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TMI Blog2021 (9) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order and therefore both the order of assessment dated 28.12.2018 u/s. 143(3) of the Act and even the impugned order dated 26.3.2021 u/s. 263 of the Act are without jurisdiction and deserves to be quashed as such. 2. That order dated 26.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Ghaziabad has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2.1 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.2 That the learned Principal Commissioner of Income Tax has failed to appreciate that action u/s. 263 of the Act is otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of unaccounted money and unexplained income taxable under the head "income from other sources" by invoking section 69 of the Act read with section 115BBE of the Act. 3.1 That the learned Principal Commission of Income Tax has also erred both in law and, on facts in not directing to allow exemption of long term capital gain of Rs. 65,24,465/- in respect of sale of shares through recognized stock exchange u/s. 10(38) of the Act. 3.2 That while making the aforesaid addition and denying the exemption learned Principal Commission of Income Tax has failed to appreciate that, appellant was owner of equity shares of a listed company which had been held by it for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term 'capital asset' was not includible in total income of the assessee in view of section 10(38) of the Act. 3.3 That the learned Principal Commission of Income Tax has failed to appreciate the evidence tendered by the appellant to support the purchase and sale of shares and hence findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulfillment of the object and purpose stated in this indenture." 2. Further, the point No. 3 of the trust deed reads as follows: "that the total Trust funds along with all accretions thereto by way of income, contributions, gifts and/or otherwise shall be accumulated till attaining of the majority o f the beneficiary or 31.03.2015 and may be used for the purpose of higher education of the beneficiary, or to any other use she may later desire." 3. Herein please explain: (a) When the shares held in the name of the trust were transferred in the name of the trustee. As per the trust deed, the trust has liquidated on 31-03-2015. (b) Please explain why you had preferred to file a return in the name of trust instead in the name of trustee as w.e.f. 01-04-2015 i.e. Financial Year 2015-16, Assessment Year 2016-17. The year under reference, there is no trust in existence and the entire trust property has been transferred to the trustee. (c) Please provide the documentary evidence of change in share price at which the shares were sold. (d) As per the trial balance, the following amount has been shown invested in the name of the trust i.e. (i) Shares - Hotly Commercial (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference. This is also supported by the fact that the year under consideration is the last year for which the assessee trust filed its ITR. In response to the queries raised by your good-self at serial number 3 of the above referred notice we submit as under:- a) From the above, it is clear that the assessee trust did not expire on 31.03.2015 hence the shares held in the name of the trust were transferred to its beneficiary after 03.09.2015, i.e. after the sale of the shares on which LTCG was earned. The sale of shares was made during the months of May and June, 2015. b) The ITR for the relevant year has been filed in view of the fact that the assessee trust was continuing during the year in view of the clause 9 of the trust deed. c) Photocopies of the contract notes as issued to the assessee trust by its broker regarding the sale of shares on which long-term capital gain has been earned are enclosed herewith as Annexure 2. The shares were sold online through Bombay stock exchange and sale rates thereof are verifiable from the contract notes enclosed herewith. d) The fact that the assessee has made investment in share capital of 3 companies totaling Rs. 28,96,000/- has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance/Profit & loss A/c and computation of income on the basis of which tax is paid. The indirect expenses of Rs. 5,34,807.58, have been booked to the debit of the P & L account as placed on record only for the accounting purpose and mainly consists of advance tax, TDS and self assessment Tax to the tune of Rs. 5,40,082/- DMAT expenses of Rs. 5,725.58 and bank charges of Rs. 229/-. As per the accounting principles any expenditure with an allowable under the Income Tax Act, or not, is to be booked to the debit of the profit and loss account. The booking of expenditure to the debit of the P & L account does not necessarily mean that the same has been claimed by the assessee as allowable in its computation of income. Now we would like to draw your kind attention towards the computation of income of the assessee as already placed on record (copy of the same is again enclosed herewith as Annexure 3 for your ready reference). From the said computation of income your good-self will notice that assessee has shown a gross total income of Rs. 21,08,267/- in its computation whereas the taxable income credited to the profit and loss account is Rs. 21,08,737/-, the difference of Rs. 470/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts hereinabove it is again submitted that the assessee trust was very well in existence during the year under reference and none of its assets/income were vested with its beneficiary hence the details as sought by your good-self are irrelevant for the present case and are not required to be filed. m) The assumption on the basis of which your good-self has raised the present query is inconsistent with the facts and the trust deed of the assessee trust hence is not relevant in the present case. Further, we would like to summit that the commodity trading was carried on by the assessee trust through its broker namely M/s. PK enterprises, and not by its beneficiary i.e. Ms. Varnika Gupta. Photocopy of the statement of account of the assessee as appearing in the books of its broker i.e. M/s. P.K. Enterprises, is enclosed herewith as Annexure 4 in support of the same. The fact that the interest income was earned by the assessee trust is also evident from the fact that TDS on the interest earned and declared by the assessee was deducted on its PAN and is duly reflected in its form 26AS, copy of which is enclosed herewith as Annexure 5. Further, the observation of your good-self that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions and accretions to the trust property shall vest with the sole beneficiaries namely, Varnika Gupta after her attaining 18 years of age or whichever is later and subject to Clause 11 mentioned. When the term of the trust expires, all the trust property including all accretions up to the date of expiry of the term shall become the sole property of the beneficiaries with all the rights of ownership, use, possession and dispossession (Clause 9 at page No. 6 of the trust deed). Since, the date of birth of Varnika Gupta is 03.09.1997, she completed the age of 18 years on 03.09.2015. Hence, the trust was in existence during the Assessment Year 2016-17 but not after 03.09.2015. The trust stands dissolved or extinguished from 31.03.2015. While the entire records are before the revenue authorities, the ld. PCIT issued a notice to Varnika RPG Trust on 15.03.2021 which effectively culminating in issuing of a notice to a non-existing and expired trust. 8. In the context of the above facts, the moot query before us to adjudicate is "whether the notice issued by the ld. PCIT to a dissolved trust is legally valid or not"? 9. The Hon'ble Madhya Pradesh High Court in the case of Princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-trust was validly transferred to the educational trust and, in these circumstances, the fulfillment of the purpose of the assessee-trust, which was to pay the net residue of the rents, profits, interest and other income of the trust property to Smt. Usha Devi during her lifetime and on her death to transfer and hand over the trust property in the manner specified, to her children, became impossible. Section 77 of the Indian Trusts Act provides that a trust is extinguished when the fulfillment of its purpose becomes impossible by destruction of the trust property or otherwise. The expression 'otherwise' would cover a case where the trust property is not available for fulfillment of its purpose because all the beneficiaries under a trust have validly transferred their interest. In these circumstances, the assessee-trust must be held to have been extinguished and the Tribunal was not justified in holding that the assessee-trust was not extinguished within the meaning of section 77 of the Indian Trusts Act. Our answer to Question No. 2 is in the negative and against the revenue." 10. Hence, the order of the ld. PCIT issuing notice to an extinguished trust is illegal and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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