Atlas NetworksPvt.Ltd., Ahmedabad V. The CIT,A'bad-I, Ahmedabad

ITA 513/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62920 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BAATHEJA
• Assessee Lawyers: G C PIPARA
• Section: 143(3); 142(1); 263

Judgement Text

ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO.513/AHD/2012 (ASST. YEARS: 2007-08) ATLAS NETWORKS PVT. LTD., 204 ELLISBRIDGE SHOPPING CENTRE OPP.TOWN HALL, ELLISBRIDGE, AHMEDABAD. (APPELLANT) VS. THE COMMISSIONER OF INCOME TAX, AHMEDABAD-1, C-WING, 3 RD FLOOR, PRATYAKSHA KAR BHAVAN, NR.POLYTECHNIC, AMBAWADI, AHMEDABAD. (RESPONDENT) PAN: AADCA 9654L APPELLANT BY : MR.G.C.PIPARA RESPONDENT BY : MR. O.P. BAATHEJA, SR. D.R. ( )/ ORDER DATE OF HEARING : 17- 7-2 012 DATE OF PRONOUNCEMENT : 31-8-2012 PER: SHRI ANIL CHATURVEDI, A.M. THIS APPEAL IS FILE BY THE ASSESSEE AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME TAX, AHMEDABAD-1, PASSED UND ER SECTION 263 OF THE I.T. ACT DATED 18-1-2012 FOR THE ASSESSMENT YEA R 2007-08. ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 2 2. IN THIS CASE THE ASSESSEE FILED ITS RETURN OF IN COME ELECTRONICALLY ON 6- 3-2009 DECLARING TOTAL INCOME OF RS.92,48,847/-.THE CASE WAS SELECTED FOR SCRUTINY AND INCOME WAS ASSESSED AT RS.1,12,89,990/ - VIDE ORDER DATED 24-12-2009 FRAMED U/S.143(3) OF THE ACT. 3. ON PERUSING THE ASSESSEES BALANCE SHEET AS ON 3 1-3-2006, CIT OBSERVED THAT AN AMOUNT OF RS.3,95,200/- HAS BEEN S HOWN AS INVESTMENT IN SHARES AS COMPARED TO THAT RS.10,42,886/- AS ON 31-3-2007. OUT OF THE INVESTMENT OF EARLIER YEAR THE ASSESSEE HAS SOLD CE RTAIN SHARES AND EARNED GAIN OF RS.1,06,04,281/- WHICH WAS CLAIMED AS SHORT TERM CAPITAL GAIN. IT WAS FURTHER OBSERVED THAT THERE WAS NO SECURED AND UNSECURED LOAN REFLECTED IN THE BALANCE SHEET AS ON 31-3-2006. CON SIDERING THE FACT THAT THE ASSESSEE HAS NOT PURCHASED THE SHARES OUT OF AN Y LOAN TAKEN AND HAS NOT MADE ANY FREQUENT PURCHASE OR SALE OF SHARES, E ITHER DURING THE PREVIOUS YEAR RELEVANT TO A Y. 2007-08 OR A.Y. 2006 -07 AND THE COMPANY HAD SHOWN THE SHARES AS INVESTMENT IN THE BALANCE S HEET AND CLAIMED SHORT TERM CAPITAL GAIN ON SALE OF SHARES, THE VERI FICATION OF BALANCE SHEET WAS REQUIRED. FURTHER, ON GOING THROUGH THE CASE RE CORDS OF THE ASSESSEE, CIT OBSERVED THAT THE A.OS ORDER DATED 24-12-2009 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASONS THAT A.O. HAD NOT MADE ANY INQUIRY REGARDING THE PURCHASE OF ENTIRE I NVESTMENT ON CREDITS AND NO INQUIRY HAS ALSO BEEN MADE AS TO HOW THE AMO UNTS ARE STILL OUTSTANDING. HE ALSO OBSERVED THAT IN THE PROFIT AN D LOSS ACCOUNT ASSESSEE HAD DEBITED AN AMOUNT OF RS.6,60,713/- AS INTEREST. HE WAS THUS OF THE OPINION THAT THE SHORT TERM CAPITAL GAIN OF RS.1.06 CRORE DECLARED BY THE ASSESSEE SHOULD HAVE BEEN ASSESSED AS BUSINESS INCO ME INSTEAD SHORT TERM CAPITAL GAINS. ACCORDING TO THE CIT THIS REQUI RES CLARIFICATION. ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 3 4. CIT ALSO OBSERVED THAT THE ASSESSEE HAS GIV EN LOANS AND ADVANCES TO THE COMPANY TO THE TUNE OF RS.2 CRORES. CIT., WA S OF THE VIEW THAT THE A.O. HAS NOT INQUIRED INTO THE RELATIONSHIP WITH TH E PARTIES WITH THE ASSESSEE AND THE A.O. HAS ALSO NOT EXAMINED THE APP LICABILITY OF SECTION 2(22)(E) OF THE I,.T. ACT. HE THUS CONCLUDED THAT A .O. HAS NOT CONDUCTED NECESSARY INQUIRY BEFORE PASSING THE ORDER AND THER EFORE, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 5. ACCORDINGLY COMMISSIONER OF INCOME TAX ISSUED SH OW CAUSE NOTICE DATED 15-12-2011 FOR THE PURPOSE OF INITIATING PROC EEDINGS U/S.263.THE ASSESSEE APPEARED AND ALSO FILED WRITTEN SUBMISSION S. IN REPLY TO THE SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT THE A.O. H AD CALLED FOR COMPLETE DETAILS OF SALES AND PURCHASE OF SHARES MADE DURING THE YEAR, DETAILS OF UNSECURED LOAN, DETAILS OF INTEREST RECEIVED AND PA ID BY THE COMPANY, OPENING AND CLOSING STOCK OF SHARES, DETAILS OF AMO UNT PAYABLE TOWARDS SHARES PURCHASED AND SCRIP-WISE DETAILS OF SHARES A BOUT THE SHORT TERM CAPITAL GAIN OF RS.1.06 CRORES. ALL THE DETAILS REQ UIRED WERE FURNISHED TO THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AN D BASED ON THE DETAILS THE A.O. COMPLETED THE ASSESSMENT AND CONSI DERED THE SHORT TERM CAPITAL GAIN ON SALE OF SHARES AS INCOME UNDER THE HEAD CAPITAL GAIN. WITH RESPECT TO THE EXAMINATION OF THE APPLICABILITY OF SECTION 2(22)(E) WAS CONCERNED, THE ASSESSEE SUBMITTED THAT THE A.O. VID E NOTICE U/S.142(1) DATED 12-11-2009 HAD CALLED FOR THE DETAILS OF ASSO CIATE CONCERNS, DETAILS OF UNSECURED LOANS, DETAILS OF LOANS AND ADVANCES G IVEN TO DETAILS OF SHAREHOLDING OF THE COMPANY. IT WAS THEREFORE, SUBM ITTED THAT THE ORDER WAS PASSED BY THE A.O. AFTER CONSIDERING ALL THE SU BMISSIONS AND DETAILS ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 4 CALLED FOR. THE ASSESSEE ALSO SUBMITTED THAT IT HAD PREFERRED APPEAL AGAINST THE ORDER OF A.O. BEFORE THE CIT (A). CIT (A) DISMI SSED THE APPEAL. IN VIEW OF THIS MATTER, THE ASSESSEE URGED THAT THE ORDER P ASSED BY THE A.O. IS NOT PREJUDICIAL AND ALSO NOT ERRONEOUS TO THE INTEREST OF THE REVENUE AND THEREFORE, IT WAS URGED THAT ACTION U/S. 263 BE DRO PPED. . 6. CIT DID NOT AGREE WITH THE CONTENTIONS AND SUBMI SSIONS MADE BY THE ASSESSEE. HE WAS OF THE VIEW THAT THE SUBMISSIONS M ADE BEFORE HIM SHOULD HAVE BEEN FILED ALONG WITH THE RETURN OF INC OME OR ALONG WITH THE SUBMISSIONS MADE AT THE TIME OF ASSESSMENT MADE BEF ORE THE A.O. ACCORDINGLY, HE HELD THE ORDER OF THE A.O. TO BE ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HE ACCORDINGLY C ANCELLED THE ASSESSMENT ORDER PASSED U/S. 143(3) DATED 24-11-200 9. 7. AGGRIEVED BY THE ACTION OF THE CIT, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 8. BEFORE US THE LD. A.R. SUBMITTED THAT THE ORDER OF THE A.O. CANNOT BE CONSIDERED AS ERRONEOUS OR PREJUDICIAL TO THE INTER EST OF THE REVENUE UNDER THE PROVISIONS OF SEC.263 FOR THE REASON THAT THE A .O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD CALLED FOR THE DETAILS W ITH RESPECT TO SALE AND PURCHASE OF SHARES, DETAILS OF CLOSING STOCK OF SHA RES SCRIPWISE ETC., AND THE SHARES OF WHICH SHORT TERM CAPITAL GAIN OF RS.1 .06 CRORES WAS EARNED BY THE ASSESSEE. ALL THE RELEVANT DETAILS WERE FURNISH ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. A.R. SUBMITTED THE COPY OF THE LETTER DATED 11-12-2009 ADDRESSED TO THE A.O. IN SUPPORT O F HIS CONTENTION THAT THE NECESSARY DETAILS CALLED FOR BY THE A.O. WERE S UBMITTED. HE POINTED OUT ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 5 THE DETAILS OF LOANS AND ADVANCES GIVEN. SHAREHOLDI NG PATTERN, COPIES OF THE LEDGER ACCOUNT OF THE PERSONS TO WHOM LOANS AND ADVANCES WERE GIVEN, STATEMENT OF COMPUTATION OF CAPITAL GAIN ON SALE OF SHARES WERE SUBMITTED TO A.O. HE ALSO PLACED ON RECORD THE COPY OF THE NOTICE ISSUED BY THE A.O. U/S. 142(1) DATED 12-11-2009 WHEREIN VARIO US DETAILS WERE CALLED FOR BY THE A.O. THE LD. A.R. FURTHER SUBMITTED THA T THE LD. CIT HAS NOT POINTED OUT AS TO HOW THE ORDER OF A.O. IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUBMITTED THAT ON THE CONTR ARY, CIT IN HIS ORDER U/S. 263 HAS GIVEN A FINDING THAT CONSIDERING THE FACT THAT THE ASSESSEE- COMPANY HAS NOT PURCHASED THE SHARES OUT OF ANY LOA N TAKEN AND HAS NOT MADE ANY FREQUENT PURCHASE OR SALE OF SHARES EITHER DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08 OR A.Y. 2006-07 IN TH E BALANCE SHEET OR CLAIM OF SHORT TERM CAPITAL GAIN ON SALE OF SHARES ARE CO NSIDERED THE VERIFICATION OF BALANCE IS THEREFORE REQUIRED. THE LD. A.R. FUR THER POINTED OUT THAT CIT HAS HIMSELF OBSERVED AT PAGE-3 OF HIS ORDER AS UNDE R:- ON VERIFICATION OF THE SHAREHOLDING PATTERN IT IS NOTICED THAT THE ASSESSEE COMPANY HAS NOT ADVANCED ANY LOAN TO THE P ERSON WHO IS THE BENEFICIAL OWNER OF THE SHARES OR ANY CONCERN I N RESPECT OF WHICH SHAREHOLDER OR PARTNERS OR IN WHICH THE SHAREHOLDER HAS SUBSTANTIAL INTEREST. THIS TOO REQUIRES FURTHER VERIFICATION. 9. THE LD. A.R. THEREFORE, SUBMITTED THAT IN THE OR DER, THE CIT HAS NOT POINTED OUT HOW THE ORDER IS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE. HE THUS, URGED THAT THE ORDER OF CIT BE Q UASHED. 10. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF CIT. HE FURTHER RELIED ON THE DECISION IN THE CASE OF RAJALAKSHMI M ILLS LTD. VS. ITO, ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 6 COMPANY CIRCLE-III, COIMBATORE ITAT CHENNAI BENCH D (SPECIAL BENCH) (2009) 31 SOT 353 (CHENNAI) (SB) AND THE DECISION I N THE CASE OF VIJAY KUMAR GUPTA VS. C.I.T. (2011) 13 TAXMANN.COM.178 (A HD.). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS A.O. HAD ISSUED NOTICE U/S. 142(1) DATED 12-11-2009 CALLING FOR VARIOUS DETAILS LIKE N AMES AND ADDRESSES OF THE DIRECTORS OF THE COMPANY, SHAREHOLDING RATIO, P AN NO., DETAILS OF UNSECURED LOAN OF THE COMPANY, CONFIRMATION, DETAIL S OF LOANS AND ADVANCES GIVEN, DETAILS OF SHORT TERM CAPITAL GAIN OF RS.1.06 CRORE. THE REQUIRED INFORMATION WAS FURNISHED TO THE A.O. BY T HE ASSESSEE. THE DETAILS SUBMITTED BY THE ASSESSEE WERE VERIFIED AND ACCORDI NGLY THE SHORT TERM CAPITAL GAIN OF RS.1.06 CRORE WAS DETERMINED. IN TH E ORDER OF CIT PASSED U/S. 263 WE FIND THAT CIT HIMSELF HAS GIVEN A FINDI NG THAT THE ASSESSEE- COMPANY HAS NOT ADVANCED ANY LOANS TO THE PERSON BE NEFICIAL OWNERS OR SHARES OR IN WHICH THE SHAREHOLDERS ARE MEMBERS OR PARTNERS OR IN WHICH THE SHAREHOLDERS ARE SUBSTANTIALLY INTERESTED. WHEN THE ASSESSEE HAS NOT ADVANCED ANY LOANS TO PERSONS WHO HAVE SUBSTANTIAL INTEREST IN THE ASSESSEE-COMPANY, THE QUESTION OF CONSIDERING DEEME D DIVIDEND U/S. 2(22)(E) DOES NOT ARISE. WITH RESPECT TO THE CAPITA L GAIN, CIT HAS HIMSELF STATED THAT THE ASSESSEE HAS NOT PURCHASED THE SHAR ES OUT OF LOAN TAKEN AND HAS NOT MADE ANY FREQUENT PURCHASES OR SALE OF SHARES EITHER DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08 OR 2006- 07 AND THE SHARES AS SHOWN IN THE BALANCE SHEET AND SHORT TERM CAPITAL G AINS OR SALE OF SHARES ARE CONSIDERED, CIT HAS NOT POINTED OUT AS TO HOW T HE ORDER PASSED BY A.O. U/S. 143(3) IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 7 AS PER THE PROVISIONS OF SECTION 263. HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD. (ITA NO.179/2 011 ORDER DATED 1-3- 2012) HAS HELD THAT IN A CASE WHERE THE A.O. HAS FO RMED A WRONG OPINION OR FINDING ON MERITS, THE CIT HAS TO COME TO THE CO NCLUSION AND HIMSELF DECIDE THAT THE ORDER IS ERRONEOUS BY CONDUCTING NE CESSARY ENQUIRY BEFORE PASSING THE SEC. 263 ORDER. CIT CANNOT REMAND THE M ATTER TO THE A.O. FOR FURTHER ENQUIRIES OR TO DECIDE WHETHER THE FINDINGS RECORDED ARE ERRONEOUS WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS AND H OW THAT IS SO. IN VIEW OF THESE FACTS AND RELYING ON THE AFORESAID DECISION O F HONBLE DELHI HIGH COURT, WE ARE OF THE VIEW THAT CIT WAS NOT JUSTIFIE D IN INVOKING PROVISIONS OF SECTION 263 IN THE PRESENT CASE. WE THUS QUASH THE ORDER OF CIT PASSED U/S. 263. THUS THE GROUND OF ASSESSEE IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 - 8- 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO51 3/AHD/2012 ASST YEA R 2007- 08. . 8 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT-1, AHMEDABAD. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD 1.DATE OF DICTATION 19 - 7 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 24/ 8 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 27 - 8 - 2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 31 - 8 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 31 - 8 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3 1 - 8 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..