TaxTMI 
TaxTMI 
2021 (7) TMI 142
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....he Act. However, later it was selected for scrutiny through CASS and the assessment order u/s. 143(3) of the Act was passed on 19.07.2017 wherein the AO accepted the return of income as it was returned by the assessee. According to Ld. PCIT, he received a proposal for review of the assessment order dated 09.07.2017 since an error was detected in the assessment order and thereupon he perused the said proposal and found that the AO has failed to take logical action on the information available with him. According to Ld. PCIT, he issued show cause notice (SCN) to the assessee u/s. 263 of the Act, the relevant portion of the SCN is reproduced as under: "The main reason for scrutiny was in regard to huge investment made (Rs. 8.35 crores) in unlisted securities. The officer has not inquired about the source of such huge investment, it appears from the record that the assessee sold inventory (MF units) and diverted the fund into investment in unlisted equity; but no detail was obtained by the officer. The assessee earned dividend income of Rs. 2.32 crores out of MFs but disallowance u/s. 14A had not been considered by the officer. In the course of assessment proceedings, the AO had pa....
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....erused the records. Before we advert to the facts and law involved in this lis before us, let us revise the law governing the issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by ld. Principal CIT to invoke his revisional powers enjoyed u/s. 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Pr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s. 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneo....
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.... scrutiny was in regard to the huge investment made of Rs. 8.95 crores in unlisted equity and the main fault attributed by him was that the source of such huge investment has not been enquired into by the AO. However it is interesting to note that in the same breath the Ld. PCIT notes that " it appears from the record that the assessee sold inventory (MF unit) and diverted the fund into the investment in unlisted equity." From the aforesaid observation/finding made by the Ld. PCIT in the show cause notice issued on 06.03.2020 which has been reproduced (supra) we note that the Ld. PCIT himself has recorded a finding that the source of huge investment in unlisted equity was from the sale consideration of the mutual fund units/inventory (MF units). Therefore, the main fault alleged by the Ld. PCIT that the source of huge investment made by the assessee to the tune of Rs. 8.95 crores in unlisted equity has not been enquired into by the AO falls down by the Ld PCIT's admission that from the assessment records it appears that the source from the investment was from the sale consideration of the mutual fund units/inventory. And the remaining fault is that no details of the investment ....
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.... below: 10. In order to buttress this fact the assessee has filed the bank statement as well as mutual funds statements which reflects that the amount has been received from the redemption of mutual funds, he drew our attention to page 41 and 46 of PB wherein the copy of statement showing source of investment made in unlisted equities along with relevant bank statement and mutual funds statement are found enclosed. He thereafter drew our attention to page 37 of PB wherein the details of other investment under non-current investment is given wherein the name of investment in equity instruments are given and from a perusal of the same, we note that the details of investment in quoted shares are given. We note from page 37 of PB the details viz. name of unquoted and quoted shares along with the number of shares held by the assessee as on 31.03.2015. The entire details of investment made by the assessee is seen to have been filed by the assessee before the AO. So, therefore, the Ld. PCIT's allegation that no details was called for by the AO during the enquiry conducted in respect of huge investment made to the tune of Rs. 8.95 crores in unlisted equity is on wrong assumption of fa....