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TMI Blog2017 (5) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 for the Assessment Year 2005-06 is erroneous in so far as it is prejudicial to the interest of revenue and thereby setting aside the assessment order passed by the Assessing Officer under section 143(3) r. w.s.153A. 3. On the facts and circumstances of the case and in law, the learned CIT erred in directing the Assessing Officer to re-verify the details and sources from which the Appellant had made the investment in immovable properties without appreciating that in response to the enquiry, the Appellant had filed complete details of immovable properties including sources for making such investments and the same were duly reflected in the Balance Sheets filed with the Assessing Officer. 4. On the facts and circumstances of the case and in law, the learned CIT erred in directing the Assessing Officer to re-verify the details regarding the difference in stamp duty paid and also the details of the properties. 5. On the facts and circumstances of the case and in law, the learned CIT erred in directing the Assessing Officer to re-verify the nature, regularity and amount of transactions in shares and securities involved and ascertain whether the same comes within the ambit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was observed by ld. CIT from the records of assessment proceedings u/s 143(3) of the 1961 Act that the assessee had shown advances and deposits amounting to ₹ 16,05,41,233/- in the Balance Sheet as on 31-03-2005 as per schedule F which includes stamp duty of ₹ 40,80,500/- . The learned CIT submitted that as per balance sheet the stamp duty charges were shown of ₹ 40,48,500/- whereas the receipts of the stamp duty submitted were of ₹ 32,65,500/- and the difference between the two establishes that there were certain properties other than those disclosed by the assessee. The ld. CIT observed that certain property which were purchased by the assessee had not been disclosed to the Revenue. The source of investment in these properties of aggregate value of ₹ 7,54,02,860/- remained unexplained, were the observation of the learned CIT. It was also observed that the A.O. has not obtained details of the remaining amount of stamp duty of ₹ 7,73,000/-. The third ground for invoking Section 263 of the 1961 Act is with respect to the short term capital gain of ₹ 71,07,855/- declared by the assessee on the sale and purchase of shares which in the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-05 for a total consideration of ₹ 7,54,02,860/-. The consideration was paid as under. Rs. Upto A.Y. 2005-06 4,56,00,000 A.Y. 2006-07 1,15,00,000 A.Y. 2007-08 1,00,00,000 A.Y. 2008-09 83,02,860 Total 7,54,02,860 Since the accounting in respect of the above flats was on cash basis, the assesse had accounted for all the payments made against them and the same was reflected as advances in the respective years. Accordingly, as on 31.03.2005, the amount of ₹ 4,56,00,000/- was shown under the head Advances and Deposits . In respect of these flats, during the assessment year 31/3/2005, the assesse had made payment of stamp duty amounting to ₹ 34,48,500 and registration charges of ₹ 6,00,000 aggregating to ₹ 40,48,500/-. The said amount of ₹ 40,48,500 has been reflected under the head Advances and Deposits . In Schedule F to the Balance Sheet filed with your along with the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mutual Funds and Shares are enclosed giving the details of all transactions like name of scrip, date of purchase, quantity, amount and capital gain along with supporting evidences/contract notes. We hope the above will meet with your requirements. The assessee had also filed premises-wise details of purchase consideration, stamp duty registration fees. The assessee had also filed Balance Sheet and the relevant details of advances and deposits for the year ending 31/3/2005 to 31/3/2009. A copy of the said letter submitted by the assessee together with all the supporting evidences are enclosed for the kind perusal of your honour. During the course of the scrutiny assessment proceedings, the assessee had also filed a letter from Surela Investments and Trading Pvt Ltd handing over the possession of the various premises at Central Garden Complex to the assessee. Thus, your honour's contention that the immovable properties acquired by the assessee have not been reflected in the Balance Sheet is without any basis. The Assessing Officer had verified the details filed by the assessee in respect of immovable properties and all the relevant supporting evidences filed wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of making investment in shares and securities in any of the years under consideration. Moreover, no interest expenditure has been incurred or claimed by the assessee against the income arising from such investments. The assessee has always utilized its own surplus funds or family funds accumulated over a period of time and has not resorted to borrowing for the purpose of investments. This is borne out by the details fifed with you during the course of the assessment proceedings. 3. The assessee does not have administration set up and has not engaged or employed any person for investment in shares or securities and the same is being carried out by the assessee himself which goes to prove that the investment in shares is not an organized activity. 4. During the period under consideration, the assessee had also made investment in the units of various mutual funds. The assessee has received dividend on the said mutual fund units. The investment in the mutual funds can, by any stretch of imagination, be considered only as investment and not as business assets more particularly, since the units of mutual fund cannot be traded on the market at all, the units c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities. 7. The assessee has taken delivery of shares against the purchases made and the same are credited to his demat account. Similarly, the assessee has given delivery of shares against sales made from the demat account. Hence, all the transactions of purchase and sale are delivery based. 8. The treatment given by the assessee in respect of shares and investments has been accepted by the Department year after year. The Department has in all the years accepted the income of the assessee as short term capital gain or long term capital gain as the case may be. The facts and the circumstances are not different from the year years and hence there is no justification on the part of the department to treat the same as business income. It may be relevant to state here that the department has accepted the treatment given by the assessee even in these seven years either u/s. 143(3)/143(1) of the Act. 9 The frequency and volume of the transaction entered into by the assessee in all these years has not been huge. Moreover, the volume and the frequency should be considered vis-a-vis the availability of the funds and the size of the balance sheet of the assessee. 10. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing full payment for investments the transactions are to be treated as giving rise to capital gain and cannot be branded as trading in shares. In view of the above, it is submitted that the income or loss arising out of purchase and sale of shares and securities is in the nature of capital gain and the assessee has treated the same accordingly as per the provisions of the Act and hence the same cannot be treated as business income. From the above, it is amply clear that the issue under consideration was also raised by the Assessing Officer for which the detailed explanation has been given. After considering the explanation made by the assessee, the details filed by the assessee in this respect, the facts of the case, the provisions of law and the various case laws relied upon by the assessee, the Assessing Officer was satisfied that the profit on sale of shares has rightly been offered as income under the head capital gain . According to the Assessing Officer, after considering the submissions of the case, there was no justification in taxing the income on sale of shares as business income. It is only after due consideration that the Assessing Officer has chosen to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act. Erroneous assessment refers to an assessment that deviates from the law and accordingly an order cannot be termed as erroneous unless it is not in accordance with law. It is further submitted that at the time of passing the assessment order, the Assessing Officer was fully satisfied about the immovable properties acquired by the assessee and the sources thereof The Assessing Officer was also aware of the decision of the Jurisdictional High Court and the Supreme Court in case of Gopal Purohit v JCIT - 228 CTR 582. In such circumstances, it cannot be said that the order of assessment passed by the Assessing Officer after considering all the factual positions, details filed and various judicial pronouncements is erroneous or prejudicial to the interests of the revenue. The assessee relies on the decision of Gujarat High Court in Garden Silk Mills Ltd v CIT - 221 ITR 861 in which it was held that the Commissioner is not empowered to ignore the binding decisions of the Supreme Court or a Jurisdictional High Court considered by the Assessing Officer while passing the Assessment order. The assessee also relies on the decision of Supreme Court in the case of CIT v. G.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power to re-examine the accounts and determine the income himself at a higher figure. This is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself would not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, that the order is erroneous is absent. The ITAT, Bombay in the case of Jhuleal Land Development Corpn. v. DCIT (56 ITD 345) following Gabriel India's judgment, also held that when Assessing Officer's view was also a possible view, it could be incorrect to hold assessment order to be erroneous merely because Commissioner held a different view. The Assessing Officer has rightly allowed the claim of the assessee company after considering the facts of the case. The order passed by the Assessing Officer is neither erroneous nor prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the assessee with respect to the first two grounds which has been invoked by the ld. CIT u/s 263 of the 1961 Act namely to verify the investments made by the assessee in immovable properties and its sources of acquisition as well to verify the difference in stamp duty as reflected in the Balance Sheet and as submitted in reply before the learned AO during the course of assessment proceedings u/s 143(3) r.w.s. 153A of the 1961 Act wherein no additions were made in assessment proceedings by the A.O. u/s 143(3) r.w.s. 263 of the 1961 Act vide assessment orders dated 30-03-2014, and the AO confined the additions only by bringing to tax gains arising on sale of shares of ₹ 71,07,855/- as business income instead of capital gains declared by the assessee, vide assessment order dated 30-03-2014 passed u/s 143(3) r.w.s. 263 of the 1961 Act. The ld. counsel submitted that the genesis of the assessment order dated 29-12-2010 passed by the AO u/s 143(3) r.w.s. 153A of the Act was the search conducted by Revenue in the case of the assessee u/s 132 of the Act on 05.03.2009. It is submitted that the afore-said assessment order dated 29- 12-2010 passed by the AO u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The ld. D.R., on the other hand, relied on the order of the ld. CIT. 7. We have considered the rival contentions and also perused the material available on record. We have observed that the assessee e-filed the original return of income on 31-08-2005 declaring total income at ₹ 1,26,04,661/- which return of income was processed u/s 143(1) of the 1961 Act. The assessment on this case was originally framed by the AO u/s 143(3) of the 1961 Act on 19-12-2007 accepting the returned income. Thereafter the assessment was framed by the AO vide assessment order dated 29th December 2010 passed u/s 143(3) r.w.s. 153A of the 1961 Act, wherein the expenses of ₹ 2500/- which were claimed on account of professional tax were disallowed by the AO and the income was assessed at ₹ 1,26,07,160/-. The background of the case are that search and seizure action u/s 132 of the 1961 Act was carried on by the Revenue on 05-03-2009 in the case of Jai Group, its employees and close associates. The Jai Corp Group has extended its operation to realty sector. The group is partner along with RIL in two major upcoming SEZ namely Navi Mumbai Special Economic Zone(NMSEZ) and Mumbai Special Ec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessee had made investments in the properties and whether the said income was offered for taxation m the relevant assessment years as well as to verify the genuineness of the claim of the assessee regarding reflection of the investment in the respective years. The Id. CIT also directed the AO to verify the difference in the payment of stamp duty of ₹ 7,73,000/- between the amount of ₹ 40,48,500/- as reflected in Balance Sheet and an amount of ₹ 32,65,500/- reflected in the reply submitted before the AO during the assessment proceedings , while the assessee claimed before learned CIT that the assessee has paid ₹ 34,48,500/- towards stamp duty and ₹ 6,00,000/- was paid towards registration charges . The learned CIT directed the AO to verify the details of the properties and its sources of acquisition. The learned CIT also directed A.O. to verify whether the gains arising from sale of shares/units of Mutual funds should be charged to tax as business income in accordance with the CBDT Circular No. 4, vide orders dated 25-03-2013 passed by learned CIT u/s 263 of the 1961 Act. We have observed from the records before us that it is not brought on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 7,54,02,860 These 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. Further, with respect to treatment of short term capital gains on sale of shares of ₹ 71,07,855/- as business income invoked as one of the grounds by learned CIT for applying Section 263 of the 1961 Act also lacks merit as' the AO had while framing assessment order dated 29-12-2010 passed u/s 143(3) r.ws. 153A of the 1961 Act had made proper and detailed enquiries against whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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