TMI Blog2017 (2) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... was verified by the Ld. Assessing Officer The rate of taxes are the same on short term capital gain and since taxes were correctly paid, there is no loss to the revenue. Under these circumstances, the assessment was correctly made after due and complete inquiry and by verifying the details and therefore, action U/s.263 of the I T Act on this account is unjustified and invalid. Nexux of interest paid against interest income - Held that:- The bank statements were placed on record, which shows the borrowings made by the assessee on overdraft account and the amounts advanced to the parties from whom interest income is received. Direct nexus of interest income to interest expenditure has been verified not only with the bank statement but also with the return of income. In the return of income, the amounts stated by you in your notice for income and claim for deduction of interest paid both have been shown under and details regarding this, has been furnished separately to the Ld. A.O. which has been verified by him. Copy of the statement is annexed herewith for your ready reference. The nexus of interest income to expenditure was also established, allowability of expenditure was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax, Ahmedabad-1II, Ahmedabad has wrongly/erroneously invoked provisions of Section 263 of the Act assuming that the order passed by the Ld. A.O. was erroneous and prejudicial to the interest of the revenue and has erred in giving directions to re-examine four issues afresh. 3. That the Ld. Commissioner of Income-tax, Ahmedabad - III, Ahmedabad has wrongly considered that - (i) Ld. A. O. made assessment in the routine manner, (ii) did not verify specific details that were required to be verified, (iii) did not verify the nexus between earning of interest income and allowability of interest expenditure and (iv) that the transactions of purchase and sales of investments of the appellant were not as an investor but were as a trader. 4. That the Ld. Commissioner of Income-tax, Ahmedabad - III, Ahmedabad while considering that the Ld. A. 0. did not examine the details furnished by the appellant in pursuance to the specific information called for by the Ld. A.O. Ld. C1T has not come out with any evidence or mistake on the part of the Ld. A.O. in making assessment and all the observations made by him are vague, general and not supported by information or details coming f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT U/s. 263 of the Act directing to reframe the assessment on four issues after conducting necessary inquiry be quashed and be cancelled. (ii) Any other reliefs, deductions and directions as the facts and circumstances of the case require to be granted. 8. The appellant craves leave to add, amend, alter, modify the grounds of appeal on or before the time of hearing. 2. Briefly stated facts are that assessee is an individual earning income from salary, interest, capital gain and share of profits from partnership firm. Return of income for Asst. Year 2008-09 on 31.07.2008 declaring total income of ₹ 9,70,476/-. The case was selected for scrutiny assessment and notice u/s 143(2) of the Act dated 17.9.2009 followed by notice u/s 142(1) of the Act dated 6.7.2010 duly served on the assessee. Necessary details were called for and supplied by the assessee and returned income was accepted as assessed income. Thereafter ld. Commissioner of Income Tax -3, Ahmedabad exercised his power under section 263 of the Act and examined the assessment record and assessment order u/s 143(3) of the Act dated 13.9.2010 passed in the case of assessee and observed that following 4 issues we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that there was a proper enquiry with respect to all these four points and ld. Assessing Officer has made application of mind in examining these details. However, ld. Commissioner of Income Tax was not convinced with the submissions made by the assessee and was of the confirmed view that the Assessing Officer did not examine the above mentioned four issues which made the whole assessment order erroneous and prejudicial to the interest of revenue and accordingly ordered ld. Assessing Officer to examine the above four issues afresh and set aside the order u/s 143(3) of the Act dated 13.9.10 and to pass fresh assessment order by observing as under :- 7.2 Going through the submissions made available by the Assessee, it is observed that the Assessee has submitted enough evidences to prove that the shares allotted to him were transferred to the accounts of his wife Abha Goyal and his HUF. However, the Assessee's claim that the profit had been incurred in their respective incomes and they had paid taxes as short term capital gain and were shown in their Return of Income is not supported by evidences. Though, the Assessee has claimed that the Assessing Officer had looked into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has claimed that the Income Tax Consultation Fee was business expenditure and was considered as allowable from business income. Further he had claimed that since it was not personal expenditure of the Assessee, it cannot be said that the action of the Assessing Officer in allowing this expenditure, was erroneous. 9.2 The Assessing Officer had not verified the issue the explanation furnished by the Assessee was not offered before the Assessing Officer. The assessment order was therefore erroneous prejudicial to the interest of the Revenue. 10. The fourth issue was regarding short term capital gain en shares held and sold by the Assessee. The Assessing Officer had not examined as to whether the transactions of purchase sales made by the Assessee was as an investor or as a trader. 10.1 The Assessee had furnished the details of short term capital gain on shares held and sold by him. These shares were purchased / allotted and were received in demat account of the Assessee and were subsequently sold from demat account. The Assessee is an investor and a retired person, making investment of his funds in fixed deposit, bonds, debentures, Govt. securities, shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers are challenging the validity of the order u/s 263 of the Act passed by ld. Commissioner of Income Tax and ground no.6 has been raised on merits of the issue. We first take up the grounds raised by the assessee challenging the order of ld. Commissioner of Income Tax u/s 263 of the Act.. 4. Ld. Authorised Representative (AR) submitted that the return of income was filed on 31/07/2008 declaring total income of ₹ 8,71,810/- and after submitting voluminous data, information, details and on proper verification of all details relating to each income under each head, the Ld. ITO, Ward 7(2), Ahmedabad after considering explanations and inquiries made by him, he determined income of ₹ 9,70,476/-. The submissions made on different dates are as under:- S.No. Date of submission Page Nos. 1. 09/06/2010 1-112 2. July, 2010 113-150 3. 28/08/20 0 2 There is no income which can be said to have escaped which is prejudicial to the revenue requiring an acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding money. The assessee raised funds on security of fixed deposits with the Banks. The income from fixed deposits was completely disclosed and included in return of income. The income which was received from the parties to whom advances were made, was also verified and the amount which is paid to the bank on overdraft account has also been verified from bank statements, placed on record. The bank statements were placed on record, which shows the borrowings made by the assessee on overdraft account and the amounts advanced to the parties from whom interest income is received. Direct nexus of interest income to interest expenditure has been verified not only with the bank statement but also with the return of income. In the return of income, the amounts stated by you in your notice for income and claim for deduction of interest paid both have been shown under and details regarding this, has been furnished separately to the Ld. A.O. which has been verified by him. Copy of the statement is annexed herewith for your ready reference. The nexus of interest income to expenditure was also established, allowability of expenditure was also examined and after due verification of the details, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings taking action U/s.263 is purely an action of change of opinion. Therefore, the same may please be dropped. 5. Ld. AR further relied on the following judgments - 1. CIT vs. Max India Ltd. (2007) 295 ITR 0282(SC) 2. CIT vs. Amit Corporation Tax Appeal No.2583 of 2010 (2012) 81 CCH 0069 GujHC 3. Adani Wilmar Ltd. DCIT in ITA No.1654/Ahd/2015 (2015) 126 DTR0205(Ahd)(Trib) 4. Adani Enterprises Ltd. vs. Addl.CIT in ITA No.1545/Ahd/2014 (2015) 68 SOT 0129 (Ahmedabad. 5. Cadila Healthcare Ltd. vs. C1T in ITA No.1096/Ahd/2013 910/Ahd/2014 (2015) 67 SOT 0188 (Ahmedabad) 6. V. G. Krishnamurthy vs. CIT (1985) 152 ITR 0683 7. Jhulelal Land Development Corpn. Vs. DCIT (1995) 56 ITD 0345 8. CTT Vs. R. K. Construction Co [2009] 313 ITR 65 (Guj) Special leave Petition to Hon'ble SC Dismissed 313 ITR 83 (SC) 9. CIT Vs. Hindustan Coco Cola. Beverages P Ltd. [2011] 331 ITR 192 (Delhi) 10. CIT Vs Sunbean Auto Ltd. [2011] 332 ITR 167 (Delhi) 11. CIT Vs. Anilkumar Sharraa [2011] 335 ITR 83 (Delhi) 12. CIT Vs. Mahendra Kumar Bansal [2008] 297 ITR 99 (All) 13. CITVs. Gabriel India Ltd. [1993] 203 ITR 108 (Bom) ... : 14. CIT Vs, Arvind Jeweller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (iii) The Income Tax Consultation Fee of Rs. 7,235/- had been allowed in the computation of income which should have been disallowed being of personal expenditure. The assessment order is erroneous to that extent and prejudicial to the interest of the revenue. (iv) It is further observed that you had shown short term capital gain on shares with a holding period of to 12 days. Though the volume and the transaction are low, the holding period implied an intention of business rather than to earn capital gains. The same was required to be examined. Assessing Officer having failed to examine this issue has rendered the assessment erroneous and prejudicial to the interest of the revenue.'' 8. From perusal of the paper book at page 17 we find that notice u/s 142(1) of the Act dated 31.05.2010 was issued by DCIT requiring 13 information which inter alia included details of bank accounts, investments in shares with copy of demat account, working of long term/short term capital gain, details of interest income earned and source of investments made for acquiring shares. In all the above referred four queries (referred in para 7 above) were raised in the notice d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as a partner, details of interest paid to bank. Series of events which occurred during the course of assessment proceedings shows that ld. Assessing Officer has made adequate enquiries with reference to the four issues referred above in paragraph 7 raised by ld. Commissioner of Income Tax in the proceedings u/s 263 of the Act and ld. Assessing Officer made due application of mind and has framed the assessment order accordingly. 11. We further observe that Hon. Supreme Court in the case of Malabar Industrial Co. Ltd. 243 ITR 83 has laid down the following ratio:- A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was viewed that the assessment order cannot be branded as an erroneous order on this issue. As far as third part was concerned, it was found that this aspect was squarely covered by the decision of the Gujarat High Court. (Para 14) AO had taken a possible view of aspect, which could not be subject to action under section 263. The AO had invited the explanation of the assessee, gone through the details submitted by it, and thereafter, allowed the depreciation including additional depreciation as per law. His view may not get approval from the point of view of the Commissioner, but, the opinion of the AO was also a possible view, and therefore, no action u/s 263 can be justified. On due consideration of these facts and circumstances, the appeal of the assessee was allowed and the order passed by the Commissioner u/s 263 was quashed.. 13. We also observe that in the case of Cadila Healthcare Ltd. vs. CIT in ITA No. 1096/Ahd/2013 910/Ahd/2014 (2015) 67 SOT 0188 (Ahmedabad) has held that when Assessing Officer makes full enquiries by raising queries with respect to issues under consideration and same are also replied by assessee then order passed by Assessing Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case has wrongly invoked the jurisdiction under s. 263 inasmuch as all the necessary and primary facts were before the AO and no enquiry was required and, in fact, no enquiry was made in the subsequent proceedings. The revisionary jurisdiction cannot be allowed for substituting his opinion. 15. Respectfully following the judgments of Hon. Apex Court and High Court and the decisions of the Co-ordinate Bench as discussed above and after examining the facts of the case in the light thereof, we are of the confirmed view that the issues raised by ld. CIT in his notice u/s 263 of the Act were well enquired by the ld. Assessing Officer during the course of assessment proceedings u/s 143(3) of the Act and there was a thorough examination of the necessary details provided by the assessee with relation thereto and therefore, the order of ld. Assesing Officer u/s 143(3) of the Act dated 13.9.10 is neither erroneous nor prejudicial to the interest of Revenue. We accordingly quash the order of ld. CIT u/s 263 of the Act and restore that of the ld. Assessing Officer u/s 143(3) of the Act. Accordingly, all the grounds raised by the assessee challenging the validity of the order u/s 263 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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