TaxTMI 
TaxTMI 
2024 (6) TMI 151
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....he Act is found to be erroneous in so far as it is prejudicial to the interest of the revenue. 2 2. That the Id. Principal Commissioner of Income- tax grossly erred in treating the exempt Long-Term Capital Gain earned by the assessee appellant as bogus and failed to appreciate that the ld. Assessing Officer had passed the assessment order after appreciating all supporting documents and evidences submitted by the assessee and therefore the assessment order passed by the ld. Assessing Officer is neither erroneous nor is prejudicial to the interest of the revenue. 3 2.1. That the Id. Principal Commissioner of Income- tax grossly erred in ignoring the detailed submissions made by the assessee in response to notice u/s. 263 and in passing the impugned order on assumptions, presumptions, conjectures and surmises which is bad in law. 4 3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing." 3. The fact as culled out from the records is that in this case the assessee has filed return of income on 26.10.2016 for the A.Y 2016-17 declaring total income at Rs. 16,40,790/- and the same was processed on 14.04.2017 u/s. 143(1) at the retur....
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....mation received from the Investigation Wing in this case which covered various aspects such as introduction, identification of this penny stock company. detailed modus operand of obtaining of bogus LTCG, parameters for defining / identifying the penny stocks, detailed analysis of company M/s Appu Marketing Limited / Ejecta Marketing Limited, case laws in favour of revenue, action taken by SEBI in this stock etc. 6.3 The AO failed to consider this detailed information received from the Investigation Wing, Mumbai. The AO did not make any inquiry from the penny stock companies, stock exchange, brokers etc. to examine the genuineness and correctness of the claim of long term capital gain made by the assessee. The AO simply accepted reply of the assessee and documents submitted by him without making any inquiry / Investigation / verification of the same. 6.4 Further, it is noticed that the AO issued a query letter dated 17.12.2021 in this case to the assessee as under "Please refer to the scrutiny assessment proceedings u/s 143(3) / 147 of the Act in your case for the AY 2016-17. In this connection notice u/s 148 of the Act was issued on (31/3) / 2021 vide DIN & notice No.ITBA/AST....
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....ke inquiry on the issue for which the case was reopened. The AO accepted the claim of the assessee without any verification on inquiry. The AO erred in accepting the claim of the assessee as genuine ignoring the information received from the Investigation Wing. Thus, the AO failed to consider the material available on record. 7 As discussed above, the AO failed to apply his mind on the material available on record and failed to invoke the applicable provisions of law. This in turn has resulted in passing of an erroneous order by the AO in the case due to non-application of mind to relevant material, an incorrect assumption of facts and an incorrect application of mind to the law which is prejudicial to the interest of the revenue and hence liable for revision under section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has held as under- ".... An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind." 8 Considering all the facts....
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....Marketing Ltd. Is a listed company and the entire shareholding of which is bought by the syndicate to provide accommodation entries to the beneficiaries with the help of the brokers and entry operators. It was also noticed that transactions to provide such accommodation entries are done in three steps i.e. purchase of share at nominal rate, price rigging and final sale of share. The above information have been analyzed and it has been found that the assessee has introduced his own unaccounted funds through the colour of bogus LTCG entry, by trading in the penny scrip of M/s Goenka Business and Finance Limited & Ejecta Marketing Ltd. On the basis of the information received, it is found that the assessee is one of the beneficiary and taken accommodation entry as detailed here under: S.No. Name of Scrip LTCG Transaction Amount 1. Appu Marketing Ltd./ Ejecta Marketing Ltd. (Script code-EML/538653/INE649L01013) 77,79,200/- 4. That the assessee filed his reply on 03.01.2022 is pursuance of notice u/s 142(1) dated 17.12.2021 wherein e submitted as under: * That I have purchased 12500 equity shares of Rs. 10/- each of M/s Appu Marketing and Manufacturing Limited/ Ejecta ....
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....e proceedings u/s 263 of the Act vide notice dated 29.01.2024 on the finding that: "After considering the reply submitted by you, the Assessing Officer did not draw any adverse conclusion of the issue of reopening and accepted income declared by you in the ITR. However, it is observed on perusal of assessment record and case history that the Assessing Officer did not examine the issue of bogus long-term capital gain properly and failed to make inquiry/investigation which was required considering the detailed report of the Investigation Wing in the case. The bogus LTCG thus claimed was required to be added to the total income. In view of the above-mentioned facts, it appears that the assessment order passed u/s 147 r.w.s. 144B of the I.T. act 1961 in your case for A.Y. 2016-17 dated 23.03.2022 is erroneous in so far as it is prejudicial to the interest of the revenue. I, accordingly, propose to modify the order on the above issue under the power vested with me u/s 263 of the I.T. Act, 1961." 8. That it is trite that the exercise of power u/s. 263 of the Act is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest ....
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....example, when an Assessing 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 Assessing Officer has taken one view with which the CIT did not agree with, it cannot be treated as an erroneous order prejudicial to the interest of the revenue because the view taken by the Assessing Officer is unsustainable in law. 11. The ld. AO has examined that issue as it is evident from the query posed and reply filed by the assessee. Since, in this case ld. AO has clearly conducted the enquiry and revenue did not pin point the error on the part of the assessing officer the order passed after due application of mind cannot be subjected to proceeding u/s. 263 of the Act. 12. The AO while framing the assessment had taken a possible view, and the show cause notice u/s. 263 does not demonstrate the error remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudi....
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....2022) 11 TMI 1177 has held: Revision u/s 263 - PCIT may have information from the assessment file or through other sources - correctness of the exercise of power under section 263 - contention advanced before us by the revenue is that the assessee could not establish the genuineness of the transactions to prove that it had not indulged in any dubious share transactions meant to account for undisclosed income under the garb of long term capital against (LTCG) to claim exemption under Section 10 (38) - HELD THAT:- In the cases on hand there is nothing on record to show that such an exercise was done by the PCIT. Tribunal after noting several decisions on the subject rendered by the Coordinate Benches of the Tribunal had allowed the assessee's appeal and set aside the order passed by the PCIT under Section 263 - Tribunal has proceeded to examine the merits of the matter and granted relief. It is the submission that so far as the merit of the cases are concerned similar issue was tested by this Court in the case of Principal Commissioner of Income Tax Vs. Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] Though such may be the issue, as pointed out earlier the learned Tribunal had....
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....3 the ld. PCIT did not bring anything on record that how the order of the ld. AO is erroneous and prejudicial to the interest of the revenue what material he relied - He relied on the same material on which the ld. AO has already applied his mind. In the proceeding before the ld. PCIT the assessee in his reply submitted the profit / loss derived by the assessee and the figures reported in the PCIT notice is same in the assessment order and in the reply to the assessee. On issue no. 1 the ld. PCIT noted that " The AO accepted the version of the assessee without properly examining and verifying the ITS details with transactions in the ledger account maintained by the broker and from the bank statement.", and on issue no. 2 he observed that " The AO is directed to verify the sales from the ledger account in the books of broker and from the BSE/NSE. As regards claim of the assessee in respect of transactions carried out by other parties by utilizing the PAN of the assessee, the AO is directed to carry out necessary verifications from such other parties and from BSE/NSE. Thus, the bench noted that on both the issue the ld. PCIT has not pointed that how the order is erroneous and pre....
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....sumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. However, every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. We draw strength from case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and also from the case of CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC). * Hon'ble ITAT Kolkata Bench in Mukesh Kumar Agarwalla v. PCIT (2023) 12 TMI 628 has held: Revision u/s 263 - CIT noticed that AO had not properly examined the issue of suspicious sale transaction in shares and exempt LTCG claimed by the assessee - whether the AO has....
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....e to establish and show the error or mistake made by the AO, making the order unsustainable in law. The matter cannot be remitted for a fresh decision to the AO to conduct further enquiries without a finding that the order is erroneous, the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the AO would imply and mean that the Ld. Pr. CIT has not examined and decided whether or not the order is erroneous but has simply directed the AO to decide the aspect/question. Assessee appeal allowed. * Hon'ble ITAT Ahmedabad Bench in Darshan Shivlal Thakkar v. PCIT (2023) 8 TMI 25 has held: Revision u/s 263 by CIT - Addition u/s 68 - exempted u/s 10(38) denied - long-term capital gain shown by the assessee as arising from the sale purchase of the script of a penny stock company - 2nd round of litigation - HELD THAT:- AO during the original assessment proceedings has taken one of the possible views while framing the assessment under the provisions of section 143(3) of the Act. It is the settled position of law that any plausible view taken by the AO during the assessment proceedings cannot render ....
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....st of uncertain factors both internal and external. SEBI is the watchdog for any manipulative actions in the stock market. The assessee has entered into meager transactions of sale of mere 15000 shares held by it and no adverse SEBI report is available implicating the assessee for any concerted or manipulative action which may give rise to any kind of suspicion of any fictions gains. The order of co-ordinate Bench does not tend to remove the fetters placed on the scope of Section 263 under consideration in the present case. Some inadequacy will not render each and every order erroneous on the touchstone of Section 263 where the extent of inquiry has been questioned by the Revisional Commissioner. The issue requires to be looked in the context and setting of facts in each case. Decided in favour of assessee. * Hon'ble ITAT Chandigarh Bench in Trivikram Singh Toor v. PCIT (2022) 11 TMI 523 has held: Revision u/s 263 - Reopening of assessment u/s 147 - Long Term Capital Gain from the position of the possibility of it being a sham transaction - HELD THAT:- On giving our thoughtful consideration to the claims and counter claims of the parties before us, we deem it appropriate to fir....
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....g the future we act in the present. Decisions taken in the present are based on available input. What lies in the future is always an estimated guess. By accepting an estimated addition the broker cleverly evades penal consequences of Detection and discovery of client fund mismanagement. These statements of surrender by Brokers it cannot be over emphasized should be treated with utmost caution in the interests of the economic activity in the country and as a safeguard to the trusting citizens who engage and pay for the services of these Brokers. These surrenders consciously and unscrupulously made invite whimsical consequences for the bonafide investors. How and why the tax department should accept the words of such a manipulative fast thinking person and why the words of such a manipulative person be permitted to be given a precedence over the documents and evidences relied upon by a person relying in good faith on the bonafide of his Broker needs to be seriously introspected upon and addressed by the tax authorities. Permitting such criminal acts by carelessly accepting the statements/surrenders made by unscrupulous brokers needs to be addressed consciously especially when ....
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.... Manna Trust (2022 (1) TMI 693- Rajasthan High Court dated 12.01.2022 33 34 11. PCIT v Kaushalya Dealers (2023 (5) TMI 365 - CALCUTTA HIGH COURT) dated 24.11.2022 35 36 12. PCIT v. Reeta Laxmani & Others 2022 (11) TMI 1177 - CALCUTTA HIGH COURT) dated 22.11.2022 37 39 13. Gaurav Purohit v. PCIT 2024 (2) TMI 336 - ITAT JODHPUR) dated 02.02.2024 40 54 14. Gayatri Devi v. CIT Central 2023 (10) TMI 23 - ITAT JAIPUR) dated 20.09.2023 55 82 15. Mukesh Kumar Agarwal v. PCIT 2023 (2) TMI 628 - ITAT KOLKATA) dated 09.10.2023 83 87 16. Darshan Lal Thakkar v. PCIT 2023 (8) TMI 25 - ITAT AHMEDABAD) dated 30.06.2023 88 92 17. Pooja Mittal v. PCIT 2023 (6) TMI 836 - ITAT DELHI) dated 12.05.2023 93 97 18. Shri Trivikram Singh Toor v. PCIT 2022 (11) TMI 523 - ITAT CHANDIGARH) dated 21.09.2022 98 135 7. The ld. AR of the assessee in addition to the written submission so filed vehemently argued that the case of the assessee was re-opened for verification of the long-term capital gain based on the information received from the investigation wing of the Mumbai unit. The assessee has submitted the all the relevant details that has been called....
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....e issue based on the reasons recorded and that why the order of the ld. PCIT is within the power vested u/s. 263 of the Act. 9. We have heard the rival contentions and perused the material placed on record. The brief facts as emerges from the orders of the lower authority is that as per the record and the information available based in the report of the Directorate of Income tax (Inv), Mumbai, the assessee has introduced his own unaccounted funds through the colour of bogus LTCG entry, by trading in penny scrip of M/s Goenka Business and Finance Limited & Ejected Marketing Ltd. The revenue has alleged that the assessee is one of the beneficiaries and has taken accommodation entry and thus it was alleged that the assessee has unaccounted income to the extent of Rs. 77,79,200/- in the form of cash to obtain accommodation entries. With the information based and after obtaining necessary approval from higher authority ld. AO issued notice u/s 148 of the I.T Act 1961 on 31/3/ 2021. The assessee participated in the reopening proceeding by first filling the return of income on 21/5/2021 declaring total income at Rs. 16,40,790/- and exempt income of Rs. 78,87,360/-. There upon notice u/s ....
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....(3) of the Act on 14.04.2017 at returned income. As per record it is seen that the information and detail report provided by the Directorate of Income tax (inv), Mumbai. As per the information it has been found that the assessee has introduced his own unaccounted funds through the colour of bogus LTCG entry, by trading in penny scrip of M/s Goenka Business and Finance limited & Ejected Marketing Itd. The assessee is one of the beneficiary and taken accommodation entry as detailed here under: S. No. Name of Scrip LTCG transaction amount Rs. 1. Appu marketing ltd./ejecta marketing ltd. (script code-EML/538653/INE649L01013) 77,79,200/- Thus the assessee has unaccounted income to the extent of Rs. 77,79,200/- in form of cash which he had advanced as cash which he had advanced as cash to obtain accommodation entries. For these reasons, after recording necessary reasons and after obtaining approval from competent higher authority, notice u/s 148 of the I.T act 1961 was issued on (31/3) / 2021 vide DIN no. ITBA/AST/148/2020- 21/1032022048 * (1) In response to the notice the assessee filed return of income on (21/5) / 2021 declaring total income at Rs. 16,40,790/- and exempt i....
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....red to invoke the provision of section 263 of the Act. The assessee challenged the contentions of the PCIT exercising the power u/s. 263 of the Act stating that the issue that the ld. PCIT has raised has already been enquired upon and the ld. NFAC has applied mind on the aspect of the matter for which the reasons recorded, verification and satisfaction on the information is duly record in the order of the assessee. Therefore, the law does not empower the ld. PCIT to review the order of the NFAC [ld.AO]. On the aspect of the matter the bench noted from the submission of the assessee that the ld. NFAC [ld. AO] has called for the details for which the case was reopened, examined the details and completed the assessment after recording the satisfaction. Thus, the view taken by the ld. AO based on the information cannot be reviewed by the PCIT without establishing that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue. Both this twine condition is not established from the order of the PCIT. Based on the reasons record, the ld. AO called for the details, details placed on record were examined and the satisfaction on the issue is recorded in the order of ....
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....nd prejudicial to the interest of the revenue. Since this twin condition is not satisfied the view taken by the ld. AO is not erroneous or prejudicial and thus, we are of the considered view that the issues which are already raised, verified and settled there cannot be applied the provision of the section 263 of the Act. Not only that, but the order has also been passed in this case by NeAC where there are as much as four units i.e. Assessment unit, Verification unit, technical unit and Review unit and thus, these all units tested order merely the addition is not made cannot hit the provision of section 263 of the Act. The prerequisite for exercising the jurisdiction by the learned Principal CIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The ld. PCIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. This pr....