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TMI Blog2019 (10) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... y from Avanti Leathers Ltd.), Income from Business (Trading in Securities) and other sources. The case was selected as 'Limited' scrutiny case by Revenue. The reasons for selection in limited scrutiny were two-fold:- i. Substantial increase in capital in a year ii. Sale consideration of the property in ITR is less than the sale consideration of property reported in AIR. The issue of substantial increase in capital in the year under consideration is main bone of contention by learned PCIT which led to issue of notice u/s 263 of the 1961 Act for framing revisionary assessment, as we will see later in this order, while the other issue which led to selection for limited scrutiny by CASS viz. sale consideration of property in ITR being less than the sale consideration of property reported in AIR is not raised by learned PCIT while invoking his revisionary powers u/s 263 of the 1961 Act and hence we will confine our discussions to the issues now been invoked by learned PCIT u/s 263 of the 1961 Act. 2.2 Coming back, the AO after making inquiry as was deemed fit by him, accepted increase in capital of the assessee in the year under consideration, vide assessment order dated 23.12.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11- 12, the assessee has been allotted 20,81,467 shares to the Value of Rs. 2,08,14,670/- in the company and the sources are from the Current a/c balance held by him from the F.Y.2008-09 (Current a/c balance as on 31/3/2009 was Rs. 2,40,64,672/-) onwards. Further the Preference Share Capital to the value of Rs. 1,79,00,000/- of the assessee has been converted in to Equity Share Capital during the F.Y.2011-12. In order to show the increased investment in the Avanti Leathers Limited, (which was omitted to shown in the earlier years), the assessee has shown the corresponding increase in Capital a/c in this year. In view of the above, the increase in Capital a/c is found to be properly explained." 3. The ld.PCIT was of the view that the aforesaid assessment order dated 23.12.2016 passed by the AO u/s 143(3) of the 1961 Act was erroneous in so far as it is prejudicial to the interest of the Revenue which led ld. PCIT to issue notice dated 13.11.2018 u/s.263 asking assessee to submit its explanations, by stating in the said notice as under:- "The assessee is an Individual assessed with the Income Tax Officer, Non Corporate Ward- 2(2), Chennai. The assessee had filed his Return of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the assessment u/s.143(3) passed by the Assessing Officer, Non-Corporate Ward-2(2), Chennai is proposed to be taken up u/s.263 of the IT. Act, 1961 to pass appropriate revision orders, after giving opportunity to the assessee." 3.2. The assessee in response to aforesaid notice issued by learned PCIT u/s 263 of the 1961 Act, filed detailed reply (vide letter dated 02.01.2019 which is placed in file) as to all the contentions raised by ld.PCIT as to increase in capital and investments in its Balance Sheet as at 31.03.2014 as also transfer of credit balance standing in the name of Standard Chartered Capital Markets and transfer of credit balance in Vento Car to capital account, thus explaining all the differences in the books of accounts as were required to be explained by learned PCIT in his notice issued u/s 263 of the 1961 Act. The detailed reply was submitted by the assessee on 02.01.2019 which is reproduced as under: "I wish to submit here below matters raised in notice u/s 263 in respect of which assessment is stated to have been made erroneously by the learned assessing officer(AO): Matters raised: 1) The aggregate of increase in capital a/c and investment a/c i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return in Form 20B for F Y 2013- 14 filed with Registrar of Companies by M/s Avanthi Leathers Limited. The copy of above annual return for the financial year 2013-14 is enclosed in Annexure-2 where in the company has confirmed that the assessee is a share holder in the company to the extent of Rs. 4,23,93,670. Year wise allotment of above equity shares of Rs. 4,23,93,670 is given below: Rs. 1 Before 1,4.2002 36,79,000 2 12.02.2011-Conversion of preference share capital into equity shares 1,79,00,000 3 2.02.2011-Conversion of credit balance in current a/c of assessee into equity shares 2,08,14,670 Total equity shares of assessee as on 31.03.2014 as per books of a/c of Avanthi Leathers Limited 4,23,93,670 For s.no.1 for Rs. 36,79,000, the origin goes back to financial year 2002-03. For s.no.2 for Rs. 1,79,00,000 copy of return of allotment in Form 2 filed with Registrar of Companies is enclosed in Annexure-3. The origin of preference share capital goes back to financial year 2002-03. Copy of annual report of M/s Avanthi Leathers Limited for financial year 2002-03 is enclosed as proof for the same in Annexure-4 For s.no.3 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered by assessee in his return of income also. Standard Chartered Capital Market were the share trading agents for the assessee. The credit balance in their a/cs in the books of assessee relating to earlier years was transferred to capital account in the financial year 2013-14. Here also, transaction does not relate to financial year 2013-14 and therefore does not attract assessment for assessment year 2014-15. 3.1.3) Transfer of credit balance in the Vento car a/c - Rs. 1,96,000: One Vento car of the assessee had been sold in earlier year and the credit balance of Rs. 1,96,000 lying in that a/c has been transferred to capital a/c during the financial year 2013- 14. Here also, the transaction does not relate to financial year 2013-14 and does not attract assessment for assessment year 2014-15. 3.2) Reply to para 1.2 Increase in investment a/c: Investment represents investment in Avanthi Leathers Limited, a company registered with Hyderabad Stock Exchange. The opening and closing balances of investment a/c shown in notice are not correct. I enclose copy of investment a/c for your kind perusal in Annexure-8. Based on enclosed investment a/c, I give here below the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n opening stock of shares while bringing forward opening balance" 11,24,360 4. The ld.PCIT was not satisfied with the aforesaid reply filed by the assessee and was of the view that the AO has not made proper inquiry and there is complete lack of application of mind on the part of the AO. The assessment order dated 23.12.2016 passed by the AO u/s 143(3) of the 1961 Act was set aside by learned PCIT by holding the same to be erroneous in so far as prejudicial to the interest of the Revenue, vide revisionary order dated 03.01.2019 passed by learned PCIT u/s 263 of the 1961 Act. 5. The assessee is aggrieved by invocation of provision of Sec.263 by learned PCIT and has filed this appeal with the tribunal. 6. The learned counsel for the assessee at the outset submitted that the assessee had died and the wife of the assessee was impleaded as legal heir of the assessee. It was submitted that she was not aware that the revisionary order passed by ld.PCIT u/s.263 of the 1961 Act is challengeable before tribunal, but later she was advised that the revisionary order passed by learned PCIT u/s 263 is required to be challenged before the tribunal by filing an appeal u/s 253(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h tribunal and admit this appeal in the interest of substantial justice by condoning the delay of 84 days in filing this appeal late with the tribunal beyond the time stipulated u/s 253(3) of the 1961 Act. We order accordingly. 8. On merits, the Ld.Counsel for the assessee submitted that the case of the assessee was selected for framing limited scrutiny by Revenue under CASS and the assessee has duly explained before the AO all the queries raised by the AO. It was submitted that the AO had made proper inquiries and verifications before framing assessment vide orders dated 23.12.2016 passed u/s 143(3) of the 1961 Act. It was stated that even inquiries were made with the said company namely M/s. Avanti Leathers Ltd. in which the assessee had made investments. The learned counsel for the assessee would rely on the decision of Hon'ble Delhi High Court in the case of CIT v. Sunbeam Auto Limited reported in (2011) 332 ITR 167(Delhi) and submitted that merely because inadequate inquiries were made by the AO as contemplated by learned PCIT will not give power to learned PCIT to invoke revisionary provisions as are enshrined in Section 263 of the 1961 Act. 8.2 The ld.CIT-DR, on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y viz. sale consideration of property in ITR being less than sale consideration of property reported in AIR and hence we have not dwelt upon the same. Coming back, in any case, these are the investments which were made by the assessee in the earlier years and the Revenue was always empowered to invoke provisions of Section 148 of the 1961 Act by reopening the concluded assessment for those years in which said investments were made in case Revenue was of the view that income has escaped assessment for those years, provided other ingredients of reopening were satisfied. It is fundamental that every assessment year is a self contained year and correct income of the correct assessment year is to be brought to tax in the hands of the correct assessee. The income earned, if any by the assessee cannot be brought to tax in the year under consideration as is sought to be done by learned PCIT. After considering material on record, we are of the view that proper explanations were furnished by the assessee at the time of assessment as well in response to notice u/s 263 of the 1961 Act issued by learned PCIT. In our considered view, the AO accepted the contentions of the assessee only after bei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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