Shri Dharamprakash Vedpal Goyal, Ahmedabad V. The Income Tax Officer, Ward 7(2), Ahmedabad

ITA 1464/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9176 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P. S. CHAUDHARY
• Keywords: Business income; Revision of order; Depreciation; Business expenditure; Salary income; Opportunity of being heard; Additional depreciation; Difference of opinion; Assessment record; Change of opinion; Revenue expenditure; Set aside; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 142(1); 192; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI S. S. GODARA, JM & SHRI MANISH BORAD, AM. ITA NO.1464/AHD/2013 ASST. YEAR: 2008-09 SHRI DHARAMPRAKASH VEDPAL GOYAL, SUKAN 23, KAILASH COLONY, 132, FT. RING ROAD SATELLITE AREA, AHMEDABAD.. VS. ITO WD-7(2), AHMEDABAD. APPELLANT RESPONDENT PAN ADFPG 7173E APPELLANT BY SHRI TUSHAR VASA, AR RESPONDENT BY SHRI P. S. CHAUDHARY, SR.DR DATE OF HEARING: 18/01/2017 DATE OF PRONOUNCEMENT: 15/02/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE FOR ASST. YEAR 2008-09 IS DIRECTED AGAINST THE ORDER U/S 263 OF THE IT ACT, 1961 (IN S HORT THE ACT) PASSED ON 15.3.13 BY THE LD. COMMISSIONER OF INCOME TAX, A HMEDABAD-3, AHMEDABAD: FOLLOWING GROUNDS OF APPEAL HAVE BEEN RA ISED BY THE ASSESSEE :- 1. THAT THE PROCEEDINGS INITIATED U/S.263 OF THE ACT A RE VOID AB-INITIO AND THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX, AHMED ABAD -III, AHMEDABAD U/S. 263 OF THE ACT IS ERRONEOUS AND IS AGAINST LAW , FACTS AND EVIDENCE ON RECORD. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 2 2. THAT THE LD. COMMISSIONER OF INCOME-TAX, AHMEDABAD- 1II, AHMEDABAD HAS WRONGLY/ERRONEOUSLY INVOKED PROVISIONS OF SECTION 2 63 OF THE ACT ASSUMING THAT THE ORDER PASSED BY THE LD. A.O. WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HAS ERRED IN GIVING DIR ECTIONS TO RE-EXAMINE FOUR ISSUES AFRESH. 3. THAT THE LD. COMMISSIONER OF INCOME-TAX, AHMEDABAD - III, AHMEDABAD HAS WRONGLY CONSIDERED THAT - (I) LD. A. O. MADE ASSESS MENT IN THE ROUTINE MANNER, (II) DID NOT VERIFY SPECIFIC DETAILS THAT W ERE REQUIRED TO BE VERIFIED, (III) DID NOT VERIFY THE NEXUS BETWEEN EARNING OF I NTEREST INCOME AND ALLOWABILITY OF INTEREST EXPENDITURE AND (IV) THAT THE TRANSACTIONS OF PURCHASE AND SALES OF INVESTMENTS OF THE APPELLANT WERE NOT AS AN INVESTOR BUT WERE AS A TRADER. 4. THAT THE LD. COMMISSIONER OF INCOME-TAX, AHMEDABAD - III, AHMEDABAD WHILE CONSIDERING THAT THE LD. A. 0. DID NOT EXAMIN E THE DETAILS FURNISHED BY THE APPELLANT IN PURSUANCE TO THE SPECIFIC INFORMAT ION CALLED FOR BY THE LD. A.O. LD. C1T HAS NOT COME OUT WITH ANY EVIDENCE OR MISTAKE ON THE PART OF THE LD. A.O. IN MAKING ASSESSMENT AND ALL THE OBSER VATIONS MADE BY HIM ARE VAGUE, GENERAL AND NOT SUPPORTED BY INFORMATION OR DETAILS COMING FROM THE ASSESSMENT RECORDS AND THEREFORE, THE ORDER OF THE LD. CIT U/S.263 OF THE ACT IS PRE-DETERMINCD WITH A VIEW TO COME OVER CERTAIN OBJECTIONS AND OBSERVATIONS OF SOME OTHER AGENCY AND NOT BY INDEPE NDENT EXAMINATION OF THE RECORDS. 5. THE APPELLANT CONTENDS THAT THE APPELLANT FURNISHED ALL THE PARTICULARS ON THE FOUR POINTS ON WHICH THE ASSESSMENT HAS TO BE EXAMI NED AFRESH AND IT CANNOT BE EXPECTED THAT A RESPONSIBLE, EXPERIENCED AND AUT HORIZED OFFICER HAVING CALLED FOR AND RECEIVED THE DETAILS WOULD NOT HAVE VERIFIED AND EXAMINED AS PER PROVISIONS OF LAW PREVAILING ON THE DATE OF THE ASSESSMENT AND THEREFORE, ACTION U/S.263 OF THE ACT IS UNJUSTIFIED, UNREASONA BLE AND INVALID IN LAW. 6. THE APPELLANT CONTENDS THAT - (A) THERE IS NO INCOME TO THE APPELLANT FROM THE SH ARES APPLIED BY AND ALLOTTED TO THE APPELLANT ON BEHALF OF HIS WIFE AND HUF, WHI CH WAS AN ACTION OF THE APPELLANT WITHOUT ANY PROFIT MOTIVE AND NO OTHER AU THORITY HAS RIGHT TO TAX INCOME BY ESTIMATING THE BEING DIFFERENCE BETWEEN M ARKET VALUE AND COST PRICE OF SHARES AS INCOME OF THE APPELLANT WHEN IT WAS NOT INTENDED FROM THE INCEPTION. (B) THE INTEREST EXPENDITURE HAD DIRECT NEXUS WITH INTEREST INCOME AND INTEREST EXPENDITURE IS FULLY ALLOWABLE AS DEDUCTION. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 3 (C) THE PROFESSIONAL FEES OF RS.7,235/- PAID WAS BU SINESS EXPENDITURE AND WAS NOT PERSONAL EXPENDITURE OF THE APPELLANT, OR EXPEN DITURE OF CAPITAL NATURE. (D) THE TRANSACTIONS OF CAPITAL GAIN HAVING RETURNE D BY THE APPELLANT WERE TRANSACTIONS RELATING TO INVESTMENT MADE BY THE APP ELLANT AND NOT AS BUSINESS AS DEALER IN SHARES AND THE LD. A.O. HAVING EXAMINE D THIS ASPECT, RIGHTLY CONSIDERED IT AS CAPITAL GAIN. 7(A) THE APPELLANT SUBMITS THAT OBSERVATIONS OF THE LD. CIT THAT ASSESSMENT ORDER WAS PASSED WITHOUT DUE DILIGENCE, WITHOUT APP LICATION OF MIND ON THE PART OF THE LD. A.O. AND THAT THE LD. A.O. HAVING CALLED FO R ALL DETAILS DID NOT VERIFY THE SAME AND PASSED THE ORDER, WHICH AS PER LD. A.O. IS JUSTIFIED. 7(B) THERE ARE NO GUIDELINES ISSUED BY THE DEPARTME NT EITHER INTERNALLY OR PUBLICLY FOR MAKING ASSESSMENT OR FRAMING ASSESSMEN T ORDER. THEREFORE, ASSESSMENT ORDER OF LD. A.O. IS NOT DEFECTIVE IN AN Y MANNER TO CONCLUDE THAT THE LD. A.O. PREJUDICIAL TO THE INTEREST OF REVENUE. 8. IN VIEW OF THE ABOVE AND OTHERS THAT MAY BE URGE D AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT- (I) ACTION OF THE LD. CIT U/S. 263 OF THE ACT DIRECTING TO REFRAME THE ASSESSMENT ON FOUR ISSUES AFTER CONDUCTING NECESSAR Y INQUIRY BE QUASHED AND BE CANCELLED. (II) ANY OTHER RELIEFS, DEDUCTIONS AND DIRECTIONS A S THE FACTS AND CIRCUMSTANCES OF THE CASE REQUIRE TO BE GRANTED. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND , ALTER, MODIFY THE GROUNDS OF APPEAL ON OR BEFORE THE TIME OF HEARING. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL EARNING INCOME FROM SALARY, INTEREST, CAPITAL GAIN AND SHAR E OF PROFITS FROM PARTNERSHIP FIRM. RETURN OF INCOME FOR ASST. YEAR 2 008-09 ON 31.07.2008 DECLARING TOTAL INCOME OF RS.9,70,476/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) OF THE ACT DATED 17.9.2009 FOLLOWED BY NOTICE U/S 142(1) OF TH E ACT DATED 6.7.2010 DULY SERVED ON THE ASSESSEE. NECESSARY DE TAILS WERE CALLED FOR AND SUPPLIED BY THE ASSESSEE AND RETURNE D INCOME WAS ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 4 ACCEPTED AS ASSESSED INCOME. THEREAFTER LD. COMMISS IONER OF INCOME TAX -3, AHMEDABAD EXERCISED HIS POWER UNDER SECTION 263 OF THE ACT AND EXAMINED THE ASSESSMENT RECORD AND ASS ESSMENT ORDER U/S 143(3) OF THE ACT DATED 13.9.2010 PASSED IN THE CASE OF ASSESSEE AND OBSERVED THAT FOLLOWING 4 ISSUES WERE NOT TAKEN UP FOR EXAMINATION BY LD. ASSESSING OFFICER :- (I) IT WAS NOTICED THAT THE ASSESSEE HAD APPLIED FO R SHARES IN IPOS/FPOS OF VARIOUS COMPANIES ON BEHALF OF HIS WIFE AND HUF WHICH WERE ALLOTTED AND LATER ON SOLD TOO. THE SHARES ON ALLOTMENT WERE TRANSFERRED TO THE DEMAT A CCOUNTS OR DELIVERED DIRECTLY AGAINST THEIR SALE. THE LEGALITY AND PERMISSIBILITY TO APPL Y IN ONE'S NAME ON BEHALF OF OTHERS IS QUESTIONABLE. WHETHER ON THE DATE OF THE ALLEGED TR ANSFER, THE DIFFERENCE BETWEEN THE COST AND THE MARKET VALUE WAS CHARGEABLE TO TAX AS CAPIT AL GAINS IN THE HANDS OF THE ASSESSEE WAS REQUIRED TO BE EXAMINED. THE SAME WAS NOT EXAMI NED BY THE ASSESSING OFFICER, THUS MAKING THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (II) FURTHER, AS PER THE COMPUTATION OF INCOME, THE ASSESSEE HAD DECLARED INTEREST INCOME OF RS. 5,61,930/- AND HAD CLAIMED INTEREST EXPENDITURE OF RS.20,807/- - AND RS. 6,27,550/- AS INTEREST PAID TO BANKS AGAINST THIS INCOME. THE A. O. HAD NOT VERIFIED THE NEXUS BETWEEN EARNING OF THE INTEREST INCOME AND THE ALLO WABILITY OF THE EXPENDITURE, THUS MAKING THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (III) THE INCOME TAX CONSULTATION FEE OF RS. 7,235/- HAD BEEN ALLOWED IN THE COMPUTATION OF INCOME WHICH SHOULD HAVE BEEN DISALL OWED BEING OF PERSONAL EXPENDITURE. THE ASSESSMENT ORDER IS ERRONEOUS TO T HAT EXTENT AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (IV) IT IS FURTHER OBSERVED THAT YOU HAD SHOWN SHORT TER M CAPITAL GAIN ON SHARES WITH A HOLDING PERIOD OF TO 12 DAYS. THOUGH THE VOLUME AND THE TRANSACTION ARE LOW , THE HOLDING PERIOD IMPLIED AN INTENTION OF BUSINESS RATHER THAN TO EARN CAPITAL GAINS. THE SAME WAS REQUIRED TO BE EXAMINED. ASSESSING OFFICER HAVING F AILED TO EXAMINE THIS ISSUE HAS RENDERED THE ASSESSMENT ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE.'' DURING THE COURSE OF PROCEEDINGS U/S 263 OF THE ACT ASSESSEE IN REPLY TO THE ABOVE FOUR ISSUES OBSERVED BY LD. COMMISSION ER OF INCOME TAX, CONTENDED THAT THE ASSESSEE HAD SUBMITTED BEFO RE LD. ASSESSING OFFICER ALL DETAILS INCLUDING THE DETAILS OF APPLIC ATION OF SHARES IN IPO/FPOS IN THE NAME OF SELF, IN THE NAME OF HIS WI FE AND HUF ALONG ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 5 WITH DEMAT ACCOUNTS, DETAILS OF INTEREST INCOME, SH ORT TERM/LONG TERM CAPITAL GAINS AND PROFESSIONAL CHARGES PAID. IT WAS ALSO CONTENDED THAT THERE WAS A PROPER ENQUIRY WITH RESPECT TO ALL THESE FOUR POINTS AND LD. ASSESSING OFFICER HAS MADE APPLICATION OF M IND IN EXAMINING THESE DETAILS. HOWEVER, LD. COMMISSIONER OF INCOME TAX WAS NOT CONVINCED WITH THE SUBMISSIONS MADE BY THE ASSESSEE AND WAS OF THE CONFIRMED VIEW THAT THE ASSESSING OFFICER DID N OT EXAMINE THE ABOVE MENTIONED FOUR ISSUES WHICH MADE THE WHOLE AS SESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY ORDERED LD. ASSESSING OFFICER TO EXAM INE THE ABOVE FOUR ISSUES AFRESH AND SET ASIDE THE ORDER U/S 143(3) OF THE ACT DATED 13.9.10 AND TO PASS FRESH ASSESSMENT ORDER BY OBSER VING AS UNDER :- 7.2 GOING THROUGH THE SUBMISSIONS MADE AVAILABLE BY THE ASSESSEE, IT IS OBSERVED THAT THE ASSESSEE HAS SUBMITTED ENOUGH EVIDENCES TO PROVE THAT THE SHARES ALLOTTED TO HIM WERE TRANSFERRED TO THE ACCOUNTS OF HIS WIFE ABHA GOYAL AND HIS HUF. HOWEVER, THE ASSESSEE'S CLAIM THAT THE PROFIT HAD BEEN INCURRED IN THEIR RESPECTIVE INCOMES AND THEY HAD PAID TAXES AS SHORT TERM CAPIT AL GAIN AND WERE SHOWN IN THEIR RETURN OF INCOME IS NOT SUPPORTED BY EVIDENCE S. THOUGH, THE ASSESSEE HAS CLAIMED THAT THE ASSESSING OFFICER HAD LOOKED INTO THE MATTER BEFORE FINALIZING THE ASSESSMENT, THE EVIDENCES AS REGARDS DOCUMENTS .SUP PORTING THE CLAIM ARE NOT PLACED ON THE RECORD OF THE ASSESSEE, AS SUCH, THE ASSESSMENT WAS DONE IN A ROUTINE MANNER AND THE ASSESSING OFFICER HAD NOT VE RIFIED THE SPECIFIC DETAILS THAT WERE REQUIRED TO BE VERIFIED WHILE PASSING THE ASSE SSMENT ORDER. THE ASSESSMENT ORDER WAS THEREFORE ERRONEOUS IN SO FAR AS PREJUDIC IAL TO THE INTEREST OF THE REVENUE. 8.0 . THE SECOND ISSUE WAS REGARDING THE INTEREST I NCOME EARNED BY LENDING MONEY. AS PER THE COMPUTATION OF INCOME, THE ASSESS EE HAD DECLARED INTEREST INCOME OF RS.5,61,930/- AND HAD CLAIMED INTEREST EX PENDITURE OF RS.20,807/- AND RS,6,27,550/- AS INTEREST PAID TO BANKS AGAINST THI S INCOME. THE ASSESSING OFFICER HAD NOT VERIFIED THE NEXUS BETWEEN EARNING OF THE I NTEREST INCOME AND THE ALLOWABILITY OF THE EXPENDITURE, THUS MAKING THE AS SESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 6 8.1 IN THE WRITTEN SUBMISSION, THE ASSESSEE HAS SUB MITTED THAT HE EARNED INTEREST INCOME FROM DIFFERENT PERSONS BY LENDING MONEY. THE ASSESSEE RAISED FUNDS ON SECURITY OF FIXED DEPOSITS WITH THE BANKS. THE INCO ME FROM FIXED DEPOSITS WAS COMPLETELY DISCLOSED AND INCLUDED IN RETURN OF INCO ME. THE INCOME WHICH WAS RECEIVED FROM THE PARTIES TO WHOM ADVANCES WERE MAD E, WAS ALSO VERIFIED AND THE AMOUNT WHICH WAS PAID T<\- THE BANK ON OVERDRAFT AC COUNT WERE VERIFIED FROM BANK STATEMENTS AND PLACED ON RECORD. THE BANK STAT EMENTS WERE PLACED ON RECORD, WHICH SHOWED THE BORROWINGS MADE BY THE ASS ESSEE ON OVERDRAFT ACCOUNT AND THE AMOUNTS ADVANCED TO THE PARTIES FROM WHOM I NTEREST INCOME WAS RECEIVED. DIRECT NEXUS OF INTEREST INCOME TO INTEREST EXPENDI TURE HAD BEEN VERIFIED NOT ONLY WITH THE BANK STATEMENT BUT ALSO WITH THE RETURN OF INCOME. 8.2 THE ASSESSING OFFICER HAD NOT VERIFIED THE ISSU E & THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT OFFERED BEFORE THE ASSESSING O FFICER. THE ASSESSMENT ORDER WAS THEREFORE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9.0 THE THIRD ISSUE WAS REGARDING THE INCOME TAX CO NSULTATION FEE OF ? 7,235/-WHICH HAD BEEN ALLOWED IN THE COMPUTATION OF INCOME, WHIC H SHOULD HAD BEEN DISALLOWED BEING PERSONAL EXPENDITURE. THE ASSESSMENT ORDER IS ERRONEOUS TO THAT EXTENT AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9.1 IN THE WRITTEN SUBMISSION, THE ASSESSEE HAS CLA IMED THAT THE INCOME TAX CONSULTATION FEE WAS BUSINESS EXPENDITURE AND WAS C ONSIDERED AS ALLOWABLE FROM BUSINESS INCOME. FURTHER HE HAD CLAIMED THAT SINCE IT WAS NOT PERSONAL EXPENDITURE OF THE ASSESSEE, IT CANNOT BE SAID THAT THE ACTION OF THE ASSESSING OFFICER IN ALLOWING THIS EXPENDITURE, WAS ERRONEOUS. 9.2 THE ASSESSING OFFICER HAD NOT VERIFIED THE ISSU E & THE EXPLANATION FURNISHED BY THE ASSESSEE WAS NOT OFFERED BEFORE THE ASSESSING O FFICER. THE ASSESSMENT ORDER WAS THEREFORE ERRONEOUS & PREJUDICIAL TO THE INTEREST O F THE REVENUE. 10. THE FOURTH ISSUE WAS REGARDING SHORT TERM CAPITAL G AIN EN SHARES HELD AND SOLD BY THE ASSESSEE. THE ASSESSING OFFICER HAD NOT EXAMINED AS TO WHETHER THE TRANSACTIONS OF PURCHASE SALES MADE BY THE ASSESS EE WAS AS AN INVESTOR OR AS A TRADER. 10.1 THE ASSESSEE HAD FURNISHED THE DETAILS OF SHORT TER M CAPITAL GAIN ON SHARES HELD AND SOLD BY HIM. THESE SHARES WERE PURCHASED / ALLOTTED AND WERE RECEIVED IN DEMAT ACCOUNT OF THE ASSESSEE AND WERE SUBSEQUENTLY SOLD FROM DEMAT ACCOUNT. THE ASSESSEE IS AN INVESTOR AND A RE TIRED PERSON, MAKING INVESTMENT OF HIS FUNDS IN FIXED DEPOSIT, BONDS, DE BENTURES, GOVT. SECURITIES, SHARES AND OTHER INSTRUMENTS. HE WAS DERIVING INCOM E FROM THESE INVESTMENTS. THE ASSESSEE HAD NOT CARRIED ON BUSINESS IN SHARE D EALINGS. FURTHER, THE ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 7 ASSESSEE HAS STATED THAT THERE HAVE BEEN DECISIONS ON FACTS WHICH HAVE HELD SUCH TRANSACTIONS TO BE SHORT TERM CAPITAL GAIN. HON'B LE IT AT, AHMEDABAD HAS ALSO HELD IN SEVERAL DECISIONS THAT THESE TRANSACTIONS WERE S HORT TERM CAPITAL GAIN TRANSACTIONS. THE ASSESSEE HAD NOT CARRIED OUT THESE TRANSACTIONS ON REGULAR BASIS BUT ONLY IN FEW CASES AND IN SOME SELECTED SCRIPTS. THE ASSESSEE HA D FURNISHED ALL DETAILS REGARDING SHARE APPLICATIONS, ALLOTMENT OF SHARES, SALES BILL S AND DELIVERY OF SHARES ON SALE FROM HIS DEMAT ACCOUNT THE TRANSACTIONS WERE LOW AND VOL UME WAS ALSO MARGINAL. THEREFORE, THE ASSESSING OFFICER'S DECISION TO TAX THIS AS INCOME FROM SHORT TERM CAPITAL GAIN IS JUST AND EQUITABLE ON FACTS. 10.2 IT IS CLEAR FROM THE FREQUENCY AND MAGNITUDE O F THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITHIN A SHORT PERIOD THAT THE ASSESSE E WAS PURCHASING AND SELLING SHARES WITH AN INTENTION TO MAKE PROFIT, RATHER THA N TO DERIVE INCOME BY WAY OF DIVIDEND. THEREFORE, THE PROFIT ARISING FROM THE PU RCHASE AND SALE OF SHARES SHOULD HAVE BEEN TAXED AS PROFIT FROM BUSINESS INSTEAD OF SHORT TERM CAPITAL GAIN. 11.0 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND ALSO GONE THROUGH THE ASSESSMENT RECORDS. IT IS EVIDENT FROM THE FACTS DI SCUSSED IN PARA-2.0 TO PARA-10.0 ABOVE THAT THE ASSESSING OFFICER HAD NOT EXAMINED T HE ISSUES MENTIONED HEREIN ABOVE AND ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT EXAMI NATION AND WITHOUT APPLICATION OF MIND ON THE AFORESAID ISSUES. THIS MADE THE WHOLE A SSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE . IN VIEW THEREOF, I AM OF THE OPINION THAT THE ASSESSMENT ORDER ON ALL THE ABOVE FOUR ISS UES IS REQUIRED TO BE EXAMINED AFRESH. THE ASSESSMENT ORDER DATED 13/09/2010 PASSE D U/S 143(3) OF THE ACT IS ACCORDINGLY SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-EXAMINE ALL THE ABOVE FOUR ISSUES AFRESH AND RECORD A CLEAR CUT FIN DING BEFORE PASSING A FRESH ASSESSMENT ORDER. HE IS ALSO DIRECTED TO AFFORD A R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE PASSING A FRESH ASSESS MENT ORDER. 3. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. ASSESSEE HAS RAISED 9 GROUNDS OF APPEAL OUT OF WHIC H EXCEPT GROUND NO.6 ALL OTHERS ARE CHALLENGING THE VALIDITY OF THE ORDER U/S 263 OF THE ACT PASSED BY LD. COMMISSIONER OF INCOME TAX AND GR OUND NO.6 HAS BEEN RAISED ON MERITS OF THE ISSUE. WE FIRST TAKE U P THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE ORDER OF LD. COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT.. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 8 4. LD. AUTHORISED REPRESENTATIVE (AR) SUBMITTED TH AT THE RETURN OF INCOME WAS FILED ON 31/07/2008 DECLARING TOTAL INCO ME OF RS.8,71,810/- AND AFTER SUBMITTING VOLUMINOUS DATA, INFORMATION, DETAILS AND ON PROPER VERIFICATION OF ALL DETAILS R ELATING TO EACH INCOME UNDER EACH HEAD, THE LD. ITO, WARD 7(2), AHMEDABAD AFTER CONSIDERING EXPLANATIONS AND INQUIRIES MADE BY HIM, HE DETERMINED INCOME OF RS.9,70,476/-. THE SUBMISSIONS MADE ON DI FFERENT DATES ARE AS UNDER:- S.NO. DATE OF SUBMISSION PAGE NOS. 1. 09/06/2010 1-112 2. JULY, 2010 113-150 3. 28/08/2010 2 THERE IS NO INCOME WHICH CAN BE SAID TO HAVE ESCAPE D WHICH IS PREJUDICIAL TO THE REVENUE REQUIRING AN ACTION U/S. 263 OF THE I T ACT. [A] AS REGARDS FIRST ISSUE LD. AR SUBMITTED THAT THE AS SESSEE MADE APPLICATIONS IN HIS OWN NAME TO DIFFERENT COMPANIES IN IPOS. THERE IS NO ILLEGALITY OR IS QUESTIONABLE TO MAKE AN APPLICA TION TO COMPANY FOR SHARES. THIS WAS CLEARLY UNDER CONTRACTUAL OBLIGATI ON AND UNDERSTANDING BETWEEN THE PARTIES I.E. HIS WIFE AND HIS HUF, THAT WHATEVER SHARES ARE ALLOTTED TO HIM, THE SAME WILL BE HANDED OVER TO THEM AT COST AND THEY WILL DECIDE WHETHER TO SELL O R HOLD SHARES AND WHEN THEY SELL SHARES, PROFIT OR LOSS ARISING ON SA LE, WOULD BE THEIR PROFIT OR LOSS. THE ASSESSEE WILL BE PAID THE AMOUN T OF SHARE APPLICATION MONEY AND ALLOTMENT MONEY. THE ASSESSEE HAS DEBITED THE AMOUNTS TO THEIR RESPECTIVE ACCOUNTS, WHICH IS VERIFIED BY THE LD. ASSESSING OFFICER. (ZEROX COPIES OF ACCOUNTS ARE EN CLOSED). THE ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 9 SHARES WILL BE DELIVERED TO THE DEMAT ACCOUNT OF TH E RESPECTIVE PERSONS AND THE ASSESSEE HAS DELIVERED THE SAME TO THE DEMAT ACCOUNTS. IN CASE OF HIS HUF, THE SHARES WERE DELIV ERED TO HUF DEMAT ACCOUNT WHICH HAS BEEN VERIFIED BY THE LD. AS SESSING OFFICER FROM DEMAT ACCOUNT STATEMENT FILED AND PLACE ON REC ORD. THE ASSESSEE AND HIS WIFE HAD DEMAT ACCOUNT IN JOINT NAMES. THE LD. ASSESSING OFFICER HAS ALSO VERIFIED THE INFORMATION REGARDING SHARES GIVEN TO THE ASSESSEE'S WIFE AND THE ASSESSEE'S HUF . HE HAS ALSO CATEGORICALLY ASKED AND HAD SEEN WHETHER THESE PERS ONS OR RECIPIENTS OF SHARES HAD SOLD AND DISCLOSED INCOME IN THEIR RESPECTIVE RETURNS AND BEING SATISFIED, HE HAS FINALIZED THE A SSESSMENT. WE ARE ENCLOSING HEREWITH A STATEMENT FOR YOUR PERUSAL WHI CH SHOWS PROFIT ARISING TO THESE PERSONS FROM THE SHARES ALLOTTED T O THE ASSESSEE AND TRANSFERRED TO THEM. THE PROFIT HAS BEEN INCLUDED I N THEIR RESPECTIVE INCOME AND THEY HAVE PAID TAXES AS SHORT TERM CAPIT AL GAIN IN THEIR RETURN. THIS FACT WAS VERIFIED BY THE LD. ASSESSING OFFICER THE RATE OF TAXES ARE THE SAME ON SHORT TERM CAPITAL GAIN AND S INCE TAXES WERE CORRECTLY PAID, THERE IS NO LOSS TO THE REVENUE. UN DER THESE CIRCUMSTANCES, THE ASSESSMENT WAS CORRECTLY MADE AF TER DUE AND COMPLETE INQUIRY AND BY VERIFYING THE DETAILS AND T HEREFORE, ACTION U/S.263 OF THE I T ACT ON THIS ACCOUNT IS UNJUSTIFI ED AND INVALID. [B] AS REGARDS THE SECOND ISSUE RELATING TO NEXUX O F INTEREST PAID AGAINST INTEREST INCOME LD. AR SUBMITTED THAT THE A SSESSEE EARNED INTEREST INCOME FROM DIFFERENT PERSONS BY LENDING M ONEY. THE ASSESSEE RAISED FUNDS ON SECURITY OF FIXED DEPOSITS WITH THE BANKS. THE INCOME FROM FIXED DEPOSITS WAS COMPLETELY DISCL OSED AND ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 10 INCLUDED IN RETURN OF INCOME. THE INCOME WHICH WAS RECEIVED FROM THE PARTIES TO WHOM ADVANCES WERE MADE, WAS ALSO VE RIFIED AND THE AMOUNT WHICH IS PAID TO THE BANK ON OVERDRAFT ACCOU NT HAS ALSO BEEN VERIFIED FROM BANK STATEMENTS, PLACED ON RECORD. TH E BANK STATEMENTS WERE PLACED ON RECORD, WHICH SHOWS THE B ORROWINGS MADE BY THE ASSESSEE ON OVERDRAFT ACCOUNT AND THE A MOUNTS ADVANCED TO THE PARTIES FROM WHOM INTEREST INCOME I S RECEIVED. DIRECT NEXUS OF INTEREST INCOME TO INTEREST EXPENDI TURE HAS BEEN VERIFIED NOT ONLY WITH THE BANK STATEMENT BUT ALSO WITH THE RETURN OF INCOME. IN THE RETURN OF INCOME, THE AMOUNTS STATED BY YOU IN YOUR NOTICE FOR INCOME AND CLAIM FOR DEDUCTION OF INTERE ST PAID BOTH HAVE BEEN SHOWN UNDER AND DETAILS REGARDING THIS, HAS BE EN FURNISHED SEPARATELY TO THE LD. A.O. WHICH HAS BEEN VERIFIED BY HIM. COPY OF THE STATEMENT IS ANNEXED HEREWITH FOR YOUR READY RE FERENCE. THE NEXUS OF INTEREST INCOME TO EXPENDITURE WAS ALSO ES TABLISHED, ALLOWABILITY OF EXPENDITURE WAS ALSO EXAMINED AND A FTER DUE VERIFICATION OF THE DETAILS, THE ASSESSMENT WAS FIN ALIZED. THERE IS NO REASON NOW TO QUESTION THE ACTION OF THE LD. A.O. A ND COME TO A CONCLUSION THAT ASSESSMENT WAS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE. [C] FURTHER THE INCOME TAX CONSULTATION FEE OF RS.7 ,235/- IS BUSINESS EXPENDITURE AND WAS CONSIDERED AS ALLOWABLE FROM BU SINESS INCOME. THIS IS NOT PERSONAL EXPENDITURE OF THE ASSESSEE AN D THEREFORE, IT CANNOT BE SAID THAT ACTION OF THE LD. A.O. ALLOWING THIS EXPENDITURE FROM BUSINESS INCOME WAS ERRONEOUS. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 11 [D] FURTHER AS REGARDS SHORT TERM CAPITAL GAIN ON S HARES THE ASSESSEE HAD FURNISHED THE DETAILS OF SHORT TERM CAPITAL GAI N ON SHARES HELD AND SOLD BY THE ASSESSEE. THESE SHARES WERE PURCHAS ED / ALLOTTED AND WERE RECEIVED IN DEMAT ACCOUNT OF THE ASSESSEE AND WHEN SUBSEQUENTLY SOLD. THE ASSESSEE IS AN INVESTOR AND A RETIRED PERSON, MAKING INVESTMENT OF HIS FUNDS IN FIXED DEPOSIT, BO NDS, DEBENTURES, GOVT. SECURITIES, SHARES AND OTHER INSTRUMENTS. HE IS DERIVING INCOME FROM THESE INVESTMENTS. THE ASSESSEE HAS NOT CARRIE D ON BUSINESS IN SHARE DEALINGS AND HAS CATEGORICALLY DISCUSSED AND HAS GIVEN INFORMATION IN RETURN OF INCOME. THERE HAVE BEEN DE CISIONS ON SIMILAR FACTS WHICH HOLD SUCH TRANSACTIONS TO BE SHORT TERM CAPITAL GAIN. HON'BLE ITAT, AHMEDABAD HAS HELD IN SEVERAL DECISIO NS THAT THESE TRANSACTIONS ARE OF SHORT TERM CAPITAL GAIN NATURE. THE ASSESSEE HAS NOT CARRIED ON THESE TRANSACTIONS ON REGULAR BASIS BUT ONLY IN FEW CASES AND IN SOME SELECTED SCRIPTS. THERE IS NO INQ UIRY OR INVESTIGATION REQUIRED NOW TO BE DONE WHEN THE ASSE SSEE HAD FURNISHED ALL DETAILS REGARDING SHARE APPLICATIONS, ALLOTMENT OF SHARES, SALES BILLS AND DELIVERY OF SHARES ON SALE FROM DEM AT ACCOUNT. THE TRANSACTIONS HAVE BEEN LOW AND VOLUME IS ALSO MARGI NAL. THEREFORE, ONCE THE LD. ASSESSING OFFICER HAS ALREADY VERIFIED THESE DETAILS, HIS DECISION TO TAX AS INCOME FROM SHORT TERM CAPITAL G AIN IS JUST AND EQUITABLE ON FACTS. LD. COMMISSIONER OF INCOME TAX S DECISION TO CONSIDER IT AS BUSINESS INCOME IS ERRONEOUS AND A C HANGE OF OPINION AND SUCH CHANGE OF OPINION BY LD. COMMISSIONER OF I NCOME TAX TO DIRECT THE LD. A.O. TO CONSIDER IT AS BUSINESS INCO ME IS OUTSIDE THE PURVIEW OF SCOPE OF THE PROVISIONS OF SECTION 263 O F THE I T ACT. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 12 IN VIEW OF THE ABOVE FACTUAL POSITION AND THE DETAI LS FURNISHED WITH THE RETURN OF INCOME AS WELL AS SUBMISSIONS MADE DURING COURSE OF ASSESSMENT PROCEEDINGS TAKING ACTION U/S.263 IS PUR ELY AN ACTION OF CHANGE OF OPINION. THEREFORE, THE SAME MAY PLEASE B E DROPPED. 5. LD. AR FURTHER RELIED ON THE FOLLOWING JUDGMENTS - 1. CIT VS. MAX INDIA LTD. (2007) 295 ITR 0282(SC) 2. CIT VS. AMIT CORPORATION TAX APPEAL NO.2583 OF 2010 (2012) 81 CCH 0069 GUJHC 3. ADANI WILMAR LTD. DCIT IN ITA NO.1654/AHD/ 2015 (2015) 126 DTR0205(AHD)(TRIB) 4. ADANI ENTERPRISES LTD. VS. ADDL.CIT IN ITA NO.1 545/AHD/2014 (2015) 68 SOT 0129 (AHMEDABAD. 5. CADILA HEALTHCARE LTD. VS. C1T IN ITA NO.1096/AH D/2013 & 910/AHD/2014 (2015) 67 SOT 0188 (AHMEDABAD) 6. V. G. KRISHNAMURTHY VS. CIT (1985) 152 ITR 068 3 7. JHULELAL LAND DEVELOPMENT CORPN. VS. DCIT (199 5) 56 ITD 0345 8. CTT VS. R. K. CONSTRUCTION CO [2009] 313 ITR 65 (GUJ) SPECIAL LEAVE PETITION TO HON'BLE SC DISMISSED 313 ITR 83 (SC) 9. CIT VS. HINDUSTAN COCO COLA. BEVERAGES P LTD. [2 011] 331 ITR 192 (DELHI) 10. CIT VS SUNBEAN AUTO LTD. [2011] 332 ITR 167 (DE LHI) 11. CIT VS. ANILKUMAR SHARRAA [2011] 335 ITR 83 (DE LHI) 12. CIT VS. MAHENDRA KUMAR BANSAL [2008] 297 ITR 99 (ALL) 13. CITVS. GABRIEL INDIA LTD. [1993] 203 ITR 108 (B OM) '... : 14. CIT VS, ARVIND JEWELLERS [2003] 259 ITR 502 ( GUJ) 15. CIT VS. DEEPAK MITTAL [ 2010] 324 ITR 411 ( P & H ) 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE (DR) SUPPORTED THE ORDER OF LD. CIT AND FURTHER ADDED TH AT WITH REGARD TO THE FIRST ISSUE ABOUT APPLYING THE SHARES IN IPOS/F POS OF VARIOUS COMPANIES ON BEHALF OF THE ASSESSEES WIFE AND HUF WHICH WERE ALLOTTED AND LATER ON SOLD IT IS NOT UNDERSTOOD THA T WHY THE APPLICATION WAS MADE BY ASSESSEE EVEN WHEN ASSESSEES WIFE AND HUF WERE ALREADY HAVING DEMAT ACCOUNTS AND THE APPLICATION I N IPOS/FPOS COULD HAVE BEEN EASILY MADE IN THEIR NAMES. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 13 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE DECISIONS RELIED ON BY THE LD. AR AND ALSO PERUSED THE ORDER OF LD. CIT QUA THE ASSESSMEN T ORDER, QUA THE QUERIES RAISED IN THE COURSE OF ASSESSMENT OF PROCE EDING. IN ORDER TO EXAMINE THE VALIDITY OF THE ORDER OF LD. CIT PASSED U/S 263 OF THE ACT RELATING TO THE FOLLOWING FOUR ISSUES, IT WOULD BE NECESSARY TO EXAMINE AS TO WHETHER LD. ASSESSING OFFICER WHILE FRAMING A SSESSMENT ORDER U/S 143(3) OF THE ACT RAISED NECESSARY QUERIES AND CAME ACROSS THE DETAILS WITH RESPECT TO FOLLOWING ISSUES RAISED BY LD. COMMISSIONER OF INCOME TAX IN HIS ORDER U/S 263 OF THE ACT :- (I) IT WAS NOTICED THAT THE ASSESSEE HAD APPLIED FO R SHARES IN IPOS/FPOS OF VARIOUS COMPANIES ON BEHALF OF HIS WIFE AND HUF WHICH WERE ALLOTTED AND LATER ON SOLD TOO. THE SHARES ON ALLOTMENT WERE TRANSFERRED TO THE DEMAT A CCOUNTS OR DELIVERED DIRECTLY AGAINST THEIR SALE. THE LEGALITY AND PERMISSIBILITY TO APPL Y IN ONE'S NAME ON BEHALF OF OTHERS IS QUESTIONABLE. WHETHER ON THE DATE OF THE ALLEGED TR ANSFER, THE DIFFERENCE BETWEEN THE COST AND THE MARKET VALUE WAS CHARGEABLE TO TAX AS CAPIT AL GAINS IN THE HANDS OF THE ASSESSEE WAS REQUIRED TO BE EXAMINED. THE SAME WAS NOT EXAMI NED BY THE ASSESSING OFFICER, THUS MAKING THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (II) FURTHER, AS PER THE COMPUTATION OF INCOME, THE ASSESSEE HAD DECLARED INTEREST INCOME OF RS. 5,61,930/- AND HAD CLAIMED INTEREST EXPENDITURE OF RS.20,807/- - AND RS. 6,27,550/- AS INTEREST PAID TO BANKS AGAINST THIS INCOME. THE A. O. HAD NOT VERIFIED THE NEXUS BETWEEN EARNING OF THE INTEREST INCOME AND THE ALLO WABILITY OF THE EXPENDITURE, THUS MAKING THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (III) THE INCOME TAX CONSULTATION FEE OF RS. 7,235/- HAD BEEN ALLOWED IN THE COMPUTATION OF INCOME WHICH SHOULD HAVE BEEN DISALL OWED BEING OF PERSONAL EXPENDITURE. THE ASSESSMENT ORDER IS ERRONEOUS TO T HAT EXTENT AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (IV) IT IS FURTHER OBSERVED THAT YOU HAD SHOWN SHORT TER M CAPITAL GAIN ON SHARES WITH A HOLDING PERIOD OF TO 12 DAYS. THOUGH THE VOLUME AND THE TRANSACTION ARE LOW , THE HOLDING PERIOD IMPLIED AN INTENTION OF BUSINESS RATHER THAN TO EARN CAPITAL GAINS. THE SAME WAS REQUIRED TO BE EXAMINED. ASSESSING OFFICER HAVING F AILED TO EXAMINE THIS ISSUE HAS RENDERED THE ASSESSMENT ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE.'' ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 14 8. FROM PERUSAL OF THE PAPER BOOK AT PAGE 17 WE FIN D THAT NOTICE U/S 142(1) OF THE ACT DATED 31.05.2010 WAS ISSUED B Y DCIT REQUIRING 13 INFORMATION WHICH INTER ALIA INCLUDED DETAILS OF BANK ACCOUNTS, INVESTMENTS IN SHARES WITH COPY OF DEMAT ACCOUNT, W ORKING OF LONG TERM/SHORT TERM CAPITAL GAIN, DETAILS OF INTEREST I NCOME EARNED AND SOURCE OF INVESTMENTS MADE FOR ACQUIRING SHARES. IN ALL THE ABOVE REFERRED FOUR QUERIES (REFERRED IN PARA 7 ABOVE) WE RE RAISED IN THE NOTICE DATED 31.5.2010. ASSESSEE VIDE HIS REPLY DAT ED 9.6.2010 TO DCIT FURNISHED COMPLETE DETAILS OF CAPITAL GAINS, I PO/FPO APPLICATION ON BEHALF OF ASSESSEE, ASSESSEES WIFE AND D.P.GOYA L HUF, DETAILS OF INTEREST INCOME EARNED AND INTEREST PAID. THESE DETAILS ARE PLACED ON RECORD FROM PAGES 14 TO 22 OF THE PAPER BOOK. 9. FURTHER VIDE LETTER DT.6/7/10 LD. ASSESSING OFFI CER CALLED FOR CERTAIN MORE INFORMATION FROM POINTS (A) TO (I) OF NOTICE PLACED AT PAGE 23 OF THE PAPER BOOK WHICH WAS DULY REPLIED BY THE ASSESSEE ON 19.7.10 AND THE REMAINING INFORMATION ON 28.8.10. IN THE NOTICE DATED 6.7.10 LD. ASSESSING OFFICER HAD ASKED TO FUR NISH BREAK UP OF PARTY-WISE INTEREST INCOME, EVIDENCE OF INTEREST PA YMENT, COPY OF BANK ACCOUNT AND DEMAT ACCOUNT. ASSESSEES REPLY DA TED 28.8.10 ALONG WITH COPIES OF DEMAT ACCOUNT OF SELF, WIFE AN D DP GOYAL HUF WHICH WERE FILED BEFORE LD. ASSESSING OFFICER ARE P LACED AT PAGES 24 TO 57 OF THE PAPER BOOK. COPY OF BALANCE SHEET AND COPY DEMAT ACCOUNT WERE ALSO SUPPLIED FOR EXAMINATION DURING T HE ASSESSMENT PROCEEDINGS. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 15 10. ON PERUSAL OF THE ABOVE INFORMATION CALLED FOR BY THE ASSESSING OFFICER AND THE NECESSARY REPLIES MADE THERETO HAVE NOT BEEN OBJECTED BY LD. COMMISSIONER OF INCOME TAX IN HIS O RDER U/S 263 OF THE ACT SO MUCH SO THAT IN THE SUBMISSIONS MADE BY ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX ALL THE ABOVE REFERR ED DETAILS, DOCUMENTS WHICH WERE FILED BEFORE THE ASSESSING AUT HORITY WERE ALSO PLACED BEFORE LD. COMMISSIONER OF INCOME TAX AND N OT RAISING OF ANY OBJECTION TO THE SAME IN HIS ORDER U/S 263 OF THE A CT AMPLY PROVES THAT LD. COMMISSIONER OF INCOME TAX HAS ACCEPTED TH AT THESE DETAILS WERE VERY WELL BEFORE THE ASSESSING AUTHORITY. FURT HER FROM GOING THROUGH THE INFORMATION CALLED FOR BY THE ASSESSING AUTHORITY, IT IS CLEAR THAT THEY ALSO INCLUDED THE INFORMATION REQUI RED WITH RELATION TO THE IMPUGNED FOUR ISSUES RAISED BY LD. COMMISSIONER OF INCOME TAX IN THE COURSE OF PROCEEDINGS U/S 263 OF THE ACT WIT H RELATION TO APPLICATION OF SHARES IN IPOS/FPOS OF VARIOUS COMP ANIES ON BEHALF OF HIS WIFE AND HUF AND THE SHARES POST ALLOTMENT W ERE TRANSFERRED TO THE DEMAT ACCOUNTS OR DELIVERED AGAINST THEIR SALE, DETAILS OF SHORT TERM CAPITAL GAIN AS WELL AS THEIR HOLDING PERIOD W ITH VOLUME OF TRANSACTIONS, COPY OF DEMAT ACCOUNT, DETAILS OF INT EREST EARNED FROM VARIOUS PARTIES INCLUDING M/S ASEEM EXPORTS WHICH W AS LATER ON JOINED BY THE ASSESSEE AS A PARTNER, DETAILS OF INT EREST PAID TO BANK. SERIES OF EVENTS WHICH OCCURRED DURING THE COURSE O F ASSESSMENT PROCEEDINGS SHOWS THAT LD. ASSESSING OFFICER HAS MA DE ADEQUATE ENQUIRIES WITH REFERENCE TO THE FOUR ISSUES REFERRE D ABOVE IN PARAGRAPH 7 RAISED BY LD. COMMISSIONER OF INCOME TA X IN THE PROCEEDINGS U/S 263 OF THE ACT AND LD. ASSESSING OF FICER MADE DUE ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 16 APPLICATION OF MIND AND HAS FRAMED THE ASSESSMENT O RDER ACCORDINGLY. 11. WE FURTHER OBSERVE THAT HON. SUPREME COURT IN T HE CASE OF MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOW N THE FOLLOWING RATIO:- 'A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY TH E COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO B E SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDIC IAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER; IT IS ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS,' 12. WE FURTHER OBSERVE THAT IN THE CASE OF COMMISSI ONER OF INCOME TAX VS. AMIT CORPORATION (2012) 81 CCH 0069 GUJHC H AS HELD THAT DURING THE COURSE OF FRAMING OF ASSESSMENT, ASSESS ING OFFICER HAD ACCESS TO ALL RECORDS OF ASSESSEE, AFTER PURSUING S UCH RECORD ASSESSING OFFICER FRAMED ASSESSMENT, SUCH ASSESSME NT COULD NOT HAVE BEEN RE-OPENED IN EXERCISE OF REVISION POWER U /S 263 FOR MAKING FURTHER INQUIRIES. 12.1 WE FURTHER OBSERVE THAT THE CO-ORDINATE BENCH IN THE CASE OF ADANI WILLMAR LTD. VS. DCIT IN ITA NO.1654/AHD/2015 DATED 24.9.2015 ADJUDICATED SIMILAR ISSUE AND HAS HELD AS UNDER :- ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 17 IN THE CASE OF SUN BEAM /AUTO, THE HON'BLE HIGH COURT HAD POINTED OUT A DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WAS A LACK OF ENQUIRY, THEN THE ASSESSMENT ORDER CAN BE BRANDED AS ERRONEOUS. AO HAD ISSUED A SHOW CAUSE NOTICE AND INVITED EXPLA NATION OF THE ASSESSEE QUA THE DETAILS OF FIXED ASSETS AND THE DEPRECIATION CLAIME D BY IT ON THIS POINT, MEANING THEREBY, HE HAD APPLIED HIS MIND ON THE CLAIM OF DEPRECIATIO N MADE BY THE ASSESSEE . THE DELHI HIGH COURT IN THE CASE OF BSES YAMUNA POWER LTD, (S UPRA) HAD HELD THAT DEPRECIATION AT THE RATE OF 60% WOULD BE ADMISSIBLE ON COMPUTER PERIPHERALS. THUS, A POSSIBLE VIEW CAN BE TAKEN BY THE AO WITH REGARD TO THE ADMISSIBI LITY OF DEPRECIATION ON UPS, SCANNER ETC. AT THE RATE OF 60%. IT WAS ONE OF THE POSSIBLE VIEWS, WHICH THE AO HAD TAKEN. AS FAR AS THE DEPRECIATION AT THE RATE OF 60% ALLOWED TO T HE ASSESSEE ON SAP LICENCE WAS CONCERNED, THE AO HAD INVESTIGATED THE ISSUE AND TO OK AN OPINION THAT IT MIGHT HAVE NOT BEEN REFLECTED SPECIFICALLY IN THE ASSESSMENT ORDER . IF THE ID.COMMISSIONER HAD A DIFFERENT OPINION ON THIS ISSUE, THEN IT WOULD BECO ME A DEBATABLE ONE. ACCORDING TO THE ASSESSEE , IN VARIOUS JUDGEMENTS, IT HAS BEEN HELD THAT THE SO FTWARE EXPENSE WAS TO BE ALLOWED AS REVENUE EXPENDITURE. CONSIDERING THE NAT URE OF ITS DEBATABLE-NESS, IT WAS VIEWED THAT THE ASSESSMENT ORDER CANNOT BE BRANDED AS AN ERRONEOUS ORDER ON THIS ISSUE. AS FAR AS THIRD PART WAS CONCERNED, IT WAS F OUND THAT THIS ASPECT WAS SQUARELY COVERED BY THE DECISION OF THE GUJARAT HIGH COURT. (PARA 14) AO HAD TAKEN A POSSIBLE VIEW OF ASPECT, WHICH COULD NOT BE SUBJECT TO ACTION UNDER SECTION 263. THE AO HAD INVITED THE EXPLANATION OF THE ASSESSEE, GONE THROUGH THE DETAILS SUBMITTED BY IT, AND THEREAFTER, ALLOWED TH E DEPRECIATION INCLUDING ADDITIONAL DEPRECIATION AS PER LAW. HIS VIEW MAY NOT GET APPRO VAL FROM THE POINT OF VIEW OF THE COMMISSIONER, BUT, THE OPINION OF THE AO WAS ALSO A POSSIBLE VIEW, AND THEREFORE, NO ACTION U/S 263 CAN BE JUSTIFIED. ON DUE CONSIDERATI ON OF THESE FACTS AND CIRCUMSTANCES, THE APPEAL OF THE ASSESSEE WAS ALLOWED AND THE ORDE R PASSED BY THE COMMISSIONER U/S 263 WAS QUASHED.. 13. WE ALSO OBSERVE THAT IN THE CASE OF CADILA HEAL THCARE LTD. VS. CIT IN ITA NO. 1096/AHD/2013 & 910/AHD/2014 (2015) 67 SOT 0188 (AHMEDABAD) HAS HELD THAT WHEN ASSESSING OFFICER MAKES FULL ENQUIRIES BY RAISING QUERIES WITH RESPECT TO ISSUES UNDER CONSIDERATION AND SAME ARE ALSO REPLIED BY ASSESSEE THEN ORDER PASSED BY ASSESSING OFFICER CANNOT BE SAID AS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 18 14. SIMILARLY THE CO-ORDINATE BENCH, BOMBAY IN THE CASE JHULELAL LAND DEVELOPMENT CORPORATION VS. DCIT IN ITA NO.149 /BOM/1992 (1996) 56 ITD 0345 ADJUDICATED THE ISSUE CHALLENGIN G THE ORDER U/S 263 OF THE ACT HAS HELD AS UNDER :- IT IS WELL ESTABLISHED BY NOW THAT BEFORE INVOKING SUCH JURISDICTION, TWO CONDITIONS MUST BE FULFILLED VIZ, (I) THAT THE ORDER OF THE AO IS E RRONEOUS AND (II) SUCH ORDER SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE, SO, THE CIT MUST HAVE SOME MATERIAL BEFORE HIM IN ORDER TO HOLD THE ORDER OF THE AO IS ERRONEO US. HE ALSO MUST SHOW SUCH MATERIAL IN HIS ORDER SINCE HE IS A QUASI JUDICIAL AUTHORITY AND HIS ORDER IS SUBJECT TO SCRUTINY BY THE LOWER AUTHORITIES OR THE COURTS. THE ORDER OF T HE AO HE HELD TO BE ERRONEOUS MERELY ON WHIMS AND FANCY OF THE CIT. THE WORD 'ERRONEOUS' HAS NOT BEEN DEFINED IN THE ACT. HOWEVER, IT HAS BEEN SUBJECT TO THE JUDICIAL CONSID ERATION IN VARIOUS CASES. AN ORDER CAN BE SAID TO BE ERRONEOUS WHEN; (A) IT IS FULL OF ERRORS EITHER FACTUALLY OR LEGALL Y; (B) IT IS NOT IN ACCORDANCE WITH LAW; (C) WHEN THE CONCLUSION DRAWN BY THE AO COULD NOT H AVE BEEN REACHED ON THE FACTS OF THE CASE; AND (D) THE AO WAS REQUIRED TO ENQUIRE ABOUT AND ASCERT AIN THE FACTS BUT HAS FAILED TO DO SO, IF THE CIT COMES TO THE CONCLUSION THAT THE ORDER O F THE AO IS ERRONEOUS ON THE FACTS AVAILABLE ON RECORD, THEN HE MAY GIVE A CORRECT FIN DING OF FACT OR LAW AND REVISED THE ORDER. WHERE, HOWEVER, SUCH FINDING CANNOT BE GIVEN FOR WANT OF FACTS IN RESPECT OF WHICH AO SHOULD HAVE MADE ENQUIRIES, THEN IN SUCH C ASES THE CIT MAY SET ASIDE THE ORDER AND DIRECT THE AO TO MAKE ENQUIRIES FOR ASCER TAINING THE FACTS AND THEN DECIDE THE MATTER IN ACCORDANCE WITH LAW. BUT THE CIT, CANNOT SUBSTITUTE HIS OWN OPINION WHERE THE VIEW TAKEN BY THE AO IS ALSO A POSSIBLE VIEW. HE CA NNOT ALSO SET ASIDE THE ORDER OF THE AO IN THE GUISE OF AN ENQUIRY WHERE ALL THE FACTS A RE ALREADY ON RECORD. THE CIT CANNOT BE ALLOWED TO SET ASIDE THE ORDER OF AO FOR MAKING ROVING AND FISHING ENQUIRIES. THE CIT CERTAINLY HAS POWERS TO SET ASIDE AN ASSESSMENT AND DIRECT THE AO TO MAKE AN ENQUIRY ONLY IN THOSE CASES WHERE THE AO HAD FAILED TO ASCE RTAIN THE FACTS AND IN SUCH CASE THE CIT MUST INDICATE IN HIS ORDER IN WHAT RESPECT THE ENQUIRY HAS TO BE MADE. CIT IN THE PRESENT CASE HAS WRONGLY INVOKED THE JUR ISDICTION UNDER S. 263 INASMUCH AS ALL THE NECESSARY AND PRIMARY FACTS WERE BEFORE THE AO AND NO ENQUIRY WAS REQUIRED AND, IN FACT, NO ENQUIRY WAS MADE IN THE SUBSEQUENT PROCEEDINGS. THE REVISIONARY JURISDICTION CANNOT BE ALLOWED FOR SUBSTITUTING HIS OPINION. 15. RESPECTFULLY FOLLOWING THE JUDGMENTS OF HON. AP EX COURT AND HIGH COURT AND THE DECISIONS OF THE CO-ORDINATE BEN CH AS DISCUSSED ABOVE AND AFTER EXAMINING THE FACTS OF THE CASE IN THE LIGHT THEREOF, ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 19 WE ARE OF THE CONFIRMED VIEW THAT THE ISSUES RAISED BY LD. CIT IN HIS NOTICE U/S 263 OF THE ACT WERE WELL ENQUIRED BY THE LD. ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT AND THERE WAS A THOROUGH EXAMINATION OF THE NECESSARY DETAILS PROVIDED BY THE ASSESSEE WITH RELATION THER ETO AND THEREFORE, THE ORDER OF LD. ASSESING OFFICER U/S 143(3) OF THE ACT DATED 13.9.10 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. WE ACCORDINGLY QUASH THE ORDER OF LD. CIT U/S 263 OF T HE ACT AND RESTORE THAT OF THE LD. ASSESSING OFFICER U/S 143(3) OF THE ACT. ACCORDINGLY, ALL THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE ORDER U/S 263 OF THE ACT ARE ALLOWED. 16. AS REGARDS GROUND NO.6 ON MERITS OF THE CASE, W E ARE OF THE VIEW THAT AS WE HAVE ALREADY QUASHED THE IMPUGNED O RDER U/S 263 OF THE ACT IT WOULD BE JUST ACADEMIC TO DEAL WITH THE SAME. THUS WE DISMISS THE SAME. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2017 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 15/02/2017 MAHATA/- ITA NO. 1464/AHD/2013 ASST. YEAR 2008-09 20 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 13/02/2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 14/02/2017 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 15/2/17 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: