TMI Blog2012 (2) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law, the CIT erred in exercising jurisdiction u/s 263 by setting aside the aforesaid issue even though the same had been discussed and scrutinized by the Assessing Officer in detail while framing the assessment u/s 143(3) of the Act. 2.2 That on the facts and circumstances of the case and in law, the CIT erred in setting aside the aforesaid issue even after recording prima facie finding on the merits of the issue in favour of the appellant. 2.3 That on the facts and circumstances of the case and in law, the CIT failed to point out any error in the order of the Assessing Officer in assessing profit on transfer of shares as capital gains , which is sine que non for initiation of proceedings u/s 263 of the Act. 3. Without prejudice, that the CIT erred on facts and in law in setting aside the assessment order to be redone afresh and not merely setting aside the aforesaid issue of taxability of income from sale of shares. 4. The appellant craves leave to add, alter or amend or vary any of the above grounds of appeal before or at the time of hearing. 2. Facts, in brief, as per relevant orders are that return declaring income of Rs. `2,14,62,660/- filed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT Vs. Max India Ltd., 295 ITR 282 (S.C.);CIT Vs. Sunbeam Auto Ltd. 332 ITR 167 (Del.);CIT Vs. Anil Kumar Sharma, 335 ITR 83 (Del);CIT Vs. Vikas Polymers, 236 CTR 476/194 Taxman 57;Hari Iron Trading Co. Vs. CIT, 263 ITR 437 (P H);Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (S.C.);CIT Vs. Hindustan Coca Cola Beverages (P) Ltd. 331 ITR 192(Del.);CIT Vs. International Travel House Ltd., 194 Taxman 324;CIT Vs. DLF Power Ltd., 329 ITR 289(Del.);CIT Vs. Eicher Ltd., 294 ITR 310 (Del.);CIT Vs. Ashish Rajpal, 320 ITR 674 (Del.);CIT Vs. Rohit Anand, 327 ITR 445 (Del);CIT Vs. Gopal Purohit, 228 CTR 582(Bom.); and CIT Vs. PNB Finance Industries Ltd, 236 CTR 1 (Delhi). 4. On the other hand, the ld. DR supported the findings of the ld. CIT and further contended that issue had not been examined by the AO during the course of assessment proceedings. In his rejoinder, the ld.AR submitted that the assessee dealt with only one scrip and profit from sale of shares was reflected as short term capital gain and long term capital gain depending upon their holding. 5. We have heard both the parties and gone though the facts of the case as also the aforecited decisions. Since the issue rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from sale of shares and after considering their detailed reply dated 16.10.2008 accepted the submissions of the assessee. The said reply of the assessee reads as under:- The assessee company had not made any fresh investment(s) during the year under purview. The investment pertains to past years. Moreover, the assessee did not earn any brokerage among the transaction, which could prove that the transactions were made to earn brokerage. Apart, the assessee company had shown such investments since many years and accordingly income earned therein were computed under the head capital gain. Also, your honour can view that no frequent transactions were existing which proves the nature of receipt is revenue nature. Moreover, in books of account also shares are classified as investment not as stock in trade. The management of the company had not even converted such investment into stock in trade at any time during the year. Besides above circular No.4/2007 dt. 15.06.2007 prescribes the distinction between shares held as stock in trade and shares held as investments 1. The Income-tax Act, 1961 makes a distinction between a capital asset and a trading asset . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transactions; (iii)ordinarily the purchase and sale of shares with the motive of earning a profit, would result in the transaction being in the nature of trade/adventure in the nature of trade; but where the object of the investment in shares of a company is to derive income by way of dividend, etc., then the profits accruing by change in such investment (by sale of shares) will yield capital gain and not revenue receipt. 9. CBDT also wishes to emphasise that it is possible for a taxpayer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads, i.e., capital gains as well as business income. In the instant case also the assessee company had accounted the shares as investments, not as stock in trade. Secondly, the assessee had earned the dividend upon the investments held. Which itself proves that the aim of the assessee is to earn the income upon long term investments. Hence, the same Hence, the same may please be treated as capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest of the revenue , as observed in Dawjee Dadabhoy and Co. vs. S.P. Jain, 31 ITR 872 (Calcutta ) , can only mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. Thus, the exercise of revisional jurisdiction under the provisions of section 263 of the Act is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the AO was erroneous and prejudicial to the interest of the revenue and that fresh determination of the assessment was necessary. There must be material to justify the Commissioner s finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the Revenue. 5.4. Though there is a fine though subtle distinction between lack of inquiry and inadequate inquiry, it is only in cases of lack of inquiry that the CIT can exercise his revisional jurisdiction. As held in Gabriel India Ltd. (supra), the CIT cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held to be erroneous simply because in his order he did not make an elaborate discussion in that regard .. 5.5 While adjudicating a similar issue, Hon ble Supreme Court in the case of CIT Vs Max India Ltd. (supra) relying upon its earlier decision in the case of Malabar Industrial Co. Ltd. (supra) held as under: The phrase prejudicial to the interests of the Revenue in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law . 5.6 Similarly, Hon ble Gujarat High Court in the case of CIT Vs R. K. Construction Co. 313 ITR 65 held as under: As far as law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mere fact that a different view can be taken, should not be the basis for an action under section 263 of the Act and it cannot be held to be justified. 5.8 In CIT v. Mehrotra Brothers 270 ITR 157 (MP), the Hon ble High Court gave the stamp of approval to the order of the Tribunal which, after relying on CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141, had held that when the AO considered the records before him and completed the assessment after considering the evidence filed and after his satisfaction about the genuineness of cash credits, the order of revision under Section 263 on the vague ground that the AO did not make proper enquiry was not valid. 5.9 Hon ble Punjab Haryana High Court in the case of CIT Vs Deepak Mittal 324 ITR 411 held that change of opinion by reappraising the evidence is not within the parameters of revisional jurisdiction of the Commissioner under section 263 of the Act. 5.10 In CIT vs. Internat ional Travel House,194 Taxman 324(Del),Hon ble Delhi High Cour t while relying, inter alia, on the decision of Hon ble Gujrat High Court in Arvind Jewellers(supra) observed that the Commissioner had really made an effort to cause a routine inquiry wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court observed as under: 7. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fell into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this Court. That being the position, the present case would not be one of lack of inquiry and, even if the inquiry was termed as inadequate, following the decision in Sunbeam Auto Ltd. s case (supra), that would not by itself give occasion to the Commissioner to pass orders under section 263 of the said Act, merely because he has a different opinion in the matter . No substantial question of law arises for our consideration. Consquently, the appeal is dismissed. 5.13 In CIT vs. Leisure Wear Exports Ltd. [2010] 46 DTR (Del ) 97 Hon ble Delhi High Court held that power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee that the very premise on which order under section 263 was made against the assessee, namely, that the Income-tax Officer has not at all examined the goodwill account is not existent. According to him, it is apparent from the record that the goodwill account was thoroughly examined by the Income-tax Officer before making the assessment and after examining when he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This contention of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have noticed above, the assessee in his reply to the show-cause notice under section 263 had specifically mentioned that the entire matter was scrutinised and accepted while passing the assessment order. Our attention was also drawn to annexure 'D'. A submission made by the assessee to the Income-tax Officer, Surat, dated October 18, 1976, regarding the assessment year 1974-75 giving detailed ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. Applying the aforesaid tests to the facts of the case it is not possible to uphold the order of the Tribunal as regards jurisdiction after considering the law enunciated by the apex court. The Assessing Officer after making due inquiries, as noted hereinbefore, adopted one view and granted partial relief under section 80-I of the Act. The Commissioner of Income-tax takes a different view of the matter. However, that would not be sufficient to permit the Commissioner of Income-tax to exercise powers under section 263 of the Act because when two views are possible and the Commissioner of Income-tax does not agree with the view taken by the Assessing Officer, the assessment order cannot be treated as erroneous and prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. That is not the position in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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