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2016 (11) TMI 292 - ITAT AHMEDABAD

2016 (11) TMI 292 - ITAT AHMEDABAD - TMI - Validity of revision orders u/s 263 - Held that:- Elaborate enquires were made not only before the assessment proceedings started but also during the course of the assessment proceedings and the assessee has fully complied with all queries raised by the Revenue Authorities. The contention that the present Assessing Officer did not make full enquiry is not acceptable, because when the assessment records were transmitted from one DCIT to another DCIT, the .....

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ssee. - ITA No. 1454/Ahd/2015 - Dated:- 21-10-2016 - Shri N. K. Billaiya, Accountant Member And Shri S. S. Godara, Judicial Member Assessee by : S/Shri S.N. Soparkar, P. M. Mehta & Parin Shah, ARs Revenue by : Shri R.N. Parbat, CIT-DR ORDER Per N. K. Billaiya, Accountant Member With this appeal the assessee has challenged the correctness of the order of the Principal Commissioner of Income-Tax (Central), Ahmedabad dated 30.03.2015 pertaining to AY 2010-11. 2. The assessee has strongly challe .....

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1.99 crores has been accepted as the assessed income. 5. Drawing support from the provisions of Section 263 of the Act, the Principal CIT issued a show-cause notice dated 19.02.2015. The relevant parts of the notice read as under:- 3. It is observed that you have admitted by your own that the transaction in shares were made with a motive to earn profit and therefore the nature of these transaction cannot be that of investment and same should be treated as business transaction. As a result of sam .....

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noticed that cash was deposited on the date of transfer of the funds in your account. Neither the return of income nor any confirmation was filed by M/s. Sheetal Bio Agrotech Limited. 4. In view of the above facts, the assessment order u/s 143(3) dated 26.03.2013 passed by the Assessing Officer is prima facie both erroneous as also prejudicial to the interest of the revenue and therefore, I intend to revise the said order u/s 263 of the I.T. Act. 5. Vide this letter, you are therefore, given an .....

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l CIT who made the following observations while setting aside the assessment order:- 4. The written submission filed by the AR of the assessee has been carefully considered by me. On perusal of records it is found that the assessee invested very meager amount of ₹ 2,16,600/- as compared to investment in the shares of M/s Radhe Developers India Ltd. amounting to ₹ 3.78 crores. The assessee himself admitted that apart from shares of Radhe Developers India Ltd., no major transactions in .....

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9 and on the same date, bank account was also opened by Sheetal Bio Agrotech Ltd. in the same bank and same branch. Thereafter, on 30/06/2009, cash was deposited in the Bank account of M/s. Sheetal Bio Agrotech Ltd. and on the same day, funds were transferred to Shri Shital P. Shah and further transferred to Radhe Developers India Ltd., which clearly indicate that funds deposited in cash and transferred to the account of assessee is unexplained cash credit and source of same should have been be .....

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263 of the Act. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio:- "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order .....

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roneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous" 8. Now, let us see in the light of the above ratio whether the assessment has been made on an incorrect assumption of facts or an incorrect application of law. The first observation of the Principal CIT is that the assessee had invested very meager amount of ₹ 2,16,600/- as compared to investment in the shares of Rad .....

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having failed to do so, the order passed by the Assessing Officer becomes erroneous and prejudicial to the interest of the Revenue. The Principal CIT concluded by holding as under:- The assessment order dated 26/03/2013 is therefore cancelled and the Assessing Officer is directed to again complete the assessment after making appropriate enquiry regarding the source of unsecured loan of ₹ 3.4 crores, as mentioned above. The Assessing Officer is directed to verify complete trail of funds and .....

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h. On 24.10.2007, the assessee applied for 21 lacs convertible warrants at ₹ 18/- each and on 04.01.2008, the assessee was allotted the warrants. On 21.08.2009, the warrants were converted into shares of ₹ 10/- each against one warrant and accordingly, the assessee got 2.10 crores shares at ₹ 1/- each. Between 02.02.2010 and 31.03.2010, the assessee sold 1.02 crores shares at profit. 10. The aforementioned transactions were questioned by the ADIT. Necessary replies were filed b .....

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itted that the sources of these investments were loans received from M/s Shital Bio Agritech Ltd, whose account pay cheques drawn on Bhuj Mercantile Cooperative Bank on 29-06-2009. The investment was made on 30-06-2009 and further you have submitted that the loan of ₹ 3.40 lacs was repaid by you after selling these shares before 30-03-2010. On further perusal it is noted that you have made investment of ₹ 38.07 lacs that is 10 per cent of total investment ₹ 3.87 crores out of w .....

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38.7 lacs be not treated as unexplained cash credits appearing in your books within the meaning of Section 68 of the Act. Looking to the nature of transactions carried out by you and the statement given by you before ADIT(Inv.), Ahmedabad that you have made these transactions with a motive to earn profit, indicating the nature of the transactions as business transactions. You are, therefore, required to showcause as to why STCG shown by you on these transactions be not treated as income from bus .....

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first notice was issued by the DCIT, Circle-11, Ahmedabad, but thereafter the records were transmitted to DCIT, Central Circle-1(3). Therefore, the present Assessing Officer had no opportunity to examine the details/documents. This contention of the ld. DR does not hold any water, because on 23.03.2013 the assessee had filed affidavit explaining the nature, source, identity and genuineness of the entire transactions of allotment of share warrant and conversion of the same to shares and subsequen .....

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rder which reads as under:- In response to the notices, Shri Gautam N. Shah, CA attended with the assessee Shri Shital P. Shah and filed the details called for. The details submitted by the assessee have been verified and kept on record. The assessee is an individual and deriving income from business, house property, capital gains and income from other sources… And the returned income was accepted as such. 13 The Assessing Officer has taken a view which may be different from the view of t .....

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ent order should be erroneous and prejudicial to the interest of the Revenue. By erroneous is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for di .....

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urt in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon ble jurisdictional High Court was seized with the following substantial question of law:- Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of .....

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ubmitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise to a long term capital gain. Looking to the tenor of queries by the Assessing Office and details supplied by the assessee, we are unable to accept such a condition. In that view of the matter, the observation of the Tribunal that the Assessing Officer havin .....

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essment proceedings started but also during the course of the assessment proceedings and the assessee has fully complied with all queries raised by the Revenue Authorities. The contention that the present Assessing Officer did not make full enquiry is not acceptable, because when the assessment records were transmitted from one DCIT to another DCIT, the other DCIT was well aware of the queries raised during the course of proceedings. The Officer was also aware of all the replies filed by the ass .....

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