TMI Blog2019 (9) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... nces filed by the assessee then the order passed, without application of mind or verification is bad in law. We have to necessarily hold that the exercise of power by the Pr. CIT u/s 263 was bad in law. We also find that in her reply, the assessee has stated before the Pr. CIT that the assessee has earned capital gain on the sale of shares of M/s. Goodwill Griha Nirmal Pvt. Ltd., and that she has not incurred any loss as alleged in the said notice. The details were furnished. Despite these explanation and evidences filed, the Pr. CIT had committed a factual error in concluding at page 10 para 5 of his order that the assessee has claimed capital loss on account of share transactions of M/s. Goodwill Griha Nirman Pvt. Ltd.. An order passed u/s 263 based on a mistake of fact, cannot be sustained. This is not a case of non enquiry or non application of mind. The allegation of the Pr. CIT is that the issue requires further verification and investigation. Appeal of the assessee is allowed. - I.T.A. No. 794/Kol/2019 - - - Dated:- 28-8-2019 - Sri J. Sudhakar Reddy, Accountant Member And Sri S.S. Viswanethra Ravi, Judicial Member For the Assessee : Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a ground for exercise of jurisdiction by the ld. Pr. CIT u/s 263 of the Act, as no error prejudicial to the interest of the revenue in the order of assessment is pointed out. c) The Assessing Officer in his notice u/s 143(1) of the Act, dt. 21/10/2016, at point no. 6, directed the assessee to furnish the details of sales transactions in shares and that the assessee in his reply dt. 16/11/2016, has at point no. 6, annexure B1, B2 B3, (copies of which were placed in the paper book) had furnished all the necessary information to the Assessing Officer. He further pointed out that vide letter dt. 22/11/2016, the details of the capital gains were furnished to the Assessing Officer. Copies of the details were placed in the paper book. Thus, he submits that the Assessing Officer called for all the necessary records and after verifying the same had accepted the claim of the assessee. He submitted that the view taken by the Assessing Officer was a possible view and that it is not the case of the ld. Pr. CIT that the view taken by the Assessing Officer was wrong and untenable and hence under these circumstances, the exercise of jurisdiction u/s 263 of the Act was bad in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of scrutiny proceedings, in a notice given u/s 142(1) of the Act on 21/10/2016, directed the assessee to furnish the details of the sale transactions in shares. The assessee in his reply dt. 16/11/2016, at para 6, stated as follows:- 6. Details of Capital Gain earned on Sales of Shares, as recorded in accounts are enclosed at Annexure B1; details of Capital Gain offered to tax are enclosed at Annexure B2. Details of Profit on Sale of Shares are enclosed at Annexure B3. (Point 6) 7.1. Later the assessee submitted the following details to the Assessing Officer vide his letter dt. 22/11/2016:- 1. Details of Capital Gains offered to tax have been filed with your goodself vide written submission dated 03.11.2016, point 6, Annexure B2. The assessee had earned Long Term Capital Gains on sale of land at Jaipur. Details of Long Term Capital Gain on sale Jaipur property, recorded in the books of the assessee, are enclosed at Annexure A. Copies of Conveyances deeds, with respect to sale of such lands, are enclosed therewith. 2. Details of Capital Gains offered to Lax have been filed with your goodself vide writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a normal business loss - However, Commissioner (Appeals) passed an order under section 263 setting aside assessment order on ground that no proper inquiry was made - Tribunal, however, found on facts that inquiry was conducted in a proper manner and thus, Tribunal confirmed order passed by Assessing Officer - Whether on facts, impugned order passed by Tribunal was to be confirmed - Held, yes 7.1.3. The Hon ble Jurisdictional High Court in the case of CIT vs. J.L. Morrison [2014] 366 ITR 593 (Calcutta), held as follows:- As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. (Paras 90-92, 102) 7.1.4. The Hon ble Bombay High Court in the case of CIT vs. Fine Jewellery (India) Ltd. [2015] 372 ITR 303 (Bombay), has held as follows:- 8. We find that the impugned order of the Tribunal does record the fact that specific queries were made during the Assessment proceedings with regard to details of expenditure claimed under the head miscellaneous expenses aggregating to ₹ 2.94 crores. The respondent-assessee had responded to the same and on consideration of response of the respondent-assessee, the Assessing Officer held that of an amount of ₹ 17.98 lakhs incurred on account of repairs and maintenance out of ₹ 2.94 cores is capital expenditure. This itself would be indication of application of mind by the Assessing Officer while passing the impugned order. The fact that the assessment order itself does not contain any discussion with regard to the balance amount of expenditure of ₹ 1.76 crores i.e. ₹ 2.94 crores less & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the revenue. Reason is simple. While exercising the revisionary jurisdiction, the Commissioner is not sitting in appeal. [Para 9] 7.1.6. Applying the propositions of the law laid down in the above case-law to the facts of this case, we have to necessarily hold that the exercise u/s 263 of the Act, by the ld. Pr. CIT, is bad in law as there is application of mind by the Assessing Officer during the assessment proceedings and as the Assessing Officer has taken a possible view on examination of the issue on hand. It cannot be said that the view of the Assessing Officer is not tenable. 7.2. Further, we find that the ld. Pr. CIT in show cause notice dt. 22/02/2019 at para 2 3 observed as follows:- 2. On verification, it is observed that Short term Long term Capital Gains on sale of shares were made by you during the period 01.04.2013 to 31.03.2014 and also you had purchased 3500 shares of Goodwill Gridha Pvt. Ltd. on 02.04.2004 for an amount of 35000/- and the same was sold at ₹ 2,51,12,500/- on 02.05.2013. However, from your bank statement the amount has been shown to be credited as RTGS by Alayama Mathew. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These replies, in our view, were not properly considered by the ld. Pr. CIT. The allegations that the sale of shares transactions was suspicion is not supported by facts. No revision can take place based on mere suspicion. The ld. Pr. CIT has not controverted the submissions and evidences filed by the assessee. When the assesee has furnished all the details, including the purchase details and sale details, the ld. Pr. CIT has not explained, as to how he came to a conclusion that there is an error that caused prejudice to the interest of the revenue. There is no verification or enquiry by the ld. Pr. CIT of the information furnished by the assesee to him. The ld. Pr. CIT has simply set aside the matter to the file of the Assessing Officer for fresh adjudication, without himself conducting any enquiry into the matter. The law requires the ld. Pr. CIT to himself conduct an enquiry and then only come to a conclusion that the order in question is erroneous and prejudicial to the interest of the revenue. If the ld. Pr. CIT had not applied his mind to the replies, details and evidences filed by the assessee then the order passed, without application of mind or verification is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [See : Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ****** From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been held as follows:- The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of ITO v. D.G. Housing Projects Ltd. [2012] 343 ITR 329/20 taxmann.com 587/[2013] 212 Taxman 132 (Mag.), the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry. 9.2. The Hon ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) held as follows:- In the instant case, the findings recorded by the Tribunal are correct as the Commissioner has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner is that 'order passed by Assessing Officer may be erroneous'. The Commissioner had doubts about the valuation and sale consideration received but the Commissioner sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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