2024 (6) TMI 318 - AT - Income Tax

Principal Commissioner cannot revise assessment without identifying specific errors or examining assessee's evidence under Section 263

ITAT Kolkata quashed Pr. CIT's revision order u/s 263 regarding short-term capital loss and long-term capital gains. The Pr. CIT set aside AO's assessment ... Revision u/s 263 - Examination of short-term capital gain and loss, long-term capital gain - CIT held order of the AO was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry - HELD THAT:- A perusal of the impugned order of the Pr. CIT reveals that the Ld. Pr. CIT had asked the assessee about the details and evidences relating to short-term capital loss and long-term capital gains etc. to which the assessee had given a detailed reply. Once a point wise reply was given by the assessee, then a duty was cast upon the CIT to examine the reply of the assessee and form a prima- facie opinion as to whether the order of the AO was erroneous so far as it was prejudicial to the interest of Revenue. We further note that the Ld. Pr. CIT did not raise any query as to what enquiries were made by the AO before proceeding to pass the assessment order in question. In our view, once the Ld. Pr. CIT had proceeded to make an enquiry regarding the genuineness of the claim of the assessee, he was supposed to make a prima-facie opinion which may not be a concluding opinion to hold that the order of the AO in his view was erroneous so far as it was prejudicial to the interest of Revenue. The opinion of the Commissioner that the AO had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. Merely because, the assessment order in question is not a detailed order that itself, does not mean that the AO had not made enquiries in this respect. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order. A perusal of the revision order passed by the ld. Pr. CIT shows that the ld. Pr. CIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr. CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO. Simply because the ld. Pr. CIT felt that the AO should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. Thus no justification on the part of the ld. Pr. CIT in setting aside the assessment order for de novo assessment. Decided in favour of assessee. Issues Involved:1. Exercise of revision jurisdiction u/s 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT).2. Examination of short-term capital gain and loss, long-term capital gain, and dividend income by the Assessing Officer (AO).Summary:Issue 1: Exercise of revision jurisdiction u/s 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT)The assessee appealed against the revision order dated 14.03.2023 by the PCIT, Kolkata, u/s 263 of the Income Tax Act. The PCIT directed the AO to reassess the case, citing that the AO had not properly examined the issues during the assessment proceedings. The PCIT observed discrepancies in the short-term capital gain and loss reported by the assessee and issued multiple show-cause notices to the assessee, who provided detailed replies and explanations. Despite this, the PCIT held that the AO's order was erroneous and prejudicial to the interest of the revenue, setting aside the assessment order for a de novo assessment.Issue 2: Examination of short-term capital gain and loss, long-term capital gain, and dividend income by the Assessing Officer (AO)The assessee declared a total income of Rs. 1,09,24,210/- for A.Y 2018-19, which was accepted by the AO. The PCIT noted discrepancies in the short-term capital gain and loss reported in the ITR and financial statements. The assessee explained that the net short-term capital loss was computed after considering the provisions of section 94(7) of the Act. The PCIT, however, concluded that the AO had not made the necessary enquiries and set aside the assessment order.Tribunal's Findings:The Tribunal found that the PCIT did not point out any specific errors or discrepancies in the details furnished by the assessee. The PCIT's general observation that the AO did not make proper enquiries was not sufficient to set aside the assessment order. The Tribunal emphasized that the PCIT should have made or caused to make necessary enquiries to form a prima facie opinion on whether the AO's order was erroneous and prejudicial to the interest of the revenue. The Tribunal referred to the provisions of section 263 and relevant case laws, concluding that the PCIT's order was not justified.Conclusion:The Tribunal quashed the PCIT's order, stating that it was not sustainable as per law. The appeal of the assessee was allowed, and the assessment order was upheld.Result:The appeal of the assessee stands allowed.