High Court Of Delhi
CIT vs. VIMGI Investment (P) Ltd.
Sections 94(7), 260A, 263
Asst. Year 2001-02
Madan B. Lokur & V.B. Gupta, JJ.
IT Appeal No. 1433 of 2006
14th February, 2007
Counsel Appeared
R.D. Jolly, for the Appellant : O.S. Bajpai, for the Respondent
ORDER
By the court :
The Revenue is aggrieved by an order dt. 30th Sept., 2005 passed by the Tribunal, New Delhi Bench ‘B’ in ITA No. 1371/Del/2005 relevant for the asst. yr. 2001-02.
2. The assessee had purchased some units of mutual funds which were cum dividend. The units were sold within two or three days of purchase but after receiving the dividend. The dividend received by the assessee was about Rs. 3.72 crores and the units were sold at a loss of about Rs. 4.45 crores. The loss incurred in the sale of units was adjusted by the assessee against business profits.
The AO, while assessing the return of the assessee, accepted the bona fides of the transaction and did not cast any doubt upon the genuineness of the sale of the units and, therefore, adjusted the loss on account of sale against the business profits.
The CIT however, had a different view and invoked the powers entrusted to him under s. 263 of the IT Act, 1961 to revise the order on the ground that the transaction entered into by the assessee was not bona fide. After hearing the assessee, the CIT set aside the assessment order and directed the AO to make a fresh assessment order after enquiry and after giving an opportunity of hearing to the assessee. Feeling aggrieved by the order passed by the CIT, the assessee preferred an appeal before the Tribunal which allowed the appeal and that is how the matter is before us under s. 260A of the IT Act.
Our attention has been drawn by learned counsel for the respondent to a recent decision rendered by this Court in CIT vs. Vikram Aditya & Associates (P) Ltd. (2006) 204 CTR (Del) 238 : (2006) 287 ITR 268 (Del). In that case also, the question of “dividend stripping” had arisen and it was noted that there was a gap in the law which was exploited by the assessee and that the legislature had recognised this gap and taken steps to rectify it with effect from the asst. yr. 200203 by amending s. 94 of the Act. Insofar as the present appeal is concerned, it is with reference to the asst. yr. 2001-02 when the gap in the law still existed.
The contention urged by learned counsel for the Revenue is that the CIT had validly exercised his powers under s. 263 of the Act to revise the order of assessment. Two views have been canvassed before us, one taken by the AO and the other canvassed by learned counsel for the Revenue on the basis of the amendment made to s. 94 of the Act with reference to the asst. yr. 2002-03.
In Malabar Industrial Co. Ltd vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) the Supreme Court held that if two views are possible on an issue and both the views are reasonable, then the CIT ought not to exercise power under s. 263 of the Act.
We find that insofar as the present case is concerned, only one view is possible and that was taken by the AO and that view was valid with reference to the asst. yr. 2001-02. Therefore, there was no occasion for the CIT to exercise his powers under s. 263 of the Act to revise the order passed by the AO and tax the assessee on the ground that the transaction was an attempt to avoid tax. The purchase and sale of units by the assessee was undoubtedly bona fide and this was accepted by the AO. Under these circumstances, the question of the CIT invoking his powers under s. 263 of the Act would not arise. Following the decision of this Court in Vikram Aditya & Associates (P) Ltd. (supra), we find no substance on the merits of the case.In any event, in view of the decision of the Supreme Court in Malabar Industrial Co. Ltd. (supra), the exercise of power by the CIT under s. 263 of the Act is not warranted, if it is assumed that two views are possible on the issue.
Consequently, we are of the opinion that no substantial question of law arises for our consideration under s. 260A of the Act.
Accordingly, the appeal is dismissed.
[Citation : 290 ITR 505]
