D.b. Income Tax Appeal v. M/ S Deepak Real Estate Developers(I) Pvt. Ltd

{1} DB INCOME TAX APPEAL NO.581/2011 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR JUDGMENT D.B. INCOME TAX APPEAL NO.581/ 2011COMMISSIONER OF INCOME TAX, KOTAVs.M/ s DEEPAK REAL ESTATE DEVELOPERS(I) PVT. LTD. DATE:03.03.2014HON'BLE THE CHIEF JUSTICE MR. AMITAVA ROYHON'BLE MR. JUSTICE VEERENDR SINGH SIRADHANAMs. Parinitoo Jain, for the appellant.Mr. Sidarth Ranka, for the respondent. ****BY THE COURT (PER HON'BLE THE CHIEF JUSTICE): Heard Ms. Parinitoo Jain, the learned counsel for the appellant and Mr. Sidarth Ranka, the learned counsel for the respondent. The present is an appeal under Section 260A of the Income TaxAct, 1961 (for short, hereafter referred to as 'the Act'). The factual background in the bare minimum is that the respondent-assessee is engaged in the business of investment in real estateand market securities. For the assessment year 2006-07, in question, itdisclosed its income from gains of investment in shares besides from tradingin shares and from other sources. The Assessing Officer i.e. the Income TaxOfficer (OSD), Range-1, Kota, completed the assessment under Order 143(3)of the Act vide his order dated 25.09.2008. As the said order would reveal, inresponse to the notice issued under Section 143(2) of the Act, the {2} DB INCOME TAX APPEAL NO.581/2011 representative of the respondent-assessee duly appeared before the saidauthority and produced the requisite information/ details with supportingvouchers of expenditure, as disclosed in P&L account besides the books ofaccount, which were duly examined. The Assessing Officer, on a scrutiny ofthe return submitted by the respondent-assessee disclosing its main source ofincome from gain on investment of shares as well as from trading in sharesand from other sources, observed that it was duly supported by necessaryevidence. It was recorded as well that complete details of debtors andcreditors had been furnished by the respondent-assessee and that no adversematerial/ discrepancies had been noticed during the verification of the booksof account maintained by it as well as the details submitted in endorsementthereof. The return of the respondent-assessee was, thus, accepted. The Commissioner of Income Tax, Kota (for short, hereafterreferred to as 'the CIT'), however, in exercise of his power under Section 263of the Act, issued notice to the respondent-assessee being of the opinion thatthe assessment of the Assessing Officer was erroneous and was furtherprejudicial to the interest of the revenue. The respondent-assessee enteredappearance and submitted its detailed reply to the queries, set out in theshow cause notice. The learned CIT thereafter, by his order dated07.01.2010, interfered with the assessment of the Assessing Officer anddirected him(Assessing Officer) to verify the details/ documents, as mentionedtherein and to decide the issues and pass a speaking order as per law, afteraffording an opportunity of hearing. While arriving at this conclusion, thelearned CIT, however, held that the sale transactions pertaining to 3,39,496 {3} DB INCOME TAX APPEAL NO.581/2011 {3} DB INCOME TAX APPEAL NO.581/2011 Zyden Gentec equity shares and effected on 20.04.2005, 28.04.2005,06.05.2005, 12.05.2005 and 08.09.2005, could not be construed to bedisputed as those were supported by documentary evidence and that theAssessing Officer was justified in taking a view that those shares of OverseasCapital Limited, as appearing in sale bill, and those of Zyden Gentec Limited,were the same. It was, however, of the view that the Assessing Officer,having drawn that conclusion, ought to have, before accepting the saidtransaction as long term capital gain, examined whether the respondent-assessee was holding the same for a period of more than one year, so as toclaim exemption on that count. The CIT, however, acknowledged that thelearned representative of the respondent-assessee had brought to his noticethe fact that complete details of long term gain on sale of shares, had beenfiled along with computation of income and was available with the AssessingOfficer during the assessment proceedings and that the materials at hisdisposal did contain the date of purchase of the said shares. That the periodof holding of the shares involved was more than one year and that those beingheld as investment and STT being paid while selling the same justified theclaim for exemption under Section 10(38) of the Act, was mentioned. The CITaccepted as well the sale of 3,39,496 shares on the aforementioned datesthrough its broker Inventure Growth & Securities Limited under the aegis ofBombay Stock Exchange for a total consideration of Rs.3,71,81,627.01. Heheld as well that the Assessing Officer was correct to conclude thatshareholding of 2,18,000 shares out therefrom, was for a period of more thanone year, for which the respondent-assessee had been validly granted {4} DB INCOME TAX APPEAL NO.581/2011 exemption from tax under Section 10(38) of the Act. Vis-a-vis the balanceshares i.e. 1,21,496 (3,39,496 – 2,18,000), the CIT noticed the stand of therespondent-assessee that the same were in physical form. Referring to thesupporting documents produced on behalf of the respondent-assessee, thelearned CIT observed that the same had not been filed during course of theassessment proceedings and thus, were not verified and commented upon bythe Assessing Officer. It held the view that proper verification thereof wasnecessary by the Assessing Officer to ensure that 1,43,000 shares of OverseasCapital Limited, which were received and delivered in physical form to theDirector of the respondent-assessee, were transferred to its Demat account,so as to ensure that these were held by it(respondent-assessee) in physicalform for a period of more than one year to entitle it to the benefit ofexemption under Section 10(38) of the Act. With regard to amount of loan ofRs.43,28,000/ -, taken by the respondent-assessee from one Smt. Usha Gupta,the learned CIT held that the documents and records produced before him inconnection therewith, had not been laid before the Assessing Officer earlier.He, thus, concluded that in view of lack of enquiry and non application ofmind on the part of the Assessing Officer, the assessment was erroneous andprejudicial to the interest of the revenue. Noticeably, the learned CIT did notrecord any categorical finding on any aspect of the assessment made videorder dated 25.09.2008 that the related conclusion of the Assessing Officerwas either factually incorrect or unsustainable in law, having regard to thecomplete materials on record. Be that as it may, being aggrieved by the above determination, {5} DB INCOME TAX APPEAL NO.581/2011 Be that as it may, being aggrieved by the above determination, {5} DB INCOME TAX APPEAL NO.581/2011 the respondent-assessee preferred an appeal under Section 260A of the Actbefore the Income Tax Appellate Tribunal, Jaipur Bench 'A', Jaipur (for short,hereafter referred to as 'the Tribunal'), which by its rendering dated25.03.2011, interfered with the above referred decision of the learned CIT. Asthe text of this order, impugned in the present appeal, would reveal thelearned Tribunal did notice the relevant facts in extenso and observed thatthe only dispute was with regard to 1,43,000 shares received in physical formand eventually shown in the Demat account of the respondent-assessee.Referring to the documents/ records produced before the learned CIT, thelearned Tribunal recorded that he(CIT) had not formed any opinion that theseshares had not been held by the respondent-assessee for more than one year.The learned Tribunal expressed the view that in the face of the materialsbefore him, the learned CIT could not have formed any opinion that theassessment order was erroneous. It recalled the findings of the AssessingOfficer, as adverted to hereinabove and concluded that the learned CIT, nothaving come to the conclusion that the assessment order was erroneous andno reasons having been recorded to demonstrate that the same wasprejudicial to the interest of the revenue, he was not justified to refer thematter back to the Assessing Officer and that too, without examining thematerials produced before him on merits. Learned counsel for the appellant has urged that having regard tothe scope of Section 263 of the Act, the learned CIT was within hisj urisdiction to remit the matter to the Assessing Officer bearing in mind theinterest of the revenue and thus, the learned Tribunal erred in law in {6} DB INCOME TAX APPEAL NO.581/2011 interfering with his decision. Mr. Sidarth Ranka, the learned counsel for the respondent-assessee, per contra, has urged that in absence of any finding whatsoever ofthe learned CIT that any of the conclusions recorded by the Assessing Officerin his order dated 25.09.2008 was unfounded being dehors the record or incontravention of the mandate of any provision of the Act, he had apparentlyacted beyond his jurisdiction in purported exercise of Section 263 of the Actand in the face of the detailed consideration of all relevant aspects by thelearned Tribunal, no interference in the instant appeal is called for. Upon hearing the learned counsel for the parties and on aconsideration of the materials on record, we are inclined to sustain the pleataken on behalf of the respondent-assessee. The salient facts bearing on thedebate have been outlined hereinabove. To reiterate, a bare perusal of theorder dated 25.09.2008 of the Income Tax Officer (OSD), Range-1, Kota,would testify that the Assessing Officer had consciously examined all relevantrecords in accepting the return submitted by the respondent-assessee.Noticeably, the learned CIT, in spite of his incisive analysis of the factualdetails, did not find fault with any of the findings of the Assessing Officer,culminating in ultimate conclusion that the return of the respondent-assesseewas acceptable as a whole. The text of the decision of the learned CITauthenticates that the respondent-assessee had furnished to him all relevantrecords and documents in support of its return accepted by the AssessingOfficer. The learned CIT did neither reject the said documents/ records to beirrelevant, nor lacking in their probative worth. It simply remanded the {7} DB INCOME TAX APPEAL NO.581/2011 matter to the Assessing Officer observing that these ought to have been laidbefore him and examined at the time of assessment. It is no longer res integra that the revisional jurisdiction available {7} DB INCOME TAX APPEAL NO.581/2011 matter to the Assessing Officer observing that these ought to have been laidbefore him and examined at the time of assessment. It is no longer res integra that the revisional jurisdiction available to a Commissioner under Section 263 of the Act, is essentially circumscribedby the determinant that the order of the Assessing Officer is erroneous somuch so that it is prejudicial to the interest of the revenue. This statutoryenjoinment carves out an extremely constricted ambit of such discretionaryj urisdiction. The word “ considers” applied in the statutory provision involved,signifies a genuine satisfaction of that authority that the order of theAssessing Officer is erroneous and that the interest of the revenue isprejudicing thereby. Any exercise of the revisional jurisdiction, bereft of suchsatisfaction and/ or finding that the order of the Assessing Officer is erroneousand that it is prejudicial to the interest of the revenue and that too, based ontangible materials on record, is impermissible rendering the resultant ordervoid. Judged on the above touchstone, we are of the unhesitantopinion, having regard to the materials on record, that no interference withthe impugned order of the learned Tribunal is warranted, in the facts andcircumstances of the case. No substantial question of law, as contemplated bySection 260A of the Act, exists to be examined. The appeal is dismissed. (VEERENDR SINGH SIRADHANA),J. (AMITAVA ROY),C.J. / KKC/Certificate: All corrections made in the judgment/ order have been incorporated in thejudgment/ order being emailed. KAMLESH KUMAR P.A.