2020 (6) TMI 288 - AT - Income Tax

Tribunal reverses PCIT's jurisdiction decision, restores AO's assessment.

Pushpa Devi Sonthalia Versus Principal Commissiner of Income Tax, Kolkata-2, Kolkata

The tribunal allowed the appeal, reversing the PCIT-12, Kolkata's revision order due to lack of territorial jurisdiction and on merits. The AO's regular ... Revision u/s 263 - non-enquiry qua the issue of long term capital gains claimed as exempt u/s 10(38) - Bogus LTCG - as per PCIT's since the AO had failed to examine all factual aspects prima facie indicating lack of genuineness in assessee's long term capital gains - HELD THAT:- We adopt the detailed discussion of M/s. Gitish Tikmani, HUF & Ors. [2019 (9) TMI 1177 - ITAT KOLKATA] mutatis mutandis and hold that PCIT has erred herein whilst doubting genuineness of the assessee's long term capital gains based on all the supporting evidences. Assessing Officer had rightly treated the assessee’s foregoing LTCG derived from sale of shares to be genuine - Assessing Officer had issued sec. 133(6) letter / notice to the M/s SHCL during the course of scrutiny which stood adequately replied in assessee’s favour - relevant factual details in support of the assessee’s share purchase document, contract notes, bank statement, (supra) already in the case records.There is not even an iota of material quoted against the assessee to have been engaged in all the foregoing artificial price rigging. The PCIT's revision directions under challenge are therefore reversed on merits as well. The AO's regular assessment dated 11.01.2016 stands restored as a necessary corollary. - Decided in favour of assessee. Issues Involved:1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961.2. Validity and correctness of the PCIT's revision order under Section 263.3. Examination of the genuineness of long-term capital gains (LTCG) claimed as exempt under Section 10(38) of the Act.Issue-wise Detailed Analysis:1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961:The appellant challenged the jurisdiction of the PCIT-12, Kolkata, arguing that the PCIT lacked territorial jurisdiction at the time of invoking Section 263 proceedings. The appellant submitted that the assessment jurisdiction was transferred multiple times, ultimately placing it under the DCIT, Central Circle-2(2), Kolkata, which falls outside the territorial supervision of PCIT-12, Kolkata. The tribunal noted that the PCIT-12, Kolkata did not have the territorial jurisdiction to invoke Section 263 revision jurisdiction in the assessee's case. The tribunal cited the hon'ble jurisdictional high court's decision in Ramshila Enterprises Pvt. Ltd. vs. PCIT, holding similar revision orders by a non-jurisdiction Commissioner as a nullity. Consequently, the tribunal reversed the PCIT-12, Kolkata's revision order for lack of territorial jurisdiction.2. Validity and correctness of the PCIT's revision order under Section 263:The PCIT's revision order termed the regular assessment as erroneous and prejudicial to the interest of the revenue due to the alleged non-enquiry into the issue of long-term capital gains. The tribunal examined whether the PCIT rightly exercised his revision jurisdiction under Section 263. It was noted that the Assessing Officer (AO) had issued a Section 142(1) notice and conducted scrutiny proceedings, during which the assessee provided all necessary details regarding the long-term capital gains. The tribunal emphasized that an order can be revised under Section 263 only if it is both erroneous and prejudicial to the interests of the revenue. The tribunal referred to several judicial precedents, including the hon'ble Supreme Court's decision in Malabar Industrial Co. Ltd., which established that an order is not erroneous if the AO adopts one of the permissible views in law. The tribunal concluded that the PCIT's revision jurisdiction was not sustainable as the AO had conducted necessary enquiries and accepted the assessee's claim based on relevant evidence.3. Examination of the genuineness of long-term capital gains (LTCG) claimed as exempt under Section 10(38) of the Act:On merits, the tribunal found no reason to accept the Revenue's stand that the AO failed to carry out necessary enquiries regarding the genuineness of the assessee's LTCG. The tribunal noted that the assessee had filed all necessary details during scrutiny, and the AO had issued specific questionnaires which were satisfactorily answered by the assessee. The tribunal referred to its co-ordinate bench's decision in M/s. Gitish Tikmani, HUF & Ors. vs. ITO, which reversed similar revision directions and restored the AO's action accepting the corresponding LTCG as genuine. The tribunal reiterated that the PCIT's exercise of revision jurisdiction based on suspicious circumstances without concrete evidence was not sustainable. The tribunal held that the AO had rightly treated the assessee's LTCG as genuine, supported by all relevant evidence. Consequently, the tribunal reversed the PCIT's revision order on merits and restored the AO's regular assessment.Conclusion:The tribunal allowed the assessee's appeal, reversing the PCIT-12, Kolkata's revision order for lack of territorial jurisdiction and on merits. The AO's regular assessment dated 11.01.2016 was restored. The tribunal also noted the extraordinary situation due to the COVID-19 pandemic and excluded the period of lockdown from the ninety days' pronouncement period.