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2015 (5) TMI 818 - ITAT AHMEDABAD

2015 (5) TMI 818 - ITAT AHMEDABAD - TMI - Revision u/s 263 - directing AO to treat income from sale of shares as business income instead of income from short term capital gains - Held that:- Perusal of the questionnaire as well as reply given by the assessee exhibits that Assessing Officer has conducted inquiry before accepting the stand of the assessee. In the impugned order, Ld. Commissioner has nowhere pointed out, as to how the order of the Assessing Officer is erroneous. He simply observed .....

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Ld. CIT had nowhere establishes, as to how, it was speculative transaction. It is merely replacement of the opinion of the Assessing Officer with other possible view. Therefore, in our opinion Ld. Commissioner is not justified to take action u/s. 263. We allow the appeal of assessee and quash the impugned order passed u/s. 263 of IT Act by Ld. CIT. - Decided in favour of assesse. - ITA No. 1164/Ahd/2011 - Dated:- 22-5-2015 - Shri G.D. Agrawal and Shri Rajpal Yadav, JJ. For the Appellant : Shri .....

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as erred in taking cognizance u/s. 263 of the Income tax Act and revising the assessment order passed by the Assessing Officer u/s. 143(3), directing him to treat income from sale of shares as business income instead of income from short term capital gains. 3. The brief facts of the case are that assessee has filed its return of income on 27-10-2006 declaring total income at ₹ 47,13,718/-. The case of the assessee was selected for scrutiny assessment and a notice u/s. 143(2) of the Income .....

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of the assessment record, Ld. Commissioner formed an opinion that assessee had income from capital gain at ₹ 19,99,677/-. The assesse, besides, doing normal business, had traded in shares. The Assessing Officer had treated the income arising out of the sale of shares as short term capital gain, whereas in view of explanation appended to section 73 of the Income Tax Act, 1961, trading in share was required to be treated as speculation business and profit from such speculation business was r .....

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IT. The copy of the show cause notice has been place at page no. 1 to 2 of the paper book. The reply of the assesse is available on pages no. 03 to 8 of the paper book. It was contended before the Ld. Commissioner that Ld. Assessing Officer in his questionnaire dated 10-10-2008 had specifically asked as to why, profit on sale of shares amounting to ₹ 19,99,697/- may not be treated as business income of the assessee company. The assessee had given a reply contending therein that the company .....

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chased on 8th September, 2014, 14th September,2014 etc. Out of this 2,20,000/- shares were sold in the month of April, June, and August, 2005. It was also contended that explanation to section 73 is not applicable on the facts of the assessee s case. Thus, assessee had raised two fold submissions before the Ld. CIT. (a) Ld. Assessing Officer has investigated the issue during the assessment proceedings and accepted the explanation of the assessee which is a plausible view; (b) even on merit the t .....

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to point out other circumstances for doubting the transaction. 6. Ld. counsel of the assesse, while impugning the order of CIT contended that Assessing Officer issued show cause notice on the particular issue and conducted an inquiry. After explanation of assessee, he accepted the stand of the assessee. Therefore, Ld. Assessing Officer has taken one of possible view and Ld. Commissioner while exercising his power u/s. 263 cannot replace the possible view taken by the Assessing Officer. In the s .....

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er is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this .....

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s or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after th .....

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the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or inj .....

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The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The lear .....

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e the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. Explanation-1 has been substituted by the Finance Act 1998 (26 of 1988). It threw a light to some extent the scheme of the Act. Under clause (a) of the Explanation, it has been provided that an order of the assessment made by the Income Tax Officer on the basis of a direction issued by the Jt. Commissioner u/s 144A would be an order of the Income Tax Officer. In other .....

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S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct .....

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ed one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under 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 determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his est .....

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ment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 9. Apart from the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto .....

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by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself .....

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s submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open . 10. In the light of above, let us consider the show cause notice issued by the Assessing Officer dated 1 .....

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 2. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 3. Why profit on sale of shares of ₹ 1999697 may not be treated as business income of the company? 4. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. 5. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx The above details may please be filled within 3 days of receipt of this letter. Yours Faithfully Sd/- (R.H. GOHEL) Dy. Commissioner of Income-tax Circle. 5. Ahmedabad 1 .....

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t doing business of sale and purchase of shares. Shares purchased by the company are for investment purpose only. From the balance sheet of the company for last two to three years it will be observed that the company has made investment in shares of only two companies, viz. Aärvee Denim and Export Ltd and Praneta Industries Ltd. Out of this investment in shares of Aarvee Denim and Export Ltd is made before 10 years and which still exist as investment. Investment in shares of Praneta Industr .....

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