2017 (8) TMI 1698 - HC - Income Tax

Revision u/s 263 by CIT - Share transactions entered into by the Assessee were not genuine - HELD THAT - Initially the Assessment was done under Section 143(3) - HELD THAT - Before passing the Assessment order the Assessee was called by the Assessing Officer seeking the details. The examination was done by the AO relating to sale and transactions of purchase shares entered into by the Assessee. Explanation was called from the Assessee. Assessee submitted explanation along with all the details i.e. the copy of the broker notes for purchase of shares, physical purchase of shares, the details of the share transactions, the copy of the account of broker, the proof of payment of share purchases of Praneta Industries Ltd., D-mat Account and after satisfaction the Assessing Officer passed a order under Section 143(3) of the Act. Tribunal has observed that the Assessee had filed proof of the purchases in the shape of ledger account in the name of M/s.DPS Shares and Securities Pvt. Ltd., even the copy of the physical shares has been submitted on record. All the details of the transactions are reproduced by the Tribunal in the order. The order certainly cannot be said to be erroneous on the part of the AO. The order was passed by the AO u/s 143(3) of the Act, after making necessary inquiries and verifying the claim made.- No error has been committed by the Tribunal. No substantial question of law arises.

Summary

Issues:
1. Valid exercise of powers under Section 263 of the Income Tax Act, 1961 by the Commissioner of Income Tax (CIT).
2. Genuine nature of share transactions entered into by the Assessee.
3. Consideration of evidence by the CIT while passing order under Section 263 of the Act.
4. Assessment under Section 143(3) of the Act and subsequent actions taken by the Assessing Officer.
5. Tribunal's observation regarding the proof of purchases submitted by the Assessee.
6. Tribunal's decision on the correctness of the Assessing Officer's order under Section 143(3) of the Act.

Analysis:

The appeal before the Bombay High Court pertained to the Assessment Year 2006-07, specifically focusing on the order passed under Section 263 of the Income Tax Act, 1961. The Counsel for the Appellant argued that the CIT validly exercised its powers under Section 263 by setting aside the order under Section 143(3) of the Act, deeming it erroneous and prejudicial to the Revenue's interest. The contention was based on the Assessee's share transactions being deemed not genuine, as evidenced by the investigation conducted by the Assessing Officer. The Bombay Stock Exchange's response further supported the CIT's decision under Section 263.

The Respondent's counsel supported the impugned order, leading to a discussion on the initial assessment conducted under Section 143(3) of the Act. The Assessing Officer had called the Assessee for details regarding share transactions, and after thorough examination and submission of relevant documents by the Assessee, the order under Section 143(3) was passed. However, the Tribunal noted that the Assessee had provided proof of purchases through ledger accounts and physical shares, which led to the conclusion that the Assessing Officer's order was not erroneous. The Tribunal reiterated that the necessary inquiries were made before passing the order under Section 143(3) of the Act.

In light of the Tribunal's findings and the evidence presented, the High Court concluded that no error was committed by the Tribunal. It was determined that no substantial question of law arose from the case, resulting in the dismissal of the appeal without costs. The judgment highlighted the importance of thorough investigation and verification of claims in assessing the genuineness of transactions to uphold the integrity of the tax assessment process.