TaxTMI 
TaxTMI 
2025 (6) TMI 316
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.... explanation-2 there under and that too by recording incorrect facts and findings and in violation of principles of natural justice. 2. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in setting aside the order passed by the assessing officer u/s 143(3) dated 31-12-2018 with direction to pass fresh order after conducting proper enquiries and investigations etc. into the claim of the assessee and that too by recording incorrect facts and findings and without observing the principles of natural justice and more particularly when all the details/information/evidences were available on the record at the time of assessment proceedings. 3. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in passing the impugned order u/s 263 and that too without providing the opportunity of being heard and in violation of principles of natural justice. 4. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in observing that there is nonapplication of mind on the part of assessing officer in as much the necessary verification of facts/e....
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....ome /system Rs. 16,76,97,150/- Add: Addition/ Disallowances on account of: (1) Addition of account of expenses on agriculture income (As discussed in Para 3) Rs. 5,65,200/- Total income Rs. 16,82,62,350/- Or say Rs. 16,82,62,350/- 5. The assessee is an individual and derives income from salary and interest income. After verification of record, assessed u/s 143(3) of the I. T. Act on total income of Rs. 16,82,62,350/-. Issue demand notice & challan accordingly. Charge interest u/s 234A/B/C of the I. T. Act, as the case may be. Give credit for prepaid taxes, if any, after due verification." 4. Later, the PCIT, using his revisionary power under section 263 of the Act, passed the impugned order as under: - "3. After examination of records, a show cause notice u/s 263 of the Income Tax Act, 1961 was issued to the assessee through ITBA under DIN & Notice No. ITBA/REV/F/REV1/2020- 21/1031641759(1)/2287dated 22.03.2021 requiring him to explain as to why the order dated 31.12.2018 passed by the DCIT, Central Circle, Noida under Section 143(3) of the Income Tax Act should ....
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....on 21.03.2014 and 24.03.2014 as against alleged purchase bill dated 29.04.2013. No enquiries have been made by the Assessing Officer to ascertain the fate of balance payment and to the cause of delay in the payment to the Kolkata seller especially when the alleged trade was an off-line trade. No enquiries as to the date of delivery and lodging of these shares with the DP for demat and transfer have been sought by the Assessing Officer. The source of investment into the purchase of shares has also not been queried and investigated by the Assessing Officer during the assessment proceedings. No confirmation has been sought from the seller either. [iv] It is further noticed that the Assessing Officer has failed to take into account that CBDT had circulated a report from the Investigation Directorate, Kolkatavide letter F.No.287/30//2014-IT(Inv.-II)- Vol. III dated 16.03.2016 wherein the Investigation Directorate in its letter F.No. 75A/2015-16/257-273 dated 27.04.2015 had given details of enquiries conducted by it into the activities of providing accommodation entries in the form of LTCG in the trade of various shares and securities, to be claimed as exempted u/s 10[38] of the....
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....ts totalled Rs. 7,55,00,000/- as against disclosure of Rs. 7,00,00,000/- claimed by the assessee. The applicability of the provisions of Section 41[1] looking to the nature of credits in the books of the assessee was also not examined by the Assessing Officer especially in the light of the provisions of Section 115BBE of the Income Tax Act, 1961. Further, if the amount was received in pursuance to a contract for transfer of any capital asset, then such forfeited amount was also taxable in the year of receipt/forfeiture u/s 56(2)(ix) of the Act, yet the AO failed to make any enquiry or verification w.r.t. the nature of transaction wherein such amounts were received nor attempted to ascertain as to which year such amounts were received or in which year such amounts were forfeited and for what reasons. [vii] Records also show that the assessee purchased immovable property during the year for Rs. 7,51,44,720/- as against the stamp duty valuation of Rs. 38,41,10,000/- leading to possible invocation of the provisions of Section 56[2][vii][b][ii] of the Income Tax Act, 1961. However, neither the Assessing Officer has made any queries or conducted enquiries nor the assessee has of....
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....ling to enquire into the antecedents of the persons lending to the assessee as regards their identity and capacity and into the genuineness of transactions; lack of any query or enquiry into the application of the provisions of Section 56[2][vii][b] in the transaction involving purchase of immovable property, the absence of independent enquiries or verification from Noida authority into the nature of transaction between it and the assessee and merely accepting the claim of the assessee, the order passed by the AO definitely lacks the enquiries or verifications, which should have been done on the facts and circumstances of the case, thereby the order becoming erroneous in terms of clause (a) of Explanation-2 under Section 263 of the Income Tax Act. 6. In reply to Para 3[i] of the show cause notice dated 22.03.2021 wherein it was brought to the notice of the assessee that exempt income of only Rs. 18,84,000/- from agriculture has been claimed in the ITR and that in the column relating to income arising out of LTCG from transactions where STT has been paid, NIL income has been shown, without refuting the averment, the assessee has tried to shift the issue by stating that in t....
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....sed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue in the light of Explanation-2 to Section 263 of the Income Tax Act, 1961. 8. In respect of lack of enquiry by the Assessing Officer in the matter of receipt of Rs. 10,25,32,500/- from the sale of assessee's land to Noida, the assessee has reiterated the provisions of Section 10/37] of the Income Tax Act, 1961 relating to compulsory acquisition of urban agricultural land and to CBDT circular dated 25.10.2016 issued in the light of RFCTLAAR Act without stating anything whether any independent verification was undertaken by the Assessing Officer. In fact, records clearly show that even though the land under question was located in the vicinity of a municipal board and that the transaction involved was in the nature of mutual consent instead of compulsory acquisition, the Assessing Officer has not deemed it fit to carry out any independent verification or enquiries of his own before accepting the claim of the assessee. By doing so, the assessment order passed by him has been rendered erroneous in so far as it is prejudicial to the interests of the revenue. 9. S....
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..... Incriminating facts and findings were mentioned in the enquiry report of Inv. Wing Kolkata, which were also available before the AO at the time of making assessment. A bare reading of the report with massive supporting data and copies of statements of various entities involved in the accommodation racket at different stages and the detailed project report, would make it very clear that a racket was being run in an organized manner by the operators spread over various cities and involving various entities including penny stock companies, routing the sale purchase of shares through shell Cos controlled by various operators though a mesh of entities and also showing connivance of broking entities also. The AO neither confronted the assessee with the confessions of these entities nor carried out any independent verification with respect to them. The conclusions drawn in the report of Inv. wing were not based on mere fiction or general hypothesis but on the basis of extensive search and surveys operations done at various levels and then subsequent enquiries made to link the transaction in order to prove that the accommodation racket was being run by the operators for providing bogus L....
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....s seen that the assessee had claimed purchase of 335000 shares of CCL international Limited @ Rs. 31/share amounting to Rs. 1,03,85,000/- from one M/s Anaam Merchants Private Limited, a Kolkata based company, through off-line trade. It has not struck the Assessing Officer that out of the total purchase consideration of Rs. 1,03,85,000/-, the assessee could file bank transactions of only Rs. 1,00,00,000/-, Neither any query has been raised in respect of the balance amount of Rs. 3,85,000/- nor the assessee been asked to explain the source of Rs. 20,00,000/-. It has also not taken note by the Assessing Officer that there was a huge gap between the alleged purchase of shares on 29.04.2013 and the date of part-payment of purchase consideration on 21.03.2014 & 24.03.2014. This is all the more alarming given the fact that the sale bill by the Kolkata based company to a Ghaziabad resident detailing physical sale of shares is without payment of any stamp duty or details of distinctive numbers of shares being sold. No details of charging of Service Tax or registration with the Service Tax department on the said sale bill are present thereby lending little credibility to the said sale bill i....
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....uiry or verification, assessment order was erroneous and prejudicial to interest of Revenue. The AO in the instant case also, instead of making any independent verification, just accepted the claim of LTCG based on paper documents issued by hawala operators, when the sale of penny stock of CCL International Ltd was all already admitted by operators in their statements to be a part of accommodation entry only. 10.4 The other contention of the assessee in these proceedings is that the stock of CCL International Limited is not a penny stock or the company, a paper company and that orders passed by SEBI pronounce it so. In his support, the assessee has adduced a copy of order dated 06.04.2016 passed by SEBI in the case of CCL International Limited. The document filed by the assessee has been carefully examined. It is seen that the order of SEBI being relied upon by the assessee was passed by it in connection with the alleged failure by M/s CCL International Limited to view and redress complaints of investors against it through the use of SCORES [SEBI Complaints Redress System) as well as file Action Taken Reports with the regulator i.e., SEBI. The regulator did not express any....
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.... with the seller, of dubious distinction and the purchase consideration of suspected origins. In spite of the same, the Assessing Officer neither made adequate enquiries with the assessee nor did he make any independent verification of his own to check the veracity of the claim of the assessee. Failure to make the necessary enquiries and take them to the logical conclusion, in itself, attracts the provisions of Explanation-2 of Section 263 of the Income Tax Act, 1961. 10.6 Even without prejudice to the distinguishable facts, the decisions cited do not help the cause of the assessee. In the case of Reeshu Goel, where the decision was rendered after the passage of assessment order in the present case, the said assessee had purchased the shares directly from the company and the entire process of applying for shares, payment of purchase consideration, allotment of shares and its dematerialization was completed within 3 months unlike in the present case where the shares were allegedly purchased from a third party, without details of distinctive numbers, who was paid partially after a gap of about a year without the available antecedents details of dematerialization. Thus, on fa....
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.... 263 of the Income Tax Act, 1961 rendering the assessment order passed by him erroneous in so far as it is prejudicial to the interests of the revenue. The arguments made by the assessee before the undersigned are that the AO after being provided the documents, he has recorded his satisfaction and hence it is not the case of lack of enquiry by the AO. It is contended that mere unexpected increase in prices of shares would not lead to conclusion that the transaction was not genuine. It has been also claimed that the assessee had submitted the documents to discharge its onus wherein nothing adverse in pointed out in them and as such the order passed by the AO is neither erroneous nor prejudicial to interest of revenue. It has been contended that any subsequent difference of opinion of CIT in the manner of satisfaction arrived by AO, even if prejudicial cannot be termed as erroneous. The assessee has relied several judicial rulings in support of this contention. All the rulings are based on provisions of the Act which existed prior to amendment wherein explanation-2 has been introduced w.e.f. 1/4/2015 deeming certain situations to be erroneous and prejudicial to interest of revenue. H....
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....ve been made, have not been made, making the order erroneous and prejudicial to interest of revenue within the meaning of section 263 read with Clause (a) of Explanation-2 there under. I, therefore, under the powers conferred u/s 263 of the Income Tax Act, 1961, hereby set aside the order passed by Assessing Officer u/s 143[3] for A.Y. 2016-17 with direction to pass fresh order after conducting proper enquiries, including third party enquiries and investigations etc. into the claim of the assessee, after providing opportunity to the assessee also." 5. Aggrieved, the assessee filed appeal before the Tribunal. 6. The Ld. Counsel submitted that the issue of capital gains of Rs. 8,74,51,109/- arisen on sale of shares of M/s. CCL International Ltd., claimed as exempt under section 10(38) of the Act had been examined by the Assessing Officer (AO) in depth. It was also submitted before us that the assessee had filed the copy of the Tribunal order in the case of Mukta Gupta vs. ITO in ITA No. 2766/Del/2018 dated 26.11.2018 [page 100A to 100L of PB], before the AO. The details of the bank account, DEMAT Account and purchase bills etc., had been filed before the AO on 16.12.2018, and t....
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....] had held that the jurisdiction under section 263 of the Act could not be assumed on the basis of suspicion and thus, nothing adverse could be read from this observation of the Ld. PCIT. The Ld. PCIT had raised doubts on purchase bill filed by the assessee in paragraph 10.3 of the impugned order. But in view of the fact that the shares were received in the depository account of the assessee on 25.03.2014 (page 77 of PB) and even if it was assumed but not admitted that the shares were purchased on or about this date, the sale thereof in FY 2015-16 would result LTCG exempt under section 10(38) of the Act, argued the Ld. Counsel. 6.3 The Ld. Counsel further submitted that the Ld. PCIT has pointed out that the address in the bill as D-35, Anand Vihar, Delhi 110016, an address different from that of the assessee but this address in the bill was assessee's old address, which was also available in the old/past I. T. records of the assessee (page 344 of the PB). The Ld. Counsel further contended that the identity of the purchaser was not in doubt particularly when his PAN was also mentioned on the bill (page 37 of PB). The Ld. PCIT had also mentioned that only a sum of Rs. 1.00 Crore h....
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....e document was furnished by the Ld. Counsel before us, which may demonstrate that the AO has carried out any investigation. From the assessment order, it is not evident that the AO has gone through various details, documents, etc. furnished by the assessee during the assessment proceedings and carried out any further investigations which should have been made before arriving the conclusion that the capital gains has been genuinely claimed exempt under section 10(38) of the Act. Further, in view of contradictory decisions of Delhi Tribunal on the issue of capital gains arisen on sale of shares of M/s. CCL International Ltd., the facts of the case would have been investigated properly by the AO. 10. The Hon'ble Supreme Court, in the case of Paville Project Pvt. Ltd. in Civil Appeal No. 6126 of 2021 order dated 06.04.2023 had stated that the scheme of the Income Tax was to levy and collect tax in accordance with the provisions of the Act which was entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue was losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The Court upon perusing the a....
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....ort and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [(1957) 31 ITR 872 (Cal)], the High Court of Karnataka in CIT v. T. Narayana Pai [(1975) 98 ITR 422 (Kant)], the High Court of Bombay in CIT v. Gabriel India Ltd. [(1993) 203 ITR 108 (Bom)] and the High Court of Gujarat in CIT v. Minalben S. Parikh [(1995) 215 ITR 81 (Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT [(1987) 163 ITR 129 (Mad)] interpreting "prejudicial to the interests of the Revenue". The High Court held: "In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration." In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy a....