2017 (5) TMI 419 - AT - Income Tax

Revision u/s 263 - unexplained investment in properties - capital gain computation - difference in the payment of stamp duty between the amount as reflected in Balance Sheet and an amount reflected in the reply submitted before the AO during the assessment proceedings - Held that - It is not a case where no enquiries have been made by AO or an inadequate enquiry were made by the AO. In case of differential in stamp duty of ₹ 7,73,000/- as pointed out by learned CIT, the assessee duly explained that the value reflected as stamp duty in Balance Sheet comprised of stamp duty of ₹ 34,48,500/- and registration charges of ₹ 6,00,000/- and there is no difference in the value as reflected in Balance Sheet in the replies filed by the assessee before the AO during proceedings u/s 143(3) r.w.s. 153A of the 1961 Act. The said amounts were duly reflected in the Balance Sheet of the assessee. Investments were reflected in the Balance Sheet of the assessee. The evidences for above assessment years were filed before the AO in proceedings u/s 143(3) r.ws. 153 A of the 1961 Act which were verified by the AO. Hence, it could not be said that the said view is erroneous so far as prejudicially to the interest of revenue so as to be covered under the mandate of Section 263 of the 1961 Act which is fortified further by the AO itself dropping both the grounds of invocation of Section 263 of the 1961 Act by learned CIT in an assessment order dated 30-03-2014 framed u/s 143(3) r.w.s. 263 of the 1961 Act, wherein no additions were made on grounds of differential in stamp duty as well investments in properties and its sources. With respect to treatment of short term capital gains on sale of shares as business income invoked as one of the grounds by learned CIT for applying Section 263 also lacks merit as the AO had while framing assessment order dated 29-12-2010 passed u/s 143(3) r.w.s. 153A of the 1961 Act had made proper and detailed enquiries against which the assessee submitted detailed replies and arrived at conclusion to treat the gains arising from sale of share as capital gains which is a plausible view both on facts and on law. The replies filed by the assessee on this ground in proceedings before the AO u/s 143(3) r.w.S 153A of the 1961 Act is reproduced in preceding para s of this order and are not repeated again for sake of brevity. Thus, the order dated 25-03-2013 passed by learned CIT u/s 263 of the 1961 Act is even not sustainable on this ground. AO itself in original assessment framed u/s 143(3) of the 1961 Act vide assessment orders dated 19-12-2007 and also in assessment orders dated 29-12-2010 passed u/s 143(3) r.w.s. 153A of the Act has accepted gains on sale of shares as capital gains while it is brought on record that detailed enquiry was made by the AO before passing assessment order dated 29-12-2010 passed u/s 143(3) r.w.s. 153A of the 1961 Act. Even keeping in view the newly inserted explanation 2 to Section 263 of the 1961 Act, in our considered view this order dated 25-03- 2013 of the learned CIT u/s 263 of the 1961 Act is not sustain able in the eyes of law - Decided in favour of assessee.

Issues Involved:
1. Legality of the order passed by the CIT under Section 263 of the Income Tax Act, 1961.
2. Whether the assessment order passed by the Assessing Officer (AO) under Section 143(3) read with Section 153A was erroneous and prejudicial to the interest of revenue.
3. Verification of details and sources of investments in immovable properties.
4. Verification of the difference in stamp duty paid and the details of properties.
5. Verification of the nature, regularity, and amount of transactions in shares and securities.
6. Treatment of income or loss from the purchase and sale of shares and securities as capital gains or business income.

Issue-wise Detailed Analysis:

1. Legality of the Order Passed by the CIT under Section 263:
The appellant objected to the order dated 25/3/2013 passed by the CIT under Section 263 of the Income Tax Act, 1961, claiming it was illegal, bad in law, ultra vires, and contrary to the provisions of law and facts of the case. The Tribunal analyzed the grounds of appeal and the CIT's directions to the AO to re-verify various details and sources of investments, concluding that the CIT's order was not justified.

2. Erroneous and Prejudicial to the Interest of Revenue:
The CIT held that the assessment order dated 29/12/2010 was erroneous and prejudicial to the interest of revenue. The Tribunal examined whether the AO had made proper inquiries during the assessment proceedings and found that the AO had indeed verified all details and sources of investments. The Tribunal concluded that the AO's order was a plausible view and not erroneous or prejudicial to the revenue.

3. Verification of Details and Sources of Investments in Immovable Properties:
The CIT directed the AO to re-verify the details and sources of investments in immovable properties. The Tribunal noted that the assessee had provided complete details of the immovable properties, including sources of funds, during the assessment proceedings. The AO had verified these details and accepted the assessee's claim. The Tribunal found no basis for the CIT's direction to re-verify the details.

4. Verification of the Difference in Stamp Duty Paid and Details of Properties:
The CIT observed a discrepancy in the stamp duty charges reflected in the balance sheet and the receipts submitted. The Tribunal noted that the assessee had explained the difference, stating that the stamp duty and registration charges were correctly reflected in the balance sheet. The AO had verified these details during the assessment proceedings, and there was no need for further verification.

5. Verification of the Nature, Regularity, and Amount of Transactions in Shares and Securities:
The CIT directed the AO to verify whether the transactions in shares and securities should be treated as business income instead of capital gains. The Tribunal noted that the AO had already examined this issue during the assessment proceedings and accepted the assessee's claim of treating the income as capital gains. The Tribunal found that the AO's decision was based on a detailed analysis and was a plausible view.

6. Treatment of Income or Loss from Purchase and Sale of Shares and Securities:
The assessee argued that the income or loss from the purchase and sale of shares and securities was in the nature of capital gains, as per the decision of the Bombay High Court in the case of Gopal Purohit v. JCIT. The Tribunal observed that the AO had considered the assessee's submissions, the facts of the case, and the relevant judicial pronouncements before accepting the claim. The Tribunal concluded that the AO's order was not erroneous or prejudicial to the interest of revenue.

Conclusion:
The Tribunal quashed the CIT's order dated 25/3/2013 passed under Section 263 of the Income Tax Act, 1961, and allowed the appeal filed by the assessee. The Tribunal found that the AO had made proper inquiries and arrived at a plausible view on all the issues raised by the CIT, and the assessment order was neither erroneous nor prejudicial to the interest of revenue.

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