2022 (9) TMI 190 - AT - Income Tax

Revision u/s 263 - unexplained cash credit u/s 68 - bogus gain on sale of shares - HELD THAT - PCIT does not state anywhere in his order as to why the purchase cost of shares would not be allowable as deduction while computing the income thereon. Without mentioning any of these facts, merely by placing reliance on the order passed by the ld. AO for Asst Year 2014-15, the ld. PCIT comes to the conclusion that the similar treatment ought to have been given by the ld. AO for Asst Year 2015-16 also. This in our considered opinion, is not the proper method for assuming revisionary jurisdiction u/s 263 of the Act. We also find that Explanation 2 to Section 263 of the Act has also not been invoked by the ld. PCIT in the instant case and hence we do not deem it fit to get into the applicability of the said Explanation to the facts of the present case before us. AO had made adequate enquiries on the gain on sale of shares of Vishwajyoti Finance Ltd during the course of assessment proceedings, on which fact, there is no dispute before us. As stated supra, the ld. PCIT had not brought any evidence on record as to why the cost of such shares would not be allowable as deduction. PCIT had merely relied on the assessment order framed for the Asst Year 2014-15. We find that the reliance placed by the ld. DR on the decision of Belazio Construction P Ltd v 2019 (9) TMI 198 - BOMBAY HIGH COURT is not applicable to the facts of the instant case before us as it was rendered in the context of validity of reopening of assessment u/s 147 of the Act based on information obtained in earlier scrutiny assessment year. We hold that the ld. AO on examination of all the details filed before him, had taken a plausible view on the issue. Hence we have no hesitation in quashing the revision order passed by the ld. PCIT u/s 263 of the Act in the facts and circumstance of the instant case. Accordingly, the grounds raised by the assessee are allowed.

Summary

Issues:
1. Justification of directing the AO to treat sale proceeds of shares as unexplained cash credit under section 68 of the Act.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved the question of whether the Principal Commissioner of Income Tax was justified in directing the Assessing Officer to treat the sale proceeds of shares as unexplained cash credit under section 68 of the Income Tax Act. The assessee, an individual, had declared income from various sources in the original return for the assessment year 2015-16. The Assessing Officer completed the assessment accepting the returned income. However, the Principal Commissioner sought to revise the assessment under section 263 of the Act, contending that the gain on the sale of shares should be treated as unexplained cash credit, similar to the treatment in the previous assessment year. The Principal Commissioner's basis for revision was the rejection of the claim of exemption in the earlier year. The Tribunal noted that the Assessing Officer had conducted thorough inquiries regarding the sale of shares and the gains made, with the assessee providing all necessary details. The Tribunal observed that the Principal Commissioner did not provide any reasons as to why the treatment of the gain as business income by the Assessing Officer was erroneous. The Principal Commissioner's reliance on the previous year's assessment without considering the specifics of the current year's case was deemed improper by the Tribunal.

The Tribunal emphasized that the Assessing Officer had already made adequate inquiries into the sale of shares, and the Principal Commissioner failed to provide any evidence as to why the cost of shares should not be allowed as a deduction. The Tribunal also distinguished the case cited by the Revenue, stating it was not applicable to the current scenario. The Tribunal concluded that the Assessing Officer had taken a plausible view on the issue after examining all details before him. Therefore, the Tribunal quashed the revision order passed by the Principal Commissioner under section 263 of the Act, allowing the grounds raised by the assessee. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 2nd September 2022.