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TMI Blog2022 (6) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... .CIT seeks inquiry and verification in respect of transactions in penny stock whereas, on the other hand, the Pr.CIT has given a conclusive direction to the Assessing Officer to treat the complete sale transactions to be brought to tax under Section 68 of the Act and imposition of tax thereon at higher rate under Section 115BBE of the Act. In our mind, such approach of the Pr.CIT effectively nullifies the direction of the Assessing Officer to make proper inquiry. Once a finding of conclusive nature is given, the outcome of enquiry losses its relevance. Such action of the Pr.CIT cannot be countenanced in law. AO offered the income arising on purchase and sale of shares as business income and duly accepted by the Assessing Officer, the realignment of income proposed in a revisional proceeding is not backed by any cogent basis and is in the realm of surmises. The assessee has paid taxes at the normal rate on such income, and therefore, no prejudice can be attributed to the interest of the Revenue merely because the higher rate of tax can be charged under Section 115BBE. The judgment of Hon ble Delhi High Court in Krishna Devi Ors. [ 2021 (1) TMI 1008 - DELHI HIGH COURT] casts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that such order is erroneous insofar as it is prejudicial to the interest of the Revenue. The show cause notice issued in this regard is extracted herein for ready reference. To, Anusha Maheshwari KU-112 Vishakha Enclave, Pitam Pura Delhi 110088, Delhi India PAN: AIPPPM1192E Assessment Year : 2015-16 Dated 11/03/2020 DIN Letter No. ITBA/COM/F/17/2019-20/0126451683(1) Sir/Madam/M/s. Subject: Notice u/s. 263 of the Income Tax, 1961, in the case of Ms. Anusha Maheshwari (PAN : AIPPM1192E) for A.Y. 2015-16 reg. 1. The Income tax return declaring taxable income of Rs. 14,82,770/- was filed on 29/09/2015. The case was selected for Complete Scrutiny by CASS. The reason for selection was suspicious sale transaction in shares (Penny Stock tab in ITS) . Assessment was completed u/s 143(3) on 27.12.2017 at returned income. 2. Trading in 4000 shares of M/s. Channel Nine Entertainment Ltd has been made. The assessee has sold 4000 shares at Rs. 17,43,600/- The assesee has purchased shares at Rs. 2.5 each and sold at Rs 435.75/- each. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner 1. the order is passed without making inquiries or verification which should have been made; 2. the order is passed allowing any relief without inquiring into the claim; 3. the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or 4. the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 7. In this connection, you are required to show cause as to why the assessment may not be reframed u/s 263 of the I.T. Act, 1961. You may file your reply in the office of the undersigned along with records on 17.03.2020 3.30 P.M. at Room No. 1904, 19th Floor, E- 2 Block Dr. S.P. Mukherjee Civic Centre, Minto Road, New Delhi 110002. 4. As per the show cause notice, the Pr.CIT observed on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted that the relevant evidences and documents concerning the purchase and sale transaction have been duly filed before the Assessing Officer as called for. It was further submitted that the alleged abnormal increase in the price of the company, i.e., Channel Entertainment Ltd. in itself cannot be the reason for alleging transactions to be clandestine or indulgence of the assessee in any manner. The price of the shares were market oriented being listed on the stock exchange. The assessee has entered into a meager purchase of 1000 shares on 10.11.2012 and upon the issue of bogus share, the assessee owned 4000 shares post bonus. These shares were eventually sold in the stock market and the resultant profit was declared as business income. It was further pointed out that the assessment was framed under CASS. The assessee was required to explain the CASS reasons i.e. suspicious sale transactions in shares (penny stock TAR in ITS). It was further contended that the Assessing Officer has made pointed inquiries and elicited replies thereon. It was pointed out that even in the context of Section 10(38) i.e. exempt Long Term Capital Gain, the Hon ble Delhi High Court in PCIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Channel Nine Entertainment Ltd. have not been disclosed in the return and that such gains, based on report of the investigation wing Kolkata/Delhi is bogus and accommodation entry in respect of which exemption under Section 10(38) of the Act has been incorrectly claimed. The assessee was specifically show caused as to why the receipt of Rs.17,43,600/- should not be treated as unexplained cash credit. The assessee filed a reply to the aforesaid show cause notice wherein, besides furnishing necessary detailed information and documentary evidences in relation to transactions, it was also submitted that assessee has not claimed any exemption under Section 10(38) on these transactions and the income arising on sale of shares has been treated as business activity by the assessee. It is further case of the assessee that after considering the information available with the Assessing Officer and conducting necessary inquiries in the peculiar facts towards alleged bogus transactions, the assessment was framed under Section 143(3) of the Act wherein the explanation offered by the assessee were accepted in the context of the case in discharge of quasi-judicial functions. 8.2 The revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BBE. The judgment of Hon ble Delhi High Court in Krishna Devi Ors. casts doubt on such treatment arising from sale of shares. Under such circumstances, startling spike, cannot be the reason, in itself, to invoke jurisdiction under Section 263 of the Act particularly, where the gains arising from sale of shares are not covered by tax concession under Section 10(38) of the Act. The case laws cited on behalf of the assessee as well as Revenue has been perused. None of the decisions are applicable when no prejudice is found to have been caused to the Revenue. The operation of Section 263 is a non starter in the absence of any prejudice show to have caused to revenue. The decision referred to on behalf of the Revenue in case of Pooja Gupta (supra) is in the context of different factual matrix, i.e., the assessee therein claimed exemption from tax liability under Section 10(38) of the Act causing prejudice to the revenue. 10. In the light of the delineations made, the revisional order of the Pr.CIT is set aside and quashed. 11. In the result, the appeal of the assessee is allowed. ITA No.1809/Del/2020 (Assessment Year 2015-16) 12. The fact and issue involved in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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