Tribunal upholds Assessing Officer's inquiries, quashes revisional order, and allows assessee's appeal.

The Tribunal found that the Assessing Officer (AO) had conducted adequate inquiries and verifications regarding the assessee's transactions in shares, leading to the acceptance of the genuineness of the capital gain. The Tribunal held that the AO's order was not erroneous or prejudicial to the Revenue's interest. Consequently, the revisional order by the Principal Commissioner of Income Tax (PCIT) was quashed, and the assessee's appeal was allowed. In a similar case involving another assessee, the Tribunal applied the same findings, resulting in the quashing of the revisional orders passed by the PCIT.

---

---

Issues Involved:
1. Whether the assessment order passed under section 143(3) of the Income Tax Act was erroneous and prejudicial to the interest of the Revenue, warranting revision under section 263 of the Act.

Issue-Wise Detailed Analysis:

1. Erroneous and Prejudicial Assessment Order:
The primary issue raised by the assessee was that the Principal Commissioner of Income Tax (PCIT) erred in holding the assessment framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act as erroneous and prejudicial to the interest of the Revenue under section 263 of the Act.

Facts and Background:
The assessee, an individual deriving income from salary and other sources, declared an income of Rs. 8,99,020/-. The return was selected for scrutiny under CASS for suspicious transactions in shares and long-term capital gain. The AO, after verification, accepted the return income. The PCIT found that the assessee purchased shares of M/s Sunrise Asian Limited at Rs. 20 per share and sold them at Rs. 480-490 per share, claiming a long-term capital gain of Rs. 10,08,673/- as exempt under section 10(38) of the Act. The PCIT noted a report from DDIT (Investigation) Kolkata regarding price manipulation of penny stocks, which the AO did not consider. The PCIT held that the AO failed to conduct proper inquiries despite having reports from DDIT and SEBI, thus making the assessment order erroneous and prejudicial to the interest of the Revenue.

Assessee's Argument:
The assessee contended that all necessary details were furnished during the assessment proceedings, and the AO, after proper verification, accepted the genuineness of the capital gain. The assessment order, therefore, could not be deemed erroneous or prejudicial to the Revenue's interest.

Tribunal's Analysis:
The Tribunal examined whether the AO made adequate inquiries or verifications regarding the exemption claimed under section 10(38) of the Act. It was emphasized that an inquiry deemed inadequate by the Commissioner does not make the AO's order erroneous. The Tribunal referred to various judicial precedents distinguishing between lack of inquiry and inadequate inquiry, noting that the AO's prerogative is to decide the extent of inquiry.

Judicial Precedents:
- Delhi High Court in CIT Vs. Sunbeam Auto 332 ITR 167 (Del.): Held that if the AO made any inquiry, even if inadequate, it does not justify the Commissioner passing orders under section 263 merely because he has a different opinion.
- Bombay High Court in Gabriel India Ltd. [1993] 203 ITR 108 (Bom): Emphasized that the Commissioner must base his consideration on materials on record and cannot initiate proceedings for fishing and roving inquiries.
- Supreme Court in Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates [2019] 106 taxmann.com 31 (SC): Upheld that detailed inquiries by the AO, even if leading to a different conclusion by the Commissioner, do not justify revision under section 263.
- Supreme Court in Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd [2020] 114 taxmann.com 545 (SC): Held that 263 proceedings are invalid if the AO made inquiries and took a plausible view in law.

Conclusion:
The Tribunal found that the AO made inquiries and verified the details regarding the assessee's transactions in shares. The AO's acceptance of the genuineness of the capital gain was based on materials placed on record. The Tribunal held that there was no error in the AO's order causing prejudice to the Revenue's interest. Consequently, the revisional order passed by the PCIT was quashed, and the appeal of the assessee was allowed.

Application to Similar Case:
For the similar issue raised in the case of another assessee, the Tribunal applied the same findings, allowing the appeal.

Final Order:
Both appeals filed by different assessees were allowed, and the revisional orders passed by the PCIT were quashed.

Order Pronouncement:
The order was pronounced in the Court on 20/07/2022 at Ahmedabad.

---