TMI Blog2020 (1) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... and fails to make inquiries which are called for in the circumstances of the case. In view of the above position of law enunciated in Rampyari Devi Saraogi (supra) and because the AO has completed the assessment in undue haste or without inquiry, the Pr. CIT has rightly exercised his power u/s 263 by holding that the order of the AO is erroneous and prejudicial to the interest of revenue. However, it is too early on the part of the Pr. CIT to direct the AO to redo the assessment so that abuse of provision of section 10(38) is prevented and income is brought to tax in light of recent judgments in penny stock cases. We modify the above direction of the Pr. CIT and direct the AO to frame an order as per the provisions of the Act, after providing reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. - ITA No. 2943/MUM/2018 - - - Dated:- 13-1-2020 - Shri Saktijit Dey (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. P.J. Pardiwalla, Sr. Advocate And Mr. Sashank Dundu, AR For the Revenue : Mr. Rajesh Kumar Mr. V.Vinod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI on penny stock companies. g The assessee has also sold his shares during the period of Nov 2012 to April 2013 where maximum off-loading was done by the beneficiaries of bogus LTCG and the price of shares was at peak. h Analysis of the brokers bill shows that assessee has sold the shares of M/s Luminaire Technologies Ltd. in various lots during the day. In many cases, it is found that the shares are sold at different time during the day but the rate at which the shares are sold is constant. This is another impossibility that the rates of shares are without any movement during the day. i No genuine investor would invest in a company which is consistently making losses, which has no future prospects and not having any credentials unless he is in contact with the insider/ operator engaged in the price control of the shares. j The investment made was with a malafide intention to get the funds introduced through misuse of the share market mechanism by claiming arranged exempt LTCG. 3. Briefly stated, the facts are that the assessee filed its return of income for the assessment year (AY) 2013-14 on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high price, thus realizing gains to the beneficiary in the form of LTCG. Further it is observed by him that as verified from the website of moneycontrol.com, LTL has submitted the last annual report, audit report, annual accounts only upto the year ending March 2014 and this shows that the company has curtailed its affairs after the intervention of BSE/SEBI on penny stock companies. In view of the above fact, the Pr. CIT held that LTL is a shell company. Thus the Pr. CIT set aside the order dated 17.12.2015 passed by the AO and directed him to redo the assessment so that abuse of provision of section 10(38) is prevented and income is brought to tax in light of recent court judgments in penny stock cases. 4. Before us, the Ld. counsels for the assessee file a Paper Book (P/B) containing the documents which were submitted before the AO and Pr. CIT. We summarize below the submissions made by the assessee before the Pr. CIT and the contentions before us. It is explained that there is no bogus or entry providers involved and the AO, after due application of mind, considering the past history of the assessee has complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Ward, Howrah, who has made the assessments, had only jurisdiction over cases of new assessees, whose names began with the alphabetical letters from S to Z , with a view to camouflage the name and make it appear to fall within the jurisdiction of the Income Tax Officer, the name has been given in the reverse order by putting the surname first and her own name afterwards, as will be apparent from the returns filed, whereas in the case of the present appellant no such attempt to camouflage any name has been made; d. No bank account or any proper books of account were maintained by the assessee or produced before the ITO, whereas in the case of the present appellant the bank account has been filed during the original assessment proceedings; further proper and complete books of accounts have been maintained by the appellant and the same has not been disputed by the AO during the original assessment proceedings; e. No evidence whatsoever was produced in respect of the money-lending business done and interest income shown to have been received by the assessee, no names were given as to the parties to whom the loans were advanced, with amounts and ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document and also to give explanations as to why the amounts mentioned therein should not be added back to the total income of the assessee. In response to it the assessee denied any connection with the incriminating document. The AO was satisfied with the said explanations and accordingly, did not make any addition to the total income for the assessment years 2007-08 and 2008-09. Taking support from Explanation 2, however, the Commissioner took the view that the AO had completed the assessments without making proper inquiries with regard to the incriminating documents. Accordingly, the Commissioner passed the revision order u/s 263 of the Act. In appeal, the Tribunal held that newly inserted Explanation 2(a) to section 263 does not authorize or give unfettered powers to Commissioner to revise each and every order, if in his opinion, same has been passed without making inquiries or verification which should have been made . In the case of Nisha Jain (supra), the assessee is an individual and Director of ARL Infratech Ltd. and filed return of income for AY 2013-14 on 20.09.2013 declaring total income of ₹ 1,58,70,180/-. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal allowed the appeal filed by the assessee. In Nirav Modi (supra), it is held : 12. In the present facts, the Assessing Officer was satisfied, consequent to making an enquiry and examining the evidence produced by the Assessing Officer, establishing the identity and creditworthiness of the donor as also the genuineness of the gift. The CIT in his order of revision, does not indicate any doubts in respect of the genuineness of the evidence produced by the Assessee. The satisfaction of the Assessing Officer on the basis of the documents produced is not shown to be erroneous in the absence of making a further enquiry. It is made clear that our above observations should not be inferred to mean that it is open to the Assessing Officer to enquire into the source of source for the purpose of the present facts. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan (supra) has observed that there can be no doubt that where the view taken by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad rightly invoked provisions of section 263 of the Act. In the case of Bisakha Sales (P.) Ltd. (supra), during the AY 2008-09, the assessee-company received share application money with huge and unjustified share premium from corporate entities. The AO passed an assessment order accepting the genuineness of deposits received by the assessee. The Commissioner, however, passed a revisional order setting aside the assessment order. In appeal, the Tribunal held that where the assesseecompany received share application money with huge and unjustified share premium from corporate entities, merely because said amount was received through banking channel, the AO was not justified in accepting said transactions as genuine without making proper inquiries and, therefore, impugned a revisional order passed by the Commissioner setting aside the assessment order was to be upheld. 6.2 As mentioned earlier, the AO has passed an order u/s 143(3) dated 27.12.2015 accepting the return income of ₹ 13,64,810/-. The assessment order speaks of itself. The said assessment order is produced below : 1. The Return of income for A.Y. 2013-14 has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the documents available on record. One cannot miss the proposition that assessment made without inquiry is prejudicial to the interest of revenue. In Rampyari Devi Saraogi (supra), it is held in order that the Commissioner may consider an order to be erroneous for the purposes of section 263, the error of law may not be apparent on the face of the order, the Commissioner may consider an order of the Assessing Officer to be erroneous not only if it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case. In view of the above position of law enunciated in Rampyari Devi Saraogi (supra) and because the AO has completed the assessment in undue haste or without inquiry, the Pr. CIT has rightly exercised his power u/s 263 by holding that the order of the AO is erroneous and prejudicial to the interest of revenue. However, it is too early on the part of the Pr. CIT to direct the AO to redo the assessment so that abuse of provision of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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