SEJPAL DIPAN SHAH, MUMBAI V. CIT CEN -IV, MUMBAI

ITA 1096/MUM/2009

• Counselvise Citation: 109619914 RSA 2009
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 02-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHALIN D DIVARIA
• Keywords: Principle of natural justice
• Section: 6; 263; 143(3)

Judgement Text

1 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004- -- -05 05 05 05 ) )) ) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E EE E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P M JAGTAP, AM & P M JAGTAP, AM & P M JAGTAP, AM & P M JAGTAP, AM & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO.1096/MUM/2009 1096/MUM/2009 1096/MUM/2009 1096/MUM/2009 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2004 2004 2004 2004- -- -05 0505 05 ) )) ) SEJPAL DIPAN SHAH 201/202 PATHAK BLDG NEHRU ROAD VILE PARLE (E) MUMBAI 57 VS TH COMM OF INCOME TAX CEN IV, MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.ABEPS9872R ABEPS9872R ABEPS9872R ABEPS9872R A SSESSEE BY SHRI SHALIN D DIVARIA REVENUE BY SHRI D SONGATE PER PER PER PER VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 10.12.2008 OF THE CIT PASSED U/S 263 OF THE I T ACT FOR THE AY 2004-05. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS IN THIS APPEAL: I) THE LD CIT ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S 263 CANCELLING THE ORDER DATED 24.7.2006 U/S 143(3) FOR ASSESSMENT YEAR 2005-06 PASSED BY THE ASSESSING OFFICER AND DIRECTI NG THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER. II) THE LD CIT CENTRAL IV MUMBAI PASSING THE ORDER U/S 263 DID NOT HAVE THE JURISDICTION TO EXERCISE THE POWERS UNDER THE S AID SECTION 263 OF THE I T ACT, 1961. 3 THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAINS ( LTCG) OF RS. 19,94,288/- ON SALE OF SHARES OF JAY KAY DEE I NDUSTRIES LTD. THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F(2) OF THE I T ACT. TH E CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT U/S 143(3). SUBSEQUENTLY, THE CIT PROPOSED TO REVISE THE ASSESS MENT BY INVOKING PROVISIONS OF SEC. 263 OF THE I T ACT ON THE GROUND THAT LTCG OF RS. 19,94,288/- CLAIMED BY 2 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004- -- -05 05 05 05 ) )) ) THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER WITHOUT CALLING FOR THE REQUIRED DETAILS/CONDUCT ENQUIRY WARRANTED IN THE F ACTS AND CIRCUMSTANCES OF THE CASE. THE CIT THEN CANCELLED THE ASSESSMENT AND DI RECTED THE ASSESSING OFFICER TO FRAME FRESH ASSESSMENT ORDER IN ACCORDANCE WITH LAW AFTER VERIFICATION/ ENQUIRY VIDE THE IMPUGNED ORDER PASSED U/S 263 OF T HE I T ACT. 3.1 BEFORE US THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE FURNISHED THE REQUIRED DETAILS BEFORE THE ASSESSING OFFICER AND AFTER EXAMINATION OF THE DETAILS, THE ASSESSING OFFICER ACCEPTED TH E CLAIM OF THE ASSESSEE REGARDING LTCG AND EXEMPTION U/S 54F(2). HE HAS P OINTED OUT THAT THE ASSESSING OFFICER, IN PARA 3 OF THE ASSESSMENT ORDE R, HAS RECORDED THAT DETAILS OF PURCHASES AND SALES OF SHARES ARE FILED. THUS, THE LD AR HAS SUBMITTED THAT ONCE THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND TAKEN A VIEW THEN THE CIT CANNOT TAKE A DIFFERENT VIEW. AS SUCH THE REVISION ORDER PASSED BY THE CIT IS MADE WITHOUT JURISDICTION TO EXERCISE TH E POWERS UNDER THE PROVISIONS OF SEC. 263 OF THE I T ACT. HE HAS FURTHER CONTEND ED THAT THE PURCHASES OF SHARES WERE TRANSACTED DURING THE AY 2002-03 AND BY VIRTUE OF THIS FACT THE ASSESSMENT ORDER PASSED U/S 143(3) FOR THE AY 2004-05 CANNOT B E SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE H AS FURTHER CONTENDED THAT THE ASSESSEE HAS BEEN SUBJECTED TO SCRUTINY PROCEEDINGS U/S 143(3) FOR THE LAST SIX YEARS AND THE ASSESSEE FILED ALL THE EVIDENCES FOR PURCHASE OF SHARES OF JAY KAY DEE INDUSTRIES LTD WHICH PERTAIN TO AY 2002-03 AND THE ASSESSMENT FOR THE AY 2002-03 WAS COMPLETED U/S 143(3) WITHOUT FINDING AN Y FAULT OR ERROR ON THE FACT OF PURCHASE OF SHARES. HE HAS RELIED UPON THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GAB RIEL INDIA LTD REPORTED IN 203 ITR 108. 3 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004- -- -05 05 05 05 ) )) ) 3.2 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY IN RESPECT OF THE CLAIM O F CAPITAL GAINS OF THE ASSESSEE. HE HAS REFERRED TO THE IMPUGNED ORDER PA SSED U/S 263 AND SUBMITTED THAT NO DETAILS REGARDING THE NAME AND ADDRESS OF T HE PREVIOUS OWNER OF THE SHARES, SETTLEMENT NUMBER OF PURCHASE, PURCHASE PRI CE, MODE OF PAYMENT, CHEQUE NUMBER AND DATE ETC., ARE PRODUCED BY THE AS SESSEE BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO D ID NOT CALL FOR SUCH RELEVANT DETAILS AND EVIDENCES FOR MAKING AN ENQUIRY. THEREF ORE, THERE WAS NO FORMAL ENQUIRY MADE BY THE ASSESSING OFFICER, WHICH IS NE CESSARY BEFORE ALLOWING THE CLAIM OF THE ASSESSEE AND THEREFORE, THE ASSESSMENT ORDER IS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUS TRIAL CO LTD VS CIT REPORTED IN 243 ITR 83. 4 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS ACCEP TED THE CLAIM OF THE ASSESSEE WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) AS UN DER: THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAIN OF RS. 19,94,288/- ON SALE OF SHARES OF JAY KAY DEE INDUSTRIES LTD. THE D ETAILS OF PURCHASES AND SHARES OF SHARES ARE FILED. THE ASSESSEE HAS CLAIME D EXEMPTION/S 54F(2) OF THE ACT AND FILED A PHOTOCOPY OF DEPOSITS OF RS.20, 75,000/- BEING CONSIDERATION OF SALE PROCEEDS OF SHARES DEPOSITED UNDER CAPITAL GAIN ACCOUNT WITH VIJAYA BANK A/C NO.VCC 2/2004. THE CLA IM OF EXEMPTION IS CONSIDERED. 4.1 THUS, IT IS CLEAR THAT THE ASSESSMENT ORDER DOE S NOT EXHIBIT ANY THOUGHT PROCESS ON THE PART OF THE ASSESSING OFFICER WHILE ADDRESSING THE ISSUE OF GENUINENESS OF THE CLAIM OF CAPITAL GAINS OF THE AS SESSEE, RATHER, NO ENQUIRY OR VERIFICATION WAS CONDUCTED BY THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE 4 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004- -- -05 05 05 05 ) )) ) ASSESSEE. THUS, IT IS CLEAR FROM THE ASSESSMENT OR DER THAT THE ASSESSING OFFICER HAS NOT DELIBERATEED OR APPLIED HIS MIND ON THE ISS UE OF GENUINENESS AND CORRECTNESS OF THE CLAIM OF LTCG. THEREFORE, THE AS SESSING OFFICER HAS NOT EXPRESSED ANY VIEW ON THE ISSUE. MOREOVER, THE ASS ESSING OFFICER HAS NOT MADE ANY ATTEMPT TO ADDRESS THE ISSUE. IT IS WELL SETTLE D PROPOSITION OF LAW THAT NON APPLICATION OF MIND BY THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT; RENDERS ASSESSMENT ORDER ERRONEOUS SO FAR THE PRE JUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, NO VIEW WAS TAKEN BY THE ASSESSIN G OFFICER THEN IT CANNOT BE SAID THAT THE CIT HAS TAKEN A DIFFERENT VIEW. 4.2 THE HONBLE SUPREME COURT IN THE CASE OF MALABA R INDUSTRIAL CO LTD HAS HELD THAT PROVISION CANNOT BE INVOKED TO CORRECT EA CH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER. AN INC ORRECT ASSUMPTION OF ACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE RE QUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATGORY FALL ORDERS PASSED W ITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE HONBLE SUPREME COURT FURTHER OBSERVED THAT THE PHRASE PREJUDICIAL TO TH E INTERESTS OF THE REVENUE HAS TO BE READ N CONJUNCTION WITH AN ERRONEOUS ORDER PA SSED BY THE ASSESSING OFFICER. IF DUE TO AN ERRONEOUS ORDER OF THE ITO, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICI AL TO THE INTEREST OF THE REVENUE. IT WAS FURTHER OBSERVED THAT THE ASSESSING OFFICER ACCEPTED THE ENTRY IN THE STATEMENT OF ACCOUNT FILED BY THE ASSESSEE IN THE A BSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY ENQUIRY. ON THOSE FACTS THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS, IS IR RESISTIBLE AND THE EXERCISE OF JURISDICTION BY THE COMMISSIONER U/S 263 WAS JUSTIF IED. 4.3 FROM THE DETAILS FILED BY THE ASSESSEE, IT IS N OT POSSIBLE TO CONCLUDE THE ACTUAL DATE OF PURCHASE OF SHARES IN QUESTION. THER E IS NO DOUBT THAT IF THE CLAIM 5 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 ITA NO.1096/MUM/2009 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004 (ASST YEAR 2004- -- -05 05 05 05 ) )) ) OF THE ASSESSEE REGARDING LTCG IS FOUND AS INCORREC T, THE ACCEPTANCE OF THE SAME WOULD BE PREJUDICIAL TO THE INTEREST OF THE RE VENUE BECAUSE THE ASSESSEE ALSO CLAIMED EXEMPTION U/S 54F(2) OF THE ACT. THERE FORE, THE ISSUE REQUIRES A PROPER VERIFICATION AND EXAMINATION AT THE LEVEL OF THE ASSESSING OFFICER AS NO VERIFICATION OR EXAMINATION WAS CONDUCTED BY THE AS SESSING OFFICER WHILE ACCEPTING THE CLAIM OF THE ASSESSEE. 5 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND A NY ERROR OR ILLEGALITY IN THE REVISION ORDER PASSED BY THE CIT U/S 263. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27 TH DAY OF MAY 2011, SD/- SD/- ( (( ( P M JAGTAP P M JAGTAP P M JAGTAP P M JAGTAP ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH MAY 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI