Tribunal allows appeal despite late filing, questions legitimacy of sale transactions.

The tribunal admitted the appeal despite a 223-day delay in filing, condoning the delay. The legitimacy of suspicious sale transactions in shares was questioned, with the Principal Commissioner invoking Section 263 for reassessment. The assessing officer's inquiry into the transactions was deemed adequate, supported by documentary evidence. The tribunal concluded that the assessing officer's decision was not erroneous, overturning the Principal Commissioner's revision under Section 263. The appeal of the assessee was allowed.

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Issues Involved:
1. Delay in filing the appeal.
2. Legitimacy of the assessee's suspicious sale transactions in shares.
3. Invocation of Section 263 by the Principal Commissioner of Income Tax (Pr. CIT).
4. Adequacy of the Assessing Officer's (AO) inquiry and verification during the assessment proceedings.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed by the assessee with a delay of 223 days. After reviewing the petition for condonation, the tribunal was convinced that the delay was justified due to sufficient cause. Consequently, the delay was condoned, and the appeal was admitted.

2. Legitimacy of the Assessee's Suspicious Sale Transactions in Shares:
The assessee disclosed a total income of Rs. 20,40,470/- for the Assessment Year 2015-16 and claimed a loss of Rs. 73,22,956/- from the sale of shares in penny stocks (Cressanda Solutions Ltd., Kailash Auto Finance Ltd., and Rajlaxmi Industries Ltd.). The Pr. CIT identified these transactions as suspicious based on reports from the Directorate of Investigation, Kolkata, which indicated that these shares were used for generating bogus Long Term Capital Gains (LTCG) and Short Term Capital Loss (STCL). The Pr. CIT argued that the AO failed to conduct necessary verification or investigation into these transactions.

3. Invocation of Section 263 by the Principal Commissioner of Income Tax (Pr. CIT):
The Pr. CIT issued a show-cause notice proposing to revise the assessment order under Section 263 of the Income Tax Act, 1961, stating that the AO's assessment was erroneous and prejudicial to the interests of revenue. The Pr. CIT directed the AO to reassess the income of the assessee for AY 2015-16 after verifying the issues related to the suspicious sale transactions in penny stocks.

4. Adequacy of the Assessing Officer's (AO) Inquiry and Verification During the Assessment Proceedings:
The AO had issued a notice under Section 142(1) and a detailed questionnaire, requiring the assessee to furnish documents and evidence of the sale transactions. The assessee provided contract notes, bills, and other documentary evidence supporting the transactions. The AO, after considering these documents, concluded that the transactions were genuine. The tribunal noted that the AO had conducted a thorough inquiry and verification, and the conclusion reached was a possible view supported by judicial precedents.

Tribunal's Conclusion:
The tribunal held that the AO had conducted a proper inquiry and verification of the transactions. The AO's order was not erroneous or prejudicial to the interests of revenue. The tribunal quashed the Pr. CIT's order under Section 263, stating that the AO had taken a possible view after due verification, and the Pr. CIT's revision was not justified. The appeal of the assessee was allowed.

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