TMI Blog2012 (2) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... after analyzing all details and therefore there was no error in the impugned assessment order so as to justify action u/s 263 of the Act. Under the circumstances, the very assumption of power u/s 263 of the Act is unjustified and bad in law and therefore, order u/s 263 of the Act deserved to be quashed. 3. Alternatively and without prejudice to the grounds raised here, the ld. CIT has erred in setting aside the order of assessment officer by directing to treat the Income from Capital gains as the Business income of the Appellant. 4. Ld. CIT has erred in not considering various facts, submissions, explanations and clarifications as given by the appellant and further erred in not appreciating the facts and law in their proper perspective. 2. The learned Commissioner of Income Tax (CIT in short) in his order has observed that an assessment was made u/s 143 of the IT Act dated 11-12-2008 and total income was assessed at ₹ 63,55,230/-. It was also noted in the impugned order that a return was filed on 27-12-2006 on an income of ₹ 50,66,788/- which was later on revised at ₹ 63,55,225/- on 13-09-2007. The case was selected for scrutiny and therefore, noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the arguments. According to CIT there was regular purchase and sales of share transactions carried out by the assessee but to ascertain the true character of the income no enquiry was made. According to him, the question whether a particular transaction is a trading transaction or a capital transaction could only be decided only on ascertaining the true nature and frequency of the transactions carried out by the assessee. He has held that the order of the AO was prejudicial to the interest of the revenue, as per the followings: 9. As the A. O. has accepted the Short Term Capital Gain as shown by the assessee without making proper verification and ascertaining the true nature of the income, which has resulted in short levy of tax and under incorrect head of income, hence the order passed by the Assessing Officer is erroneous and found to be prejudicial to the interest of Revenue. Hon ble Supreme Court has observed in the case of Malabar Industrial Company Ltd. Vs. CIT (243 ITR 83) that where the Assessing Officer had accepted entry in the statement of account filed by the assessee showing certain income as agricultural income, without making any inquiry, the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of Hon ble Delhi High Court in the case of CIT Vs Sunbeam Auto Ltd., 332 ITR 167. He has also stated that the transaction as made by the assessee were defined in the order by the Hon ble Bombay High Court in the case of CIT Vs Gopal Purohit, 336 ITR 287. His another legal argument was that a distinction must be drawn between lack of inquiry and inadequate inquiry. In case of lack of inquiry, the CIT can invoke revisionary powers, but not in the case where there are inadequate inquiry. For this legal proposition reliance was placed on the decision of the Hon ble Delhi High Court in the case of CIT Vs Anil Kumar Sharma, 335 ITR 83 (Delhi). 5. From the side of the revenue, learned DR, Mr. Ravindra Kumar appeared and supported the order passed u/s 263 of the IT Act. He has argued that there was no finding by the AO in respect of the nature of the transaction whether it was Short Term Capital Gain or not. No investigation whatsoever was made by the AO though a return was revised and the transaction in question was under doubt. As per the assessment order itself the same was passed in a cryptic manner. The learned DR has emphasized that though the return of income was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order, arrived at a finding that the claim was allowed in a per functionary manner or in a mechanical manner, then it is within his powers to invoke the provisions of section 263 of the IT Act. The learned CIT could also invoke the revisionary powers if he has found that without probing into the matter the AO has allowed a claim or accepted the returned income. An assessment order can be erroneous either in law or in fact. An assessment order can be an erroneous one when prima facie a claim is allowed which according to the learned CIT was against the provisions of law. An assessment order can be held as prejudicial to the interest of the revenue if in the opinion of the learned CIT the inquiry was not adequate or no inquiry at all has been made. We may like to mention that the AO is not only an adjudicator but also an investigator. The AO cannot remain a passive spectator while dealing with a return of income filed by the tax payer. If, on the face of the return it is apparent that an inquiry is required, then it is expected from the AO to conduct an investigation so as to ascertain correctness of the return filed as also the income declared therein. It is his duty t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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