DCIT, Hyderabad v. Sri C.Srinivasa Raju, Hyderabad

ITA 1638/HYD/2008 | 2002-2003
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 163822514 RSA 2008
Assessee PAN ACPPC2768Q
Bench Hyderabad
Appeal Number ITA 1638/HYD/2008
Duration Of Justice 1 year(s) 6 month(s) 24 day(s)
Appellant DCIT, Hyderabad
Respondent Sri C.Srinivasa Raju, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-05-2010
Date Of Final Hearing 22-04-2010
Next Hearing Date 22-04-2010
Assessment Year 2002-2003
Appeal Filed On 06-11-2008
Judgment Text
ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI N.R.S. GANESAN JUDICIALMEMBER AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NO.1638/HYD/08 : ASSESSMENT YEA R: 2002- 03 DCIT CENTRAL CIR-I HYDERABAD. VS SRI C. SRINIVASA RAJU HYDERABAD. (PAN - ACPPC 2768Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VASUNDHRA SINHA RESPONDENT BY : SHRI V. RAGHAVENDRA RAO O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE CIT (A)-I HYDERABAD DATED 14-8-2008 PERTAINING TO THE ASSESSMENT YEAR 2002-03. 2. FOLLOWING ARE THE GROUNDS OF APPEAL TAKEN BY THE REVENUE IN THE PRESENT APPEAL- '1. THE ORDER OF THE CIT (A) IS ERRONEOUS IN LAW AN D ON FACTS OF THE CASE. 2. THE CIT (A) OUGHT TO HAVE CONFIRMED THE ASSESSME NT AS THE ASSESSMENT WAS RIGHTLY REOPENED UNDER SECTION 147 O F THE I T ACT AS THERE WERE MANY NEW FACTS INFERRING UNDISCLOSED INC OME. 3. THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THIS CASE WAS RIGHTLY REOPENED WITHIN THE MEANING OF EXPLANATION- 2(C)(IV) OF SECTION 147 OF THE I T ACT. ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 2 4. THE CIT(A) OUGHT TO HAVE REJECTED THE ASSESSEE' S CONTENTION OF SALE OF SHARES AT A LOWER PRICE FOR RAISING FUNDS WAS NO T CORRECT AS THE ASSESSEE WAS NOT HAVING ANY FINANCIAL HARDSHIP. 5. THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THA T A NEW INFORMATION WAS BROUGHT ON RECORD IN THE FORM OF THE FACT THAT M/S DATA QUEST MANAGEMENT CONSULTANTS LTD. HAS NOT ALLOTTED SHARE S TO OTHERS OTHER THAN PROMOTERS AT A LOWER PRICE THAN THE PRICE AT W HICH THE ASSESSEE SOLD THE SHARES AND CONFIRMED THE ASSESSMENT MADE.' 3. THE REVENUE HAS FILED ADDITIONAL GROUND WHICH READ S AS UNDER:- ' THE CIT(A) HAS ERRED IN UPHOLDING THE ASSESSEE'S CL AIM OF SHORT TERM CAPITAL LOSS OF RS.1.89 CRORES. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN IND IVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-0 3 ON 31-7- 2002 DECLARING INCOME OF RS.15 31 28 740 AND THE RETUR N WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTIO N 143(3) OF THE ACT ACCEPTING THE INCOME AS RETURNED. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER APPEARS TO HAVE CALLED FOR INTER ALIA DETAILS OF THE LOSSES INCURRED FROM SALE OF CAPITAL ASSETS INCURRED BY THE ASSESSEE ON ACCOUNT OF SALE OF THE SHARES OF DATAQUEST MANAGEMENT CONSULTANTS LIMITED (DMC) TO M/S. TAURUS F OUNDATION PVT. LIMITED. AFTER CONSIDERING THE EXPLANATION FURN ISHED THE INCOME RETURNED WAS ACCEPTED. SUBSEQUENTLY A NOTICE UNDER SECTI ON 148 WAS ISSUED TO THE ASSESSEE ON 15-11-2006 BY REOPENING THE AB OVE ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT. IN T HE COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSEE WAS ONCE AGAIN ASKED TO EXPLAIN THE REASONS FOR SELLING SHARES HELD IN THE CASE O F M/S. ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 3 DATAQUEST MANAGEMENT COMMUNICATIONS LIMITED FOR A LOW RATE BY PRESUMING THAT THE SALE TRANSACTION WAS AN ARTIFICIAL TR ANSACTION. THE ASSESSING OFFICER ALSO AVERRED THAT THE LOSS WAS INCURRED IN ORDER TO SET IT OFF AGAINST THE LONG TERM CAPITAL GAINS AND THE ASSESSE E EXPLAINED THE CIRCUMSTANCES UNDER WHICH HE SOLD THE SHARES IN LOSS AN D SWORN STATEMENT WAS RECORDED FROM THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ANOTHER SWORN STATEMENT WAS RECO RDED FROM ONE ASSISTANT MANAGER OF FINANCE AND ACCOUNTS IN THE COMPANY OF M/S DATAQUEST MANAGEMENT COMMUNICATIONS LIMITED AND THE ASSESSING OFFICER HAS REJECTED THE REASONS STATED BY THE ASSESSE E FOR SELLING THE SHARES AT A LOW RATE AND INCURRING LOSS. THE ASSESSING OFFICER AFTER CONSIDERING THE FACTS OF THE CASE HELD THAT THE LOSS STATED TO HAVE BEEN INCURRED OF RS.1 89 00 000 ARTIFICIALLY CR EATED BY SELLING THE UNQUOTED SHARES OF M/S. DATAQUEST MANAGEMENT COMMU NICATIONS LIMITED IS DENIED SET OFF AGAINST THE CAPITAL GAINS AND THE SAME IS ADDED BACK TO THE INCOME OF THE ASSESSEE. AGGRIEVED AG AINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE PREFERRED AN AP PEAL BEFORE THE CIT (A). ON APPEAL THE CIT (A) AFTER CONSIDERING THE ISSUES ELABORATELY IN HIS ORDER DATED 14TH AUGUST 2008 HEL D IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE FINDINGS OF THE LEARNED CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE SUPP ORTING THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT PRESENT RE- ASSESSMENT PROCEEDINGS UNDER S.147 OF THE ACT IS DONE WITHIN FOUR YEARS. THE ASSESSEE WAS ALLOTTED THE SHARES OF DATA QUEST ON 14-07-200 1 AT A PREMIUM OF RS.145 PER SHARE AND THE ASSESSEE SOLD AWAY THE SHARES AT RS.37.28 PER SHARE ON 11-11-2001 I.E. WITHIN FIVE MONTHS OF PURCHASING. AS PER THE STATEMENT RECORDED FROM SHRI. S. R.BADRISH AM ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 4 FINANCE DATA QUEST THAT THE COMPANY HAS NEVER ALLOTT ED SHARES TO ANY OUTSIDE PARTY FOR A PRICE LESS THAN RS.155 PER SHARE TILL DECEMBER 2006. THEREFORE THE ASSESSEE'S CONTENTION THAT THE PRICE OF THE SAID SHARE HAD GONE DOWN IS NOT TENABLE. THE SHARES OF THE SAID COMPANY ARE NOT LISTED AND ARE NOT TRADED IN ANY OF THE STOCK EXCHANGES. THE MARKET PRICE FOR THE SHARES OF THE COMPANY ON THE DATE OF PURCHASE AND SALE ARE NOT AVAILABLE ON THIS TRANSACTION THE ASSESSE E CLAIMED SHORT TERM CAPITAL LOSS TO OFF SET THE LONG TERM CAPITAL GAIN. THE SAID TRANSACTION IS AN ARTIFICIAL TRANSACTION TO INCUR ARTIFICI AL LOSS THAT CAN BE SET OFF AGAINST HUGE CAPITAL GAINS EARNED FOR THE PURPO SE OF AVOIDING TAX. IT IS FURTHER SUBMITTED THAT FROM THE BALANCE SHEE T OF THE ASSESSEE WHERE THE ASSESSEE IS HOLDING HUGE CAPITAL THE ASSESSE E'S CLAIM THAT HE WAS IN FINANCIAL HARDSHIPS TO SELL THE SHA RES IS NOT CORRECT. SINCE THERE WAS A NEW MATERIAL CAME TO THE KNO WLEDGE OF THE ASSESSING OFFICER THAT IN THE CASE OF ELEM INVESTMENT THE DATA QUEST ALLOTTED THE SHARES AT RS.167 PER SHARE ON 30-11-2001 WITHIN 20 DAYS OF SALE OF SHARES BY THE ASSESSEE. HENCE THE ASSESSING OFFICER HAD INFORMATION TO FORM THE REASONS TO BELIEVE THAT THE SH ORT TERM CAPITAL LOSS WAS NOT INCURRED. HENCE SHE SUBMITS THAT REASSESSMENT PROCEEDINGS ARE VALID AND THE SAME IS TO BE CONFIRMED. 6. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSE SSEE WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE FILED HIS RETURN FOR THE ASSESSMENT YEAR 2002-03 ON 31-7-2002 DECLARING INCOME OF RS.15 31 28 740. THE RETURN WAS TAKEN UP FO R SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ACCEPTING THE INCOME AS RETURNED. IN THE COURSE OF THE A SSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED FOR INTER ALIA DETAILS OF THE LOSSES INCURRED FROM SALE OF CAPITAL ASSETS INCURRED BY THE ASSESSEE ON ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 5 ACCOUNT OF SALE OF THE SHARES OF DATAQUEST MANAGEMENT CON SULTANTS LIMITED (DMC) TO M/S TAURUS FOUNDATION PVT6. LIMITED. AFTER CONSIDERING THE EXPLANATION FURNISHED THE INCOME RETURN ED WAS ACCEPTED WHICH MEANS THAT THE LOSS INCURRED ON SALE OF SHOR T TERM CAPITAL ASSETS AND ITS SET OFF AGAINST THE LONG TERM CAPIT AL GAINS WAS ACCEPTED. SUBSEQUENTLY A NOTICE UNDER SECTION 148 WAS IS SUED TO THE ASSESSEE ON 15-11-2006 BY REOPENING THE ABOVE ASSESSMENT UN DER SECTION 147 OF THE I T ACT. NEITHER AT THE TIME OF INI TIATION OF REASSESSMENT PROCEEDINGS NOR IN THE COURSE OF REASSESSMENT PROCEEDINGS THE REASONS RECORDED UNDER SECTION 148(2) OF THE I T ACT FOR REOPENING ASSESSMENT WERE SUPPLIED TO THE ASSESSEE. I N THE COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSEE WAS ONCE AGAI N ASKED TO EXPLAIN THE REASONS FOR SELLING SHARES HELD IN T HE CASE OF M/S DATAQUEST MANAGEMENT COMMUNICATIONS LIMITED FOR A LOW RATE AFTER PRESUMING THAT THE SALE TRANSACTION WAS AN ARTIFICIAL TR ANSACTION. THE ASSESSING OFFICER ALSO PRESUMED THAT THE LOSS WAS INCURRED IN ORDER TO SET IT OFF AGAINST THE LONG TERM CAPITAL GAINS AND THE ASSESSEE EXPLAINED THE CIRCUMSTANCES UNDER WHICH THE ASSESSEE SOLD THE SHARES FOR A LOSS. A SWORN STATEMENT WAS RECORDED FROM THE ASSESSE E IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT WOULD APPEAR THAT A SW ORN STATEMENT WAS ALSO RECORDED FROM ONE ASSISTANT MANAGER OF FINANCE AND ACCOUNTS IN THE COMPANY OF M/S DATAQUEST MANAGEMENT COMMUNICATIONS LIMITED. THE ASSESSING OFFICER HAS REJECTE D THE REASONS STATED BY THE ASSESSEE FOR SELLING THE SHARES AT A LO W RATE AND INCURRING LOSS AND HE REPLIED ON THE STATEMENT OF THE OFFICER OF M/S DATAQUEST MANAGEMENT COMMUNICATIONS LIMITED ACCORDING T O WHOM THAT COMPANY NEVER ALLOTTED SHARES TO ANY OUTSIDE PARTY FOR A PRICE LESS THAN THE RS.155/- TILL DECEMBER 2006 AND THE ASSESSE E WAS A STRANGER TO THE ISSUE OF SHARES BY THIS COMPANY AND ITS VA LUE AND ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 6 THOSE STATEMENTS CANNOT BE RELEVANT FOR THE SALE OF T HE ASSESSEE'S SHARES OR THE PRICE FOR WHICH THE ASSESSEE HAD TO SELL THEM . 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUT ED FACT THAT THE ASSESSING OFFICER HAD CALLED FOR VARIOUS DETAILS REGARDING SHORT TERM CAPITAL LOSS AND THE REQUIRED DETAILS WERE SUBMITTED BY THE ASSESSEE. WE FIND FROM THE ORDER OF THE CIT [A] THAT THE ASSESSI NG OFFICER HAD CALLED FOR DETAILS RELEVANT TO THE SHORT TERM CAPITAL LOSS VIDE HIS LETTER DATED 20-10-2004 WHICH WAS EXTRACTED IN HIS ORDER DATE D 14-8-2008. IT IS CLEAR THAT THE ASSESSING OFFICER HAD CALLED FOR VARIO US DETAILS AND THE RELEVANT DETAILS WERE ALREADY BEFORE THE ASSESSING O FFICER WHO WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ACCEPTED THE CLAIM OF THE ASSESSEE WITH REGARD TO SHORT TERM CAPITAL LOSS AS CO RRECT AND DETERMINED THE TAXABLE INCOME AS RETURNED BY THE ASSESSE E. ACCORDINGLY THE PARTICULARS AS ASKED FOR HAVING BEEN FIL ED AND THE RELEVANT PARTICULARS HAVING BEEN EXAMINED DURING THE COURSE OF ORIGINAL ASSESSMENT THERE IS NO REASON FOR THE ASSESSING O FFICER TO INITIATE PROCEEDINGS UNDER S.147 OF THE ACT. EVEN TH E INITIATION OF PROCEEDINGS UNDER S.147 IS BASED ON CHANGE OF OPINION AN D THAT CHANGE OF OPINION IS BASED ON WRONG FACTUAL DETAILS. TH E CIT (A) CATEGORICALLY HELD THAT THE REASONS RECORDED ON THE BASIS OF WHICH ASSESSMENT HAS BEEN REOPENED WERE ON FACTUAL ERRORS FOU ND IN THE NOTE SHEET OF THE FILE AND ALSO HE HELD THAT THE DISCRE PANCIES MENTIONED BY THE ASSESSING OFFICER IN THE NOTE SHEET OF R EASONS RECORDED ON THE BASIS OF WHICH ASSESSMENT HAS BEEN REOPENED ACTUALLY DID NOT EXIST. THUS IN OUR OPINION EFFECTIVELY T HERE WERE NO REASONS EXISTING AT ALL FOR REOPENING OF THE ASSESSMENT. IN OU R CONSIDERED OPINION WHERE THE MATTER HAS BEEN CONSIDERED IN THE ORIGINAL ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 7 ASSESSMENT AND THE ASSESSEE'S STAND HAS BEEN ACCEPTED BY THE ASSESSING OFFICER HE CANNOT REVIEW HIS OWN DECISION AS IT A MOUNTS TO CHANGE OPINION WHICH IS NOT PERMITTED EVEN FOR THE RE ASSESSMENT INITIATED WITHIN THE FOUR YEARS TIME LIMIT WHEN THE REASON TO BELIEVE ESCAPEMENT ITSELF IS BASED ON FACTUAL ERRORS. ACCORDINGLY WE HOLD THAT THE CIT (A) IS RIGHT IN CANCELING THE IMPUGNED ASSESSMENT . WE CONFIRM THE SAME. SINCE WE ARE UPHOLDING THE ORDER OF THE CIT (A) ON TECHNICAL GROUND WE ARE NOT INCLINED TO GO INTO THE M ERIT OF THE CASE. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED ORDER WAS PRONOUNCED IN THE COURT ON 31-5-2010. SD/- N.R.S. GANESAN SD/- AKBER BASHA JUDICIAL MEMBER ACCOUNTANT MEMBER. DT/- 31ST MAY 2010 COPY FORWARDED TO: 1. DCIT CENTRAL CIR-1 ROOM NO. 703 7TH FLOOR AA YAKAR BHAVAN HYDERABAD. 2 SRI C. SRINIVASA RAJU PLOT NO.1317 ROAD NO.66 JU BILEE HILLS HYDERABAD. 3. 5. CIT(A)-I HYDERABAD. 4) CIT AP HYDERABAD. THE DR ITAT HYDERABAD. JMR * ITA 1638/HYD/08 SRI C. SRINIVASA RAJU HYD. 8