AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (12) TMI 1067
X X X X Extracts X X X X
X X X X Extracts X X X X
.... officer by invoking the provisions of section 263 of the Act even when the order was passed by the assessing officer under section 143(3) of the Act after conducting necessary enquiries and after due application of mind. 3. that on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer by invoking the provisions of section 263 of the Act even when the amount of long term capital gain of Rs. 22,10,437/- as earned on sale of shares and claimed exempt under section 10(38) of the Act was duly supported with ample documentary evidences which were never disproved during the course of revisionary proceedings. 4. The appellant reserves her right to add, alter and modify the grounds of appeal as taken by her." 2. Facts in brief are that the assessment u/s 143(3) of the Income Tax Act 1961(hereinafter referred as the Act) was framed vide order dated 27.12.2016. The assessing Officer accepted return filed by the assessee. Subsequently, the Ld. Pr. CIT after examining the records initiated the proceedings u/s 263 of the Act by issuing the notice dated 21.12.2017. In response thereto, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as it is prejudicial to the interest of revenue on account of passing of the order without making required enquiries / investigations. 3. As per available records, it is found that' during the course of assessment proceedings for A. Y. 2014-15, the case was selected for complete scrutiny under CASS with the reason as under: "Suspicious transaction relating to long term capital gain on share (Inputs front Investigation Wing)'" You had purchased and sold the share of M/ s Sunrise Asian Limited as per the chart below:' You had claimed Rs. 22,10,437/- as exempt L.T.C.G. in return] income filed by you . The claim has been derived from the alleged investment in the share of M/s Sunrise Asian Limited., which has been classified as penny stock Company. From. the office note appended to the assessment order also it is found that "the AO has questioned this issued but did not carry out any enquiry/ investigation and accepted the claim. Accepting the said claim without conducting appropriate enquiry/ Investigation renders the assessment order U/s 143(3) dated 27/12/2016 erroneous and resultan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 491700 46391.7 3 Sunrise Asian Ltd. 16.1.12 4.3.14 22500 2492 441450 416458 That in the show cause notice you have referred the scripts in which long term capital gain was earned by the assessee as penny stock. In the concluded para you have stated that:- «From the office note appended to the assessment order also it is found that the AO has questioned this issue but did not carry out any enquiry / investigation and accepted the claim. Accepting the said claim without conducting appreciate enquiry / investigation renders the assessment order U/s 143(3) dated 27/ 12/2016 erroneous and resultantly not disallowing the said claim render the assessment order is prejudicial to the interest of revenue. You are, therefore) required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of AO dated 27-12- 2016 is erroneous in so far as it is prejudicial to the interest of revenue. " 3.1 The assessee in addition to the long term capital gain on sale of shares of M/ S Sunrise Asian Limited) also earned long term capital gain of Rs. 5)39) 969/ - on sale of shares of M/ ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 1 M/ s Sunrise Asian Limited 01-02-14 to 28-02-14 2 M/ s Sunrise Asian Limited 01-03-14 to 31-03- 3 M/ s Sunrise Asian Limited 10-02-14 to 07-03- 4 M/ s Sunrise Asian Limited Jan, 13 to Jan. 15 3.7) That perusal of the above quotation It is evident that share price of the shares on which these were sold by the assessee was duly verifiable. Hence, the assessing officer was rightly accepted the long term capital gain as shown by the aseessee 4.1 That in the present case in hand, the assessing Hofficer had make exhaustive inquiry and collect all the documents from the assessee and also recorded her statement. Hence, as per explanation 2 to section 263111 of the Act, the assessment order in question shall not be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. 4.2 That Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. CIT [20001 243 ITR 83 (SC) after considering the decisions of Rampyari Devi Saraogi (supra) and Smt. Tara Devi Aggarwal (.mpra): "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open". . 4.41 Hon'ble. Ahmedabad Bench of ITAT in the case of MIS Jay Agriculture Test vs. Pr. CIT (Appeal No. Income-tax Act, 1961. No.605/Ahd/2015 dated. 01.01.2015 has held that 01-2015 has held that" .' ' ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the issues raked up by the Pr. CIT stand: examined by the AO in the assessment proceedings and the Id Pr CIT has failed to state as to how the order of AO is erroneous and not in accordance with law or settled legal position. Even on merit, the assessee is entitled to all the deductions/ claims as per the provisions of the Act. Considering all these facts in totality and respectfully following the ratio laid down in the various decisions cf th« Jurisdictional and other High Courts, we are of the considered view that the jurisdiction by the Pr. CIT u/ s 263 of the Act was invalidly assumed. Accordingly we set aside the proceedings u/ s 263 of the Act as being invalid and also consequent u/ s 263 of the Act. 4.61 These principles have been re-iterated by the Apex Court in its judgment in Commissioner of Income Tax vs Amitabh Bachan {2016 (3) KLT SN.4 (C.No.3) SCI, where the court inter alia held thus: "There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under S.263 of the Act merely on the ground that there is another possible view of the matter. Permitting e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. It precisely means an order 'which ha« not been passed in' consonance with the principles of law which has in ultimate eventuate affected realisation of lawful revenue either by the State has not been realised or it has gone beyond realisation. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AD is wrong. That may be so but that is not enough What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. 5 That in view of the above, 'in the present case, the assessing officer make ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee has said that the purchase cost these shares as on 16.01.2012 was amounting Rs. 1,20,000/-. It is evident that the assessee has shown bogus LTCG amounting to Rs. 22,10,437/- and the same should have been added to the income of assessee, after due examination and after giving opportunity to the assessee on the result of such examination. The assessee in his submission during the course of proceedings before me has submitted that the issue has been considered by the AO which is not correct inasmuch as no enquiries have been regarding the genuineness of such profits. It is not denied that assessing officer specifically asked for the details of share transactions and the contract notes etc were submitted during the assessment proceedings but the same, if not substantiated by the other prerequisites of a genuine transaction; remains unverified. It is also not denied that the transactions have been routed through banking channels and established through Demat account but the same also is insufficient to hold any transaction to be genuine without proper enquiry in this regard. 3.1.2. The submission of the assessee cannot be accepted as the fact remains that the AO has not ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee" rendered ,by the Jurisdictional High Court or Supreme Court in the case <if the assessee or any other person. Accordingly, it was incumbent upon the AO to have made necessary enquiries or verifications, which were required to verify whether the claim of long term capital gain was genuine or not. 5. Legal position on power of Commissioner for Revision u/s 263: Case laws on the power of Commissioner, favor Revenue, in following situations as regards enquiry by Assessing Officer: a. Complete failure to conduct relevant enquiry; b. Conducting enquiry but not taking it to its logical conclusion; c. Conducting enquiry but drawing the wrong conclusion. 5.1. Reference is invited to recent judgment of Kolkata Tribunal in the case of Marigold Nirman Pvt Ltd and related cases ITA 1365/KOL/2013 .DATED 3.0.7.15, also reported as SubhlakshmiVanijya (P., Ltd in 172 TIJ 721(KOL) has considered virtually the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing officer to require the information 'on such points or matters' as he may require. Ordinarily it is not possible for the Assessing Officer to inquire into each and every entry recorded in the books of account of the assessee. He has to exercise his acumen in extracting out the relevant points or matters on which he wants to concentrate. But, what is important in this regard is that the operation of section 142(1)/143(2) comes to an end when an assessment is completed after examining such point or matters which the Assessing officer feels to inquire before ,finalizing the assessment. It is only thereafter that the revisional powers of the commissioner under section 263 can come into play for ascertaining if the Assessing officer examined all the relevant points, which ought to have been examined. If the commissioner, on examination of records of assessment, comes to the conclusion that the Assessing officer failed to enquire into certain other relevant aspects which, in fact, necessitated thorough investigation, then he has all the power to revise the assessment' order. In the instant case, the assessment already stands finalized and now the commissioner is examinin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ara 19.e.} Q. Whether the order of the Commissioner was based on irrelevant consideration and was he supposed to point out: specifically where the Assessing Officer went wrong in not properly, examining the issue of share capital? A. Wh.3re the Assessing Officer has mode proper enquiry and still comes to a wrong conclusion, which' renders the assessment order erroneous and prejudicial to the interest of the revenue, it becomes the duty of the Commissioner to expressly point out where the Assessing Officer went wrong on merits. But in a case, where no enquiry has been conducted at all or the so-called enquiry conducted by the Assessing Officer is as good as no enquiry,' as is the case under consideration, in such circumstances, the Commissioner simply needs to point out those relevant aspects of assessment, which the Assessing Officer lost sight of, but were required to be properly probed. There can be no way for the Commissioner to tell erroneous approach of the Assessing Officer on merits in such circumstances because the view of the Assessing Officer on merits is not available. Requiring the Commissioner to indicate 'where the Assessing Officer went ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... his order. There is no doubt that the proceedings before the Assessing Officer are quasi-judicial proceedings and a decision taken by him in this regard must be supported by reasons. Otherwise, every order, such as the one passed by the Assessing Officer, could result in a theoretical possibility that it may be revised by the commissioner under section 263. Such a situation is clearly impermissible. (Para 9) It is also necessary for the parties to know the reasons 'that have weighed with the adjudicating authority in coming to a conclusion. The order passed by the Assessing Officer should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. {Para 10) It was found that the order passed by the Assessing Officer was cryptic, to say the least, and it colil1J not be sustained. The Tribunal could not substitute its own reasoning to ,justify the order passed by the Assessing Officer when the Assessing Officer himself did not give any reason in the order passed by him. [Para 11) Therefore, the matter was to be remanded to the file. of the Assessing Officer to decide the issue afresh in ter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se-company was accepted by the Assessing Officer without any further enquiry, examination or verification as was warranted. 6. [2016J 237 Taxman 211 (Mad Income-tax Officer, Ward- VII(2), Chennai During relevant year, assessee made cash payments to suppliers of crackers _ Without examining details "f expenditure involved, Assessing Officer allowed said payments - Commissioner found that assessee had made cash payments in excess of Rs. 20,000 to some suppliers on day-today basis _ He thus passed a revisional order disallowing said payments under section 40A(3) _ Whether on facts, impugned revisional order did not require any interference - Held, yes [Para 16) [In favour of revenue) Therefore, in view of the above discussions, I am of the considered opinion that the order dated 27.12.2016 for A.V. 2014-15 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the order without making required enquiries/investigations. Accordingly, I am satisfied that provisions of section 263 of LT. Act 1961 are required to be invoked. Therefore, the assessment for A.V. 2014- 15 framed on 27.12.2016 is hereby set-aside to the fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under consideration does not exceed the limit as prescribed U/s 44AB of the Income Tax, hence the assessee was not liable to get its books of accounts audited U / s 44AB of the Income Tax Act. 1.3 Copy of Financial Statements of the assessee for the year ended 31-03-2014, 31-03-2013 and 31-03-2012 is enclosed for your kind perusal 1.4.1) Details of the deduction U/s VIA of the Income Tax Act, as claimed by the assessee in the year under consideration is as under:- S. No. Particulars Amount (Rs) Deduction Claimed U/s 8OC 1 Housing Loan Repayment 53,891 2 Life Insurance Premium 42,264 3 Tution Fees 64,750 1,00,00 U/s 80TTA 1 Saving Bank Interest 8,715 8,715 Total 1,08,715 1.4.2) Copy of receipts in respect of LlC Premium as paid by the assessee along with the copy of Home Loan A/c of the assessee with Union Bank of India is enclosed for your kind perusal. 2] Details of the sources of Income of the assessee during the year under consideration is as under:- S.No. Particulars Amount 1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) That the assessee has received dividend income of Rs. 3,830/- from IDEA Cellular & Union Bank of India, the same is exempt u/s 10(34) of the Income Tax Act. 6.3] The assessee in the year under consideration has sold shares of M/s IDEA Cellular Limited and M/s Sunrise Asian Limited through her broker M/s India Securities Pvt. Ltd. 6.4] Copy of the following documents as to justify the amount of Long term capital gain of Rs. 27,50,406/- is enclosed:- S.No. Particulars Page No M/s IDEA Cellular Limited 1 Copy of D-mat statement of the assessee with the Union Bank of India for the period 01/04/2013 to 31/03/2014 25 2 Sale note Dt. 18/11/2013 for sale of 5,590 shares issued by Indira Securities Pvt. Ltd 26-27 M/s Sunrise Asian Limited 1 Purchase note as issued by M/s P Saji Textiles Limited regarding sale of shares of M/s Conart Trader's Limited (Now known as M/s Sunrise Asian Limited) to the assessee is enclosed 28 2 Copy of Share transfer form for transfer of shares in the name of the assessee 29 3 Copy of Share certificate, duly transferred in the name of the assessee 30 4 Copy of Amalgamation Order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s were sold through exchange. Hence, it is not a case where no enquiry was conducted. In fact from the material placed before us suggests some application of mind, by Assessing Officer. Admittedly, the Ld. Pr. CIT in the impugned order has recorded the factum collection of evidence and recording of statement. In view of Ld. Pr. CIT the Assessing Officer ought to have made further enquiry. In this background now let us examine the correctness of the view taken by the Ld. Pr. CIT. The assessee has placed reliance on various case laws. The assessee has also placed reliance on the order of Co-ordinate Bench rendered in the case of Smt. Manita Vs. Pr. CIT ITA No.3432/Del/2019 dated 12.7.2019. The Co-ordinate Bench held as under :- 6. We have considered the rival submissions and perused the material on record. The A.O. in this case passed the assessment order under section 143(3) because the case was selected for scrutiny for the reasons of suspicious long term capital gains on shares. The A.O. called for explanation of assessee and assessee filed reply time to time which are part of the record. The explanation of assessee is supported by all the evidences and material on record....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g term capital gains exemption was claimed have been mentioned in the return of income itself. Thus, there was no reason to believe that the A.O. did not examine this issue at the assessment stage. Further, the case was selected for scrutiny because the ITA.No.3432/Del./2019 Smt. Manita Muzaffarnagar suspicious long term capital gains earned by assessee. This information must be based on information received from Investigation Wing. Therefore, Ld. D.R. was not justified in contending that report of Investigation Wing have not been considered by the A.O. Since it was the sole reason for completing the scrutiny assessment, therefore, it could not be believed that A.O. would not have gone through the material available before him on record. May be the A.O. has not discussed the details in the assessment order but it would not give right to the Ld. Pr. CIT to hold that no investigation or enquiry have been made at assessment stage. It appears that A.O. has taken one of permissible view in the matter as per Law and if the Ld.Pr. CIT does not agree with the view of the A.O, the assessment order could not be treated as erroneous in so far as it is prejudicial to the interests of the Reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....error in setting aside the revision order under section 263 passed by the Principal commissioner." 10. A similar view has been taken by the Hon'ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. (supra) wherein it has been held as under: "That the findings recorded by the Tribunal were correct as the Commissioner had not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner was that "order passed by the Assessing Officer may be erroneous". The Commissioner had doubts about the valuation and sale consideration received but he should have examined this aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined this aspect and accepted the computation figures but he had reservations. The Commissioner in the order had recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and. therefore. the assessment order was "erroneous". This finding would be correct. if he had examined and verified the transact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y step to make enquiry herself and also did not point out that how and in what manner the enquiries made by the A.O. were not sufficient. We therefore considering the totality of the facts and keeping in view the ratio laid down by the Hon'ble Delhi High Court in the aforesaid referred to cases, are of the view that the Ld. CIT(A) was not justified in holding the assessment order dt. 28/1 0/2015 passed by the A.O. as erroneous and prejudicial to the interest of the Revenue, therefore the impugned order is set aside. 15. It is submitted on behalf of the assessee that the issue of genuineness of the shares of M/s Sunrise Asian Limited has been examined by the Co-ordinate Bench of the Tribunal and this fact is duly recorded by it in the case of Dipesh Ramesh Vardhan Vs. DCIT-Central Circle -2(2), Mumbai ITA No.7648/Mum/2019 as observed in para 9 to 12 is as under :- 9. The fact that the assessee could not produce the concerned person of M/s SAL was rightly controverted by submitting that the aforesaid entity was not under the control of the assessee and the assessee was under no obligation to do so. The existence of M/s SAL is beyond doubt since it was a listed corpora....