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TMI Blog2020 (10) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... e aspects, it is a difficult proposition to determine the issue either way which is dependent on the facts in question. CIT(A) has mechanically applied the law evolved by judicial precedents on contours of S. 153A in an abstract and generic manner. CIT(A) was under bounden duty to make suitable inquiry to find the presence or otherwise of the incriminating material and should simply ought not to have brushed aside the additions and determine the viability of additions/ disallowance upon a vague and non-descript remand report where pertinent points raised by the CIT(A) remains unanswered. The findings of CIT(A), in our view, lacks comprehension. CIT(A) ought to have repeated the inquiry on incriminating material from the AO where the remand report allegedly did not cogently address the pertaining issue raised by the CIT(A) himself at the first instance. No such inquiry has been made as enjoined in law towards corroboration of assertions made by AO in support of its challenge to jurisdiction for additions. Assessee himself has discredited the entries pertaining the purchase and sale transactions of shares in its books. The submissions remains un-repudiated to our understanding. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law, the Ld.CIT(A) has erred in law and on facts is not appreciating the provisions of section 153A of the I T Act, 1961 which requires the total income to be brought under tax without any restrictions. 2. On the facts and in the circumstance of the case and in law, the Ld.CIT(A) has erred in law and on facts in holding that such assessment or reassessment u/s 153A of the I T Act, 1961 is to be restricted only to the incriminating materials found during the search. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 5,00,00,000/- made by the AO on account of loss on sale of shares of Amrapali Capital & Finance Services Ltd. (ACFSL). 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts without appreciating the facts that the assessee himself admitted that the purchase and sales shown in audited books of accounts are mere unilateral book/paper entries and no actual purchase and sale transactions have been carried out as mentioned in para 5.1 of said assessment order." 3. Briefly stated, the assessee company filed its return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts & ITAT. In the case on of the appellant, the A. O. has merely mentioned in the order that a search u/ s 132 of the Act was carried out on 26/ 10/ 2012. There is no reference to any books of accounts, documents or incriminating material seized and belonging to the appellant for the assessment year under consideration. The particular of income and i ts related transactions are duly recorded in the statutorily audited books of account f i led with the returns of income and the A. O. has made addition out of the same and no other addition on the basis of incriminating material or admission made by the appellant is made. In the absence of any incriminating material found, no additions can be made while making assessment u/ s. 153A of the Act, as the appellant had f i led original return of income on 30. 9. 2008 and assessment proceedings were not pending on the date of search, so as to abate. The appellant' s case has been found covered by following binding judgements :- (i) CIT Vs. Kabul Chawla [ 2015] Taxcorp DT 61778 (Del. HC) (ii) Intas Pharmaceutical Vs. DCIT in IT (SS) A no. 807- 809/ Ahd./ 2010 (Ahd. ITAT) (iii) Jay Infrastructure & Properties Pvt. Ltd, Vs. ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue correctly in favour of the assessee. On inquiry from the bench towards any averment made on behalf of the AO in the remand report on absence of incriminating material, the learned AR however could not demonstrate such facts to the satisfaction of the Tribunal. 9. We have carefully considered the rival submissions. The short question present for adjudication is whether it is open to the AO to disallow loss claimed on sale of shares in the current proceedings under s.153A of the Act in the context of the facts of the case. The jurisdiction to invoke the provisions of S. 153A per se is not in challenge having regard to the search action. What is in challenge is whether impugned additions/ disallowances made dehors the incriminating material is permissible as per the scheme of assessment embodied in S. 153A of the Act. It is the case of the assessee that the return of income filed prior to search under s.153A of the Act had stood concluded and was not pending at the time of search. It is thus the case of assessee that the AO was prohibited from making additions/ disallowances unconnected to the material found in the course of search in an such unabated assessment. 9.1 In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame token, we are equally flummoxed by the appalling assertions made in the submissions of the assessee before AO which went unnoticed by the CIT(A). For the sake of easy reference, the submissions as reproduced in para 5.1 of the assessment order is extracted hereunder: "(a) At the outset, i t is submitted that in the audited accounts, the working used are Loss from F&O activity. However, i t may be noted that the words [ F&O] used were inadvertently written on account of copy and paste function and was a bonafide mistake. The correct words are " Loss from Share Trading". This is to emphasize the fact that mere words would not change the nomenclature of the transaction, which in the instant case is share trading loss. (b) The investment in shares of ACFSL has been converted into stock in trade as on 01.04.2010 and therefore treated as loss on sale of such shares has been treated as business loss during the year. (c) It is further submitted that the entries of purchase and sale as shown in the audited accounts on which profit of ₹ 5,02,25,000 /- has been shown are mere unilateral book/ paper entries and no actual purchase and sale transactions have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be wrongly claimed in books as 'derivative transaction' by the assessee and consequently characterized as 'business loss' as per the scheme of the Act. On the contrary, the loss arising on ordinary share transaction, needs to be tested on the touchstone of deeming fiction embedded in Explanation to Section 73 of the Act to determine whether the impugned loss is speculative in nature and thus to be treated on a different tangent. As per the averments of the Assessee by way of it submissions, the share trading transactions have the attributes of ordinary transactions in contrast to derivative transactions enjoying a different legal status in view of exceptions carved out in S. 43(5) of the Act. Hence, the issue needs to be examined by the CIT(A) from this perspective as well which may call for some factual verifications. 9.6 As narrated, the controversy involved is complex and cannot be stereotyped by applying the judicial precedents summarily in the wake of very peculiar facts existing in the present case as narrated above. The Assessee has claimed lack of economic substance in the share transactions arising on purchase and sale of shares as recorded in the books. In our view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first appellate authority and indeed that of ITAT to have ensured that effective inquiry is carried out on the subject matter of appeal. Likewise, the Hon'ble Bombay High Court in ITO (TDS) vs. Thyrocare Technology Ltd. (Bom) Income Tax Appeal No.53 of 2016 & Ors. judgment dated 11.09.2017 also similarly observed that once the Tribunal was obliged in law to examine the matter and re-appreciate all the factual materials, then it should have performed that duty satisfactorily and in terms of powers conferred by law. The Aurangabad Bench of the Hon'ble Bombay High Court in the case of CIT vs. Chalisgaon People's Co-op. Bank Ltd. (Tax Appeal No. 31 of 2005 & Ors. judgment dated 23.03.2015) has also underlined the need for appropriate enquiry on the factual aspects to determine the issue. It observed that it was obligatory on the part of fact finding authorities to make inquiry and arrive at a finding. Thus, the solemn duty requires us to direct the CIT(A) to examine the whole issue in accordance with law after taking note of crucial aspects on purported sham nature of share transactions, if any. The matter is remanded back to the file of CITA(A) accordingly. 11. In the result, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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