Krishna Shriram, New Delhi V. CIT, New Delhi

ITA 1649/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74004 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADHIR JHA
• Assessee Lawyers: ROHIT GARG S
• Keywords: Gift; Business income; Assessment record; Prejudicial to interest
• Section: 143(3); 263; 63

Judgement Text

ITA NO. 1649/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1649/DEL/2011 A.Y. : 200 6 - 0 7 KRISHNA SHRIRAM, D-46, MALCHA MARG, NEW DELHI (PAN:AABPS4899L) COMMISSIONER OF INCOME TAX, DELHI-XI, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. AJAY VOHRA, & SH. ROHIT GARG, ADVOCATES DEPARTMENT BY : SH. ADHIR JHA, CIT(DR) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX, DELHI-XI, NEW DELHI DATED 17.2.2011 PASSED UNDER SECTION 263. 2. IN THIS CASE THE ASSESSING OFFICER HAS PASSED TH E ORDER UNDER SECTION 143(3) OF THE I.T. ACT FOR ASSTT. YEAR 2006 -07 DATED 8.12.2008 AS UNDER:- THE ASSESSEE FILED HIS RETURN OF INCOME ON 25.7.2 006 DECLARING INCOME OF RS. 833,48,262/-. THE CASE WAS PROCESSED U/S. 143(1) OF THE I.T. ACT ON 28.10.2006 . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY TH ROUGH CASS ON THE BASIS OF INFORMATION RECEIVED ON AIR. NOTICE U/S. 143(2) OF THE I.T. ACT, 1961 DATED 26.7.2007 W AS ITA NO. 1649/DEL/2011 2 ISSUED REQUIRING THE ASSESSEE TO FURNISH THE DETAI LS ALONG WITH NECESSARY EVIDENCES IN RESPECT OF INVESTMENT MADE DURING HE YEAR UNDER CONSIDERATION. IN COMPLIANCE T O THE NOTICE, SH. SUMMIT KUMAR, CA AND AR OF THE ASSESSEE APPEARED AND FILE THE DETAILS CALLED FOR WHICH IS P LACED ON RECORDS. AFTER CONSIDERATION OF THE DETAILS/EVIDENCES FURNISHED, THE RETURNED INCOME IS ACCEPTED. ASSESSED AT RS. 833,48,262/-. ISSUE NECESSARY FORMS. GIVE CREDIT TO PREPAID TAXES. CHARGE INTER EST AS PER THE PROVISIONS OF THE I.T. ACT. 3. THE ABOVE ORDER WAS FOUND BY THE LD. CIT TO B E ERRONEOUS SO FAR AS THE SAME WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE DUE TO THE FOLLOWING REASONS RECORDED IN THE SHOW CAUSE NO TICE IN THIS REGARD. AS PER AIR INFORMATION THE ASSESSEE INVESTED TOTAL OF RS. 25.50 CRORES IN SIEL HOLDING LTD., WHERE HE IS THE CEO AS INDICATED IN THE CERTIFICATE IN FORM NO. 16 ENCLOSE D WITH THE RETURN OF INCOME. THE SOURCE OF THIS INVESTMENT HAS BEEN EXPLAINED OUT OF THE LONG TERM CAPITAL GAINS O F RS. 59.11 CRORES AND SHORT TERM CAPITAL GAINS OF RS. 8. 26 CRORES ON SALES OF SHARES. THE LTCG HAS BEEN CLAIM ED EXEMPT AND TAX @ 10% HAS BEEN PAID ON THE STCG. FRO M THE DETAILS OF WORKING OF THESE CAPITAL GAINS, IT I S OBSERVED THAT THESE GAINS HAVE BEEN MADE ONLY IN RESPECT OF THE PURCHASES AND SALES OF THE SHARES OF MAWANA SUGARS LTD. THE ASSESSEE BELONGS TO THE SRI RAM GROUP AND MAWANA SUGARS LTD., IS ONE OF THE GROUP COMPANIES. FROM THE TRANSACTIONS ON WHICH CAPITAL G AINS ITA NO. 1649/DEL/2011 3 HAVE BEEN EARNED, IT IS EVIDENT THAT THE ASSESSEE W AS WELL AWARE ABOUT THE ACTIVITIES OF THE COMPANY. THI S IS EVIDENT FROM THE FACT THAT LTCG TO THE EXTENT OF RS. 59.11 CRORES HAS BEEN EARNED ON INVESTMENT OF R S. 6.83 CRORES ONLY AND STCG TO THE EXTENT OF RS. 8.26 CRORES HAS BEEN EARNED ON INVESTMENT OF RS. 0.17 CR ORES ONLY. THEREFORE, THE ACTIVITY OF THE ASSESSEE IS NO T A NORMAL INVESTMENT ACTIVITY. THIS IS CERTAINLY A BU SINESS ACTIVITY AND SUCH INCOME SHOULD HAVE BEEN CONSIDERE D TO BE TAXED ACCORDINGLY. THE INVESTMENT OF RS. 6.83 CRORES IN THE SHARES ON WHICH LTCG HAS BEEN CLAIMED WAS MADE IN THE A YS 2004-05 AND 2005-.06. THE GENUINENESS AND THE SOURC E OF INVESTMENT SHOULD HAVE BEEN VERIFIED WHICH IS NO T DONE. EVEN THE ASSESSMENT RECORDS FOR THESE YEARS H AVE NOT BEEN MADE AVAILABLE DESPITE OF REQUEST MADE. IT HAS BEEN INDICATED BY THE AO THAT SUCH RECORDS WERE NOT MADE AVAILABLE TO HIM ON TRANSFER OF THIS CASE TO H IS CIRCLE. THEREFORE, THE AO DID NOT EXAMINE THIS ASPE CT AT ALL. AS FAR AS STCG IS CONCERNED, IT IS OBSERVED AT OUT OF THE TOTAL NUMBER OF SHARES OF 7,00,000, THE COST OF 6,79,000 SHARES IS BEING SHOWN AS ZERO. IT SHOULD H AVE BEEN VERIFIED FROM WHERE THESE SHARES HAVE COME. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ALSO RECEIVED GIFTS OF RS. 7.92 CRORES FROM HIS MOTHER AND RS. 1.83 LACS FROM FATHER. ALTHOUGH A CONFIRMAT ION FROM MOTHER HAS BEEN OBTAINED, THERE IS NOTHING TO INDICATE ABOUT THE SOURCE OF HER INCOME FROM WHERE ITA NO. 1649/DEL/2011 4 THESE GIFTS WERE ALLOWED. THIS ASPECT SHOULD HAVE BEEN EXAMINED FURTHER. 4. ASSESSEE SUBMITTED THAT NO ACTION UNDER SECTION 263 IS CALLED FOR. ASSESSEES SUBMISSION IN THIS REGARD ARE AS U NDER:- YOUR GOODSELF HAVE STATED IN THE NOTICE THAT THE ASS ESSEE BELONGS TO SHRIRAM GROUP AND MAWANA SUGARS LIMITED IS ONE OF THE GROUP COMPANIES AND THEREFORE, ASSESSEE WAS WELL AWARE ABOUT THE ACTIVITIES OF THE COMPANY. THEREFORE, LONG TERM AS WELL AS SHORT TERM CAPITAL GAIN EARNED ON SALE OF INVESTMENTS IN THE FORM OF SHARES OF MAWANA SUGARS LIMITED WAS FROM BUSINESS ACTIVITIES AND ACCORDINGLY, CHARGEABLE TO TAX AS BUSINESS INCOME. IT IS RESPECTFULLY SUBMITTED THAT SHRI KRISHNA SHRIRAM WA S NOT DIRECTLY CONNECTED WITH MANAGEMENT OF MAWANA SUGARS LIMITED. HE WAS NEITHER A DIRECTOR NOR AN EMPLOYEE OF ABOVE COMPANY. MOREOVER, IT IS HUMBLY SUBMITTED THA T THERE IS NO PROVISION IN THE INCOME TAX ACT IN ACCO RDANCE WITH WHICH INCOME EARNED ON SALE OF SHARES HELD BY A PERSON, EVEN IF CONNECTED WITH MANAGEMENT, IS CHARGEABLE TO TAX AS BUSINESS INCOME AND NOT AS CAP ITAL GAIN. THE ASSESSEE WAS HOLDING THE SHARES ADMITTEDL Y AS INVESTMENT AND, THEREFORE, CAPITAL GAIN EARNED ON S ALE OF SHARES WAS IN THE NATURE OF LONG TERM AND SHORT TER M CAPITAL DEPENDING UPON PERIOD OF HOLDING OF SHARES AS PER DETAILS DULY SUBMITTED WITH THE RETURN OF INCOME. H ENCE, THERE IS NO ERROR IN THE ORDER OF ASSESSMENT WHICH CAN INVITE INVOCATION OF ACTION UNDER SECTION 263 OF TH E ACT. IN ANY CASE, THE INCOME EARNED ON SALE OF SHARES WA S CONSIDERED AND ACCEPTED AS CAPITAL GAIN BY THE ASSE SSING OFFICER AFTER DUE APPLICATION OF MIND. EVEN IF IT I S ITA NO. 1649/DEL/2011 5 ASSUMED THAT THERE IS A POSSIBILITY OF TAXING THE I NCOME AS BUSINESS INCOME, IT IS A DEBATABLE ISSUE AND TWO VIEWS ARE POSSIBLE. AS PER THE WELL SETTLED LEGAL POSITI ON PROPOUNDED BY THE SUPREME COURT VIDE DECISIONS IN THE CASES OF MALABAR INDUSTRIAL CO. LTD. V. CIT, 243 I TR 83 (SC) AND CIT V. MAX INDIA LIMITED, 295 ITR 282 (SC) , NO ACTION UNDER SECTION 263 OF THE ACT CAN BE TAKEN IN THE CASES WHERE TWO VIEWS ARE POSSIBLE. IT HAS BEEN STATED IN THE NOTICE THAT SOURCE OF INVESTMENT MADE IN SHARES IN A.YRS 2004-05 AND 2005 - 0.6, ON WHICH LTCG HAS BEEN EARNED HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER. IN THIS REGARD, IT IS STATED THAT ACTION UNDER SECTION 263 OF THE ACT IS NOT CALLED FOR THE PURPOSE OF VERIFICATION OF A PARTICU LAR FACT AND THAT TOO RELATABLE TO AN EARLIER YEAR. FURTHER, IT IS AN ADMITTED POSITION THAT INVESTMENT HAD BEEN MADE IN A. YRS. 2004-05 AND 2005-06. THIS FACT HAS BEEN DUL Y ACCEPTED BY THE ASSESSING OFFICER. IT IS SUBMITTED THAT ORDER OF ASSESSMENT PASSED FOR A. Y. 2006-07 CANNO T BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE ON THE GROUND THAT INVESTMENTS MADE IN EARL IER YEARS HAD NOT BEEN VERIFIED,. IN ANY CASE THERE CAN BE NO IMPACT RESULTING FROM VERIFICATION OF SOURCE OF INV ESTMENT MADE IN EARLIER YEARS ON THE INCOME ASSESSABLE IN A . Y. 2006-07. IT HAS BEEN FURTHER STATED IN THE NOTICE ISSUED U/S 263 OF THE ACT THAT OUT OF 7 LACS SHARES ON WHICH S TCG. WAS EARNED, COST OF 6,79,000 SHARES WAS SHOWN AS ZE RO AND THIS FACT SHOULD HAVE BEEN VERIFIED. IT IS STAT ED IN THIS REGARD THAT THE ASSESSEE HAD SHOWN TOTAL SALE ITA NO. 1649/DEL/2011 6 CONSIDERATION AS CHARGEABLE TO TAX AND TAX THEREON HAS BEEN DULY PAID. THERE COULD BE NO POSITION OF THE ASSESSEE ADVERSE THAN SHOWING TOTAL SALE CONSIDERAT ION AS TAXABLE CAPITAL GAIN. HENCE, THE ORDER PASSED BY THE ASSESSING OFFICER CANNOT BE SAID TO BE ERRONEOUS AN D PREJUDICIAL TO INTEREST OF REVENUE. IT IS FURTHER S TATED IN THIS REGARD THAT ASSESSEE HAD DULY SUBMITTED DETAIL S REGARDING COMPUTATION OF CAPITAL GAIN AND VALUE OF SHARES WAS SHOWN AS. NIL AND POSITION AS SUCH WAS ACCEPTED BY THE ASSESSING OFFICER AFTER EXAMINING THE RETURN OF INCOME AND THE DETAILS SUBMITTED TO HIM. THEREFORE, THERE IS NO ERROR IN THE ORDER OF ASSESSMENT INVITI NG ACTION UNDER SECTION 263 OF THE ACT. LASTLY, IT HAS BEEN STATED IN THE NOTICE THAT THE ASSESSEE HAD RECEIVED GIFTS OF RS. 7.92 CRORES FROM HIS MOTHER AND RS. 1.83 LACS FROM HIS FATHER. IN REGARD TO GIFTS FROM MOTHER IT HAS BEEN MENTIONED THAT, THOUG H CONFIRMATION FROM THE MOTHER WAS OBTAINED, THERE WA S NOTHING TO INDICATE ABOUT THE SOURCE OF HER INCOME FROM WHERE GIFTS WERE MADE. THIS ASPECT NEEDS TO BE EXAMINED. IT IS SUBMITTED IN THIS REGARD THAT ORDER OF ASSESSMENT PASSED IN THE CASE OF THE ASSESSEE CANNO T BE ALLEGED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE ON THE GROUND THAT SOURCE IN THE CASE OF MO THER FROM WHICH GIFT WAS MADE TO THE ASSESSEE HAD NOT BE EN EXAMINED. AS PER THE WELL SETTLED LEGAL POSITION, A N ASSESSEE IS NOT OBLIGED TO EXPLAIN SOURCE OF THE SO URCE OF ANY RECEIPT. ADMITTEDLY GIFT WAS RECEIVED FROM THE MOTHER AND CONFIRMATION IN RESPECT THEREOF HAD BEEN DULY SUBMITTED TO THE ASSESSING OFFICER. ACCORDINGL Y, THE ITA NO. 1649/DEL/2011 7 ASSESSING OFFICER HAD ACCEPTED THE POSITION AFTER D UE VERIFICATION. THEREFORE, NO ACTION UNDER SECTION 26 3 OF THE ACT IS CALLED FOR ON THIS GROUND ALSO IN THE CASE O F ASSESSEE. 5. HOWEVER, THE LD. CIT WAS NOT SATISFIED. HE HELD THAT THERE WAS NO ENOUGH TIME TO MAKE THE AO TO EXAMINE THE DETAIL S. HOWEVER, THE AO DECIDED TO COMPLETE THE CASE WITHOUT MAKING THE DETAILED EXAMINATION. LD. CIT FURTHER HELD THAT ALL THESE F ACTS CLEARLY INDICATE THAT THE AO WAS IN A HASTE TO COMPLETE THE ASSESSME NT WITHOUT MAKING THE DETAILED ENQUIRY. HE REFERRED THE DECIS ION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF THALIBAI F. JAIN VS. ITO 101- ITR-1(KAR.). THE ASSESSMENTS WERE MADE IN UNDUE HASTE AND WITHOUT ENQUIRY ARE PREJUDICIAL TO THE INTEREST OF THE REVENUE, AND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE HELD TO BE ERRONEOUS. LD. CIT FURTHER OBSERVED THAT SIMILARLY IN A DECISION IN THE CASE OF BISMILLAH TRADING CO VS INTELLIGENCE O FFICER 248-ITR- 292(KER.) THE HON'BLE KERALA HIGH COURT HELD THAT ' PREJUDICIAL TO THE INTERESTS OF THE REVENUE' DOES NOT NECESSARILY MEAN LOSS OF REVENUE, BUT MUST BE GIVEN A DIGNIFIED CONSTRUCTION. THERE M UST BE GRIEVOUS ERROR IN THE ORDER PASSED BY THE ITO WHICH MIGHT SE T A BAD TREND OR PATTERN WHICH MIGHT BE THOUGHT TO BE PREJUDICIAL TO THE REVENUE ADMINISTRATION. THE ABOVE SAID VIEWS ARE ALSO SUPPO RTED BY JUDGMENTS IN THE CASE OF G. V. ENTERPRISES 99 ITR 3 75 (DEL.), SWARUP VEGETABLE PDTS. INDIA. LTD. 187 ITR 412 (ALL.), MUK UR CORPORATION 111 ITR 312 (GUJ.) AND SESHAI PAPERS BOARD LTD. 242 ITR 490. 6. CONSIDERING THE ABOVE, LD. CIT CONCLUDED AS UNDE R:- THAT THE MAJOR ISSUES INVOLVED IN THIS CASE HAVE N OT AT ALL BE TAKEN UP FOR EXAMINATION WHICH HAS RESULTED INTO COMPLETE FAILURE OF THE PURPOSE OF ITA NO. 1649/DEL/2011 8 TAKING UP THE CASE FOR SCRUTINY ASSESSMENT. THEREFORE, THE ASSESSMENT ORDER MADE IN THE CASE IS HELD TO BE ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. ALTHOUGH THE REPLIES ON T HE ISSUES HAVE BEEN SUBMITTED DURING THE PROCEEDINGS U/S 263 OF THE IT ACT, 1961, THE DETAILS CAN NOT BE VERIFIED SINCE THE PROCEEDINGS ARE FOR THE LIMITED PURPOSE OF EXAMINING WHETHER THE PROVISIONS OF THIS SECTION ARE APPLICABLE IN THE CASE OR NOT. ACCORDINGLY, THE ASSESSMENT COMPLETED U/S 143(3) OF THE IT ACT, 1961 ILL THE CASE IS HEREBY SET ASID E WITH THE DIRECTIONS TO THE AO THAT ALL THE MAJOR ISSUES, AS ABOVE, SHOULD BE EXAMINED IN DETAIL BY GIVING OPPORTUNITY TO THE ASSESSEE AND TO MAKE A FRESH ASSESSMENT IN THE CASE AS PER LAW. 7. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. 9. AS REGARDS THE ISSUE OF CAPITAL GAIN, IT HAS BEE N NOTED BY THE LD. CIT THAT LONG TERM CAPITAL GAIN OF RS. 59.11 CR ORES AND SHORT TERM CAPITAL GAIN OF RS. 8.26 CRORES HAVE BEEN EARNED BY THE ASSESSEE ON SALE OF SHARES. LD. CIT HAS NOTED THAT FROM THE D ETAILS OF WORKING OF THIS CAPITAL GAIN IT WAS OBSERVED THAT THESE GAIN H AVE BEEN MADE ONLY IN RESPECT OF PURCHASE AND SALE OF SHARES OF M AWANA SUGAR LTD. LD. CIT NOTED THAT THE MAWANA SUGAR LTD. BELONGS TO THE SAME GROUP TO WHICH THE ASSESSEE BELONGS. IT HAS BEEN NOTED B Y THE LD. CIT THAT ASSESSEE WAS WELL AWARE OF THE ACTIVITIES OF THE CO MPANY. THIS IS EVIDENT FROM THE FACT THAT LONG TERM CAPITAL TO THE EXTENT OF RS. 59.11 CRORES HAS BEEN EARNED ON INVESTMENT OF RS. 6 .83 CRORES ONLY AND SHORT TERM CAPITAL GAIN TO THE EXTENT OF RS. 8. 26 CRORES HAS BEEN ITA NO. 1649/DEL/2011 9 EARNED ON INVESTMENT OF RS. 0.17 CRORE ONLY. LD. C IT OPINED THAT THE ACTIVITIES OF THE ASSESSEE IS NOT A NORMAL INVESTME NT ACTIVITY. THIS WAS A BUSINESS ACTIVITY AND SUCH INCOME SHOULD HAV E BEEN CONSIDERED TO BE TAXED ACCORDINGLY. 10. IN THIS REGARD, IT WAS SUBMITTED THAT THE ASSE SSEE IS NEITHER A DIRECTOR NOR AN EMPLOYEE OF THE ABOVE COMPANY. MOR EOVER, IT HAS BEEN SUBMITTED THAT THERE IS NO PROVISION IN THE I NCOME TAX ACT, IN ACCORDANCE WITH WHICH INCOME EARNED ON SALE OF SHA RES HELD BY A PERSON EVEN IF CONNECTED WITH THE MANAGEMENT IS CHA RGEABLE TO TAX AS BUSINESS INCOME AND NOT AS CAPITAL GAIN. IT HAS BEEN SUBMITTED THAT ASSESSEE WAS HOLDING THE SHARES AS INVESTMENT . THEREFORE, CAPITAL GAIN EARNED HAS BEEN PROPERLY RETURNED. H ENCE, IT HAS BEEN SUBMITTED THAT THERE IS NO ERROR IN THE ORDER OF TH E ASSESSMENT WHICH MAY NEED INVOCATION OF ACTION UNDER SECTION 2 63 OF THE ACT. IT HAS FURTHER BEEN SUBMITTED IN ANY CASE THE INCO ME EARNED ON SALE OF SHARES WAS CONSIDERED AS CAPITAL GAINS BY T HE AO, AFTER DUE APPLICATION OF MIND. IF IT ASSUMED, THERE WAS POSS IBILITY TAXING THE INCOME OF THE BUSINESS INCOME, IT IS A DEBATABLE I SSUE AND TWO VIEWS AND POSSIBLE. IN THIS REGARD, LD. COUNSEL O F THE ASSESSEE HAS PLACED RELIANCE UPON A CATENA OF CASE LAWS FOR THE PROPOSITION THAT WHERE ENQUIRY HAS NOT BEEN DONE BY THE AO, LD. CIT CANNOT DIRECT FOR DETAILED ENQUIRY. FURTHERMORE, WHEN TWO VIEWS ARE POSSIBLE AND THE AO HAS ADOPTED ONE OF THE VIEWS, ACTION U/S. 26 3 CANNOT BE INVOKED. 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE HAVE ALSO GONE THROUGH THE ASSESSMENT RECORDS. WE FIND THAT AO HAS NOT ASKED ANY QUERY WHATSOEVER WITH REGARD TO THE CAPI TAL GAINS. HENCE, IT CANNOT BE SAID THAT SOME ENQUIRY WAS DONE BY THE AO. THE ASSESSMENT ORDER IS ALSO VERY SHORT AND DOES NO T CONTAIN ANY REFERENCE TO SUCH ENQUIRY. HENCE, IT CANNOT BE SAI D THAT AO HAS ITA NO. 1649/DEL/2011 10 FORMED ANY OPINION. FROM THE DETAILS ATTACHED WITH THE RETURN OF INCOME, WE FIND THAT THE LONG TERM AND SHORT TERM C APITAL GAINS HAVE ARISEN ONLY IN RESPECT OF DEALING OF SHARES OF MAWA NA SUGAR LTD. THE LONG TERM CAPITAL GAIN HAS ARISEN ON ACCOUNT O F 15 TRANSACTIONS IN THE SHARES OF THE SAID COMPANY DURING THE FINANC IAL YEAR. AGAIN THE SHORT TERM CAPITAL GAIN HAS ARISEN ON ACCOUNT OF THREE TRANSACTIONS OF ACQUISITION OF SHARES AND ONE TRANS ACTION OF SALE OF SHARES. 11.1 IT IS SETTLED LAW THAT THAT FREQUENCY AND MAGN ITUDE OF TRANSACTION ARE ALSO IMPORTANT FACTOR TO DECIDE WH ETHER THE TRANSACTION IS BUSINESS TRANSACTION OR INVESTMENT T RANSACTION. NOW IN OUR CONSIDERED OPINION, THE MAGNITUDE OF SHARE TRAN SACTION IN THIS CASE DOES CALL FOR ANY ENQUIRY ON THE PART OF THE AO AS TO WHETHER THESE ARE INVESTMENTS TRANSACTIONS OR BUSINESS TRAN SACTIONS. A.O. IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. WE FIND THAT AO HAS TOTALLY FAILED TO MAKE ANY ENQUIRY. IN THESE C IRCUMSTANCES, WE FIND THAT THE INVOCATION OF SECTION 263 BY THE LD. CIT IS CORRECT AND ACCORDINGLY WE HOLD THAT THE LD. CIT HAS RIGHTLY AS KED THE AO TO EXAMINE THIS ASPECT. 12. ANOTHER ASPECT REFERRED BY THE LD. CIT IS THAT INVESTMENT OF RS. 6.83 CRORES IN THE SHARES IN WHICH LONG TERM CAPITA L GAIN HAVE BEEN EARNED WAS MADE IN THE ASSTT. YEAR 2004-05. LD. CI T HAS OPINED THAT AO SHOULD HAVE VERIFIED THE GENUINENESS OF SOU RCE OF INVESTMENT WHICH HAS NOT BEEN DONE. WE FIND THAT TH IS DIRECTION OF THE LD. CIT IS NOT SUSTAINABLE. ACTION U/S. 263 IS NOT CALLED FOR VERIFICATION OF A PARTICULAR FACT RELATABLE TO EARL IER YEAR. IN THE PREVIOUS YEAR THE POSITION SUBMITTED BY THE ASSESS EE HAS BEEN ACCEPTED. THAT PROPOSITION CANNOT BE ENQUIRED INTO IN THE SUBSEQUENT ASSESSMENT YEAR U/S. 263. ITA NO. 1649/DEL/2011 11 13. FURTHER, LD. CIT HAS OBSERVED THAT SHORT TERM C APITAL GAIN HAS ARISEN OUT OF TOTAL NUMBER OF SHARES OF 700,000/-. COST OF 679000 SHARES IS BEING SHOWN ZERO. IT SHOULD HAVE BEEN VER IFIED FROM WHERE THESE SHARES HAVE COME. IN THIS REGARD, IT HAS BEE N SUBMITTED THAT ASSESSEE HAS SHOWN TOTAL SALE CONSIDERATION CHARGE ABLE TO TAX AND TAX THEREON HAS BEEN DULY PAID. HENCE, THERE COULD BE NO POSITION OF THE ASSESSEE ADVERSE THAN SHOWING TOTAL SALE CON SIDERATION AS TAXABLE CAPITAL GAIN. IT HAS FURTHER BEEN SUBMITTE D THAT WHEN THE ACQUISITION VALUE OF SHARES WAS SHOWN AS NIL, NO PR EJUDICE IS CAUSED TO REVENUE. 14. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS, W E FIND THAT IN THE DETAILS REGARDING THE COMPUTATION OF SHORT TERM CAPITAL GAIN, ASSESSEE HAS SHOWN 6,79,000 SHARES ACQUIRED ON 12. 11.2005 FOR WHICH NO RATE PER UNIT OR COST PRICE HAS BEEN MENTI ONED. THIS MEANS THAT THESE SHARES WERE ACQUIRED FOR NO COST. IN OUR CONSIDERED OPINION, LD. CIT IS CORRECT IN HOLDING T HAT THIS MATTER NEEDED AN ENQUIRY FROM THE AO AND AO HAS NOT MADE A NY ENQUIRY WHATSOEVER AS NOTED ABOVE IN THE ABOVE PARAGRAPHS. UNDER THE CIRCUMSTANCES, WE HOLD THAT THE DIRECTION OF THE LD . CIT FOR MAKING AN ENQUIRY IN THIS REGARD IS QUITE JUSTIFIED UNDER SECTION 263 OF THE I.T. ACT. 15. LD. CIT HAS FURTHER OBSERVED THAT DURING THE YE AR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED GIFT OF RS. 7.92 CRORES FROM HIS MOTHER AND RS. 1.83 LACS FROM FATHER. ALTHOUGH THE CONFIRMATION FROM THE MOTHER HAS BEEN OBTAINED. THERE IS NOTHIN G TO INDICATE THE SOURCE OF INCOME FROM WHERE THESE GIFTS WERE RECEIV ED. THIS ASPECT SHOULD HAVE BEEN EXAMINED FURTHER. 16. IN THIS REGARD, IT HAS BEEN SUBMITTED BY THE AS SESSEE THAT ORDER CANNOT BE CONSIDERED TO BE ERRONEOUS OR PRE-J UDICIAL ON THE ITA NO. 1649/DEL/2011 12 GROUND THAT SOURCE OF SOURCE HAS NOT BEEN EXAMINED. THE GIFT WAS RECEIVED FROM THE MOTHER AND CONFIRMATION IN RESPE CT THEREOF HAS BEEN SUBMITTED TO THE AO. THE AO HAS ACCEPTED THE POSITION AFTER DUE VERIFICATION. THEREFORE, NO ACTION U/S. 26 3 OF THE ACT IS CALLED FOR ON THIS GROUND ALSO. IN THIS REGARD, ALSO LD . COUNSEL OF THE ASSESSEE HAS RELIED UPON THE CASE FOR THE PROPOSITI ON THAT LD. CIT CANNOT DIRECT FOR MAKING FURTHER ENQUIRIES. IF THE AO HAS ADOPTED ONE VIEW OF THE POSSIBLE VIEW, THE SAME CANNOT BE C ONSIDERED TO BE LIABLE FOR ACTION UNDER SECTION 263. 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT VIDE ORDER SHEET ENTRY D ATED 6.11.2008 THE AO HAS ASKED THE ASSESSEE FOR EVIDENCE OF GIFT RECEIVED. IN THIS REGARD, ASSESSEE HAS SUBMITTED ONLY CONFIRMATION FR OM THE MOTHER, COPY OF BANK STATEMENT IN WHICH THE AMOUNT OF GI FT IS REFLECTED AND THE COPY OF TELEGRAPHIC TRANSFER CREDIT ADVICE. WE FIND THAT THESE DOCUMENTS SUBMITTED IN SUPPORT OF THE GIFTS F ROM THE MOTHER FOR THE MAGNITUDE OF RS. 7.92 CRORES ARE NOT AT ALL COGENTLY PROVING RECEIPT OF GIFT BY THE ASSESSEE. IN SUCH SITUATIO N IT IS SETTLED LAW THAT CREDITWORTHINESS OF THE DONOR IS ALSO TO BE ES TABLISHED BY THE ASSESSEE. NO DOCUMENT IN THIS REGARD HAS BEEN SUBM ITTED, NOR THE AO HAS MADE ANY ENQUIRY. SIMILARLY, WITH REGARD TO RS. 1.83 LACS FROM FATHER, NOT EVEN A CONFIRMATION WAS PRODUCED. IN THESE CIRCUMSTANCES, WE FIND THAT AO HAS NOT MADE ANY ENQ UIRY WHATSOEVER IN THIS REGARD AND THE SAME IS NOT AT AL L REFLECTED IN THE ENQUIRIES MADE AND THE ENTRIES OF THE ORDER SHEET. THE SAME IS ALSO NOT REFLECTED IN THE ASSESSMENT ORDER. IN THESE CI RCUMSTANCES, LD. CIT IS CORRECT IN HOLDING THAT THIS ASPECT NEEDS FU RTHER EXAMINATION. IT CAN ALSO NOT BE SAID THAT AO HAS ADOPTED ONE OF THE TWO POSSIBLE VIEWS WHEN NO ENQUIRY HAS BEEN MADE, WHEN THE SAME WAS REQUIRED. ITA NO. 1649/DEL/2011 13 18. THUS, WE FIND THAT ASSESSMENT ORDER AS REPRODUC ED ABOVE IS VERY LACONIC AND THEREFORE, IT DOES NOT REFLECT THA T AO HAS APPLIED HIS MIND ON THE ASPECT REFERRED IN THE ORDER OF THE LD. CIT U/S. 263. THE ORDER SHEET ENTRIES AND THE LETTERS ISSUED TO T HE ASSESSEE ALSO DO NOT ELICIT ENQUIRY BY THE AO AS MENTIONED HEREIN ABOVE. IN THESE CIRCUMSTANCES, WE FIND THAT LD. COUNSEL OF THE ASSE SSEES CONTENTION THAT AO CANNOT BE ASKED TO MAKE FURTHER ENQUIRY IS NOT TENABLE AS THE AO HAS BEEN FOUND TO HAVE MADE NO ENQUIRY. SI MILARLY, IT CAN ALSO NOT BE SAID THAT AO HAS FORMED AN OPINION WHIC H WAS ONE OF THE POSSIBLE OPINION. HENCE, THE CASE LAWS RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE DO NOT FRUCTIFY THE ASSESSE ES CASE. 19. IN THIS REGARD, WE ACCEPT THE LD. CITS OBSERVA TION THAT AO HAS MADE THE ASSESSMENT IN HASTE WITHOUT APPLYING HIS M IND PROPERLY. IN THIS REGARD, THE CASE LAW RELIED UPON BY THE LD. CIT ALSO SUPPORT HIS ACTION. IN THIS REGARD, WE WOULD LIKE TO PLAC E RELIANCE UPON THE DECISION IN THE CASE OF HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF GV ENTERPRISES 99 ITR 375 (DEL). IN THIS CASE THE JURISDICTIONAL HIGH COURT HAS EXPOUNDED THAT ITO IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN T HE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER TO CALL FOR F URTHER ENQUIRY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE WORD ER RONEOUS IN SECTION 263 INCLUDES FAILURE TO MAKE SUCH AN ENQ UIRY. WE FIND THAT THE ABOVE CASE LAW APPLIES TO THE FACTS AND CIRCUMS TANCES OF THE CASE SQUARELY. IN THESE CIRCUMSTANCES, WE HOLD THA T LD. CITS DIRECTION TO MAKE ENQUIRY ON THE ISSUE OF CAPITAL G AIN EARNED BY THE ITA NO. 1649/DEL/2011 14 ASSESSEE AS DISCUSSED ABOVE AND THE GIFT RECEIVED B Y THE ASSESSEE IS SUSTAINABLE. ACCORDINGLY, WE UPHOLD THIS ASPEC T OF THE DIRECTIONS OF THE LD. CIT UNDER SECTION 263. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/1/2014. SD/- SD/- [ [[ [BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 29/1/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 1649/DEL/2011 15