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2023 (12) TMI 267 - AT - Income TaxRevision u/s 263 - as per CIT AO has not verified transaction of sale / purchase of shares offered to tax as Income from Capital Gain, disallowance of expenditure relatable to exempt income u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962 and deduction claimed u/s. 35D of the Act, towards preliminary expenses - HELD THAT:- Disallowance u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962, and deduction u/s. 35D of the Act, the Ld.Counsel for the assessee fairly agreed that the order passed by the Ld.CIT u/s. 263 of the Act, survives on these two issues and thus, we are inclined to uphold the findings of the Ld.CIT on the issue of disallowance u/s. 14A of the Act, and deduction u/s. 35D of the Act. Correct head of income - assessment of profit derived from purchase & sale of shares, the assessee has declared profit under the head ‘short term capital gains’ - CIT was of the opinion that profit derived from sale of shares is assessable under the head ‘profits & gains of business and profession’ - It is very clear that the assessee was maintaining two portfolios i.e. one for investment and another for trading and there was a clear demarcation in the books of accounts of the assessee in respect of both segments. Therefore, we are of the considered view that the assessee has rightly declared profit derived from purchase & sale of shares under the head ‘short term capital gains’. But, it is only the Ld.CIT wrongly invoked his jurisdiction u/s. 263 of the Act, without pointing ‘how & why’ assessment order passed by the AO on the issue of profit derived from purchase & sale of shares is incorrect and erroneous in so far as it is prejudicial to the interest of the Revenue. This, position is clarified by the CBDT in their Circular No.4/2007 dated 15.06.2007, where, various parameters have been prescribed for verification of share transactions and none of parameters prescribed by the Board is adversely affecting the transactions of the assessee. Board has very clearly stated that the tax payers can have two portfolios i.e. one for investment and another for trading, but there should be clearly demarcation in the books of accounts in respect of both portfolios. In this case, the assessee has filed all evidences to prove that it was having two portfolios and maintaining separate records for investment portfolios and trading portfolio. Therefore, we are of the considered view that the assessee has rightly declared ‘short term capital gains’ towards profit derived from purchase & sale of shares, and thus, the assumption of jurisdiction by the Ld.CIT fails on this issue. Order of the Ld.CIT u/s. 263 of the Act, is valid, in case, there is no enquiry at all. In this case, as we have already stated that it is not a case of lack of enquiry. Therefore, case law relied upon by the Ld.DR does not apply to the facts of the present case.we are of the considered view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. CIT without appreciating the facts simply invoked his jurisdiction and set aside the assessment order passed by the AO u/s. 143(3) of the Act .
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