TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 180
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....nsaction relating to the short term capital loss incurred in the shares of UNNO Industries Ltd. According to ld. Pr. CIT, the AO had allowed the set off of the short term capital loss of Rs. 15,49,658/- against assessee's other business income without enquiring into the allowability of such claim in terms of the CBDT Instruction No.287/30/2014-IT(Inv II)Vol. III dated 16.03.2016. He accordingly issued a show cause notice on 26.02.2019 u/s 263 of the Act and after hearing the assessee the ld. Pr. CIT held that AO's order was erroneous and prejudicial to the revenue for lack of enquiry in respect of loss incurred and set aside the order of AO directing him to pass order afresh after taking note of his observations in the order u/s 263. Aggrieved by the revision order of the ld. Pr. CIT, the appellant has preferred this appeal before us. 3. We have heard both the parties and perused the paper book and case laws cited by both the parties. We note that the appellant company is engaged in the business of trading. The case of the appellant was selected for scrutiny under CASS and one of the reason for selection was suspicious transactions relating to short term capital loss on sale ....
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....Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the CIT. The twin conditions which need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and(ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed by the without application of mind; or (iv) if the AO has not investigated the issue before him. In the circumstances enumerated above only the order passed by the Assessing Officer can be termed as erroneous for the purpose of S.263 of the Act. Coming next to the second limb, the AO's erroneous order can be revised by the CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudi....
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....arding assessee's suspicious transactions relating to short term capital loss claimed in the return and therefore to examine its veracity he required the assesse to furnish the following: "10. Details of Suspicious transaction relating to Sort Term Capital Loss on shares (inputs from investigation Wing) i.e. Name of Scrip, Date of purchase, Quantity, Rate in Mode of payment. Date of Sale, Quantity sold, Rate, Date of Dividend declaration, Amount of dividend, STT paid, S.T. Capital Loss." 6. We note that in compliance with the AO's notice u/s.142(1)the appellant furnished the required details vide its submission dated 03.08.2016. Along with the letter dated 03/08/2016 the appellant furnished a statement giving detailed break-up of the short term capital gain as well as short term capital loss incurred on sale of investments in shares and other securities. It is further noted that the appellant furnished copies of its bank statements, contract notes, etc. in support of its transactions conducted in shares of UNNO Industries Ltd which resulted in short term capital loss of Rs. 15,49,658/-. On examination of the details furnished, we find that the direct evidences furnished by the a....
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..... As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is....
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....when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR 593 As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not ....
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.... ld. Pr. CIT has found fault with the AO's order in the present case is the lack of enquiry on the part of the AO in allowing appellant's claim for short term capital loss. In this context we find that there is a clear distinction between "lack of enquiry" and "inadequate enquiry". If there is an enquiry, even if inadequate, that would not by itself give occasion to the ld. Pr.CIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the CIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then the Ld. Pr. CIT should himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his order was unsustainable in law. In the given facts of the present case, as noted earlier, the AO had made due enquiries into the claim of short term capital loss incurred by the appellant in the shares of UNO Industries. The AO had called for complete details of the short term capital loss incurred in shares which was reported to be suspicious....
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....n entry providers, riggers, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate has now uploaded details of such information in respect of individual assessees who have made transactions in such penny stocks. 3. Vide EFS Instruction under reference a new button 'Penny Stock' has been added on Individual Transaction Screen (ITS) to display information related to penny stock, now enabled on the screen of the Assessing Officers (AOs). Available information regarding the manipulative transactions has been captured in the functionality, including the investigation report of the Kolkaia Investigation Directorate. The functionality also contains a guidance note for the Assessing Officers. Such details are visible to the AOs of those assessees whose particulars have emanated out of the investigation report of Kolkata Investigation Directorate and whose cases have been considered actionable, at this stage. The details are also visible to supervisory officers of such AOs. 4. In case of any difficulty in viewing the information on ITS, Shri Vipul Agarwal, JDIT (S....
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....uiry into these peripherial issues that the ld. Pr.CIT held the order to erroneous and prejudicial to the interests of the Revenue. From the material placed before us and in view of the discussions in the earlier paras, we however note that these aspects did not have any material bearing in deciding whether assessee's transactions in shares and consequent loss incurred were genuine or not . In fact the SCN issued by the PCIT nowhere makes any reference to these factors for considering the AO's order to be erroneous. On the contrary we find that before the order of assessment was passed the AO had required the assessee to furnish transactional documents proving the purchase and sale of all shares held as investment during the year. On examination of the material placed before him by the appellant, the AO was satisfied that the short term capital loss was incurred by the appellant on sale of shares listed on the Bombay Stock Exchange. The appellant had filed before the Ld. AO the relevant details and also produced the time stamped contract notes issued by its broker. All the transactions were made through registered share broker at rates prevailing on the stock exchange on the releva....