MR. BHAVESH KANTILAL KUBADIA, MUMBAI V. PR. CIT -20, MUMBAI

ITA 516/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8063 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-04-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Capital Gains
• Section: 69; 148; 263; 63; 143(3); 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 516/Mum/2021 (A.Y: 2013-14) Mr. Bhavesh Kantilal Kubadia 7, 2 nd Floor, Neminath Bldg, SK Bole, Dadar (W), Mumbai – 400028 Vs. PCIT-20 Room No. 418, 4 th Floor, Piramal Chamber Lalbaug, Parel, Mumbai - 400012 ./ज आइआर ./PAN/GIR No. : AGRPK2377D Appellant .. Respondent Appellant by : Mr.Neelkanth Khandelwal.AR Respondent by : Mr.Rakesh Garg, CIT DR Date of Hearing 24.01.2022 Date of Pronouncement 24.02.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed an appeal against the order of the Principle Commissioner of Income Tax(PCIT)-20, Mumbai passed u/s 263 of the Act. The assessee has raised the following grounds of appeal: 1. The Principal Commissioner of Income T ax -20, Murnb ai [h erein af ter ref erred to as the Pr. CIT ] erred in f raming an order dated 23/03/2021 under sec tion 263 of th e Inco me T ax Ac t, 1961 to se t asid e the order of th e In co me T ax Off icer -21[1][2 ], Mu mb ai [hereinaf ter ref erred to as th e ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 2 - Assessing Of f icer] by holding th at the assessmen t order d ated 14 /12 /2017 passe d by the A sse ssing Off icer und er sec tion 143[3] r. w.s. 147 of Income T ax Act, 1961 is erroneous and prejudicial to the in terest of th e Revenue and con sequ entl y, directing the A ssessing Of f icer to f rame th e order of asse ssmen t de n ovo. 2. The Appellan t co n tends th at the Pr.C IT has no t ap preciated th e f ac ts of the case in its entire ty; th e impugned order under sec tio n 263 is bad in law in asmuch as th e asse ssmen t order of the Asse ssing Off icer is neith er erroneou s nor prejudicial to th e in terests of th e Revenue. 3. The A ppellan t f ur th er, con tends th at the Pr.CIT ought not to h ave reached th e af oresaid conclusion in asmuch as h er conclu sion is b ased on the same m ater ial wh ich h as b een considered by the Assessing Off icer to make the ad ditio n in his assessmen t order, and thus, the impu gn ed ord er passed by the Pr. C IT und er sec tion 263 is bad in law. 4. The PCIT h as erred in directing th e Assessing Of f icer to ad d a sum of Rs. 12,51,250/- as undisclosed income und er sec tion 68 of income T ax Ac t, 1961, represen ting the purch ase price of shares incurred in the earlier year. 5. The Appellan t f u rth er, con tend s th at on the f ac ts and in the circumstan ces of the c ase and in l aw, the Pr.C IT lacks jurisdic tion to pass th e impu gned order in asmuch as th e Assessing Off icer on the basis of same mater ial h as mad e ad dition, wh ich is a su bject matter of appe al to the C IT [A] , an d thus, the ord er of the Assessing Off icer will merge with the order of the C IT [A] on the same su bject matte r. 6. The Appellan t cr av es leave to add to, al ter and/or amend th e af ore stated ground of appeal. 2. The brief facts of the case are that the assessee is engaged in the business of trading of shares. The assessee has filed the return of income for the A.Y 2013-14 on 31.08.2013 disclosing a total income of ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 3 - Rs.6,58,290/- and the return of income was processed u/s 143(1) of the Act. The A.O found that the assessee has claimed exemption of long term capital gains on penny stock shares u/sec 10(38) of the Act. The A.O. has reason to believe that income has escaped the Assesseement and issued notice u/s 148 of the Act. In response to the notice, the assessee has filed a letter dated 08.08.2017 to treat the return of income filed on 31.08.2013 as due compliance. Subsequently, notice u/s 143(2) and 142(1) of the Act are issued. Whereas the A.O. has dealt on the facts, trading in shares, reports of the investigation wing and the submissions of the assessee in response to show cause notice and determined the total income with the denial of exemption of Long Term Capital gains u/sec10(38) of the act and made addition of sale proceeds u/s 68 of the Act of Rs.77,02,597/- and disallowance of commission expenses u/s 69 of the Act of Rs.2,31,078/- and assessed the total income of Rs. 85,91,970/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 14.12.2017. ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 4 - 3. Subsequently, the PCIT on perusal of the record found that the A.O has not made any enquiry on the submissions and made addition of sale proceeds U/sec 68 of the Act and the commission expenses u/s 69 of the Act. The PCIT is of the view that the A.O should have considered the entire transaction of sale proceeds taxable u/sec68 of the Act and therefore the order passed u/s 143(3) r.w.s 147 of the Act is erroneous and prejudicial to the interest of the revenue and issued notice u/s 263 of the Act. In compliance to the notice, the assessee has filed the details referred at Para 4 of the PCIT order. The PCIT considered the reply filed by the assessee in compliance to the show cause notices issued. The PCIT is of the opinion that the A.O has not dealt on the transactions of purchase of shares and has not conduct any enquiry on the disputed issue. Therefore the entire sale proceeds on transactions of shares should be treated as part of sale consideration and commission transactions has to be verified and set aside the assessment order and directed the assessing officer to frame fresh assesseement and passed the order u/sec263 of the Act dated 23-03-2021. ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 5 - Aggrieved by the revision order, the assessee has filed an appeal before the Honble Tribunal. 4. At the time of hearing, the Ld. AR submitted that the A.O. has considered the facts and after verification and examination of dispute has denied the exemption 10(38) of the Act and treated the proceeds from share transactions u/sec68 of the Act. The Ld. AR emphasized that the disputed issue was considered by the A.O and after verifying the facts has passed the assesseement order and further the assessee has filed the appeal with the CIT(A) and the same is pending. The Ld. AR supported the submissions with the decision of the Honble Tribunal on similar and identical issue and prayed for allowing the assessee appeal. Contra, the Ld. DR supported the order of the PCIT. 5. We heard the rival submissions and perused the material available on record. Prima-facie, the sole crux of the disputed issue is with respect to directions of the PCIT to consider the purchases price as the part of the long term capital gains and the whole sale proceeds amounting to Rs. 89,53,847/- ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 6 - has to be treated as income u/sec68 of the Act. The Ld. AR submitted that the Assesseement order set aside by the PCIT does not satisfy the twin conditions being erroneous and prejudicial to the interest of the revenue. The assessee has diligently complied with the notice u/s 148 and u/sec142(1) of the Act. Whereas the A.O has verified the facts of sale of shares and was not satisfied with the submissions and made addition u/sec68 of the Act. We find that the Hon’ble Tribunal in the similar issue in the case of Akshy Ramprasad Agarwal VS ITO in ITA No. 153/Mum/2021 dated 08.10.2021 has dealt on the issue of validity of revision order u/sec 263 of the Act at page3 Para 5.1 of the order, which is read as under: 5.1 . T hereaf ter, th e Asse ssing Off icer completed the asse ssmen t in view of provision u/s.143(3) r. w.s. 147 of th e Ac t r aising the addition on accou nt of lon g ter m c ap ital gain in su m of R s.47,37 ,582 /-. It is argued by th e ld. represen tative of the assessee th at on ce th e issue has alread y been r aised by the Assessin g Off icer and there af ter, the cl aim of th e asse ssee was denied then, in th e said circumstances, the asse ssmen t cou ld no t be revised in view of provision u/s.263 of th e Ac t. In suppor t of this con ten tion, the ld. represen tative of the assessee h as pl aced reliance on the c ase based upon simil ar circumstanc es titled as Mr s. M an ish a A jay Sh ah vs. Pr. C IT -30 in IT A No.3001 /Mum/2019 dated 14/1 0/2020 . The copy of this order is pl aced in the f ile an d relevan t f ind ing is hereby reprodu ced as under:- ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 7 - “4. We h ave heard the submission s made by ld. Departmen tal Represen tative and h ave ex amined the material av ailable on record. The PC IT h as invoked revisional jurisdic tion und er sec tion 263 of th e Ac t on the ground th at th e Assessing Off icer has f ail ed to ex amine the tr an sac tion of purch ase and sale of sh ares. Ano ther re ason f or in voking revision al jurisd ic tion b y the PC IT is, th at th e asse ssee in IDS 2016 h as only decl ared long ter m c ap ital gain on penny sto ck, wh ere as, th e assessee sh ould h ave declar ed gross sale receip t of the sh are s. The immu nity is gr an ted to the assessee to the ex ten t IT A NO. 3001/MUM/2 019 (A.Y.2015-16) declaration is made u nder IDS 2016 and not ag ain st the en tire tr an saction. T he PCIT invoked revision al jurisdic tion to tax th e diff eren ce be tween gross sal e price of the shares Rs.34,30,000/- and Long Term Capital G ain s decl ared by the assessee Rs. 32 ,86,815/- In oth er words, th e PC IT seeks to tax even the purch ase cost of th e sh ares i.e. Rs. 1,43,185 /- stating it to be a bogus purch ase tr ansac tion. 5. Af ter examining the d ocumen ts on record we d o not concur with the vie w of the PC IT . The assessee has demon str ated f rom the ban k statemen t th at the amo un t h as been paid f or pu rchase of share s of GCM S ecuritie s Ltd. through cheque. Th is is f urther corrobor ated by sh are applic ation form of GCM Secu rities at page 2 2 of th e Paper Book and tr an saction-cum- holdin g state men t in the case of assessee issued by S tock Hold ing Corporation of India L td . at page 19 of th e Paper Book. T he docu men ts f urnished by the assessee clearl y ind icates th at th e sh ares were indeed purchased by th e asse ssee th rough bankin g tr an sac tion s. It is no t the c ase of the Revenu e th at the amount paid by th e assessee f or pu rchase of sh ares has tr avelled back to the assessee in the f orm of cash or an y o ther manner. 6. The provisions of sec tion 2 63 of th e Ac t can be invoked if , the twin condition s mand ated under the sec tion are satisf ied, i.e: (i) the order of th e Assessing Off icer sought to be revised is erroneous; an d (ii) it is prejudicial to th e in terests of th e revenue. ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 8 - If an y one of these two con ditions is absen t, the Commission er of Income T ax cannot take recourse to se ction 263 of the Ac t. 7. In the presen t c ase, we f ind th at the Assessing Off icer has issued a qu estion naire wherein specif ic information was sough t on tr an sac tion of equity sh ares an d workin g of shor t ter m c ap ital gain /lon g ter m c apital gain. T he assessee f urnished a de taile d reply to the notice issued under sec tion 142(1) of the Ac t, wherein the assessee wh ile replyin g to th e qu ery on tr an sac tio n of shares, inf ormed th at a decl ar ation under IDS 2016 has been made in respec t of lon g term c apital gain arising on sale of shares to GCM Securities L td. Ostensibly, the A ssessin g Off icer af ter ex aminin g the docu ments accep ted th e same and made no ad dition. Merely f or th e re ason th at the Assessing Off icer h as taken a pl ausible view af ter examin in g the records th at is n ot ac cep table to th e PC IT , would not make the asse ssmen t order erroneous. In th e presen t c ase twin condition s se t ou t in sec tion 263 are not satisf ied and hen ce, th e PC IT wron gly assumed revision al jurisdic tion. 5.2 . In vie w of the above f ac ts and cir cumstan ces, it is quite clear th at th e f ac t of the presen t c ase is quite simil ar to th e f ac t of the c ase under con sid eration. T ak ing in to all th ese f ac ts, we are of the view th at the r evision of assessment u/s.263 is not liable to be sustain able in th e eye s of law. Theref ore, we se t aside th e same and all owed th e appeal of the assessee. 6. We find that the facts of the present case are identical and similar to the ratio of the judicial decision. We find that the assessee has complied with the statutory notice u/sec148 and 142(1) of the Act and the show cause notice.The submissions of the Ld. AR are realistic duly supported with the material information and judicial decisions. We Considering ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 9 - the overall facts, circumstances, ratio of the judicial decision and the details submitted in the course of hearing are of the view that the if any query is raised in the assessement proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind. Hence, the PCIT action cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly we do not find any merits in the order and we set aside the order u/s 263 passed by the Pr.CIT and allow the grounds of appeal of in favour of the assessee. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 24.02.2022. Sd/- Sd/- (S RIFAUR RAHMAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 24.02.2022 KRK, PS ITA No. 516/Mum/2021 Mr. Bhavesh Kantilal Kubadia., Mumbai. - 10 - /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai