IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.86/JODH/2014 (A.Y. 2010-11) DEEPCHAND SURANA, VS. CIT 1, JODHPUR. C/O SHAILENDRA BARDIA, C.AS., 53, NEHRU PARK, JODHPUR. PAN NO. AFMPS 5108 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ALOK JAIN. DEPARTMENT BY : DR. DEEPAK SEHGAL- D.R. DATE OF HEARING : 08/05/2014. DATE OF PRONOUNCEMENT : 21/05/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 04/02/2014 OF LD. CIT-1, JODHPUR. THE FOLLOWING GR OUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. THAT THE ORDER UNDER SEC. 263 OF THE I.T. ACT, 1961 AS PASSED BY THE LEARNED CIT IS NOT JUSTIFIED BOTH ON FACTS AND IN L AW. 2. THAT THE LEARNED CIT HAS NOT GIVEN ANY BASIS OR REASONING WHICH JUSTIFIED THE PASSING OF THE ORDER UNDER SEC. 263. 3. THAT THE ORDER OF THE LEARNED CIT IS BASED ON M ERE SUSPICION AND DOUBTS AND THERE IS NO SUCH MATERIAL ON THE BASIS O F WITH IT COULD BE 2 SAID THAT THE ORDER OF THE LEARNED ACIT IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. THAT THE LEARNED CIT HAS NOT GIVEN ADEQUATE OPPO RTUNITY TO THE ASSESSEE TO EXPLAIN HIS SIDE. 5. THAT THE ORDER OF THE LEARNED ACIT IS NOT ERRONE OUS OR PREJUDICIAL TO INTEREST OF THE REVENUE. THE LEARNED ACIT HAD PASS ED THE ORDER AFTER ONLY APPRECIATING THE COMPLETE FACTS AND MAKING ADE QUATE INQUIRY. THEREFORE, THERE IS NO JUSTIFICATION OF INITIATION OF THE PROCEEDINGS U/S 263 BY THE LEARNED CIT. 6. THAT THERE IS NO MATERIAL ON THE BASIS OF WHICH IT COULD BE SAID THAT THE SHORT TERM CAPITAL GAIN BE TREATED AS BUSINESS INCOME. 7. THAT THE APPELLANT BE ALLOWED TO ADD, ALTER, AME ND, MODIFY OR WITHDRAW ANY OF THE GROUND(S) OF APPEAL BEFORE OR A T THE TIME OF HEARING OF THIS APPEAL. 8. THAT THE APPELLANT PRAYS FOR JUSTICE. 2 FROM THE ABOVE GROUNDS, IT IS GATHERED THAT ONLY G RIEVANCE OF THE ASSESSEE RELATES TO THE INITIATION OF PROCEEDINGS U NDER SECTION 263 OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) BY THE LD. CIT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 24/01/2011 DECLARING TOTAL INCOME OF RS. 17,09,980/-. LATER ON, CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAD SHOWN INCOME OF RS. 27,42,135/- FROM SHORT TERM CAPITAL G AIN UNDER SECTION 111A OF THE ACT AND CLAIMED SET OFF OF BROUGHT FORW ARD SHORT TERM CAPITAL LOSS OF RS. 12,32,523/-. THE ASSESSEE PRODUCED ALL THE DETAILS OF SHORT 3 TERM CAPITAL GAIN FOR THIS YEAR AND SHORT TERM CAPI TAL LOSS FOR THE PRECEDING YEAR AND ALSO PRODUCED BOOKS OF ACCOUNTS AND CONTRACT NOTES FOR SHARE TRANSACTIONS WHICH WERE EXAMINED. THE AS SESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE A CT AT AN INCOME OF RS. 17,09,980/-. THEREAFTER, LD. CIT, JODHPUR EXER CISED HIS REVISIONARY POWERS UNDER SECTION 263 OF THE ACT AND OBSERVED TH AT THE ASSESSEE HAD DISCLOSED SHORT TERM CAPITAL GAIN AT RS. 27,42,135/ - OUT OF WHICH BROUGHT FORWARD SHORT TERM CAPITAL LOSS AMOUNTING TO RS. 12 ,32,523/- WAS CLAIMED. HE ALSO NOTICED THAT THE ASSESSEE HAD MAD E SHARE TRANSACTIONS OF MORE THAN 200 LISTED SHARES OF DIFFERENT COMPANI ES DURING THE YEAR WITH THREE SHARE BROKERS AND IN A NUMBER OF TRANSAC TIONS, DELIVERY OF SHARES WAS NOT TAKEN. HE ALSO POINTED OUT THAT THE SHARES WERE SOLD WITHIN A SHORT PERIOD AND IN NUMBER OF CASES, THE H OLDING PERIOD WAS LESS THAN 60 DAYS. THE LD. CIT ALSO NOTED THAT THE ASSE SSEE HAD PAID DIFFERENT AMOUNT TO SHARE BROKERS AFTER NETTING WITH PURCHASE AND SALES AND THAT THE ASSESSEE HAD DISCLOSED A SMALL AMOUNT OF DIVIDE ND OF RS. 1,29,232/- ONLY. THE LD. CIT ISSUED NOTICE UNDER SECTION 263 OF THE ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED AS UNDER :- (I) THE INCOME OF RS. 27,42,135 AS REFERRED IN THE NOTICE IS SHORT TERM CAPITAL GAINS ON SALE OF SHARES WHICH WERE HELD BY THE ASSESSEE AS THE INVESTMENTS. THE COMPLETE DETAILS OF THE SAME WERE GIVEN DURING THE 4 COURSE OF ASSESSMENT PROCEEDINGS WHICH WERE EXAMINE D BY THE ACIT IN DETAIL. (II) THE ASSESSEE HAS SOMETIMES DONE, DAY TRADING OF SHARES AND EARNED PROFIT OF RS. 2,23,199 WHICH HAS BEEN SHOWN AS BUSINESS INCOME. THE ASSESSEE HAS DONE DAY TRADING WITH KIFS , PRABHUDAS LEELADHAR AND SHIL. THE DETAILS OF THE SAME WERE AL SO SUBMITTED TO THE ACIT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (III) THE ASSESSEE HAS BEEN DOING THE TRADING IN S HARES AND HAS ALSO MADE INVESTMENT IN THE SHARES. THE SAID PRACTICE OF THE ASSESSEE HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE PAST AND ALSO BY THE ACIT WHILE COMPLETING THE ASSESSMENT. (IY) THE ASSESSEE HAS CLAIMED SET OFF OF THE EARLIE R YEAR'S CARRY FORWARD SHORT TERM CAPITAL LOSS OF RS. 12,32,523 WH ICH WAS ALSO ALLOWED BY THE ACIT AFTER VERIFYING THE RELEVANT DETAILS. (V) THE ASSESSEE HAS PAID SECURITY TRANSACTION TAX OF RS. 99,627 WHICH THE ASSESSEE DID NOT CLAIM AS THE TAX PAYMENT FOR T HE REASON THAT HE EARNED CAPITAL GAIN ON THE SALE OF INVESTMENT IN SH ARES. THE ASSESSEE HAS VALUED HIS INVESTMENT AT COST ONLY. (VI) THE CBDT IN CIRCULAR NO. 4 ON 2007 DATED 15 TH JUNE, 2007 HAS CLEARLY STATED THAT IT IS POSSIBLE FOR A TAXPAYER TO HAVE T WO PORTFOLIOS I.E. AN INVESTMENT PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND TRADING PORTFOLIOS COMPRISING OF STOCK AND TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. WHERE THE ASSE SSEE HAS TWO PORTFOLIOS, THE ASSESSING OFFICER MAY HAVE INCOME U NDER THE BOTH THE HEADS I.E. CAPITAL GAIN AS WELL AS BUSINESS INCOME. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD EXAMINED COMPLETE DETAILS AND ALSO MADE ENQUIRY WHILE COMPLE TING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THEREFORE, ORDER OF THE ASSESSING OFFICER WAS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THERE WAS NO JUSTIFICATION FOR INITIATION OF THE PR OCEEDINGS UNDER SECTION 263 OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT, 5 CHANDIGARH BENCH IN THE CASE OF VESTA INVESTMENTS A ND TRADING COMPANY PVT. LTD. REPORTED IN 70 ITD PAGE 200. 4. THE LEARNED CIT OBSERVED THAT THE SUBMISSIONS OF T HE ASSESSEE WERE NOT ACCEPTABLE FOR THE FOLLOWING REASONS:- (I) IN THE COMPUTATION OF TOTAL INCOME, THE ASSES SEE HAD DISCLOSED INCOME FROM SHARE BUSINESS AMOUNTING TO RS. 2,23,19 9 AND SHORT TERM CAPITAL GAIN OF RS. 27.42.137. ON PERUSAL OF T HE DETAILS FROM THESE TWO SOURCES, IT IS FOUND THAT THERE IS NO CLEAR METHOD OR IDENTIFIC ATION OR CRITERIA TO FIND OUT AS FOR WHICH TRANSACTION OF SHARES, THE ASSESSEE CONSIDERS INCOME FROM BUSINESS AND FOR WHI CH SHARES HE CONSIDERS INCOME UNDER THE HEAD FROM CAPITAL GAIN. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CARRIED OUT S HARES TRANSACTIONS WITH THREE BROKERS NAMELY KIFS, SHIL A ND PL. PROFITS ON SALE OF SHARES THROUGH THESES THREE BROKERS, HE HAS SHOWN SOME TRANSACTIONS AS BUSINESS TRANSACTIONS AND FOR SOME SHARES UNDER THE HEAD CAPITAL GAIN. (II) IT IS FURTHER NOTICED THAT THE SHARES TRANSAC TIONS ENTERED WITH SHARE BROKER NAMELY PL, THERE IS NO OPENING BALANCE WITH HIM AND ALL THE 38 SHARE SCRIPS ARE PURCHASED FOR RS. 35,13,325 IN THE YEAR AND WERE SOLD FOR RS, 23,79,361 EXCEPT CLOSING BALANCE OF RS. 12, 29,106 AND EARNED SHORT TERM PROFIT OF RS. 95,141. SIMILARLY, THE ASS ESSEE HAS CARRIED OUT SHARES TRANSACTIONS OF 95 SCRIPS OF LISTED COMPANIE S WITH KIFS AND HAS PURCHASED 1,46,157 NUMBER OF SHARES WORTH RS. 1 ,24,70,362 OUT OF WHICH ALONG WITH OPENING BALANCE, HAD SOLD 1,54,654 SHARES OF DIFFERENT COMPANIES FOR TOTAL VALUE OF RS. 1,33,007 ,36, LEAVING BALANCE 19,845 SHARES WORTH RS. 12,30,036 AND EARNE D PROFITS OF RS. 12,39,675. IN RESPECT OF SHARES TRANSACTIONS WITH S HIL, IT IS FOUND THAT THE ASSESSEE HAD MADE TRANSACTIONS OF 99 SCRIPS AND HAD SHOWN PURCHASES OF 1,20,876 SHARES WORTH RS. 1,02,62,348 AND HAD SOLD 1,17,128 SHARES FOR RS. 1,05,42,334 AND EARNED PROF ITS OF RS. 16,19,571, LEAVING BALANCE 30,260 SHARES WORTH RS. 23,18,537. 6 (III) ON PERUSAL OF DATES OF PURCHASES AND SALES O F SHARES OF DIFFERENT COMPANIES THROUGH THREE SHARE BROKERS, IT IS FOUND THAT NUMBER OF SHARES WERE SOLD IN LESS THAN 30 DAYS OF HOLDING AND STILL THE ASSESSEE HAD SHOWN THE GAINS UNDER THE HEAD SHORT TERM CAPITAL G AIN. (IV) THE ONLY SOURCE OF INCOME OF THE ASSESSEE IS FROM SHARE DEALING EXCEPT A SMALL HOUSE RENT INCOME FROM HOUSE PROPERTY. (V) THE ASSESSEE HAD EARNED PROFITS ON SALE OF SHA RES AMOUNTING TO RS.29,54,389, OUT OF WHICH HE HAD CLAIMED FOLLOWING EXPENSES (I) APPLICATION LOSS - RS. 1293 (II) BROKERAGE RS. 57,200 (III) DEMAND CHARGES - RS. 9,989 (IV) INTEREST TO BANK - RS. 45,735 (V) SECURITY TRANSACTION TAX - RS.94,646 (VI) BANK CERTIFICATES - RS. 3,389 ----------------------- TOTAL EXPENSES OF RS. 2,12,252 ------------------------ TOTAL NET PROFIT OF RS.27,42,137 THUS, IN VIEW OF THE ABOVE, THE ASSESSEE'S SUBMISS ION AT PARA 1.5 OF LETTER DATED 12 TH DECEMBER, 2013 IS NOT FOUND CORRECT. THE ASSESSEE HAD CLAIMED EXPENSES FOR RUNNING BUSINESS IN SHARE DEAL ING, HOWEVER, WHILE COMPUTING TOTAL INCOME, THE NET PROFITS IN SH ARES DISCLOSED UNDER SHORT TERM CAPITAL GAIN. (VI) THE ASSESSEE HAD MADE TRANSACTIONS OF SINGLE SCRIPS IN NUMBER OF TIMES AS CAN BE SEEN, IT FROM THE SHARE TRANSACTION SHEETS OF BROKER NAMELY KIFS. THE ASSESSEE HAD ENTERED INTO NUMBER O F TRANSACTIONS OF 'INFOTECH' IN THE FINANCIAL YEAR UNDER CONSIDERA TION AND HAD EARNED PROFIT OF RS. 1,01,783 ON PURCHASE AND SALE OF 32,835 SHARES. NO CLOSING BALANCE OF THIS SHARE IS SHOWN. THEREFORE, IT CAN BE SAID THAT THE ASSESSEE HAD BEEN CARRYING ON TRADING OF SHARES REG ULARLY, CONTINUOUSLY AND AT VERY HIGH FREQUENCY AND HIS INTENSION WAS NE VER TO KEEP THESE 7 SHARES AS INVESTMENT. IT WAS ONLY FOR THE PURPOSE O F CLAIMING BENEFIT OF LOWER RATE OF TAX U/S 111A OF THE ITAT, 1961. REFERENCE WAS MADE TO THE FOLLOWING CASE LAWS:- 1. JAY SHREE PRADIP SHAH VS. ACIT REPORTED IN 131 ITD 326 (MUMBAI). 2. P.V.S. RAJU & ORS. VS. ACIT REPORTED IN 340 ITR 75 (A.P.) 5. THE LD. CIT ALSO OBSERVED THAT THE ASSESSING OFF ICER HAD NOT EXAMINED/INQUIRED INTO AS WHAT BASIS THE PROFIT ON SALE OF SHARES HAD BEEN DISCLOSED BY THE ASSESSEE UNDER THE HEAD BUSI NESS OR CAPITAL GAIN IN RESPECT OF SHARES TRANSACTIONS MADE THROUGH THRE E BROKERS AND WHAT WAS THE CRITERIA ON THE BASIS OF WHICH THE INCOME U NDER THE HEAD BUSINESS HAD BEEN SHOWN ON SHARES TRANSACTIONS AN D WHY IN RESPECT OF HOLDING LESS THAN 60 DAYS IN RESPECT OF DELIVERY TA KEN, THE SHARE PROFIT HAD BEEN SHOWN UNDER THE HEAD CAPITAL GAIN. THE LD . CIT FURTHER OBSERVED THAT THE ASSESSEE HAD NOT SUBMITTED ANY EV IDENCE ON THE BASIS OF WHICH THE PROFIT FROM PARTICULAR SHARE TRANSACTI ON COULD BE CONSIDERED UNDER THE HEAD BUSINESS INCOME. HE WAS OF THE VI EW THAT THE ASSESSEE HAD SHOWN THE PROFIT ON SALE OF SHARES UNDER THE HE AD CAPITAL GAIN TO PAY LESSER AMOUNT OF TAX. HE FURTHER OBSERVED THAT THE PROCEEDINGS OF EVERY YEAR ARE TO BE JUDGED ON THE BASIS OF FACTS O F THAT YEAR AND THE ASSESSING OFFICER HAD TO EXAMINE EVERY TRANSACTION AND NATURE WITH A 8 VIEW TO DETERMINE CORRECT INCOME AND TAX PAYABLE TH EREON. HE WAS OF THE VIEW THAT NO ENQUIRY BY THE ASSESSING OFFICER H AD BEEN MADE TO FIND OUT A JUSTIFIABLE METHOD FOR SHOWING OF INCOME EITH ER UNDER THE HEAD BUSINESS INCOME OR UNDER THE HEAD CAPITAL GAIN ON SHARE TRANSACTION CARRIED OUT THROUGH SHARE BROKERS, THEREFORE, THE A SSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS. THE LD. CIT POINTED OUT THAT THE NUMBER OF SHARE TRANSACTIONS WERE SOLD WIT HIN LESS THAN 30 DAYS HOLDING, BUT THE ASSESSING OFFICER HAD NOT EXAMINED WHETHER INTENTION OF THE ASSESSEE WAS TO GO FOR INVESTMENT IN SHARES OR IT WAS IN NATURE OF BUSINESS TRANSACTIONS. THE LD. CIT ALSO POINTED OU T THAT THE ASSESSEE HAD A SINGLE PORTFOLIO OF SHARE TRADING WITH THREE SHAR E BROKERS WITHOUT SPECIFYING OF HIS INTENTION WHILE DEALING IN SHARES . THEREFORE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WA S ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO EXAMINE WHETHER S HARE PROFIT OF RS. 27,42,135/- DISCLOSED AS SHORT TERM CAPITAL GAIN BY THE ASSESSEE FALL IN THE BUSINESS INCOME AND TO PASS ASSESSMENT ORDER AFRES H. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. M/S. SCHENECTADY BACK INDIA LTD. VS. DCIT REPORTED IN 272 ITR (AT) 103 (MUMBAI) 2. SMT. TARADEVI AGARWAL VS. CIT REPORTED IN 88 ITR 32 3 (S.C.) . 9 BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL. 6. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE LD. CIT AND FURTHER SUBMITTED THAT THE A SSESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE AND THE LD. CIT HAD NOT GIVEN ANY BASIS AND HAD ALSO NOT RE CORDED ANY FINDING TO THE EFFECT THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS OR IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS CONTENDED THAT THE ASSESSING OFFICER FULLY EXAMINED THE BOOKS OF ACCOU NTS ALONG WITH THE DETAILS INCLUDING CONTRACT NOTES FOR SHARE TRANSACT IONS AND AFTER PROPER VERIFICATION, THE RETURNED INCOME OF RS. 17,09,980/ - DECLARED BY THE ASSESSEE WAS ACCEPTED. IT WAS POINTED OUT THAT NON E OF THE ISSUE RAISED BY THE LD. CIT IN THE NOTICE DATED 28/08/2012 UNDER SECTION 263 OF THE ACT SUGGEST THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS CONTENDED THAT THE NUMBER OF TRANSACTIONS FOR PURCHASE AND SALE IN AN ASSESSMENT YEAR CANNOT BE A CRITERIA FOR DETERMINING THE BUSINESS I NTENTION OF THE ASSESSEE AND IT WAS ONLY THE INTENT WITH WHICH THE ASSESSEE HAD ENTERED INTO THE TRANSACTION WILL DETERMINE THE NATURE OF T RANSACTION. IT WAS FURTHER CONTENDED THAT AS PER CLARIFICATION OF THE CBDT ISSUED VIDE ITS CIRCULAR NO. 4 OF 2007 DATED 15/06/2007 IT IS POSSI BLE FOR A TAXPAYER TO 10 HAVE TWO PORTFOLIOS I.E. AN INVESTMENT PORTFOLIO AN D A TRADING PORTFOLIO. HOWEVER, THE INTENTION WOULD BE THAT OF THE ASSESSE E REGARDING THE CATEGORIZATION OF SHARES INTO THE INVESTMENT PORTFO LIO OR TRADING PORTFOLIO. IT WAS EMPHASIZED THAT THE ASSESSEE HAD DULY CATEGO RIZED THE DAY TRADING OF SHARES INTO TRADING PORTFOLIO, THE INCOME THEREO F HAD BEEN SHOWN AS BUSINESS INCOME AND DULY ACCEPTED BY THE ASSESSING OFFICER. THEREFORE, IN THE RELEVANT ASSESSMENT YEAR, THERE WAS NO JUSTI FICATION TO TREAT THE TRANSACTION IN CERTAIN SHARES COMING INTO INVESTMEN T PORTFOLIO AS THE TRANSACTION OF TRADING PORTFOLIO. IT WAS CONTENDED THAT THE ASSESSING OFFICER HAD ACCEPTED THE RETURN OF INCOME AFTER EXA MINING THE COMPLETE FACTS ON THE MATTER OF SHORT TERM CAPITAL GAIN AND HAD TAKEN A VIEW ON THE BASIS OF FACTS OF THE ASSESSEES CASE. THEREF ORE, THE LD. CIT WAS NOT JUSTIFIED IN SUGGESTING HIM TO TAKE A DIFFERENT VIE W. IT WAS ALSO STATED THAT THE CASE LAWS REFERRED TO BY THE LD. CIT HAD D IFFERENT FACTS AND WERE NOT APPLICABLE TO THE ASSESSEES CASE. RELIANCE WA S PLACED ON THE FOLLOWING CASE LAWS:- 1. J.M. SHARE & STOCK BROKERS LTD. VS. JCIT (ITAT J BENCH, MUMBAI IN I.T.A.NO. 2801/MUM/2000) 2. MANAGEMENT STRUCTURE & SYSTEM (P) LTD. VS. ITO R EPORTED IN (2010) 41 DTR (MUM) (TRIB.) 426. 11 3. NIDHI DYEING & PRINTING MILLS (P) LTD. VS. ITO ( 2011) 9 ITR (TRIB.) 65 (AHD) 4. ACIT VS. KETHAN KUMAR A. SHAH (2000) 242 ITR 83 (KER) 5. GANESH BUILDERS VS. CIT (2013) 158 TTJ (JD.) 801 . 6. SUNIL BHANDARI VS. ACIT (2013) 154 TTJ (JD) 751. 7. CIT VS. HARI SINGH & ASSOCIATES (2014) CTR (RAJ. ) 7 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. REITERATED THE OBSERVATIONS MADE BY THE LD. CIT AND SUPPORTED THE IMPUGNED ORDE R. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, THE LD. CIT DIRECTED THE ASSESSING OFFICER TO RE-EXAMINE WHETHER SHARE PROFITS OF RS. 27,42,135/- DISCLOSED BY THE A SSESSEE AS SHORT TERM CAPITAL GAIN FELL UNDER THE HEAD BUSINESS INCOME. ACCORDING TO THE LD. CIT, THE ASSESSEE SOLD THE SHARES IN NUMBER OF TRAN SACTIONS WITHIN LESS THAN 30 DAYS HOLDING. THEREFORE, IT WAS IN THE NAT URE OF BUSINESS TRANSACTION. ON THE CONTRARY, THE CLAIM OF THE ASS ESSEE IS THAT THE ASSESSING OFFICER EXAMINED ALL THESE FACTS DURING T HE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND AFTER DETAILED EXAMINATION OF THE BOOKS OF ACCOUNTS AND C ONTRACT NOTES ETC., THE RETURNED INCOME WAS ACCEPTED. SO, IT CANNOT BE SAID THAT THE 12 ASSESSEE DID NOT MAINTAIN PROPER RECORDS AND THE AS SESSING OFFICER HAD NOT CONSIDERED THE CLAIM ON THE BASIS OF BOOKS OF A CCOUNTS AND HAD NOT MADE PROPER ENQUIRY. IN THE PRESENT CASE, THE ASSE SSEE WAS MAINTAINING TWO PORTFOLIO OF SHARES ONE AS INVESTMENT AND ANO THER AS STOCK IN TRADE. THE PROFIT EARNED ON THE INVESTMENT WAS SHO WN UNDER THE HEAD CAPITAL GAIN AND THE PROFIT FROM THE TRADING ACTI VITY WAS SHOWN UNDER THE HEAD BUSINESS INCOME. THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER DATED 06/09/2012 PASSED UNDER SECT ION 143(3) OF THE ACT HAS MENTIONED AS UNDER:- IN RESPONSE TO THESE NOTICES SH. SANTOSH MEHTA A/ R OF THE ASSESSEE AND SHRI DEEP CHAND SURANA ASSESSEE HIMSELF ATTENDED TI ME TO TIME AND FILED WRITTEN SUBMISSION AND DETAILS. THE ASSESSEE HAD S HOWN INCOME OF RS. 27,42,135/- FROM SHORT TERM CAPITAL GAIN U/S 111A A ND CLAIMED SET OFF OF BROUGHT FORWARD SHORT TERM CAPITAL LOSS OF RS. 12,3 2,523/-. THE A/R PRODUCED THE DETAILS OF SHORT TERM CAPITAL GAIN FOR THIS YEAR AND SHORT TERM CAPITAL LOSS FOR PRECEDING YEAR. ASSESSEE PRODUCED BOOKS OF ACCOUNTS AND CONTRACT NOTES FOR SHARE TRANSACTIONS WHICH WAS EXA MINED AND AFTER VERIFICATION AND DISCUSSION THE RETURNED INCOME OF RS. 17,09,980/- DECLARED BY ASSESSEE IS ACCEPTED. 9 . FROM THE ABOVE OBSERVATIONS OF THE ASSESSING OFFI CER, IT IS CLEAR THAT THE ASSESSING OFFICER EXAMINED THE ISSUE RELATING T O THE INCOME SHOWN AT RS. 27,42,135/- UNDER THE HEAD SHORT TERM CAPITAL GAIN UNDER SECTION 111A OF THE ACT AND CLAIMED BROUGHT FORWARD SHORT T ERM CAPITAL LOSS AMOUNTING TO RS. 12,32,523/- TO BE SET OFF AGAINST THE ABOVE SAID SHORT 13 TERM CAPITAL GAIN. IN THE PRESENT CASE, THE LD. CI T WANTED THAT THE ASSESSING OFFICER SHOULD TREAT THE SHORT TERM CAP ITAL GAIN AS BUSINESS INCOME, BUT NO BASIS HAS BEEN GIVEN FOR THE SAID DI RECTION. 10. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BE EN VASTLY EXAMINED AND ANALYZED BY VARIOUS COURTS INCLUDING H ONBLE APEX COURT. THE REVISIONARY POWER CONFERRED ON THE LD. CIT VIDE SECTION 263 OF THE ACT IS OF VIDE AMPLITUDE, IT ENABLES THE LD. CIT TO CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EM POWERS THE LD. CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ONCE HE COMES TO THE ABOV E CONCLUSION ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSES SING OFFICER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENU E, THE LD. CIT IS EMPOWERED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE MAY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESS MENT OR HE MAY 14 MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CAN CEL THE ASSESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPO WERED TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN S ECTION 263 OF THE ACT. BUT THE LD. CIT DOES NOT HAVE UNFETTERED AND UNCHEQ URED DISCRETION TO REVISE AN ORDER, HE IS REQUIRED TO EXERCISE REVISIO NAL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FA IRNESS IN ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPECT TO THE PRINCI PLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTION OF INDIA AS WELL AS IN SECTION 263 OF THE ACT. AN ORDER CAN BE TREATED AS ERRONEOUS IF IT IS PASSED IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR PASSED WIT HOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAKING I NTO CONSIDERATION THE IRRELEVANT FACTS. THE WORD PREJUDICE IS CONTEMPL ATED UNDER SECTION 263 OF THE ACT IS THE PREJUDICE TO THE INCOME TAX ADMIN ISTRATION AS A WHOLE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETT ING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE C ONTEXT. THE FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 OF THE ACT MAY BE SUMMARIZED AS UNDER:- (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFI LLED. 15 (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAN THE SAID SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREMENT OF ORDER BE ING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OFFICE R HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HA S TAKEN ONE VIEW WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMI NES THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER S ECTION 263 OF THE ACT, IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE ASSE SSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISES QUASI-JUDIC IAL POWER VESTED IN HIM AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTIO N UNDER SECTION 263 OF THE ACT, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. IN SUCH TYPE OF CASES, IF THE ASSESSING OFFICER HA S MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND 16 THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BE A LE TTER IN WRITING AND THE ASSESSING OFFICER ALLOWED THE CLAIM ON BEING SATISF IED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE AS SESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 11 . IN THE PRESENT CASE AS WE HAVE ALREADY POINTED OU T THAT THE ASSESSEE FURNISHED THE DETAILS RELATING TO THE SHAR ES TRANSACTIONS, DISCLOSED THE PROFIT ON THE BASIS OF BOOKS OF ACCOU NTS WHEREIN ALL THE TRANSACTIONS WERE ENTERED. THE ASSESSEE WAS MAINTA INING THE SHARES TRANSACTIONS WITH THREE BROKERS UNDER TWO PORTFOLIO S I.E. INVESTMENT PORTFOLIO AND TRADING PORTFOLIO . THE ASSESSEE DIS CLOSED SHORT TERM CAPITAL GAIN OF RS. 27,42,135/- ON THE SALE OF SHARES WHICH WERE HELD AS AN INVESTMENT AND ALSO DECLARED PROFIT OF RS. 2,23,1 99/- AS BUSINESS INCOME ON THE DAY TRADING OF SHARES. THE ASSESSEE ALSO PAID SECURITY TRANSACTION OF TAX. THE ASSESSING OFFICER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, ASKED THE ASSESSEE TO FURNISH THE DETA ILS RELATING TO THE SALE TRANSACTIONS AND THE ASSESSEE FURNISHED THE SAME BE FORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT. SO, IT CANN OT BE SAID THAT THE ASSESSEE HAD NOT FURNISHED THE DETAILS RELATING TO THE SHARES TRANSACTIONS 17 OR THE ASSESSING OFFICER HAD NOT EXAMINED THOSE DET AILS WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. WE THE REFORE, BY CONSIDERING THE TOTALITY OF THE FACTS OF THE PRESENT CASE, ARE OF THE VIEW THAT THE LD. CIT WAS NOT JUSTIFIED IN TREATING THE ASSESSMENT OR DER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT A S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THA T VIEW OF THE MATTER, THE IMPUGNED ORDER IS SET ASIDE AND THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS RESTORED. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 21 ST MAY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST MAY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.