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TMI Blog2020 (11) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer thereafter issued scrutiny notice(es) and completed his regular assessment in question. 3. Coming to the impugned revision proceedings, the PCIT issued his show-cause notice dated 01.11.2018 on the ground that the assessee had claimed sec. 10(38) LTCG/LTCL of Rs.3,66,536/- claimed after transferring shares hold in M/s Kailash Auto Finance Ltd. The PCIT quoted the DIT(Inv.) Kolkata discrete inquiries to observe that the said LTCG/Loss had been derived from share transactions sale-price in penny stock which rendered the assessment accepting the same as correct to be to erroneous causing prejudice to the interest of the Revenue. 4. The assessee appears to have filed written statement(s) dated 16.11.2018 and 13.02.2019 inter alia pleading therein that the Assessing Officer's action accepting his LTCG/Loss on sale of shares held in M/s Kailash Auto Finance Ltd., as genuineness was very much correct since he had made all detailed inquiries and after going through the corresponding details in the nature of demat account, sale-purchase transactions to registered brokerage of stock exchange in the corresponding listed shares, payments received through proper channel duly sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so stated that he had filed all necessary details like contract notes before the AO in reply to specific query raised by him. The assessee has relied upon various decisions of the Hon'ble Gujarat High Courts and Hon'ble Kolkata Tribunal. 6. I have considered the submission of the assessee. The perusal of record shows that the case of the assessee was selected for scrutiny on account of "suspicious transaction relating to long term capital gain on shares (inputs from investigation wing)". The record shows that the AO had only issued a notice u/s 142(1) dated 07.06.2016 where he raised a general query with regard to trading account shares for the year ended 31.03.2014, cash flow statement, receipt and payment account. This query was general information sought from the assessee and the assessee furnished his balance sheet & P&L A/c and his computation of income including a statement of exempt long term capital gain involving 80 scripts. This statement included the details of capital gains on sale of the shares of Kailash Auto Finance Ltd. There is no evidence on record to show that the AO took cognizance of the information received from investigation wing with regard to tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Devi Aggarwal V. CIT(1973) 88 ITR 3Z3(SC). The reasoning for this proposition has been explained by Hon'ble Delhi High Court in the case of GEE VEE Enterprise Vs. Addl. CIT (1975) 99 ITR 375 in the following para: "It is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should hove made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income Tax Officer is very different from that of civil court. The statements made ill the pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidences which come before it. The Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment made in Sec. 263 of the Act with effect from 01.6.2015, I hold that the impugned assessment order dt. 29/07/2016 passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue and is liable to be set aside. The Assessment Order u/s.143(3) dated 29/07/2016 made by AO is accordingly set aside with the direction to made fresh assessment after considering the complete facts as discussed above and submissions made by the AR of the assessee in respect of the above specific issue raised and after giving opportunity to rho assessee and in accordance with law." This leaves the assessee aggrieved. 6. We have given our thoughtful consideration to rival pleadings against and in support of PCIT's impugned sec.263 jurisdiction revising the regular assessment dated 29.07.2016 accepting the assessee's LTCG/Loss derived from transfer of shares held in M/s Kailash Auto Finance (supra). It is not in dispute that the assessee had filed all the supportive detailed evidence (supra) forming part of the assessment records. Learned PCIT is also equally fair in not treating the impugned assessment as a case of the former limbs of lack of inquiry but he holds that it is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case. Dr. Srihari vehemently contends that the Assessing Officer has not carried out the require due enquiry with regard to assessee's above stated LTCG which prompted the PCIT to invoke his revision jurisdiction. He refer to the PCIT's detailed discussion to this effect that such kind of LTCG are offshoot of collusion amount of entry operators, promoters and investors concerned deriving bogus LTCG by taking recourse to artificial price of the scrips. He next highlights the CBDT's standard operating procedural (SOP) issue recently to the field authorities for handling cases of bogus LTCG / losses derive mainly of penny stock. 7. Dr. Srihari's next reliance is on various decisions i.e. ITA No.4057/Del/2018 Pooja Gupta vs. Pr. CIT,New Delhi decided on 31.01.2019, ITA No.5714/Del/2018 Pooja Ajmani vs. ITO Ward-20(4), New Delhi decided on 25.04.2019, ITA No.1723/Bang/2018 Smt. M.K. Rajeshwari vs. Income-tax Officer, Ward-3, Raipur decided on 12.10.2018 and those referred in the PCIT's order under challenge (supra) to pray for upholding the impugned revision order under challenge. 8.We have given our thoughtful consideration to rival contentions. The sole issue that arises for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyaridevi Saraogi v. CIT (1968) 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal V. CIT (1973) 88 ITR 323 (SC)". 25. In Max India Ltd. (3 Supra), reiterated the view in Malabar Industrial Co.Ltd. (2 Supra) and observed that every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. 27. In Sunbeam Auto Ltd.( 5 Supra), the Delhi High Court held that the Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc.; that whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted; that to do so is to divide one argument into two and multiply the litigation. It held that cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, makes inquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the account or by making some estimate himself; that the Commissioner, on perusal of the record, may be of the opinion that the estimate made by the Officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income Tax Officer; but that would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure; there must be material available on the record called for by the Commissioner to satisfy him prima facie that the order is both erroneous and prejudicial to the interests of the Revenue. Otherwise, it would amount to giving un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse cannot be had to Sec.263 (1) of the Act. b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. c) To invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO the Revenue is losing tax lawfully payable by a person, it would be certainly prejudicial to the interest of the Revenue. The power of revision is not meant to be exercised for the purpose of directing the AO to hold another investigation without describing as to how the order of the AO is erroneous. From this it also follows that where the assessment order has been passed by the AO after taking into account the assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by the CIT which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a valid order under s. 263 it is essential that the CIT has to record an express finding to the effect that order passed by the AO is erroneous which has caused loss to the Revenue. Furthermore, where acting in accordance with law the AO frames certain assessment order, same cannot be branded as erroneous simply because according to the CIT, the order should be written more elaborately.-Malabar Industrial Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails had been furnished. The AO had also not made any inquiries. In the detailed discussion on this aspect, the Tribunal has observed that insurance claim was lodged for the goods lost in transit. The assessee at that time had merely filed a claim with the insurance company. This claim had not been approved as the insurance company had neither accepted the same nor given any assurance for making payment. Therefore, no income had "accrued" which could be taxed. The Tribunal rightly held that ordinarily the income is said to have accrued to a person when he acquires the right to income and this should be enforceable right, though actual quantification or receipt may follow in due course. The mere claim to income without any enforceable right cannot be regarded as an accrued income for the purpose of IT Act. (Para 16) Coming to the claim under s. 80HHC, it was totally uncalled for on the part of the CIT to say that the AO did not make requisite inquiries because of the simple reason that the AO had, in fact, declined and rejected this claim of the assessee. If the AO himself disallowed the deduction claimed by the assessee on this account under s. 80HHC, one fails to understand wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ueries and has not given any finding whatsoever that there is an error made by the AO or that the circumstances was such that would require and warrant further inquiry or investigation. No error in the assessment order has been pointed out and it is not stated as to how prejudice was caused to the revenue. The finding that the AO had failed to properly scrutinise the above aspects does not give powers to the ld. CIT to revise the assessment u/s 263 of the Act. Making rowing enquiries is not a finding of an error. Assessments cannot be set aside for fresh enquiries unless a specific error is pointed out at not making proper enquiry cannot be equated with no enquiry. In view of the above we quash the order passed u/s 263 of the Act and allow the appeal of the assessee. 12. In the result the appeal of the assessee is allowed" Keeping in mind the foregoing detailed discussion that an assessment has to be both erroneous as well as prejudicial in interest of the Revenue simultaneously before the same is sought to be revised and it is not permissible for the CIT or the PCIT to exercise his revision jurisdiction in case the Assessing Officer has taken one of the possible view, we pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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