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TMI Blog2022 (1) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... e pursuant to direction under section 263 and as the amount involved is assessed under section 68, only effect will be that the income offered under business income would now be assessed under section 68 as income from other sources. It has been submitted that after set off of other losses the assessed income of the assessee would be the same as in the original assessment order. Hence, it is plea that when there is no change in income assessed the order of AO cannot be said to be prejudicial to the interest of revenue. The Ld.CIT has tried to respond to the submission by observing that as per section 115BBE income tax shall be collected at that of 60%, when the total income of the assessee includes such as the one here i.e under section 68 et cetera and that no deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee in computing as income referred here. Now, the assessment year under consideration is assessment year 2015-16, the CBDT circular referred by counsel of the assessee clearly provides that the amendment brought in by financial year 2016 in this regard is inserted with from 01.04.2017 and assessee is entitled to claim set of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tocks were very well available with AO and the original assessment order was passed with the knowledge of such information and after proper inquiry thereto. Therefore, such order could not be held to be prejudicial to the interest of the revenue. Copy of AIR information is already on record before Ld. Pr. CIT as well as the Ld. AO. 7 For that the Ld. Pr. CIT should not have invoked the provisions of sec. 263 without himself examining the details and evidences but no such examination was made and no lack of enquiry was found in the order of the Ld. AO. 8 For that on the facts and circumstances the order the Ld. Pr. CIT may be set aside. 3. The learned PCIT in this case noted the following back ground for issuing notice under section 263 of the Act :- 1. The return of income for this year had been filed by the assessee, declaring income of ₹ 48,09,450/-. The Assessing Officer (AO) has made assessment u/s. 143(3)of the Income Tax Act, 1961 in this case for A.Y. 2015-16 as per order dated 28/09/2017 at the returned income of ₹ 48,09,450/-. During the year under consideration, the assessee had sold shares of M/s Maa Jagadamba Trade Links Ltd. and M/s Moryo Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of M/s MaaJagadambe Trade Links and M/s Moryo Industries Ltd for a consideration of ₹ 1,10,53,808/~. Pursuant to a specific inquiry by the Ld.AO under section 143(2) of the Act vide his letter dated 09.08.2017, the assessee vide his letter dated 27.09.2017 through order sheet submitted all the details including details for purchase of shares of M/s MaaJagadambe Trade Links and M/s Moryo Industries Ltd for an aggregate cost of ₹ 42,80, OOO/- respectively on 26.12.2012 and 12.05.2012. Copies of the said correspondence is enclosed herewith for your perusal. The said shares were forming part of the opening stock at the said cost in the P&L A/C of the assesses for the relevant A Y. During the relevant year the said shares were sold for a total consideration of ₹ 1.10.53.808/- and the profit arising there from was credited to the P&L A/C of the assesseeliable for tax (in the case of the assessee @ of 30%). The net profit in the P&L A/C forms part of the computation of income and due tax thereon has been paid by the assessee. AH these facts were disclosed on specific questioning by the Ld.AO during the course of assessment proceedings. In fact such details were eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the gross profit arising from sale of the 2 scripts viz: M/s MaaJagadambe Trade Links and M/s Moryo Industries Ltd for a consideration of ₹ 1,10,53,808/- after deduction of cost of acquisition of ₹ 42,80, OOO/- has been offered to tax as business income and the assessee has not claimed same to be exempted 10(38) of the Act by way of LTCG as being point of concern in the show cause. 7. It may further be submitted that ail the documentary evidences w.r.t. the sale proceeds of ₹ 1,10,53.808/-being through registered share broker with SEBI on the floor of recognized stock exchange and through banking transactions has been/can be provided for to establish the identity of the payer and genuinty of the transaction as required by provisions of section 68 of the Act, referred to by your Honor in the show cause. Of course the creditworthiness of such payer is vouched by their registration with the concerned stock exchange and SEBI. 8. Attention of your Honor is brought to various pronounced rulings stated below: a. The Apex Court in the case of Malabar Industrial Co Ltd (supra) 243 ITR 83 held that when two possible views are available and the issue is debatable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards submission [C] above, learned counsel submitted that this Court gave the finding that the order of the Assessing Officer, Solan was bad but that such a question did not arise out of the appeal decided by the Income-tax Appellate Tribunal as the Tribunal had dealt with the question of jurisdiction only and hence this Court exceeded its appellate jurisdiction while holding that the order was bad on account of non-application of mind. The submission is factually incorrect. The Tribunal while accepting the appeal of the assessee held that the order had been passed by the Assessing Officer under section 263 of the Income-tax Act on the basis of the inquiry conducted by her and that the Commissioner of Income-tax could not have interfered with the said order merely because he formed a different view on scanning the record. Appellate Tribunal clearly said that the order of Assessing Officer was based on an inquiry conducted by her. This Court did not approve of this finding of the Tribunal, because the note appearing below the order of the Assessing Officer clearly shows that it is not passed on application of mind but on the interference by the Commissioner of Income-tax". d. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn to the fact that as it is clear from the AIR information available with the Ld.AO at the time of the original assessment, the report of the investigation wing w.r.t. alleged penny stocks were very well available with him and the original assessment order was passed with the knowledge of such information and after proper inquiry thereto. Therefore such order could not be held to be prejudicial to the interest of the revenue. Copy of AIR information is enclosed herewith for your ready reference with special attention to page no 5. Without prejudice to the same a request is being made to provide us with copy of information received from investigation wing. 2. Attention of your good office is once again drawn to the fact that the income from the alleged penny stocks of ₹ 67,73,8087- has been offered by the assessee as business income liable for tax at full rate after adjusting therefrom business losses in trading of other scripts and business expenses at ₹ 13,77,7227- and has been assessed accordingly. No LTCG/STCG benefits have been availed by the assessee w.r.t, the alleged penny stocks. Thereby even if the said income is reassessed u/s. 263 of the Act, after set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee appears. c. Also as submitted even earlier the assessee during the relevant year although as dealt in scripts which are so called "penny stocks, has not claimed benefit of LTCG/STCG and has offered profit from such scripts as business income which is taxable at normal rate of tax. 2. As required by your good office we would like to submit: a. 'Statement of scripts traded in by the assesse during the relevant year reflecting details of opening stock, purchases, sales and closing stock along with copy of the P&L account of the assessee for trading in shares reflecting the net profit earned therefrom.' Both these statements even were submitted during the original assessment proceedings. b. As submitted attention of your good office is once again drawn to the fact that the income from the alleged penny stocks of ₹ 67,73,808/-has been offered by the assessee as business income liable for tax at full rate after adjusting there from business losses in trading of other scripts and business expenses at ₹ 73,77,722/- and has been assessed accordingly. No LTCG/STCG benefits have been availed by the assessee w.r.t. the alleged penny stocks. Thereby even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, whose shares were purchased by the assessee. (iii) "Bell Pattern" in share price movement, i.e. once price target is achieved the price falls back to minimum. (iv) No rhyme or reason for sudden spurt of share price, defying the share Index or similar share price movements. (v) Promoters of shares are also not from any established groups, in fact they are of people of no means. (vi) Price escalation through synchronised trading within limited parties, mostly entities controlled by the entry operators. (vii) Statement recorded during search or survey operations conducted by the Investigation Wing indicates that price of the shares were manipulated with the sole aim of providing bogus accommodation entries." 6. Thereafter, learned PCIT referred to certain case laws in this regard. He further observed as under :- "4. There is another aspect of the matter. Further, as per section 115BBE of the Act, income tax shall be calculated at 60% where the total income of assessee includes following income: a) Income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D and reflected in the return of income furnished under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny assessment proceedings. Even assuming the correctness of strenuous assertion of the assessee that relevant material was then made available to the Assessing Officer, circumstances show the credits ought to have been examined vis-a-vis their genuineness in light of the well-established ambit of enquiry contemplated in section 68 of the Act. 8. Thus, whether the documents were or were not filed before the Assessing Officer is not germane to the revision proceedings. A perusal of assessment proceedings show that while making the assessment, the Assessing Officer has failed to examine the issues properly and has not applied his mind to facts and circumstances of the case for the purpose of determining the genuineness of the claims. The Assessing Officer was duty-bound to conduct a complete enquiry and consider the application of provisions of the law, including that of section 68 of the Act, if he were to come across material that discredits or impeaches the particulars furnished. This is the view enunciated by the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Nova Promoters & Fin/ease (P) Ltd [2012] 18 taxmann.com 217, as also in the case of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Explanation 2 to section 263(1) of the Act to the Assessing Officer. He is directed to conduct the requisite enquiries to arrive at the correct conclusion as per law and frame the order of assessment de novo, keeping in mind the observations made in the foregoing paragraphs. Needless to add, adequate opportunity of being heard will be afforded to the assessee to file details and furnish his explanation." 8. Against this order assessee is in appeal before us. 9. We have heard both the parties and perused the record. Learned counsel of the assessee submitted that the AO has made due inquiry. Ld. Counsel submitted that all the information with relationship to the assessee transactions were available with the AO. The assessee has submitted all necessary details and after examining the same the AO has passed the order. In this regard he referred to the paper book submitted before the Tribunal. He referred to the various notices issued by the Assessing Officer he submitted that the AO has duly asked information on reconciliation statement of AIR with the assessee's books. He submitted that the information from AIR captured all assessee's transaction. That the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BAI -BORIVALI Savings 11700100001267 Copies of bank statement is being attached as Annexure - E 5) Notice u/s 148 has been received for the AY: 2014-15, for which the assessment is in process. 6) Reconciliation Statement of 26AS is being attached as Annexure - F 7) Reconciliation of Individual Transaction Statement is being attached as Annexure - G" 12. Learned counsel referred to further enquire where copy of Demat accounts were required and furnished. Further it was submitted that on 27.9.2017 vide order-sheet entry the AO was given various other details relating to purchase of shares, proof of payment, detail of persons involved in Dmat statement. Referring to the details, learned counsel submitted that thorough inquiry has been done by the Assessing Officer. He submitted that following case laws are duly applicable :- "Order cannot be said to be erroneous, if AO had adopted one of the possible views • Malabar Industrial Co. Ltd vs. CIT (109 Taxman 66(SC) • PCIT vs. Yes Bank Ltd (ITA No.599 of 20 15 (Bom-HC) • CIT vs. Greenworld Corporation (181 Taxman 111) (SC) • CIT vs. Max India Ltd 166 Taxman 188(SC) Order cannot be revised u/s.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the sale of shares of companies, which as per the enquiry of the department were found to be dubious and sham transaction. He noted that AO has not made proper enquiries and verification, which would have been made to ascertain the relevant facts for the purpose of deciding the issue at hand. 17. The Ld.CIT has noted the response to this notice by the assessee. Assessee has made elaborate submission that various details were sought by the AO and all the details were supplied. It was also pointed out that the investigation department finding were also available before the AO. After noting the elaborate submission of the assessee that the matter was duly enquired by the AO. Ld.CIT observed that it is not the issue whether the documents were filed or not. He held that AO has not applied his mind to the facts of the case and examined the provisions of section 68. As already submitted before the Ld.CIT, this is not a case of claim of bogus long term capital gain. Assessee has offered the receipt as business income, which is subject to normal rates of taxes. We note that Ld.CIT has not at all specified what more enquiry was required. When, he has noted the assessee submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance or set off of loss shall be allowed to the assessee in computing as income referred here. Now, the assessment year under consideration is assessment year 2015-16, the CBDT circular referred by counsel of the assessee clearly provides that the amendment brought in by financial year 2016 in this regard is inserted with from 01.04.2017 and assessee is entitled to claim set off against income determined under section 115BBE of the Act till the AY 2016-17. Hence, even if the section referred by the Ld.CIT is invoked the assessee will still be eligible for the set off as referred above and the income would be the same as assessed by the AO in the original assessment. This proposition is neither rebutted by Ld.CIT nor by the revenue before us. It is a settled law that after the exercise of revisionary jurisdiction the income assessed remains the same, it cannot be said that the order of the AO is prejudicial to the interest of revenue. Hence, Ld.CIT's jurisdiction will not be valid. Hence, invocation of section 263 jurisdiction by the Ld.CIT is also not sustainable on this count also. 19. In the background of our discussions and precedents, we set aside the order passed by Ld.CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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