INSTNAT HOLDINGS LTD, MUMBAI V. PR. CIT (ADMN) 46, MUMBAI

ITA 2345/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4043 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 02-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Court: TRIBUNAL
• Department Lawyers: B C S NAIK
• Keywords: Capital asset; Cost of acquisition; Wholly owned subsidiary; Fair market value; Assessment record
• Section: 143(3); 133(6); 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. NO.2345/M/2015 (ASSESSMENT YEAR: 2010 - 2011 ) INSTANT HOLDINGS LTD., 213, BEZZOLA COMPLEX, B WING, 71, SION TROMBAY ROAD, CHEMBUR, MUMBAI 400 071. / VS. PRINCIPAL COMMISSIONER OF INCOME TAX (ADMN.) - 6, MUMBAI. ./ PAN : AACCK5600M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA / RESPONDENT BY : SHRI B.C.S. NAIK, CIT - DR / DATE OF HEARING : 19. 0 2 .2016 / DATE OF PRONOUNCEMENT : 20.04 .2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEA L FILED BY THE ASSESSEE ON 24.4.2015 IS AGAINST THE ORDER OF THE PRINCIPAL CIT, M UMBAI PASSED U/S 263 OF THE ACT VIDE ORDER DATED 30.3.3015. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ UNDER: - GROUND NO.1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT IN THE APPELLANTS CASE. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT UNDER SECTION 263 OF THE ACT MAY KINDLY B E QUASHED AND THE ASSESSMENT ORDER OF THE AO DATED 23.3.2013 MAY BE RESTORED. GROUND NO.2: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT ERRED IN EXERCISING THE JURISDICTION U/S 263 OF THE ACT ON THE GROUND THAT NO ORDER HAS BEEN PASSED BY THE FIRST APPELLATE AUTHORITY ON THE ISSUE RELATED TO SHORT TERM CAPITAL LOSS ON TRANSFER OF INTEREST IN RPG ITOCHU FINANCE LTD ( RIFL ) BENEFIT TRUST WITHOUT CONSIDERING THE INTENT AND OBJECTS OF CL AUSE (C) OF THE EXPLANATION TO SUB - SECTION (1) OF SECTION 263 OF THE ACT. (2) THE APPELLANT PRAYS THAT IT BE HELD THAT THE CIT HAS NO JURISDICTION TO EXERCISE REVISIONARY POWER U/S 263 OF THE ACT WITH RESPECT TO ISSUE IN APPEAL BEFORE THE FIRST APPELLATE AUTHO RITY IN VIEW OF CLAUSE (C) OF THE EXPLANATION TO SECTION 263(1) OF THE ACT. 2 GROUND NO.3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT ERRED IN SETTING ASIDE THE APPELLANTS CASE BACK TO THE LD AO FOR MAKING A FRESH ASSESSME NT BY HOLDING THAT THE ASSESSMENT ORDER DATED 23.3.2013 MADE BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, THE LD AO ERRED IN MAKING VARIOUS OBSERVATIONS AND GIVING VARIOUS FINDINGS WITHOUT ANY CORROBORATIVE EVIDENCE AND / OR CONTRARY TO SUCH EVIDENCE AND / OR WITHOUT ANY BASIS IN REACHING THE ABOVE CONCLUSIONS. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT U/S 263 OF THE ACT MAY KINDLY BE QUASHED AND THE ASSESSMENT ORDER OF THE AO DATED 23.3.2013 BE RESTORED. ALL THE AB OVE GROUNDS ARE WIT H OUT PREJUDICE TO EACH OTHER. 2 . BEFORE GOING TO THE BRIEF FACTS OF THE CASE, WE FIND IT RELEVANT TO PLACE CERTAIN FACTS THAT TOOK PLACE BEFORE THE DATE OF THIS HEARING BY US. THIS IS A CASE WHERE THE APPEAL WAS ADJOURNED FROM TIME TO TIME AROUND 20 TIMES BEFORE IT IS FINALLY HEARD ON 19 TH FEBRUARY, 2016. THERE WAS A NOTING IN THE RECORD ABOUT THE NON - COOPERATION OF THE DEPARTMENT ON VARIOUS GROUNDS INCLUDING ON THE GROUND OF THEIR PROPOSAL TO APPOINT A SPEC IAL COUNSEL TO PLEAD THEIR SIDE . THE ORDER SHEET NOTING DATED 17.12.2015 SPEAKS ABOUT THE NON - COOPERATION OF THE LD DEPARTMENTAL REPRESENTATIVES. ALTHOUGH THE CASE WAS SUBSTANTIVELY HEARD ON 10.9.2015, THE BENCH DECIDED TO DE - HEARD THE CASE CONSIDERING T HE DEPARTMENTAL NON - COOPERATION VIDE ITS LETTER DATED 22.9.2015. THERE WAS A LSO NOTING ON THE LETTER OF ADJOURNMENT DIRECTING THE AO FOR NOT PASSING A CONSEQUENTIAL ORDER . PROBABLY, THAT BENCH FELT AGAINST THE CREATION OF HUGE DEMAND BY WAY OF PASSING A F RESH ASSESSMENT ORDER. WHEN THIS WAS BROUGHT TO OUR NOTICE BY THE LD DR, C ONSIDERING THE TIME BARRING NATURE OF THE FRESH ASSESSMENT ORDER, TO GIVE EFFECT TO THE ORDER OF THE CIT U/S 263, WE DIRECTED THE AO TO PROCEED WITH THEIR FRESH ASSESSMENT PROCEEDI NGS U/S 143(3) R.W.S 263 OF THE ACT. LD DR WAS INFORMED ACCORDINGLY. 3 . COMING TO THE BASIC FACTS NECESSARY FOR ADJUDICATION OF THE APPEAL, WE FIND, THE ASSESSEE FILED THE RETURN ON 6.10.2012 DECLARING THE LOSS OF RS. 33.73 CRS (ROUNDED OFF). NOTICE U/S 143(2) WAS ISSUED AND THE ASSESSMENT WAS COMPLETED ON 23.3.3013 DETERMINING THE ASSESSED LOSS AT RS. 16.05 CRS (ROUNDED OFF). IN THE REGULAR ASSESSMENT, AO DISALLOWED THE CLAIM OF SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS AS PER THE DISCUSSION GIVEN IN PAR A 5 OF THE ASSESSMENT ORDER. OTHERWISE, ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SECURITIES AND SHARES. 4. THE BRIEF FACTS RELEVANT FOR THE ABOVE ADDITION OF RS. 17.68 CRS INCLUDE THAT THE ASSESSEE CLAIMED THE SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS AND THE SAME WAS 3 GENERATED OUT OF THE TRANSACTION OF TRADING OF BENEFICIAL INTEREST . THE FACTS LEADING TO THE SAID BENEFICIAL INTEREST INCLUDE THAT THE ASSESSEE PURCHASED THE BENEFICIAL INTEREST FOR A SUM OF RS. 45,31,16,989/ - ON 2.1.2010. THE SAID BENEFICIAL INTEREST RELATES TO THE SHARES OF THREE COMPANIES VIZ (I) M/S. BRABOURNE ENTERPRISES LTD (BEL); (II) M/S. OCTAV INVESTMENTS LTD (OIL) AND (III) M/S. SUMMIT SECURITIES LTD (SSL). THESE SHARES WERE ORIGINALLY HELD BY THE ABOVE ONES IN A COMPANY CALLED M/S. CHI INVESTMENTS LTD . T HE SAID THREE COMPANIES WERE AMALGAMATED BY VIRTUE OF JUDGMENT OF HONBLE HIGH COURT AND THE SHARES WERE FRESHLY ALLOTTED. HOWEVER, WHILE ALLOTTING, THE SHARES WERE TRANSFERRED TO A TRUST IE RIFL BENEFICIAL TRUST . THE BENEFIT RELATABLE TO THE SHARES IN THE TRUST IS RECOGNISED AS A BENEFICIAL INTEREST. THE BENEFICIAL INTEREST IS THE SUBJECT MATTER OF ABOVE PURCHASES BY THE ASSESSEE. NET COST OF THE SAID SHARES AS PER THE BOOKS IS RS. 45,31,16,989/ - . THE SAID AMOUNT IS ARRIVED AT AFTER CONSIDERING THE DIMINUTION IN VALUE OF S OME SHARES WHICH AMOUNTS TO RS. 1,81,67,311/ - . THUS, RIFL HAS BENEFICIAL INTEREST, WHICH WAS SOLD TO THE ASSESSEE FOR A SUM OF RS. 45.31 CRS. THE COST OF THESE SHARES AS PER THE FAIR MARK ET VALUE (FMV) IN THE STOCK EXCHANGE IS ONLY RS. 6.83 CRS (ROUNDED OFF). SUBSEQUENTLY, T HE SAID RS. 45.31 CRS WORTH OF BENEFICIAL INTEREST WAS SOLD BY THE ASSESSEE TO A COMPANY NAMED M/S. OFFSHORE INDIA LTD AFTER 35 DAYS OF ITS ACQUISITION. THE SAME WA S SOLD FOR RS. 27.63 CRS. THEREFORE, THE ASSESSEE CLAIMED SHORT TER M CAPITAL LOSS OF RS. 17.68 CRS ( THE DIFFERENCE BETWEEN RS.45.31 CRS AND RS. 27.63 CRS ) . AS STATED ABOVE, IN THE ASSESSMENT, AO DISALLOWED THE SAID SHORT TERM CAPITA LOSS OF RS. 17.68 CRS WHILE MAKING ASSESSMENT. AO IS OF THE VIEW THAT THE SALE PRICE @ 27.63 CRS IS NOT PROPER. HE REASONED THAT WT THE GAP OF 35 DAYS, THE VALUE OF BENEFICIAL INTEREST COULD NOT HAVE FALLEN DOWN TO RS. 27.63 CRS FROM 45.31 CRS. AGGRIEVED WITH THE ABOVE DECIS ION OF THE AO, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A), WHICH IS STILL PENDING FOR CONSIDERATION AND ADJUDICATION. 5. THE PRINCIPAL CIT - 6, MUMBAI REVISED THE ABOVE SAID ASSESSMENT ORDER OF THE AO DATED 23.3.2013 VIDE HIS ORDER DATED 30.3.2015. AS PER THE PROCEDURE, PRINCIPAL CIT ISSUED A SHOW CAUSE NOTICE DATED 22.1.2015 AS REQUIRED UNDER THE STATUTE. IN THE REVISION ORDER, PRINCIPAL CIT HIGHLIGHTED MAINLY THREE ISSUES IN HIS ORDER AND THEY ARE VIZ., (I) AOS UTTER LACK OF APPLICATION OF MIND IN EXAMINING THE VITAL ASPECT 4 OF ALLEGED PURCHASE AND SALE TRANSACTIONS IN RESPECT OF BENEFICIAL INTEREST; (II) THE GENERATION OF LONG TERM CAPITAL GAINS OF RS. 30,66,46,184/ - AND ASSESSEES CLAIM OF T HE SAME U/S 10(38) OF THE ACT ; AND (III) THE CLAIM OF LONG TERM CAPITAL LOSS OF RS. 15.93 CRS, WHICH IS SOUGHT TO BE CARRIED FORWARD FOR FUTURE SET OFF. WE SHALL EXAMINE EACH OF THE ISSUE RAISED BY THE PRINCIPAL CIT IN THE SUCCEEDING PARAGRAPHS OF TH IS ORDER. 1. ALLEGATION OF NON - APPLICATION OF MIND BY AO WITH REGARD TO THE TRANSACTION OF PURCHASE AND SALE OF BENEFICIAL INTEREST, WHICH RESULTED IN THE SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS : - 6. THE PRINCIPAL CIT DEALT WITH THIS ISSUE IN PARAS 2.1 TO 2.2.4 OF HIS ORDER. RELYING ON THE ASSESSEES BOOKS OF ACCOUNT, PRINCIPAL CIT QUESTIONED THE AOS DECISION IN ACCEPTING THE CLAIM OF PURCHASE PRICE OF THE BENEFICIAL INTEREST AT RS. 41.35 CRS. MENTIONING THAT THE SUBJECT MATTER OF THE BENEFICIAL INTE REST HAS ORIGIN IN THE QUOTED SHARES , PRINCIPAL CIT DREW CONCLUSIONS THAT THE PURCHASE CONSIDERATION SHOULD HAVE BEEN ONLY TO THE EXTENT OF RS. 6,82,84,519/ - . IN THIS REGARD, HE RELIED ON THE LAST AVAILABLE DATA ON THE MARKET QUOTES OF THE SHARES. CRITICIZING THE AOS DECISION IN IGNORING THIS FACT, PRINCIPAL CIT MENTIONED THAT THE AO DID NOT EXAMINE INTO VARIOUS ASPECTS OF THE PURCHASE PRICE OF THE BENEFICIAL INTEREST. HE COMMENTED THAT NO REASONABLE BUYER WOULD PAY AROUND 6.8 TIMES OF THE PR ICE AT WHICH THESE SHARES COULD HAVE BEEN ACQUIRED ON THE STOCK EXCHANGE. HE FURTHER MENTIONED THAT THE AO HANDLED THIS ISSUE RECKLESSLY AND FAILED TO CARRY OUT REL EVANT AND MEANINGFUL INQUIRIES AND THIS IS THE CASE OF UTTER LACK OF APPLICATION OF MIND O F THE AO. FURTHER, D RAWING ATTENTION TO THE SALES TRANSACTIONS OF THE SAID BENEFICIAL INTEREST TO M/S. OFFSHORE INDIA LTD, PRINCIPAL CIT WAS CRITICAL OF THE AOS DECISION IN ACCEPTING THE ASSESSEES CLAIM THAT T HE SALE PRICE OF T HE IMPUGNED SHARES IS RS . 27.63 CRS, WHEN THE MARKET VAL UE WAS ONLY RS.6 - 7 CRS , WHEREIN THE TRANSACTION WAS DONE WITHIN THE TIME GAP OF 35 DAYS FROM THE DATE OF PURCHASE ON 6.2.2010. WITH THE GAP OF 35 DAYS, THE VALUE OF BENEFICIAL INTEREST CANNOT FALL FROM RS 45.31 CRS TO 27.63 CRS. THE PRINCIPAL CIT REASONED WHY ANY BUYE R SHOULD BUY THE SHARES AT RS. 2 7.63 CRS WHEN THEY ARE AVAILABLE IN THE STOCK EXCHANGES FOR RS. 6.83 CRS (ROUNDED OFF). PRINCIPAL CIT WAS CRITICAL OF THE AOS DECISION IN ACCEPTING THE SALE PRICE AT RS. 27.63 CRS, AS 5 CLAIMED BY THE ASSESSEE. HE FURTHER COMMENTED THAT THE AO SHOULD HAVE CARRIED ON DEEPER INQUIRIES , MORE SO, WHEN THE BUYER IE M/S. OFFSHORE INDIA LTD AS AN UNRELATED PERSON AS PER AO . ON THE AOS FINDING ABOUT THE RELATIONSHIP BETWEEN THE ASSESS EE AND M/S. OFFSHORE INDIA LTD, PRINCIPAL CIT, AS HELD IN PARA 2.2.4 OF HIS ORDER, IS OF THE OPINION THAT M/S. OFFSHORE INDIA LTD BELONGS TO THE RPG CELLULAR INVESTMENTS & HOLDING PVT. LTD (RPG GROUP ENTITY) AND IT TANTAMOUNT TO A RELATED , IF NOT, A SPE CIFIED PERSON WITHIN THE MEANING OF SECTION 40A(2)(B) OF THE ACT. THUS, HE FOUND FAULT WITH THE AOS FINDING IN TREATING M/S. OFFSHORE INDIA LTD AS A N UNRELATED PARTY. THUS, PRINCIPAL CIT HELD THAT THE AO FAILED TO EXAMINE (1) THE PURCHASE PRICE OF THE BENEFICIAL INTEREST AT RS.45.31 CRS ; (2) THE SALE PRICE OF THE BENEFICIAL INTEREST BY THE ASSESSEE TO M/S. OFFSHORE INDIA LTD AT RS. 27.63 CRS AND (3) THE RELATIONSHIP OF THE ASSESSEE WITH M/S. OFFSHORE INDIA LTD. PRINCIPAL CIT ATTRIBUTED THESE FAI LURES TO THE AO IN CONDUCTING MEANINGFUL INQUIRIES INTO THE WHOLE GAMUT OF TRANSACTION S RELATING TO THE CLAIM OF SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS. NO ISSUE WAS RAISED BY THE PRINCIPAL CIT REGARDING THE NATURE OF THE BENEFICIAL INTEREST ORIGINALL Y OWNED BY RIFL. WE SHALL NOW DEAL WITH THE ARGUM ENTS OF BOTH THE PARTIES ON THESE ISSUE S . 7. BEFORE US, SHRI VIJAY MEHTA, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS THE CASE WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE T HE ASSESSMENT ORDER DATE D 23.3.2013. ASSESSEE SUBMITTED VARIOUS DETAILS DURING THE ASSESSMENT AND THE SAME IS EVIDENT FROM THE LETTERS DATED 9.11.2012; 5.12.2012; 31.1.2013; 21.2.2013 ETC. BRINGING OUR ATTENTION TO SOME CORRESPONDENCE BETWEEN THE AO AND THE ASSESSEE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASPECTS OF PURCHASE AS WELL AS THE SALE WERE CONSIDERED AND EXAMINED BY THE AO AND IN THIS REGARD, THE FACT OF DISALLOWANCE OF THE CLAIM OF SHORT TERM CAPITAL LOSS BY THE AO IN THE REGULAR ASSESS MENT WAS REPEATEDLY HIGHLIGHTED. HE REASONED THAT WITHOUT APPLYING THE MIND TO THE ABOVE ASPECTS OF PURCHASE AND SALE OF BENEFICIAL INTEREST , THE AO COULD NOT HAVE DISALLOWED THE SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS. HE ALSO MENTIONED THAT THE BENEF ICIAL INTEREST WAS VALUED AT RS. 45.31 CRS, WHICH IS ESSENTIALLY THE COST PRICE OF SHARES IN THE HANDS OF THE PREVIOUS OWNER . FURTHER , REFERRING TO THE SALE PRICE OF RS. 27.63 CRS, LD COUNSEL FOR THE ASSESSEE SUBMITTED 6 THAT THE SAME IS MUCH HIGHER THAN T HE SO CALLED MARKET RA TE OF RS. 6.83 CRS. IN THAT WAY , THERE IS NOTHING PREJUDICIAL TO THE INTEREST OF REVENUE. ASSESSEE GOT BENEFITED IN THE PROCESS AND THERE IS NO REVENUE LOSS. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE S 98; 86; 100; 170 ETC. FURTHER, HE SUBMITTED THAT THIS IS A CASE WHERE AO APPLIED HIS MIND TO PURCHASE AND SALE TRANSACTIONS BE FORE DISALLOWING RS. 17.68 CRS IN THE ASSESSMENT. THEREFORE, THE ORDER OF THE AO IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF REVENUE. FURTHER, IT IS THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE THAT THE ISSUE OF SHORT TERM CAPITAL GAINS WAS ALREADY CONSIDERED BY THE AO AND THE SAME IS THE SUBJECT MATTER OF ADJUDICATION BY THE CIT (A). LD AR IS OF THE VI EW THAT THE AO COULD NOT DISALLOW THE LOSS OF RS. 17.68 CRS WITHOUT GOING INTO THE CLOSELY CONNECTED TRANSACTION OF PURCHASE AND SALE OF BENEFICIAL INTEREST, MORE SO, WHEN THERE IS INQUIRY AND DATA FURNISHED BY THE ASSESSEE IN THE ASSESSMENT. 8. ON THE OTHER HAND, SHRI B.C.S. NAIK, CIT - DR FOR THE REVENUE HAS HEAVILY RELIED ON THE ORDER OF THE PRINCIPAL CIT. FURTHER, LD DR FILED WRITTEN SUBMISSIONS IN SUPPORT OF THE REVISION ORDER OF THE PRINCIPAL CIT. REGARDING THE SAID AMENDED PROVISIONS, B RING ING OUR ATTENTION TO CLAUSE (C) TO EXPLANATION - 1 TO SUB - SECTION (1) OF SECTION 263 OF THE ACT, LD DR SUBMITTED THAT THE MATTER IN QUESTION WAS NOT CONSIDERED AND DECIDED BY THE CIT (A) IN THE APPEAL, THEREFORE, THE SAID PROVISIONS OF CLAUSE (C) WILL NOT HE LP THE ASSESSEE. REGARDING LACK OF INQUIRY AND APPLICATION OF MIND BY THE AO, BRINGING OUR ATTENTION TO THE REVISION ORDER OF THE PRINCIPAL CIT IN GENERAL AND PARAS 2.1 TO 2.2.4 OF HIS ORDER IN PARTICULAR, LD CIT - DR SUBMITTED THAT NOTWITHSTANDING THE FACT OF DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS, WHICH IS THE NET FIGURE OF RS. 45.31 CRS (PURCHASE PRICE) MINUS RS. 27.63 CRS (SALE PRICE), AO FAILED TO REASON THE CORRECTNESS OF THE SAID PURCHASE AND SALE PRICES. LD CIT - DR MENTIONED THAT WHE N THE QUOTED PRICE OF THE SHARES, WHICH SHOULD BE THE BASIS FOR VALUING THE BENEFICIAL INTEREST, IS ONLY RS. 6.83 CRS, THE AO SHOULD HAVE EXAMINED THE RECORDED PURCHASE AND SALE PRICES . IT IS REASONABLE TO EXPECT THE AO TO GO INTO THESE FIGURES, WHICH A RE ABNORMALLY HIGH TO THE QUOTED PRICES. HE ALSO MENTIONED THAT THE DISALLOWANCE OF RS. 17.68 CRS WILL NOT ABSOLVE THE INCORRECT PURCHASE AND SALE PRICES ACCEPTED BY THE 7 AO IN ASSESSMENT . AS PER THE LD DR, THIS IS THE CASE OF PERFUNCTORY INQUIRIES BY T HE AO AND NOT THE CASE OF MEANINGFUL INQUIRIES. HE ALSO SUBMITTED THAT THE SAID PURCHASE PRICE OF RS. 45.31 CRS WAS NEVER PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. SIMILARLY, THE SALE PRICE OF RS. 27.63 WAS ALSO NOT RECEIVED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. IN THE WRITTEN SUBMISSIONS, LD CIT - DR SUBMITTED THAT THE ABOVE OUTSTANDING PAYMENTS WERE PAID BY THE ASSESSEE BY VIRTUE OF ALLOTTING THE SHARES TO THE SELLER M/S. SUMIT SECURITIES LTD WITH THE ABNORMAL PREMIUM OF RS. 715/ - P ER SHARE, WHICH HAS A FACE VALUE OF ONLY RS. 10/ - . THIS ALLOTMENT WAS DONE PRECISELY TO THE EXTENT OF THE LIABILITY OF RS. 45.31 CRS. FURTHER, LD CIT - DR RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF HORIZON INVESTMENT CO. LTD. VS. CIT IN ITA NO.1 593/2013 (AY 2008 - 2009) FOR THE PROPOSITION THAT THE CIT CAN ASSUME JURISDICTION FOR AOS FAILURE TO CARRY OUT RELEVANT AND MEANINGFUL INQUIRIES AND FOR NON - APPLICATION OF MIND. LD CIT - DR ALSO TOOK OBJECTION TO THE APPLICABILITY OF THE PROVISIONS OF SECTI ON 49(1)(III)(E) R.W.S 47(IV) OF THE ACT FOR CONSIDERING THE COST OF THE PREVIOUS OWNER (M/S. SUMIT SECURITIES LTD) FOR DETERMINING THE PURCHASE PRICE OF THE BENEFICIAL INTEREST. OBJECTING TO THE LD COUNSELS SUBMISSION THAT THIS IS NOT A CASE OF REVEN UE LOSS CONSIDERING THE DIFFERENCE BETWEEN THE SALE PRICE (RS. 27.63 CRS) AND THE QUOTED PRICE (RS. 6.83 CRS) OF THE SHARES, LD CIT - DR SUBMITTED THAT THE LOSS OF REVENUE SHOULD BE WORKED OUT CONSIDERING THE DIFFERENCE BETWEEN RS. 45.31 CRS AND RS. 6.83 CRS ETC. IN ANY CASE, THIS IS THE CASE WHERE NO LOSS WAS QUANTIFIED BY THE PRINCIPAL CIT IN THE REVISION ORDER. FURTHER, CIT - DR UNDERLINED THE AOS FAILURE TO CONDUCT INQUIRIES IN THE MATTERS RELATING TO THE NATURE OF BENEFICIAL INTEREST IN T HE SHARES. HE IS OF THE OPINION THE BENEFICIAL INTEREST IS NOT A CAPITAL ASSET OF THE PREVIOUS OWNER. FURTHER, LD CIT - DR LISTED OUT THE INQUIRIES THE AO SHOULD HAVE CONDUCTED IN ORDER TO CONCLUSIVELY EXAMINE THE IMPUGNED TRANSACTIONS RELATING TO THE PU RCHASE AND SALE OF THE BENEFICIAL INTEREST. SINCE, THESE INQUIRIES WERE NOT DONE, FROM THE LD CIT - DRS POINT OF VIEW, THE INQUIRIES CONDUCTED BY THE AO AMOUNTS TO PERFUNCTORY INQUIRIES . AS PER THE LD CIT - DR, THE ORDER OF THE AO IS NOT A SPEAKING ORDE R AND NOT BASED ON ANY MEANINGFUL INQUIRIES. HE RELIED ON VARIOUS DECISIONS IN SUPPORT OF THE VALID JURISDICTION BY THE PRINCIPAL CIT U/S 263 OF THE ACT, WHEN THERE IS LACK OF INQUIRY, INADEQUATE INQUIRY, IMPROPER INQUIRY, PERFUNCTORY INQUIRY ON AN ISSUE. THE ORDER OF 8 THE AO BECOMES ERRONEOUS, WHEN THERE ARE NO SUCH INQUIRIES CONDUCTED BY THE AO. HE RELIED ON THE DECISION OF THE ITAT, KOLKATA BENCH IN THE CASE OF MARIGOLD NARIMAN PVT LTD (155 ITD 171) IN S UPPORT OF THE ABOVE ASSERTION. FURTHER, LD CIT - DR RELIED ON THE CONTENTS OF AMENDED EXPLANATION - 2 TO SECTION 263 OF THE ACT W.E.F 1.6.2015 (FINANCE ACT, 2015) FOR THE PROPOSITION THAT THE PRINCIPAL CIT CAN ASSUME JURISDICTION WHEN THE ORDER PASSED (BY THE AO) WITHOUT MAKING INQUIRIES OR VERIFICATION WHIC H SHOULD HAVE BEEN MADE. RELYING ON THE ORDER OF THE TRIBUNAL IN THE CASE OF CROMPTON GREAVES LTD IN ITA NO.1994/M/2013 AND 2836/MUM/2014, DATED 1.2.2016 LD DR DEMONSTRATED THAT THE ABOVE SAID AMENDMENT TO EXPLANATION - 2 TO SECTION 26 3 IS CLARIFICATORY I N NATURE. THUS, THE LD CIT - DR OPINED THAT THE JURISDICTION ASSUMED BY THE PRINCIPAL CIT ON THE ISSUE OF PURCHASE AND SALE OF BENEFICIAL INTERES T SHORT TERM CAPITAL LOSS IS VALID DESPITE THE AOS DECISION OF DISALLOWING RS. 17.68 CRS. ON THIS ISSUE, DURIN G REBUTTAL TIME, SHRI VIJAY MEHTA, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISION OF THE ITAT, KOLKATA BENCH IS A CASE OF NO INQUIRIES AT ALL AND IT IS NOT A CASE WHERE THE AO MADE DISALLOWANCE UNLIKE THE DISALLOWANCE OF RS. 17.68 CRS IN THE PRE SENT CASE. IN RESPONSE TO THE LD CIT - DRS RELIANCE IN THE CASE OF CROMPTION GREAVES LTD (SUPRA), LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID FINDING OF THE TRIBUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA) CONSTITUTES OBITER DICTA ONLY AND NOT A RATIO DECIDENDI. OTHERWISE, IN THE SAID APPEAL, THERE IS NO ISSUE ABOUT THE RETROSPECTIVE OR PROSPECTIVE NATURE OF THE SAID AMENDMENT TO EXPLANTION - 2 TO SECTION 263 OF THE ACT. FURTHER, LD AR SUBMITTED THAT KOLKATA BENCH FAILED TO CONSIDER THE DECISIO N IN THE CASE OF MARIGOLD NARIMAN PVT LTD (SUPRA), WHEREIN IT WAS HELD THAT THE AMENDMENT TO EXPLANATION 2 IS PROSPECTIVE IN APPLICATION. 9. WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE RELATING TO THE ISSUE OF LACK OF APPLICATION OF MIND OF AO TO THE FIGURES RELATING TO PURCHASE PRICE (RS. 45.31 CRS) AND SALE PRICE (RS.27.63 CRS) OF BENEFICIAL INTEREST QUA ITS MARKET RATE OF RS. 6.83 CRS. THE CASE OF THE LD COUNSEL FOR THE ASSESSEE IS THAT, AO CALLED FOR ALL RELEVANT DETAILS OF PURCHASE AND SAL E OF BENEFICIAL INTEREST AND APPLIED HIS MIND TO ALL THESE ISSUES WHICH EVENTUALLY LED TO THE FACT OF DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS, THE DIFFERENCE BETWEEN RS. 45.31 CRS AND RS. 27.63 CRS (IE THE 9 DIFFERENCE BETWEEN PURCHASE PRI CE AND SALE PRICE OF BENEFICIAL INTEREST). VARIOUS CORRESPONDENCE / DOCUMENTS FILED BY THE ASSESSEE DURING THE PRECEEDINGS U/S 143(3) OF THE ACT WERE RELIED. 10. PER CONTRA, THE CASE OF THE REVENUE IS THAT THE AO UTTERLY FAILED TO APPLY HIS MIND AND FAI LED TO CONDUCT MEANINGFUL INQUIRIES TO THE ISSUE OF CORRECTNESS OF PURCHASE AND SALE PRICES OF BENEFICIAL INTEREST. OF COURSE, LD DRS CASE ADDITIONALLY IS THAT THE AO ERRED IN ACCEPTING THE EXISTENCE OF BENEFICIAL INTEREST AND GAVE LIST OF INQUIRIES, THE AO SHOULD HAVE UNDERTAKEN IN THE REGULAR ASSESSMENT AND MENTIONED VARIOUS JUDGMENTS / ORDERS IN FAVOUR OF THE VALID JURISDICTION OF CIT U/S 263 OF THE ACT, WHEN AO FAILED TO UNDERTAKE PROPER / ADEQUATE / REASONABLE INQUIRIES. ON THE REVENUE LOSS ASPE CT, WHICH THE TWIN CONDITION OF SECTION 263 OF THE ACT, THE CASE OF THE LD DR, IF NOT THE VIEW OF THE CIT, AO SHOULD HAVE DISALLOWED ENTIRE AMOUNTS OF RS. 45.31 CRS AND RS. 27.63 CRS (PURCHASE AND SALE PRICES OF BENEFICIAL INTEREST) RESPECTFULLY. ALTERN ATIVELY, AO SHOULD HAVE DISALLOWED RS. 45.31 CRS (PURCHASE PRICE) MINUS RS. 6.83 CRS (FAIR MARKET VALUE OF THE SHARES) ACCEPTING THE PURCHASE PRICE OF RS. 45.31 CRS AND RS. 27.63 CRS AS SALE PRICE OF THE BENEFICIAL INTEREST. THERE IS NO DISPUTE ON THE F ACT THAT THE PRINCIPAL CIT IS SILENT ON THE ISSUE OF REVENUE LOSS ASPECT BOTH IN THE SHOW CAUSE NOTICE DATED 22.2.2015 AND THE REVISION ORDER DATED 30.3.2015. THERE IS NO DISPUTE THAT THE PRINCIPAL CIT FAILED TO QUANTIFY THE LOSS IN ANY TERMS IN HIS ORD ER. FURTHER, THE CASE OF THE LD DR IS THAT THE PRINCIPAL CIT VALIDLY ASSUMED JURISDICTION IN THIS CASE UNDER CLAUSE (C) OF THE EXPLANATION - 2 TO SECTION 263(1) OF THE ACT. DECISION ON THE RELEVANCE OF EXPLANATION - 2 TO SECTION 263 (1) OF THE ACT 11. REFERRING TO THE AMENDMENT TO CLAUSE (C) TO SECTION 263(1) OF THE ACT, LD AR MENTIONED THE PROVISIONS OF SECTION 263 OF THE ACT WERE AMENDED BY THE FINANCE ACT, 2015 W.E.F. 1.6.2015 WHEREBY EXPLANATION - 2 TO SECTION 263(1) WAS INSERTED. THE PRINCIPAL CIT CAN VALIDLY ASSUME JURISDICTION UNDER THIS SECTION IF AO PASS AN ORDER EITHER WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN DONE OR ALLOWING ANY RELIEF WITHOUT INQUIRE INTO THE CLAIM OR NOT IN ACCORDANCE WITH ANY ORDER / DIRECTION / INSTR UCTION ISSUED U/S 119 ETC. THE CASE OF THE LD DR BEFORE US IS THAT THE SAID AMENDMENT IS CLARIFICATORY IN NATURE AND SHOULD BE APPLIED TO THE ORDERS 10 REVISED U/S 263 OF THE ACT. IN SUPPORT, LD DR RELIED ON THE REFERENCE MADE IN THE DECISIONS OF THE TRIBUN AL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA). PER CONTRA, LD COUNSEL FOR THE ASSESSEES ARGUMENT IS THAT THE SAID AMENDMENT IS PROSPECTIVE IN NATURE AND IT SHOULD BE APPLIED TO THE ORDERS REVISED PRIOR TO THE AMENDMENT. REGARDING THE DECISION OF THE TR IBUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID DECISION WAS PASSED WITHOUT CONSIDERING THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. A.V. INDUSTRIES VS. ACIT IN ITA NO. 3469/M/2010 (AY 2005 - 06), DATE D 6.11.2015. HE BROUGHT OUR ATTENTION TO THE CONTENTS OF PARA 11 OF THE SAID TRIBUNALS ORDER (SUPRA), WHEREIN THE TRIBUNAL GAVE A CATEGORICAL FINDING THAT THE DEEMED PROVISIONS OF EXPLANATION - 2 TO SECTION 263(1) ARE NOT APPLICABLE FOR THE AY UNDER CONSID ERATION. IT IS OBVIOUS THAT THIS PARTICULAR DECISION OF THE COORDINATE BENCH DECISION OF THE TRIBUNAL WAS NOT CONSIDERED IN THE DECISION OF THE TRIBUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA). IT IS ALSO THE LD COUNSELS ARGUMENT THAT THE DECISION O F THE TRIBUNAL IN THE CASE OF CROMPTON GREAVES LTD (SUPRA) DID NOT DEAL WITH THE ISSUE IE WHETHER THE SAID AMENDMENT IS IN RETROSPECTIVE OR PROSPECTIVE IN NATURE. LD COUNSEL FOR THE ASSESSEE ALSO MENTIONED THAT A FAVOURABLE DECISION SHOULD BE CONSIDERED W HEN CONTRARY / DIVERGENT DECISIONS EXIST ON THE ISSUE. 12. ON CONSIDERING THE ARGUMENTS OF BOTH THE PARTIES AS WELL AS THE CITED DECISIONS ON THIS ISSUE, WE FIND THE SAME IS RELEVANT ONLY IF THE AO PASSED AN ORDER WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. IN OUR VIEW, THE ADJUDICATION OF THESE ARGUMENTS BECOMES IRRELEVANT IF THE AOS ORDER IS FOUND PASSED AFTER MAKING DUE INQUIRIES / VERIFICATION, WHICH SHOULD HAVE BEEN MADE. OTHERWISE , OUR DECISION ON RETROSPECTIVITY OF AMEND MENT BECOMES AN ACADEMIC EXERCISE ONLY. DECISION OF THE TRIBUNAL ON AMENDED CLAUSE (C) TO EXPLANATION - 1 TO SECTION 263(1) OF THE ACT 13 . FIRSTLY, WE SHALL DEAL WITH THE ARGUMENTS RELATING TO LACK OF JURISDICTION FOR THE PRINCIPAL CIT IN VIEW OF THE PROVISIONS OF THE SAID CLAUSE (C) OF EXPLANATION - 1 TO SECTION 263(1) OF THE ACT. IN THIS REGARD, WE HAVE PERUSED THE RELEVANT PROVISION S OF CLAUSE (C) O F EXPLANATION - 1 TO SECTION 263(1) OF THE ACT AND THE SAME READS AS UNDER: - 11 (C) WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN SUBJECT MATTER OF ANY APPEAL [FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988 ], THE POWERS OF THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AN D DECIDED IN SUCH APPEAL . ] 1 4 . FROM THE ABOVE, THE EXPRESSION SUCH MATTERS AS HAD NOT BEEN CONSIDERED AN D DECIDED IN SUCH APPEAL , WE FIND THE EXPRESSIONS ARE USED IN NEGATIVE SENSE AND PAST TENSE GRAMMATICALLY. IN OTHER WORDS, IF THE CIT (A) IS STILL SEIZED UP WITH THE MATTER, AS IN THE INSTANT CASE, THE SAME CANNOT BE DESCRIBED AS CONSIDERED AND DECIDED. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE ON THIS ASPECT SHOULD BE DISMISSED AND IT IS IN FAVOUR OF THE REVENUE. WE APPROVE THE ARGUMENTS OF LD DR IN THIS REG ARD. DECISION OF THE TRIBUNAL ON THE ISSUE OF BENEFICIAL INTEREST SALE / PURCHASE PRICE 15 . NEXT, WE SHALL TAKE UP THE ARGUMENTS RELATING TO NATURE OF BENEFICIAL INTEREST AND APPLICATION OF MIND OF AO ON ISSUES RELATING TO PURCHASE AND SALE PRICE OF B ENEFICIAL INTEREST . 16 . SO FAR AS THE ISSUE RELATING TO EXISTENCE OF BENEFICIAL INTEREST AS AN ASSET IS CONCERNED, WE PERUSED CAREFULLY THE ORDERS OF THE AO AND THE PRINCIPAL CIT AND FIND THAT THEY ARE SILENT ON THIS ISSUE. ALTHOUGH, THIS ISSUE WAS RA ISED IN THE WRITTEN SUBMISSIONS OF THE LD DR, HE FAIRLY ADMITTED THAT THE PRINCIPAL CIT HAS NOT RAISED THIS ISSUE AS A SPECIFIC MATTER IN HIS SHOW CAUSE NOTICE OR REVISION ORDER. IN OTHER WORDS, THIS MATTER IS RAISED BEFORE US (HONBLE ITAT) FOR THE FIRST TIME. THUS, IN OUR OPINION, LD CIT - DR EXCEEDED HIS BRIEF IN DOING SO. THE SAME IS NOT LEGALLY PERMITTED IN LAW. ON THIS ASPECT, LD COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS BI NDING JUDGMENTS IN THE CASES OF MAHINDRA AND MAHINDRA LIMITED (36 SOT 348) (MUMBAI TRIBUNAL) AND MANY OTHERS. AS HELD BY US, IN THE ASSESSEES OWN CASE FOR EARLIER YEARS, WE DISMISSED THE ARGUMENT OF THE LD DR ON THIS ISSUE AS LEGALLY UNSUSTAINABLE ONE AND IT IS IN FAVOUR OF THE ASSESSEE. 17 . WE SHALL NOW TAKE UP THE PRINCIPAL C ITS CORE CONCLUSIONS ON UTTER LACK OF APPLICATION OF MIND OF THE AO ON THE ISSUES OF PURCHASE AND SALE PRICES OF BENEFICIAL INTEREST. IN THIS REGARD, WE PERUSED THE CONTENTS OF THE ASSESSMENT ORDER OF THE AO 12 AND THE DOCUMENTS PLACED BEFORE HIM . FROM THE SAME, WE FIND THE DISALLOWANCE OF RS. 17.68 CRS MADE BY THE AO IN THE REGULAR ASSESSMENT RELATES TO THE SHORT TERM CAPITAL LOSS AROSE OUT OF TRANSACTIONS OF PURCHASE AND SALE OF BENEFICIAL INTEREST. FURTHER, W E FIND LOT OF CORRESPONDENCE IN THIS REG ARD O N THE RECORD. FROM VARIOUS PAGES OF THE SAID CORRESPONDENCE AVAILABLE BEFORE THE AO, SHRI VIJAY MEHTA, LD COUNSEL FOR THE ASSESSEE LISTED OUT VARIOUS PAGES OF THE ASSESSEES PAPER BOOK TO DISPLAY THE FACT OF PLACING RELEVANT DATA / INFORMATION RELATI NG TO PURCHASE PRICE & SALE PRICE OF BENEFICIAL INTEREST IE RELEVANT INVOICES; PAYMENT DETAILS; BASIS FOR ARRIVING AT THE SAID PURCHASE PRICE AND REASONS ADOPTING SUCH BASIS (MAY BE OR NOT SUSTAINABLE) ETC. FROM THE SAID , WE NEED TO DECIDE, IF THE AO FAIL ED TO VERIFY THE DETAILS OF PURCHASE AND SALE PRICE OF BENEFICIAL INTEREST, WHILE DISALLOWING RS. 17.68 CRS. BASIC TRANSACTION RELATING TO EARNING OF SHORT TERM CAPITAL LOSS IS AS FOLLOWS: - PURCHASE PRICE OF BENEFICIAL INTEREST SALE PRICE OF BEN EFICIAL INTEREST = SHORT TERM CAPITAL LOSS RS. 45.31 CRS RS. 27.63CRS = RS. 17.68 CRS. 18 . IN THE RETURN OF INCOME, ASSESSEE CLAIMED ABOVE MENTIONED SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS. THE CLAIM OF LOSS IS THE STARTING POINT FOR THE AO FOR HIS INVESTIGATION. WHAT DOES THIS MEAN FOR THE AO? HE A SSUMED THE BOGUS NATURE OF THIS LOSS WHEN INVESTIGATION BEGAN IN THE ASSESSMENT . AT THE END OF HIS INVESTIGATION, THE ASSESSMENT HAS RESULTED IN THE DISAL LOWANCE OF THE SAID SHORT TERM CAPITAL LOSS OF RS. 17.68 CRS FOR BOGUS NATURE? ON THESE FACTS, WE NEED TO DECIDE IF THE AO EVENTUALLY DISALLOWED THE SAID LOSS WITHOUT TRAVELLING INTO THE ASPECT OF PURCHASE AND SALE PRICE RELATED DETAILS. THERE ARE DETAI LS ON FILE RELATING TO WHAT CONSTITUTES RS. 45.31 CRS, IE THE COST PRICE OF THE SHARES IN THE HANDS OF THE PREVIOUS OWNER, VESTING OF BENEFICIAL INTEREST WITH THE RIFL BENEFIT TRUST, THE FACT OF AMALGAMATION OF COMPANIES APPROVED BY THE HONBLE HIGH COURT , WHAT CONSTITUTES RS. 45.31 CRS ETC . 19 . HOW IT IS POSSIBLE FOR THE AO TO DISALLOW RS. 17.68 CRS WITHOUT GOING INTO THE PURCHASE AND SALES DETAILS OF THE BENEFICIAL INTEREST ? WE FIND, THE MATTER OF SHORT TERM CAPITAL LOSS CONSTITUTES A GENERIC ONE IN NATURE. THE ISSUES RELATING TO PURCHASE AND SALE PRICE OF BENEFICIAL INTEREST; RELATIONSHIP OF THE PARTIES INVOLVED 13 CONSTITUTES ITS SPECIES. AO HAS ACCESS TO THE DETAILS OF RS. 6.83 CRS TOO DURING THE REGULAR ASSESSMENT. 20. SHORT TERM CAPITAL LOSS OR GAIN IS THE PRODUCT OF A TRADING TRANSACTION. IT INVOLVES PURCHASE AND SALE. TO OUR MIND, IT APPEARS THAT THE AO MIGHT HAVE CERTAINLY APPLIED HIS MIND TO THE SAID TRADING TRANSACTIONS AT THE TIME OF DISALLOWING THE LOSS OF RS. 17.63 CRS IN THIS CASE. OBVIOUSLY, THIS FIGURE IS THE DEFERENCE BETWEEN THE PURCHASE PRICE AND THE SALE PRICE OF BENEFICIAL INTEREST. WHEN THERE IS A RELEVANT DATA AVAILABLE ON RECORD REGARDING THE PURCHASE / SALE VALUES, WHICH AO SHALL NOT VERIFY INTO THE VELOCITY / CORRECTNESS OF THESE PRICES, WHEN AO DISALLOWED AND MADE ADDITION OF LOSS OF RS. 17.63 CRS IN THE ASSESSMENT ? IT IS DIFFICULT TO ACCEPT THE LD DRS ARGUMENT ON LACK OF APPLICATION OF MI ND BY AO TO THE ISSUES OF PURCHASE / SALE PRICE. 21 . THEREFORE, WE FIND THAT IT IS THE CASE OF THRUSTING OPINION OF CIT ON THE AO. WE ARE OF THE OPINION THAT THE AO IS IN KNOW OF THE ISSUES RELATING TO PURCHASE, SALE, LOSS WHICH WAS FINALLY DISALLOWED B Y THE AO IN REGULAR ASSESSMENT. AS SUCH, PRINCIPAL CIT FAILED TO MAKE UP THE REVENUE LOSS AND SPECIFY / QUANTIFY SUCH REVENUE LOSS EITHER IN ANY VOGUE OR CLEAR TERMS. THEREFORE, WE C ANNOT APPRECIATE PRINCIPAL CITS DECISION TO QUASH THE AOS ORDER WITHOU T FULFILLING THE TWIN CONDITIONS OF ERROR REVENUE LOSS IN THE AOS ORDER. OBVIOUSLY, H IS REVISION ORDER IS DEFICIENT ON THIS ASPECT OF REVENUE LOSS. IN OUR OPINION, IT IS THE CASE OF HIT AND RUN. PRINCIPAL CIT SHOULD HAVE DEMONSTRATED IN HIS ORDER T HE REVENUE LOSS IS CLEARLY EXPRESSED LANGUAGE / FIGURES. IT S NOT THE DUTY OF THE LD DR TO DO IT. HE DOES NOT HAVE SUCH JURISDICTION. NO SUCH FIGURES APPEAR IN THIS ORDER. PRINCIPLE CIT IS DULY BOUND IN THIS REGARD AND IT IS NOT THE DUTY OF THE LD C IT DR TO INTERPRET / TO EXTRACT / CULL OUT SOME FIGURES BEFORE US TO ADD UP TO THE OMISSIONS OF THE PRINCIPAL CIT IN THE REVISION ORDER PASSED U/S 263 OF THE ACT. PRINCIPAL CIT SHOULD CLEARLY DEMONSTRATE THE ERRORS AND REVENUE LOSS AND NOT TAX LOSS ALONE. PRINCIPAL CIT IS NOT ALLOWED TO ASSUME JURISDICTION U/S 263 UNDER THE GUISE OF AOS FAILURE TO CONDUCT ADEQUATE INQUIRIES. IN PRINCIPLE, THE ASPECT OF AOS FAILURE IS AN UNENDING PROCESS AND IT IS DIFFICULT TO FIND END TO IT. AO HAS TO STOP HIS INQUIRI ES SOMEWHERE GIVEN THE TIME RESTRICTIONS IMPOSED ON HIM FOR COMPLETING THE ASSESSMENT. PRINCIPAL CIT CANNOT INVOKE THE 14 AMENDED PROVISIONS OF EXPLANATION - 2 (A) TO SECTION 263 O F THE ACT TO JUSTIFY HIS ORDER. WE DISMISS THE LD CIT - DRS RELIANCE ON THE ORDE R OF THE ITAT IN THE CASE OF CROMPTON GREAVES LTD (SUPRA). ON PERUSAL OF THE SAID DECISION OF THE TRIBUNAL DATED 1.2.2016 (SUPRA), WE FIND THE SAME CONSTITUTES OBITER DICTA ONLY AND HAS NO BINDING NATURE. IN ANY CASE, WE FIND THAT IT IS NOT A CASE OF COM PLETING REGULAR ASSESSMENT WITHOUT MAKING INQUIRIES OR VERIFICATION, WHICH SHOULD HAVE BEEN MADE [CLAUSE (A) OF EXPLANATION - 2 TO SECTION 263(1) OF THE ACT IS RELEVANT]. THE CLAUSE (A) READS AS UNDER: - (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; 22 . THE ABOVE PRIVISONS APPLY ONLY TO THE CASES OF ORDERS PASSED BY AO WITHOUT MAKING INQUIRIES OR VERIFICATION AT ALL, WHICH SHOULD HAVE BEEN DONE. UNLIKE IN THE CASE OF MARIGOLD NARIMAN PVT LTD (SUPRA), HEAV ILY RELIED BY THE AO, IN THE INSTANT CASE, AO MADE INQUIRIES ON THE MATTER OF TRANSACTIONS LEADING TO SHORT TERM CAPITAL LOSS. THEREFORE, IN OUR OPINION, THE ORDER PASSED U/S 263 OF THE ACT O N T H I S I S S U E IS INVALID. II. GENERATION OF LONG TERM CAPITAL GAINS OF RS 30,66 ,46,184/ - AND ASSESSEES CLAIM OF THE SAME U/S 10(38) OF THE ACT: - 23 . THE SECOND ISSUE RELATES TO THE ISSUE OF CLAIM OF EXEMPTION OF LONG TERM CAPITAL GAINS OF RS. 30.66 CRS CLAIMED U /S 10(38) OF THE ACT. STT WAS PAID ON THE SE GAINS. M/S. BNK SECURITIES P LTD IS THE BROKER. THE SHARE S WERE TRANSFERRED THROUGH THE STOCK E XCHANGE ELECTRONICALLY. ASSESSEE OWNED SEVERAL SHARES OF CESC LTD; EVEREADY INDUSTRIES LTD; MCLEOD RUSSEL (INDIA) LTD AND PHILLIPS CARBON BLACK LTD ETC. ASSESSEE EARNED LONG TERM CAPITAL GAINS IN THE TRADING OF THESE SHARES. IN THE ASSESSMENT MADE U/S 143(2) OF THE ACT, THE AO ACCEPTED THE CLAIM OF THE ASSESSEE. HOWEVER, IN REVISION PROCEEDINGS U/S 263 OF THE ACT , THE PRINCIPAL CIT OBSERVED THAT THE TRANSACTION OF SHARE TRADI NG TOOK PLACE BETWEEN THE GROUP RELATED CONCERNS. AS PER THE CIT, THE IMPUGNED SHARE / SALE TRANSACTIONS ARE COLLUSIVE, SYNCHRONOUS AND SUSPICIOUS. AO ACCEPTED THE CLAIM WITH OUT MAKING RELEVANT MEANING INQUIRIES INTO THE COST OF SHARE S ACQUISITIONS / HOL DING PERIOD AND ABOVE ISSUES. 15 24 . BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO CALLED FOR VARIOUS DETAILS RELATING TO THE SAID M/S. BNK SECURITIES (THE BROKER) , CONTRACT NOTES, TRANSACTIONAL DATES ETC (PAGES 114 TO 118 AND 119 TO 160 OF THE ASSESSEES PAPER BOOK ARE RELEVANT) AND EXAMINED THE RELEVANT ISSUES. THEY INCLUDE THE ASPECTS OF ACQUISITION OF SHARES IN QUESTION IN EARLIER AYS AND ISSUE OF HOLDING PERIOD OF SHARES. EVENTUALLY, AO ACCEPTED THE FACT THAT THE GAINS IN QUESTION ARE LON G TERM CAPITAL GAINS. THE CLAIM OF THE ASSESSEE U/S 10(38) WAS ACCEPTED. LD COUNSEL FOR THE ASSESSEE TOOK OBJECTION TO THE FINDING OF THE PRINCIPAL CIT AND MENTIONED THAT THE TRADING OF TRANSACTIONS WAS DONE ELE CTRONICALLY AND SELLER DOES NOT KNOW THE ID ENTITY OF THE FACELESS BUYER AT THE TIME OF ONLINE E - CONTRACTING . HE, FURTHER, ARGUED THAT THE PRINCIPLE CIT HAS NO TANGIBLE EVIDENCE TO DEMONSTRATE THAT THE TRANSACTIONS ARE COLLUSIVE AND SYNCHRONOUS. THEY ARE SUSPICION BASED ON LY. PRINCIPLE CIT DID NO T FIND ANY MISTAKE WITH THE SAID DOCUMENT S PLACE D AT PAGES 114 TO 160 OF THE PAPER BOOK. LD COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF M/S. A.V. INDUSTRIES VS. ACIT IN ITA NO. 3469/M/2010 (AY 2005 - 06), DATED 6.11.20 15 AND ANOTHER DECISION IN THE CASE OF GAURAV MATHRAWALA VS. CIT IN ITA NO.2378/M/2015 (AY 2010 - 2011), DATED 6.1.2016 FOR THE PROPOSITION THAT THE CIT NEEDS TO GIVE SPECIFIC FINDINGS AS TO WHY / HOW THE ASSESSEES CONTENTIONS ARE INCORRECT AND HOW THE AO S FINDING IN THE REGULAR ASSESSMENT IS ERRONEOUS. FURTHER, IT IS THE CONTENTION OF THE ASSESSEE THAT THE SHARES IN QUESTION AROSE TO ASSESSEE NOT ONLY OUT OF SCHEME OF BUSINESS REENGINEERING AS APPROVED BY THE HIGH COURT AFTER DUE VERIFICATION INTO THE FACTS BUT ALSO GOT THE LEGAL SANCTITY. THEREFORE, THE CLAIM IS VALID BEYOND ANY DOUBT. 25 . PER CONTRA, LD DR FOR THE REVENUE FILED WRITTEN SUBMISSIONS STATING THAT THE AO DID NOT CALL FOR VARIOUS DETAILS LIKE DEMAT ACCOUNT; PA YMENT DETAILS BEFORE ETC BEFORE ACCEPTING. OTHERWISE, LD DR RELIED ON THE ALLEGATIONS OF THE CIT RELATING TO COLLUSIVE AND SYNCHRONOUS TRANSACTIONS. HE ARGUED THAT IT IS THE CASE OF INADEQUATE INQUIRY BY THE AO. HENCE, AS PER THE LD CIT - DR, THE ASSUMPTIO N OF JURISDICTION U/S 263 OF THE ACT IS VALID ON THIS ISSUE. 26 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. IN PARTICULAR, WE HAVE 16 EXAMINED THE SHARE TRADING RELATED DOCU MENTS PLACED AT PAGES 114 TO 116 OF THE ASSESSEES PAPER BOOK. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT MATERIAL, WE FIND THAT THE CASE OF THE LD CIT - DR / PRINCIPAL CIT IS THAT THE AO FAILED TO MAKE MEANINGFUL INQUIRIES INTO THE MATTE R OF ACQUISITION OF SHARES, HOLDING PERIOD, COLLUSIVE / SYNCHRONOUS SALE TRANSACTIONS ETC. ON THESE ISSUES, WE FIND FROM THE DOCUMENTS THAT THE ASSESSE GOT THE SHARE BY VIRTUE OF BUSINESS REENGINEERING APPROVED BY THE HONBLE HIGH COURT. ASSESSEE BECAME THE OWNER OF SUCH SHARES RESULTANTLY. THESE SHARES WERE TRADED INVOLVING THE SE PLATFORM ELECTRONICALLY AND DE - MAT ACCOUNTS OF THE PARTIES INVOLVES EVIDENCES THE SAME. THERE IS NO SUSTAINABLE UNFAVOURABLE FINDING OF THE FACT BY THE PRINCIPLE CIT ON THE R ATES / SHARES INVOLVED AND PAYMENTS. THE ALLEGATION OF THE PRINCIPAL CIT AND LD DR IS THAT THE AO SHOULD HAVE DONE MORE PROBING INTO THE TRANSACTIONS AND THE ALLEGATION OF COLLUSIVE / SYNCHRONOUS T RANSACTIONS. WE ALSO FIND THAT THE AO UNDERTOOK THE CROSS VERIFICATION EXERCISE IN ORDER TO VERIFY THE CLAIMS WITH BROKER. THE PROCEEDINGS INITIATED BY THE AO U/S 133(6) OF THE ACT EVIDENCES THE SAME. IN OUR OPINION, IT IS VERY CLEAR THAT ALLEGATIONS BY THE PRINCIPAL CIT ARE BASED ON SUSPICION, WHICH IS UNSUST AINABLE IN LAW. THERE IS NO IOTA OF EVIDENCE AGAINST THE ASSESSEE THAT SUPPORTS THE COLLUSIVENESS. REGARDING ....BASED ALLEGATIONS, WE FIND THAT THE PRINCIPLES OF PROBABILITY SHOULD TAKE CARE. AS SUCH, WE FIND THERE IS NO SUSTAINABLE REVENUE LOSS REPORT ED BY THE PRINCIPAL CIT . ACTUALLY, ASSESSEE GAINED IN THE PROCESS. IN OUR OPINION, AS PER THE CLAIM OF ASSESSEE U/S 10(38) OF THE ACT CANNOT CONSTITUTE A REVENUE LOSS AS IT IS OTHERWISE A LEGITIMATE ONE. THUS, IT IS A CA S E OF SUSPICION OF THE PRINCIPAL CIT RATHER THAN ANY ALLEGATIONS WITH SUBSTANCE. THEREFORE, WE DISMISS THE FINDING OF THE PRINCIPAL CIT AND HOLD THAT THE CIT HAS WRONGLY ASSUMED JURISDICTION III . ASSESSEES CLAIM OF LONG TERM CAPITAL LOSS OF RS. 15.93 CRS: 27 . THE THIRD ISSUE RAISED BY THE PRINCIPAL CIT IN HIS ORDER RELATES TO THE CLAIM OF LONG TERM CAPITAL LOSS OF RS. 15.93 CRS. ON FACTS, ASSESSEE SUBMITTED THAT THE ASSESSEE OWNS CERTAIN EQUITY SHARES OF CFL CAPITAL FINANCIAL SERVICES LTD; SAREGAMA INDIA LTD A ND NON - CUMULATIVE PREFERENCE SHARES OF RPGCITH (P) LTD. THERE WERE SOLD FOR LOSS TO SS LTD AN D OTHERS, THE 100% SUBSIDIARY OF THE ASSESSEE. AO EXAMINED THIS ISSUE DURING THE REGULAR ASSESSMENT U/S 143(3) OF THE ACT. AO 17 ACCEPTED THE CLAIM OF THE SAID LOS S AFTER EX AMINING THE DOCUMENTS THAT THROUGH LIGHT ON THE ABOVE LOSS YIELDED TRANSACTIONS. THERE ARE DOCUMENTS IN THE ASSESSMENT RECORDS THAT REVEALS THE DETAILS OF PERIOD OF HOLDING, OWNERSHIP OF SHARES, COST OF ACQUISITION, SALE PRICE, FINANCIAL STATEM ENTS OF THE YEAR ETC. AO ACCEPTED THE CLAIM OF THE ASSESSEE AFTER GOING THROUGH THE ABOVE DETAILS. IN THE PROCEEDINGS BEFORE THE CIT U/S 263 OF THE ACT THE PRINCIPAL CIT OPINED THAT THE AO FAILED TO EXAMINE ALL ASPECTS. IN SUPPORT, LD DR SUBMITTED IN PA GE 23 OF HIS WRITTEN SUBMISSION THAT ASSESSMENT ORDER IS SILENT ABOUT THIS ISSUE AD THERE IS NO NEEDED DISCUSSION ON THIS TOPIC. FURTHER, LD DR MENTIONED THAT THE SALE PRICE, BEING A OFF - MARKET TRANSACTION AND MUTUALLY AGREED PRICE, WAS NOT EXAMINED AT LEN GTH. 28 . ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO EXAMINED THIS ISSUE IN DETAIL AND CALL ED FOR ALL THE DOCUMENTS NEEDED FOR FORMING OPINION ON VARIOUS ASPECTS OF THE TRANSACTIONS, WHICH GAVE RISE TO THE LONG TERM CAPITAL LOSS. AO CALLED FOR DETAILS ON PURCHASE AND SALE PRICE, FINANCIAL STATEMENTS, PERIOD OF HOLIDAY OF THE SHARES ETC. LD COUNS EL FOR THE ASSESSEE ALSO PICK UP HOLES IN THE ARGUMENT OF LD DR AND THE PRINCIPAL CITS ORDER AND MENTIONED THAT THE FACTS ON SALE PRICE OF RS. 0.50 PAISA PER SHARE OF RS. 10/ - WAS ON THE RECORDS OF THE AO WHILE COMPLETING THE SCRUTINY ASSESSMENT. AO ACCE PTED THE CLAIM OF THE ASSESSEE AFTER FINDING THAT THE SAID PRICE WAS ARRIVED AT AFTER INDEXATION BENEFITS. IT IS UNDISPUTED FACT AS CAN BE SEEN FROM THE CONTENTS OF PARA 5 OF THE REVISION ORDER. FURTHER, LD AR FILED WRITTEN SUBMISSION GIVING THE DETAILS OF THE ARGUMENTS AND THE FACTS. RELEVANT WRITTEN SUBMISSIONS ON THIS ISSUE IS EXTRACTED AS UNDER: - THIS IS GROSSLY AN INCORRECT STATEMENT BY CIT DR. THE ASSESSEE SUBMITS THAT DETAILS REGARDING SALE PRICE WERE FURNISHED TO THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. I) THE ASSESSEE SOLD SHARES OF CFL CAPITAL FINANCIAL SERVICES LTD AT THE RATE OF RS. 0.50 PER SHARE SINCE THIS COMPANY HAD ERODED ITS NETWORTH. THE ASSESSEE HAD FURNISHED THE BALANCE SHEET ALONG WITH NOTES OF SUCH COMPANY TO THE AO. II) ALTHOUGH THE SHARES OF SAREGAMA INDIA LTD WERE SOLD OFF - MARKET, THE ASSESSEE SOLD IT AT THE PRICE PREVAILING ON THE BSE. IN THIS CONNECTION THE ASSESSEE HAD FILED THE SCREENSHOT OF THE PREVAILING PRICE ON BSE ON THE DATE OF SALE. III) THE ASSESSEE SOLD THE PRE FERENCE SHARES AT FACE VALUE. FURTHER, THE FOLLOWING DOCUMENTS WERE SUBMITTED WITH THE AO WHILE FILING REPLIES TO HIS QUESTIONNAIRE / ORAL QUERIES RAISED DURING THE COURSE OF ASSESSMENT PROCEEDINGS: - 18 1) COMPUTATION OF INCOME WHICH SHOWS LTCL OF RS. 15.93 CRS (PG 1 OF PB); 2) DETAILS OF LTCL WHICH OUGHT TO BE C/F ALONG WITH A NOTE (PG 2 OF PB); 3) STATEMENT SHOWING LTCL OF RS. 15.93 CRS (PG 4 OF PB); 4) NOTE ON C/F OF LOSSES (PG 21 - 22 OF PB); 5) COPY OF BALANCE SHEET OF KEC HOLDINGS LTD REFLECTING SHARES SOLD AS LONG TERM APPEARING AS AT 31.3.2008 (PG 102 - 103 OF PB); 6) COPY OF INVESTMENT SCHEDULE OF I NSTANT H OLDINGS LTD SHOWING SHARES SOLD AS LONG TERM APPEARING AS AT 31.3.2008 (PG 104 OF PB); 7) COPY OF INVOICES SHOWING SALE OF SHARES (PG 105, 106, 110, 111, 112 OF PB); 8) COPY O F BALANCE SHEET OF CFL CAPITAL FINANCIAL SERVICES LTD ALONG WITH NOTES TO ACCOUNTS SHOWING NEGATIVE NETWORTH (PG 107 TO 109 OF PB); 9) COPY OF STOCK PRICE OF EQUITY SHARE OF SAREGAMA INDIA LTD ON BSE ON THE DATE OF SALE (PG 113 OF PB); THE AO COMPLETED THE ASSESSMENT AFTER CONSIDERING THE ABOVE DETAILS AND ALLOWED THE LTCL. THIS SHOWS APPLICATION OF MIND ON THE PART OF THE AO. IN ADDITION TO THE ABOVE, IT IS PERTINENT TO NOTE THAT, THE ISSUE INVOLVED HERE IS NOT OF RS. 15.93 CRS BUT ACTUALLY RS. 6.53 CRS. OUT OF THE TOTAL LTCL OF RS. 15.93 CRS, THE LOS OF RS. 9.40 CRS IS INCURRED ON ACCOUNT OF TRANSFER OF SHARES TO THE HOLDING COMPANY. SUCH TRANSFER IS NOT TREATED AS TRANSFER U/S 47(V) OF THE ACT. HENCE, ONLY THE LTCL OF RS. 6.53 CRS IS C/F FOR SET OFF AGAINST THE CAPITAL GAINS IN FUTURE YEARS. THE SAME IS MENTIONED IN THE NOTES TO COMPUTATION OF INCOME (PG 2 OF PB). HOWEVER, IN ALL ARGUMENTS, THE CIT AND CIT DR HAVE INCORRECTLY MENTIONED LTCL OF RS. 15.93 CRS. WE REQUEST YOUR HONOUR TO TAKE THE SAME ON RECORD. 29 . LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION WRITTEN SUBMISSION PAGES 1 TO 4; 21 TO 22; 102 TO 106; 110 TO 112; 107 TO 109 AND 113 AND EXPLAINED EACH OF THESE DOCUMENTS. THESE DOCUMENTS RELATES TO THE INQUIRIES CONDUCTED BY THE AO IN THE REGULAR ASSESS MENT. 30 . WE HAVE BOTH THE PARTIES AND PERUSED THE SAID DOCUMENTS AND THE ORDERS OF THE AO AND THE CIT. WE HAVE GONE THROUGH THE WRITTEN SUBMISSIONS OF BOTH CIT - DR AND THE LD COUNSEL FOR THE ASSESSEE. THE ISSUE UNDER CONSIDERATION RELA TES TO THE LONG TERM CAPITAL LOSS OF RS. 15.93 CRS ON SALE OF SHARES OF CFL CAPITAL FINANCE SERVICES LTD; SAREGAMA LTD; RPG - CITH (P) LTD (PREFERENTIAL SHARES). GENERAL ALLEGATIONS OF THE CIT AGAINST AO RELATES TO AOS FAILURE TO CARRY OUT ANY VERIFICATION INTO THE ARBITRARY SALE PRICE IN SALE OF THE SHARES OF CFL; SAREGAMA AND PREFERENTIAL SHARES OF RPG - CI T HL. PURCHASE PRICE OF THESE SHARES IS ALSO NOT EXAMINED. IN THIS REGARD, WE EXAMINED THE DATA GATHERED BY THE AO PLACED AT PAGES 1, 2, 4, 21 - 22, 102 - 1 03, 104, 105, 106, 110, 111, 112, 107 TO 109 & 113, WRITTEN SUBMISSIONS OF THE ASSESSEE DURING THE REGULAR ASSESSMENT PROCEEDINGS ETC. WE HAVE ALSO EXAMINED THE DETAILS OF SHARES, COST AND SALES PRICE AND THE BREAK - UP OF THE SAID LOSS OF RS. 15.93 CRS. F OR THE SAKE OF COMPLETENESS, WE EXTRACT THE SAID DETAILS AS UNDER: - 19 31 . WE HAVE ALSO EXAMINED THE WRITTEN SUBMISSIONS MADE BEFORE US AND FIND THAT THE FOLLOWING IS RELEVANT: - THE CIT STATES THAT THE SALE PRICE WAS DECIDED ON AN ARBITRARY BASIS. THE ASSESSE SUBMITS THAT DETAILS REGARDING SALE PRICE OF ABOVE SHARES WERE FURNISHED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. I) THE ASSESSEE SOLD SHARES OF CFL CAPITAL FINANCIAL SERVICES LTD AT THE RATE OF RS. 0.50 PER SHARE SINCE THIS COMPANY HAD ERODED ITS NETWORTH. THE ASSESSEE HAD FURNISHED THE BALANCE SHEET ALONG WITH NOTES OF SUCH COMPANY TO THE AO. II) ALTHOUGH THE SHARES OF SAREGAMA INDIA LTD WERE SOLD OFF - MARKET, THE ASSESSEE SOLD IT AT THE PRICE PREVAILING ON THE BSE. IN THIS CONNECTION THE ASSESSEE HAD FILED THE SCREENSHOT OF THE PREVAILING PRICE ON BSE ON THE DATE OF SALE. III) THE ASSESSEE SOLD THE PREFERENCE SHARES AT FACE VALUE. 32 . CONSIDERING THE INQUIRIES BY THE AO AND PAGES FILED BEFORE HIM BY THE ASSESSEE, WE FIND THAT THE INQUIRIES OF THE AO CANNOT BE CONSIDERED PERFUNCTORY OR INADEQUATE. WE NEED TO CONSIDER THE TIME LIMITATION TO THE AO / THE WORK LOAD ON ANY AO OF THIS PERIOD. ON MERITS ALSO, IT IS NOT THE CASE OF PRINCIPAL CIT THAT PREFERENTIAL SHARES OF RPG - CITHL ARE SOLD BELOW PRICE. THERE WERE SOLD AT FACE VALUES. OF COURSE, AFTER INDEXATION BENEFITS WERE CLAIMED , THE CAPITAL LOSSES ARE REPORTED. REGARDING SHARES OF SAREGAMA, WE FIND THAT THEY ARE QUOTED SHARES AND THE SALE PRICE ARE COMPETITIVE EVEN IF THEY ARE OFF - MARKET TRANSACTIONS. PREVAILING PRICE OF THE SHARES ON BOMBAY STOCK EXCHANGE ARE PLACED ON RECORD. REGARDING SHARES OF CFL ALSO, WE FIND THAT THE RELEVANT FINANCIAL STATEMENTS REVEALS THAT THE 20 CAPITAL OF COMPANY IS ERODED ITS WORTH AND CHARTERED ACCOUNTANTS A LSO CERTIFIED THIS FACT IN THEIR ANNUAL REPORTS OF THE COMPANY. REGARDING, PURCHASE PRICES, WE FIND THAT ISSUE IS NOT RELEVANT TO THE YEAR CONSIDERATION. REASONS FOR THE SAME INCLUDES THAT THE SHARES IN QUESTION WERE ACQUIRED IN THE EARLIER AYS AND THERE ARE NO NEW PURCHASES IN THE YEAR UNDER CONSIDERATION. 33 . THEREFORE, WE ARE OF THE OPINION, THE AO CONDUCTED REASONABLE INQUIRIES INTO THE BASIC FACTS MATERIAL TO THE MAKING OF THE ASSESSMENT. IT IS OBVIOUSLY NOT THE CASE OF LACK OF INQUIRIES BY THE AO DURING THE ASSESSMENT. THE DOCUMENTATION CITED ABOVE IN THIS ORDER SUGGEST THE ABOVE FINDING. WE CANNOT UNDERSTAND WHY THE AO SHOULD TRAVEL INTO ZONE OF PURCHASE PRICE OF THE SHARES OF CFC, SAREGAMA RPG - CITHL AS THEY WERE ACQUIRED IN THE PAST. ANY AD DITION ON THE ACCOUNT OF PURCHASE PRICE IN THIS YEAR IS UNSUSTAINABLE IN LAW. IT IS A SETTLED LEGAL PRINCIPLE. ANY ADDITION RELATING TO INVESTMENT SHOULD BE MADE IN THE YEAR OF INVESTMENT. REGARDING SALE PRICE ALSO, THE SAME ARE COMPETITIVE QUA THE PRICES QUOTED IN BSE AND THE FINANCIALS, AS THE CASE MAY BE. NO ADVERSE DATA IS PLACED BY THE CIT ON RECORDS. CIT ALSO FAILED TO DEMONSTRATE THE LOSS OF REVENUE AS REQUIRED WHEN HE ASSUMES JURISDICTION U/S 263 OF THE ACT. WE ALSO NOTICED THAT BOTH THE PRINCIPAL CIT AND CIT - DR HAVE NOT LISTED / ELABORATED THE MEANING OF THE EXPRESSION ALL ASPECTS USED BY THEM WHILE COMMENTING ON THE AOS FAILURE TO CARRYOUT INQUIRIES. THUS, IT IS THE CASE OF AO CONDUCTING THE INQUIRIES DURING THE REGULAR ASSESSME NT PROCEEDINGS, FORMING AN OPINION IN THE MATTER WITH DUE APPLICATION OF HIS MIND AND NOT MAKING ANY ADDITION AFTER DUE INQUIRIES. WITH SO MUCH OF EVIDENCE ON RECORDS IN SUPPORT OF THE ABOVE, WE CANNOT HOLD AO FAILED TO MAKE MEANINGFUL INQUIRIES. THUS, WE DISMISS THE ARGUMENTS OF LD DR AND ALLOW THE VIEWS OF THE LD COUNSEL FOR THE ASSESSEE. ACCORDINGLY, WE HOLD, PRINCIPAL CIT ERRONEOUSLY ASSUMED JURISDICTION ON THIS ISSUE TOO. 34 . BEFORE PARTING ON THE ISSUE OF APPLICATION OF MIND, WE WOULD LIKE TO M ENTION THAT THAT, WHILE DESCRIBING THE ORDER OF THE AO IN MATTERS OF JURISDICTION OF CIT U/S 263, THE DEPARTMENT USED THE FOLLOWING EXPRESSIONS. THEY ARE; (I) LACK OF INQUIRY ; (II) INADEQUATE INQUIRY ; 21 (III) IMPROPER INQUIRY AND (IV) PERFUNCTORY INQUIRY 35 . REGARDING LACK OF INQUIRY , WE ARE OF THE OPINION THAT THE SAME IS RELEVANT TO CASE OF NO INQUIRY AT ALL BY AO IN THE REGULAR ASSESSMENT. NO QUESTIONS RAISED ON THE MATTER DISCUSSED BY THE CIT IN REVISION PROCEEDINGS. THE SAME SHOULD NOT BE USED IN CASES OF SOME OR F ULL INQUIRIES INTO SUCH MATTER. REGARDING INADEQUATE INQUIRY, WE ARE OF THE OPINION THAT THE EXPRESSION INADEQUACY IS NOT DEFINED AND IT IS A MATTER OF SUBJECTIVE AND RELATIVE ITEM. WHAT IS THE DECIDING ITEM BETWEEN THE ADEQUACY AND INADEQUACY, S IMILAR IS THE EXPRESSION OF IMPROPER INQUIRY. WHAT IS THE DECIDING LIVE BETWEEN PROPER AND IMPROPER INQUIRIES? THESE EXPRESSIONS NEED TO BE UNDERSTOOD FROM THE POINT OF VIEW OF AO ACCEPTING ERRONEOUS CLAIMS OF ERRONEOUS ASSUMPTION OF LAW (FAILURE TO FOL LOW LAW / PRECEDENTS ON THE MATTER) OR FACT AFTER GATHERING THEM. FINALLY, ON THE ISSUE OF PERFUNCTORY INQUIRY ALSO, WE FIND THIS EXPRESSION MEANS AN ACTION TO CARRY OUT WITHOUT REAL INTEREST / FEELING / EFFORT, CURSORY, DESULTORY, ROUTINE DUTY, HASTY, SUPERFICIAL, DONE QUICKLY ETC. THE CASES OF THE PERFUNCTORY INQUIRY SHOULD ALSO BE ANALYSED BY THE CIT DURING THE PROCEEDINGS U/S 263, THE AOS DIFFICULTIES, RESTRICTIONS, WORK LOAD ASPECTS, ORIGINAL INTENTIONS OF AO ETC. PRINCIPAL CIT NEEDS TO ACT P RACTICAL IN THESE MATTERS. IN ASSESSMENT, AO ACCEPTS VARIOUS CLAIMS OF THE ASSESSEE MADE IN THE RETURNS AFTER SCRUTINIZING OR AUDITING THE ACCOUNTS OF THE ASSESSEE AND MADE FEW ADDITIONS / DISALLOWED FEW CLAIMS. NOT ALL SUCH ACCEPTANCES FALL IN THE CATEG ORY OF INADEQUATE INQUIRY OR IMPROPER INQUIRY OR PERFUNCTORY INQUIRY. THEREFORE, PRINCIPAL CIT CANNOT RESORT TO HIT AND RUN APPROACH. HE IS UNDER LEGAL OBLIGATION TO ENLIST THE DETAILS OF INQUIRIES NOT DONE BY THE AO, THE MANNER OF CONDUCTING SUCH IN QUIRIES ETC AND QUANTIFY OR DEMONSTRATE THE REVENUE IN CLEARLY EXPRESSED LANGUAGE IN HIS ORDER. THEREFORE, ON THE FACTS OF THE PRESENT CASE AND THE SETTLED LEGAL PROPOSITIONS IN FORCE, WE ARE OF THE OPINION THAT THE PRINCIPAL CIT WRONGLY ASSUMED JURIS DICTI ON U/S 263 OF THE ACT ON ALL THESE ISSUES RAISED BY HIM. CONSIDERING THE INQUIRIES DONE BY THE AO CLEARLY MADE OUT IN THE RECORDS ABOVE, WE ARE OF THE OPINION THAT THIS IS NOT THE CASE OF INADEQUATE INQUIRY OR IMPROPER INQUIRY OR PERFUNCTORY INQUIRY . THEREFORE, WE RESTORE THE ORDER OF THE AO ORIGINALLY PASSED ON 19.3.2014. ACCORDINGLY, GROUND NOS.1 TO 3 RAISED BY THE ASSESSEE ARE ALLOWED. 22 36 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0 T H A P R I L , 2016. S D / - S D / - ( SANDEEP GOSAIN ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 0 . 4 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI