JUHIS IDEA MERCANTILE P LTD, MUMBAI V. PR CIT 6, MUMBAI

ITA 2619/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2934 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Revision of order; Transfer pricing; Opportunity of being heard; Principle of natural justice; Period of limitation; Source of fund; Cost of acquisition; Valuation report; Assessment record
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.2619/M/2015 ASSESSMENT YEAR: 2010-11 M/S. JUHIS IDEA MERCANTILE PVT. LTD., BLUE GARDENIA, 1 ST FLOOR, FLAT NO.2, PEDDAR ROAD, MUMBAI 400 026 PAN: AABCJ 3253F VS. PRINCIPAL CIT-6, ROOM NO.501, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIPUL JOSHI, A.R. REVENUE BY : SHRI ALOK JOHRI, D.R. DATE OF HEARING : 05.05.2016 DATE OF PRONOUNCEMENT : 24 06.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 05.03.2015 OF THE COMMISSIONER OF INCOME TAX [HEREINAFTER REFERRED TO AS THE CIT] RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS CHALLENGED THE VERY VALIDITY OF THE REVISION ORDER PASSED BY THE CIT UNDER SECTION 263 OF THE ACT CONT ENDING THAT THE LD. CIT HAS WRONGLY AND ILLEGALLY EXERCISED HIS REVISION JU RISDICTION IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ORIGINAL ASSESSMENT ORDER WAS PASSED BY THE ASSESSI NG OFFICER (HEREINAFTER REFERRED TO AS THE AO) ON 26.03.13 IN SCRUTINY ASSE SSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT. THE AO MADE CERTAIN ADDITIONS INTO THE INCOME OF THE ASSESSEE NOT ACCEPTING THE DIMINUTION IN THE VALUE OF STOCK OF ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 2 SHARES OF M/S. SANKALP RETAIL VALUE STORES P. LTD. ADOPTED BY THE ASSESSEE FOR THE CALCULATION OF NOTIONAL LOSS AT THE END OF THE YEAR. HE ESTIMATED THE VALUE OF THE SHARES AT A HIGHER RATE AND ACCORDINGLY MADE CORRESPONDING ADDITIONS TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) [HE REINAFTER REFERRED TO AS THE CIT (A)] AGITATING THE ADDITION OF RS.1,96,00,0 00/- MADE BY THE AO ON ACCOUNT OF ALLEGED UNDERVALUATION OF CLOSING STOCK OF SHARES. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE FILED CERTAIN S UBMISSIONS BEFORE THE LD. CIT(A) INCLUDING THE VALUATION REPORT OF THE SAID S HARES OF M/S. SANKALP RETAIL VALUE STORES P. LTD. THE LD. CIT(A) CALLED FOR REM AND REPORT FROM THE AO IN RESPECT OF VARIOUS SUBMISSIONS AND EVIDENCES FURNIS HED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS. A REMAND REPORT DATED 1 1.08.14 IN THIS RESPECT WAS SENT BY THE AO TO THE LD. CIT(A), BUT THROUGH THE O FFICE OF THE CIT, REAFFIRMING THE VALUATION OF THE SHARES OF M/S. SAN KALP RETAIL VALUE STORES P. LTD. AT 85% OF THE DISCOUNTED CASH FLOW OF RS.2129. 89 CRORES AS AGAINST THE 60% VALUE ADOPTED BY THE ASSESSEE. HOWEVER, THE SA ID REMAND REPORT NEVER REACHED THE OFFICE OF CIT(A). THE REASON BEING THAT THE SAID REMAND REPORT WAS SENT BY THE AO TO THE CIT IN COMPLIANCE OF HIS WRIT TEN DIRECTIONS THAT ANY REMAND REPORT TO BE SENT TO THE CIT(A) MUST BE FORW ARDED THROUGH OFFICE OF THE CIT. A COPY OF THE LETTER BEARING NO.CIT-6/263/200 4-05 DATED 09.10.15 HAS BEEN PLACED ON FILE WHICH HAS BEEN ADDRESSED TO CHI EF COMMISSIONER OF INCOME TAX-IV, MUMBAI BY CIT OF INCOME TAX-VI, MUMB AI. A PERUSAL OF THE SAID LETTER REVEALS THAT THE LD. CIT-6 HAS APPRAISE D THE CHIEF CIT-IV THAT FROM THE PERUSAL OF SOME OF THE ORDERS OF LD. CIT(A), IT WAS OBSERVED BY HIM THAT RELIEF HAS BEEN GIVEN BY THE LD. CIT(A) BASED ON TH E WISHI-WASHY REMAND REPORTS OF THE AO. PURSUANT TO THIS, IT WAS DIRECT ED BY THE LD. CIT TO THE AO THAT REMAND REPORTS FALLING UNDER HIS CHARGE SHOULD BE FORWARDED TO CIT THROUGH HIS OFFICE. THE RELEVANT PART OF THE SAID LETTER FOR THE PURPOSE OF READY REFERENCE IS REPRODUCED AS UNDER: ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 3 THE CHIEF COMMISSIONER OF INCOME TAX IV MUMBAI SIR, SUB: COPY OF NOTICES ISSUED U/S 263 OF THE ACT IN CASES OF IDEA TRACOM PVT. LTD. (WHICH MERGED WITH INSTANT HOLDINGS LTD.) AND JUHI'S IDEA MERCANTILE P. LTD. WHICH EMANATED FROM THE REC EIPT OF REMAND REPORTS FROM THE OFFICE OF ADDL. CIT LEG. ****** PLEASE REFER TO THE ABOVE. 2. FROM PERUSAL OF SOME OF THE ORDERS OF CIT(A), IT WAS OBSERVED THAT RELIEF HAS BEEN GIVEN BY THE CIT(A) BASED ON THE WISHY-WAS HY 'REMAND REPORTS' OF THE AO. PURSUANT TO THIS, IT WAS DECIDED THAT REMAN D REPORTS FROM THIS CHARGE SHOULD BE FORWARDED TO CIT(A) FROM THE OFFIC E OF THE UNDERSIGNED ONLY. A WRITTEN DIRECTION WAS ISSUED TO THIS EFFEC T. 3. SUBSEQUENT TO THIS DIRECTION ON RECEIPT OF TWO R EMAND REPORTS FROM THE OFFICE OF THE ADDL. CIT. IT CAME TO THE NOTICE OF THE UNDERSIGNED THAT ASSESSMENTS IN CASES OF IDEA TRACOM PVT. LTD. (WHIC H MERGED WITH INSTANT HOLDINGS LTD.) AND JUHI'S IDEA MERCANTILE P. LTD. F OR A.YS.2011-12 & 2010-11 RESPECTIVELY WERE NOT DONE PROPERLY AND CERTAIN VIT AL ASPECTS WHICH WERE REQUIRED TO BE EXAMINED BY THE AOS WERE NOT LOOKED INTO AT ALL. IN VIEW OF THIS, NOTICES U/S.263 OF THE ACT HAVE BEEN ISSUED IN THESE ABOVE TWO MENTIONED CASES. COPIES OF THE SAME ARE FORWARDED H EREWITH FOR YOUR KIND PERUSAL. 4. IN CASE OF IDEA TRACOM PVT. LTD., . 5. IN CASE OF JUHIS IDEA MERCANTILE P. LTD., IT WA S OBSERVED THAT PROFIT OF RS.27 CRORES APPROX. EARNED FROM SALE OF SHARES WAS NEUTRALIZED BY INGENIOUS METHOD BY BUYING SHARES OF CONNECTED ENTI TIES AT A HIGHER PRICE AS STOCK-IN-TRADE AND THEN SHOWING THE SAME S HARES AT MARKET VALUE AS PART OF CLOSING STOCK THEREBY ARTIFICIAL C REATING A LOSS OF RS.25.20 CRORES. 6. IN BOTH THESE CASES, IT WAS OBSERVED THAT ADDITI ONS WERE MADE ON FRIVOLOUS ISSUES ON ACCOUNT OF WHICH CIT(A) HAD CALLED FOR REMAND REPORTS. 7. THE ABOVE INFORMATION IS FOR YOUR KIND KNOWLEDGE . YOURS FAITHFULLY. (DR. R. K. KAKKAR) COMMISSIONER OF INCOME TAX-6, MUMBAI ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 4 5. PURSUANT TO RECEIPT OF THE ABOVE REMAND REPORTS, THE LD. CIT ISSUED NOTICE UNDER SECTION 263 OF THE ACT TO THE ASSESSEE . EVEN AT THE SAKE OF REPETITION, WE THINK IT PERTINENT TO MENTION HERE T HAT AS REPORTED IN THE SUBJECT OF THE LETTER ITSELF, THE JURISDICTION/PROCEEDINGS UNDER SECTION 263 HAS EMANATED FROM THE RECEIPT OF REMAND REPORTS SENT BY THE AO T O THE OFFICE OF LD. CIT-6 WHICH WERE MEANT TO BE SENT TO THE LD. CIT(A) IN RE LATION TO THE APPEALS PENDING BEFORE HIM. 6. THE LD. CIT, THEREAFTER PASSED AN ORDER UNDER SE CTION 263 OF THE ACT SETTING ASIDE THE ASSESSMENT ORDER DATED 26.03.13 O BSERVING THAT THE AO HAD ONLY MADE INQUIRIES IN RESPECT OF THE DIMINUTION IN THE VALUE OF THE SHARES HELD AS STOCK IN TRADE OF M/S. SANKALP RETAIL VALUE STOR ES P. LTD. BUT HE HAD NOT INQUIRED ABOUT THE PURCHASE PRICE OF THE SAID SHARE S. THE LD. CIT OBSERVED THAT M/S. SANKALP RETAIL VALUE STORES P. LTD. AT TH E TIME OF THE PURCHASE TRANSACTION WAS A LOSS MAKING COMPANY AND THAT THE ASSESSEE HAD PURCHASED THE SHARES AT A MUCH HIGHER RATE THAN ITS MARKET VA LUE. THE VALUE OF THE SHARES HAD DRASTICALLY FALLEN DOWN WITHIN 2 MONTHS AND THE ASSESSEE VALUED THE SHARES AT A VERY LOW VALUE AND THUS CLAIMED THE LOSS OF RS .25.20 CRORE SO AS TO INTRODUCE THE PROFIT OF RS.26.97 CRORES SHOWN BY TH E ASSESSEE FROM THE SALE OF SHARES OF M/S. PANTALOON RETAIL (INDIA) LTD. IN TH E VIEW OF THE LD. CIT, THE ENTIRE EXERCISE WAS DONE BY THE ASSESSEE TO REDUCE THE PROFIT OF SHARES AND THUS TO AVOID THE DUE PAYMENT OF TAXES. APART FROM THAT , THE LD. CIT ALSO OBSERVED THAT THE AO HAD NOT MADE RELEVANT AND MEANINGFUL IN QUIRIES REGARDING THE PURCHASE AND SALE OF SHARES OF M/S. PANTALOON RETAI L (INDIA) LTD. HE OBSERVED THAT THE NUMBER OF SHARES PURCHASED AND SOLD OF M/ S. PANTALOON RETAIL (INDIA) LTD. BY THE ASSESSEE WERE NOT PROPERLY INQUIRED BY THE AO. HE OBSERVED THAT THERE WAS CERTAIN DEFECTS IN THE BILLS RELATING TO THE SALE OF SHARES OF M/S. PANTALOON RETAIL (INDIA) LTD. AND THAT THE AO DID N OT CARRY OUT PROPER VERIFICATION REGARDING THE PURCHASE AND SALE CLAIMS OF THE ASSESSEE OF THE ABOVE STATED SHARES OF M/S. PANTALOON RETAIL (INDIA) LTD. THE LD. CIT FURTHER OBSERVED THAT LIKEWISE THE ASSESSEE HAD CLAIMED DIM INUTION IN THE VALUE OF THE ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 5 STOCK OF SHARES OF OTHER LISTED COMPANIES. THE LD. CIT ALSO OBSERVED THAT THE AO DID NOT RAISE ANY QUERIES RELATING TO THE CLAIM OF TRADING AND FABRICS, THE BUSINESS FROM WHICH THE ASSESSEE HAD SHOWN A PROFIT OF RS.97,930/-. HE FURTHER OBSERVED THAT IN THE OBJECT CLAUSE OF THE M EMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSESSEE COMPANY, THE TRADING IN SHARES WAS NOT MENTIONED AS ITS BUSINESS AND THEREFORE THE ASSESSEE WAS NOT AUTHORIZED TO CARRYING ON THE BUSINESS OF TRADING IN SHARES. HE ACCORDINGLY ISSU ED NOTICE UNDER SECTION 263 OF THE ACT TO THE ASSESSE. THE ASSESSEE RAISED CERT AIN PRELIMINARY OBJECTIONS SUCH AS THAT THE RELEVANT QUERIES WERE DULY RAISED BY THE AO AND THAT ALL THE TRANSACTIONS WERE DULY EXPLAINED BEFORE THE AO AND THAT THE AO HAD DULY APPLIED HIS MIND DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND IN CONSEQUENCE TO SUCH ENQUIRIES THE LD . AO HAD MADE CERTAIN ADDITIONS AGAINST WHICH THE ASSESSEE HAD ALREADY FI LED AN APPEAL BEFORE THE CIT(A). THE ASSESSEE ALSO AGITATED THE INVOCATION OF JURISDICTION UNDER SECTION 263 BY THE CIT ON MERITS AND PLEADED THAT ALL THE T RANSACTIONS WERE DULY EXPLAINED AND WERE CARRIED OUT AT ARMS LENGTH PRIC E; THAT THE DECISION OF THE ASSESSEE TO PURCHASE THE SHARES OF THE M/S. SANKALP RETAIL VALUE STORES P. LTD. WAS A WELL THOUGHT BUSINESS DECISION AS M/S. SANKAL P RETAIL VALUE STORES P. LTD. IN THE PAST HAD SHOWN VERY FAST AND DYNAMIC GR OWTH. THAT IT ESTABLISHED 42 STORES SPREAD ACROSS 23 CITIES IN INDIA WITHIN A SHORT SPAN OF THREE YEARS ONLY. IT ESTABLISHED FIXED PRICE STORES POPULARLY KNOWN AS DOLLAR STORES IN THE DEVELOPMENT MARKETS AND BECAME THE MASTER FRANCHISE E OF MY DOLLAR STORE INC./DOLLAR STORE INTERNATIONAL, USA FOR INDIA (DSI ). THAT THE COMPANY HAD DIVERSIFIED SUPPLY BASE ACROSS THE COUNTRIES SUCH A S USA, UK, PORTUGAL, SOUTH AFRICA, THAILAND AND CHINA. THAT DUE TO THESE CIRC UMSTANCES, IT HAD BECOME A VERY ATTRACTIVE TARGET FOR PRIVATE EQUITY PLAYERS. SINCE M/S. SANKALP RETAIL VALUE STORES P. LTD. WAS PLANNING TO GO PUBLIC AND HENCE IT WAS EXPECTED TO DELIVER HAND SOME RETURNS. THE INVESTMENT COMMITTE E OF THE ASSESSEE, CONSIDERING THE ABOVE CIRCUMSTANCES AND ACCEPTING G OOD BUSINESS OPPORTUNITIES, ACQUIRED SHARES OF M/S. SANKALP RETA IL VALUE STORES P. LTD. WITH ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 6 A PLAN TO OFF LOAD THE SAME AT MUCH HIGHER PRICE IN FUTURE. ASSESSEE NEGOTIATED WITH M/S. SANKALP RETAIL VALUE STORES P. LTD. AND A FTER NEGOTIATIONS, THE PURCHASE CONSIDERATION OF SHARES WAS FIXED AND 4980 000 SHARES WERE PURCHASED FOR A SUM OF RS.30 CRORES WHICH WERE SHOW N AS STOCK IN TRADE. HOWEVER, AT THE END OF THE YEAR, DUE TO CERTAIN PRO BLEMS THERE OCCURRED SERIOUS SETBACK TO THE SAID COMPANY AND THE VALUE OF ITS S HARES FALLEN DOWN DRASTICALLY. A VALUATION REPORT WAS OBTAINED AND ON THE BASIS OF THE SAID VALUATION REPORT, THE VALUATION OF THE CLOSING STOCK WAS DONE AND THE RESULTANT LOSS WAS OFFERED/CLAIMED IN THE RETURN OF INCOME. IT WAS AL SO EXPLAINED THAT THE DETAILS OF PURCHASE AND SALE OF SHARES OF M/S. PANTALOON RE TAIL (INDIA) LTD. WERE DULY PROVIDED AND THAT ALL THE SALE TRANSACTIONS WERE CA RRIED OUT AT ARMS LENGTH PRICE. THE PURCHASES OF THE M/S. PANTALOON RETAIL (INDIA) LTD. WERE DONE IN THE EARLIER YEAR AND THE SAME WERE SOLD DURING THE YEAR AND RESULTANT PROFITS WERE OFFERED FOR TAXATION. WITH RESPECT TO THE PROFIT E ARNED IN TRADING IN FABRIC THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAD STARTED TH E VENTURE OF TRADING IN FABRIC FOR THE FIRST TIME DURING THE FINANCIAL YEAR UNDER CONSIDERATION AND THAT ALL THE TRANSACTIONS WERE DIRECTLY AT ARMS LENGTH AND THRO UGH PROPER BANKING CHANNEL FOR WHICH PROPER BILLS/INVOICES WERE MAINTAINED AND PRODUCED AT THE TIME OF ASSESSMENT. THE AO AFTER DULY VERIFYING THE SAID D ETAILS HAD ACCEPTED THE PROFITS RETURNED BY THE ASSESSEE FROM THIS ACTIVITY . REGARDING THE VALUATION OF SHARES OF OTHER ILLUSTRATED COMPANIES, IT WAS EXPLA INED THAT THE TRANSACTIONS WERE CARRIED OUT AT MARKET RATE AND VALUATION AS ON THE CLOSING DATE WAS ALSO AT THE MARKET RATE. THAT THE ASSESSEE HAD NO CONTROL OVER THE MARKET RATES AND THEREFORE THERE WAS NO QUESTION OF DOUBTING THE SAI D TRANSACTIONS. SO FAR AS THE OBJECT CLAUSE WAS CONCERNED, IT WAS EXPLAINED THAT IT WAS NOT DECISIVE OF THE BUSINESS ACTIVITY OF THE ASSESSEE SO FAR AS ASSESSM ENT OF INCOME WAS CONCERNED. UNDER INCOME TAX ACT, THE ASSESSEE WAS SUPPOSED TO RETURN PROFIT OR LOSS ON THE BUSINESS ACTIVITY CARRIED OUT. WHETHER THE BUS INESS ACTIVITY WAS CARRIED OUT AS PER THE OBJECT CLAUSE OR NOT WAS NOT RELEVANT SO FAR AS THE TAXATION OF INCOME WAS CONCERNED. HOWEVER, IT WAS EXPLAINED THAT IN T HE RETURN OF INCOME AS WELL ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 7 AS IN THE TAX AUDIT REPORT IT WAS MENTIONED THAT TH E ASSESSEE WAS ENGAGED IN THE SHARE TRADING ACTIVITY AND IN TRADING IN FABRICS. 7. THE LD. CIT, HOWEVER, DID NOT ACCEPT THE CONTENT IONS OF THE ASSESSEE AND OBSERVED THAT THE AO HAD FAILED TO MAKE RELEVANT AN D MEANINGFUL ENQUIRIES AND THAT THE ASSESSMENT ORDER TANTAMOUNT TO BEING ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE ACCORDINGLY EXERCISING HIS REVISION POWERS UNDER SECTION 263 OF THE ACT, SET ASIDE THE ASSESSMENT OR DER DATED 26.03.13 AND DIRECTED THE AO TO RE-DO THE ASSESSMENT AFRESH. 8. AT THIS STAGE, WE DEEM IT FIT TO MENTION AN IMP ORTANT FACT OF THE CASE THAT PURSUANT TO THE NOTICE ISSUED UNDER SECTION 263 BY THE CIT, THE ASSESSEE HAD REQUESTED, NOT ONLY TO THE AO AND THE CIT (A) BUT TO THE LD. CIT ALSO, FOR INSPECTION OF RECORDS AND RETRIEVE THE COPIES OF TH E ASSESSMENT RECORDS SO AS TO ENABLE IT TO PROPERLY REPLY AND CONTEST THE SAID NO TICE U/263 BECAUSE, AT THE RELEVANT TIME, THE SAID RECORD, DUE TO CERTAIN UNAV OIDABLE CIRCUMSTANCES, WAS NOT AVAILABLE WITH THE ASSESSEE. THE AO AND THE CIT(A) DID NOT ALLOW THE INSPECTION AS THE LD. CIT WAS SEIZED OF THE MATTER. LD. CIT, HOWEVER, DECLINED THE SAID REQUEST OF THE ASSESSEE OBSERVING THAT THE FINDINGS OF THE CIT WERE BASED U PON THE DETAILS FILED BY THE ASSESSEE ITSELF AND THAT GIVING FURTHER INSPECTION DURING THE CURRENCY OF REVISION PROCEEDINGS MIGHT AFFECT INQUIRIES/INVESTIGATIONS A ND REVISION PROCEEDINGS AS THE ASSESSEE WOULD GET OPPORTUNITY TO TAILOR ITS BO OKS OF ACCOUNTS OR DOCUMENTS TO TALLY MIRROR COPY WITH MATERIAL LIKELY TO BE BRO UGHT ON RECORD. ANOTHER POINT THAT IS RELEVANT TO MENTION HERE THAT PURSUANT TO THE RECEIPT OF REMAND REPORT FROM THE AO BY THE LD. CIT, THE LD. C IT DID NOT FORWARD THE SAID REMAND REPORT TO THE CIT (A) BUT, IN FACT, INF ORMED HIM THAT HE WAS CONTEMPLATING REVISION PROCEEDINGS AND THUS PREVENT ED THE CIT(A) FROM PASSING AN ORDER IN THE PENDING APPEAL OF THE ASSES SEE BEFORE HIM. ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 8 9. BEFORE PROCEEDING FURTHER, IT IS ALSO PERTINENT TO MENTION HERE THAT THE AO PASSED FRESH ASSESSMENT ORDER DATED 31.03 2016 A S PER DIRECTIONS OF THE CIT GIVEN UNDER SECTION 263 OF THE ACT. HE, HOWEVE R, DID NOT DOUBT OR MAKE ANY ADDITION IN RESPECT OF THE PURCHASE VALUE OF TH E SHARES OF M/S. SANKALP RETAIL VALUE STORES P. LTD. HE, HOWEVER, MADE CERT AIN ADDITIONS RE- DETERMINING THE VALUE OF THE CLOSING STOCK OF THE S HARES OF M/S. SANKALP RETAIL VALUE STORES P. LTD. AT ITS PURCHASE COST OF RS.30 CRORES AND THUS REJECTED THE CLAIM OF THE DIMINUTION IN THE VALUE OF THE SHARES. HE ALSO TOOK THE COST PRICE AS THE VALUE OF THE CLOSING STOCK OF THE SHARES OF OTHER LISTED COMPANIES AND MADE CORRESPONDING ADDITIONS. HE ALSO OBSERVED THA T THE OBJECT OF CLAUSE OF THE ASSESSEE DID NOT MENTION THAT THE ASSESSEE COMP ANY WAS IN THE BUSINESS OF TRADING IN FABRICS, HE, THEREFORE, HELD THAT THE AS SESSEE WAS NOT INVOLVED IN THE BUSINESS ACTIVITY OF FABRICS AND DISALLOWED THE CLA IM OF EXPENSES OF RS.36,84,323/- RELEVANT TO THE SAID BUSINESS ACTIVI TY OF FABRICS. HE, ACCORDINGLY, ASSESSED THE TOTAL INCOME OF THE ASSES SEE AT RS.268844853/- AS AGAINST THE TOTAL INCOME OF RS.18535479/- ASSESSED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. 10. NOW COMING TO THE MERITS OF THE APPEAL BEFORE U S. THE LD. A.R. OF THE ASSESSEE HAS VEHEMENTLY CONTENDED THAT THE LD. CIT HAS WRONGLY AND ILLEGALLY INVOKED THE REVISION JURISDICTION UNDER SECTION 263 OF THE ACT WITH A PREDETERMINED APPROACH TO STALL THE CONTINUATION OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A). HE HAS FURTHER CONTENDED TH AT EVEN THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN VIOLATED BY NOT AFFORDING THE ASSESSEE AN OPPORTUNITY TO INSPECT THE RECORD. HE HAS FURTHER SUBMITTED TH AT EVEN ON MERITS, SINCE, THE AO DURING THE ASSESSMENT PROCEEDINGS HAD MADE THORO UGH ENQUIRIES AND EVEN HAD MADE CERTAIN ADDITIONS REGARDING THE VALUATION OF THE CLOSING STOCK AND ALL THE DETAILS EVIDENCES AND EXPLANATIONS WERE DULY FU RNISHED BEFORE THE AO, UNDER THESE CIRCUMSTANCES, THE ACTION OF THE CIT IN REVISING THE ORDER UNDER SECTION 263 OF THE ACT WAS NOT JUSTIFIED. THAT THE ORDER OF THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. HE HAS FURTHER SUBMITTED ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 9 THAT THE ISSUE WAS ALREADY CONSIDERED BY THE LD. CI T(A) AND A REMAND REPORT WAS CALLED UPON AND EVEN THE REMAND REPORT WAS ALSO PREPARED AND SENT BY THE AO, WHEREIN, IT WAS SPECIFICALLY OBSERVED BY HIM TH AT THE SOURCE OF FUNDS AND THE TRANSACTION OF PURCHASE OF THE SHARES WERE PROV ED. THE SELLER OF THE SHARES HAD ALSO RETURNED THE CORRESPONDING PROFITS FROM TH E SALE OF SHARES OF M/S. SANKALP RETAIL VALUE STORES P. LTD. AND THEREFORE A LL THE ISSUES WERE NOT ONLY EXAMINED BY THE AO DURING THE ORIGINAL ASSESSMENT P ROCEEDINGS BUT ALSO DURING THE REMAND PROCEEDINGS AND THAT THE LD. CIT HAD GOT NO JURISDICTION AT THAT STAGE TO INTERFERE WITH THE APPELLATE PROCEEDI NGS BEFORE THE CIT(A) BY WAY OF BLOCKING THE REMAND REPOT AND THEREAFTER SETTING ASIDE THE ASSESSMENT ORDER. 11. ON THE OTHER HAND, THE LD. D.R. HAS CONTENDED T HAT THE LD. CIT IS A SUPERVISORY AUTHORITY AND HE PLAYED HIS ADMINISTRAT IVE ROLE IN DIRECTING THE AO TO SEND THE REMAND REPORT THROUGH HIS OFFICE IN ALL THE CASES IN WHICH THE CIT(A) HAD CALLED A REMAND REPORT FROM THE AO. HE HAS FURTHER CONTENDED THAT THE AO HAD ONLY INVESTIGATED ABOUT THE VALUE O F THE CLOSING STOCK AND THAT NO INVESTIGATIONS WERE CARRIED OUT BY THE AO REGARD ING THE VALUE OF THE SHARES OF THE M/S. SANKALP RETAIL VALUE STORES P. LTD. AT THE TIME OF PURCHASE AND THAT WITHIN A SHORT SPAN OF TWO MONTHS, THE VALUE OF THE SHARES HAD FALLEN DOWN DRASTICALLY WHICH SHOWED THAT THE ASSESSEE HAD MANI PULATED THE PURCHASE AND SALE TRANSACTIONS TO NEUTRALIZE THE PROFITS EARNED FROM THE SALE OF SHARES FROM M/S. PANTALOON RETAIL (INDIA) LTD. AND THUS THE LD. CIT HAD RIGHTLY HELD THAT THE AO DID NOT CARRY OUT RELEVANT AND MEANINGFUL EN QUIRIES AND THEREFORE THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE F IRST AND FOREMOST POINT FOR ADJUDICATION BEFORE US IS AS TO WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT CAN BE SAID TO BE HAVING JURISDIC TION TO EXERCISE HIS REVISION POWERS U/S 263 OF THE ACT? ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 10 THE LD. D.R., TO STRESS HIS POINT, HAS PLACED RELIA NCE ON THE PROVISIONS OF SECTION 263 OF THE ACT, WHICH FOR THE SAKE OF CONVE NIENCE, ARE REPRODUCED AS UNDER: 263. (1) THE [PRINCIPAL COMMISSIONER OR] COMMISSIO NER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTA NCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. [EXPLANATION 1.]FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST D AY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT C OMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-TAX OFFICER ON TH E BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER S ECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EX ERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL D IRECTOR GENERAL OR] DIRECTOR GENERAL OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTIO N 120; (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWA YS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT A VAILABLE AT THE TIME OF EXAMINATION BY THE [PRINCIPAL COMMISSIONER OR] COMM ISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWE RS OF THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER UNDER THIS SUB-SECTIO N SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MAT TERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. 7A [EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE D EEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 11 C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH A NY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119 ; OR ( D ) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISD ICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON.] (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH T HE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TI ME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TR IBUNAL, [NATIONAL TAX TRIBUNAL,] THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB- SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNIT Y TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PE RIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. --------------------------------------------------- -------------------------------------------------- 7A. INSERTED BY THE FINANCE ACT, 2015, W.E.F. 1-6-2 015 13. HE WHILE INVITING OUR ATTENTION TO THE ABOVE PR OVISIONS OF SECTION 263 OF THE ACT HAS SUBMITTED THAT UNDER SUB SECTION (1) OF SECTION 263, THE COMMISSIONER IS EMPOWERED TO CALL FOR AND EXAMINE T HE RECORD OF ANY PROCEEDING UNDER THE ACT. HE, WHILE INVITING OUR A TTENTION TO CLAUSE (B) TO EXPLANATION 1, HAS STATED THAT IT INCLUDES ALL RECO RDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. HE HAS FURTHER INVITED OUR ATTENTION TO CLAUSE (C) TO SAID EXPLANATION AND HAS VEHEMENTLY CONTENDED THAT WHERE ANY ORDER REFERRED TO IN THE SUB CLAUSE (1) AND PASSED BY THE AO HAD BEEN SUBJECT MATTER OF ANY APPEAL, THE POWERS OF THE CIT ARE EXTENDED TO SUCH MATTERS AS HAD BEEN NOT BE EN CONSIDERED AND DECIDED IN SUCH APPEAL. HE HAS FURTHER INVITED OUR ATTENTI ON TO NEWLY INSERTED EXPLANATION 2 TO CONTEND THAT THE ORDER CAN BE SAID TO BE ERRONEOUS IN SO FAR AS ITS PREJUDICIAL TO THE INTEREST OF THE REVENUE IF I N THE OPINION OF THE COMMISSIONER, THE ORDER IS PASSED WITHOUT MAKING IN QUIRIES OR VERIFICATIONS WHICH SHOULD HAVE BEEN MADE OR THAT THE ORDER HAS B EEN PASSED BY THE AO ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAI M. HE IN THIS RESPECT HAS CONTENDED THAT THE SAID EXPLANATION 2 IS EXPLANATOR Y AND CLARIFICATORY IN NATURE AND THAT THE SAME CAN BE APPLIED RETROSPECTIVELY TO THE CASE OF THE ASSESSEE. ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 12 14. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D .R. IN THIS RESPECT. A CAREFUL PERUSAL OF THE PROVISIONS OF SECTION 263 RE VEALS THAT THE CIT MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THE ACT AND IF, HE IS OF THE VIEW THAT THE ORDER PASSED BY THE AO THEREIN IS ERR ONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE, AFTER MAKING ENQUIRIES IN THIS RESPECT AND GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE, MAY PASS SU CH ORDERS THEREON INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR C ANCELLING THE ASSESSMENT OR DIRECTING A FRESH ASSESSMENT. SO WHAT IS REVEALE D FROM THE SAID PROVISIONS THAT THERE MUST BE AN ORDER OF THE AO IN THE PROCEE DINGS, THE RECORD OF WHICH HAS BEEN CALLED UPON BY THE LD. CIT, IN RELATION TO WHICH THE CIT CAN EXERCISE HIS REVISION JURISDICTION UNDER SECTION 263 OF THE ACT. 15. ADMITTEDLY, IN THE CASE IN HAND, THE LD. CIT(A) HAD CALLED FOR A REMAND REPORT WHICH WAS PART OF THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) AND WAS REQUIRED TO BE SENT BY THE AO TO THE LD. CIT(A ) DURING THE COURSE OF ADJUDICATION OF THE APPEAL, PROCEEDINGS OF WHICH WE RE CONTINUING BEFORE HIM. HOWEVER, BY A GENERAL ORDER, THE LD. CIT DIRECTED T HE AO TO SEND EACH AND EVERY REMAND REPORT THROUGH HIS OFFICE. NOW COMING TO THE RELEVANT PROVISIONS, IN CASE OF A REMAND REPORT, NEITHER THE AO IS AUTHORIZED TO PASS ANY ORDER NOR HE HAS OTHERWISE ANY OCCASION TO PASS ANY ORDER. HENCE, THE REMAND REPORT IN THIS CASE, IN OUR VIEW, WAS A PART OF THE APPELLATE PROCEEDINGS WHICH WAS CALLED UPON BY THE LD. CIT(A) FOR APPRECIATION AND CONSIDERATION OF THE FACTS BEFORE HIM. THEREFORE, SINCE NO ORDER HAS BE EN PASSED BY THE AO IN RELATION TO THE REMAND PROCEEDINGS/REMAND REPORT, T HE RECORD OF WHICH WAS CALLED UPON BY THE CIT, THERE WAS NO OCCASION OR JU RISDICTION TO THE CIT TO EXERCISE ANY REVISION JURISDICTION AS THERE WAS NO ORDER OF THE AO EMANATING FROM THE REMAND REPORT. IT HAS BEEN SPECIFICALLY W RITTEN BY THE LD. CIT IN THE OPENING LINES OF THE IMPUGNED ORDER PASSED UNDER SE CTION 263 THAT AT THE TIME OF FORWARDING OF REMAND REPORT PREPARED BY THE AO T O THE LD. CIT(A), HE OBSERVED THAT THE AO HAD NOT CONSIDERED ALL THE ISS UES AT THE TIME OF PASSING OF ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 13 THE ASSESSMENT ORDER. HE ACCORDINGLY INVOKED THE R EVISION JURISDICTION UNDER SECTION 263 OF THE ACT. FURTHER, FROM THE LETTER D ATED 09.10.14 ADDRESSED BY THE LD. CIT TO THE CCIT, IN THE VERY SUBJECT OF THE LETTER, THE CIT HAS MENTIONED THAT THE NOTICES HAVE BEEN ISSUED UNDER S ECTION 263 OF THE ACT IN THE CASE OF IDEA TELECOM PVT. LTD. AND IN THE CASE OF JUHI IDEA MERCANTILE PVT. LTD. (ASSESSEE) WHICH EMANATED FROM THE RECEIPT OF REMAND REPORTS FROM THE AO. THE ABOVE WORDINGS IN THE OPENING LINES OF THE IMPUGNED ORDER AS WELL AS FROM THE LETTER DATED 09.10.14 REVEALED THAT THE RE VISION JURISDICTION UNDER SECTION 263 OF THE ACT HAS BEEN INVOKED/EMANATED FR OM THE REMAND REPORT OF THE AO. AS OBSERVED ABOVE, NEITHER THERE WAS NOR T HERE CANNOT BE ANY ORDER PASSED BY THE AO IN RELATION TO THE REMAND REPORT C ALLED UPON BY THE CIT(A) OR ANY HIGHER AUTHORITY, HENCE, UNDER SUCH CIRCUMSTANC ES, THERE CANNOT BE ANY INVOCATION OF JURISDICTION UNDER SECTION 263OF THE ACT SO FAR AS THE REMAND REPORT OR THE PROCEEDINGS RELATING TO THE REMAND RE PORT ARE CONCERNED. THE PROCEEDINGS UNDER THE ACT, AS MENTIONED IN THE PRO VISION OF SECTION 263, IN OUR VIEW, DOES NOT INCLUDE THE PROCEEDINGS BEFORE ANY APPELLATE AUTHORITY SUCH AS CIT(A), ITAT, HONBLE HIGH COURT OR THE HONBLE SUPREME COURT. THE PROCEEDINGS BEFORE AN APPELLATE AUTHORITY OR ANY OR DER PASSED THEREIN BY AN APPELLATE AUTHORITY, IN OUR VIEW, CANNOT BE SUBJECT ED TO THE REVISION JURISDICTION OF THE LD. CIT. IF SUCH A PROPOSITION IS ALLOWED T O BE ACCEPTED, IT WILL HAVE GRAVE CONSEQUENCES AND IN THAT EVENT IT WOULD MEAN THAT THE LD. CIT WOULD HAVE POWERS NOT ONLY TO INTERFERE BUT TO PREVENT TH E HIGHER AUTHORITIES, INCLUDING THIS TRIBUNAL, THE HONBLE HIGH COURT OR THE HONBLE SUPREME COURT FROM ADJUDICATING MATTERS BEFORE THEM AND WHEREVER ANY REPORT OR CLARIFICATION WILL BE SOUGHT BY ANY HIGHER AUTHORITY RELATING TO ANY FACTUAL ASPECT OF A MATTER BEING CONSIDERED BY SUCH AN HIGHER AUTHORITY, THE L D. CIT WOULD IMMEDIATELY EXERCISE HIS JURISDICTION UNDER SECTION 263 AND WOU LD STALL THE PROCEEDINGS BEFORE THE APPELLATE AUTHORITIES AND WOULD REVISE T HE ORDER OF THE AO PREVENTING THE APPELLATE AUTHORITIES FROM PASSING A NY ORDER. THE REMAND REPORT OR THE REMAND PROCEEDINGS CARRIED OUT BY THE AO ON THE DIRECTIONS OF THE ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 14 CIT(A), WHO IS HAVING AN INDEPENDENT JUDICIAL AUTHO RITY TO DECIDE THE MATTERS IN APPEAL BEFORE HIM, ARE THE PART OF THE PROCEEDIN GS BEFORE SUCH AN APPELLATE AUTHORITY AND THE AO HAS NO JURISDICTION TO PASS AN Y ORDER IN RESPECT OF SUCH A REMAND REPORT BUT JUST TO CARRY OUT CERTAIN INVESTI GATION OF FACTS AS REQUIRED BY THE APPELLATE AUTHORITY AND SUBMIT A REPORT TO THE LD. CIT(A) OR THE HIGHER APPELLATE AUTHORITY WHOSOEVER HAS DIRECTED HIM TO D O SO. IT IS UNDER THE JURISDICTION OF THE APPELLATE AUTHORITY TO CONSIDER SUCH A REMAND REPORT SENT BY THE AO, ACCEPT IT OR REJECT IT OR TO PASS ANY ORDER ON THE BASIS OF SUCH A REMAND REPORT AFTER CONSIDERING OBJECTIONS, IF ANY, FILED BY THE ASSESSEE AGAINST SUCH A REMAND REPORT. THE AO IS NOT AUTHORIZED TO PASS AN Y INDEPENDENT ORDER IN RELATION TO SUCH A REMAND PROCEEDING OR REMAND REPO RT. IN OUR VIEW, NO OTHER AUTHORITY SUCH AS THE LD. CIT HAS ANY JURISDICTION TO INTERFERE, CALL FOR OR PASS ANY ORDER IN RELATION TO SUCH A REMAND REPORT OR RE MAND PROCEEDINGS EXCEPT THE APPELLATE AUTHORITY BEFORE WHOM A CHALLENGE HAS BEE N MADE BY WAY OF WRIT PETITION OR APPEAL OR REVISION, AS THE CASE MAY BE, AGAINST THE ORDER FOR CALLING OF REMAND REPORT ETC. HAVING COMPETENT JURISDICTION OVER SUCH AN AUTHORITY WHO HAS CALLED THE REMAND REPORT. THE LD. CIT NEITHER HAS GOT ANY APPELLATE JURISDICTION OVER THE CIT(A) NOR ON ANY OF THE OTHE R HIGHER AUTHORITIES IN JUDICIAL HIERARCHY. IN VIEW OF THIS, THE EXERCISE OF THE REVISION JURISDICTION IN RELATION TO THE REMAND REPORT/REMAND PROCEEDINGS BY THE LD. CIT IS BEYOND HIS POWERS GIVEN UNDER THE ACT. 16. THE NEXT IMPORTANT POINT TO BE SEEN IN THIS CASE IS WHETHER, IN THIS CASE, THE EXERCISE OF REVISION JURISDICTION BY THE LD. CI T UNDER SECTION 263 OF THE ACT WAS IN REGULAR COURSE OF HIS DUTIES/WORK OR THE SAME WAS EXERCISED WITH A PREDETERMINED MIND THAT WHATEVER HIS AO DID OR WAS DOING, THAT WAS WRONG, ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. AS OBSERVED ABOVE, IN THE CASE IN HAND THE LD. CIT WAS HAVING A PREDETERMINED PREJUDICIAL MIND EVEN BEFORE THE INVO CATIONS OF THE PROVISIONS OF SECTION 263 OF THE ACT EXERCISING HIS REVISION J URISDICTION. AS DISCUSSED ABOVE, THE LD. CIT WAS OF THE VIEW THAT IN EACH AND EVERY APPEAL PENDING ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 15 BEFORE THE CIT(A), WHO, NO DOUBT, HOLDS A RANK AND DESIGNATION EQUAL TO THAT OF CIT AND HAS INDEPENDENT JUDICIAL POWERS TO DECIDE T HE APPEALS PREFERRED BY AN ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED BY THE AO. IT IS WORTHWHILE TO MENTION HERE THAT THE POWERS OF THE LD. CIT(A), AS PER THE PROVISIONS OF THE ACT, ARE CO-TERMINUS WITH THAT OF AO AND UNDER THE CIRCUMSTANCES THE LD. CIT(A) IS NOT ONLY EMPOWERED TO DECIDE THE ISSUES P UT BEFORE HIM BY THE ASSESSEE BUT HE HAS JURISDICTION TO LOOK INTO THE O THER ISSUES AND OTHER ASPECTS RELATING TO THE ASSESSMENT OF INCOME AND MAY AFTER HEARING THE ASSESSEE ON THOSE OTHER ISSUES, ENHANCE THE ASSESSMENT MADE BY THE AO. WE FIND THAT THE ASSESSEE HAD AGITATED THE DETERMINATION/ESTIMATION OF THE VALUE OF THE CLOSING STOCK BY THE AO IN ITS APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAD CALLED FOR A REMAND REPORT FROM THE AO IN RELATION TO THE SUBMISSIONS AND DETAILS FURNISHED BY THE ASSESSEE IN THIS RESPECT. THE AO HAD MADE RELEVANT ENQUIRIES IN RESPECT OF SOURCE OF FUNDS, PURCHASE C OST OF THE ASSESSEE, SHARES VALUE OF THE CLOSING STOCK ETC. AND WAS OF THE VIEW THAT THE ASSESSEE HAD UNDERVALUED THE CLOSING STOCK AND MADE ADDITIONS VI DE ASSESSMENT ORDER DATED 26.03.13. ON THE DIRECTIONS OF THE LD. CIT(A), IN RELATION TO THE FURTHER DETAILS AND EVIDENCES SUBMITTED BY THE ASSESSEE, THE AO MAD E FURTHER ENQUIRIES IN RESPECT OF ABOVE MATTER AND REAFFIRMED HIS FINDINGS IN THIS RESPECT. IT IS PERTINENT TO MENTION HERE THAT THE AO HAD MADE CATE GORICAL OBSERVATION THAT THE ASSESSEE HAD TAKEN A LOAN FROM BANSI MALL MANAG EMENT CO. PVT. LTD. ON 28.01.2010 AND INVESTED THE SAID AMOUNT IN M/S. SAN KALP RETAIL VALUE STORES P. LTD. FOR RS.30 CRORES ON 28.01.2010 AND THAT IT WAS CLEAR THAT THE SAID AMOUNT OF RS.30 CRORES WAS USED FOR PURCHASE OF SHA RES FROM THE FUTURE VENTURE INDIA LTD. THAT THE VALUE OF THE SHARES PU RCHASED AT THE RATE OF RS.60.24 PER SHARE ON 28.01.2010 DRASTICALLY REDUCE D IN A SPAN OF TWO MONTHS TO THE VALUE AT THE RATE OF RS.10 PER SHARE AS ON 3 1.03.10. THE ABOVE FINDINGS WERE REPORTED BY THE AO AFTER GOING THROUGH THE DET AILS FORWARDED BY THE CIT(A), THE DETAILS SUBMITTED BY THE ASSESSEE, DETA ILS CALLED FOR BY THE AO DURING THE REMAND PROCEEDINGS AND THE DETAILS AVAIL ABLE AS PER RECORD. THE ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 16 OBSERVATIONS OF THE AO MADE IN PARA 7 OF THE REMAND REPORT ARE RELEVANT WHICH FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER : 7. THE DETAILS FORWARDED BY YOUR GOODSELF, THE DET AILS CALLED FOR DURING THE REMAND PROCEEDINGS AND THE DETAILS AS PER RECORD AR E PERUSED AND THE FOLLOWING OBSERVATIONS ARE MADE. A) ASSESSEE HAS TAKEN LOAN FROM BANSI MALL MANAGEME NT CO. PVT. LTD. ON 28 JANUARY 2010 AND INVESTED IN SANKALP SHARES FOR RS. 30 CRORES ON 28 TH JANUARY 2010. BANSI MALL MANAGEMENT CO. PVT. LTD. HAS TAKEN LOAN OF R.30 CRORES FROM BANSI MALL MANAGEMENT PVT. LTD. AND THEN ADVANCED T HE SAME AMOUNT TO THE ASSESSEE AND THEN ASSESSEE HAS INVESTED THE SAI D AMOUNT IN SANKALP SHARES. AL THE TRANSACTIONS ARE SHOWN ON SOME DATE. B) IT IS CLEAR FROM THE ABOVE THAT THE AMOUNT OF RS . 30 CRORES RECEIVED FROM THE BANSI MALL MANAGEMENT CO. PVT. LTD . ARE U SED FOR PURCHASE OF SHARES FROM THE FUTURE VENTURE INDIA LTD. FOR 30 CRORES AN D THE SAID SHARES ARE VALUED AT RS. 4.70 CRORES AT THE END OF THE YEAR. THE VALUE O F SHARES PURCHASED @ RS.60.24 PER SHARE ON 28 TH JANUARY IS DRASTICALLY REDUCED IN A SPAN OF 2 MONTHS TO THE VALUE @RS. L0 PER SHARE AS ON 3L/3/20 10. 17. THE AO, HOWEVER, FURTHER OBSERVED THAT THE ASSE SSEE HAD UNDERVALUED THE CLOSING STOCK. THIS REMAND REPORT SENT BY THE AO TO THE OFFICE OF THE CIT WAS NOT FURTHER FORWARDED BY THE LD. CIT TO THE FIL E OF THE LD. CIT(A) AND THIS FACT HAS BEEN SPECIFICALLY RECORDED BY THE LD. CIT IN THE IMPUGNED ORDER. HE, IN FACT, INFORMED THE LD. CIT(A) THAT HE HAD EXERCI SED HIS JURISDICTION UNDER SECTION 263 OF THE ACT. HE, THEREFORE, PREVENTED TH E LD. CIT(A) FROM PASSING THE APPELLATE ORDER. IN HIS LETTER TO THE CCIT, TH E LD. CIT HAS CATEGORICALLY OBSERVED THAT THE LD. CIT(A) WAS GIVING RELIEF TO T HE ASSESSEES ON THE BASIS OF WISHI-WASHY REPORTS OF THE AO. HE, THEREFORE, DIRE CTED THE AO TO SEND IN ALL THE CASES THE REMAND REPORTS THROUGH HIS OFFICE, WH EREIN, THE LD. CIT(A) HAS CALLED FOR SUCH REMAND REPORTS FROM THE AO. IN OUR VIEW, THIS VERY ACTION OF THE LD. CIT IS A GROSS AND BLATANT ILLEGAL INTERFER ENCE IN THE APPELLATE JURISDICTION OF THE LD. CIT(A). AS OBSERVED ABOVE, THE LD. CIT(A) AND THE LD. CIT ARE OF THE EQUAL RANK AND CAN EXERCISE THEIR JU RISDICTIONS IN THEIR RESPECTIVE FIELDS WITHOUT INTERFERING IN THE JURISDICTION AND WORK OF EACH OTHER. IN THIS CASE, THE LD. CITS ACTION, BY OBSERVING THAT SINCE THE LD. CIT(A) IS GIVING RELIEF TO THE ASSESSEES ON THE BASIS OF THE REMAND REPORTS OF THE AO, OF ADOPTING ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 17 THE PRACTICE TO PREVENT THE LD. CIT(A) TO PASS ORDE RS IN THE APPEALS PENDING BEFORE HIM CANNOT BE APPRECIATED AT ALL IN ANY OF T HE CIRCUMSTANCES. THE LD. CIT, IN OUR VIEW, HAD NO JURISDICTION TO DIRECT THE AO TO SEND EACH AND EVERY REMAND REPORT THROUGH HIS OFFICE TO THE LD. CIT(A). IN OUR VIEW, THE LD. CIT(A) HAS DIRECT JURISDICTION OVER THE AO AS AN AP PELLATE AUTHORITY AND THE LD. CIT HAS NO JURISDICTION TO INTERFERE IN THE JUD ICIAL FUNCTION OF THE AO IN PURSUANCE AND IN COMPLIANCE OF THE ORDERS OF THE LD . CIT(A) DURING THE PENDENCY OR IN THE COURSE OF ADJUDICATION OF ANY AP PEAL BEFORE HIM. THE ORDER FOR CALLING OF THE REMAND REPORT WAS PASSED BY THE LD. CIT(A) AND THE AO WAS SUPPOSED TO SEND HIS REMAND REPORT TO THE LD. CIT(A ) WITHOUT ANY INTERFERENCE OF ANY OTHER INCOME TAX AUTHORITY IN THIS RESPECT. THUS, BY GIVING A GENERAL DIRECTION TO THE AO THAT EACH AND EVERY REMAND REPO RT CALLED FOR BY THE CIT(A) BE ROUTED THROUGH HIS OFFICE WAS BEYOND HIS JURISDI CTION. IN OUR VIEW, EXERCISE OF THE REVISION POWERS UNDER SECTION 263 FROM A REM AND REPORT CALLED UPON BY CIT(A) OR ANY OTHER HIGHER JUDICIAL AUTHORITY IS WR ONG AND ILLEGAL. MOREOVER, SUCH AN EXERCISE WAS DONE BY THE LD. CIT NOT IN A R OUTINE COURSE BUT WITH A PREDETERMINED, PREJUDICIAL, BIASED MIND AND APPROAC H TO STALL, IN ANY EVENT, THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) OR TO I NTERFERE IN THE SMOOTH CONDUCT OF APPELLATE PROCEEDINGS BY WAY OF BLOCKING THE REMAND REPORT IN HIS OFFICE AND THEREBY EXERCISING HIS JURISDICTION UNDE R SECTION 263 OF THE ACT. 18. THE ANOTHER ASPECT, WHICH CANNOT BE IGNORED IS THAT THE LD. CIT, IN THIS CASE, HAS FAILED TO COMPLY WITH THE PRINCIPLES OF N ATURAL JUSTICE AS HE REJECTED THE APPLICATION OF THE ASSESSEE FOR INSPECTION OF T HE RECORD ON FLIMSY GROUNDS. SUCH AN APPLICATION WAS MOVED BY THE ASSESSEE BEFOR E THE AO ALSO. HOWEVER, THE AO REFUSED TO ALLOW THE INSPECTION OF THE RECOR D SAYING THAT THE LD. CIT WAS SEIZED OF THE MATTER. ON THE ONE HAND, THE LD. CIT HAS CATEGORICALLY WRITTEN THAT THE RECORD ON THE BASIS OF WHICH HE HA D DECIDED TO INVOKE THE REVISION JURISDICTION UNDER SECTION 263 OF THE ACT WAS NOTHING BUT THE OWN RECORD/ DOCUMENTS SUBMITTED BY THE ASSESSEE. THEN, UNDER SUCH CIRCUMSTANCES, WHAT PREVENTED THE LD. CIT FROM ALLOWING THE ASSESS EE TO EXAMINE ITS OWN ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 18 RECORD IS NOT UNDERSTANDABLE TO US. THE LD. CIT HA S RAISED CERTAIN QUERIES TO THE ASSESSEE ON THE BASIS OF SOME RECORD AND WHEN T HE ASSESSEE REQUIRED TO GO THROUGH THE SAID RECORD TO ANSWER THOSE QUERIES, TH E REFUSAL TO ALLOW THE INSPECTION OF SUCH RECORD AND THEN TO MAKE THE ADDI TIONS ON THE BASIS OF REPLY FILED BY THE ASSESSEE, WITHOUT CONSULTATION OF THE RECORD, TO SUCH QUERIES VIOLATES THE PRINCIPLES OF NATURAL JUSTICE. 19. THE ANOTHER PECULIAR FACT IN THIS CASE IS THAT THE AO ALREADY HAD MADE ENQUIRIES REGARDING THE SOURCE OF FUNDS FOR THE PUR CHASE OF SHARES, THE PURCHASE VALUE OF THE SHARES, THE VALUE OF THE CLOSING STOCK ETC. NOT ONLY ONCE BUT THRICE I.E. FIRSTLY DURING THE ORIGINAL ASSESSMENT PROCEED INGS, SECONDLY DURING THE REMAND PROCEEDINGS AND THIRDLY IN THE COURSE OF FRE SH ASSESSMENT PROCEEDINGS DONE WHILE GIVING EFFECT TO THE ORDER OF THE CIT PA SSED UNDER SECTION 263 OF THE ACT AND THE AO COULD NOT FIND ANY DEFECT OR ANY EXAGGERATED PURCHASE VALUE OF THE SHARES OF M/S. SANKALP RETAIL VALUE S TORES P. LTD. WE FURTHER FIND FROM THE PERUSAL OF THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT THAT THE LD. CIT TO FIND FAULT WITH THE ASSESSM ENT ORDER HAS GONE INTO SUCH ASPECTS WHICH HAD NO RELEVANCY SO FAR AS THE TAXATI ON OF THE INCOME OF THE ASSESSEE WAS CONCERNED. HE, IN THE IMPUGNED ORDER, HAS OBSERVED THAT THE OBJECT CLAUSE OF THE MEMORANDUM AND ARTICLES OF ASS OCIATION OF THE ASSESSEE DID NOT SUGGEST THAT THE ASSESSEE WAS ENGAGED IN TR ADING IN FABRICS AND TRADING IN SHARES. HOWEVER, A PERUSAL OF THE ORIGINAL ASSE SSMENT ORDER ITSELF, REVEALS THAT THE ASSESSEE HAD DULY MENTIONED NOT ONLY IN TH E AUDIT REPORT, RETURN OF INCOME BUT ALSO IN THE PROCEEDINGS BEFORE THE AO TH AT HE WAS ENGAGED IN SHARE TRADING AND FABRIC BUSINESS. THE ASSESSEE HAD RETU RNED A VERY GOOD PROFIT FROM THE SALE OF M/S. PANTALOON RETAIL (INDIA) LTD. WHIC H HAS BEEN ACCEPTED BY THE AO. THE ASSESSEE HAS ALSO RETURNED POSITIVE PROFIT IN RESPECT OF FABRIC TRADING BUSINESS. ONLY BECAUSE, THE ASSESSEE HAD RETURNED LOSS ON ACCOUNT OF DIMINUTION IN THE VALUE OF THE STOCK OF M/S. SANKAL P RETAIL VALUE STORES P. LTD. SHARES, THAT ITSELF, CANNOT BE A GROUND TO HOLD THA T THE ASSESSEE HAD NOT CARRIED OUT ANY SUCH TRANSACTIONS. IF THE VIEW POINT OF TH E LD. CIT IS TO BE ACCEPTED, ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 19 THEN UNDER SUCH CIRCUMSTANCES, NEITHER THE INCOME F ROM THE SALE OF SHARES OF M/S. PANTALOON RETAIL (INDIA) LTD. SHOULD HAVE BEEN TAXED NOR THE INCOME FROM FABRIC TRADING. THE DETAILS OF TRANSACTIONS CARRIE D OUT BY THE ASSESSEE WERE DULY FURNISHED BEFORE THE AO AND THE AO HAS NOT DOUBTED THE SAME. EVEN THE BILLS RELATING TO THE TRANSACTIONS IN QUESTION WERE SUBMI TTED BEFORE THE LD. CIT. SINCE THE ASSESSEE HAS RETURNED PROFITS IN RESPECT OF SALE OF M/S. PANTALOON RETAIL (INDIA) LTD. AS WELL AS IN RESPECT OF FABRIC BUSINESS AND THEN BY RELYING UPON THE OBJECT CLAUSE OF THE ASSESSEE COMPANY, THE ACTION OF THE CIT IN REJECTING THE CONTENTION OF THE ASSESSEE THAT IT WA S ENGAGED IN SUCH A BUSINESS WOULD RESULT INTO NON TAXATION OF SUCH AN INCOME. UNDER THE CIRCUMSTANCES, IT IS NOT THE ORDER OF THE AO BUT THE ORDER OF THE CIT WHICH MAY PROVE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 20. THE LD. CIT, NOT ONLY IN THE OPENING LINES OF T HE IMPUGNED ORDER BUT ALSO WHILE CONCLUDING, HAS OBSERVED THAT THE AO HAD NOT MADE RELEVANT AND MEANINGFUL ENQUIRIES WHILE PASSING THE ASSESSMENT O RDER. THIS TERMINOLOGY OF RELEVANT AND MEANINGFUL INQUIRIES DOES NOT FIND MEN TION UNDER THE PROVISIONS OF THE ACT. IT IS APPARENT FROM THE RECORD THAT TH E AO HAD MADE ENQUIRIES IN RESPECT OF THE MATTER AND IT IS NOT A CASE OF LACK OF INQUIRY. EVEN, AS OBSERVED ABOVE, IN THE FRESH ASSESSMENT ORDER PASSED IN PURS UANCE TO THE DIRECTIONS ISSUED BY THE LD. CIT VIDE HIS IMPUGNED ORDER PASSE D UNDER SECTION 263 OF THE ACT, THE AO HAD AGAIN MADE INQUIRIES AND NO NEW FAC T OR DETAIL HAS COME INTO HIS KNOWLEDGE. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE AO HAD NOT MADE INQUIRIES OR VERIFICATIONS WHICH SHOULD NO T HAVE BEEN MADE OR THE AO HAD GRANTED ANY RELIEF WITHOUT INQUIRING INTO TH E CLAIM. 21. SO FAR AS THE FINDING OF THE LD. CIT THAT THE A O HAD NOT INQUIRED REGARDING THE DIMINUTION IN THE VALUE OF THE SHARES OF THE LISTED COMPANIES IS CONCERNED, THE ASSESSEE HAS EXPLAINED THAT THE SAME WAS ADOPTED AS PER THE MARKET VALUE WHICH CAN BE VERIFIED FROM THE STOCK E XCHANGE AND UNDER SUCH CIRCUMSTANCES, THE INVOCATION OF JURISDICTION U/S 2 63 MERELY ON THE BASIS OF ITA NO.2619/M/2015 M/S. JUHIS IDEA MERCANTILE PVT. LTD. 20 DOUBT BUT WITHOUT ANY EVIDENCE ON THE FILE THAT THE SAME HAS BEEN WRONGLY STATED, IS NOT JUSTIFIED AND THE SAME IS NOT SUFFIC IENT TO HOLD THAT THE ORDER OF THE AO WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 22. IN VIEW OF THE ABOVE CIRCUMSTANCES, IN OUR VIEW , THE LD. CIT HAS CROSSED HIS JURISDICTION WHILE INVOKING PROVISIONS OF SECTI ON 263 OF THE ACT. THUS, THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 OF TH E ACT IS SET ASIDE AND THE CONSEQUENTIAL ASSESSMENT ORDER PASSED BY THE AO WHI LE GIVING EFFECT TO THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE AC T HAS NO LEGS TO STAND AND THE SAME IS ALSO SET ASIDE. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.06.2016. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.06.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.