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TMI Blog2024 (9) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been interfered by the Ld.PCIT exercising his jurisdiction u/s. 263 of the Act, and not the AO himself u/s. 147 of the Act, which power he doesn t enjoy. Therefore, in the facts of the present case reliance by department of the Hon ble Supreme Court decision in the case of PVS Beedies case [ 1997 (10) TMI 5 - SUPREME COURT ] does not come to the aid of Revenue, because, audit team has not brought any fact which AO has not noticed during the scrutiny assessment on 31.12.2015. Therefore, there is no merits in the grounds of appeal raised by the Revenue, so, it is dismissed and we confirm the action of the Ld.CIT(A) holding the re-assessment bad in law. Re-characterization of Short Term Capital Gains (STCG) from the sale of shares as business income, to be taxed at 30% instead of the beneficial rate of 15% under Section 111A - CIT(A) deleted the addition as the assessee has transacted in share of a single scrip, M/s. United Spirits and that share was held for a short period of time and noted that the AO had neither given any details of the share transaction nor reasons as to why these transactions needs to be treated as business transaction - According to the CIT(A), the AO failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use it was change of opinion on the part of the AO and therefore, he upheld the legal issue raised by the assessee as well as he decided on merits and consequently deleted the additions made by the AO. 3. The brief facts are that the assessee filed his return of income on 17.02.2014 for AY 2013-14 declaring total income of Rs. 11,48,60,850/-. Later, the case of the assessee was selected under CASS and completed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter in short the Act ) on 31.12.2015 accepting the retuned income. Subsequently, the original assessment was re-opened u/s. 147 by issue of notice u/s. 148 of the Act dated 31.03.2020 ( after expiry of four years from the end of the relevant Assessment Year ). The AO noted in the re-assessment order dated 28.09.2021 that during the course of assessment proceedings, the assessee had filed statement of computation of Short Term Capital Gains (hereinafter in short STCG ) from the sale of shares as under: Particulars (in Rs. ) Total Profit 11,71,33,910/- Less: Interest paid 51,87,945/- Net profit 11,19,45,965/- 4. And then, the AO noted that when he verified the records, he observed that the assessee didn t file any evidence to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of acquisition. Thereafter, the AO after referring to the CBDT Circular No.6 of 2016 was of the opinion that the assessee s transaction of buying and selling of share of M/s. United Spirits by taking huge loan and paying interest @24% tantamounts to adventure in the nature of trade and needs to be taxed @30% instead of 15% as claimed by the assessee holding as under: In the facts and circumstances of the present case, the assessee has taken a high interest loan from M/s Hiwide Enterprises Private Ltd for a short period of 3 months. The assessee paid an interest of 24% on this unsecured loan. The assessee did not have his own capital. But he wanted to undertake the risk of investing in the shares of United Spirits. Every share trade has an element of risk. In fact, the scale of the risk can be ascertained from the fact that the assessee earned upwards Rs. 11 crores from the sale proceeds. The assessee almost doubled the amount taken as loan from Hiwide Enterprises Private Ltd. Not only did the assessee repay this high value loan, it also eaned a profit of nearly Rs 11 crores on account of the same. The quantum of gain and frequency of transaction indicate that the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged the action of the AO re-opening the original assessment framed u/s. 143(3) of the Act [ and that too after four years from the end of the relevant Assessment Year ] as well as on the merits of the addition; and the Ld.CIT(A) allowed the grounds of appeal of the assessee on both grounds ( legal as well as on merits ). 6. Aggrieved, the Revenue is in appeal before this Tribunal. 7. Regarding the legal issue of re-opening of original assessment, we note that the assessee had filed return for AY 2013-14 on 17.02.2014 declaring total income of Rs. 11,48,60,850/- which was processed u/s. 143(1) of the Act and later selected for scrutiny, and assessment was completed on 31.12.2015 u/s. 143(3) of the Act by accepting income declared in the return. Thereafter, the AO has re-opened the assessment by issuing impugned notice u/s. 148 of the Act on 31.03.2020, which was an event after the expiry of four years from the end of the relevant Assessment Year, meaning, the additional condition precedent as provided under first proviso to sec.147 of the Act also needs to be satisfied i.e, the AO has to pass one more hurdle while recording reason to re-open the assessment that assessee failed to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be self-explanatory and should not keep the assessee guessing for reason. Reason provide link between conclusion and the evidence . Hence, as held by the Hon ble High Court that while examining the jurisdiction of AO to have re-opened the assessment, we have to only consider the reasons recorded by the AO on a stand-alone basis and adjudicate as to whether AO has satisfied in the reasons recorded, the condition precedent i.e, reason to believe escapement of income to validly re-open the assessment. And for re-opening the assessment after four year from the end of the relevant assessment year, an assessment which has undergone scrutiny assessment an additional condition also need to be satisfied i.e. the assessee failed to disclose fully and truly all material facts necessary for assessee s assessment. 9. Keeping the aforesaid legal principles in mind, when we turn our attention to the facts relevant for examining the legal issue, we note that the AO in the re-assessment order itself acknowledges that assessee had filed the statement of computation of STCG from the sale of shares, wherein, assessee had disclosed about the total profit from the sale of shares of M/s. United Spiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen the assessment on the very same material which was before him ( without any other material from outside agencies in the present case ) was akin to review of his own action ( assessment order framed u/s. 143(3) of the Act on 31.12.2015 ), which is not permissible in law. Therefore, we are of the opinion that the Ld.CIT(A) rightly held that the AO didn t had the jurisdiction to re-open the assessment, hence, we confirm the action of the Ld.CIT(A) on legal issue. 10. Having said so, we also take note of the grounds of appeal raised by the Department, wherein, it has been stated that the Ld.CIT(A) failed to appreciate that the re-opening of assessment of the case on the basis of factual information given by the Audit Party. It is neither the case of the Revenue that the Audit Party has brought out any new facts (on this issue), which was not disclosed by the assessee during the original assessment nor it is the case of the Audit Party that assessee has not disclosed fully and wholly all material facts necessary for assessee s assessment on the issue of sale of shares of M/s. United Spirits. In this regard, it is noted that while re-opening the assessment, the AO has asserted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the AO failed to give the analysis of the frequency of the share transactions nor has given any information about the earlier activities of the assessee [ preceding and succeeding years ]. Therefore, he reversed the action of the AO to treat the income from STCG of Rs. 11,48,60,850/- as business income . We concur with the findings of the Ld.CIT(A), because, the AO didn t appreciate the relevant facts and materials in respect of the issue, which shows that the transaction of purchase and sale of single Scrip, M/s. United Spirits was in the nature of trade and hence, it can t be held that the transaction in question was an adventure in the nature of trade. It should be borne in mind that the question whether a transaction is in the nature of trade is a mixed question of fact and law; and the AO has to place on record all relevant facts and materials necessary for the purpose of determining whether transaction is in the nature of trade/adventure in the nature of trade. The AO failed to place on record the relevant/primary facts necessary for determining this mixed question of fact as well as law. In order to hold the transaction of shares as business income of the assessee, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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