TaxTMI 
TaxTMI 
2020 (11) TMI 813
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....Pr. CIT has failed to establish as to how the said order was erroneous in so far as being prejudicial to the interests of revenue, particularly when the Ld. AO had made complete inquiries, thus the order passed deserves to be struck down. 1.2 That, Ld. Pr. CIT has erred in passing the order u/s 263 setting aside the assessment only on the basis of change of opinion whereas the assessment order has been passed by Ld. AO after complete explanation and required enquiries and thereby order u/s 263 deserves to be quashed. 2. On the facts and in the circumstances of the case and in law, ld. Pr. CIT erred in directing the AO to examine the issue of equity share transaction after using the information /material passed on by Investigation Directorate by ignoring the fact that all such material/information has already been considered and enquiries based on such material / information has already been carried out by ld. AO thus such directions of ld. Pr. CIT are devoid of merits and not in consonance with facts on record and thereby consequent order passed u/s 263 deserves to be quashed. 3. On the facts and in circumstances of the case and in law, Ld. Pr. C1T has gr....
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....ssee further reiterated the submission as made in the written submission. The submission of the assessee are reproduced as under: "Brief facts of the case are that assessee is a HUF and for the year under appeal has filed its return of income declaring total income at Rs. 4,90,900/- and claimed exempt income of Rs. 11,52,000/- towards the long term capital gains from the sale of shares. Thereafter the case of assessee was selected for scrutiny under CASS which was specifically for verifying the genuineness of the share transactions. Various query letters / show cause notice were issued by the Ld. AO from time to time and after due scrutiny, enquiries and verifications into the matter, the assessment was completed u/s 143(3) of the Act vide dated 29.11.2017 wherein the returned income was accepted. Thereafter, the Ld. CIT (Admn.) invoked the provisions of section 263 of the Income Tax Act, 1961 by alleging that the Ld. AO has not made proper enquiries and verification into the matter and issued Show Cause Notice u/s 263 to the assessee requiring him to show cause with regard to the proposed action u/s 263 (APB 10-11). In response to show cause notice replies were s....
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.... case was to be handled by the AO in accordance with the EFS instructions issued by the System Directorate of the department. In this regard kind attention of the hon'ble bench is invited to the fact that during the course of assessment proceedings on 22.11.2017 (APB 16-18) a detailed show cause notice running into 3 pages was issued by ld. AO wherein it was alleged that the transaction of purchases and sale of shares of M/s Jackson Investment ltd. entered into by the assessee is accommodated bogus entry carried out to obtain bogus long term capital gains. It is also relevant to state here that the said show cause notice is issued in accordance with the instructions issued by the System Directorate of the Income Tax department. From the perusal of the same, it can be seen that in the said notice ld. AO specifically referred certain enquiries carried out by the Director of Income Tax (Investigation) Kolkatta and further show caused the assessee as to why not the capital gains declared by it is held as unexplained credit and the same be not added u/s 68 of the Act. Ld. AO further proposed to make the addition towards the commission paid for obtaining such gain. However, afte....
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....ebut any evidences filed by assessee before Ld. AO and also could not rebut the explanations and submissions made before him in proceedings u/s 263. Ld. CIT(A) had merely observed that Ld. AO had not made sufficient enquiries and he should have made more enquiries. The extent of in-depthness of enquiries differs from person's perception and cannot be made as a base to treat the order passed by Ld. AO as erroneous and prejudicial to the interest of revenue. In view of the above factual background of the case, it is humbly submitted that essential elements necessitated for invoking section 263 are not fulfilled. The basic ingredients to be fulfilled before invoking section 263 have been explained by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83 (SC) (Case Law paper book APB 1-6) in the following words: "A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income Tax Officer is erroneous is so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be....
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....the following decisions: (1) Shri Narayan Tatu Rane vs ITO ITA No.2690 & 2691/Mum/16 (case law paper book pages 7-27) dated 06.05.2016 "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying out enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquirie....
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....d not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263." In view of the above proposition, and respectfully following principle laid down by the Hon'ble courts and keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly." In view of above, it is submitted that : 1. The Order of Ld. AO is not erroneous: It has already been established above that assessee has purchased the shares after making payment through banking channels and after sold them after a period of more than three years through online mode in the recognized stock exchange. Nevertheless, the Ld. AO had made inquiry on this aspect and complete details as asked for by the Ld. AO were submitted by assessee during the course of assessment proceedings and, as submitted above, the Ld. AO passed the assessment order after taking into consideration all those details and evidences. It is therefore, submitted tha....
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....herefore, in view of such legal position, no action u/s 263 could have been taken. It is a well established law by now that section 263 does not contemplate mere substitution of the opinion of AO with that of CIT. It has further been held by the Courts that where two views are possible in the matter and the AO has chosen any one of them, then revision cannot be made merely because the CIT is of the opinion that the other view should have been taken by the AO. 2. The Order of Ld. AO is not prejudicial to the interest of revenue: In light of the facts of the present case, it is submitted that the Ld. CIT (Adm.) has failed to appreciate the facts that the shares purchased by the assessee were through payees account cheque and after getting transfer, the same were lying in the DMAT account of the assessee for about 2 years when the same were sold through a member broker in recognized stock exchange. Further the assessee has submitted all these details before the Ld. AO in reply to the show cause letter (APB 12-15) and ld. AO could not found out any deficiency in the same. Rather the ld. CIT(Adm.) in his order asked the AO to make enquiries in specific manner ....
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....lizers & Chemicals Ltd. (Raj HC) (2014) 51 TW (III) 157 Therefore, it is clear the CIT does not have unfettered and un-checked discretion / power to reverse the order. He can do so within the bounds of the law and has to satisfy the need of fairness in action and fair play with due respect to the principle of Audi Alterem Partem as envisaged in the Constitution. The law is well settled that the CIT cannot invoke the powers to correct each and every mistake or error committed by the AO. Every loss to the Revenue, cannot be treated as prejudicial to the interest of the Revenue and if the Assessing Officer has adopted one of the course permissible under the law or where two views are possible and the AO has taken one view which the CIT does not agree with, it cannot be treated as an order erroneous and prejudicial to the interest of the revenue. The AO exercises quasi judicial power vested in him and if he exercises such powers in accordance with law, arrives at a just conclusion such conclusion cannot be termed as erroneous only because the CIT does not feel satisfied with the conclusion. 2. CIT Vs. M/s Deepak Real Estate Developers P. Ltd. (Raj HC) (2014) 51 TW (IV....
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....nterest of revenue. CIT Vs. Ganpat Ram Bishnoi, 296 ITR 292 (Raj.) Revision: S. 263 of Income tax Act, 1961: A.Y. 1993-94: Powers of Commissioner: No power to make short enquiries or to go into process of assessment again and again: Finding that AO made assessment after relevant enquiries: Jurisdiction assumed by Commissioner unsustainable. It is thus submitted that for the sake of clarification and at the cost of repetition it is submitted that twin conditions as laid down u/s 263 i.e. erroneous and prejudicial to the interest of the revenue have to be cumulatively satisfied and in the absence of one of the conditions, not being attracted the other would become nonest for the purposes of revision. Therefore, in view of the above it is prayed that the impugned order of Ld. CIT(Admn.) be quashed and held bad in law. 5. Per contra, Learned. Departmental Representative (DR) vehemently opposed these submissions and supported the impugned order. Ld. CIT-DR has taken through impugned order and also the assessment order. The argument of the Ld. CIT-DR is that the ex-facie there is a lack of enquiry by the assessing officer ....
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....vertently not considered the investigation made by the department in respect of M/s Jackson Investment Ltd, and allowed the claim of the assessee and he could not make proper enquiries a' assessment was becoming time barred. (D)The AO allowed exempt long term capital gains u/s 10(38) of the Income tax Act, 1961 of Rs. 11, 52, 000/- without making proper enquiries and not considering investigation made by the department. As the AO has not made proper enquiries and not considered the report of investigation made by the department in respect of trading in penny stock i. e. M/s Jackson Investment Ltd , and allowed exempt long term capital gains u/s 10(38) of the Income-tax Act, 1961, of Rs. 11, 52, 000/-. Therefore, the order passed by the AO on 29. 11. 2017 is erroneous and prejudicial to the interest of the revenue. 7. There is no dispute with regard to the fact that the assessing officer had issued show cause notice dated 22.11.2017. The relevant contents of the notice are as under: From the perusal of details filed during the course of scrutiny proceedings and on examination of material available on record, it is seen that that you have claimed Exe....
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....xchange certain persons working as a syndicate in order to provide entries of tax ex- pt bogus Long Term Capital Gains to large number of persons in lieu of unaccounted cash. The basic objective of this racket is to convert black money into white without payment of Income Tax. The unaccounted cash of such persons [beneficiaries] is utilized to purchase shares of such companies at a very high artificially inflated market price. 5. This practice is generally called, Accommodation Entry Scam, as the activities of such persons are carried out with prime objective of accommodating unaccounted cash of beneficiaries into their regular books of accounts without paying any tax on the same. 6. During the Survey, the statement of Directors/entry operators had been recorded and they admitted that the various companies are being run on paper only and they do not exist in reality. Some of them were formed to provide accommodation entries only in the form of share capital. 7. The statement of various key persons of share brokers were recorded during the course of survey proceedings conducted by the Investigation Wing, Kolkatta and they admitted that various companies ar....
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....00/- for purchases of shares as per enclosed copy of contract not for sale & latter of transfer of share dated 20/10/2011. ( I I ) That the assessee has invested Rs. 40000/- out of his income from commission/brokerage earn on the sale of agriculture goods. (iii) That the assessee paid Rs. 40000/- through M/s Pleasant Dealcom Pvt Ltd as per enclosed sale bill. (iv) That requisite copy of contract note for sale & purchases enclosed. (v) That requisite copy of bank statement reflecting receipt of sale of investments enclosed. (vi) That requisite copy of Demat A/c statement to prove inward & delivery of shares enclosed herewith. (vii) That we heard from our friend & other investor that the investment in shares of M/s Jackson investment Limited will be a Gold Investment from the point of long terms investment, hence we also like to invested in these shares. (viii) That the assessee has forget the name & Address of the person who has recommended the purchases these share. (ix) That assessee having primary school knowledge, hence he was unable to made analysis of financial performance before purchases of shares. ....
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....iven through Demat A/c as per enclosed copy of the same. (c) Contract Notes for Sale & purchases of the broker who are members of recognize stock exchange as per copy of the same enclosed. The assessee's Long term Capital Gain is genuine. The following cases of our jurisdictional High Court as well as High Court of the other state and tribunal support the case of the assessee in which it is held that such that where aseessee proved genuineness of share transactions by contract notes for sale and purchases, bank statement, demat account showing transfer in and out of shares can not be treated unexplained cash credit u/ s 68 of the I.T. Act 1961:- (i).High Court of Rajasthan at Jaipur in case of CIT Vs. Smt. Pooja Agarwal (D.13, Income Tax Appeal No 385/2011, decided on 11/ 09/ 2017) (ii) High Court of Rajasthan at Jodhpur in case of CIT Vs. Smt Sumitra Devi in ITA 54/2012 (iii) High Court of Gujrat in case of CIT Vs. Maheshchandra G. Vakil {2013) 40 taxmann.com 326 (Gujrat) (iv) High Court of Allahabad in case of CIT Vs. Udit Narain Agarwal in ITA 560 of 2009 (v) Tribunal at Kolkata in Case of SCIT vs Sunita Khema in ITA nos 714 to 71....
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....urisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An ....
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.... the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent‟s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. I....
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....ken by the various Coordinate Benches of the ITAT in the following cases:- ITA No. 3391/Del/2018 Assessment year 2014-15 (a) AV Industries v. ACIT [ITA No. 3469/Mu m/2010] dated 06.11.2015 (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 (c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017. (d) Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015] dated 09.09.2016 (e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017. 5.8 Accordingly, respectfully following the ratio of the various judgments as referred to in the preceding paragraphs, we have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of the Act and we have no option but to quash the same. It is so ordered accordingly. 6.0 In the result, the appeal of the assessee stands allowed. 11. Ld. AR has also taken us through the decision of the Mumbai Bench of this Tribunal rendered in the case of ITO vs. Shri Narayan Tatu Rane(supra) wherein the Tribunal in paras 19 to 21 has decided the issue as under: "1....
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....n which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinizing the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant. 21. In t....