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TMI Blog2014 (11) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, Sh. Summit Kumar, CA and AR of the assesse appeared and file the details called for which is placed on records. After consideration of the details/evidences furnished, the returned income is accepted. Assessed at Rs. 833,48,262/-. Issue necessary forms. Give credit to prepaid taxes. Charge interest as per the provisions of the I.T. Act." 3. The above order was found by the Ld. CIT to be erroneous so far as the same was prejudicial to the interest of the revenue due to the following reasons recorded in the show cause notice in this regard. "As per AIR information the assessee invested total of Rs. 25.50 crores in SIEL Holding Ltd., where he is the CEO as indicated in the certificate in Form No. 16 enclosed with the return of income. The source of this investment has been explained out of the Long Term Capital Gains of Rs. 59.11 Crores and Short Term Capital Gains of Rs. 8.26 crores on Sales of shares. The LTCG has been claimed exempt and tax @ 10% has been paid on the STCG. From the details of working of these Capital Gains, it is observed that these Gains have been made only in respect of the purchases and sales of the shares of Mawana Sugars Ltd. The assessee belongs to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Moreover, it is humbly submitted that there is no provision in the Income Tax Act in accordance with which income earned on sale of shares held by a person, even if connected with management, is chargeable to tax as business income and not as capital gain. The assessee was holding the shares admittedly as investment and, therefore, capital gain earned on sale of shares was in the nature of long term and short term capital depending upon period of holding of shares as per details duly submitted with the return of income. Hence, there is no error in the order of assessment which can invite invocation of action under Section 263 of the Act. In any case, the income earned on sale of shares was considered and accepted as capital gain by the Assessing Officer after due application of mind. Even if it is assumed that there is a possibility of taxing the income as business income, it is a debatable issue and two views are possible. As per the well settled legal position propounded by the Supreme Court vide decisions in the cases of Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83 (SC) and CIT v. Max India Limited, 295 ITR 282 (SC), no action under Section 263 of the Act can be taken in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial to the interest of revenue on the ground that source in the case of mother from which gift was made to the assessee had not been examined. As per the well settled legal position, an assessee is not obliged to explain source of the source of any receipt. Admittedly gift was received from the mother and confirmation in respect thereof had been duly submitted to the Assessing Officer. Accordingly, the Assessing Officer had accepted the position after due verification. Therefore, no action under Section 263 of the Act is called for on this ground also in the case of assessee. 5. However, the Ld. CIT was not satisfied. He held that there was no enough time to make the AO to examine the details. However, the AO decided to complete the case without making the detailed examination. Ld. CIT further held that all these facts clearly indicate that the AO was in a haste to complete the assessment without making the detailed enquiry. He referred the decision of the Hon'ble High Court of Karnataka in the case of Thalibai F. Jain vs. ITO 101-ITR-1(Kar.). The assessments were made in undue haste and without enquiry are prejudicial to the interest of the revenue, and what is prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was well aware of the activities of the company. This is evident from the fact that long term capital to the extent of Rs. 59.11 crores has been earned on investment of Rs. 6.83 crores only and short term capital gain to the extent of Rs. 8.26 crores has been earned on investment of Rs. 0.17 crore only. Ld. CIT opined that the activities of the assessee is not a normal investment activity. This was a business activity and such income should have been considered to be taxed accordingly. 10. In this regard, it was submitted that the assessee is neither a Director nor an employee of the above company. Moreover, it has been submitted that there is no provision in the Income Tax Act, in accordance with which income earned on sale of shares held by a person even if connected with the management is chargeable to tax as business income and not as capital gain. It has been submitted that assessee was holding the shares as investment. Therefore, capital gain earned has been properly returned. Hence, it has been submitted that there is no error in the order of the assessment which may need invocation of action under section 263 of the Act. It has further b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been done. We find that this direction of the Ld. CIT is not sustainable. Action u/s. 263 is not called for verification of a particular fact relatable to earlier year. In the previous year the position submitted by the assessee has been accepted. That proposition cannot be enquired into in the subsequent assessment year u/s. 263. 13. Further, Ld. CIT has observed that short term capital gain has arisen out of total number of shares of 700,000/-. Cost of 679000 shares is being shown Zero. It should have been verified from where these shares have come. In this regard, it has been submitted that assessee has shown total sale consideration chargeable to tax and tax thereon has been duly paid. Hence, there could be no position of the assessee adverse than showing total sale consideration as taxable capital gain. It has further been submitted that when the acquisition value of shares was shown as NIL, no prejudice is caused to revenue. 14. We have carefully considered the submissions, we find that in the details regarding the computation of short term capital gain, assessee has shown 6,79,000 shares acquired on 12.11.2005 for which no rate per unit or cost price has been mentioned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same is not at all reflected in the enquiries made and the entries of the order sheet. The same is also not reflected in the assessment order. In these circumstances, Ld. CIT is correct in holding that this aspect needs further examination. It can also not be said that AO has adopted one of the two possible views when no enquiry has been made, when the same was required. 18. Thus, we find that assessment order as reproduced above is very laconic and therefore, it does not reflect that AO has applied his mind on the aspect referred in the order of the Ld. CIT u/s. 263. The order sheet entries and the letters issued to the assessee also do not elicit enquiry by the AO as mentioned hereinabove. In these circumstances, we find that Ld. Counsel of the assessee's contention that AO cannot be asked to make further enquiry is not tenable as the AO has been found to have made no enquiry. Similarly, it can also not be said that AO has formed an opinion which was one of the possible opinion. Hence, the case laws relied upon by the Ld. Counsel of the assessee do not fructify the assessee's case. 19. In this regard, we accept the Ld. CIT's observation that AO has made the assessment i ..... 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