TMI Blog2014 (5) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to the shares transactions or the AO had not examined those details while framing the assessment under s. 143(3) of the Act. We therefore, by considering the totality of the facts of the present case, are of the view that the learned CIT was not justified in treating the assessment order passed by the AO under s. 143(3) of the Act as erroneous and prejudicial to the interest of the Revenue. In that view of the matter, the impugned order is set aside and the assessment order passed by the AO is restored. - Decided in favour of assessee - ITA No. 86 /Jodh/2014 - - - Dated:- 21-5-2014 - Hari Om Maratha, Judicial Member And N.K. Saini, Accountant Member For the Petitioner : Alok Jain For the Respondent : Deepak Sehgal ORDER N.K. Saini, Accountant Member This is an appeal by the assessee against the order dt. 4th Feb., 2014 of learned CIT-1, Jodhpur. The following grounds have been raised in this appeal: 1. That the order under s. 263 of the IT Act, 1961 as passed by the learned CIT is not justified both on facts and in law. 2. That the learned CIT has not given any basis or reasoning which justified the passing of the order under s. 263. 3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar with three share brokers and in a number of transactions, delivery of shares was not taken. He also pointed out that the shares were sold within a short period and in number of cases, the holding period was less than 60 days. The learned CIT also noted that the assessee had paid different amount to share brokers after netting with purchase and sales and that the assessee had disclosed a small amount of dividend of ₹ 1,29,232 only. The learned CIT issued notice under s. 263 of the Act. In response to the said notice, the assessee submitted as under : (i) The income of ₹ 27,42,135 as referred in the notice is short-term capital gains on sale of shares which were held by the assessee as the investments. The complete details of the same were given during the course of assessment proceedings which were examined by the Asstt. CIT in detail. (ii) The assessee has sometimes done, day trading of shares and earned profit of ₹ 2,23,199 which has been shown as business income. The assessee has done day trading with KIFS, Prabhudas Leeladhar and SHIL. The details of the same were also submitted to the Asstt. CIT during the course of assessment proceedings. (iii) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of shares through theses three brokers, he has shown some transactions as business transactions and for some shares under the head 'capital gain'. (ii) It is further noticed that the shares transactions entered with share broker namely, PL, there is no opening balance with him and all the 38 share scrips are purchased for ₹ 35,13,325 in the year and were sold for Rs, 23,79,361 except closing balance of ₹ 12,29,106 and earned short-term profit of ₹ 95,141. Similarly, the assessee has carried out shares transactions of 95 scrips of listed companies with KIFS and has purchased 1,46,157 number of shares worth ₹ 1,24,70,362 out of which along with opening balance, had sold 1,54,654 shares of different companies for total value of ₹ 1,33,007,36, leaving balance 19,845 shares worth ₹ 12,30,036 and earned profits of ₹ 12,39,675. In respect of shares transactions with SHIL, it is found that the assessee had made transactions of 99 scrips and had shown purchases of 1,20,876 shares worth ₹ 1,02,62,348 and had sold 1,17,128 shares for ₹ 1,05,42,334 and earned profits of ₹ 16,19,571, leaving balance 30,260 shares worth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO had not examined/inquired into as (on) what basis the profit on sale of shares had been disclosed by the assessee under the head 'Business' or 'Capital gain' in respect of shares transactions made through three brokers and what was the criteria on the basis of which the income under the head 'Business' had been shown on shares transactions and why in respect of holding less than 60 days in respect of delivery taken, the share profit had been shown under the head 'capital gain'. The learned CIT further observed that the assessee had not submitted any evidence on the basis of which the profit from particular share transaction could be considered under the head 'Business income'. He was of the view that the assessee had shown the profit on sale of shares under the head 'Capital gain' to pay lesser amount of tax. He further observed that the proceedings of every year are to be judged on the basis of facts of that year and the AO had to examine every transaction and nature with a view to determine correct income and tax payable thereon. He was of the view that no enquiry by the AO had been made to find out a justifiable method for sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that as per clarification of the CBDT issued vide its Circular No. 4 of 2007, dt. 15th June, 2007 [(2007) 210 CTR (St) 29], it is possible for a taxpayer to have two portfolios i.e. an investment portfolio and a trading portfolio. However, the intention would be that of the assessee regarding the categorization of shares into the investment portfolio or trading portfolio. It was emphasized that the assessee had duly categorized the day trading of shares into trading portfolio, the income thereof had been shown as business income and duly accepted by the AO. Therefore, in the relevant assessment year, there was no justification to treat the transaction in certain shares coming into investment portfolio as the transaction of trading portfolio. It was contended that the AO had accepted the return of income after examining the complete facts on the matter of short-term capital gain and had taken a view on the basis of facts of the assessee's case. Therefore, the learned CIT was not justified in suggesting him to take a different view. It was also stated that the case laws referred to by the learned CIT had different facts and were not applicable to the assessee's case. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt-term capital gain under s. 111A and claimed set off of brought forward short-term capital loss of ₹ 12,32,523. The Authorised Representative produced the details of short-term capital gain for this year and short-term capital loss for preceding year. Assessee produced books of account and contract notes for share transactions which was examined and after verification and discussion the returned income of ₹ 17,09,980 declared by assessee is accepted. 9. From the above observations of the AO, it is clear that the AO examined the issue relating to the income shown at ₹ 27,42,135 under the head 'Short-term capital gain' under s. 111A of the Act and claimed brought forward short-term capital loss amounting to ₹ 12,32,523 to be set off against the above said short-term capital gain. In the present case, the learned CIT wanted that the AO should treat the short-term capital gain as business income, but no basis has been given for the said direction . 10. The subject of 'revision under s. 263' has been vastly examined and analyzed by various Courts including Hon'ble apex Court. The revisionary power conferred on the learned CIT vide s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only when an order is erroneous, than the said section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under the law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under s. 263 of the Act, is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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