TaxTMI 
TaxTMI 
2021 (4) TMI 1022
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....cted for limited scrutiny for the following reasons:- "(i) Mismatch in sales turnover reported in Audit Report and ITR (ii) Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR (iii) Suspicious sale transaction in shares (Penny Stock tab in ITS)" 3.1. The assessment was completed u/s 143(3) on 29/12/2017, determining the total income of the assessee company at Rs. 20,65,790/-. The ld. Pr. CIT, Kolkata, issued a show- cause notice to the assessee on 07/01/2020, proposing to revise the assessment order passed u/s 143(3) of the Act, passed on 29/12/2017 by invoking his powers u/s 263 of the Act. The showcause notice is at page 2 & 3 of the assessment order. The assessee replied to the showcause notice. After considering the reply, the ld. Pr. CIT, at para 6 of his order, held as follows:- "6. I have carefully considered the facts of the case and gone through the submission of the assessee. On perusal of the assessment record, it is seen that, the assessee company had claimed loss of Rs. 73,22,956/- on account of sale transaction in penny stock shares of M/s. Cressanda Solutions ltd, Kailash Auto Finance Ltd. & Rajlaxmi Industries Ltd. In t....
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....ply to the show cause notice issued u/s 263 of the Act and also the arguments made before the ld. PCIT. The sum & substance of his arguments are that the AO has called for and examined all the documents and evidences pertaining to the above transaction after due enqiry and has come to a plausible conclusion. That such conclusion of the AO is supported by number of judicial decisions including that of the ITAT. He relied on the decision of co-ordination Bench of ITAT, Kolkata in the case of M/s Gitsh Tikmani, HUF & Ors. In ITA Nos. 01 to 04/Kol/2019, ITA No. 05/Kol/2019 & ITA Nos. 13 to 15/Kol/2019 dated 20.09.2019 for AY 2014-15 and the decision of Co-ordinate Bench of ITAT , Kolkata in the case of Kaushal Kishore Bihani in ITA No. 690/Kol/2019 dated 19.10.2020 for AY 2014-15 and submitted that the issue is squarely covered in the assessee's favour as the fact those case are identical with the facts of this case. He filed a copy of the order of the Tribunal in the case of Manish Kumar Baid Vs. ACIT, ITA Nos. 1236& 1237/Kol/2017 dated 18.08.2017, for the proposition that purchase and sale of shares of M/s. Kailash Auto Finance Ltd., cannot be considered as bogus, in the facts an....
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....furnish the following information. (i) Please state the mode of acquisition of the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI. Documents in support of the same may be furnished. (ii) Kindly state who looks after your investments in share and mutual funds. Is your consent sought before making decisions related to purchase and sale of shares? (iii) Kindly state the financial rationale behind investment in the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI. Did you do any financial and technical analysis while trading in this scrip? If so, what sources were referred to? (iv) Did you earn any dividend out of the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI? (v) Please state the broker/brokers involved in trading of the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI? (vi) A report on bogus LTCG through penny stocks at the platform of BSE has been received by the Investigation Wing, Kolkata where it is seen that the scrip CRESSANDA, KAILASH AUTO & RAJLAXMI is used for providing accommodation entry in the form of bogus LTCG in lieu of commission by entry operators and brokers who work in connivance with each other. In light of this fact, please clarify why the LTCG earned through the scrip shou....
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....purchase of share of M/s Surbhi Chemicals and Investment Ltd. "Details of Investment in Equity Shares during the year under consideration i) Name & address of the company in which investment is made ii) Copy of allotment letter iii) Copy of "Contract Note" in respect of quoted shares iv) Date of allotment of shares v) No. Of shares vi) Value of shares vii) Source of payment made for obtaining shares viii) In this regard, you are also requested to furnish the evidence of Mode of such payment alongwith the details of cheque numbers and the copy of bank statement (FY2013-14) highlighting the relevant entries therein showing the transaction. 7. Please furnish the following details in respect of Long Term Capital Gain i) Name of Scrip ii) Date of purchase iii) Quantity iv) Rate v) Mode of payment vi) Date of sale vii) Quantity Sold viii) Rate ix) Date of Sale x) Amount of dividend xi) STT Paid xii) L. T. Capital Gain xiii) Copy of Brokers "Contract Note" In this regard, you are also requested to furnish the evidence of Mode of such payment along with the details of cheque numbers and the copy of bank statement (FY 2013-14) highlighting the....
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....own by various courts on the issue of revisionary jurisdiction of the Commissioner of Income Tax u/s 263 of the Act. The Hone'ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiciton u/s 263 of the Act by the Principal Commissioner of Income Tax and culled out the principles laid down in the judgments as below: 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Sec.263 (1) of the Act. It a....
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....the Commissioner passed his order; that the mechanics of the section had become so complicated over the years that two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospective will not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi High Court held that the power of suo motu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an "erroneous judgment" means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should have been written differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so f....
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....nditure where the said claim was allowed by the latter on being satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be ille....
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.... tax officer was not justified in accepting the initial capital, the gift received and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever . He directed the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed were correct or not" 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of th....
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....t if this is permitted, litigation would have no end except when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. g) The power of the Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assess....
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....de 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 able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries....
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....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 the case 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 clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Raison Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questio....
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.... Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of Rs. 1 lakh was to be received for sale of permit. If that is so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. 341 ITR 166 (Del) The prerequisite to the exercise of suo motu jurisdiction under s. 263 by the CIT is that the order of the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. Two conditions are to be satisfied, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) the error committed by the AO in the order is prejudicial to the interest of the Revenue. Both these conditions are to be satisfied simultaneously. It is also well-settled principle that provisions of s. 263 would not be invoked merely to correct a mistake or error committed by the AO unless it has caused prejudice to the interest of the Revenue. If an order is based on incorrect assumpti....
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....whisper that the order is erroneous. Even if it is inferred that non-consideration of the issues pointed out by the CIT would amount to an erroneous order, it is not stated as to how this order is prejudicial to the interest of the Revenue. The penultimate paras of the order, at best, contain the observations that the AO was satisfied with making flimsy additions which were deleted by the CIT(A). There is not a whisper as to how this order was prejudicial to the interest of the Revenue. That apart, the approach of the Tribunal in discarding the observation of the CIT about not making proper inquiries in respect of the said four issues is also justified and without blemish. (Paras 12 to 14) First comment of the CIT was in respect of finished goods in the closing stock. The CIT found that these were to the tune of Rs. 5.28 crores. According to the CIT, when the total turnover of the assessee was Rs. 6.13 crores, the AO should have satisfied himself by calling for more details as to how there was closing stock of such a magnitude of Rs. 5.28 crores. Thus, the CIT has not doubted the statement of finished goods in the closing stock furnished by the assessee. He has only remarked ....
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....t as claim under s. 80HHC was fully disallowed by the AO. It is not at all observed as to how the order of the AO on this account was erroneous and further as to how it was prejudicial to the interest of the Revenue. Thus, order of the CIT was rightly set aside by the Tribunal. In the case on hand the ld. CIT finds fault with the AO for not invoking Rule 8D while making disallowance u/s 14A. The Hon'ble Delhi High Court in the case of Maxop Investments Ltd. Vs CIT (supra) held that the AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is not satisfied with the correctness of the claim of the assessee. This is a condition precedent while rejecting the claim of the assessee, with regard to incurring of expenditure or no expenditure in relation to exempt income. The AO will have to indicate cogent reasons for the same and Rule 8D comes into play only when the AO records a finding that he is not satisfied with the assessee's method. In the case in hand the AO has not made any such recording of satisfaction and has accepted the disallowance made u/s 14A by the assessee. In such circumstances it is not open ....
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....ing. We are observing in view of all these facts that the Assessing Officer had rightly accepted the assessee's LTCG keeping in making the overwhelming evidence forming part of records. This tribunal's co-ordinate bench decision (supra) as well as hon'ble jurisdictional high court's decisions CIT vs. Ratan ITA No.105/2016, M/s Classic Growers Ltd vs. CIT ITA 129/2012, CIT vs. Lakshmargarh Estate & Trading Co. Ltd. (2013) 40 taxman 439 (Cal), CIT vs. Smt. Shreyashi Ganguly ITA 196/2012, CIT vs. Bhagwati Prasad Agarwal (2009/ TMI 34738/Cal in 22/2009 29.04.2009 have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee's foregoing LTCG derived from sale of shares to be genuine. That being the case, we hold that PCIT's exercise of revision jurisdiction merely on suspicious circumstances by invoking in sec. 263 Explanation (supra) with effect from 01.06.2015 is not sustaining. We therefore reverse the PCIT's order under challenge and restore the impugned assessment framed by the Assessing Officer on 29.07.2016. It is made clear....