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TMI Blog2022 (12) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... s arbitrary and unjustified. 3 That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted to by the Principal Commissioner of Income Tax is unwarranted and uncalled for. 4 That the issues in respect of investment in bonds u/s 54EC as well as sale of shares was scrutinised by the Assessing Officer in depth and as such revising the order passed by the Assessing Officer is arbitrary and unjustified. 5 That the Ld. Principal Commissioner of Income Tax has failed to carry out any enquiry during the course of revisionary proceedings in respect of the issues being raised by her which is mandatory and as such the order passed by her is arbitrary and unjustified. 6 That the order of Commissioner of Income tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law." 2. In the facts of the present case, the assessee returned an income of Rs.19,44,840/- in the return filed on 22.07.2016. Subsequently, the assessee filed a Revised return on 27.10.2016 declaring an income of Rs.29,55,280/-. The case of the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lunar month as ld. PCIT has held. Referring to the relevant provision, it was his submission that the statutory mandate on "6 months" as interpreted in various orders of the ITAT it was argued that it would show that "the view taken by the AO is a correct view". Attention was invited to the following decisions : 1. Alkaben B. Patel vs. ITO43 Taxmann.com 333(Ahm) 2. Dr. (Smt.) Sujatha Ramesh vs. CBDT87 Taxmann.com 228 (Kar) 3. Kartick Chandra Mondal vs. PCIT113 Taxmann.com 586 (Kol) 4.3 Accordingly, it was his submission that on this first issue, on which there is a notice to the assessee, the arguments on behalf of the assessee are that due enquiries have been made by the AO which are supported by the legal position thereon. The order passed by the ld. PCIT on the other hand, it was submitted, is based on a selective reading of the MOU and ignoring the legal position on the facts. 5. Addressing the direction of the ld. PCIT on the second issue addressed vide para 6 to 6.2 at pages 6 to 9 of the order, it was his submission that on this issue, no notice was given to the assessee by the ld. PCIT. Accordingly, relying upon the legal position on this issue, the first line o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain earned on sale of shares held in a company in terms of MOU signed in August 2015 among the concerned parties. From perusal of the MOU dated 26.08.2015, it was seen that there were certain conditions in that MOU and the clause 16 of the same, which is relevant here is reproduced as under: "on receipt of the full and final consideration by transferers, the transferees will be the 100% share holders in the company and will have 100% management control over the company" As per clause 16 of the MOU, on receipt of full and final consideration by the transferors, the transferee would have the 100% shareholding and management control over the transferor company. The whole amount of Rs. 1,72,05,600/- was received by you vide cheque dated 24.12.2015. 3. As per record, it is seen that a sale deed (for the sale of the shares) was executed on 30 December 2015 between you and the company signed by you and the transferee company, however payment in respect of the shareholding was received through cheques on 24.12.2015. Since, the amount pertinent to sale of the shareholding in the company was received on 24 December 2015, therefore as per clause 16 of the MOU, the same was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and transfer of 100 shares by the transferors on or before 25 th February 2016 and all liabilities and claims for the past period will be responsibility of transferors" 2) Clause 16 of the MoU reads as under: "On receipt of the full and final consideration by transferors, the transferees will be the 100% shareholder in the company and will have 100% management control over the company." The same is conditional on various conditions which have to be fulfilled and cannot be read in isolation. It has to be read in conjunction to the other clause of MoU. 3) Clause 17 of MoU reads as under: "On receipt of the full and final payment, the transferors will execute transfer deeds and sale deed duly witnessed handover all original share certificates, all statutory records, all original property title documents and all accounting records to transferees. The transferor will make entries in the statutory register and record all its minutes in the minutes to Directors and Shareholders till the date of final completion of all obligations under this agreement and intimation of all necessary and relevant matters will be duly filed with the Registrar of Companies" Thus clause 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady stood enquired into by the AO. In view of these submissions it was his prayer that the order may be quashed on this issue. Para 7.2.11 addressing the said issue it was his prayer that in the absence of a Show Cause Notice, which fact has been verified by the Ld. CIT DR from the record, the impugned order qua the findings/directions given in paras 6 to 6.2 may be held to be non-maintainable. Without prejudice to the above primary argument, it was also his submission that this issue also stood fully enquired into by the A.O. Hence, the impugned order it was his prayer may be quashed in toto. 7.3 In the said backdrop addressing the documents available on record, attention was invited to copy of the Show Cause Notice dated 16.04.2018 issued by the AO available at pages 1,2 and 3. Referring to the specific query raised on this issue which was also flagged in the CASS, it was highlighted the AO required the assessee to explain : "Proof of investment if any made for claiming exemption u/s 54." 7.3.1 Attention was also invited to copy of the reply dated 28.05.2018 filed before the AO. Inviting attention to page 4 to 5 of the Paper Book alongwith annexures at pages 6 to 31 specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to by the AO in the first notice issued to the assessee which has been referred to at page 3 para 3 of the Paper Book on record. The replies of the assessee on the said issue are also available on record, however, reverting back to the first issue on which the ld. PCIT has show caused the assessee which is under consideration referring to page 35 which is again raised through ITBA portal, it was highlighted that the AO specifically required the assessee to give the following information: "Please refer to assessment proceeding pending in your case for the A.Y. 2016-17. You are requested please furnish detail of shares purchased and sold and exemption claimed u/s 54F and 54EC in respect of long term capital gain." 7.5 The assessee's reply to the said notice, it was submitted is available at page 37 dated 23.11.2018. It was submitted that it is after considering the reply contained in these documents that the AO passed the order. It was his submission that these are times wherein the queries are raised through ITBA Portal and the replies are also sent via the portal. Hence, it is not possible for the parties to ignore these facts. The present case based on the facts and evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is seen that there were certain conditions in that MOU and the clause 16 of the same, which is relevant here is reproduced as under: "on receipt of the full and final consideration by transferers, the transferees will be the 100% share holders in the company and will have 100% management control over the company" As per clause 16 of the MOU, on receipt of full and final consideration by the transferors, the transferee would have the 100% shareholding and management control over the transferor company. The whole amount of Rs. 1,72,05,600/- was received by you vide cheque dated 24.12.2015. As per record, it is seen that a sale deed (for the sale of the shares) was executed on 30 December 2015 between the assessee and the company signed by the assessee and the transferee company, however payment in respect of the shareholding was received through cheques on 24.12.2015. Since, the amount pertinent to sale of the shareholding in the company was received on 24 December 2015, therefore as per clause 16 of the MOU, the same was required to be taken as effective date for transfer and accordingly, investment was required to be made on or before 24 June 2016. 5.1 Since, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax vs. Jyoti Foundation 357 ITR 388 (Delhi) 5. CIT vs. Kwality Steel Suppliers Complex 395 ITR 1 (SC) 8. The ld. CIT-DR carrying the Bench through the Show Cause Notice issued by ld. PCIT submitted that in the facts of the present case, the action of the ld. PCIT is fully justified on facts. It was his submission that clause No.16 relied upon by the ld. PCIT was the relevant clause and it is not a case that clause-5 and 17 relied upon by the assessee have been ignored. It was argued that there is a finding of fact that the total payment was finally received by the assessee on 24.12.2015. Hence, the period for claiming exemption expired on 24.06.2016. It was submitted that these facts on record are not in dispute. The final payment was received on 24.12.2015 and the REC Bonds were purchased by the assessee on 30.06.2016 hence the statutory time limit has been exceeded. As a result thereof, the order passed by the AO is erroneous and prejudicial to the interests of the Revenue and hence it was his prayer that it may be upheld. 8.1 Addressing the findings of the ld. PCIT in para 6 and 6.2 challenged by the assessee on the ground that no Show Cause Notice was issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT on the reading of the MOU is an incorrect and incomplete reading of the documents on record. It is a matter of fact that apart from executing a sale deed there was various other formalities pending which were still required to be fulfilled before the transaction could be said to be completed. Article 5 and Article 17 has specifically been pressed into service on behalf of the assessee. Considering the replies on the queries raised based on the documents relied upon the AO has taken a plausible view on the facts. The Ld. PCIT, on the other hand, has not taken into consideration the full facts and has failed to bring out the error in the order and has also not cared to address the legal position as to why the interpretation given by the AO to the six month period can be said to be incorrect. On the other hand we find that the interpretation given by the ld. PCIT that the six month period should be interpreted on a day to-day basis instead of British Calendar month i.e. last date of the month is unsustainable in view of the legal position addressed earlier in this order. Thus, on a perusal of the material available on record, on the other hand find that the AO before passing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee as the assessee has full right to make his / her submissions before the AO in the next round anyway. We find such an argument is not acceptable. The assessee's time cannot be taken for granted as the assessee appearing before the tax authorities cannot be made to run around appearing again and again to justify the claim which anyway was allowable and has been allowed in the first round by the AO. The Authorities functioning under the Income Tax Act as Government Authorities are performing State functions for the benefit of the citizens. They no longer can continue to work with the mind set of administering the law applicable to colonials. This style of functioning may have been prevalent unquestioningly during colonial times under a foreign rule, however, it is no longer acceptable in the preset times. By an order passed by the AO after due queries a vested right operates in the favour of the assessee as a valid order in the eyes of law is available., Hence, if by such an order any error or prejudice is caused to the Revenue, the Revisionary Authority, we agree has all the powers of setting aside such orders. However, in order to disturb the vested right of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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