TMI Blog2023 (9) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of LTCG on sale of shares - Merely raising the queries during assessment in a general manner and getting replies of the same cannot give rise to presumption of application of due diligence and a judicious examination of issue by the ld. AO as not a word in regard to issue is reflected in the assessment order. The conclusion of no enquiry drawn by Ld. PrCIT requires no interference. The Assessing Officer had fallen in duty to show that the inquiry which was initiated by raising queries was taken to a reasonable end so as to draw a conclusive inference in favour of the assessee. The findings of Ld. PCIT of LTCG claim being one liable to brought under tax u/s 68 r.w.s 115BBE requires no interference. Whether Section 263 does not give powers to the PrCIT to enhance the assessment and to pass an order of assessment itself? - In the case in hand although the queries were raised by ld. AO and which were responded by the assessee, the assessment order though does not show any reason for not making the addition but Ld. PrCIT has duly examined both the issues to establish, that additions should have been made. Thus, Ld. PCIT was in its right to modify the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to reasons for which case has been selected for scrutiny. In response of the same assessee furnished his reply on various dates as per the order sheet submitting various documents. The same has been examined and placed on record. 3. After examination of the Return of Income, supporting details/documents and written submissions filed during the course of assessment proceedings the returned income of the assessee is accepted. Assessed at an income of Rs. 18,93,020/-. Notice of demand and ITNS is separately issued. 2.1 Ld. PrCIT observed from the assessment records that the case was selected for scrutiny to examine the large cash payments made towards credit card bills. The assessee had a credit card with ICICI Bank having number 5241930902828009. There was evidence on Insight Portal (Departmental Portal developed to collect data from Reporting Entities who are required to furnish a Statement of Financial Transactions or a Statement of Reportable Account u/s 285BA of the IT Act) that the assessee had made cash payments of Rs 5,35,500/- to ICICI Bank for settling this credit card bill. In the proceedings u/s 143(3), the AO raised a query in this regard, but when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal information indicates that, out of the total capital gains disclosed of Rs. 38.26 lakhs, a sum of Rs. 35.10 lakhs is in respect of the investment in M/s. Gateway Distributors Limited. The assessee has earned abnormal profits of 1700% in respect of the shares held in this company. M/s. Gateway Distributors Limited does not appear to be a listed company. As per the contract note and Demat account furnished by the assessee, the shares sold during the year was in respect of a company by the name M/s. Monotype India Limited. It was found that the company M/s. Monotype India Limited has ceased all its business activities since 1999 and even the factory premises of the company had been shut down since that year. As regards the company M/s. Gateway Distributors Limited, no information was placed on record about this company, its operations or its promoters. Therefore, the phenomenal return of 1700% disclosed by the Assessee on this investment raised doubts regarding its genuineness. 3. After considering the response of the assessee the Ld. PCIT examined the two issues; In regard to the first issue of credit card payments sources , Ld. PrCIT observed that the details of payments m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation was provided by the assessee to explain the source for the cash utilized to make the credit card payment, the same remained unexplained. 3.3 Besides the cash payments, the credit card statement showed a few payments made by cheque received from third parties. The details in this regard are as under: S. No. Party Name Date Amount 1. Sunil A Thakur 31.01.2017 50,000 2. -do- 28.02.2017 1,14,000 3. -do- 28.03.2017 65,500 4. Amarbath Lalbahadur Thakur 12.01.2017 55,250 5. -do- 31.01.2017 50,000 Total 3,34,750/- 3.4 The Assessee was asked to explain the circumstances under which these two persons issued cheques towards the credit card bills. The Assessee was also asked to submit the bank stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital of Monotype India Limited, directly or indirectly through other companies. In the course of a search and seizure operation Mr. Naresh Jain admitted to indulging in a systematic activity of rigging prices of the shares of Monotype India Limited with the intention of providing entry for bogus long term capital gain against commission receipts. 4.1 The assessee exited the shares in March 2017 at a price of 18 per share. Looking at the business fundamentals of the company, under normal circumstances, there would have been no investor interested in acquiring the shares of Monotype India Limited from the Assessee at the price of 18 per share. 4.2 Even without relying on the doctrine of preponderance of probability, efforts were made to identify the ultimate buyer of these shares to see if any genuine buyer would have acquired these shares from the Assessee at such prices. Out of the sales executed by the Assessee on 17th March 2017, three of the end buyers could be located on the basis of information from the Stock Exchange. On verification w.r.t. 2 parties, it was found that they were persons of very meagre means of income. They have not filed any return for this period and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of penny stock cases before allowing long term capital gain. The assessing officer failed to undertake the minimum enquiry that was warranted in this case merely on the basis of material available on the record before him. An order passed without making enquiries or verification which should have been made in this case is an order deemed to be erroneous in so far as it is prejudicial to the interest of revenue. In arriving at this conclusion reliance was placed on judgments in Pooja Gupta Vs PCIT-19 ITA No 4057/Del/2018 dated 31.01.2019; Udit Kalra vs ITO ITA 220/2019 and CM NO 10774/2019 dated 08.03.2019; Sanjay Kaul vs PCIT-8, Delhi(2020) 119 taxman.com470(Delhi); Puja Ajmani vs ITO ITA No 5714/Del/2018 dt 25.04.2019.; 7. Accordingly substantiating the conclusion that AO has failed to make enquires and making his own supplemental and incidental enquires the Ld. PrCIT held that; 1. An amount of Rs. 5,35,500/- representing the cash utilized for discharge of credit card bills and the amount of Rs. 3,34,750/- being the cheques issued by 3rd parties in favour of the assessee s credit card bills are brought to tax as the assessee s income from unexplained sources und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax under section 68 read with section 1158E of the Act on the ground that the said amount was not assessed by the Assessing Officer in the assessment order and he ought to have undertaken a detailed enquiry on the genuineness of the LTCG before allowing exemption. 8.1 Additional ground has also been raised as follows. That the Order dated 31.03.2022 passed u/s 263 of the Income Tax Act, 1961 by the Ld. Principal Commissioner of Income fax , (Central) -1 Delhi is against the law as under the above said Section of the Act, he could not have passed an Assessment Order itself, determining the total income of the Appellant, for the reason that under the provisions of the Income Tax Act, 1961, it is only the Assessing Officer who is authorized to pass an Assessment Order and not the Pr. CIT. 9. Heard and perused the record. 10. Ld. AR submitted that in regard to credit cards payments notice was also issued which is made available at page no. 131 of the paper book and assessee had replied the same by reply dated 28.11.2019 available at page no. 132. Therefore, it was not a case of lack of inquiry or no inquiry into the issue. So merely because there can be different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much apparent from the material on record that initially the assessee has even denied holding any credit card. Then assessee made a submission that no cash payment of the credit card payment has been made. However, Ld. PCIT has established that there were cash payments by the assessee herself and that there were also payments by strangers towards the credit cards of assessee. It is apparent that based upon the explanation given in the Revision proceedings, Ld. PCIT has concluded that Rs. 5,35,500/- were paid cash against the credit card dues. The Assessee had tried to explain before Ld. PCIT that this amount of cash was part of the cash withdrawals during the year but the same is contrary to the assertion before Ld. AO that no cash was even paid and which Ld. PCIT has demonstrated on the basis of the withdrawals from bank that this amount of Rs. 5,35,500/- could not have been part of the withdrawals. 12.4 Ld. PCIT has duly examined the fact that the two persons who admitted the cash payment on behalf of the assessee had no credibility on the basis of their financial status to have made payment otherwise then if it was sponsored by the assessee. The bank statement of these two pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted which shows that assessee transacted in two lakhs share of Gateway Distributors Ltd. which are shown to be acquired on 03.11.2010. This has been reproduced by the ld. PrCIT in para 14 of it s order. It comes up that Ld. PrCIT had examined the issue observing in para 15, that M/s. Monotype India Ltd. has ceased all its business activities and even the factory premises of the company had been shut down since that year. And also with regard to the M/s. Gateway Distributors Ltd. no information was placed on record about this company, its operations or its promoters. As from the capital gains details it was very evident that there was of a phenomenal return disclosed by the assessee. There was sufficient material on record with the ld. AO to examine the same. However, no analysis is not reflected in the assessment order. In these circumstances, Ld. PCIT was justified to examine the issue and consider if there was no inquiry. 15.1 The bench is of considered view that merely raising the queries during assessment in a general manner and getting replies of the same cannot give rise to presumption of application of due diligence and a judicious examination of issue by the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from 1st August 1999 and subsequently closed and disposed off. Even the marketing and other offices of the company have been closed and have become non-operational. It is further stated that the management is exploring possibilities of other business activities. It is stated that pending identification of other business activities, the funds have been temporarily deployed in shares and securities. As on 31st March 2010, out of the total assets of Rs 4.43 crores, a sum of Rs 4.42 crores was on account of accumulated losses. Same was the position as on 31st March 2011. There are no fixed assets in the balance sheet of the company nor any investments. The entire share capital of Rs 4.14 crores and unsecured loan of Rs 28 lacs is represented by Accumulated losses on the asset side. The accumulated losses of the company are far in excess of its net worth. The profit and loss account for the year ended 31st March 2010 as well as for the year ended 31st March 2011 shows that there are no operational activities in the company. Administrative and other overheads incurred for the purpose of maintaining the corporate structure of the company such as audit fees, legal and profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, left out or not made by the AO, though ought to be made in the assessment proceedings. The same may or may not be by way of enhancement. 18. Lastly, Ld. AR has relied the order of Co-ordinate Bench in the case of Mr. Jitendra Singh Chadha vs. PCIT ITA no. 2732/Del/2018 dated 31.12.2018 to submit that Ld. PrCIT could not have passed the assessment order himself as only Assessing Officer is authorized to pass the assessment order. However, in that case the Co-ordinate Bench had concluded that assessment order was passed after application of mind. While here is a case which exhibit complete absence of application of judicial mind to the queries raised by AO and submissions of assessee qua which Ld. PrCIT has modified the findings on the basis of his independent enquiry. Ld. AR has also relied the judgment of Hon ble Supreme Court of India CIT, Shimla Versus Greenworld Corporation 2009 181 Taxman 111 (SC) for the contention that when Ld. AO has taken into consideration the response of assessee, the powers u/s 263 cannot be resorted only because another view is possible. However, the Bench is of considered view that in the case in hand the aforesaid proposition is not applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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