TMI Blog2011 (5) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of sale of shares and claim of exemption u/s 10(38) of the Act afresh without taking into consideration the submissions, documentary evidence and factual matrix placed on record by the appellant in revisional proceedings, that was considered by AO while passing scrutiny order. This action of Id. CIT is harsh, uncalled for and completely against the principles of Natural Justice. 2. Through the above ground the assessee has challenged the revision of assessment u/s 263. The facts relating to the controversy are that assessment u/s 143(3) was completed by the AO on 29.02.2008. The assessee had declared an income of ₹ 3,95,640/- in the return filed on 28.08.2006. While completing the assessment the AO passed the order as under :- 2. The case was selected for scrutiny as per CASS and notice u/s 143(2) of the Act was issued on 17/07/2007 and same was served upon the assessee by registered post. Thereafter notice u/s 142(1) dated 31.01.2008 along with detailed questionnaire letter was issued and served upon the assessee. 3. In response to notices issued u/s 143(2) and 142(1) of the Act, Shri K.I. Jain, C.A. duly authorised attended from time to time and furnished th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 836, however, no details regarding modes of payment of such purchases at ₹ 92,836/-were obtained by the Assessing Officer. b) The above 65000 shares of Indo Green Projects Ltd. were credited in your demat account with the Prawn Ratilal Shares Stock Brokers Ltd. only on 20.05,2005 and thereafter, the same have been sold on 23.05.2005, 27.05.2005 and 02.06.2005. c) During the course of assessment proceedings a copy of your bank account with Progressive Mercantile Co. Op. Bank Ltd. for the period 20.03.2003 to 28.04.2007 had been furnished. Though the sale proceeds of the above shares have been credited in this bank account on 27.05.05, 01. 06.2005 and 09.06.2005 there is no debit reflecting payments for purchase of shares in the month of April 2004. d) The company M/s. Indo Green Projects Ltd. has scrip code of 531968 and scrip ID of INDOGR and is trading at Bombay Stock Exchange. The historical share price data of this company on the BSE website does not show any transaction whatsoever on 12.4.04, 13.4.04 and 15.4.04. In the above background of the facts, it appears to the undersigned that proper inquiries regarding long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The cost of shares of ₹ 92836 of Indo Green were shown as investment in the Balance sheet and the share profit mentioned above was reflected in P L A/c statement of income. We are herewith enclosing copies of following for your ready reference, i) Copy of Indo Green Ltd. share A/c. ii) Copy of Broker Shahrukh N. Tara iii) Copy of Balance Sheet Profit Loss Account for the F. V. 2004-05 iv) Copy of statement of total income for the A.Y. 2005-06 v) Cop/ of acknowledgement for A.Y 2005-06 Kindly note that all these details were a/ready there fn the file of the assessee with the deportment. b) Your goodselves have raised the 2 nd i ssue that the above 65000 shares of Indo Green Project Ltd. were credited in demote account with the Pravin Ratilal Share Brokers Ltd. only on 20/05/2005. We may be permitted to state that these shores were held by the a ssessee common demote account of Broker at the time of Purchases and transferred to her demat account before selling of these shores. Copy of declara tion of Broker showing this fact is enclosed herewith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the issue of long term capital gains on sale of 65,000 shares of M/s Indo Green Projects Ltd., the AO did not carry out proper enquiry/verification. He held the order of the AO erroneous and prejudicial to the interest of revenue. The ld. CIT referred to following judgments in support of his decision :- Tarajan Tea Co. (P) Ltd. vs. CIT 205 ITR 45 (Gau) CIT vs. Seshasayee Paper Boards Ltd. 242 ITR 490 (Mad) CIT vs. South India Shipping Corpn. Ltd. 233 ITR 546 (Mad) CIT vs. Emery Stone Mfg. Co. 213 ITR 843 (Raj) Mannulal Matadeen vs. CIT 277 ITR 346 (All) 4. Against above, the ld. AR for the assessee submitted that the AO had in fact carried out enquiries. He referred to the notice of the AO dated 31.1.2008 enclosing therewith an annexure showing calling for details in respect of following items:- 1. Details of Bank accounts including account Nos. and Branch with reconciliation statement.(Copy of statements to be furnished). 2. Copies of bills for capital gains. 3. Details of family, household expenses and contribution from other members if any. 4. Copy of demat account. 5. Copy of account of M/s Chopra Textiles. 6. Books of account maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the assessee till May, 2005. The claim that payment was adjusted against sale of shares of Geometric Software and Biocon Ltd. would indicate that they were speculative transactions. Merely bills have been raised and assessee has been credited. There is no evidence of actual transaction in respect of which sums of ₹ 45,825/- and ₹ 46,811/- have been credited to the account of the assessee. Shares of Indo Green Project Ltd. were lying in the account of broker of Shahrukh N. Tara which is called a common demat account. It is not known as to what is the lien of the assessee on that common demat account. Whether it contains shares of assessee only or it contains shares of several other persons. It is not known who is actual owner of such alleged demat account. Whether name of the assessee ever figured in such common demat account in which the shares of Indo Green Project Ltd. were lying, which were actually transferred to demat account of the assessee only in May, 2005. The ld. DR submitted that in fact AO had taken up this case for scrutiny under CASS i.e. computer assisted selection cases of scrutiny. When some specific information is passed on to the AO he selects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner thinks fit. The assessment also cannot be set aside for inadequate enquiries. It is not a case of no enquiry at all. All the relevant data was furnished before the AO. He was satisfied and accepted the long term capital gains. The ld. AR referred to the following judgements :- Rayon silk Mills vs. CIT (1996) 221 ITR 155 (Guj) CIT vs. Nirma Chemicals Works (P) Ltd. (2009) 309 ITR 67 (Guj) 9. We have considered the rival submissions and perused the material on record. The undisputed facts relating to the controversy are that the case was selected for scrutiny under CASS. It is not clarified whether the AO was required to confine himself only on the items referred to him by the Central Information System through computer which in the case related to transaction in Mutual Funds and on which the AO was apparently satisfied in the scrutiny assessment. It is also not clarified whether selection under CASS was only a mode of selection for scrutiny and AO was therefore, free to carry out any enquiry and make any addition as he deemed fit. Therefore, reference to CASS by the ld. DR does not bring any relevance to the issue unless it would have been clarified that as per instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gains, the necessary enquiries to be carried out by the AO are (1) when the capital asset is sold and what are the sale proceeds. (2) When the capital asset is purchased and what is the cost of acquisition; (3) What is the further expenditure in connection with the acquisition of the asset or in connection with its sale. (4) What is the long term capital gain or short term capital gains. If ld. AO accepts what is suggested to him by the assessee that it is long term capital gain, then it cannot be said that he has carried out the duties entrusted on him. We notice that the AO had asked very cryptic and simple question in his letter dated 31.1.2008. He had asked for copies of bills for capital gains. There is no query as to when the shares were purchased, what is the amount paid and when they were paid. There is also no query as to when the shares were sold and for what amount. In reply the assessee plainly submitted that it has earned long term capital gains. It does not provide various ingredients for calculation of capital gains and evidence in support thereof. The queries were cryptic and reply is also cryptic as if a formality to the issue is being completed. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in that case and after carrying out enquiries, whatever he considered fit, he accepted that they were wholly incurred for business purposes. This cannot be equated with not carrying out enquiries on an important aspect of computation of capital gains. Thus in the present case the issue is about not carrying out enquiry on acquisition of shares by the assessee which was not done as is clear from material submitted by the assessee. Once shares are not kept in her personal demat account, it could not be said to have been acquired by her in 2004 and therefore, she could apparently become owner of the shares only when shares were transferred in her own demat account on 20th May 2005 and therefore, could have only earned the short term capital gain, on their sale on 23.5.2005, 27.5.2005 2.6.2005. The failure of the AO to take note of and to carry out enquiries, on this aspect would clearly make his order erroneous and prejudicial to the interest of revenue. This is apart from the other issues that payment for purchase of shares was not enquired by the AO and established by the assessee. We accordingly uphold the order of ld. CIT and dismiss the appeal. 11. In the result, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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