Income Tax Appellate Tribunal - Indore
Anila Kumar Rupani, Indore vs Assessee on 11 November, 2011
1
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
AND
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No.33/Ind/2011
A.Y. 2006-07
Smt. Anila Kumar Rupani
Indore
PAN - ABTPR-3269F ... Appellant
vs
Commissioner of Income Tax-I
Indore ... Respondent
Appellant by : Shri S.S. Deshpande
Respondent by : Shri Keshav Saxena
Date of Hearing : 11.11.2011
Date of Pronouncement : 24.11.2011
O R D E R
2 PER JOGINDER SINGH This is an appeal by the assessee challenging the invocation of revisional jurisdiction by the learned CIT u/s 263 of the Act.
2. During hearing of this appeal, the crux of arguments on behalf of the assessee is that the learned CIT is not justified in invoking the revisional jurisdiction u/s 263 especially when the assessment order is neither erroneous nor prejudicial to the interest of revenue as the assessment was framed after due scrutiny of facts, on examination of relevant details filed by the assessee, and other facts which were necessary to arrive at the conclusion. The learned counsel for the assessee invited our attention to pages 8, 9, 11, 14 to 17 of the paper book. A passionate plea was raised by the learned counsel for the assessee that if the learned Assessing Officer does not make any mention of such inquiries/details, the assessee should not be penalised. It was contended that complete inquiries were made by the Assessing Officer and then the issue of short term 3 capital gain was accepted. A plea was also raised that even when two views are possible, section 263 cannot be invoked. The learned counsel for the assessee relied upon the following cases :-
i. CIT v. Max India Limited; 295 ITR 282 (SC) ii. CIT v. DLF Power Limited; 329 ITR 289 (Del) iii. CIT v. Design & Automation Engineers; 323 ITR 632 (Bom) iv. CIT vs. Ratlam Coal Ash Company; 171 ITR 141 (MP) vii. CIT vs. Vikas Polymers; 194 Taxman 57 (Del)
viii. CIT vs. Anil Kumar Sharma; 194 Taxman 504 (Del)
3. On the other hand, the learned CIT DR, Shri Keshav Saxena, strongly defended the impugned order by submitting that firstly there is no mention in the assessment order as to which details were filed by the assessee and what type of inquiries were made by the Assessing Officer. It was emphatically argued that even there is no whisper of frequency of trading and borrowal of funds in the assessment order meaning thereby that even bare facts are not mentioned in the assessment order. It was contended that it is to be seen whether the Assessing Officer made any valid opinion. Plea was also raised that when true facts are not mentioned in the 4 assessment order so the assessment order is erroneous as there is not even a single line mentioning allowability of shares. The assessment order was argued to be framed in slip shot manner.
4. In reply, the learned counsel for the assessee contended that the decision of the Hon'ble M.P. High Court, relied upon by the learned CIT DR, is not applicable to the facts of the present appeal as in that case no inquiry was made by the Assessing Officer and even the assessment was not framed in a hurried manner whereas during assessment, inquiry was conducted for five months which was not a slip shot inquiry. It was claimed that borrowed amount was from son in law of the assessee where no interest was paid. This assertion of the assessee was strongly challenged by the learned CIT DR that this claim of the assessee was even never examined by the Assessing Officer. The learned CIT DR relied upon the decision in Malabar Industrial Company Limited v. CIT (243 ITR 83) (SC), Duggal & Company vs. CIT; 220 ITR 456 (Del) and CIT v. Deepak Kumar Garg; 299 ITR 435 (MP).
5
5. We have considered the rival submissions and perused the material available on file. Brief facts of the case are that the assessee is an individual and the family is comprising of six members. The assessment was framed by the learned Assessing Officer vide order dated 29.12.2008 u/s 143(3) of the Act. The learned CIT invoked the revisional jurisdiction u/s 263 of the Act on the plea as to why the short term capital gain may not be treated as business income as against short term capital gain. The assessee challenged invocation of revisional jurisdiction on the ground that the facts were examined by the Assessing Officer and necessary information like contract note of securities along with a chart specifying date and cost of purchase, copies of bank accounts, books of account, bills, etc were duly filed by the assessee and were examined by the Assessing Officer and as such the Assessing Officer has applied his mind to the facts of the case while framing the assessment. We further find that due opportunity was granted to the assessee by the learned CIT. If the impugned order is examined, the whole thrust of the learned CIT is that the 6 learned Assessing Officer accepted the claim of the assessee without proper appraisal of facts whether it is case of short term capital gain or income from business. The assessment order was opined to be prejudicial to the interest of revenue. Before the learned CIT also the assessee took the plea that one of the possible views was adopted by the Assessing Officer, therefore, it would not render the view to be erroneous and even a brief order cannot be said to be erroneous and prejudicial to the interest of the revenue.
6. Now we shall deal with the cases relied upon by the learned respective counsels. So far as the decision of the Hon'ble Apex Court in the case of Max India Limited (supra) is concerned, it was on the issue that the learned CIT purported to exercise his revisional powers in 1997 on the basis of amendment made on a particular date with retrospective effect. It was held that the learned CIT should have applied the law applicable in 1997, therefore, it was held that the learned CIT was not entitled to invoke the revisional jurisdiction, consequently, the facts are different, therefore, may not help 7 the assessee. In the case of DLF Power Limited (supra) the Assessing Officer took one of the two possible views, therefore, it was held that the order was not erroneous. However, in the present appeal, there is no whisper of the issue of capital gains in the assessment order, therefore, this judicial pronouncement also does not help the assessee. In the case of Design & Automation Engineers (Bombay) Private Limited the ground for revision was that the learned CIT was not agreeing with the view taken by the Assessing Officer. It was held that the invocation of revisional jurisdiction was not valid, therefore, it is on different facts. Likewise, in the case of Anil Kumar Sharma (supra) from Hon'ble Delhi High Court the issue was whether it was discernible from record that the Assessing Officer had applied his mind to the issue in question. In the present appeal, since the issue was not even mentioned in the assessment order, therefore, this judicial pronouncement also does not help the assessee. In the case of Ratlam Coal Ash Company (supra) the revisional powers were invoked by the learned CIT on the ground that proper inquiries were not made 8 by the Assessing Officer. There was a finding by the Tribunal that the assessee furnished requisite information and the ITO considered the facts and completed the assessment, therefore, the revisional order was held to be not valid. In the present appeal, as we have mentioned in the preceding paras that even there is no whisper of the issue in the assessment order and the order was passed in slip shot manner, therefore, the learned CIT remanded the issue for de novo consideration to the file of the learned Assessing Officer, we find justification in invocation of revisional jurisdiction by the learned CIT, therefore, this judicial pronouncement also does not help the assessee.
7. The learned CIT DR also placed reliance on the decision of the Hon'ble Apex Court in Malabar Industrial Company Limited (supra) wherein it was held that before invoking the revisional jurisdiction, the learned CIT has to be satisfied of twin conditions, namely, (i) the assessment order, sought to be revised, is erroneous and (ii) it is prejudicial to the interest of revenue. In the present since no discussion was made by the 9 Assessing Officer regarding the impugned issue itself, therefore, this judicial pronouncement is very much applicable, therefore, it goes in favour of the revenue. Identical ratio was laid down by the Hon'ble Delhi High Court in the case of Duggal & Company (supra). The decision of the Hon'ble jurisdictional High Court in the case of Deepak Kumar Garg (supra) further fortifies the case of the revenue.
8. Now, we shall examine the conclusion drawn by the ld. CIT, which is reproduced hereunder :-
" I have considered the submissions of the assessee. I have also perused the information available on record. The facts which emerges are -
1. Major purchase of shares of Shree Precoated was made by the assessee after the amount of Rs. 25 lacs was borrowed by the assessee. The amount was borrowed on 17.10.2005 to 27.10.2005 and the investment was made on 25.10.2005 to 27.10.2005. Further, after selling these shares on 08.02.2006 with the credit appearing in bank account of assessee on 14.02.2006 on the very next date the borrowed amount of Rs. 25 lacs was returned. Thus it is evident that the shares were purchased out of borrowed funds and investor will not invest in shares out of borrowed funds to earn dividend or to make long term investment. The intention of the assessee was to get profit out of the appreciation.
2. In the case of the assessee no dividend was earned while the profit earned was of Rs. 61.53 lacs out of borrowed funds.10
3. The entire profit is earned from the shares purchased and sold within the short period of less than 5 months which indicates that shares were purchased neither to earn dividend nor to make long term investment but to get profits in a short span of time.
4. The short term capital gain was earned by the assessee out of sale of shares which were purchased during the relevant previous year.
These factual details brought the case of the assessee within the parameters as laid down in CBDT Circular No.4/2007 dated 15.06.2007. It was the first year when the assessee entered into share transaction activities. The ld. AR only harped on the fact that the A.O. has accepted the claim and even though the order is brief and cryptic yet it does not make it erroneous. The ld. AR relied on certain decisions quoted supra but the facts therein are very different as both the cases pertained to granting of deduction u/s 80HHC in view of amendment to section 80HHC but in the case of the assessee it is evident that the income arising out of transaction in shares vis-a-vis all the facts discussed about was not taxable as STCG rather a view of contents of Circular No. 4 (supra) it was taxable as adventure in nature of trade. Herein viz-a-viz facts of case of assessee the decision of the Hon'ble I.T.A.T. Ahmedabad Bench in the case of Smt. Deepa Ben Amit Bhai Shah reported at (2006 ITJ 45 I.T.A.T. Ahgmedabad Bench) is relevant wherein it has been held that looking into the volume, frequency, continuity and regularity of transaction of purchases and sales in shares it can be inferred that these transactions must have been entered into by the assessee with a profit motive. In the case of assessee there were frequent transaction of purchase and sale of shares and thus the income was taxable not as short term capital gains. Thus the order passed by the A.O. becomes erroneous and prejudicial to the interest of revenue and section 263 of I.T. Act is accordingly invoked.
In all fairness the matter is set aside to the file of the A.O. for denovo consideration."
9. If the aforesaid conclusion drawn by the learned CIT is analysed there is a mention that there were frequent 11 transaction of purchase and sale thus the income was taxable as a short term capital gain, therefore, the matter was set aside to the file of the Assessing Officer for de novo consideration. However, if the contention of the learned counsel for the assessee that the facts were duly examined by the Assessing Officer, for argument sake, is presumed to be correct, still we find that in the assessment order even there is no whisper by the Assessing Officer that due inquiries were made by him. Even there is no mention regarding short term or long term capital gain, meaning thereby, even if it is presumed that necessary inquiries were made by him, it must find place in the assessment order. The issue of capital gain even has not been discussed or mentioned in any manner. It seems that the order was passed in slip shot manner. Unless and until the discussion is made regarding inquiry made by the Assessing Officer or the impugned issue is adjudicated, how anybody can assume that the mind was applied by the Assessing Officer. We find from the assessment order that even there is no whisper of the issue of capital gains and merely discussion has 12 been made regarding household expenses, composition of family, withdrawal of household expenses and addition made for low household expenses only, meaning thereby, even if, any inquiry was made by the Assessing Officer regarding capital gains, it should find place in the assessment order. There is no mention in the assessment order about the frequency of investment made in shares, nature of transactions, sale and purchase, delivery, etc. In the absence of all these details, it is difficult to decide whether the assessee is a trader or an investor in shares, we are of the considered opinion that the learned CIT is justified in invoking the revisional jurisdiction u/s 263 of the Act.
10. Before the learned CIT invokes revisional jurisdiction u/s 263 of the Act, he should get himself satisfied about the aforementioned twin conditions. In the impugned order, same satisfaction has been recorded by him. Admittedly, what constitutes "prejudice to revenue" had been the subject matter of a judicial debate. One view was that "prejudicial to the interest of revenue" does not necessarily mean loss of revenue. 13 The expression is not to be construed in a petty fogging manner but must be given a dignified construction. The interest of revenue cannot be equated to rupees and paise merely rather there must be grievous error in the order passed by the ITO which might set a bad trend or pattern for similar assessment which, on a broad reckoning, the Commissioner might think to be prejudicial to the revenue administration. Admittedly, where another view is possible, revision is not permissible. However, the CIT must point out the exact error and afford opportunity to the assessee qua such error. The Hon'ble Gujrat High Court in Ramdev Exports v. CIT; 120 Taxman 315 even went to the extent that revisional jurisdiction can be exercised even if the return filed by the assessee is accepted by the Assessing Officer. In view of the fact that even there is no whisper in the assessment order regarding the issue of capital gains, therefore, we are of the considered opinion that the assessment was framed in a slip shot/hurried manner, therefore, we find no justification to interfere with the impugned order. The same is upheld.
14
Finally, the appeal of the assessee is dismissed. Order was pronounced in the open Court on 24.11.2011.
Sd sd (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24.11.2011
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-