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2016 (12) TMI 1540 - ITAT VISAKHAPATNAM

2016 (12) TMI 1540 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - disallow the claim of exemption u/s 54EC and 54F - order erroneous and prejudicial to the interest of the revenue - Held that:- In the present case on hand, on perusal of the facts available on record, we find that the A.O. has conducted detailed enquiry and also examined the issues pointed out by the CIT. The assessee has explained the issue pointed out by the CIT with necessary evidences. Therefore, the CIT, cannot assume juris .....

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judicial to interest of revenue. In this case, assessment order passed by the A.O. is neither erroneous nor it is prejudicial to the interest of revenue, as the issue of capital gains and exemption u/s 54EC and 54F has been examined by the A.O. and also there is no prejudice is caused to the interest of revenue as investments in 54EC and 54F is in accordance with law. Therefore, we are of the view that the assessment order passed by the A.O. u/s 143(3) of the Act dated 16-01-2013 is not erroneou .....

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apatnam dated 20- 03-2015, u/s 263 of the Income Tax Act, 1961 for the assessment year 2010-11. Since, facts are identical and issues are common, they are heard together and disposed off, by this common order for the sake of convenience. 2. The brief facts extracted from ITA. No. 178/Vizag/2015 are that the assessee, an individual filed his return of income for the A.Y. 2010- 11 on 30-07-2010 declaring total income of ₹ 49,69,760/-, consisting of income from salary, income from other sourc .....

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tice u/s 263 of the Act, dated 19-06-2014 and asked to explain as to why the assessment order passed u/s 143(3) dated 16-01- 2013 for the A.Y. 2010-11 shall not be reviewed for the reasons recorded in the show-cause notice. The CIT, proposed to review the assessment order for the reason that the A.O. has erred in allowing exemption u/s 54EC and u/s 54F towards investment in capital gains bonds and purchase of residential property, which is otherwise not allowable, as the assessee has invested sa .....

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ent order erroneous in so far as it is prejudicial to the interest of revenue within the meaning of section 263 of the Act. 4. In response to show cause notice, the assessee has filed written submission and submitted that the assessment order passed by the A.O. is neither erroneous nor prejudicial to the interest of revenue, as the A.O. has examined the issue of computation of capital gain towards sale of shares and exemption claimed u/s 54EC and 54F of the Act, by specific questionnaire dated 1 .....

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nt agreement dated 12-08-2009 between Aquarius Capital (Mauritius) Limited and Vijay Nirman Company Private Limited and its share holders along with share transfer form in Form no 7B of the Companies Act, 1956 and form no. FC-TRS filed with designated AD(authorized dealer) branch. The assessee also furnished details of investments in NHAI bonds and sale deed copy of residential property in support of exemption claimed u/s 54EC and 54F of the Act. The A.O. after satisfied with details furnished b .....

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s otherwise not allowable to the assessee. The CIT, further, observed that the assessee ought to have invested sale consideration within six months or two years from the date of receipt of money, however invested in the bonds and property beyond the period of six months or 2 years from the date of receipt of money, which is because the issue got crystallized when the buyer paid money to the seller. Giving a share certificate along with share transfer form at a subsequent date would not change th .....

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investments in 54EC and 54F is beyond the time limit specified under the provisions, accordingly, the assessee is not eligible for exemption. The A.O. not only failed to examine crucial aspects of the issue, but also failed to apply his mind before allowing exemption u/s 54EC and 54F which rendered assessment order erroneous in so far as it is prejudicial to the interest of the revenue. Since, both the conditions, i.e. the order is erroneous and also prejudicial to the interest of the revenue w .....

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and specifying the name, address and occupation, if any of the transferee and has been delivered to the company along with share certificates. The A.R. further submitted that the assessee has completed share transfer by executing a transfer deed in form no. 7B duly signed and stamped which was delivered to the company on 24-11-2009 which was approved by the company on same date, therefore the effective transfer took place on 24-11-2009 and the period of investments should be computed from the da .....

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2009. The assessee has invested in NHAI bonds on 4-5-2010 which is within six months from the date of transfer and also purchased residential house property on 31-10-2011, which is within 2 years from the date of transfer and hence, the assessee is eligible for exemption u/s 54EC and 54F of the Act . The A.O. has verified all details before allowing exemption and hence, the order passed by the A.O. cannot be termed erroneous in so far as it is prejudicial to the interest of revenue. 7. The Ld. D .....

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, submitted that transfer got crystallized on the date of payment of consideration towards transfer of shares by the purchaser to the seller and subsequent execution of share transfer form and filing such form with designated authorities is only a statutory requirement which is nothing to do with transfer. The D.R. referring to clause 5.2.4, 6.1 and 6.2. of investment agreement, submitted that effective transfer took place on 10-09-2009 which is the closing date and on this date the assessee had .....

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o CBDT. Circular No. 704, dated 28- 04-1995 and argued that in the case the transactions take place directly between the parties and not through stock exchanges, the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. Since, transfer took place on 10-09-2009, the period of limitation should be computed from such date. The A.O. not only failed to examine the crucial aspect, but .....

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of a investments agreement dated 12-08-2009 between Aquarius Capital (Mauritius) Limited and Vijay Nirman Company Private Limited and its share holders. The assessee being one of the promoter share holder of the Company has transferred 133420 equity shares for a consideration of ₹ 1,99,98,613/. The said investment agreement dated 12-08-2009 has prescribed terms and conditions of share transfer and completion of statutory formalities by filing necessary forms under the Companies Act, 1956 w .....

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8377; 50,00,000/- in NHAI bonds on 4-5-2010 and claimed exemption u/s 54EC of the Act. The assessee also deposited sum of ₹ 1,50,00,000/- on 24-07-2010 in a scheduled bank under Capital Gain deposit Scheme before due date of filing return of income and proof of which has been furnished along with return of income filed u/s 139(1) on 30-07-2010 and claimed exemption u/s 54F of the Act. The assessee has purchased a house property on 31-10-2011 out of amount deposited under capital gain depos .....

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u/s 54EC and 54F, the assessee ought to have invested sale consideration within six months/ 2 years from the date of receipt of money, however on perusal of facts, the assessee made investments in NHAI bonds on 4-5-2010 and purchase of property on 31-10-2011 which is beyond the period of six months or 2 years from the date of receipt of money. According to the CIT, the effective transfer took place on the date the buyer paid money to the seller. Giving a share certificate along with share transf .....

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u/s 54EC and 54F of the Act. If, the period of limitation is computed from the date of receipt of money, then investments in 54EC and 54F is beyond the time limit specified under the provisions, accordingly, the assessee is not eligible for exemption. The A.O. not only failed examine crucial aspects of the issue, but also failed to apply his mind before allowing exemption u/s 54EC and 54F, which rendered assessment order erroneous in so far as it is prejudicial to the interest of the revenue. 1 .....

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er cannot be termed as erroneous within the meaning of sec. 263 of the Act. Having heard both the sides, we find force in the arguments of the assessee for the reason that on perusal of paper book filed by the assessee, we find that the assessee has furnished details of show cause notice issued by the A.O. and replies filed by the assessee. On perusal of details filed by the assessee, we find that the A.O. issued two notices on 13-12-2012 and 28-12-2012 calling for specific details about share t .....

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e to the conclusion that the A.O. has not examined the issue. Once, the A.O. has called for details of the issue which is subject matter of revision proceedings and the assessee has furnished details called for, it is the general presumption that the A.O. has examined the issue with necessary evidences, applied his mind and took a possible view of the matter before completion of assessment. The CIT cannot assume jurisdiction to review the assessment order by holding the A.O. has conducted inadeq .....

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sessee contends that transfer had taken place on 24-11-2009, when valid instruments of share transfer in form no. 7B is duly stamped and signed by the both the parties and presented to the Company along with original share certificates. According to the CIT, the effective transfer took place on 10-09-2009 when sale consideration is passed on to the seller. The Ld. D.R. referring to clause 4.1 (page no. 14), clause 5.2.4 and clause 6.1. and 6.2 (page no. 17) of investments agreement dated 12-08-2 .....

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uch time as the parties to the contract intended it to be transferred. The D.R. also referred to CBDT. Circular No. 704, dated 28-04-1995 and argued that in the case the transactions take place directly between the parties and not through stock exchanges the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. 12. Having heard both the sides, we do not find any merits in the fi .....

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ansferee and specifying the name, address and occupation, if any of the transferee and has been delivered to the company along with share certificates and endorsed by the Company by changing such details in the share holder register maintained under the Companies Act. In the case of shares of listed companies, effective transfer would take place when title to share is transferred from one person to another through demat account in recognized stock exchange. In the case of shares of unlisted comp .....

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owed up by actual delivery of shares. In so far as the Ld. D.R. argument that transfer would take place when parties intended to transfer, we find that when a specific provision in section 108 of the Companies Act, 1956 is provided for dealing with transfer of shares, referring to the provisions of section 19 of the Sale of Goods Act, 1930 to define share transfer is unwarranted and uncalled for. Even, the Board, by way of a circular no. 704, dated 28-04-1995 has dealt the issue and clarified th .....

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he light of the above legal position, let us examine the facts of the case. In this case, the assessee has agreed to transfer 133420 shares for a consideration of ₹ 1,99,98,613/-, in pursuant of a investments agreement dated 12-08-2009 between Aquarius Capital (Mauritius) Limited and Vijay Nirman Company Private Limited and its share holders. The assessee has transferred his shares on 24-11-2009, by filing valid share transfer form in form no. 7B duly stamped and signed by both the parties .....

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hen valid share transfer form in form no. 7B duly stamped and signed by both transferor and transferee and presented to the Company, but not on the date of receipt of money from the buyer to the seller, i.e. 0n 10-09-2009. The investment agreement between Aquarius Capital (Mauritius) Limited and Vijay Nirman Company Private Limited may give a enforceable right to the parties to the agreement, but it cannot be regarded as transfer, unless individual share holders transfers their title in shares b .....

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stments in NHAI bonds on 4-5-2010 and purchase of house property on 31-10-2011 is well within the period of six months and 2 years from the date of transfer as specified u/s 54EC and 54F of the Act, and accordingly, the assessee is eligible for exemption and thus, there is no prejudice is caused to the revenue from the order of the A.O. within the meaning of section 263 of the Act. Therefore, the CIT was incorrect in assuming jurisdiction to review the assessment order. 14. The CIT has power to .....

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ssed by the A.O. may be erroneous, but it may not be prejudicial to the interest of revenue or vice-versa. Unless the order passed by the A.O.is erroneous and prejudicial to the interest of the revenue, the CIT cannot assume jurisdiction to revise the assessment order, this is because the twin conditions i.e. the order is erroneous and the same is prejudicial to the interest of the revenue are co-exist. In the present case on hand, on perusal of the facts available on record, we find that the A. .....

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CIT cannot presume that the enquiries conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless CIT proves that assessment order passed by the A.O. is erroneous and also prejudicial to interest of revenue. In this case, assessment order passed by the A.O. is neither erroneous nor it is prejudicial to the interest of revenue, as the issue of capital gains and exemption u/s 54EC and 54F has been examined by the A.O. and also there is no prejudice is caused to the in .....

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10.6.2016. The coordinate bench of this Tribunal, under similar circumstances held that once the A.O. examined the issues on which the CIT wants further verification, the CIT cannot assume jurisdiction on the same issues which was already examined by the A.O. at the time of assessment by stating that the A.O. has conducted inadequate enquiry or there is a lack of enquiry. The relevant portion of the order is reproduced hereunder: CIT(A) assumed jurisdiction to revise the assessment order on the .....

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detailed questionnaire in respect of net profit and also TDS in respect of rent and hire charges. The A.O. after satisfied with the explanations furnished by the assessee has accepted the income returned. Therefore, ITAT are of the view that once the issues which are subject matter of revision u/s 263 of the Act, have been examined by the A.O. at the time of assessment, the CIT has no jurisdiction to entertain fresh enquiry on the same issues, because he has a different opinion on the issues. In .....

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