TMI Blog2020 (11) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned transactions before setting aside to the file of the assessing officer. Hence, the action of the Ld. Pr. CIT is contrary to the ratio laid down by the binding precedence. We, therefore, hold accordingly, impugned order is quashed. - Decided in favour of assessee. - ITA No.217/JP/2020 - - - Dated:- 19-11-2020 - Shri Kul Bharat, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Manish Agrawal (AR) For the Revenue : Shri A.S. Nehra (ACIT-DR) ORDER PER: KUL BHARAT, J.M.: This appeal by the assessee is directed against the order of the Learned Pr. Commissioner of Income Tax (Ld. Pr. CIT, Alwar, dated 23/01/2020 pertaining to the Assessment Year 2015-16. The assessee has raised following grounds of appeal: - 1. On the facts and in the circumstances of the case and in law, Ld. Pr. CIT erred in passing order u/s 263 of the Income Tax Act, 1961(the Act), when the assessment for the impugned assessment year had already been concluded by ld. AO u/s 143(3) of the Act, after seeking explanations and making all the enquiries relevant to the issue on which the proceedings u/s 143(3) are initiated and were necessary for completion of assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In response thereto, the assessee had filed a reply, thereafter the assessing officer passed order u/s 143(3) of the Act accepting the return filed by the assessee. Ld. Pr. CIT found that the assessment order was erroneous prejudicial to the interest of revenue. Hence, the order was set aside and assessing officer was asked to properly examine the issues and to verify the genuineness of the share transactions. 3. Aggrieved against this the assessee is in present appeal. 4. Ld. Counsel for the assessee vehemently argued that the action of the Ld. Pr. CIT is contrary to the settled principles of law and he further submitted that the exercise of the jurisdiction u/s 263 is not proper. The assessment order has been revised arbitrarily. Further, he relied upon various case laws i.e. Judgment of Hon ble Supreme Court rendered in the case of CIT vs. Malabar Industrial Co. Ltd. (2000) 243 ITR 83 (SC) . Further, the decisions of the Coordinate Bench of this Tribunal in the case of ITO vs. Shri Narayan Tatu Rane in ITANo.2690 2691/Mum/2016 and in the case of Pr. CIT vs. Sanjeen Kr. Khemka in ITANo.1361/Kol/2016 and the judgment of Hon ble Delhi High Court in the case of ITO v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to consider the matter afresh in light of the directions given by him in the impugned revision order, which is nothing but the change of opinion on the already decided issue. Aggrieved by the aforesaid revision order of Ld. CIT (Admn.), the assessee has preferred the present appeal before this Hon ble Tribunal. In support of and elaboration to the grounds of appeal already taken, ground-wise submission is made as under: Grounds of Appeal Nos. 1 to 3: Under all these grounds of appeal, the assessee has challenged the action of Ld. CIT(Admn.) in passing the impugned revision order u/s 263 of the Act arbitrarily and without in any manner establishing as to how the Assessment Order passed by Ld. AO was erroneous and prejudicial to the interest of revenue more particularly when the ld. AO has conducted the enquiry in the manner specified to verify the long term capital gains from the sale of shares. As stated above, in the year under appeal assessee has claimed exempt income to the tune of ₹ 11,52,000/- from the sale of shares of M/s Jackson Investment Ltd. The ld. CIT(Adm.) in his order alleged that the capital gains declared is not genuine as M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of shares, share transfer confirmation by the company, physical delivery of shares, credit of shares in demat account, sale of shares and finally debit of shares from demat account etc. were filed during the course of assessment proceedings. It is further submitted that purchase of shares were made in October, 2011 and shares were with assessee for long more than 3 years as well as these were dematerialized in between. Demat accounts are held by independent third party of repute, which cannot be doubted. Moreover it is not a case where shares were dematerialized that before their sale giving doubt to the entire transactions of sale. In the instant case shares were in Demat account since 18th February, 2013 and sold after nearly about 2 years in January, 2015 from Demat date (and about 3 year from purchase date). Further the issue has been settled by the Hon ble Rajasthan High court in the case of Pooja Agarwal (APB 26- 33) which is binding in nature and was submitted before the ld., AO. The Ld. AO after considering all the details, facts, evidences and legal position prevailing at the time of passing of order has found the gain to be not non-genuine. It is pertinent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. ] A perusal of above clarifies that order passed by assessing officer shall be deemed to be erroneous and prejudicial to the interest of the revenue if AO has passed such order without making inquiries or verification which should have been made; It is worthwhile to note here that the phrase which should have been made here in no way means that enquiries should have been made in manner as desired by CIT, rather it means that before holding an order to be erroneous, CIT should have conducted necessary enquiries or verification which brings on record certain material in order to show that the finding given by the assessing officer is erroneous. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. M/s. J.L. Morrison (India) Ltd.(ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under:- By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. We also rely on the judgment of the Hon ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : When the CIT passed the impugned order under s. 263, two views were inherently possible on the word profits occurring in the proviso to s. 80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the year 2005, though retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire material available on record in the shape of the submissions and judicial pronouncements, the Ld. AO has passed a reasoned order. Thus, the order of Ld. AO cannot at all be held as erroneous and thus the action of Ld. CIT(Adm.) in passing the impugned order concluding that the said order is erroneous and prejudicial to the revenue is bad in law. It is further submitted that, the Hon ble Bombay High Court in the case of CIT Vs. Gabrial India Ltd ., reported in 203 ITR 108 , has held that, CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO . Further, in the case of CIT Vs. Sunbeam Auto Ltd. , reported in 227 CTR 133 , the Hon ble Delhi High Court drew a distinction between Lack of inquiry and inadequate enquiry and held that, in the case of inadequate enquiry, provisions under section 263 cannot be invoked. It may however, be noted that the instance case is neither the case of inadequate enquiry nor lack of enquiry during assessment proceedings as it can be seen that due, necessary and most pertinent enquiries to all the issues emerging from the return filed by the assessee were conducted by the Ld. AO. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. Thus, it is submitted without admitting that the defect (if any) does not in anyway lead to supply the foundation for revising an otherwise valid order which can neither be said erroneous nor prejudicial to invoke section 263 of the Income Tax Act, 1961, which section cannot be permitted to be brought into play unless both the conditions i.e. the order has to be prejudicial as well as erroneous both, meaning thereby that the twin conditions are to be cumulatively satisfied before proceeding to revise an assessment order. In light of the facts / circumstances of the case, submissions made above, and the case laws relied upon, it is very humbly prayed that the impugned revision order of Ld. CIT(Admn.) may please be quashed and held bad in law, thereby restoring the assessment order of Ld. AO. Further, reliance is placed on the following case laws: 1. CIT Vs. M/s Chambal Fertilizers Chemicals Ltd. (Raj HC) (2014) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible. 4. M/s Emgee Cables Communication Ltd. Vs. CIT (2014) 51 TW (IV) 197 Section 263 power of revision by commissioner AO completed assessment at NIL assessee involved in manufacture / trading of cable/copper/wire declared income from interest commission as business income accepted by AO CIT invoked sec 263 and set-aside the order of AO directing him to consider the said income as income from other sources and not from business whether CIT justified in invoking sec 263? Held : No CIT only wanted AO to make re-verification cannot be said that that order of AO was without making proper enquiry AO having taken one of the possible view cannot be said that assessment order was erroneous and prejudicial to the interest of revenue. CIT Vs. Ganpat Ram Bishnoi, 296 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic by the SEBI, it discovered that various syndicates have arranged accommodation entry of Bogus LTCG, Bogus STCG, Bogus Long/Short term Capital Loss through trading of shares of Penny Stocks. The modus operandi found is th.t the investors/beneficiaries hold these shares for one year or so ant' then. sale it to one of the shell private limited companies of the operator. These facts were confirmed by the stake holders viz. Operator/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the Income-tax Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Jackson Investment Ltd, is a penny stock listed company. It has very small capital base but its mark capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i. e. M/s. Jackson Investment Limited is also available at ITS Data / AIR. (C)The AO inadvertently not considered the investigation made by the department in respect of M/s Jackson Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment made/received to/from broker? xv. Date of purchases of shares and date of actual deposit in Demat account. In case of delay in dematerial ization of shares, please justify the same. 2. Please state whether you are a regular investor in shares and if yes, please furnish details of Investments/trading done by you in shares for 3 years and regularity of investing in shares. 3_ As per information received from the Director of Income tax (Investigation), Kolkata, a survey u/s 133A had been carried out on various share brokers. During the Survey, Various enquiries have been conducted by the Directorate o Investigation, Kolkata, on a project basis, which has resulted into th unearthing of a huge syndicate of Entry Operators, share brokers and mone launderers, involved in providing bogus accommodation of Long Term Capit Gain, Short term capital loss. 4. It has come to light that large scale manipulation has been done in mark price of shares of certain companies listed on the Bombay Stock Exchange certain persons working as a syndicate in order to provide entries of tax ex- pt bogus Long Term Capital Gains to large number of persons in lieu of unaccounted cash. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove alongwith supporting documentary evidences and other material evidence which you may rely upon alongwith books of accounts to the office of the undersigned on the date fixed for hearing on 27.11.2017 at 11:00 A.M. The above information has been called for in terms of provisions of section 142(1) of the I.T. Act, 1961. Notice under sec. 142(1) of the I.T. Act, 1961 is enclosed herewith. 12. In addition to the above information you are also required to furnish the following information/details:- Please note that no further adjournment shall be given as this is a time barring case. Non-compliance, part compliance or incomplete compliance may entail penal action, and/or adverse inference in respect of the said issue and/or taking recourse to rejection of book results and assessment u/s 144 of the Income Tax Act, 1961 without any further reference to you in this regard 8. In response thereto, the assessee stated as under: 1. (I). That the assesee has invested ₹ 40000/- for purchases of shares as per enclosed copy of contract not for sale latter of transfer of share dated 20/10/2011. ( I I ) That the assessee has invested ₹ 40000/- out of his income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey person of share as stated by you in the notice if any is fake false based on mere presumption, suspicion or surmise and supposition. 8. That as alleged by you M/s Jackson Investment Ltd. is also one of the penny stock companies which is fake false on mere presumption, suspicion or surmise and supposition, as to the best of assessee's knowledge the Jackson Investment Ltd. is a genuine company to whom assessee received payment through bank as per enclosed bank statement and the delivery of the shares has been taken given through Demat account, Contract Notes for sale purchases of shares enclosed, share transfer latter from M/ s Jackson Investment Ltd. dated 20/11/2011 enclosed. 9. That long term capital is genuine for the reasons (a) Payment for the sale of shares received ₹ 1187082.08 through Neft in the assessee's bank as per copy of the bank statement enclosed. (b) Delivery of the shares taken given through Demat A/c as per enclosed copy of the same. (c) Contract Notes for Sale purchases of the broker who are members of recognize stock exchange as per copy of the same enclosed. The assessee's Long term Capital Gain is genuine. The followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. 19. In the present case, the findings recorded by the Tribunal are correct as the CIT 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 CIT is that order passed by the Assessing Officer may be erroneous . The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent ‟ s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the ITAT Mumbai Bench in the case of M/s Indus Best Hospitality Realtors Pvt. Ltd. in ITA No. 3125/Mum/2017 vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is retrospective in nature. Since the year under consideration is AY 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar view has been taken by the various Coordinate Benches of the ITAT in the following cases:- ITA No. 3391/Del/2018 Assessment year 2014-15 (a) AV Industries v. ACIT [ITA No. 3469/Mu m/2010] dated 06.11.2015 (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon ble Supreme Court has held in the case Parashuram Pottery Works Co. Ltd Vs. ITO (1977)(106 ITR 1) that there must be a point of finality in all legal proceedings and the stale issues should not be reactivated beyond a particular stage and the 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. 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinizing the nature of enquiry or verification carried out by the AO vis- -vis its reasonableness in the facts and circumstances of the case. Hence, in our considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pr. CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous. 12. We find that Ld. Pr. CIT has relied upon the various case laws i.e. Puja Gupta vs. Pr. CIT in ITANo.4057/Del/2018 and also heavily relied upon the amendment made in the law. We find that the coordinate Bench of this Tribunal in the case of ITO vs. Shri Narayan Tatu Rane(supra), M/s. Arun Kumar Garg, HUF, vs. Pr. CIT(supra) have ruled that the Pr. CIT can not pass the order u/s 263 of the Act on the ground that thorough enquiry should have been made by the Assessing Officer. In the present case the assessing officer had given a specific notice regarding the disputed transactions and the assesseee also gave specific reply to the show cause notice issued by the assessing officer. Therefore, it is not a case where the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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