these transactions during the assessment proceedings, and the genuineness of the transactions was established. Consequently, the Tribunal found no merit in the CIT's revision order on this issue.

4. Obtaining the Cash Flow Statement:
The CIT criticized the AO for not obtaining the cash flow statement to verify the source of cash investments made by the assessee. The assessee explained that the only significant investment was a deposit of Rs. 70,000 in a Public Provident Fund (PPF) account, funded by a withdrawal from the Canara Bank account. The Tribunal noted that the AO had reviewed the relevant bank statements and found no discrepancies. Therefore, the Tribunal concluded that the AO had adequately examined the cash investments, and the CIT's revision order was unwarranted.

Conclusion:
The Tribunal found that the AO had conducted a thorough examination of all relevant issues during the assessment proceedings. The CIT's revision order under Section 263 was deemed without legal and factual basis, as the AO had applied his mind and made appropriate inquiries. The Tribunal quashed the CIT's revision order and allowed the appeal of the assessee.