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TMI Blog2020 (8) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 263 of the Act 3. The Pr CIT has erred in observing that the AO has completed the assessment without proper verification and hence the order of the AO is erroneous and prejudicial to the interest of revenue. 4. The Pr CIT has erred, in ignoring the submissions/ documentary evidence submitted by the assessee during the assessment and revisionary proceedings, and recording factually incorrect finding while holding that the order of the AO is erroneous & prejudicial to the interest of revenue. 5. The Pr CIT has erred in not appreciating that during the course of assessment proceedings the assessee has filed all the details in respect of the issues raised by the AO much before the completion of assessment proceedings and the AO has also made proper and meaningful enquiries before taking a final conclusion vis-a-vis framing final assessment. 6. The Pr CIT has further erred in observing that assessee has not filed any evidence in respect of sale and purchase of shares and claiming exemption of section 10(38) on such transaction on which STT has also been paid. 7. The Pr CIT "has erred in not appreciating that the assessee has not only invested in the shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rease in capital. Therefore, notice u/s 263 was issued on 05.07.2019. The reasons for issue of show cause notice was on the ground that in the absence of proper verification and investigations by the ld AO on this issue the assessment order passed is erroneous and also prejudicial to the interest of revenue. 7. The assessee submitted its reply on 26.07.2019 stating that transaction entered into by the assessee is genuine transaction and all the information, documents and evidence regarding the sale and purchase of the shares were submitted to the ld AO. The assessee claimed that it has submitted the copies of the purchase bills; demat accounts, holding statement, bank statement, broker account statement and contract notes before the ld AO. It is also stated that transaction compliance with all the transaction u/s 10(38) of the Act. 8. The ld Pr. CIT held that the share purchase so cheaply and are sold at a fancy price needs a satisfactory explanation with supporting documents. He held that even during the hearing u/s 263 of the Act no such evidence were produced. He further held that the assessment lacked the necessary enquiries on the genuineness of the capital gain exempt and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The assessee submitted the complete details, which was examined by the ld AO and accepted. He submitted that the ld PCIT has held that the order is erroneous only because of the reason that the ld AO has not examined information in relation to Yamini Investment Company Ltd because such information was not with the ld AO during the assessment proceedings. The argument of the ld AR is by this, the ld PCIT has accepted that the ld AO has verified all other things. He therefore submitted that because merely one-step of the earning of the long-term capital gain exempt from tax was not examined cannot make the order of the AO erroneous and prejudicial to the interest of the revenue. iii. He further submitted that if the ld AO has not made any enquiry according to the ld PCIT then the ld PCIT should have made certain enquiry before initiating the proceedings u/s 263 of the Act to hold that the order of the ld AO is erroneous and prejudicial to the interest of revenue. He submitted that in this case the ld CIT has not made any enquiry. iv. He further submitted that the assessee has produced complete details about the sale of shares on which long-term capital gain has been earned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the price rise in the shares sold which was purchased @ 1/- per share. She submitted that the shares purchased for Rs. 15 lakhs resulted into a capital gain of Rs. 55 lakhs is enquired by the ld PCIT . Therefore, the learned principal Commissioner of income tax has made the minimum enquiry that should have been made. This Clearly shows that the order of the ld AO is erroneous and prejudicial to the interest of the revenue. He further relied on several judicial precedents and submitted that the coordinate bench in case of Puja Gupta in ITA No. 4057/Del/2018 dated 31.01.2019 has upheld the action u/s 263 of the Act on identical facts and circumstances of the case and therefore, the issue is squarely covered in favour of the revenue. She submitted that the assessment order passed by the ld AO was cryptic, short, devoid of any reference to any enquiry and AO has merely accepted the submission of the assessee. Therefore, the order passed by the ld PCIT cannot be found fault with and is perfectly in order. 11. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also considered in detail the written submission filed by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- which was claimed as exempt u/s 10(38) of the Act. The assessee submitted relevant documentary evidence. The documentary evidence shows that there is a letter of the assessee to Mr. Bishnu Kumar Bansal, director of Surya Build Co Pvt. Ltd. According to that letter written by the assessee, he is forwarding a cheque of Rs. 15 lakhs asking that party to transfer the shares to his demat account with a depository Elite f Wealth Advisors Ltd, this is placed at page No. 242 of the paper book. The another evidence at page 243 is the copy of the cheque of HDFC Bank of Rs. 15 lakhs issued by the assessee in the name of Surya Build Co. Pvt. Ltd. At page No. 244 is a copy of Demat statement in the name of assessee with Elite Wealth Advisors Pvt. Ltd from 01.04.2014 to 31.03.2015. In that demat statement of 11.04.2014 assessee showed receipt 15 lakhs shares of Fidelo Power and Infrastructure Pvt. Ltd were transferred through off market receipt. Page No. 245 is a holding statement as on 10.05.2015 of the above shares. Page No. 246 is a sale bill dated 27.03.2014 of Surya Build Co. Pvt. Ltd issued to the assessee for the cost of 15 lakhs equity shares of that company @ 1/- amounting to Rs. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry about the genuineness of the transaction in the circumstances of the case. Therefore, he directed the ld AO to make necessary enquiry to verify the issue and then pass the order after giving proper opportunity to the assessee. On careful examination of the whole issue it is apparent that the ld AO did not carry out any enquiry with respect to the long term capital gain claimed by the assessee u/s 10(38) of the Act. On careful examination of the order passed by the learned principal Commissioner of income tax, we found that, necessary enquiries were made by PCIT on the issue, therefore, on this account no fault could be found with the order u/s 263 of the income tax act. Further, when no inquiries have been made by the learned assessing officer, for the reason for which the case of the assessee was selected in scrutiny, the order is erroneous and prejudicial to the interest of the revenue. This issue is squarely covered in favour of the revenue wherein identical facts and circumstances of the case the action of the ld PCIT in absence of revisionary order u/s 263 of the Act was upheld in 2019 (1) TMI 1630 - ITAT DELHI POOJA GUPTA VERSUS PR. CIT, NEW DELHI. The findings of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of that company letter on changed to Sharp trading and Finance Co Ltd. 9. On the basis of the above information submitted by the assessee, learned assessing officer has accepted the above long-term capital gain as genuine though for the purpose of the scrutiny the case of the assessee was selected stating that it is a suspicious transaction relating to long-term capital gain on shares. The assessment order was passed on 1/4/2016. The learned CIT has passed an order under section 263 of the income tax act stating that AO Should have enquired the above claim of exempt long-term capital gain earned by the assessee on the basis of suspicious transaction. The learned principal Commissioner has revised the order on the following counts holding it to be erroneous and prejudicial to the interest of the revenue:- i. The learned assessing officer has not drawn any conclusion about the steep rise in the price of the share in which assessee has earned long-term capital gain. ii. The learned AO has not investigated the issue from the angle that it is a colourable device to evade taxes iii. AO has not taken note of information received from Calcutta investigation wing (Directorate ) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul Agarwal, JDIT (Sys) 2(1) could be contacted on 0120-2770052 or email at [email protected] 5. The undersigned is directed to request that necessary directions may kindly be issued to the officers working under your jurisdiction to access this functionality and ensure that information available in the 'Penny Stock' functionality which may be useful for the purpose of cases presently under scrutiny, is examined and considered while finalizing assessments and considering reopening of cases under section 148 of the IT Act, 1961. 6. This issues with the approval of Member (Inv), CBDT. Page | 9 11. Along with this the central board of direct taxes has also issued a detailed standard operating procedure (SOP) for investigation of the penny stock issues. There are several action points listed for the assessing officer and what need to be proved by the assessing officer when a. assessee is purchasing share of a company which is devoid of any fundamental of investment and earning long-term capital gain in such listed company which does not have any business as seen from its last profit and loss account and do not have any fixed assets or plant and machinery. b. When th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and for which also the simple letters are provided. The AO must also check for any punitive action on any of such brokers by SEBI. In short after making all such enquiry the assessing officer must collect all the information and then summon assessee about knowledge about share market in general, knowledge about the script in specific, why and how investment was made, how brokers were instructed, how well the assessee knows the brokers its office and its employees, how his decision to purchase shares of scripts is devoid of financial wisdom, statement of entities specific if any, laying all the facts before him which proves that the transaction is not normal. After that the learned assessing officer is directed by that instruction to issue a show cause notice. In the present case before us the learned assessing officer has merely accepted what is submitted before him without making any enquiry or obtaining the statement of the assessee about all these parameters. As the assessing officer has neither carried out any enquiry with the 3rd parties such as the broker, stock exchanges, and most importantly the learned AO has not examined the assessee about the share transactions as dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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