CAREVIEW TRADING & INVESTMENT P.LTD, MUMBAI V. CIT 10, MUMBAI

ITA 553/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71629 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O C TEJPAL
• Keywords: Business income
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH, MUMBAI , BEFORE SHRI H.L.KARWA , PRESIDENT & SHRI N.K.BILLAIYA , AM ITA N O. 553 / MUM/ 20 1 2 ( ASSESSMENT YEAR : 20 0 6 - 0 7) M/S CAREVIEW INVESTMENT & TRADING PVT. LTD., 908 - STOCK EXCHANGE TOWER, DALAL STREET, FORT, MUMBAI - 400 001 VS. CIT - 10 , MUMBAI - 400020 PAN/GIR NO. : A A BCC 6251 D ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI HARIDAS BHAT /REVENUE BY : SHRI O.C.TEJPAL DATE OF HEARING : 31 ST DATE OF PRONOU NCEMENT : 31 ST OCTOBER, 2013 O R D E R PER N.K.BILLAIYA , A.M : THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF CIT - 10, MUMBAI, PASSED UNDER SECTION 263 OF THE ACT, DATED 29 - 3 - 2011. 2 . THE SOLE GRIEVANCE OF THE ASSESSEE IS TH AT THE CIT HAS ERRED IN PASSING THE ORDER UNDER SECTION 263 OF THE ACT WHEN THE ORDER OF ASSESSMENT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 3 . FACTS OF THE CASE ARE THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RET URN OF INCOME ON 23 - 10 - 2006 DECLARING TOTAL INCOME OF RS. 1,60,34,209/ - . THE RETURN WAS SELECTED FOR SCRUTINY ITA NO. 553/12 2 ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS ASKED TO FILE NECESSARY DETAILS IN RESPECT OF ITS RETURN OF INCOME, WHICH INCLUDED DIVIDEND INCOME, CAPITAL GAINS AND BUSINESS INCOME. THE ASSESSEE FILED NECESSARY DETAILS AS SOUGHT BY THE AO . THE AO COMPLETED ASSESSMENT UNDER SECTION 143(3) VID E ORDER DATED 10 - 12 - 2008 AT AN INCOME OF RS. 1,61,86,640/ - . 4 . THE CIT INVOKING THE POWERS VESTED UPON HIM UNDER SECTION 263 OF THE ACT ASKED THE ASSESSEE AS TO WHY THE ORDER UNDER SECTION 143(3) DATED 10 - 12 - 2008 SHOULD NOT BE TREATED AS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE AND SET ASIDE FOR FRESH ASSESSMENT. THE ASSESSEE ATTENDED THE PROCEEDINGS UNDER SECTION 263 AND FILED NECESSARY DETAILS AND REPLY BEFORE THE CIT. THE ASSESSEE CONTENDED THAT IT HAS RIGHTLY DECLARED INCOME FROM SALE OF SH ARES UNDER THE HEAD CAPITAL GAINS AS IT WAS ONLY AN INVESTOR AND NOT A TRADER. THE CIT WAS OF THE FIRM BELIEF THAT THE AO SHOULD HAVE TREATED THE SHORT TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AS BUSINESS INCOME. THE CIT WAS ALSO OF THE FIRM BELIEF THAT THE AO HAS ACCEPTED THE SHORT TERM CAPITAL GAINS DECLARED BY THE ASSESSEE IN A PERFUNCTORY MANNER. ACCORDING TO THE CIT, WHERE AN ASSESSMENT HAS BEEN MADE WITHOUT PROPER ENQUIRY, THE ORDER WOULD BE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . THE CIT WENT ON TO CANCEL THE ASSESSMENT ORDER AND DIRECTED THE AO TO DO THE ASSESSMENT AFRESH IN RESPECT OF SHORT TERM CAPITAL GAINS AS DECLARED BY THE ASSESSEE. THE CIT DIRECTED ITA NO. 553/12 3 THE AO TO VERIFY NECESSARY DETAILS AND TO DECIDE AFRESH WHETHER THE CAPITA L GAINS ON SALE OF SHARES COULD BE TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 5 . LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE REPLY FILED BY THE ASSESSEE BEFORE THE AO ON 13 - 11 - 2008. IT IS THE SAY OF THE COUNSEL THAT WITH THIS REPLY THE ASSESSEE HAS FILED COMPLETE DETAILS OF INVESTMENT IN SHARES ALONG WITH STATEMENT OF ACCOUNTS OF HDFC BANK. THE COUNSEL ALSO POINTED OUT THAT THE ASSESSEE HAS EXPLAINED THAT THE CIRCULAR NO . 4 OF CBDT OF 2007, DATED 15 - 6 - 2007, CLEARLY STATES THAT THE ASSESSEE HAS TO MAKE DISTINCTION BETWEEN SHARES HELD AS INVESTMENTS AND HELD AS STOCK - IN - TRADE. THE COUNSEL FURTHER STATED THAT THE ASSESSEE HAS SUCCESSFULLY EXPLAINED TO THE AO THAT THE ASSESSEE COMPANY IS ENGAGED IN THE INVESTMENT ACTIVITY OF SHARES AND ACCORDINGLY INCOME DERIVED FROM INVESTMENT ACTIVITY IS TO BE CONSIDERED AS CAPITAL GAINS ONLY. IT IS THE SAY OF THE COUNSEL THAT THE AO HAS VERIFIED ALL THE DETAILS FILED BY THE ASSESSEE THOROUGH LY AND AFTER EXAMINING THE DETAILS/DOCUMENTARY EVIDENCE, THE AO HAS COME TO THE CONCLUSION THAT THE INCOME DECLARED UNDER THE HEAD CAPITAL GAINS IS CORRECT IN LAW AS WELL AS ON FACTS. THEREFORE, IT CANNOT BE SAID THAT THE ORDER OF THE AO IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE. 6. PER CONTRA , LEARNED DR STRONGLY SUPPORTED THE FINDINGS OF THE CIT. LEARNED DR RELIED UPON THE DECISION OF THE HON BLE SUPREME ITA NO. 553/12 4 COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, REPORTED IN (2000) 243 ITR 83 (SC) . 7 . WE HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE ACT. A BARE READING OF SECTION 263(1) MAKES IT CLEAR THAT THE PREREQUISITE TO THE EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST S OF THE R EVENUE. THE COMMISSIONER HAS TO BE SATISFIED WITH TWIN CONDITIONS, NAMELY, ( I ) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS ; AND (II ) IT IS PREJUDICIAL TO THE INTEREST S OF THE R EVENUE. IF ONE OF THEM IS ABSENT, RECOURSE CANNOT BE H A D TO SECTION 263(1) OF THE ACT. FOR THESE OBSERVATIONS, WE DRAW SUPPORT FROM THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V S. CIT, REPORTED IN (2000) 243 ITR 83 (SC) . FURTHER, THE ERROR ENVISAGED BY SECTION 263 I S NOT ONE WHICH DEPENDS ON POSSIBILITY OR G UESS WORK, IT SHOULD BE ACTUALLY AN ERROR OF EITHER OF FACT OR OF LAW. THE ENQUIRIES MADE AT THE TIME OF ASSESSMENT CLEARLY S HOW THAT THE AO HAS CALLED FOR THE VARIOUS DETAILS FOR EXAMINATION ALONG WITH BOOKS OF ACCOUNTS AND SUPPORT ING DOCUMENTS. THE ASSESSEES REPLY WAS SPECIFIC AND ALL THE DETAILS WITH SUPPORTING DOCUMENTS WERE PLACED BEFORE THE AO FOR VERIFICATION. THE AO AFT ER MAKING NECESSARY VERIFICATION ACCEPTED THE CONTENTION OF THE ASSESSEE IN RESPECT OF CAPITAL GAINS. THE ORDER OF THE AO MAY BE BRIEF AND CRYPTIC, BUT THAT BY ITSELF IS NOT SUFFICIENT REASON TO BRAND THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO TH E ITA NO. 553/12 5 INTERESTS OF THE REVENUE. MERELY BECAUSE THE CIT IS OF THE OPINION THAT THE INCOME OUT OF PURCHASE AND SALE OF SHARES SHOULD HAVE BEEN TREATED AS INCOME FROM BUSINESS WOULD NOT RENDER THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE DECISION OF THE AO IS A POSSIBLE VIEW BECAUSE THERE ARE CONFLICTING DECISIONS IN THIS MATTER. THEREFORE, EVERY CASE HAS TO BE DECIDED ON FACTS AND THE AO AFTER CONSIDERING THE FACTS OF THE CASE HAS ACCEPTED THE INCOME UNDER THE HEAD CAPITA L GAINS. THE CIT CANNOT IMPOSE HIS VIEW ON AOS VIEWS MERELY BECAUSE THE VIEW OF THE CIT WOULD BRING TO TAX SOME MORE MONEY TO THE TREASURY. POWER UNDER SECTION 263 CANNOT BE EXERCISED FOR STARTING FISHING AND ROVING ENQUIRIES . 8 . LEARNED DR RELIED UPON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) , WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED UPON THE VERY SAME DECISION OF THE HONBLE SUPREME COURT. 9 . A CAREFUL PERUSAL OF THE AFORE SAID DECIS ION OF THE HON BLE SUPREME COURT SUGGESTS THAT IT IS MORE IN FAVOUR OF THE ASSESSEE IN THE PRESENT CASE BECAUSE WHEN THE AO HAS ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW OR WHERE TWO VIEW ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW, WHICH THE CIT DOES N OT AGREE THE ORDER OF THE AO, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER OR PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. CONSIDERING THIS RATIO OF THE HONBLE SUPREME COURT IN THE LIGHT OF THE ITA NO. 553/12 6 FACTS OF THE PRESENT CASE, WE FIND THAT THE VIEW TAKEN BY THE AO IS NOT ON L Y OF POSSIBLE VIEW BUT ALSO PERMISSIBLE IN LAW. THEREFORE, THE ORDER OF THE CIT UNDER SECTION 263 DESERVES TO BE SET ASIDE AND WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT AND RESTORE THAT OF THE AO . 1 0 . RESULTANTLY , APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/ 2013 . SD/ - ( ) ( H.L.KARWA ) SD/ - ( ) ( N.K.BILLA IYA ) / PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 31/10 / 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI