SARAH FAISAL HAWA, V. ACIT 17(3),

ITA 1969/MUM/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71287 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Assessee
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2013
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: PRADIP N KAPASI
• Keywords: Business income; Rectification of order; Opportunity of being heard; Transactions in derivatives; Deemed to accrue or arise in india; Cost of acquisition; Reassessment proceedings
• Section: 143(3); 68; 148; 63; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/ 2013 ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, SMT. SARAH FAISAL HAWA 24, CENTRAL COURT, AGRIPADA, MUMBAI- 400 011 PAN :AAIPH 0012 P VS. ACIT 17(3) PIRAMAL CHAMBERS MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADIP N. KAPASI RESPONDENT BY : SHRI P.K. SHUKLA DATE OF HEARING : 26.06.2013 DATE OF PRONOUNCEMENT : 25.09.2013 O R D E R PER BENCH: THIS BUNCH OF EIGHT APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE LD.CIT(A) -17, MUMBAI ALL DATED 23.11 .2012 & THE CONSEQUENT ORDERS PASSED BY THE AO U/S 143(3) R.W.S. 263 ALL DATED 06 .02.2013 GIVING EFFECT TO THE SAID ORDERS OF THE LD.CIT(A) FOR THE ASSESSMENT YEARS 20 05-06, 2006-07, 2008-09 AND 2009-10. SINCE COMMON ISSUES ARE INVOLVED IN ALL TH ESE APPEALS, THE SAME ARE DISPOSED OFF BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, THE FACTS IN ITA NO 1965/M/2013 AND ITA NO 1967/M/2013 FOR THE A.Y. 200 5-06 ARE TAKEN AS LEAD CASES FOR THE DISPOSAL OF ALL THE APPEALS. 2. BRIEFLY STATED, THE ASSESSEE AN INDIVIDUAL AND PARTNER IN THE FIRM M/S HAWA EXPORTS HAVING INCOME FROM SHARE OF PROFIT FORM THE FIRM, DIVIDEND, CAPITAL GAINS AND INCOME FROM OTHER SOURCES, HAD FILED THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A NET INCOME OF RS.1,10,70, 840/- COMPRISING OF RS.19,87,127/- FROM STCG BEFORE 01.10.2004, RS.56,4 9,475/- FROM STCG AFTER ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 2 01.10.2004 AND RS.28,61,567/- FROM LTCG BEFORE 01.1 0.2004. THE ORIGINAL RETURN OF INCOME FILED ON 08.08.2005 DECLARING TOTAL INCOME OF RS.1,10,70,840/- ( COMPRISING OF RS.19,87,127 FROM STCG BEFORE 01.10.2004, RS.56, 49,475/- FROM STCG AFTER 01.10.2004 AND RS.28,61,567 FROM LTCG BEFORE 01.10. 2004) WAS ACCEPTED VIDE INTIMATION U/S 143(1). THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 DT. 02.06.2010. THE INCOME WAS REASSESSED VIDE ORDER U/ S 143(3) R.W.S. 147 DT. 30.11.2011 AT RS.1,10,70,840/-. SUBSEQUENT TO THE A CCEPTANCE, ASSESSMENT AND REASSESSMENT OF INCOME THE LD.CIT SOUGHT TO REVISE THE SAID ORDER OF REASSESSMENT ISSUING NOTICE U/S 263 DT. 30.08.2012. ORDER U/S 26 3 DT. 23.11.2012 WAS PASSED BY THE CIT DIRECTING THE AO TO AMEND THE FOLLOWING REA SSESSED INCOME BY TAXING THE CAPITAL GAINS AS BUSINESS INCOME AND MADE ADDITIONS TO THE REASSESSED INCOME AS UNDER: PARTICULARS AMOUNT SHORT TERM CAPITAL GAINS BEFORE 01.10.2004 TO BE TR EATED AS BUSINESS INCOME 19,87,127 SHORT TERM CAPITAL GAINS AFTER 01.10.2004 TO BE TRE ATED AS BUSINESS INCOME (CONCESSIONAL TAX RATE U/S 111A DENIED) 56,49,475 LONG TERM CAPITAL GAINS BEFORE 01.10.2004 TO BE TRE ATED AS BUSINESS INCOME (CONCESSIONAL TAX RATE U/S 112 DENIED) 28,61,567 LONG TERM CAPITAL GAINS AFTER 01.10.2004 TO BE TREA TED AS BUSINESS INCOME (EXEMPTION U/S 10(38) DENIED) 35,75,885 DEEMED INCOME U/S 68 OF THE INCOME TAX ACT, 1961 21 ,50,000 OUT OF WITHDRAWALS FOR HOUSEHOLD PURPOSES 1,50,000 CONSEQUENT TO THE SAID DIRECTION, THE AO HAS PASSED AN ORDER U/S 143(3) R.W.S. 263 LEADING TO VARIOUS ADDITIONS AS DIRECTED BY THE LD. CIT(A). BEING AGGRIEVED BY THE SAID ORDER OF CIT U/S 263 AND THE CONSEQUENT ORDER OF THE AO PASSED U/S 143(3) R.W.S. 263 LEADING TO VARIOUS DISALLOWANCE/ADDITION S/ADJUSTMENTS/DENIAL/LEVIES, THE ASSESSEE IS IN APPEAL BEFORE US. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS ARGUED AT LENGTH BY DRAWING OUR ATTENTION TO THE CHARTS AND FACTS SHEET FILED DURIN G THE COURSE OF THE PROCEEDINGS TO SUBSTANTIATE THE CLAIM THAT THE ORDER OF THE LD.CIT (A) U/S 263 AND THE REVISION AS REGARDS VARIOUS ADDITIONS MADE ARE NOT IN ACCORDANC E WITH LAW AND HENCE INVALID. ALSO, THE LD.AR HAS MADE ELABORATE ARGUMENTS AGAINS T THE ADDITIONS MADE IN THE ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 3 ORDER PASSED BY THE AO U/S 143(3) R.W.S. 263 WHILE GIVING EFFECT TO THE ORDER PASSED BY THE LD.CIT(A) U/S 263. ON THE OTHER HAND THE LD. DR HAS STATED THAT THE ORDERS OF THE LD.CIT(A) U/S 263 & THE REVISION MADE BY HIM AND THE ORDER PASSED BY THE AO U/S 143(3) R.W.S. 263 ARE JUSTIFIED. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. IT IS BY NOW WELL SETTLED THAT THE SCOPE OF REASSESSMENT PRO CEEDINGS IS TO BRING TO TAX THE INCOME OF THE ASSESSEE WHICH HAS ESCAPED ASSESSMENT AND SUCH INCOME ESCAPING ASSESSMENT WOULD BE AS NOTICED BY THE AO WHILE RECO RDING THE REASONS FOR ISSUING NOTICE UNDER S. 148 AND/OR AS COMING TO HIS NOTICE DURING THE COURSE OF REASSESSMENT PROCEEDINGS. IT IS PERTINENT TO NOTE T HAT THE SCOPE OF REASSESSMENT PROCEEDINGS IS LIMITED TO BRING TO TAX SUCH ESCAPED INCOME OF THE ASSESSEE. ALSO, THE POSITION OF LAW IS VERY CLEAR THAT THE ASSESSMENT O RDER PASSED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER S. 147/148 C AN BE REVISED BY THE CIT EXERCISING THE POWERS CONFERRED UPON HIM UNDER S. 2 63 IF THE SAME IS FOUND TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. 4.1 FOR THE PURPOSES OF EXAMINING THE VALIDITY OF THE ORDER OF THE LD.CIT(A), IT IS IMPORTANT TO SEE THE REASONS STATED BY THE LD.CIT(A ) FOR HIS ACTION U/S 263 OF THE INCOME TAX ACT, WHICH READS AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS AND PROVISIONS OF LAW WITH REGARD TO THE ISSUES INVOLVED. I HAVE ALSO CAREFULL Y CONSIDERED THE ARGUMENTS PUT FORTH BY THE LEARNED COUNSELS FOR THE ASSESSEE. 5.1 DURING THE PERIOD RELEVANT TO A.Y. 2007-08 THE ASSESSEE CLAIMED LONG TERM CAPITAL GAIN OF RS.3.82 CORES AS EXEMPT U/S 10 (38) AND SHORT TERM CAPITAL GAIN OF RS.1.97 CRORES, TAXABLE @ 10% U/S 1 11A. THE CLAIM OF THE ASSESSEE WAS THAT SHE HAD MADE INVESTMENT FOR LONG TERM APPRECIATION AND EARNING DIVIDEND AND THAT NO SHARES WERE TRADED BY HER AS STOCK-IN-TRADE. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND ANY ME RIT IN THIS CLAIM OF THE ASSESSEE AND HELD THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF SHARES AND THE WHOLE OF LONG TERM CAPITAL GAIN A ND SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE WAS TREATED AS BUSINESS IN COME OF THE ASSESSEE. THE ASSESSING OFFICER ARRIVED AT THE ABOVE CONCLUSI ON ON THE BASIS OF THE FOLLOWING FACTS, PECULIAR TO THE CASE OF THE ASSESS EE: ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 4 (A) THE ONLY ACTIVITY IN WHICH ASSESSEE WAS ENGAGED WAS PURCHASE AND SALE OF SHARES ON REGULAR BASIS WITH A MOTIVE TO MA XIMIZE PROFITS FROM SUCH TRADING ACTIVITY. (B) THE ASSESSEE PURCHASED 4,46,675 SHARES AND SOLD 11, 66,435 SHARES AND ALSO TRADED IN 32 SCRIPS AND ENTERED INTO 188 T RADING TRANSACTIONS WHICH WAS A CONCLUSIVE EVIDENCE OF TRADING ACTIVITY OF THE ASSESSEE IN SHARES. (C) THE ASSESSEE UTILISED SUBSTANTIAL BORROWED FUNDS FO R TRADING IN SHARES. IN THIS REGARD, THE ASSESSING OFFICER RELIED UPON T HE DECISION OF APEX COURT IN THE CASE OF SARDAR INDRA SINGH & SONS LTD. V/S CIT (1953) 24 ITR 514 (SC). (D) THE ASSESSEES TRADING ACTIVITY IN 32 SCRIPTS AND 1 88 TRANSACTIONS IN THE RELEVANT PREVIOUS YEAR WAS ENOUGH FREQUENCY OF TRADING IN SHARES TO CONCLUDE THAT ASSESSEE WAS ENGAGED IN BUSINESS A CTIVITY OF TRADING IN SHARES. FOR THE PURPOSE, THE ASSESSING OFFICER RELI ED UPON THE DECISION OF APEX COURT IN THE CASE CIT V/S SUTLEJ COTTON MIL LS SUPPLY AGENCIES LTD. (1975) 100 ITR 706 (SC). THE ASSESSING OFFICER FURTHER HELD THAT THE MANNER IN WHICH ASSESSEE WAS REFLECTING STOCK O F SHARES AS INVESTMENT IN HER BOOKS OF ACCOUNTS WAS NOT ENOUGH EVIDENCE TO CONCLUDE THAT ASSESSEE WAS AN INVESTOR ONLY. FOR TH E PURPOSE, THE ASSESSING OFFICER RELIED UPON THE DECISION OF APEX COURT IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD V/S CIT (1971) 82 ITR 3 63 (SC) AND CIT V/S SUTLEJ COTTON MILLS SUPPLY AGENCIES LTD. (1975) 100 ITR 706 (SC). (E) THE PERIOD OF HOLDING, DELIVERY BASE TRADING AND TH E CLAIM THAT ASSESSEE WAS INVESTING ONLY IN LISTED SHARE ACTIVIT IES WAS NOT RELEVANT BECAUSE THE DECISION OF HOLDING THE SHARES UP TO A PARTICULAR TIME WAS PURELY A BUSINESS DECISION WITH AN INTENT TO MAXIMI ZE PROFITS FROM SUCH SHARE TRADING ACTIVITY. (F) THE ASSESSEE WAS NOT MAINTAINING TWO PORTFOLIOS, ON E FOR INVESTMENT AND ANOTHER FOR TRADING. IN FACT, THE ASSESSEE WAS FREQUENTLY TRADING IN SPECIFIC SCRIPT AND CLAIMING THE SAME ALSO TO BE IN VESTMENT ACTIVITY. 5.2 THE ASSESSING OFFICER AFTER CONSIDERING THE VOL UME, FREQUENCY AND REGULARITY OF TRADING ACTIVITY IN SHARES, VARIOUS J UDICIAL PRONOUNCEMENTS AND CBDT CIRCULAR NO. 4/2007, HELD THE ACTIVITY OF THE ASSESSEE TO BE TRADING IN SHARES AND THE PROFIT EARNED FROM SUCH ACTIVITY WAS BROUGHT TO TAX BY THE ASSESSING OFFICER AS INCOME FROM BUSINESS. 5.3 THE LD.CIT(A), HOWEVER DID NOT UPHOLD THE FINDI NGS OF THE ASSESSING OFFICER BY RELYING ON THE DECISIONS OF THE HONBLE ITAT, MUMBAI, IN THE CASE OF GOPAL PUROHIT 122 TTJ 433 AND BASED HIS DECISION ON THE FOLLOWING: (A) THE ASSESSEE WAS SHOWING SHARE INVESTMENT IN T HE BALANCE SHEET IN EARLIER YEARS ALSO AND ASSESSEES CLAIM WAS ACCEPTE D IN EARLIER YEARS. ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 5 (B) THE ASSESSEE HAD NO ORGANIZED BUSINESS ACTIVIT Y OF TRADING IN SHARES. (C) MAJOR LONG TERM CAPITAL GAIN WAS IN RESPECT OF ONLY SHARES OF 9 COMPANIES. (D) MOST OF THE TRANSACTIONS WERE DELIVERY BASED. (E) THERE WAS NO BORROWING. (F) THERE WAS HUGE DIVIDEND INCOME. (G) MAGNITUDE OF TRANSACTION WAS NOT OF MUCH RELEV ANCE. (H) SCRIPS OF ASSESSEE WERE NOT HELD AS STOCK-IN-T RADE. 5.4 THE DECISION OF LD.CIT(A) WAS NOT ACCEPTED BY T HE DEPARTMENT AND A SECOND APPEAL WAS PREFERRED TO THE ITAT, AS THE DEC ISION OF CIT (A) DID NOT CONSIDER THE RELEVANT FACTS PECULIAR TO THE CASE OF THE ASSESSEE AND THE CORRECT POSITION OF LAW AS APPLICABLE TO THE FACTS OF THE ASSESSEE AND IN PARTICULAR ON THE FOLLOWING GROUNDS: (A) THE LD.CIT(A) DID NOT APPRECIATE THAT THE CASE OF T HE ASSESSEE WAS CLEARLY DISTINGUISHABLE ON FACTS FROM THE CASE OF GOPAL PUR OHIT 122 TTJ 433. (B) THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER WERE NOT DULY CONSIDERED AND DISTI NGUISHED. (C) THE PRINCIPLE OF RES-JUDICATA DID NOT APPLY TO INCO ME TAX PROCEEDINGS. (D) THE FOLLOWING DECISIONS OF JURISDICTIONAL ITAT WERE NOT CONSIDERED BY LD.CIT(A): (1) V. NAGESH V/S ACIT ITA NO. 5410/MUM/2008 (2) SMT. SADHANA NAVERA V/S ACIT 25(3) IN ITA NO. 2586/ MUM/2009 (E) THE DECISION OF HONBLE ITAT, AHMEDABAD IN THE CASE OF SUGAMCHAND C. SHAT V/S ACIT REPORTED IN 37 DTR 345 WAS ALSO NOT CONSIDERED BY THE LD.CIT(A). (F) THE OBSERVATIONS THAT THE ASSESSEE EARNED HUGE DIVI DEND INCOME WAS NOT FACTUALLY CORRECT FOR THE REASON THAT EARNING OF DI VIDEND F&O 12.85 LAKHS WAS ONLY INCIDENTAL TO SHARE HOLDINGS OF THE ASSESSEE, WHICH IS VALUED AT COST TO BE RS.11.63 CRORES. THE DIVIDEND ON SUCH HOLDINGS WORK S OUT TO BE EVEN LESS THAN 1% OF THE PURCHASE COST OF SHARES. (G) THE OBSERVATIONS THAT NO BORROWED FUNDS WERE UTILIZ ED BY THE ASSESSEE IS ALSO FACTUALLY INCORRECT FOR THE REASON THAT AT THE BEGI NNING OF THE YEAR THE ASSESSEE HAD BORROWED FUNDS TO THE TUNE OF RS.32.66 LAKHS FR OM HDFC BANK AND AFTER DAY-TO-DAY DEBITS AND CREDITS, AT THE YEAR END THE ASSESSEE HAD CREDIT BALANCE IN THIS BANK OF RS.52,000. IN A SIMILAR MANNER, THE AS SESSEE MAINTAINED CURRENT ACCOUNT WITH S.G. HAWA & CO. WHEREIN THE CREDIT BAL ANCE OF THE ASSESSEE IN THIS FIRM FLUCTUATED FROM 32.96 LAKHS TO RS.1.88 CRORES. THIS INDICATED THAT THE ASSESSEE UTILIZED FUNDS BORROWED FROM HDFC BANK AND FUNDS WITHDRAWN FROM HER ACCOUNT WITH H.G. HAWA & CO. ON LARGE NUMBER OF OCC ASIONS FOR PURCHASE OF SHARES AND TO EARN PROFITS FROM TRADING ACTIVITY IN SHARES. ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 6 6. WITH THE ABOVE FACTS ON RECORD AND THE FACT THAT THE ASSESSEES SHARE TRADING ACTIVITY WAS TREATED AS BUSINESS ACTIVITY I N A.Y. 2007-08 AND THE ISSUE WAS THE SUBJECT MATTER OF APPEAL BEFORE HONBLE ITA T, THE ACTION OF THE ASSESSING OFFICER IN DROPPING THE PROCEEDING INITIA TED U/S 147 AND ACCEPTING RETUNED INCOME WAS GROSSLY ERRONEOUS AND HIGHLY PREJUDICIAL TO THE INTEREST OF REVENUE. 7. AN ACTION U/S 263 WAS FULLY JUSTIFIED IN SUCH CA SES AS HELD IN JUDICIAL PRONOUNCEMENTS REFERRED TO IN NOTICE U/S 263 REPROD UCED ABOVE AND IN VARIOUS JUDICIAL PRONOUNCEMENT AS UNDER: A) IN INCOME-TAX OFFICER VS VANAZ ENGINEERS (P) LT D. 70 ITD 525-PUNE. THE HONOURABLE ITAT PUNE HELD THAT EVEN WHEN AS SESSING OFFICER FOLLOWED THE LINE AS PER DECISION OF CIT(A) IN ANOTHER YEAR, THE CIT WAS JUSTIFIED TO INVOKE REVISION U/S 263 IF THE VIEW HELD BY CIT(A), IN ANOTHER ASSESSMENT YEAR WAS NOT ACCEPTABLE TO TH E DEPARTMENT AND AN APPEAL WAS PREFERRED TO ITAT. IN THIS DECISION, THE HONBLE TRIBUNAL OBSERVED AS UNDER: THE FACT THAT ORDER OF CIT(A) WAS SUBJECT-MATTER OF FURTHER APPEAL BEFORE THE TRIBUNAL WAS VERY MUCH AVAILABLE BEFORE THE CIT AND THEREFORE, THE CIT BEING REPRESENTATIVE OF THE REVENUE WAS BOUND TO CONSIDER THE ERROR COMMITTED BY THE ASSESS ING OFFICER WITHOUT BEING INFLUENCED BY THE ORDER OF CIT(A). B) IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS IT WAS HELD THAT WHEN PROCEEDINGS INITIATED U/S 147 WERE DROPPED THE CIT COULD INVOKE REVISION U/S 263: 1. P.K. FABRICS VS. ACIT (ITAT, ASR) 67 ITD 326 2. EXPORTS INDIA VS. CIT (DEL) 246 ITR 1 3. NEW JAGAT TEXTILE MILLS P. LTD. VS CIT (GUJ) 28 2 ITR 399 C) IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS IT WAS FURTHER HELD THAT CIT WAS JUSTIFIED IN INVOKING PROVISIONS OF SECTION 263 EVEN ON DEBATABLE ISSUES: 1. JEHANNUMA PALACE HOTEL (P) LTD. VS. CIT (I TAT, INDORE) 70 ITD 552 2. D & H SECHERON ELECTORDES LTD. VS. DCIT (ITA T, INDORE) 70 ITD 214 3. MALABAR INDUSTRIAL CO. LTD. VS. CIT (SC) 243 ITR 83 D) IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS IT WAS HELD THAT AN ASSESSMENT MADE WITHOUT CONDUCTING PROPER ENQUIRIES WAS AN ERRONEOUS ASSESSMENT AND WAS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE AND CIT WAS JUSTIFIED TO REVISE THE SAME BY INVOKING PROVISIONS OF SECTION 263: 1. CIT VS. PUSHPA DEVI (PATNA) 173 ITR 445 2. ADDL. CIT VS. MUKUR CORPORATION (GUJ) 111 IT R 312 ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 7 3. SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. VS . CIT (ALL) 187 ITR 412 4. THALIBAI F. JAIN & OTHERS VS. ITO & ANR (K AR) 101 ITR 1 5. TEJINDER SINGH MAKKER VS. ACIT (ITAT, MUM-TM ) 61 ITD 57 6. RAMPYARI DEVI SAROOGI VS. CIT (SC) 67 ITR 84 7. CIT VS. MCMILLAN& CO. (SC) 33 ITR 182. 8. LAJJA VATI SINGHAL VS. CIT (ALL) 226 ITR 527 9. GEE VEE ENTERPRISES VS. ADDL. CIT & OR S(DEL) 99 ITR 375 10. D&H SECHERON ELECTORDES LTD. VS. DCIT (ITAT , INDORE) 70 ITD 214 11. JAIN BHARAT TANNERS VS. CIT (MAD) 264 ITR 6 73 12. ASHOK LEYLAND LTD. VS. CIT(MAD) 260 ITR 599 13. ARVEE INTERNATIONAL VS. ADDL. CIT (ITAT, MU M) 101 ITD 495 14. COLOR CRAFT KASHMIRA CERAMIC COMPOUND VS. I TO (ITAT, MUM) 105 ITD 59915. E) HONBLE DELHI HIGH COURT IN THE CASE OF DUGGAL & CO. V. CIT (1996) 220 ITR 456 (DEL) HELD AS UNDER: AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR B UT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS INCUMBENT ON THE ASSESSING OFFICER TO FURTHER INVESTIGATE THE FACT S TATED IN THE RETURN, WHEN CIRCUMSTANCES WOULD MAKE SUCH AN ENQUIRY PRUDE NT. THE WORD ERRONEOUS IN SEC. 263 OF THE ACT, INCLUDES THE FAI LURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIR Y HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRO NG WITH THE ORDER, IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. F) HONBLE MADHYA PRADESH HIGH COURT IN THE CASE O F CIT V. KOHINOOR TOBACCO PRODUCTS P. LTD. [1998] 148 CTR (MP) 563 HE LD AS UNDER: ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFI CER WITHOUT MAKING PROPER ENQUIRY. SUCH ORDER WAS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN AS MUCH AS THE ASSE SSING OFFICER MADE NO ENQUIRY AT ALL TO ASCERTAIN WHETHER THE INCOME RECE IVED FROM LETTING OUT OF THE PROPERTIES WERE ASSESSABLE AS INCOME FROM BUSIN ESS OR AS INCOME FROM HOUSE PROPERTY. G) HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V . M.M. KHAMBHATWALA [1992] 198 ITR 144 (GUJ) HELD AS UNDER : ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 8 POWERS CAN BE EXERCISED EVEN IF THE ISSUE IS DEBA TABLE. REVISIONAL POWER UNDER SECTION 263 IS NOT COMPARABLE WITH THE POWER OF RECTIFICATION OF MISTAKE UNDER SECTION 154. IN VIEW OF THE ABOVE AND FACTS AND ISSUES INVOLVED IN THE CASE OF THE ASSESSEE. I HOLD THAT THERE WERE NO MERITS IN THE A RGUMENTS PUT FORTH BY THE ASSESSEE AND THE PROVISIONS OF SECTION 263 WERE CLE ARLY APPLICABLE IN THE CASE OF THE ASSESSEE TO ENSURE PROPER ASSESSMENT IN ACCO RDANCE WITH PROVISIONS OF LAW. THE REASONS STATED BY THE LD.CIT(A), IN CRUX, INDI CATES THAT THE REOPENING AND THE CONSEQUENT ACTION OF THE LD.CIT(A) U/S 263 IS MAINL Y BASED ON THE FACTS EMERGED IN THE ASSESSMENT PROCEEDINGS FOR THE YEAR 2007-08 IN WHICH IT HAS BEEN FOUND BY THE AO THAT THE ASSESSEE WAS DEALING IN PURCHASE AND SA LE OF SHARES WITH PROFIT MOTIVE AND INCOME THEREFROM WAS ASSESSABLE AS BUSINESS INC OME WHICH IS SEPARATELY CONTESTED BY THE DEPARTMENT BEFORE THE ITAT AGAINST THE RELIEF GIVEN BY THE LD.CIT(A) AGAINST THE ORDER OF THE AO. THE PERUSAL OF THE REASSESSMENT ORDER PASSED BY THE AO REVEALS THAT HE HAS SIMPLY RELIED/ ACCEPTED THE REPLY OF THE ASSESSEE IN RESPONSE TO THE NOTICE GIVEN BY THE AO DURING THE REASSESSMENT PROCEEDINGS AND PROCEEDED TO COMPLETE THE ASSESSMEN T THEREBY ACCEPTING THE RETURNED INCOME OF THE ASSESSEE. THE AO HAS NOT MAD E DUE ENQUIRY IN THE LINE OF THE ASSESSMENT COMPLETED DURING THE A.Y.2007-08, WH EN THE FACT BEING THAT THE REOPENING HAS BEEN DONE ON THE BASIS OF THE SAID A. Y. 2007-08. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A)S ACTION U/S 263 IS JUSTIFIED AS THE ACTION THE AO IN DROPPINGS THE PROCEEDINGS INITIATED U/S 1 47 AND ACCEPTING THE RETURNED INCOME DURING THE YEAR UNDER CONSIDERATION IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. NO DOUBT THAT THE LD.CIT(A ) IS COMPETENT AND EMPOWERED U/S 263 TO PASS SUCH ORDERS ENHANCING OR MODIFYING THE ASSESSMENT, HOWEVER, CONSIDERING THE FACT THAT THE AO HAS MADE DUE ENQUI RY DURING THE ASSESSMENT COMPLETED DURING THE A.Y.2007-08, WHILE PASSING THE ORDER U/S 263, THE LD.CIT(A), INSTEAD OF DECIDING THE ISSUES ON MERIT GIVING A DI RECTION TO THE AO FOR MAKING THE IMPUGNED ADDITIONS, HE OUGHT TO HAVE REFERRED THE M ATTER TO THE FILE OF THE AO FOR MAKING A FRESH ASSESSMENT SO THAT THE AO COULD HAVE MADE A DUE ENQUIRY IN THE FRESH ASSESSMENT ON THE BASIS OF THE ASSESSMENT ORD ER PASSED IN THE YEAR 2007-08. ITA NOS. 1963, 1964, 1965, 1966, 1967, 1968, 1969, 1970/MUM/2013 SMT. SARAH FAISAL HAWA ASSESSMENT YEARS : 2005-06, 2006-07, 2008-09, 2009-10, 9 IN VIEW OF THAT MATTER, THE ORDER OF THE LD.CIT(A) TO THE EXTENT THAT THE REASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE IS UPHELD AND THE ORDER TO THE EXTENT O F THE DIRECTION GIVEN BY HIM TO MAKE THE IMPUGNED ADDITIONS IS SET ASIDE. ACCORDING LY, WE DIRECT THE AO TO MAKE A FRESH ASSESSMENT U/S 143(3) READ WITH SECTION 263 O N THE IMPUGNED ADDITIONS/DISALLOWANCES MADE/ENHANCED BY THE LD.CIT (A) KEEPING IN VIEW OF THE SCOPE OF REASSESSMENT PROCEEDINGS AND AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. NEEDLESS TO EMPHASIS THAT THE AO WILL MAKE THE FRESH ASSESSMENT ON MERIT WITHOUT BEING INFLUENCED BY THE DECISION AND DIRECTION OF THE LD.CIT(A) TO MAKE THE ADDITIONS/DISALLOWANCES. WE O RDER AND DIRECT ACCORDINGLY. 4.2 IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E, ITA NO 1965/M/2013 PARTLY ALLOWED AND ITA NO 1967/M/2013 IS ALLOWED FOR STATI STICAL PURPOSE. SINCE THE FACTS AND ISSUES IN THE RESPECTIVE APPEALS FOR THE ASSESS MENT YEARS 2006-07, 2008-09 AND 2009-10 ARE IDENTICAL AND SIMILAR IN NATURE, THE SA ME ARE DISPOSED OFF IN THE SAME LINE FOR THE REASONS STATED IN ADJUDICATING THE APP EALS ITA NO 1965/M/2013 AND ITA NO 1967/M/2013 FOR THE A.Y 2005-06 AS AFOREMENTIONE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.09.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR H BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.