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2022 (11) TMI 523 - AT - Income TaxRevision u/s 263 - Reopening of assessment u/s 147 - Long Term Capital Gain from the position of the possibility of it being a sham transaction - HELD THAT - On giving our thoughtful consideration to the claims and counter claims of the parties before us, we deem it appropriate to first cull out the facts necessary for adjudicating the issue before us namely; can the order passed by the PCIT u/s. 263 exercising the Revisionary Powers be said to be a valid order in the eyes of law on the basis of facts and evidences on record. In order to examine the said question, we need to set out the relevant and necessary facts on the basis of which the answer to the said question can be determined. The assessee in the facts of the present case has sold the shares of M/s. CCL International Ltd. which were acquired as a result of amalgamation of M/s. CCL International Ltd. with M/s. AAR Infrastructure wherein the assessee had originally invested a certain amount. It is an accepted fact that the Amalgamation Scheme under the aegis of the Hon'ble Delhi High Court has attained finality. The number of shares received by the assessee as a result of the amalgamation is not the issue for determination in the present proceedings. AO considering the information noticed that the assessee had sold 750000 shares in M/s. CCL International Ltd. and has not disclosed those in its return dated 02.08.2013. Considering the information after recording reasons and fulfilling the necessary formalities, he issued notice u/s. 148. The assessee filed its return on 26.10.2016 disclosing the sale of transactions. AO recording the reasons for re-opening the assessment in the impugned order dated 27.11.2017 itself required the assessee to explain and justify its claim of Long Term Capital Gain claim made in the revised return in the backdrop of the information of scam in penny stock company. This order is set aside by the ld. PCIT u/s. 263 of the Act. No contrary evidence has been filed by the Revenue. The suspicions and conjectures in the absence of any evidence have no relevance whatsoever. The argument that subsequently the share price rose and the fact that the assessee sold it at a lesser price on an earlier date is a suspicion which cannot be taken as an evidence that the share price was rigged. This fact in no way discredits the assessee's claim, infact it only fortifies the fact that assessee had no apparent insider's knowledge or clairvoyance that the share price would rise further. With hindsight most everyday rationale decisions may ultimately appear to be ill-advised actions, however none of us are clairvoyants and hence being incapable of seeing the future we act in the present. Decisions taken in the present are based on available input. What lies in the future is always an estimated guess. By accepting an estimated addition the broker cleverly evades penal consequences of Detection and discovery of client fund mis-management. These statements of surrender by Brokers it cannot be over emphasized should be treated with utmost caution in the interests of the economic activity in the country and as a safeguard to the trusting citizens who engage and pay for the services of these Brokers. These surrenders consciously and unscrupulously made invite whimsical consequences for the bonafide investors. How and why the tax department should accept the words of such a manipulative fast thinking person and why the words of such a manipulative person be permitted to be given a precedence over the documents and evidences relied upon by a person relying in good faith on the bonafide of his Broker needs to be seriously introspected upon and addressed by the tax authorities. Permitting such criminal acts by carelessly accepting the statements/surrenders made by unscrupulous brokers needs to be addressed consciously especially when applied to the clients of such brokers who may have trusted the financial acumen of these brokers. These innocent trusting lambs should not be carelessly allowed to be thrown at the wolves by the manipulative brokers. These surrender statements should be viewed with due care and caution. It is necessary for the tax authorities to examine whether the traded company has actually been barred from the Stock Exchange or was still continuing on the Stock Exchange. For the sake of removing doubts, it is being clarified that the observations are made to the transaction of buy/sale through the D-Mat account on the Stock Exchange in listed companies. On a careful consideration of the entire facts, circumstances and position of law as discussed in detail in the earlier part of this order and considering the evidences which were filed before the AO and the ld. PCIT and even further elaborated before us by both the parties, we find on facts that the Revisionary order in the peculiar facts and circumstances proceeds entirely on presumptions, conjectures and surmises. The twin conditions as laid down by plethora of decisions from the case of Malabar Industries 2000 (2) TMI 10 - SUPREME COURT , we find are not met. Accordingly, for the reasons given hereinabove in detail, the impugned order is quashed. Appeal of assessee allowed.
Issues Involved:
1. Validity of the order passed by the PCIT under section 263 of the Income Tax Act. 2. Whether the assessment order passed by the AO under section 143(3) read with section 147 was erroneous and prejudicial to the interests of the revenue. 3. Examination of the genuineness of the long-term capital gain (LTCG) from the sale of shares of CCL International Ltd. 4. Adequacy of the enquiries conducted by the AO during the assessment proceedings. 5. Relevance of the ITAT Delhi Bench decision dated 08.01.2019 in the context of the present case. Detailed Analysis: 1. Validity of the order passed by the PCIT under section 263: The ITAT considered the PCIT's order under section 263, which set aside the AO's assessment order. The PCIT's decision was based on the premise that the AO failed to make necessary enquiries and that the assessment order was erroneous and prejudicial to the interests of the revenue. The ITAT examined whether the PCIT's invocation of section 263 was justified and concluded that the PCIT's order was based on mere suspicions and conjectures without substantive evidence. 2. Whether the assessment order passed by the AO was erroneous and prejudicial to the interests of the revenue: The ITAT scrutinized the assessment order passed by the AO and considered whether it was erroneous and prejudicial to the interests of the revenue. The AO had made detailed enquiries, including verifying the transactions related to the sale of shares of CCL International Ltd., examining the broker's records, and corroborating the sale prices with the stock exchange data. The ITAT found that the AO's order was neither erroneous nor prejudicial to the interests of the revenue, as all necessary verifications were made. 3. Examination of the genuineness of the long-term capital gain (LTCG) from the sale of shares of CCL International Ltd.: The ITAT examined the genuineness of the LTCG claimed by the assessee from the sale of shares of CCL International Ltd. The AO had verified the transactions, including the purchase and sale of shares through the broker, the demat account statements, and the bank statements reflecting the sale proceeds. The ITAT found that the transactions were genuine and supported by documentary evidence, and there was no basis to treat the LTCG as bogus. 4. Adequacy of the enquiries conducted by the AO during the assessment proceedings: The ITAT assessed the adequacy of the enquiries conducted by the AO. The AO had issued notices, recorded the assessee's statements, and obtained information from the broker and the stock exchange. The AO also considered the report from the Directorate of Investigation and cross-verified the transactions with the records of the assessee's parents. The ITAT concluded that the AO had conducted thorough and adequate enquiries before passing the assessment order. 5. Relevance of the ITAT Delhi Bench decision dated 08.01.2019: The PCIT's order under section 263 relied on the ITAT Delhi Bench decision dated 08.01.2019 in the case of Shri Anip Rastogi and Smt. Anju Rastogi. The ITAT noted that this decision was not available to the AO at the time of passing the assessment order. Moreover, the facts of the present case were distinguishable from those in the ITAT Delhi Bench decision. The ITAT emphasized that the AO's order should be based on the records available at the time of assessment and not on subsequent decisions. Conclusion: The ITAT quashed the PCIT's order under section 263, holding that the AO's assessment order was neither erroneous nor prejudicial to the interests of the revenue. The ITAT found that the AO had conducted adequate enquiries and verified the genuineness of the LTCG claimed by the assessee. The reliance on the ITAT Delhi Bench decision was deemed irrelevant as it was not available at the time of the assessment and the facts were distinguishable. The appeal of the assessee was allowed.
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