Shri Subhash Chand Agarwal, JODHPUR V. ACIT, PALI

ITA 262/JODH/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54401 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K CHOBEY
• Assessee Lawyers: U C JAIN
• Keywords: Opportunity of being heard; Difference of opinion; Change of opinion
• Section: 143(3); 263

Judgement Text

1 ITA 262-10 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 262/JODH/2010 ASSTT. YEAR : 2005-06. SHRI SUBHASH CHAND AGARWAL, VS. THE ACIT, CIRCLE, PROP. M/S. GOVIND AGENCIES, SUMERPUR. PALI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI U.C. JAIN RESPONDENT BY : SHRI R.K. CHOBEY DATE OF HEARING : 08.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER PA SSED UNDER SECTION 263 BY LD. CIT JODHPUR ON 24.3.2010. 2. THE LD. COUNSEL OF THE ASSESSEE STATED THAT ASSE SSMENT IN THIS CASE HAS BEEN COMPLETED UNDER SECTION 143(3) AND THE ASSESSING OF FICER HAS EXAMINED THE ISSUE AND ATTENTION OF THE BENCH WAS DRAWN AT PAGE 15 WHERE A COPY OF QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER DATED 24.8.2007 IS PLACED IN THE PAPER BOOK. BY SERIAL NOS. 15 AND 16 OF THE SAID QUESTIONNAIRE, THE ASSESSING OFFICER HA S ASKED FOR COPY OF CONTRACT NOTES/BILLS OF SALE AND PURCHASE OF SHARES DURING THE YEAR UNDE R CONSIDERATION AND STOCK HOLDING STATEMENT OF SHARES WITH YOUR DEPOSITORY PARTICIPAN T AS ON 1.4.2005 AND 31.3.2006. THE ASSESSEE FILED REPLY VIDE LETTER DATED 11.9.2007 AN D BY PARA 11 IT HAS BEEN STATED THAT COPY 2 OF CONTRACT NOTES/BILLS OF SALE AND PURCHASE OF SHA RES DURING THE YEAR UNDER ASSESSMENT ARE SUBMITTED HEREWITH. IT WAS FURTHER SUBMITTED THAT THEREAFTER THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3). COPY OF ORDER IS A LSO PLACED ON RECORD. ATTENTION OF THE BENCH WAS ALSO DRAWN ON FIRST PAGE OF ASSESSMEN T ORDER WHERE IT IS MENTIONED THAT A LETTER DATED 24.8.2007 ALONG WITH DETAILED QUERY LE TTER WAS ISSUED AND IN RESPONSE TO THE SAID NOTICE SHRI N.K. TAPARIYA, A/R ATTENDED ALONG WITH SHRI SUBHASH CHANDRA AGARWAL, THE ASSESSEE FROM TIME TO TIME AND PRODUCED BOOKS O F ACCOUNT CONSISTING OF CASH BOOK, LEDGER, PURCHASES/SALES REGISTER, VOUCHERS ETC. WHI CH WERE EXAMINED ON TEST CHECK. IT WAS FURTHER MENTIONED THAT ASSESSEE HAS ALSO FURNISHED OTHER REQUISITE DETAILS/INFORMATION WHICH WERE EXAMINED AND PLACED ON RECORD, AND THERE AFTER THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER. ACCORDINGLY IT WAS SUBMI TTED THAT ASSESSING OFFICER HAS ALREADY APPLIED HIS MIND IN RESPECT OF SALE AND PUR CHASE OF SHARE WHICH WERE OF LTCG IN NATURE AND SHORT TERM CAPITAL GAIN IN NATURE RESPEC TIVELY. ACCORDINGLY IT WAS SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN SETTING A SIDE THE ASSESSMENT FOR RE-EXAMINATION OF SALE AND PURCHASE OF SHARES AND BY DIRECTING THAT T HE SAME MAY BE TREATED AS BUSINESS TRANSACTION. IT WAS FURTHER SUBMITTED THAT LD. CIT WAS WRONG IN OBSERVING IN PARA 4.7 THAT SHARE TRANSACTIONS WERE BUSINESS TRANSACTION AND TH EREAFTER SET ASIDE THE ASSESSMENT FOR PASSING A FRESH ORDER. IT WAS FURTHER ADDED BY LD. A/R THAT ALL THE SHARE TRANSACTIONS ARE DELIVERY BASED. THEY PURCHASED ON DELIVERY BASED A ND SOLD ON DELIVERY BASED. ALL THE SHARES ARE DEMATIZED AND ASSESSEE IS SHOWING FROM T HE DAY ONE THESE INVESTMENTS IN INVESTMENT PORTFOLIO. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS SHOWN THE VALUE OF SHARES ON COST PRICE AND NOT ON MARKET PRICE. THIS FACT ALSO ESTABLISHES THAT THE SHARE 3 TRANSACTIONS ARE ON ACCOUNT OF INVESTMENT ONLY. AT TENTION OF THE BENCH WAS DRAWN AT PAGES 5 & 6 IN SUPPORT OF THIS CONTENTION. 3. ON THE OTHER HAND, THE LD. CIT D/R STRONGLY PLAC ED RELIANCE ON THE ORDER OF LD. CIT AND IT WAS SUBMITTED THAT LD. CIT HAS PASSED A DETAILED ORDER. IT WAS FURTHER ADDED THAT IT WAS THE DUTY OF THE ASSESSING OFFICER TO EX AMINE THE ISSUE IN DETAIL WHICH HE FAILED TO DO SO. ACCORDINGLY, CIT INITIATED PROCEEDINGS U NDER SECTION 263 AND THEREAFTER OBSERVING VARIOUS REASONS AND FACTS, THEN ONLY THE ORDER OF THE ASSESSING OFFICER WAS SET ASIDE AND WAS DIRECTED TO PASS A FRESH ORDER AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT WAS ALSO ADDED THA T LD. CIT HAS NOT GIVEN ANY DIRECTION TO ADOPT THE SHARE TRANSACTION AS BUSINESS TRANSACTION BUT HE HAS SET ASIDE THE ORDER TO PASS A FRESH ORDER, DEPENDING UPON THE FACTS, AND LEGAL AS PECTS OF THE CASE. 4. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE STATED THAT THOUGH LD. CIT HAS SET ASIDE THE ORDER FOR PASSING AFRESH ORDER BUT HE HAS OBSER VED IN HIS ORDER THAT THESE ARE SHARE TRANSACTIONS, THEREFORE, THE ASSESSING OFFICER HAS TO ADOPT THESE TRANSACTIONS AS BUSINESS TRANSACTIONS AND IT WILL TANTAMOUNT TO CHANGE OF OP INION ONLY WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW AS ASSESSING OFFICER HAS APPLIED HI S MIND AND THEN ACCEPTED THE CLAIM OF THE ASSESSEE. RELIANCE WAS PLACED ON CASE LAWS, CO PIES OF WHICH ARE PLACED IN THE PAPER BOOK. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED T HEM CAREFULLY. AFTER CONSIDERING THE ORDER OF THE ASSESSING OFFICER PASS ED UNDER SECTION 143(3) ORIGINALLY, THE ORDER OF LD. CIT PASSED UNDER SECTION 263 AND THE S UBMISSIONS OF BOTH THE SIDES ALONG WITH THE VARIOUS CASE LAWS, WE FIND THAT LD. CIT WA S NOT JUSTIFIED IN INITIATING PROCEEDINGS UNDER SECTION 263. A SPECIFIC QUERY WAS RAISED BY THE ASSESSING OFFICER VIDE HIS LETTER 4 DATED 24.8.2007 AND ASSESSEE HAS FILED REPLY OF THE SAME. ASSESSEE HAS FILED COPY OF CONTRACT NOTES/BILLS OF SALE AND PURCHASE OF SHARES AND STOCK HOLDING STATEMENT AND THE FACT ABOUT THIS LETTER DATED 24.8.2007 HAS BEEN MEN TIONED IN THE BODY OF ASSESSMENT ITSELF I.E. ON PAGE 1 OF THE ORDER PASSED UNDER SECTION 14 3(3). COPY OF REPLY DATED 11.9.2007 IS PLACED AT PAGE 16 WHEREBY THE REQUIRED DETAILS WERE FILED AND THE ASSESSING OFFICER HAS ADMITTED THIS FACT ALSO THAT REQUIRED DETAILS WERE FILED AND EXAMINED. THEREFORE, IT CANNOT BE SAID THAT ASSESSING OFFICER HAS NOT EXAMINED THE CASE OR HAS NOT APPLIED HIS MIND PROPERLY. THE HONBLE BOMBAY HIGH COURT IN CASE OF GABRIEL INDIA HAS CATEGORICALLY HELD THAT IT IS NOT NECESSARY THAT ORDER PASSED UNDER SE CTION 143 (3) SHOULD BE A DETAILED AND LENGTHY, BUT THE REQUIREMENT IS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND REQUIRED DETAILS HAVE BEEN FILED, THEN ORDER OF ASS ESSING OFFICER CANNOT BE FAULTED AND ACCORDINGLY THE ORDER OF TRIBUNAL QUASHING THE ORDE R UNDER SECTION 263 WAS UPHELD. 6. THE HOMBLE BOMBAY HIGH COURT IN CASE OF GOPAL P UROHIT, 34 DTR 52 HAS HELD THAT TRIBUNAL HAVING ENTERED THE PURE FINDING OF FACT THAT ASSESSEE IS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTION, NAMELY INVESTMENT I N SHARES AND DEALING IN SHARES FOR THE PURPOSE OF BUSINESS AND HELD THAT THE DELIVERY BASE D TRANSACTION ARE TO BE TREATED AS INVESTMENT TRANSACTION AND THE PROFIT RECEIVED THER EFROM IS TO BE TREATED AS SHORT TERM OR LONG TERM CAPITAL GAIN DEPENDING ON THE PERIOD OF H OLDING OF SHARES .. 7. IN THE PRESENT CASE UNDISPUTED FACTS ARE THAT TR ANSACTIONS ARE DELIVERY BASED AND, THEREFORE, ON MERIT, WE HOLD THAT THE ASSESSING OFF ICER WAS JUSTIFIED IN ACCEPTING THE CLAIM. 8. NOW, THE LD. CIT AFTER EXAMINING THE FACTS OF TH E CASE THAT THEY ARE BUSINESS TRANSACTIONS AND, THEREFORE, SHOULD BE ASSESSED AS BUSINESS PROFIT AND NOT ON LONG TERM 5 OR SHORT TERM AS THE CASE MAY BE. THIS IS IN OUR V IEW IS ON ACCOUNT OF CHANGE OF OPINION ONLY. THE HON'BLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CORPORATION LTD., 243 ITR 83 AND IN CASE OF MAX INDIA, 295 ITR 282 HAS HE LD THAT ON ACCOUNT OF CHANGE OF OPINION, PROCEEDINGS UNDER SECTION 263 CANNOT BE IN ITIATED. IT IS FURTHER SEEN THAT ON SIMILAR FACTS IN EARLIER YEARS ASSESSMENT ALSO THE CASE OF ASSESSEE HAS BEEN ACCEPTED IN RESPECT TO LONG TERM OR SHORT TERM CAPITAL GAIN AS THE CASE MAY BE. SIMILAR ISSUE WAS DECIDED BY THE HONBLE DELHI HIGH COURT IN CASE OF ESCORTS LTD., 338 ITR 435 WHEREIN IT HAS BEEN HELD THAT TRIBUNAL WAS CORRECT IN SETTING ASIDE ORDER UNDER SECTION 263. IN THIS CASE ALSO THE LD. CIT WAS OF THE VIEW THAT THE TRAN SACTION ENTERED BY ASSESSEE WAS SPECULATIVE IN NATURE AND, THEREFORE, THEY SHOULD N OT HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. HOWEVER, THE HONBLE HIGH COURT HAS OBSER VED THAT THE CITS ORDER DID NOT WRITE THE FINDINGS TO THE FACT THAT THE STAND TAKEN BY THE ASSESSEE THAT THE UNITS PURCHASED FROM UTI HAD ACTUALLY BEEN PHYSICALLY DELIVERED ALO NG WITH EXECUTED TRANSFER DEED WAS FALSE. 9. IN THIS CASE ALSO THERE IS NO FINDING OF LD. CIT THAT THE TRANSACTION ENTERED BY ASSESSEE WAS NOT ON DELIVERY BASE OR ARE NOT DEMATI ZED. THEREFORE, IN OUR VIEW, THE LD. CIT WAS NOT JUSTIFIED IN INITIATING PROCEEDINGS UND ER SECTION 263 AS ASSESSING OFFICER HAS ALSO ENQUIRED THE MATTER BY ISSUING A DETAILED QUES TIONNAIRE AND THEREAFTER ASSESSEE HAS FILED REQUIRED DETAILS WHICH WERE TEST CHECKED BY T HE ASSESSING OFFICER AS MENTIONED IN HIS ORDER AT PAGE 1. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT AND RESTORE THE ORDER OF ASSESSING OFFICER PASSED ORIGINALLY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 6 11. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- SHRI SUBHASH CHAND AGARWAL, SUMERPUR. THE ACIT, CIRCLE, PALI. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 262/JODH/2010) BY ORDER, AR ITAT JODHPUR.