TMI Blog2019 (1) TMI 1408X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the AO has not conducted any enquiry and this is a clear case of lack of enquiry not a case inadequate enquiry. Further non application of mind by the AO can be easily gauzed from the fact that the information available with the AO has not been utilised during the assessment proceedings which makes the case fit for applying the provisions of explanation 2 (a) of section 263. The judgment of the Apex Court in the case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] wherein the action under section 263 is upheld when the Assessing Officer has accepted the statement of account filed by the Assessee without making any enquiry, the judgment of Hon’ble Supreme Court in the case of Daniel Merchants Pvt. Ltd. [2017 (12) TMI 476 - SUPREME COURT] which held that in the case where AO did not make any proper enquiry, the PCIT is correct in directing the Assessing Officer to carry thorough and detailed enquiry. On going through the questionnaire, assessment order, we have no hesitation to say that the Assessing Officer has not applied his mind to the issue of share transactions for which the detailed information is available regarding the suspicious nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passively mentioned about the inputs from investigation wing regarding the suspicious long term capital gains on shares and nothing beyond that. 3. Post the assessment proceedings, the Ld. Principal CIT issued a notice under section 263(1) to the assessee on 13/12/2017 giving the detailed reasons to invoke provisions of section 263 against the order of the Assessing Officer passed under section 143(3). During the proceedings conducted under section 263, the Ld. PCIT enquired about the capital gain earned by the assessee on sale of 30,000 shares of Kailash Auto Finance Ltd. in July 2013 for the consideration of ₹ 11,29,511/- which lead to Long Term Capital Gain of ₹ 10,99,599/- claimed by the assessee as exempt under section 10(38). It was brought to our notice that the assessee has replied to the Pr.CIT that this issue has been examined by the Assessing Officer as per point no. 4 of the reply and documentary evidence such as, i) Copy of D-MAT A/c iii) Share Bill evidencing purchase of shares iii) Bank Statement through which the payment for purchase of shares was made and the sale proceeds of shares received. iv) Copy of High Court order no. 9945 dt. 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suomotu revision cannot be exercised. Any and every erroneous order cannot be subjectmatter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. There must be material available on record called for by the Commissioner to satisfy him, prima facie, that the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. It was held that that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry', even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263, merely because he has different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. It was further held that if the AO had called for explanation on the very item from the assessee and the assessee had furnished his explanation ,then it clearly shows that the AO had undertaken the exercise of examining as to whether the expenditure incurred by the assessee is to be treated as taxable or not. If the AO was satisfied with the explanation, and accepted the same. Then the CIT cannot hold that the AO should have made further inquiries rather than accepting the explanation. Therefore, it cannot be said that it is a case of lack of inquiry'.{CIT vs. Gabrial India Ltd. (1993) 114 CTR (Bom) 81 : (199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the listed companies and as approved by the High court. 11. He also relied on the case of Lalit Jagmohan Jain (HUF) v/s ACIT ITA no. 693/KoI/2009 dated 10.02.2016 and argued that assessee is not supposed to know the working of share broker in the stock exchange. He also relied on the case of ITO vs. Raj Kumar Aggarwal, ITA No. 1330/K/07, dated 10.08.2007 where in it was held that A.O. has failed to bring on record any evidence to establish that evidence filed by assessee as well as share broker were fabricated or false. ...It is not the case of the revenue that there is no such broker or the distinctive nos of the shares of M/s Nageshwar Investments Ltd. do not exist or the transactions of purchase and sale of such shares recorded through bank and demat form are fictitious. The A.O. has simply acted on the information gathered from the Calcutta Stock Exchange and made an addition u/s 68. enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue. * The assessee is not covered in any of the conditions mentioned in Explanation 2 of Section 263(1). * Merely because the CIT may not agree to the order of the Assessing Officer just due to change of opinion, the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue. * There is a distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even if it was inadequate, it does not give right to the Commissioner to pass orders under section 263 merely because of a different opinion. * The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. * The assessee has already furnished all the documentary evidences which proves that transactions related to sale and purchase of shares are genuine. * Merely because the stock price moved sharply, the assessee is not to be blamed for bogus transactions where he has purchased and sold the stocks through registered brokers and confirmed by valid contract notes as per law. * The transactions cannot be brushed aside on suspicion and surmise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 263(1) was justified 3. Rajmandir Estates (P.) Ltd. Vs PCIT T70 taxmann.com 124 (Calcutta)/f20161 240 Taxman 306 (Calcutta)/f2016l 386 ITR 162 (Calcutta)/f20161 287 CTR 5121 (Copy enclosed) Where Hon ble Calcutta High Court held that where assessee with a small amount of authorised share capital, raised a huge sum on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees and Assessing Officer passed assessment order without carrying out requisite enquiry into increase of share capital including premium received by assessee, Commissioner was justified in treating assessment order as erroneous and prejudicial to interest of revenue 4. Rajmandir Estates (P.) Ltd. Vs PCIT f2017l 77 taxmann.com 285 (SC)/r2017l 245 Taxman 127 (SC) Hon ble Supreme Court has dismissed SLP against High Court's ruling that where assessee with a small amount of authorised share capital, raised huge sum on account of premium, exercise of revisionary powers by Commissioner opining that this could be a case of money laundering was justified 5. Shree Manjunathesware Packing Products Camphor Works Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner does not have power to revise the order of the Ld. assessing officer where there are two views possible and the Ld. assessing officer has taken one of the possible view. Further, where the Ld. assessing officer has made some enquiry and has reached at a conclusion. Therefore on debatable Issues and where there is absence of Lack of Inquiry the powers of the CIT cannot be exercised under section 263 of the act. There exists a difference between Lack of Inquiry and Inadequate Inquiry . In the present case on all the four issues raised by the Ld. CIT, in the paper book submitted by the assessee or in the arguments raised by the Ld. authorised representative we did not find that Ld. AO has made any enquiry on all ITA No. 2860/Del/2010 A Y 2005-06 PTC Impex ( India) pvt Ltd Vs. The Commissioner Of Income tax the 4 issues. Therefore, according to us there is no Inquiry made by the Ld. assessing officer on the issues raised by CIT in proceedings under section 263 of the act. The arguments of Ld. Authorized representative on the issue with respect to cash deposited in the bank account, loan repaid, bank interest on fixed deposit receipt and absence of narration in the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act. Hence, order passed u/s 263 of the act by the Id CIT is upheld and appeal of the assessee is dismissed. 16. We have heard the arguments of both the parties and gone through the facts on record. All the arguments, facts, decisions, case laws cited by the Ld. AR and the Ld. DR have been perused and duly considered for adjudication . To the notice issued by the Assessing Officer pertaining to the Long Term Capital Gains the assessee has replied that he had purchased the shares on 16/03/2012 and sold in July 2013 and received sale proceedings of ₹ 11,29,599/-. It was replied that the original shares purchased were of M/s Panchshul Marketing Ltd. which stands merged with M/s Kailash Automobile and the shares of Kailash Automobiles were allotted in the ratio of 1:1. Beyond this information there were no enquiries conducted by the Assessing Officer. The reliance of the Ld. AR on the case of Gabriel India Ltd. is of no help to the assessee as it enunciated two principles namely i.) the order is erroneous ii) by the virtue of the order being erroneous prejudice is caused to the interest of the Revenue. In the instant case there has been an information with the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor prejudicial to the interests of the revenue : The order passed has been found to be erroneous and prejudicial to the interest of the revenue as per the case law cited and on facts of the case. (b) The assessee is not covered in any of the conditions mentioned in Explanation 2 of Section 263(1) : The assessee has found to be squarely covered by the provisions of section 263 91) explanation 2 as no enquiries or verification has been conducted which should have been made by the Assessing Officer. (c) Merely because the CIT may not agree to the order of the Assessing Officer just due to change of opinion, the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue : This is not a case of the Principal CIT not agreeing to the order of the Assessing Officer and nor a case of change of opinion. In fact the Assessing Officer has nor formed any opinion in allowing the long term capital gains and practically has not examined the issue at all. (d) There is a distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even if it was inadequate, it does not give right to the Commissioner to pass orders under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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