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2019 (3) TMI 81 - AT - Income TaxRevision u/s 263 - difference in the purchase value of certain shares reflected by the assessee in the Balance Sheet - LTCG - HELD THAT - Long Term Capital Gains / loss workings as per Income Tax Act and profit/loss as per books of accounts on sale of investments which indicate that there was no discrepancy in the figures of cost of shares as reflected in the Balance Sheet and as reflected in the computation of income. All these details were made available with AO, who with due application of mind as well as after due examination, accepted the assessee s working. Consequently, the observations made by CIT-A on this account are factually incorrect and therefore the same could not form the basis of invoking revisional jurisdiction u/s 263. Sundry debtor - Typographical Error - Revisional authority stood explained by the assessee during assessment proceedings as well as during revisional proceedings which is further evident from the fact that sundry debtors balances as reflected in the Balance Sheet matches with the details filed by the assessee during assessment proceedings as supported by confirmation of accounts filed by the assessee in respect of concerned sundry debtor. Last but not the least, the alleged discrepancy, viewed from any angle, would have no bearing on assessee income during impugned AY and therefore, there could be no occasion to term the assessment order as prejudicial to the interest of the revenue on this account. This being the case, the twin conditions as envisaged by Section 263 viz. the orders should be erroneous as well as prejudicial to the interest of the revenue, remained unfulfilled on this issue Sale of investment - HELD THAT - Upon careful consideration of financial statements, it is undisputed fact that the shares held by the assessee, has all along, been reflected under the head investments rather than as stock-in-trade which is further fortified by the fact that the investments are valued at cost as against stock-in-trade which is generally valued at lower of cost or market price. It is settled legal position that it is possible for the assessee to maintain two portfolios i.e. an investment portfolio held as capital asset giving rise to income / loss under the head capital gains and trading portfolio held as stock-in-trade giving rise to income / loss under the head business income which has also been accepted by CBDT in circular No. 4 of 2007 Investments sold by the assessee during impugned AY were long term investments made between AY 2004-05 to 2006-07 and the same were held as investment valued at cost in the Balance Sheet which lend credence to the arguments of AR, in this regard. Proceeding further, we find that the aforesaid position has also been accepted by the revenue by way of acceptance of returned income for AYs 2006-07 as well as for AY 2009-10 in scrutiny assessment u/s 143(3), the copies of which have been placed on record. This is further fortified by undisputed fact that even during set-aside proceedings consequent to impugned order u/s 263, the resultant income from shares has again been assessed under the head Capital Gains only by AO despite the observation of CIT that the income should have been assessed under the head business income. Statutory audit u/s 44AB - Initiation of penalty proceedings - - HELD THAT - We find that when the income was assessed under the head capital gains, which was one of the possible views, the same did not constitute assessee s turnover for the purpose of Section 44AB and there could be no occasion for Ld. AO to initiate penalty proceedings against the assessee for non-compliance of the provisions of Section 44AB. Further, it is undisputed fact that other income reflected by the assessee did not exceed the prescribed threshold limit u/s 44AB and therefore, the provisions of Section 44AB were not applicable to the assessee. This being the case, we do not find any error in the quantum assessment order which necessitate revisions by Ld. CIT. We find certain force in the argument raised by AR in view of the fact that under law, AO is not permitted to review the orders. The cancellation of entire assessment order and direction for reframing of assessment de novo would empower AO to review the already concluded issues which is not the intention of the legislatures. We conclude that Ld. CIT was not justified in blanket set aside of the assessment order and direct Ld. AO to reframe the same de-novo. - Decided in favour of assessee.
Issues Involved:
1. Assumption of jurisdiction under Section 263. 2. Difference in purchase value of shares. 3. Mistake in computation of closing balance of sundry debtors. 4. Classification of income from sale of investments. 5. Non-initiation of penalty proceedings under Section 44AB. Detailed Analysis: 1. Assumption of Jurisdiction under Section 263: The primary issue raised by the assessee was the assumption of jurisdiction under Section 263 by the CIT. The assessee contended that the CIT's assumption of jurisdiction was beyond the scope of Section 263 and thus, the order was not sustainable in law. The Tribunal examined this issue and found that the CIT had not properly considered the explanations provided by the assessee, which is a requirement under Section 263. The Tribunal cited various judicial pronouncements, including the case of Metacaps Engineering & Mahendra Construction Co. (JV) Vs. CIT [86 Taxmann.com 128], which emphasized that the CIT must judicially deliberate on the explanations provided by the assessee before revising an assessment order. 2. Difference in Purchase Value of Shares: The CIT observed a discrepancy of ?1,00,100/- in the purchase value of shares reflected in the balance sheet. However, upon perusal of the balance sheet and related documents, the Tribunal found that the figures provided by the assessee were accurate and matched the balance sheet. The Tribunal concluded that the CIT's observation was factually incorrect and could not form the basis for invoking revisional jurisdiction under Section 263. 3. Mistake in Computation of Closing Balance of Sundry Debtors: The CIT noted a mistake in the computation of the closing balance of sundry debtors, suggesting that the closing balance should have been ?(-)9,26,30,150/- instead of ?48,71,950/-. The Tribunal found that this discrepancy was due to a typographical error in the opening balance, which was shown as negative instead of positive. The correct balances were provided during the assessment proceedings and matched the balance sheet. The Tribunal held that the CIT failed to consider the explanation provided by the assessee, rendering the invocation of Section 263 on this ground unsustainable. 4. Classification of Income from Sale of Investments: The CIT argued that the income from the sale of investments should be treated as business income instead of capital gains. The assessee contended that the investments were held as capital assets and not as stock-in-trade, which was consistently accepted in previous assessments. The Tribunal agreed with the assessee, noting that the shares were reflected as investments in the financial statements and valued at cost. The Tribunal cited the CBDT Circular No. 4 of 2007 and the Supreme Court's decision in CIT v. Associated Industrial Development Co. (P.) Ltd. [1971] 82 ITR 586 (SC) to support the assessee's position. The Tribunal concluded that the CIT's view was merely another possible view and did not render the assessment order erroneous. 5. Non-initiation of Penalty Proceedings under Section 44AB: The CIT observed that statutory audit under Section 44AB was not conducted, and the AO failed to initiate penalty proceedings. The Tribunal found that since the income was assessed under the head capital gains, it did not constitute turnover for the purpose of Section 44AB. Additionally, the other income did not exceed the prescribed threshold limit under Section 44AB. Therefore, there was no error in the assessment order regarding this issue. Conclusion: The Tribunal concluded that the CIT was not justified in invoking revisional jurisdiction under Section 263. The Tribunal set aside the CIT's order and allowed the assessee's appeal, emphasizing that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal also noted that the blanket set-aside of the assessment order by the CIT was not justified and could lead to a review of already concluded issues, which was not the intention of the legislature. The appeal was allowed, and the assessment order was upheld.
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