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TMI Blog2014 (4) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares – the AO has not at all examined the applicability of Section 2(22)(e) and, it is a case of lack of inquiry. Claim of deduction u/s 54F of the Act – Investment in residential house – Held that:- The AO did raise the query with reference to Section 54F and the assessee gave reply - the AO did raise the query in this regard and it cannot be said that there was no inquiry by the AO with reference to allowability of Section 54F to the assessee so as to empower the CIT for invoking his jurisdiction u/s 263. The order of learned CIT modified partly - His finding with regard to no inquiry u/s 2(22)(e) and the difference between the net profit as per profit & loss account and the net profit shown under various heads in the computation of income is upheld and the CIT’s finding with regard to Section 54F of the Act is vacated because the AO did make necessary inquiry with regard to deduction u/s 54F claimed by the assessee - the order u/s 263 is partly modified and the AO is directed for fresh adjudication and to inquire into and re-adjudicate the applicability of Section 2(22)(e) and also the allocation of income under the various heads by the assessee in the computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors. The Assessing Officer also asked the assessee to produce books of account, vouchers, bank accounts etc. She submitted that vide letter dated 9th August, 2010, copy of which is placed at page 30 of the assessee s paper book, the assessee furnished the details of unsecured loans etc. and also produced the books of account, supporting evidence, vouchers as asked by the Assessing Officer. She referred to another reply dated 11th August, 2010 furnished by the assessee in which she pointed out that the assessee has referred to the sale of 82,000 equity shares of Swastik Khatha Pvt.Ltd. to ACIL. In the said letter, it is mentioned that the confirmation of ACIL and certified copy of their account in assessee s books is enclosed. From those documents, she contended that all facts relating to sale of shares to ACIL and the amount received against such sale proceeds was well within the knowledge of the Assessing Officer. Therefore, the allegation of the learned CIT that no inquiry was made by the Assessing Officer with regard to the loan from ACIL is factually incorrect. Regarding allowing of deduction under Section 54F, she again referred to the query letter of the Assessing Officer d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That it is not in the control of the assessee how the Assessing Officer writes the order. Normally, wherever the Assessing Officer is satisfied with the assessee s explanation, the same is not discussed in the assessment order and the detailed discussion is only in respect of the items for which the Assessing Officer is making the addition. That the revisionary power by the CIT is not for setting aside the assessment for conducting roving and fishing enquiries. In support of this contention, she relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Vikas Polymers [2010] 194 Taxman 57 (Delhi). She further contended that it is a settled proposition by the decision of Hon ble Apex Court in the case of Malabar Industrial Co.Ltd. Vs. CIT [2000] 243 ITR 0083 that where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. 7. She, therefore, submitted that the order of learned CIT passed under Section 263 is unsustainable both on law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order is just of nine lines in which the Assessing Officer simply accepted the income returned which clearly proves total nonapplication of mind. With regard to the allocation of income under the various heads, the learned CIT-DR stated that there is no dispute with regard to assessee s contention that income is to be disclosed under the various heads of income but he stated that when there is only one trading account for shares, it is not at all clear how the assessee has allocated it within the long term capital gain, short term capital gain and business income. As per profit loss account, net profit is Rs. 81,86,608/-. However, in the computation of income, the assessee has disclosed profit as per profit loss account at two places, at one place, it is Rs. 4,50,329/-, at another place it is Rs. 73,74,663/-. It is admitted by the learned counsel that the assessee has prepared only one profit loss account, then how in the computation, the net profit has been taken at two places claimed to have been as per profit loss account and moreover, the figure of such net profit does not tally with the assessee s profit loss account. No inquiry is made by the Assessing Officer in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was a case of lack of inquiry. The accounting practice followed for a number of years had the approval of the income-tax authorities. Even for future assessment years, the very same accounting practice was accepted. 13. In the case of Jyoti Foundation (supra), their Lordships of Jurisdictional High Court held as under:- dismissing the appeal, that inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called for. The inquiry should have been conducted by the Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the inquiry. 14. In view of the above decisions of Hon'ble Jurisdictional High Court, now it is a settled position that the CIT cannot invoke his jurisdiction under Section 263 of the Act for inadequate inquiry. The assessment order can be said to be erroneous only when there is total lack of inquiry on any point. Let us now examine the facts of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a certified copy of their account in my books of accounts is enclosed herewith. 3) As stated above, the sale proceeds for sale of equity shares was received on 31st March 2008. I have purchase a residential flat from PACL India Ltd, New Delhi and a copy of the sale deed/lease deed is enclosed herewith. The lease deed has been executed on 29th July 2009. Thus the residential house has been purchased well within the stipulated time of two years from the date of receipt of sales proceeds. Please also note that my self my husband, Mr. Raj Parkash Goel, are co-owners of said flat and both hold 50% share in the residential flat. 18. The reply vide paragraph 1 is pertaining to trading in shares. The reply at paragraph 2 is also with regard to sale of shares by the assessee to Ankush Credit India Ltd. and the reply at paragraph 3 is for exemption under Section 54F. Thus, this reply also does not have any connection with the loan taken from ACIL and whether Section 2(22) is applicable thereto. Though in paragraph 2 of the above reply the assessee has mentioned that confirmation from ACIL is enclosed, we find that the said confirmation is at page 49 which reads as under:- Madam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry with reference to applicability of Section 2(22)(e) of the Act and, therefore, the above decisions of Hon'ble Jurisdictional High Court would not help the case of the assessee. 21. With reference to Section 54F, the query No.11 raised by the Assessing Officer vide letter dated 22nd July, 2010 is reproduced below for ready reference:- Give the details of income claimed exemption and prove that if fulfilled all the condition u/s 54F of the income Tax Act, 1961. 22. The reply given by the Assessing Officer vide letter dated 9th August, 2010 reads as under:- Para No.11 During the year, assessee has long term capital gains on shares and the same was claimed exempted under section 54F. All the conditions of section 54F were complied with which are explained below:- Conditions of section 54F :- 1. The assessee is an individual or a Hindu undivided family. 2. The assets transferred is any long term capital asset but other than a residential house. 3. The assessee has purchased, within one year before the date of transfer or 2 years after the date of transfer or constructed within 3 years after the date of transfer (or from the date of receipts or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the income under the various heads by the assessee. Normally, when the computation is prepared, the net profit as per profit loss account is taken from which the adjustment is shown in the computation itself with regard to income which is considered separately under other heads. In the computation, the assessee has shown some amount of short term capital gain, some amount of long term capital gain. Again, from the assessee s accounts, we could not understand how such working is made. The Assessing Officer has also not raised any such query. In view of the above, we agree with the finding of learned CIT that the Assessing Officer has not applied his mind, made no inquiry at all with reference to the allocation of income under various heads and the difference between the net profit as per profit loss account and net profit shown under different heads in the computation of income. 27. In view of the above, we, respectfully following the decisions of Hon'ble Jurisdictional High Court relied upon by the learned counsel, modify the order of learned CIT partly. His finding with regard to no inquiry under Section 2(22)(e) and the difference between the net profit as per pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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