9911796707
TMI Blog2024 (9) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Income Tax Act, 1961 (hereinafter in short 'the Act') on 31.12.2015 accepting the retuned income. Subsequently, the original assessment was re-opened u/s. 147 by issue of notice u/s. 148 of the Act dated 31.03.2020 (after expiry of four years from the end of the relevant Assessment Year). The AO noted in the re-assessment order dated 28.09.2021 that during the course of assessment proceedings, the assessee had filed statement of computation of Short Term Capital Gains (hereinafter in short "STCG") from the sale of shares as under: Particulars (in Rs. ) Total Profit 11,71,33,910/- Less: Interest paid 51,87,945/- Net profit 11,19,45,965/- 4. And then, the AO noted that when he verified the records, he observed that the assessee didn't file any evidence to show that interest paid by the assessee was part of the acquisition of shares. Therefore, he issued notice u/s. 142(1) of the Act calling for the details regarding unsecured loan taken by the assessee and after perusal of the reply of the assessee noted that assessee had taken unsecured loan from M/s. Hiwide Enterprises Pvt. Ltd., and paid interest on the loan; and in order to verify the same, the AO issued n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case, the assessee has taken a high interest loan from M/s Hiwide Enterprises Private Ltd for a short period of 3 months. The assessee paid an interest of 24% on this unsecured loan. The assessee did not have his own capital. But he wanted to undertake the risk of investing in the shares of United Spirits. Every share trade has an element of risk. In fact, the scale of the risk can be ascertained from the fact that the assessee earned upwards Rs. 11 crores from the sale proceeds. The assessee almost doubled the amount taken as loan from Hiwide Enterprises Private Ltd. Not only did the assessee repay this high value loan, it also eaned a profit of nearly Rs 11 crores on account of the same. The quantum of gain and frequency of transaction indicate that the assessee was engaging in trade and has bought a large volume of shares of one company for a short time period. The amount of risk undertaken becomes even more clear when the returned income of AY 2012-13 is brought into the picture. The returned income of the assessee in AY 2012-13 was Rs. 36,67,881/-. As opposed to this, the returned income for AY 2013- 14 is Rs. 11,48,60,850/. This astronomical jump in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the legal issue of re-opening of original assessment, we note that the assessee had filed return for AY 2013-14 on 17.02.2014 declaring total income of Rs. 11,48,60,850/- which was processed u/s. 143(1) of the Act and later selected for scrutiny, and assessment was completed on 31.12.2015 u/s. 143(3) of the Act by accepting income declared in the return. Thereafter, the AO has re-opened the assessment by issuing impugned notice u/s. 148 of the Act on 31.03.2020, which was an event after the expiry of four years from the end of the relevant Assessment Year, meaning, the additional condition precedent as provided under first proviso to sec.147 of the Act also needs to be satisfied i.e, the AO has to pass one more hurdle while recording reason to re-open the assessment that assessee failed to disclose fully & truly all the material facts required for assessment of AY 2013-14, notwithstanding the first hurdle i.e. reason to believe escapement of income. 8. In this context, it should be borne in mind that the concept of assessment is governed by the time-barring rule; and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments can be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the reasons recorded, the condition precedent i.e, reason to believe escapement of income to validly re-open the assessment. And for re-opening the assessment after four year from the end of the relevant assessment year, an assessment which has undergone scrutiny assessment an additional condition also need to be satisfied i.e. the assessee failed to disclose fully and truly all material facts necessary for assessee's assessment. 9. Keeping the aforesaid legal principles in mind, when we turn our attention to the facts relevant for examining the legal issue, we note that the AO in the re-assessment order itself acknowledges that assessee had filed the statement of computation of STCG from the sale of shares, wherein, assessee had disclosed about the total profit from the sale of shares of M/s. United Spirits to the tune of Rs. 11,71,33,910/- and claimed deduction of interest paid to the to the tune of Rs. Rs. 51,87,945/- and offered net profit of Rs. 11,19,45,965/- and claimed the same to be STCG and, offered u/s. 111A of the Act tax @15% which has been accepted by the AO in the original scrutiny assessment u/s. 143(3) of the Act dated 31.12.2015. Such an assessment has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to re-open the assessment, hence, we confirm the action of the Ld.CIT(A) on legal issue. 10. Having said so, we also take note of the grounds of appeal raised by the Department, wherein, it has been stated that the Ld.CIT(A) failed to appreciate that the re-opening of assessment of the case on the basis of factual information given by the Audit Party. It is neither the case of the Revenue that the Audit Party has brought out any new facts (on this issue), which was not disclosed by the assessee during the original assessment nor it is the case of the Audit Party that assessee has not disclosed fully and wholly all material facts necessary for assessee's assessment on the issue of sale of shares of M/s. United Spirits. In this regard, it is noted that while re-opening the assessment, the AO has asserted that the assessee didn't produce any evidence to show that interest paid was part of the cost of acquisition of shares and the details of the interest paid has not been submitted viz., no ledger account of interest as well as loan was submitted etc., which omissions if any, on the part of the AO during the original assessment, could have been interfered by the Ld.PCIT exercising hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate the relevant facts and materials in respect of the issue, which shows that the transaction of purchase and sale of single Scrip, M/s. United Spirits was in the nature of trade and hence, it can't be held that the transaction in question was an adventure in the nature of trade. It should be borne in mind that the question whether a transaction is in the nature of trade is a mixed question of fact and law; and the AO has to place on record all relevant facts and materials necessary for the purpose of determining whether transaction is in the nature of trade/adventure in the nature of trade. The AO failed to place on record the relevant/primary facts necessary for determining this mixed question of fact as well as law. In order to hold the transaction of shares as business income of the assessee, it is noted that the AO hasn't even given the essential details viz., date of purchase and sale of scrips, holding period of scrips, sales of scrips, purchase/sale price etc., and the AO has not given the details as to whether the assessee was engaged in any such kind of transaction in the earlier/subsequent assessment years. No relevant details whatsoever have been brought on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
