TaxTMI 
TaxTMI 
2021 (5) TMI 650
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....hase and sale of shares are genuine after issuing notice u/s. 133(6) of the Act for verification of the details and documents filed by the assessee and as no discrepancy was found in the transaction. The Assessing Officer completed the assessment on 27/07/2016, accepting the return of income filed by the assessee by observing as follows:- "3. On perusal of the details submitted by the assessee that during the financial year 2013-14 relevant to assessment year 2014-15, assessee derived income from Long Term Capital Gain (with STT) and claimed exemption u/s. 10(38) of the Income Tax Act, '61. It was revealed that assessee had made some share transactions regarding sale of shares through M/s. Dynamic Equities Pvt. Ltd. It this connection, letter u/s 133(6) of the Act was issued to M/s. Dynamic Equities Pvt. Ltd. for verification of said transactions regarding sale of shares. Reply received from M/s. Dynamic Equities Pvt. Ltd. which appears to be confirmed with details filed by the assessee and all transactions made through banking channel and no discrepancy found into the transactions." 3. The ld. Pr. CIT, issued a notice dt. 09/11/2018 u/s. 263 of the Act to the asses....
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....the case of the assessee for this Assessment Year was selected for scrutiny through CASS for the reason that "suspicious long term capital gain on shares" based on the input from the investigation wing. The Assessing Officer called for details and after making enquiries accepted the claim of the assessee that the transactions of purchase and sale of shares resulting in long term capital gains were genuine. He submitted that this is a possible view based on evidence and hence, the assessment cannot be revised by invoking powers u/s. 263 of the Act, as there is no error in the order. (c) that the ld. Pr. CIT was wrong in coming to the conclusion that during the assessment proceedings, the Assessing Officer did not conduct extensive necessary enquiries. The extent of enquiry was not elaborated. It is not a case of non-application of mind or non-verification. (d) that the ld. Pr. CIT acknowledges the fact that the decision of the ITAT on this issue are in favour of the assessee, but he has not followed the proposition of law laid down in these orders. (e) that the ld. Pr. CIT did not make any enquiry or verification on his own and simply based on suspicion, h....
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....ing Officer. The Assessing Officer records that the transactions were made through proper banking channels and no discrepancies were found. Thus, it is evident that the Assessing Officer has conducted independent enquiries, verified the documents filed by the assessee and thereafter took a view that the transactions of sale and purchase of shares were genuine. This view of the Assessing Officer is supported by a number of decisions of the ITAT, including the decisions in the case of Aruna Bansal vs. ITO in ITA No. 976/Kol/2018, order dt. 08/11/2018 and the order of the Jaipur Bench of the Tribunal in the case of DCIT vs. Sourabh Mittal in ITA No. 16/JP/2018, order dt. 29/08/2018, etc. 9. The ld. Pr. CIT himself states that the Assessing Officer did not conduct extensive/necessary enquiries. He does not specify what are the enquiries that the Assessing Officer has failed to do, nor what are the enquiries that he is of the view that had to be done in this case. The ld. Pr. CIT does not conduct any enquiry himself. He simply makes certain general statements and refers to certain material forwarded by the investigation wing and directs the Assessing Officer to make additions. Tax ca....
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.... 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 also held at pg-88 as follows: "The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue.....
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....ce 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 far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, thi....
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....roceedings 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 illegal and without jurisdiction. It held that the Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, on perusal of....
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.... 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 the Act can be culled out: a) 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 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. b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax ....
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.... 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 assessment. We now examine the following judgments on this issue:- DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION 357 ITR 388 (Delhi High Court) It was held that revisionary power u/s. 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD 343 ITR 329 (Delhi....
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....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 without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply ITA Nos. 01-05 & 13-15/Kol/2019 A.Y. 2014-15 Tikmani, HUF Vs. ITO Wed-28(4) Kol. Page 19 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. This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 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....
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....2 (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 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142(1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assesse....
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....e 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 assumption of facts or on incorrect application of law or without applying the principles of natural justice and without application of mind, it would be treated as erroneous. Likewise, the expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to loss of tax. If due to an erroneous order of the AO the Revenue is losing tax lawfully payable by a person, it would be certainly prejudicial to the interest of the Revenue. The power of revision is not meant to be exercised for the purpose of directing the AO to hold another investigation without describing as to how the order of the AO is erroneous. From this it also follows that where the assessment order has been passed by the AO after taking into account the assessee'....
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....nd 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 that there should have been a deeper probe by calling for more details. This is neither here nor there, when one keeps in view the ingredients of s. 263. (Para 15) Insofar as the insurance claim is concerned, the CIT observed that the assessee had shown receivable on this account to the tune of Rs. 1.21 crores but no details had been furnished. The AO had also not made any inquiries. In the detailed discussion on this aspect, the Tribunal has observed that insurance claim was lodged for the goods lost in transit. The assessee at that time had merely filed a claim with the insurance company. This claim had not been approved as the insurance co....
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....ied 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 for the ld. CIT to come to a conclusion that the AO should have invoked Rule 8D, without himself recording the satisfaction that the calculation given by the assessee in its disallowance made suo moto u/s. 14A is not correct. Coming to the other expenses claimed, the ld. CIT has simply collected information after raising queries and has not given any finding whatsoever that there is an error made by the AO or that the circumstances was such that would require and warrant further inquiry or investigation. No error in the assessment order has been pointed out and it is not stated as to how prejudice was caused to the revenue....