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2022 (6) TMI 17 - AT - Income TaxRevision u/s 263 by CIT - treatment to gains arising from sale of impugned penny stock - transactions in penny stocks and taxability of the sale consideration under Section 68 of the Act r.w. Section 115BBE - HELD THAT:- As we note that educational background of the assessee gives an impression that the assessee is well versed with the functioning of the stock market and has reasonable experience in the field. Hence, the action of assessee to treat the gains arising from sale of impugned penny stock as business income appears to be unquestionable. Noticeably, the assessee has not availed any benefit under Section 10(38) of the Act thus, facially, no ‘prejudice’ appears to have caused to the Revenue. CIT has attempted to realign the nature of income from business income to capital gain without giving any reasonable basis for doing so in the revisional order. The whole objective of revisional proceedings appears to be to tax the income arising on sale of impugned shares on higher rate, i.e., 60% under Section 115BBE of the Act. Paradoxically, while on one hand the Pr.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 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 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 [2019 (1) TMI 1630 - ITAT DELHI] 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. Revisional order of the Pr.CIT is set aside and quashed. - Appeal of assessee allowed.
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