TaxTMI 
TaxTMI 
2025 (1) TMI 1751
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....eturn on 28.04.2021 repeating the same income. The AO then issued notices u/s 143(2) and 142(1) which were also complied by assessee. Finally, the AO completed re-assessment vide order dated 22.03.2022 u/s 147 accepting assessee's submissions as well as returned income. Subsequently, Ld. PCIT examined the record of re- assessment proceeding and viewed that the order of re-assessment passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263. Accordingly, the PCIT issued show-cause notice dated 29.02.2024 and finally passed revision-order dated 19.03.2024 u/s 263 setting aside the AO's order. Aggrieved by such revision-order, the assessee has come in this appeal before us. 3. Ld. AR for assessee carried us to revision-order and demonstrated that there is one single issue for which the PCIT undertook revision. The PCIT has noted following issue in show-cause notice: "4. On perusal of the case records, it is observed that the search and seizure action u/s 132 was conducted on Jain and Dixit Group including the two residential premises of Shri Manish Bansal and Smt. Manorama Bansal on 12/07/2016. The busi....
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....s re-opened u/s 147 and that the AO has not at all verified the issue and relevant facts involved. The assessee filed reply to show-cause notice which is re-produced by PCIT in Para No. 4 of revision-order. However, the PCIT rejected reply of assessee vide Para No. 5-7 of revision order. Ld. PCIT then referred certain case-laws. He further observed in Para No. 8 of revision- order that the case of assessee is hit by clause (a) of Explanation to section 263 reproduced below and hence the assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue: "Explanation 2 - "For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the Principal Commissioner or Commissioner - (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or ....
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.... Shri Ritesh Bansal and Shri Rakesh Bansal, was managing share trading and also accepted that he along with his mother and two brothers claimed bogus LTCG of Rs. 7,82,88,917/- for A.Y. 2014-15 and also accepted the percentage expenses of such arrangement charged as commission by the intermediaries around 5%, Moreover, Shri Manish Bansal has accepted that he had made payment of 5% of LTCG to bring this unaccounted income back to the books. 3. Thus, it is clear from the above that Shri Ritesh Bansal claimed bogus LTCG of Rs. 2,22,82,125/- and also made commission expenses @5% i.e. Rs. 11,14,105/- Hence total of Rs. 2,33,96,230/- is undisclosed income of the assessee 4. Shri Ritesh Bansal has claimed exempt income of Rs. 2,22,82,125/- u/s 10(38) of Income Tax Act on sale of shares of Kappac Pharma which is evident as per schedule 'EI' of the ITR filed by him. It is a well establish fact that Kappac Pharma is a penny stock and purchase/sale in penny stock is only a way to route unaccounted income in books without paying any tax. 5. Thus Rs. 2,33,96,230/- is unaccounted income of the assessee which was not offered for taxation and thus the same has esc....
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....d and business premises at G-16, Ganesh Comples, Khajuri Bazar, Indore of Shri Rakesh Bansal, Ritesh Bansal was covered u/s 133A. 1. During the course of survey statements of Shri Rakesh Bansal and Shri Ritesh Bansal were recorded. Questions related to investment in shares were asked from both the assessee and their statement they confirmed that all the transactions related to Shares are maintained by their elder brother Shri Manish Bansal. Shri Ritesh Bansal & Shri Rakesh Bansal had claimed Long Term Capital Gain arising out of sale of shares of Penny Stocks (Kappac Pharma Ltd.). Statement of Shri Rakesh Bansal brother of Shri Manish Bansal, also revealed that all the trading had been done by Shri Manish Bansal. Shri Manish Bansal, himself accepted in his statement that he on behalf of his mother Smt Manorma Devi Bansal, brothers Shri Ritesh Bansal and Shri Rakesh Bansal, was managing share trading and also accepted that he along with his mother and two brothers claimed bogus LTCG of Rs. 7,82,88,917/- for AY 2014-15 and also accepted the percentage expenses of such arrangement charged as commission by the intermediaries around 5%. Moreover, Shri Manish Bansal has accepted....
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....Bansal. Shri Ritesh Bansal & Shri Rakesh Bansal had claimed long Term Capital Gain arising out of sale of shares of Penny Stocks (Kappac Pharma Ltd.). Statement of Shri Rakesh Bansal brother of Shri Manish Bansal. Shri Manish Bansal, himself accepted in his statement that he on behalf of his mother Smt Marorma Devi Bansal, brothers Shri Ritesh Bansal and Shri Rakesh Bansal, was managing share trading and also accepted that he along with his mother and two brothers claimed bogus LTCG of Rs. 7,82,88,917/- for AY 2014-15 and also accepted the percentage expenses of such arrangement charged as commission by the intermediaries around 5% of LTCG to bring this unaccounted income back to the books. 2. You had claimed exempt income of Rs. 2,22,80,125/- u/s 10(38) of Income Tax Act on sale of Shares of Kappac Pharma which is evident as per schedule "El" of the ITR filed. It is a well establish fact that Kappac Pharma is a penny stock and purchase/sale in penny stock is only a way to route unaccounted income in books without paying any tax. 3. Thus, it is clear from the above that you had claimed bogus LTCG OF Rs. 2,22,82,125/- and also made commission expenses @5% ie. Rs. 1....
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....director/authorised person of the said company. Since the said company is not able to sold its holding in the market at the market rate quoted on the exchange, the director of the company has found some persons who has purchased the same so that company has to get some small money on this account otherwise the company loose the cost of the share. The assessee has purchased the said shares on such nominal cost and hold such shares on the basis that in such type of companies after some time the assessee has get the good price of such shares. Some times due to merger/acquisitions of the company the small share holder are bale to get benefited in huge amount and the same is prove in the past in so many companies and small investors are get handsome gain on such scripts. The assessee has purchased such shares as small investor. As in share transactions which is off line transactions the seller is required to signed a share transfer deed in favor of the purchaser in the requisite format and such form is issued by the registrar of companies. In this transaction the required deed is issued by registrar of companies, Mumbai dated 16/08/2012. (Copy of transfer deed....
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....king channel only and the same is verifiable from the bank account submitted in your office. Sir, the assessee has earned the gain on such shares and as per the Income Tax Act Section 10(38) the entire gain earned on any shares which are listed are exempt if following conditions are fulfill by the assessee. * Shares should be listed in any stock exchange * On sale of shares the required STT has been paid * The holding period is more than one year. * Shares should be sold through the terminal i.e. online transaction. * Payment should be through account payee cheques/Draft As per Income Tax Act section 10(38) says that: This section talks about the long-term capital gains obtained after the sale/transfer of securities that are not chargeable to tax under the Income Tax Act. A capital investment, such as equity shares, that has been invested for more than 12 months is called Long-Term capital investment. Long-term capital gain/loss is the profit/loss occurred at the time or selling or transferring of the securities. The difference amount of the selling value and the purchasing value is either a gain or a loss. Con....
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....tock Broker. The payment for sale of shares was received through banking channels. All the documentary evidence being in favor of assessee. Therefore the sale transaction are also prove by the assessee. Since the assessee has proved the purchases and sales and both are genuine hence the capital gain is also through this transaction are genuine and eligible for get exemption u/s 10(38). The assessee is relied on the following decision: 1. PCIT vs. Smt. Krishna Devi (Delhi High Court) 2. Anchal Gupta vs. ITO (ITAT Lucknow) 3. Dipesh Ramesh Vardhan vs. DCIT (ITAT Mumbai) 4. Suresh Kumar Agrawal vs. ACIT (ITAT Delhi) 5. Neha Choudhary vs ITO (ITAT Kolkatta) 6. Vijayrattan Balkrishan Mital Vs DCIT (ITAT Mumbai) 7. Darshan Kumar Pahwa, Indore vs Dcit Circle5(1), Indore (ITAT Indore) 8. Pratap Bajaj vs ITO (ITAT Indore)." (d) Alongwith above reply dated 07.03.2022, the assessee filed following contemporary documents to AO, copies of which are also filed in Paper-Book: Documents Paper-Book Pages (i) Ledger A/c of Long-Term Capital Gain extracted from books of account of ....
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....nt. Thus, Ld. AR very strongly contended, the PCIT's observation that AO did not make any enquiry and the assessee did not furnish information/explanation is patently wrong. 9. Without prejudice, Ld. AR next submitted that the impugned capital gain u/s 10(38) declared by assessee was from shares of "M/s Kappac Pharma". The Ld. PCIT has stated, in Para 6.5 of revision-order, that M/s Kappac Pharma Ltd. is a penny stock and identity and credentials of the entity are suspicious in nature. Thus, the PCIT has invoked revisionary exercise on mere suspicion whereas the Hon'ble Jurisdictional High Court of Madhya Pradesh in a very recent order dated 16.05.2024 in The Chief Commissioner of Income-tax Vs. Shri Jayesh Kumar Javia HUF has accepted "Kappac Pharma" as genuine and dismissed revenue's appeal, the order of Hon'ble High Court is re-produced below in entirety: "This appeal is filed by the appellant under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') being aggrieved by the order dated 25.05.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore in ITA No.465/Ind/2019 for the Assessment Year - 2014 - 15 propos....
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....ssessment proceedings submitted all the necessary documents to prove the genuineness of the transaction which are also reflected in the submissions made by the assessee before the ld. Pr. CIT as reproduced above. The ld. Counsel has also relied upon the paper-book to submit that the assessee company filed reply dated 28.12.2021 with enclosure of copy of ITR acknowledgement dated 05.12.2021 for A.Y 2013-14, copy of computation of income for A.Y 2013-14, copy of profit and loss a/c for F.Y 2012-13 before the Assessing Officer in response to the notice issued by him u/s 142(1) of the Act in the course of reassessment proceedings. Apart from that, the assessee also furnished details and evidences before the NFAC relating to the claim of exemption of long term capital gain u/s 10(38) on account of sale of shares of M/s Blueprint Securities Limited as under: 1. Purchase Bill and contract note for purchase of Shares of Blueprint Securities Ltd. 2. Copy of physical share certificates being the name of the assessee 3. Copy of demat acknowledgement of the Eureka Stock and Share Broking Borker through whom assessee sold the shares in the F.Y 2012-13 relevant to A.Y ....
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....ng the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment .............." 9.2. The sum and substance of the above reproduced section 263(1) can be summarized in the following points: 1) The Commissioner may call for and examine the record of any proceeding under the Act; 2) If he considers that the order passed by the AO is erroneous; and (ii) is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and 4) He has to make or cause to make such enquiry as he deems necessary; 5) He may pass such order thereon as the circumstances of the case justify including, (i) an order enhancing or, (ii) modifying the assessment or (iii) cancelling the assessment and directing a fresh assessment." 5. As per the provisions of section 263, as enumerated above, after getting the explanation from the assessee, the Ld. Pr. CIT was sup....
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....of the Act, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with th....
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....regard to provisions of section 263 of the Act: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. 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. 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 ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO is unsustainable in law. It has been held by....
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.... has not been realized or it has gone beyond realization. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied]" 12. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also ....
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.... as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Re....
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....ejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the....
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....r does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 7. Further, the Coordinate Mumbai Bench of the Tribunal in the case of 'Narayan Tatu Rane v. ITO' reported in [2016] 70 taxmann.com 227 (Mum. - Trib.) has held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications. The relevant part of the order of the Tribunal is reproduced ....
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....sioner of Income Tax, Kolkata - 2 (PCIT) under section 263 of the Act was justified. The Tribunal had allowed the assessee's appeal and held that the PCIT has not recorded any finding that he has reason to believe that income assessable to tax has escaped assessment and the revenue being aggrieved by the said finding on an appeal before us. What is important to note in the instant case is that the assessment for the year under consideration, AY 2012-13 was completed on 30-3-2015. Subsequently, the assessment was reopened based on the information received from the DDIT (Investigation) Unit 2(2), Kolkata dated 6-3-2019. Thereafter, notice under section 148 of the Act was issued on 29-3-2019 and in response to such notice the assessee filed its return of income declaring a total income of Rs. 23,440/-. Subsequently, notices were issued under sections 143(2), 142(1) of the Act and the assessee filed his response along with documents. The Assessing Officer on considering the documents and the return furnished by the assessee accepted the stand taken by the assessee and completed the assessment. It is seen that PCIT has exercised jurisdiction under section 263 of the Act on the very ....
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....sed the replies of assessee, he would have certainly made a detailed noting in the assessment-order but this is not so in present case. He submitted that the assessment-order is silent on the issue raised by Ld. PCIT, which clearly demonstrates that the AO has not made enquiries as required and hence Ld. PCIT was constrained to conduct revision-proceeding. Ld. DR submitted that the action of Ld. PCIT is very much in accordance with the mandate of section 263 and must be upheld. 13. We have considered rival contentions of both sides and perused the impugned order as well as the material held on record to which our attention has been drawn. On a careful consideration of various documents placed in Paper-Book as noted in the foregoing discussion, we find that during the course of assessment-proceeding, there were specific queries raised by AO with regard to the issue contemplated by Ld. PCIT and the assessee too made detailed replies / submissions. To this extent, there is no rebuttal by revenue. Clearly, therefore, it is discernible that the Ld. AO has considered those replies / submissions and thereafter taken a plausible view. Further, the action of AO in accepting the replies/s....