M/s. Coimbatore Cable Net Private Limited, Bangalore V. ACIT, Coimbatore

ITA 959/CHNY/2011

• Counselvise Citation: 95921714 RSA 2011
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Assessee Lawyers: C RAMESH
• Keywords: Share purchase agreement; Non-deduction of tax
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A. NO. 959/MDS/2011 (ASSESSMENT YEAR : 2006-07) M/S COIMBATORE CABLE NET PRIVATE LIMITED, 642, 4 TH MAIN, INDIRA NAGAR, BANGALORE 560 038. PAN : AACCC3712C (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY WARD I, COIMBATORE. (RESPONDENT) APPELLANT BY : SHRI C. RAMESH, C.A. RESPONDENT BY : SHRI R.B. NAIK, CIT-DR DATE OF HEARING : 20.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, AGAINST THE ORDER DATED 25.3.2011 PASSED BY COMMISSIONER OF INCOME TAX-I, C OIMBATORE, UNDER SECTION 263 OF INCOME-TAX ACT, 1961 (IN SHORT THE ACT), GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT HELD THE ASSESSMENT ORDER I.T.A. NO. 959/MDS/11 2 PASSED BY THE A.O. ON 30.12.2008 FOR THE IMPUGNED A SSESSMENT YEAR AS ERRONEOUS IN SO FAR AS IT AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF CABLE NETWORK SERVICE, HAD FILED A RETURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR DECLARING A TOTAL INCOME O F ` 34,47,67,220/-. DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR, ASSESSEE HAD SOLD ITS SHARES IN M/ S BPL COMMUNICATIONS LTD., WHICH IT HAD ACQUIRED DURING T HE PREVIOUS YEAR RELEVANT TO IMMEDIATELY PRECEDING ASSESSMENT YEAR. ASSESSEE DECLARED SURPLUS ARISING OUT OF SUCH SALE AS LONG T ERM CAPITAL GAIN IN ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR. AS SESSEE HAD ALSO CLAIMED SOME EXPENDITURE WHICH, AS PER THE ASSESSEE , WAS NECESSARY FOR CARRYING OUT ITS BUSINESS ACTIVITIES. ASSESSING OFFICER, AFTER CONDUCTING A SCRUTINY OF BOOKS OF ACCOUNTS AN D OTHER DETAILS PRODUCED BY THE ASSESSEE, COMPLETED THE ASSESSMENT ON 30.12.2008 UNDER SECTION 143(3) OF THE ACT. WHILE DOING SUCH ASSESSMENT, THE ASSESSING OFFICER DISALLOWED A SUM OF ` 31,94,192/- OUT OF TOTAL I.T.A. NO. 959/MDS/11 3 PROFESSIONAL CHARGES OF ` 1,02,50,000/- FOR NON-DEDUCTION OF TAX AT SOURCES, RELYING ON SECTION 40(A)(IVA) OF THE ACT. CLAIM FOR SHORT TERM CAPITAL LOSS CARRIED FORWARD FROM EARLIER YEAR WAS ALSO NOT ALLOWED SINCE, AS PER THE A.O., FOR ASSESSMENT YEAR 2005-06, SUCH SHORT TERM CAPITAL LOSS WAS DISALLOWED. HOWEVER, T HE ASSESSING OFFICER ACCEPTED THE SURPLUS ARISING OUT OF SALE OF SHARES OF THE M/S BPL COMMUNICATIONS LTD., AS LONG TERM CAPITAL GAIN. 3. THEREAFTER, LD. CIT ON 30.12.2009 ISSUED A NOTIC E TO THE ASSESSEE REQUIRING IT TO SHOW CAUSE WHY THE ASSESSM ENT ORDER SHOULD NOT BE CONSIDERED AS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF THE REVENUE, ON ACCOUNT OF TWO REASONS. FIRST R EASON CITED WAS THAT THE ASSESSING OFFICER HAD CONSIDERED THE SURPL US ARISING OUT OF SALE OF SHARES OF BPL COMMUNICATIONS LTD. UNDER THE HEAD CAPITAL GAINS, WHEREAS, AS PER LD. CIT, IT SHOULD HAVE BEE N CONSIDERED ONLY UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS/PRO FESSION. AS PER THE LD. CIT, THE SHARES WERE PURCHASED BY THE ASSES SEE ON 1.7.2004 IN PURSUANCE OF A SHARE PURCHASE AGREEMENT WITH ONE M/S SURYASAMUDRA FINANCE AND INVESTMENTS PVT. LTD. AND SUCH SHARES I.T.A. NO. 959/MDS/11 4 WERE PURCHASED FOR ` 7 CRORES ALONG WITH CERTAIN OTHER RECEIVABLES AND LIABILITIES AS MENTIONED IN SUCH SHARE PURCHASE AGREEMENT WITH THE SAID M/S SURYASAMUDRA FINANCE AND INVESTMENTS P VT. LTD. LD. CIT OBSERVED THAT ASSESSEE WAS PURCHASING AND TRADI NG IN UNQUOTED SHARES FROM ASSESSMENT YEAR 2004-05 ONWARDS AND SUC H TRADING WAS ONE OF THE ANCILLARY OBJECTS OF THE ASSESSEE-COMPAN Y. ALTERNATIVELY, ACCORDING TO LD. CIT, THE BUSINESS LOSS WHICH COMPR ISED OF PROFESSIONAL CHARGES, BANK CHARGES, ETC. OUGHT NOT HAVE BEEN ALLOWED SINCE IT DID NOT RELATE TO ANY BUSINESS ACT IVITIES. 4. TO THE SHOW-CAUSE NOTICE, REPLY GIVEN BY THE ASS ESSEE WAS THAT THE ASSESSING OFFICER HAD CONSIDERED THE SURPL US ARISING FROM THE SALE OF SHARES OF BPL COMMUNICATIONS LTD. UNDER THE HEAD CAPITAL GAINS RIGHTLY APPRECIATING THE FACTS RELATING TO I T. AS PER THE ASSESSEE, THE SHARES WERE HELD AS INVESTMENTS AND T HEREFORE, THE VIEW TAKEN BY THE ASSESSING OFFICER THAT IT SHOULD BE CONSIDERED AS LONG TERM CAPITAL GAINS WAS A POSSIBLE VIEW WHICH WAS LAWFUL ALSO. FURTHER, IT WAS SUBMITTED BY THE ASSESSEE TH AT THOUGH ITS MAIN OBJECT WAS TO PROVIDE INTERNET SERVICES AND DISTRIB UTE CABLE TV I.T.A. NO. 959/MDS/11 5 SIGNALS, IT WAS UNABLE TO CARRY OUT SUCH BUSINESS D UE TO ADVERSE MARKET ENVIRONMENT, BUT, NEVERTHELESS, THE COMPANY WAS NEVER INCORPORATED FOR CARRYING OUT ANY TRADING IN SHARES OR SECURITIES. AS PER THE ASSESSEE, DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05, THERE WERE NO ACTIVITIES OF TRADING I N SHARES BUT, IT HAD MADE INVESTMENTS IN THE FORM OF SHARES IN RELATED C OMPANIES AND THIS WAS DONE NOT WITH AN INTENTION OF CARRYING OUT TRAD ING ACTIVITIES NOR IT WAS HELD AS STOCK-IN-TRADE. FOR ASSESSMENT YEAR 20 05-06, AS PER THE ASSESSEE, IT HAD DISPOSED OFF THE SHARES WHICH WERE ACQUIRED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004- 05, AND INVESTMENT IN M/S BPL COMMUNICATIONS LTD. WHICH WER E SOLD IN THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT YEAR, WAS ALSO DONE DURING THAT YEAR. AS PER THE ASSESSEE, THERE WAS N O MULTIPLICITY OF TRANSACTIONS NOR WAS THERE ANY FREQUENCY IN THE SAL E OF SHARES. DISPOSAL OF THE SHARES IN BPL COMMUNICATIONS LTD. W AS TAKEN PURSUANT TO A DECISION OF ALL ITS SHAREHOLDERS TO E XIT BY MAKING TRANSFER TO ESSAR GROUP. AS PER THE ASSESSEE, FREQ UENCY, CONTINUITY AND REGULARITY IN CARRYING OUT THE SALE OF SHARES A S A TRADING ACTIVITY WAS NOT THERE NOR IT EVER INTENDED TO DO SUCH A TRA DING ACTIVITY. I.T.A. NO. 959/MDS/11 6 PLACING RELIANCE ON CIRCULAR NO.4/2007 DATED 15.6.2 007 OF CBDT ASSESSEE SUBMITTED BEFORE THE LD. CIT THAT IT HAD C LASSIFIED THE SHARES UNDER THE HEAD INVESTMENTS, AND THEREFORE, AS A N ATURAL COROLLARY, SURPLUS ARISING ON SALE THEREFORE, COULD BE TAXED O NLY UNDER THE HEAD CAPITAL GAINS. VIS--VIS THE PROPOSAL FOR DISALL OWING THE PROFESSIONAL CHARGES AND BANK CHARGES, SUBMISSION OF THE ASSESSE E WAS THAT A.O. HAD ALREADY DISALLOWED A PART THEREOF FOR NON- DEDUCTION OF TAX AT SOURCE. FURTHER, AS PER THE ASSESSEE, PROFESSIONAL CHARGES OF ` 1,02,50,000/- WERE INCURRED IN CONNECTION WITH TRAN SFER OF THE SHARES OF BPL COMMUNICATIONS LTD. AND IF IT WAS NOT CONSID ERED AS BUSINESS LOSS, IT HAD TO BE CONSIDERED WHILE COMPUTING LONG TERM CAPITAL GAIN AS A NECESSARY OUTGO INCURRED IN CONNECTION WITH SU CH TRANSFER. IN A NUTSHELL, SUBMISSION OF THE ASSESSEE WAS THAT THERE WAS NOTHING IN THE ASSESSMENT ORDER WHICH COULD BE TERMED AS AN ER ROR WHICH CAUSED PREJUDICE TO THE INTERESTS OF THE REVENUE. 5. HOWEVER, LD. CIT WAS NOT IMPRESSED. ACCORDING T O HIM, ASSESSEE HAD, VIDE AGREEMENT DATED 1.7.2004 WITH M/ S SURYASAMUDRA FINANCE AND INVESTMENTS PVT. LTD., PUR CHASED I.T.A. NO. 959/MDS/11 7 49769241 SHARES OF BPL COMMUNICATIONS LTD. AND ALSO TOOK OVER RECEIVABLES AND LIABILITIES OF THE SAID M/S SURYASA MUDRA FINANCE AND INVESTMENTS PVT. LTD., AS MENTIONED IN ARTICLE-2 OF THE SAID AGREEMENT, FOR A TOTAL CONSIDERATION OF ` 7 CRORES AND 7.86 CRORES RESPECTIVELY. THOUGH A COPY OF THE AGREEMENT WAS F ILED DURING THE ASSESSMENT PROCEEDINGS, IT SEEMS THE ANNEXURE TO TH E AGREEMENT WAS NOT FILED BY THE ASSESSEE. AS PER LD. CIT, THE AGREEMENT BEING A CONSOLIDATED ONE, AND ASSESSEE HAVING TAKEN OVER EN TIRE LIABILITIES OF SURYASAMUDRA FINANCE AND INVESTMENTS PVT. LTD., PUR CHASE OF SHARES OF BPL COMMUNICATIONS LTD. WAS PART OF A CON SOLIDATED TRANSACTION AND THIS COULD ONLY BE CONSIDERED AS A BUSINESS VENTURE. AGAIN AS PER THE CIT, THERE WAS NO INTENTION FOR TH E ASSESSEE TO HOLD THE SHARES AS INVESTMENTS, AND ASSESSEE HAD NEVER D ERIVED ANY DIVIDEND INCOME FROM THESE SHARES. THEREFORE, ACCO RDING TO HIM, CIRCULAR NO.4/2007 DATED 15.6.2007 COULD NOT BE REL IED UPON. HE, THEREFORE, REACHED AN OPINION THAT ASSESSING OFFICE R HAD COME TO A WRONG CONCLUSION REGARDING SURPLUS ARISING FROM SAL E OF SHARES OF BPL COMMUNICATIONS LTD., BEING CONSIDERED AS LONG T ERM CAPITAL GAIN, WHILE IT OUGHT HAVE BEEN CONSIDERED AS BUSINE SS INCOME ONLY. I.T.A. NO. 959/MDS/11 8 VIS--VIS CLAIM OF THE ASSESSEE REGARDING PROFESSIO NAL CHARGES PAID TO M/S J.P. MORGAN & STANLEY PVT. LTD., OPINION OF LD. CIT WAS THAT NO ENQUIRY WAS MADE BY THE A.O. WITH REGARD TO THE BIL LS RAISED BY J.P. MORGAN & STANLEY PVT. LTD., TO EXAMINE THE NATURE O F SERVICE RENDERED BY THE PARTY AND THE A.O. ERRED IN COMING TO A CONCLUSION THAT THESE WERE PROFESSIONAL CHARGES. HE, THEREFOR E, CONSIDERED THE ASSESSMENT ORDER PASSED AS ERRONEOUS AND PREJUDICIA L TO THE INTERESTS OF THE REVENUE AND SET ASIDE THE ORDER WI TH A DIRECTION TO A.O. TO COMPLETE THE ASSESSMENT AFRESH TREATING THE PROFIT ON SALE OF SHARES OF BPL COMMUNICATIONS LTD. AS BUSINESS INCOM E AFTER ALLOWING SUCH EXPENDITURE WHICH WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 6. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF LD. CIT, SUBMITTED THAT ASSESSEE HAD NEVER BEEN IN THE BUSINESS OF TRADING IN SHARES. THE SHARES ACQUIRED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005-06, OF BPL COMMUNI CATIONS LTD. WAS SHOWN UNDER THE HEAD INVESTMENTS. AT NO POIN T OF TIME, THE SHARES WERE HELD AS STOCK-IN-TRADE. THERE WAS NO R EPETITIVE PURCHASE AND SALE OF SHARES. VIS--VIS THE DISALLO WANCE OF I.T.A. NO. 959/MDS/11 9 PROFESSIONAL CHARGES, LEARNED A.R. SUBMITTED THAT A .O. HAD ALREADY DISALLOWED A PART OF THIS UNDER SECTION 40(A)(IVA) OF THE ACT AND HENCE, IT COULD NOT BE SAID THAT THERE WAS NO APPLI CATION OF MIND IN THIS REGARD. AS PER THE LEARNED A.R., SUCH EXPENDI TURE HAD TO BE ALLOWED AS A DEDUCTION IRRESPECTIVE OF THE HEAD OF INCOME UNDER WHICH SURPLUS ARISING OUT OF SALE OF SHARES OF BPL COMMUNICATIONS LTD. WAS CONSIDERED. SIMILAR WAS THE CONTENTION WI TH REGARD TO BANK CHARGES ALSO. IN ANY CASE, AS PER LEARNED A.R., LD . CIT BEFORE INVOKING POWERS UNDER SECTION 263 OF THE ACT, HAD N EVER PUT NOTICE ACROSS TO THE ASSESSEE, ISSUE REGARDING TAKE OVER O F RECEIVABLES AND LIABILITIES OF M/S SURYASAMUDRA FINANCE AND INVESTM ENTS PVT. LTD., NOR THE ISSUE REGARDING NON-EXAMINATION OF PROOF OF SERVICE RENDERED BY M/S J.P. MORGAN AND STANLEY PVT. LTD. ACCORDING TO HIM, THE A.O. HAD COME TO A CORRECT CONCLUSION AND TAKEN A LAWFUL VIEW AFTER PROPERLY CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND ASSESSEE HAVING MAINTAINED SEPARATE PORTFOLIO FOR INVESTMENT S, LD. CIT WAS NOT CORRECT IN INVOKING SECTION 263 OF THE ACT. 7. PER CONTRA, LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF LD. CIT. I.T.A. NO. 959/MDS/11 10 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. VIS--VIS BOTH THE ISSUES RAISED, IT IS VERY IMPORT ANT TO REPRODUCE THE RELEVANT PARA IN THE ORDER DATED 30.12.2008 PASSED UNDER SECTION 143(3) OF THE ACT BY THE A.O. FOR THE IMPUGNED ASSE SSMENT YEAR, WHICH RUN AS UNDER :- IN RESPONSE TO THE ABOVE, THE AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE SHRI M.S. RAM, CHARTERED ACCOUNTANT OF M/S VELU PILLAI & CO., BANGALORE APPEARED AND THE CASE WAS DISCUSSED WITH HIM. BOOKS OF ACCOUNTS, BILLS, AND OTHER RELE VANT DETAILS WERE CALLED FOR AND EXAMINED. DURING THE YEAR, THE ASSESSEE HAS SOLD SHARES AND ADMITTED LONG TERM CAPITAL GAIN OF ` 35,06,67,990/-. ON GOING THROUGH THE PROFIT AND LO SS ACCOUNT, IT WAS FOUND THAT THE ASSESSEE HAS CLAIMED PROFESS IONAL CHARGES PAID AT ` 1,02,50,000/-. THE DETAILS FOR THIS PROFESSIONAL CHARGES PAID AND TDS DEDUCTED WERE CALLED FOR AND V ERIFIED. THE ASSESSEE HAS STATED BY HIS LETTER DATED 08.09.20 08, THAT IT HAS PAID PROFESSIONAL CHARGES TO J.M. MORGAN STANLE Y PRIVATE LIMITED FOR THE TRANSFER OF SHARES AND FILED THE DE TAILS AS UNDER: DATE OF DEDUCTION AMOUNT DEDUCTED AMOUNT PAID DATE OF PAYMENT DUE DATE 01.08.2005 13069 13069 01.09.2005 01.09.2005 254537 254537 07.11.2005 07.11.2005 104106 104106 07.11.2005 07.11.2005 23163 23163 07.12.2005 07.12.2005 127269 127269 06.02.2006 06.02.2006 HOWEVER, IT IS FOUND THAT THE ASSESSEE HAS NOT FILE D TDS CHALLAN FOR PAYMENT OF ` 1,27,269/-, THOUGH THEY HAVE FILED I.T.A. NO. 959/MDS/11 11 EVIDENCE FOR PAYMENT OF TDS ON THE EARLIER DATES. B Y THIS OFFICE LETTER DATED 17.11.2008 THE ASSESSEE HAS BEEN AGAIN ASKED TO FILE THE CHALLAN FOR PAYMENT OF TDS ON 07.02.2006. INSPI TE OF THIS, THEY WERE NOT FILED THE REQUIRED CHALLAN EVIDENCING THE PAYMENT. IN VIEW OF THIS, THE PROFESSIONAL CHARGES STATED AS TDS PAID TO THE EXTENT OF ` 31,94,192/- ( ` 1,02,50,000 ` 70,55,808) WAS DISALLOWED AS NOT SUPPORTED BY PROPER EVIDENCE U/S 4 0(A)(IVA). ONLY MENTION REGARDING LONG TERM CAPITAL GAIN APPEA R IN THE SECOND SENTENCE OF THE ABOVE PARA. THE SAID SENTEN CE SIMPLY STATES THAT ASSESSEE HAD SOLD SHARES AND ADMITTED LONG TER M CAPITAL GAIN. NO DOUBT, ASSESSEE MIGHT HAVE SHOWN THE SHARES HELD IN BPL COMMUNICATIONS LTD. UNDER THE HEAD INVESTMENTS. HOWEVER, NOMENCLATURE GIVEN IN THE BALANCE SHEET ALONE WILL NOT BE SUFFICIENT TO COME TO A CONCLUSION THAT THE SHARES WERE HELD AS I NVESTMENTS. ADMITTEDLY, ASSESSEE HAD MADE INVESTMENTS IN SHARES IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05, WHICH WER E SOLD BY IT IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005- 06. THIS IS CLEAR FROM ITS LETTER DATED 10.2.2010 ADDRESSED TO LD. CI T IN REPLY TO HIS NOTICE UNDER SECTION 263 OF THE ACT (PAPER-BOOK PAG ES 24 SECOND PARA). IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005-06, NOT ONLY HAD IT SOLD SHARES ACQUIRED DURING ASSESSMENT YEAR 2004-05, BUT I.T.A. NO. 959/MDS/11 12 HAD ALSO MADE FURTHER ACQUISITION OF 49,97,69,241 S HARES OF BPL COMMUNICATIONS LTD. FOR A SUM OF ` 7 CRORES. THESE SHARES WERE SOLD DURING PREVIOUS YEAR RELEVANT TO IMPUGNED ASSE SSMENT YEAR VIZ. ASSESSMENT YEAR 2006-07. HENCE, THE CLAIM OF ASSES SEE THAT IT DID NOT INDULGE IN TRADING IN SHARES DOES NOT HOLD ANY WATER. FURTHER, THE SHARES OF BPL COMMUNICATIONS LTD. WERE ACQUIRED BAS ED ON AN AGREEMENT WITH ONE M/S SURYASAMUDRA FINANCE AND INV ESTMENTS PVT. LTD. AND THE SAID AGREEMENT DATED 1.7.2004 THO UGH PRODUCED BEFORE ASSESSING OFFICER, WAS NEVER EXAMINED BY HIM . SAID AGREEMENT WAS FILED WITHOUT THE ANNEXURES RELEVANT THERETO AND THIS FINDING OF LD. CIT HAS NOT BEEN REBUTTED BY THE ASS ESSEE. CONCLUSION OF LD. CIT THAT THROUGH THE SAID AGREEMENT, NOT ONL Y HAD THE ASSESSEE ACQUIRED SHARES OF BPL COMMUNICATIONS LTD. BUT HAD ALSO TAKEN OVER RECEIVABLES AND LIABILITIES OF M/S SURYASAMUDRA FIN ANCE AND INVESTMENTS PVT. LTD. HAS NOT BEEN DISPUTED BY THE ASSESSEE. THERE HAS BEEN A TOTAL NON-EXAMINATION OF THE RELEVANT FA CTS BY THE ASSESSING OFFICER. ASSESSING OFFICER DURING THE AS SESSMENT PROCEEDINGS, NEVER ASKED FOR ANY DETAILS VIS--VIS THE TRANSACTION WITH M/S SURYASAMUDRA FINANCE AND INVESTMENTS PVT. LTD. NOR HAD THE I.T.A. NO. 959/MDS/11 13 ASSESSEE FURNISHED ANY SUCH DETAILS. SO, THERE HA S BEEN NO EXAMINATION OF THE ISSUE AS TO WHETHER THE ASSESSEE WAS INDULGING IN ANY BUSINESS ACTIVITY BY TRADING IN SHARES OR WHETH ER IT WAS ENGAGED IN A BUSINESS OF BUYING AND SELLING INVESTMENT. AS SESSING OFFICER BELIEVED THE NOMENCLATURE GIVEN IN THE BALANCE-SHEE T AND SIMPLY ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE SURPLUS WAS LONG TERM CAPITAL GAIN. AS HELD BY HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (243 ITR 83), PREJUDICI AL TO THE INTERESTS OF THE REVENUE IS OF WIDE IMPORT AND NOT CONFINED TO LOSS OF TAX. AN ORDER WITHOUT APPLICATION OF MIND IS DEFINITELY PRE JUDICIAL TO THE INTERESTS OF THE REVENUE. SIMILARLY, VIS--VIS EXP ENDITURE FOR PROFESSIONAL CHARGES PAID TO M/S J.P. MORGAN STANLE Y PVT. LTD., THOUGH ASSESSING OFFICER HAD MADE A PARTIAL DISALLO WANCE FOR NON- DEDUCTION OF TAX AT SOURCE, HAS NOT MENTIONED ANYTH ING REGARDING ANY EXAMINATION OF THE EVIDENCE IN THIS REGARD. A.O. H AD SIMPLY ACCEPTED THE LETTER DATED 8.9.2008 WHEREIN THE ASSESSEE MENT IONED THAT PROFESSIONAL CHARGES WERE PAID TO M/S J.P. MORGAN S TANLEY PVT. LTD. FOR TRANSFER OF SHARES. HERE ALSO THERE HAS BEEN N ON APPLICATION OF I.T.A. NO. 959/MDS/11 14 MIND BY THE A.O. WHICH DEFINITELY CAUSED PREJUDICE TO THE INTERESTS OF THE REVENUE. A.O. HAD SIMPLY ACCEPTED THE STATEMEN T OF THE ASSESSEE THAT SURPLUS ARISING ON THE SALE OF BPL CO MMUNICATIONS LTD. WAS CAPITAL GAINS WITHOUT EXAMINING THE UNDE RLYING AGREEMENT. A.O. HAD ALSO ACCEPTED THE CLAIM OF THE ASSESSEE TH AT PROFESSIONAL CHARGES PAID TO M/S J.P. MORGAN STANLEY PVT. LTD. A S ALLOWABLE WITHOUT EXAMINING THE RELEVANT EVIDENCE. IN SUCH C IRCUMSTANCES, WE CANNOT FIND ANY FAULT WITH THE OPINION OF THE LD. C IT THAT THE ORDER OF THE A.O. WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. WE CANNOT SAY THAT THE ASSESSING O FFICER HAD EXAMINED THE RELEVANT ISSUES, AND CHOSEN A COURSE W HICH WAS LAWFULLY POSSIBLE. WHEN THERE WAS TOTAL NON-APPLIC ATION OF MIND, THERE WAS NO QUESTION OF CHOOSING ANY OPTION MUCH L ESS A LAWFUL OPTION. WE ARE OF THE OPINION THAT LD. CIT WAS JUS TIFIED IN INVOKING POWERS VESTED IN HIM UNDER SECTION 263 OF THE ACT. NO INTERFERENCE IS CALLED FOR. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. I.T.A. NO. 959/MDS/11 15 THE ORDER WAS PRONOUNCED IN THE COURT ON 31 ST OCTOBER, 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 31 ST OCTOBER, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT-I, COIMBATORE (4) D.R. (5) GUARD FILE