TaxTMI 
TaxTMI 
2026 (6) TMI 137
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....63 has erred in observing that AO failed to verify the genuineness of the transaction of sale/purchase of the shares by the assessee despite having report of investigation wing. 5. On the facts and circumstances of the case, the PCIT has erred in relying on Explanation-2 to Section 263 ignoring that explanation cast certain burden on PCIT before invocation. 6. The Appellant craves the leave to add/modify/alter any ground during the course of hearing/pendency of appeal." 3. The Ld. Counsel for the assessee at the outset referring to ground No.1 of grounds of appeal of the assessee submitted that order passed by the Ld. PCIT u/s. 263 of the Act is bad in law. 4. Ld. Counsel for the assessee referring to page No.28 of the paper book which are the reasons recorded for reopening of assessment submitted that the assessment was sought to be reopened for the reason that the assessee had sold Equity shares of Arvind Ltd., Indusind Bank Ltd. and Yes Bank Ltd. for an amount of Rs. 43,51,075/-. However, the enquiries revealed that these shares were never purchased by the assessee in any earlier years as claimed and therefore, the sale proceeds of these shares represente....
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....copies of bank statement, copy of audited P & L account and balance sheets. Considering these evidences, submissions of the Assessee were accepted by the AO and dropped the proposal for treating the sale proceeds as income escaped assessment. 10. Subsequently, the Ld. PCIT sought to revise the reassessment order for the very same reason for which the assessment was reopened on the ground that the AO did not make proper enquiries which he should have been done. 11. We observed that identical issue came up for consideration before the Coordinate Bench of ITAT Delhi in the case of Daya Rani in ITA No.402/Del/2021 dated 20.02.2024 wherein the Tribunal considering the decision of the coordinate Bench of Delhi in the case of Sh. Paramjit Singh vs. PCIT in ITA No. 446/D/2022 order dated 01.12.2023 wherein the Tribunal placing reliance on the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Software Consultants in ITA No.914 of 2010 dated 17.01.2012, held that the Ld. PCIT erred in assuming jurisdiction u/s. 263 of the Act to revise the reassessment order passed by the AO u/s. 143(3) r.w.s. 147 of the Act where the AO accepted income returned after examining t....
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....n 29/03/2018 responded that the return already filed on 30/03/2013 declaring taxable income of Rs. 3,90,290/- may be considered as a return in response to notice u/s 148 of the Act. Subsequently, the assessee furnished various replies together with documentary evidences in response to various queries raised by the Ld. AO, including those issues that are subject matter of reasons recorded for reopening the assessment. The Ld. AO after examining the detailed explanations given by the assessee together with documentary evidences did not draw any adverse inference thereon and accepted the returned income of the assessee in the reassessment order passed on 16/11/2018. In other words, no addition was made by the Ld. AO in the reassessment proceeding in respect of issues that are subject matter of reasons recorded for reopening the assessment. 6. This reassessment was sought to be revised by the Ld. PCIT by invoking his revision jurisdiction u/s 263 of the Act on the issue of capital gains, investment of Rs. 5,50,000/- in time deposits with the Axis Bank and deduction u/s 54 of the Act on the ground that the Ld. AO had not made enquiries on the same thereby making his order erron....
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....that the order of the Assessing Officer cannot be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition has been made on account of the reasons for reopening, which were recorded before issue of notice under Section 148 of the Act. It has been held that the Assessing Officer could not have made an addition on account of share application money as no addition has been made on account of FDRs of Rs. 20 lacs. The tribunal has noticed and recorded that in the reasons for reopening it was mentioned that the assessee had made investment in form of FDRs of Rs. 20 lacs but in the assessment order passed under Section 147/143(3) of the Act it has been held that the respondent assessee had been able to show and establish the genuineness of and capacity to make the said investment. 10. Similar issue had arisen before this Court in Ranbaxy Laboratories Limited versus CIT, (2011) 336 ITR 136 (Delhi). In the said case, the Division Bench had also examined Explanation 3 to Section 147, which was inserted by Finance (No. 2) Act of 2009 with retrospective effect fro....
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.... reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." 12. The Division Bench in Ranbaxy Laboratories Limited (supra)considered the judgment of the Supreme Court in the case of V. Jagmohan Rao versus CIT and EPT, (1970) 75 ITR 373(SC) and CIT versus Sun Engineering Works Private Limited, (1992) 198 ITR 297 (SC) and has then elucidated: "18. We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT v. Jet Airways (I) Limited [2011] 331 ITR 236 (Bom). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, ....
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.... above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well." 13. On the second aspect raised by the Commissioner of Income Tax with regard to the Assessing Officer accepting the loss return of Rs. 1,02,756/-, we are of the view that the same did not require exercise of revisionary power under Section 263 of the Act. The observations of the Assessing Officer were only to the extent of stating that he had accepted the return. Benefit of carry forward of loss can be claimed in case a return is filed under Section 139(1). It is not the case of the Revenue that the assessee had tried to claim benefit of carry forward of loss on the basis of the order passed under Section 147/143(3) of the Act. 14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income....
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....n, the litigation between the parties and final compromise settlement dt. 21-09-2013 before the Lok Adalat. It is not a case where enquiries have not been done by the AO. The enquiries have been conducted and AO was satisfied that capital gains have indeed does not arise. 6.1. The opinion of the CIT that capital gains should have brought to tax in this year based on the interpretation of law, is another opinion which cannot be substituted with that of the AO in the proceedings u/s. 263 of the Act. It is trite law that CIT cannot exercise the jurisdiction u/s. 263, once AO raises queries and enquires about the issue. The Hon'ble Jurisdictional High Court in the case of Spectra Shares & Scrips Pvt Ltd., Vs. CIT (354 ITR 35 (AP)) has held that if a query was raised during the course of scrutiny by AO, it was answered to the satisfaction of AO, but neither query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of AO called for interference and revision. 6.2. Vide the Finance Act, 2015, the explanation-(2) was introduced w.e.f. 01-06-2015, which is as under: "Explanation 2.-For the purpose....
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....which the CIT in his show cause notice has alleged lack of enquiry on the part of the AO, the Assessee has given his explanation as to how on those issues the order of the AO was not erroneous. The CIT before exercising jurisdiction uls.263 of the Act by setting aside the order of the AO, ought to have given his own specific finding on those objections and without doing so, the CIT cannot exercise jurisdiction u/s 263 of the Act. The Hon'ble Delhi High Court in the case of ITO Vs. D.G.Housing Projects Ltd. (supra) has taken the view that while the AO is both an investigator and an adjudicator, a distinction has to be drawn between a case where the AO has not conducted any enquiry or examined any evidence whatsoever ("lack of inquiry") from one (i) where there is enquiry but the findings are erroneous, and (ii) where there.is failure to make proper or full verification or enquiry ("inadequate inquiry"). The fact that the assessment order does not give any reasons for allowing the claim is not by itself indicative of the fact that the AO has not applied his mind on the issue. All the circumstances have to be seen. A case of lack of enquiry would by itself render the order being e....
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.... assessee that the transaction was in-dispute and ultimately was settled in September, 2013 before the Lok Adalat. AO has accepted the explanation and did not consider it fit enough to bring capital gains to tax in AY. 2009-10. Thus, AO has taken a plausible view on the facts and circumstances of the case. Even though Ld.CIT has drawn certain inferences about the legal provisions, yet it can be seen that they are debatable in nature. For this, CIT had not brought any material on record either making further enquiries or by verifications to substantiate his inferences. It is observed that CIT has undertaken the revisional proceedings only to substitute his views of taxability in the impugned year over the view of the AO, who accepted that it is not taxable in the impugned assessment year. Thus, the CIT was not justified in law in holding that the impugned order is erroneous. 11. In the case of Spectra Shares & Scrips Pvt Ltd., Vs. CIT 1354 ITR 35] (AP), Hon'ble jurisdictional High Court has held as follows: "If there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders u/s 263 merely because he has a differen....