Syed Hameeduddin, Hyderabad V. CIT VI, Hyderabad

ITA 895/HYD/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5836 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 15-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: K VASANT KUMAR
• Keywords: Salary income; Difference of opinion; Change of opinion
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENTAND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.895/HYD/2008 : ASSTT. YEAR 2003- 04 SYED HAMEEDUDDIN, EDI BAZAR,HYDERABAD. PAN: AAHPH 7931 E (APPELLANT) VS ACIT, CIR-9(1), HYDERABAD.. (RESPONDENT) APPELLANT BY : SRI K. VASANT KUMAR RESPONDENT BY : SMT. VASUNDHARA SINHA O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED UNDER S.263 OF THE I T ACT BY THE LEARN ED COMMISSIONER OF INCOME TAX, HYDERABAD DATED 27-3-2008 FOR THE ASSESSME NT YEAR 2003-04. 2. GROUNDS RAISED IN THIS APPEAL ARE AS FOLLOWS:- I) THE LEARNED CIT(A), HYDERABAD HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE A SSESSMENT COMPLETED BY THE ACIT CIRCLE 9(1), HYDERABAD IS ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE AND THEREFORE SETTING ASIDE THE SAID ASSESSMENT ORDER WITH THE DI RECTION OF REDO THE SAME, IN THE LIGHT OF THE FINDINGS, OBSERV ATIONS AND 2 DIRECTIONS IN THE IMPUGNED ORDER DATED 27-3-2008 PA SSED UNDER SECTION 263. II) THE LEARNED CIT OUGHT TO HAVE NOTED THAT HE VARIOUS CREDITS REFERRED TO BY HIM AND DISCUSSED IN DETAIL IN THE I MPUGNED ORDER UNDER SECTION 263, ALL PERTAIN TO EARLIER YEARS AND HENCE NO PURPOSE WOULD BE SERVED BY SETTING ASIDE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 UNDER CONSIDERATION FOR VER IFICATION OF CREDITS WHICH WERE PROPERLY EXPLAINED AT THE TIME O F HEARING TO THE ASSESSING AUTHORITY. III) THE LEARNED CIT OUGHT TO HAVE ALSO NOTED THAT IN RE SPECT OF THE TRANSACTION OF CAPITAL GAINS ON SALE OF SHARES OF T RANSACTION SECURITIES LTD., WHICH IS A GENUINE TRANSACTION THE ASSESSEE HAD FURNISHED ALL THE INFORMATION UNDER CONSIDERATION, AND THAT THE COMMISSIONER SOUGHT TO MAKE ROVING ENQUIRIES WHICH IS NOT PERMISSIBLE IN PROCEEDINGS UNDER SECTION 263. THE L EARNED CIT OUGHT TO HAVE ALSO NOTED THAT ALL THE INGREDIENTS O F THE TRANSACTION ARE AVAILABLE ON RECORD, AND THAT NO DI SCREPANCY HAS BEEN BROUGHT ON RECORD AND THEREFORE THERE IS NO ER ROR IN THE ASSESSMENT ORDER OR PREJUDICE TO THE INTEREST OF TH E REVENUE. IV) THE LEARNED CIT OUGHT TO HAVE NOTED THAT THE ENQUIR Y DIRECTED BY HIM TO BE MADE AS TO THE IDENTITY OF THE PARTY TO W HOM THE ASSESSEE SOLD THE SHARES IN QUESTION, IS TOTALLY IR RELEVANT AND NOT GERMANE TO THE ISSUE OF CAPITAL GAINS UNDER CONSIDE RATION PARTICULARLY SINCE THE GENUINENESS OF THE TRANSACTI ONS STANDS PROVED BY THE ENQUIRIES CONDUCTED BY THE DEPARTMENT AND THAT IN ANY CASE THE NON-AVAILABILITY OF THE DETAILS OF THE PURCHASER OF THE SHARES DOES NOT RESULT IN ANY ERROR IN THE ASSE SSMENT ORDER OR ANY PREJUDICE TO THE INTEREST OF THE REVENUE. V) THE DIRECTIONS OF THE CIT THAT THE ASSESSING OFFICE R TO CONSIDER THE TRANSACTIONS IN THE LIGHT OF ADVENTURE IN THE N ATURE OF TRADE, AS DISTINGUISHED FROM THE CAPITAL GAINS OFFERED AND ACCEPTED IN THE ASSESSMENT, AMOUNTS TO CHANGE OF OPINION BY THE DEPARTMENT WHICH IS NOT PERMISSIBLE UNDER SECTION 263, AND THA T SUCH CHANGE OF OPINION DOES NOT AMOUNT TO ANY ERROR IN THE ASSE SSMENT ORDER OR PREJUDICE TO THE INTEREST OF THE REVENUE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIV IDUAL, DERIVES INCOME FROM MANUFACTURE AND TRADE OF ZARDA, G HUTKA AND ALLIED PRODUCTS AS WELL AS SHARE AND SALARY INCOMES FROM OTHER FIRMS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED A RET URN OF INCOME ON 22-10-2003 DECLARING A TOTAL INCOME OF RS.62, 98,690 UNDER VARIOUS HEADS. ASSESSMENT WAS ULTIMATELY COMPLETED UNDER S.143(3) OF 3 THE ACT ON 7.11.2005, AFTER MAKING CERTAIN ADDITIONS/ DISALLOWANCES, ON A TOTAL INCOME OF RS.64,54,300. 4. THE COMMISSIONER OF INCOME TAX, WHILE PERUSING THE RECORDS OBSERVED THE ABOVE ASSESSMENT TO BE ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE INSOFAR AS ON THE FOLLOWING GROUNDS- (A) THERE WAS A DISCREPANCY IN THE CORRECTED BALANCE SHEET FURNISHED DURING THE COURSE OF REVIEW PROCEEDINGS, WHICH REVEALED DISCREPANCIES ON ACCOUNT OF EXCESS OF ASSETS OVER LIABILITIES BY RS.1,000, WHICH NEEDS TO BE ENQUIRED INT O BY THE ASSESSING OFFICER.. (B) THERE ARE AS MANY AS SIX SUNDRY CREDITORS RELATING TO RED ROSE PRODUCTS, HYDERABAD, I.E. LIABILITIES CLAIMED TO BE OUTSTANDING AS ON 31.3.2003, PRIMA FACIE APPEARED TO B E SPURIOUS, CALLING FOR APPROPRIATE EXAMINATION/ENQUIRY, BUT THE ASSESSING OFFICER FAILED TO CARRY OUT ANY ENQUIRY AN D APPLY HIS MIND. (C) DISCREPANCIES IN RELATION TO SHARE TRANSACTIONS IN RELA TION TO WHICH CAPITAL GAINS OF RS.56,98,764 HAVE BEEN ADMITTED BY THE ASSESSEE. BY THE IMPUGNED ORDER UNDER S.263, THE COMMISSIONER O F INCOME TAX, AFTER DETAILED CONSIDERATION OF THE EXPLANATION AND SU BMISSIONS OF THE ASSESSEE, DIRECTED THE ASSESSING OFFICER ON THE ABOVE THREE I SSAUES AS FOLLOWS- 4 (A) AS FOR DISCREPANCY IN THE CORRECTED BALANCE SHEET, THE ASSESSING OFFICER IS DIRECTED TO PROBE IN DEPTH THE RELEV ANT ACCOUNTS AND CORRESPONDING FIGURES AS REFLECTED IN THE BAL ANCE SHEET FOR ED ROSE PRODUCTS HYDERABAD AS AT 31.3.2003. (B) AS FOR THE SUNDRY CREDITORS OF RED ROSE PRODUCTS, THE LI ABILITIES IN RELATION TO WHOM, ACCORDING TO THE COMMISSIONER OF I NCOME TAX , PRIMA FACIE APPEARED TO EB SPURIOUS, THE ASSESSING O FFICER IS DIRECTED TO MAKE PROPER ENQUIRIES AND ASCERTAIN THE GENUINENESS OF THE SAME. (C) AS FOR THE CLAIM IN RELATION TO LONG TERM CAPITAL GAI NS IN RELATION TO SHARE TRANSACTIONS, IN VIEW OF THE FURTHER DOCUMENTS SUBMITTED IN THE COURSE OF THE REVIEW PROCEEDINGS, WHICH PRESENT AN OVERALL ASPECT OF THE TRANSACTIONS, BEING IN THE NATURE OF TRADE, THE ASSESSING OFFICER IS DIRECTED GO GIV E SUFFICIENT OPPORTUNITIES TO THE ASSESSEE TO PRESENT HIS CASE, AND THEN MAKE ENQUIRIES INTO THE GENUINENESS OF THE TRANSACT IONS, AND THEN CONSIDER WHETHER THE TRANSACTIONS IN QUESTION CONSTITUTE ADVENTURE IN THE NATURE OF TRADE. 5. WITH THE ABOVE DIRECTIONS, THE COMMISSIONER OF INCO ME TAX, VIDE THE IMPUGNED ORDER UNDER S.263 OF THE ACT DATE D 7.11.2005, SET ASIDE THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER S.1 43(3) OF THE ACT, AND DIRECTED HIM TO RE-DO THE ASSESSMENT. AGGRI EVED BY THE SAID ORDER OF THE COMMISSIONER OF INCOME TAX, ASSESSEE IS I N APPEAL BEFORE US. 5 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT C IT HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CA SE IN HOLDING THAT THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER IS ERR ONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVE NUE AND THEREFORE SETTING ASIDE THE SAID ASSESSMENT ORDER WITH THE DIRECTION OF REDO THE SAME, IS NOT CORRECT. IT WAS FURTHER CONTENDED THAT CIT O UGHT TO HAVE NOTED THAT THE CREDITS REFERRED TO BY HIM AND DISCUSSED IN DETAIL IN THE IMPUGNED ORDER UNDER SECTION 263, ALL PERTAIN TO EAR LIER YEARS AND HENCE, THERE IS NO JUSTIFICATION FOR DIRECTING THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THE SAME IN THE YEAR UNDER A PPEAL. THE LEARNED CIT OUGHT TO HAVE ALSO NOTED THAT IN RESPECT O F THE TRANSACTION OF CAPITAL GAINS ON SALE OF SHARES OF TRANSACTION SECURITIE S LTD., WHICH IS A GENUINE TRANSACTION AND THE ASSESSEE HAD FURNISHED ALL T HE INFORMATION RELEVANT TO THE TRANSACTION. THE COMMISSIONER, THROUGH THE IMPUGNED ORDER UNDER S.263, IS DIRECTING ROVING ENQUIRIES WHICH IS NOT PERMISSIBLE IN PROCEEDINGS UNDER SECTION 263. HE SUBMITTED THAT ALL THE INGREDIENTS OF A GENUINE TRANSACTION ARE VERIFIABLE FROM THE MATE RIAL AVAILABLE ON RECORD, AND THEREFORE, IN THE ABSENCE OF ANY DISCREPANCY BROUGHT OUT THEREFROM BY THE CIT, IT CANNOT BE SAID THAT THERE IS ANY ERROR IN THE ASSESSMENT ORDER, MUCH LESS PREJUDICIAL TO THE INTERESTS OF THE REVENUE IT WAS FURTHER CONTENDED THAT THE CIT OUGHT TO HAVE NOTED THAT THE ENQUIRY DIRECTED BY HIM TO BE MADE AS TO THE IDENTITY OF THE PARTY TO WHOM THE ASSESSEE SOLD THE SHARES IN QUESTION, IS TOTALLY IR RELEVANT AND NOT GERMANE TO THE ISSUE OF CAPITAL GAINS UNDER CONSIDERA TION PARTICULARLY SINCE THE GENUINENESS OF THE TRANSACTIONS STAN DS PROVED BY THE ENQUIRIES CONDUCTED BY THE DEPARTMENT AND THAT IN ANY CASE THE NON-AVAILABILITY OF THE DETAILS OF THE PURCHASER OF T HE SHARES DOES NOT 6 RESULT IN ANY ERROR IN THE ASSESSMENT ORDER OR ANY PREJU DICE TO THE INTEREST OF THE REVENUE. THE DIRECTIONS OF THE CIT THA T THE ASSESSING OFFICER TO CONSIDER THE TRANSACTIONS IN THE LIGHT OF ADVE NTURE IN THE NATURE OF TRADE, AS DISTINGUISHED FROM THE CAPITAL GA INS OFFERED AND ACCEPTED IN THE ASSESSMENT, AMOUNTS TO CHANGE OF OPINION BY THE DEPARTMENT WHICH IS NOT PERMISSIBLE UNDER SECTION 263, AN D THAT SUCH CHANGE OF OPINION DOES NOT AMOUNT TO ANY ERROR IN THE ASSESSMENT ORDER OR PREJUDICE TO THE INTEREST OF THE REVENUE. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL RE PRESENTATIVE WHILE SUPPORTING THE ORDER OF THE CIT FURTHER ARGUED THAT THE CIT IS PERFECTLY JUSTIFIED IN GIVING DIRECTION TO THE ASSESSING OFFICER TO REDO THE ASSESSMENT IN THE LIGHT OF HIS FINDINGS AND OBSERVATIONS, HE SUBMITTED THAT THE CIT HAS GIVEN ONLY GENERAL OPEN DIRECTIONS TO THE ASSESSING OFFICER, TO RE-DECIDE THE ISSUES AFRESH, AND AS SUCH THERE CAN BE NO INFRINGEMENT TO THE CLAIMS OF THE ASSESSEE, IF THE ASSESSEE I S INDEED ENTITLED TO THE SAME. HE FURTHER SUBMITTED THAT IN TH E OFF-MARKET SHARE TRANSACTIONS, THERE IS EVERY POSSIBILITY OF MANIPULATION, AND AS SUCH, IN CASE OF DOUBT, ASSESSEE MAY BE CALLED UPON TO ESTABLISH THE IDENTITY OF THE PARTIES AND THE GENUINENESS OF THE TRANSACTIONS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. AS FAR AS LEGALITY AND V ALIDITY OF THE ACTION OF THE CIT IN RELATION TO THE SHARE TRANSACTIONS IS CONCE RNED, WE NOTICE THAT THE CIT NOTICED FROM VARIOUS DOCUMENTS FILED BY TH E ASSESSEE IN THE COURSE OF THE PROCEEDINGS UNDER S.263 THAT THE ASSESSEE HAS INDULGED IN FREQUENT BUYING AND SELLING OF SHARES/SECURITIES AND THI S ASPECT OF THE MATTER STRONGLY SUGGESTS THAT THE SHARE TRANSACTIONS MADE BY THE 7 ASSESSEE COULD BE AN ADVENTURE IN THE NATURE OF TRADE. SINCE THIS ASPECT HAD NOT BEEN EXAMINED BY THE ASSESSING OFFICER, AND CONSI DERING THE FACT THAT THE DOCUMENTS FILED IN THE PROCEEDINGS UNDER S .263 WERE NOT BEFORE THE ASSESSING OFFICER, HE SET ASIDE THE ORDER OF TH E ASSESSING OFFICER ON THIS ASPECT AND DIRECTED FOR RE-EXAMINATION O F THE MATTER AFRESH. WE FIND NO INFIRMITY IN THE ACTION OF THE C IT IN THIS BEHALF. THE CIT FURTHER OBSERVED THAT IT WAS EVIDENT THAT THE ASSESSI NG OFFICER HAD NOT APPLIED HIS MIND TO THE SIGNIFICANT ASPECTS OF THE I SSUE AND HAD MECHANICALLY COMPLETED THE ASSESSMENT WITH REGARD TO SHARE TRANSACTION. WE FIND MERIT IN THIS OBSERVATION OF THE CIT ALSO AND THEREFORE, CONCLUDE THAT THE ABSENCE OF APPLICATION OF M IND ON THE PART OF THE ASSESSING OFFICER HAS CERTAINLY RENDERED THE ASSESSMEN T NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF REVE NUE. IT IS EVIDENT FROM THE IMPUGNED ORDER OF THE COMMISSIONER, THAT THE SHARES HAD BEEN PURCHASED THROUGH SHAILEE SECURITIES, I.E. BY WAY OF OF F-MARKET TRANSACTIONS. THE DOCUMENT UNDER ANNEXURE-1, FILED IN THE PAPER-BOOK BEFORE US, IS A COPY OF TRANSACTION STATEMENT AS GIVEN BY STOCK HOLDING CORPORATION OF INDIA LIMITED. IT SHOWS CREDIT FOR THE PURCHASE OF TWO LAKH SHARES OF TRANSACTION SECURITIES LTD. FOR A SUM OF RS. 7 LAKHS, IN THE NAME OF SHARE KHAN LIMITED. ACCORDING TO THE COMMISSI ONER, IT IS NOT CLEAR AND NOT PROPERLY EXPLAINED BY THE ASSESSEE, AS TO W HY AND AS TO HOW SHARE KHAN LIMITED CAME INTO PICTURE IN THE SHARE TRANSACTION. 9. WITH REGARD TO THE DIFFERENCE IN THE BALANCE SHEE T, THE ASSESSEE HAD CONCEDED THAT THERE WAS A CLERICAL MISTAKE THAT THE CLOSING STOCK IN TRANSIT WAS NOT REFLECTED IN THE ASSET SIDE OF THE BALANCE SHEET PERTAINING TO THE RED ROSE PRODUCTS. HOWEVER, THE DIFF ERENCE IN THE BALANCE SHEET IS ONLY RS.1000, WHICH, ACCORDING TO THE LE ARNED COUNSEL 8 FOR THE ASSESSEE, IS NOT VERY SIGNIFICANT. WHEN THERE IS NO DISPUTE WITH REGARD TO DISCREPANCY IN THE BALANCE SHEET, THE QUANTU M OF THE DISCREPANCY, WHETHER IT IS RE.ONE OR RS.1,000, IS IMMATER IAL, AND THE DISCREPANCY BECOMES SIGNIFICANT AND REFLECTS UNRELIABILITY O F THE BALANCE SHEET. IT IS SO BECAUSE, THE DISCREPANCY IS IN THE SUM TOTA L ON BOTH SIDES OF THE BALANCE SHEET, AND SUCH A DISCREPANCY IN SUM-TOTA L COULD ARISE OUT OF A SINGLE DISCREPANCY OR ON ACCOUNT OF MULTIPLE D ISCREPANCIES IN VARIOUS ITEMS APPEARING ON ONE OR BOTH SIDES OF THE BAL ANCE SHEET. IN THE CIRCUMSTANCES THEREFORE, EVEN DIFFERENCE OF ONE RUPE E IN THE BALANCE SHEET MAY RESULT IN DISTORTED FIGURES AND SUCH A BALANCE SHEET MAY NOT REFLECT THE TRUE AND FAIR VIEW OF THE STATE OF AFFAIR S OF THE ENTITY ON THE DATE OF THE BALANCE SHEET. THEREFORE, THE CIT IS JUSTIF IED IN DIRECTING THE ASSESSING OFFICER TO PROBE THE ISSUE IN DEPTH THE RELEVANT ACCOUNTS AND THE CORRESPONDING FIGURES AS REFLECTED IN THE BALANCE SHEE T OF THE SAID COMPANY AS AT 31.3.2003. 9. AS FOR THE ISSUE RELATING TO SUNDRY CREDITORS, WE F IND FROM THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX A ND THE MATERIAL AVAILABLE ON RECORD THAT THE LIABILITIES IN RELATION TO SUNDRY CREDITORS, DID NOT COMES INTO EXISTENCE IN THE YEAR UNDE R CONSIDERATION, AS THEY WERE CONTINUING TO EXIST FROM EARLIER YEARS. WE ALSO FIND THAT MOST OF THE LIABILITIES WERE WRITTEN OFF AND OFFERED TO TAX IN THE SUBSEQUENT YEARS. MOST OF THE SAID LIABILITIES WRITTEN OF F, AS BROUGHT TO OUR NOTICE, WERE OFFERED TO TAX MUCH BEFORE THE INITI ATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCO ME TAX. ALL THE LIABILITIES WERE DULY REFLECTED IN THE RECORDS WHICH WE RE ALREADY FILED WITH THE DEPARTMENT IN THE COURSE OF EARLIER ASSESSMENT PROCEED INGS. IN THIS VIEW OF THE MATTER, IT IS NEITHER PROPER NOR JUSTIFIA BLE FOR THE 9 COMMISSIONER, IN EXERCISE OF THE POWER UNDER S.263, TO DIRECT THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THOSE LIABIL ITIES IN THE YEAR UNDER CONSIDERATION. CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES OF THE CASE, AS FAR AS THE ISSUE RELATING TO SUND RY CREDITORS IS CONCERNED, WE HOLD THAT THE COMMISSIONER OF I NCOME TAX IS NOT JUSTIFIED IN INVOKING HIS JURISDICTION UNDER S.26 3 OF THE ACT. WE ACCORDINGLY CANCEL THE IMPUGNED ORDER AND DIRECTIONS OF T HE COMMISSIONER, IN SO FAR AS IT RELATES TO THE GENUINENESS OF THE LIABILITIES ON ACCOUNT OF SUNDRY CREDITORS. 10. WE ARE SUPPORTED IN OUR FINDINGS BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. (2 43 ITR 83) WHEREIN IT WAS HELD THAT IF DUE TO AN ERRONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REVENU E. AFTER CONSIDERING TOTALITY OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE AS DISCUSSED IN THE IMPUGNED ORDER BY THE CIT AND AS ARGUED OUT BY T HE PARTIES BEFORE US, WE FIND THAT THERE ARE SEVERAL LOOSE ENDS WITH REG ARD TO THE ISSUE OF SHARE TRANSACTIONS, AND DISCREPANCIES IN THE BALANCE SHEET, BROUGHT OUT BY THE COMMISSIONER OF INCOME TAX IN THE IMPUGNED ORD ER, WHICH NEED TO BE PROBED, AND AS SUCH, IN OUR CONSIDERED VIEW, THE CIT WAS JUSTIFIED IN INVOKING HIS JURISDICTION UNDER S.263 OF THE ACT, ON LY INSOFAR AS THE DISCREPANCIES IN THE BALANCE SHEET AND SHARE TRANSACTIONS OF THE ASSESSEE IN QUESTION ARE CONCERNED. 11. IN THE LIGHT OF THE ABOVE DISCUSSION, THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER IN RELATION TO FIRST TWO ISSU ES, VIZ. SHARE TRANSACTIONS AND DISCREPANCIES IN THE BALANCE SHEET, IS ERR ONEOUS AND 10 PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THOUGH T HE SAME CANNOT BE SAID IN RELATION TO THE THIRD ISSUE RELATING TO GENUI NENESS OF THE SUNDRY CREDITORS. WE ACCORDINGLY MODIFY THE ORDER PASSED UNDER S. 263 OF THE ACT BY COMMISSIONER OF INCOME TAX, AND HOLD THAT THE ASSE SSMENT COMPLETED BY THE ASSESSING OFFICER DATED 7-11-2005 IS ERRO NEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ONLY TO THE EXTENT OF DIFFERENCE IN THE BALANCE SHEET; AND THE CLAIM OF LONG TERM CAPITAL GAINS FROM THE SHARE TRANSACTIONS CLAIMED BY THE ASSESSEE, AND ACCO RDINGLY DIRECT THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT IN ACCO RDANCE WITH THE LAW AND IN ACCORDANCE WITH THE DIRECTIONS OF TH E COMMISSIONER ON THESE TWO ISSUES. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26.3.2010 SD/- (G.C. GUPTA) SD/- (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 26TH MARCH, 2010. COPY FORWARDED TO: 1. SYED HAMEEDUDDIN, 18-8-534/12/A/1, EDI BAZAR, HYDERAB AD. 2. ACIT, CIR-9(1), HYDERABAD. 3. CIT,VI, AP, HYDERABAD. 4. THE D.R., ITAT, HYDERABAD. JMR/ B.V.S. 11