Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (1) TMI AT This

  • Login
  • Cases Cited
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2020 (1) TMI 1025 - AT - Income Tax


Issues Involved:
1. Whether the Principal Commissioner of Income Tax (Pr. CIT) erred in passing the order under Section 263 of the Income Tax Act, 1961.
2. Whether the order passed by the Pr. CIT under Section 263 of the Income Tax Act, 1961, complied with the jurisdictional conditions necessary to invoke the power of the said section.
3. Whether the transactions in shares of M/s Luminaire Technologies Ltd. (LTL) were genuine or pre-arranged to claim exempt Long Term Capital Gains (LTCG).

Issue-wise Detailed Analysis:

1. Error in Passing Order under Section 263:
The assessee contended that the Pr. CIT erred in passing the order under Section 263 of the Income Tax Act, 1961. The Pr. CIT observed that the assessee claimed exempt LTCG of ?8,94,51,920/- by trading in shares of LTL, which was identified as a penny stock by the Investigation Wing of the Department. The Pr. CIT found that the Assessing Officer (AO) did not make adequate inquiries into the details furnished by the assessee, rendering the AO's order erroneous and prejudicial to the interest of revenue under clause (a) to Explanation 2 of Section 263(1) of the Act. The Tribunal noted that the AO completed the assessment without adequate inquiry, thus justifying the Pr. CIT’s invocation of Section 263. However, the Tribunal modified the Pr. CIT's direction to redo the assessment, instructing the AO to frame an order as per the provisions of the Act after providing a reasonable opportunity of being heard to the assessee.

2. Jurisdictional Conditions for Invoking Section 263:
The assessee argued that the Pr. CIT did not comply with the jurisdictional conditions necessary to invoke the power under Section 263. The Tribunal referred to the case laws cited by both parties. It was observed that the AO must conduct a thorough inquiry and verification of the details submitted by the assessee. In this case, the AO failed to make such inquiries, leading the Tribunal to uphold the Pr. CIT’s exercise of power under Section 263. The Tribunal pointed out that an assessment made without proper inquiry is prejudicial to the interest of revenue, as held in Rampyari Devi Saraogi v. CIT.

3. Genuineness of Transactions in Shares of LTL:
The Pr. CIT made several observations regarding the transactions in shares of LTL, indicating that the price of the shares was artificially rigged, and the company was a shell entity with no business activity or future prospects. The Pr. CIT concluded that the transactions were pre-arranged to claim exempt LTCG. The assessee countered these observations by providing evidence of genuine transactions, including share purchase and sale documents, demat account details, and financials of LTL. The Tribunal acknowledged the evidence but noted that the AO did not adequately examine these details during the original assessment. Consequently, the Tribunal directed the AO to reassess the case, considering all relevant documents and providing the assessee with a reasonable opportunity to present their case.

Conclusion:
The Tribunal partly allowed the appeal, affirming the Pr. CIT's decision to invoke Section 263 but modifying the direction for reassessment. The AO was instructed to frame an order as per the provisions of the Act, after providing a reasonable opportunity of being heard to the assessee. The assessee was directed to file the relevant documents and evidence before the AO.

 

 

 

 

Quick Updates:Latest Updates