MR. NAVINCHANDRA SHAH, MUMBAI V. PR. CIT -20, MUMBAI

ITA 517/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8062 (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: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 05-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Salary income; Set aside
• Section: 68; 148; 263; 63; 143(3); 142(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. 517 & 518/Mum/2021 (A.Y: 2014-15 & 2015-16) Mr. Navinchandra Shah 10/11, Harganga Mahal, Khodadad Circle, Dadar-TT, Mumbai – 400014. Vs. PR.CIT- 20, Room No.418, 4 th Floor, Piramal Chamber, Lalbaug, Parel, Mumbai - 400012 ./ज आइआर ./PAN/GIR No. : AAEPS6096A 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: These are the two appeals filed by the assessee against the separate orders of the Principle Commissioner of Income Tax (PCIT)-20, Mumbai passed u/s 263 of the Act. Since the issues in these appeal are common and identical, hence they are clubbed, heard and consolidated order is passed. ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 2 - For the sake of convenience, we shall take up the ITA No. 517/Mum/2021 A.Y 2014-15 as a lead case and the facts narrated therein. The assessee has raised the following grounds of appeal: 1. The Prin cip al Commissioner of Income T ax -20 , Mumb ai [hereinaf ter ref erred to as the Pr. C IT ] erred in framing an order dated 24 /03 /2021 under section 263 of the Income Tax A ct, 1 961 to set asid e th e ord er of the Asstt. Commissioner of Income T ax -20 [2], Mumbai [herein af ter ref erred to as the A ssessin g Of f icer] b y holding th at th e asse ssmen t ord er d ated 28/12/2017 passed by the Assessing Off icer under section 143[3 ] r. w.s. 147 of Income T ax A c t, 1961 is erroneous and preju dicial to the in terest of th e Revenue and consequ en tly, directin g th e Assessing Off icer to f rame the order of assessmen t de novo. 2. The Appellan t co n tends th at the Pr.C IT has no t appreciated the f ac ts of the case in i ts e n tire ty; the impugned order under sec tion 263 is bad in law in asmuch as the assessmen t order of the Asse ssing Of f icer is n either erron eous nor prejud icial to the in teres ts of the Revenue. 3. The A ppellan t f ur th er, con tends th at the Pr.CIT ought n ot to h ave reach ed the af oresaid conclu sion in asmuch as h er con clu sion is based on the same mater ial wh ich has been considered by th e Assessing Off icer to make th e addition in h is assessmen t order, and thu s, th e impugned order passed b y th e Pr. C IT under section 2 63 is b ad in law. 4. The PCIT h as erred in directing th e Assessing Of f icer to add a sum of Rs. 15 ,00,000 /- as u ndisclosed in come under section 68 of Inc ome T ax Ac t, 1 961 , represen ting the purchase puce of share s in cu rred 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 circu mstances of the c ase and in law, th e Pr.C IT lacks jurisd ic tion to p as s th e impu gn ed order inasmuch as the A ssessin g Off icer on the basis of same material h as m ade ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 3 - addition, wh ich is a su bjec t matter of appeal to the C IT [A] , and th us, th e ord er of the Assessing O ff icer will merge with the order of the C IT [A] on the same subjec t matter. 6. The Appellan t cr av es leave to add to, al ter and/or amend the af orestated ground of appe al . 2. The brief facts of the case are that, the assessee derives income from salary, house property, business income, capital gain income and income from other sources. The assessee has filed the return of income for the A.Y. 2014-15 on 22.07.2014 with a total income of Rs. 60,77,230/-.The A.O has reason to believe that there is income escaping the assessment and issued notice u/s 148 of the Act. In compliance, the assessee has filed a letter to treat the return of income filed earlier on 22.07.2014 as a due compliance. The A.O has provided the reasons for reopening of assesseement to the assessee. Subsequently notice u/s 143(2) and 142(1) of the Act are issued. In compliance, the Ld. AR of the assessee attended from time to time and submitted the information and the case was discussed. The A.O on perusal of the facts and the submissions found that assessee has obtained long term capital gains on penny stock shares and claimed the exemption u/s ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 4 - 10(38) of the Act. The assessee was provided opportunity to explain the sources in respect of the share transactions. The A.O has dealt on the findings of investigation and the financial statements of the shares sold by the assessee. The A.O has issued a show cause notice for denial of claim of exemption u/sec10(38) of the Act. In compliance, the assessee has filed the details which was dealt in the A.O. order. Finally the A.O was not satisfied with the explanations 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.8,81,74,941/- and assessed the total income of Rs.9,42,52,171/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 28.12.2017. 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. 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 ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 5 - 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 on 12-03-2021 referred at Page 2 Para 4 of the order.The PCIT considered the reply filed by the assessee in compliance to the show cause notice issued. The PCIT is of the opinion that the A.O has not dealt on the transactions of purchase of shares and has not conducted any enquiry on the disputed issue. Therefore the entire sale proceeds on transactions of shares should be treated as part of sale consideration 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 24-03-2021. 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 disputed issues has denied the exemption 10(38) of the Act and treated ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 6 - 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 assessment 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 are to be treated as income u/sec68 of the Act. The Ld. AR submitted that the Assessment 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 ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 7 - 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 the 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:- “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 gro ss sal e ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 8 - 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 examinin g the documen 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. 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 inf ormation 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 ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 9 - 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 n ot 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 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 assessment 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 ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 10 - 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 PCIT and allow the grounds of appeal of in favour of the assessee. 7. In the result, the appeal filed by the assessee is allowed. ITA 518/Mum/2021, A.Y 2015-16 8. As the facts and circumstances in the appeal are identical to ITA No. 517/Mum/2021, A.Y 2014-15, (expect figures) the decision rendered in above paragraphs would apply mutatis mutandis for this case also. Accordingly, grounds of appeal are allowed in favour of the assessee. 9. In the result, both the appeals filed by the assessee are 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 ITA No. 507 & 508/Mum/2021 Mr. Navinchandra Shah., Mumbai. - 11 - KRK, PS /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