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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri N.V.Vasusdevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is against the order of Commissioner of Income Tax, XX, Kolkata in appeal No.CIT-XX/Kol/Revenue.u/s263/2013- 14/5964 dated 31.03.2014. Assessment was framed by DCIT, Circle-55 Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 23.12.2011 for assessment year 2009-10. Ground raised by assessee is below:-
1. For that on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax erred both on facts and in law in directing the assessing officer to carry out enquiry and investigation on the line suggested in the order u/s. 263 and compute the total income accordingly without appreciating the facts and submissions from its proper perspective.
A.Y. 2009-10 Rukmini (Koel) Mallick v. CIT-XX, Kol. Page 2 2. For that on the facts and in the circumstances of the case, the order passed by the Ld. Commissioner of Income Tax us. 263 of the I.T. Act is bad-in-law, biased, unjust and not sustainable in the eye of law.”
The issue raised by the assessee in this appeal is that the ld. CIT erred in treating the order of the AO erroneous in so far as prejudicial to the interest of Revenue and directing the AO to carry out the enquiry and investigation as suggested in the order passed under section 263 of the Act.
2.1 The facts of the case are that the assessee in the present case is an individual and is a cine artist. The AO framed the assessment for the year under consideration under section 143(3) of the Act after making certain addition to the total income of the assessee. The CIT opined that the passed by AO as erroneous in so far as prejudicial to the interest of Revenue because certain issues were not examined by the AO at the time of assessment as detailed below and sought clarification by issuing notice.
1) The assessee had claimed business loss in its profit and loss account for a sum of Rs. 1,16,680.00 on account of future option share. In the present case the profession of the assessee is a ‘Cine-Artist’ as disclosed in 3CD form of tax audit report. So the above losses cannot be treated as business losses therefore set off with the professional income is not possible. In response to the notice under section 263 of the Act it was submitted that the assessee has made investment and traded in various type of stocks. In support of his claim the assessee has submitted its ledger copy in the books of Share Khan Group besides other documents which is placed on record. However the assessee failed to produce the De-mat account copy in spite of several reminders.
2) The assessee earned interest income during the year on fixed deposits for an amount of Rs. 1,42,788.00 as depicted from the form 26AS. But A.Y. 2009-10 Rukmini (Koel) Mallick v. CIT-XX, Kol. Page 3 the assessee claimed that out of the above interest a sum of interest for Rs. 64,100.00 was offered for tax in the earlier years. But this fact has not been examined by the AO at the time of assessment.
3) There was survey at the premises of the assessee under section 133A of the Act. However there was no addition made in the assessment of the assessee as a result of survey. There is no mentioned about the tax evasion detected during survey. Besides no survey folder was made available during the proceedings under section 263 of the Act.
However the Ld. CIT disregarded the submission of the assessee and held the order of AO is erroneous and prejudicial to the interest of Revenue and restored the file to the AO with the direction to carry out enquiry and investigation on the above listed issues and compute total income accordingly.
Aggrieved, assessee is in appeal before us against the order passed by Ld. CIT u/s 263 of the Act.
Shri Subash Agarwala, Ld. Authorized Representative appearing on behalf of assessee and Sshri Sandeep Chaube, Ld. Departmental Representative appearing on behalf of Revenue.
We have heard the rival submissions of both the parties and perused the materials available on record. The ld. AR of the assessee submitted a paper book which is running from page no. 1 to 22. The ld. AR submitted before us that the assessee has also shown the activity from future and option in the immediate preceding assessment year 2008-09 and the same has been accepted as business activity. The ld. AR also submitted that the issue of loss from future and option has duly been investigated by the AO. In support of this our attention was drawn to page 13 of the paper book where the requisition under section 142(1) for seeking the details of the future and option A.Y. 2009-10 Rukmini (Koel) Mallick v. CIT-XX, Kol. Page 4 transaction was placed. Similarly regarding the issue of interest on fixed deposit was investigated in detail. The necessary details of the requisition under section 142(1) were placed at page 12 of the paper book. Regarding the issue of the survey folder the ld. AR submitted that all the documents were with the department and the revenue authority must have considered the necessary details from the survey folders. From the aforesaid discussion we find that the ld. CIT treated the order of the AO as erroneous and prejudicial to the interest of Revenue as the AO failed to consider certain issues at the time of assessment. However from the submission of the assessee we find that all the issues raised in the order under section 263 of the Act were duly considered by the AO. Now to arrive at the correct conclusion of the case, we deem it necessary to reproduce the relevant provisions of section 263 of the Act. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, my, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment….”
The sum and substance of the above reproduced section 263(1) can be summarized in the following points:-: 1) The commissioner may call for an examine the record of any proceeding under the Act; 2) If he considers that the order passed by the AO is (i) Erroneous; and (ii) Is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and 4) He has to make or cause to make such enquiry as he deems necessary; A.Y. 2009-10 Rukmini (Koel) Mallick v. CIT-XX, Kol. Page 5 5) He may pass such order thereon as the circumstances of the case justify including, (i) An order enhancing or, (ii) Modifying the assessment or (iii) Cancelling the assessment and directing a fresh assessment. Now in the light of above words, we have to examine as to whether the order of the ld. CIT is a valid order in the light of the above stated points/ provisions of section 263 of the Act. Regarding the issue of loss from future and option the AO has raised the query in the notice under section 142(1) of the Act. The relevant extract of the said notice is given below : “9. You are requested to furnish details of i) Loss on sale of share with all supporting papers and ii) Loss A/c future option share with all supporting documents stating a) Opening Balance stating name of shares/future option b) Purchase value with dates c) Sales value with dates d) Dividend received e) Closing balance in both the cases.”
The reply of the assessee is placed on page 16 of the paper book which is reproduced below : “Loss on Future Option As per Income Tax Act Profit & Loss from Future Option trading is treated as normal business income or loss. The character of transaction in respect of speculation trading and future trading is defined under sub- section-5 of section 43, It clearly states that an eligible transaction in respect of trading in derivatives refe5rred to in clause-act of section-2 of the Securities Contracts Regulation Act carried out in a recognized stock exchange shall not be deemed to be a speculative transaction. The explanation to the section also specifies the expression eligible transaction and recognized stock exchange.
Assessee sends herewith a statement showing loss on future option trading and the contract notes of Sharekhan Ltd. in respect of those future and option segment of NSE showing Timed Stamped Contract note issued by the broker and traded through national Stock Exchange. National Stock Exchange of India has been recognized for transaction I respect of eligible transaction vide Notification No. SO89(E) dated 25-1- 2006.
Time Stamped Contract Note with statement are produced herewith.
A.Y. 2009-10 Rukmini (Koel) Mallick v. CIT-XX, Kol. Page 6 As such the loss so claimed should not be treated as loss on a/c of speculative transaction. Yours faithfully, Enclo: As above. Sd/- N.Moulick) Advocate” Similarly regarding the issue of interest on FD the following query was raised in the notice under section 142(1) of the Act. “4. You are requested to furnish the date-wise details of Investment in Fixed Deposit and Other Deposits of for the period 01-04-08 to 31-03-09 in the following format:
Sl.No. Open Durat Rate Accrued Accru Additi Durat Rate Accru Less Net Partic ing ion of of int. As ed Int. on ion of of ed Matur Total ulars Bala Depo Int. on As on Durin Depo Int.1 Int. ed as on nce sits 31.03.0 31.03. g the sits As on 31.03. 8 09 AY 31.03 09 09-10 .09
” The reply of the assessee is placed on page 18 of the paper book which is reproduced below : “Accrued Interest on Fixed Deposit A fixed deposit was made for Rs.7,00,000/- (1,00,000 x 7) with Indian bank on 5-3-07. Against such fixed deposit a sum of Rs.4,100/- was shown and taxed as accrued interest for asstt. Year 2007-08 and RSs.54,750/- out of total accrued interest of Rs.60,000/- was taxed as accrued interest for asstt. Year 2008-09. As such on maturity of the said F/D. in the relevant year the gross interest is to be reduced by the interest already taxed in asstt. Year 2007-08 & 2008-09. From the calculation sheet, your honour will find that inadvertently Rs.5,250/- has been reduce in excess of eligible deduction. The position stands as under:-
Received on maturity on 17-7-2008 Rs.7,64,603/- Less: Principle amount Rs.7,00,000/- Gross interest received Rs. 64,603/- Less: Interest already taxed on accrual basis Asst. year 2007-08 4,100/- “ 2008-09 54,750/- Rs. 58,850/- To be taxed in the relevant Asstt. Year Rs. 5,753/-
Copy of the Balance Sheet and computation of income for assessment year 2007-08 & 2008-09 are enclosed.”
A.Y. 2009-10 Rukmini (Koel) Mallick v. CIT-XX, Kol. Page 7 Regarding the issue of survey folder it was the duty the AO to consider the information gathered during the time of survey. Now the question arises whether the information at therein was relevant or not. It was also observed that the order of the ld. CIT is also silent whether the order is erroneous and prejudicial to the interest of Revenue of the revenue. The ld. CIT failed to bring anything concrete on record that the order of the AO is erroneous and prejudicial to the interest of Revenue. We find that the ld. CIT treated the order erroneous on premise regarding the issue of survey.
We are also relying in the decision of Hon’ble Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. 332 ITR 167 (Del) and CIT v. Anil Kumar Sharma 335 ITR 83 (Del) held that the fact as to whether the AO has applied his mind or not need not necessarily be determined from what has been stated in the assessment order alone, it has to be examined as to whether any inquiry was at all conducted by the AO. There exists a difference between lack of inquiry and inadequate inquiry. If there were any inquiry, even inadequate that would not give an occasion to exercise jurisdiction u/s 263 of the Act. In view of above facts and circumstances and the decision of Hon’ble Delhi High Court above cited case law and from the facts and in the light of various judicial pronouncements the order of the ld. CIT cannot be held to be sustainable in law and the same is accordingly set aside.
In the result, assessee’s appeal is allowed. Order pronounced in the open court 05/02/2016