TMI Blog2020 (12) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order has recorded the factum collection of evidence and recording of statement. Action of the Ld. PCIT revising the assessment order under the peculiarity of the facts and circumstances of the case cannot the sustained. The impugned order is therefore, set aside and the grounds raised by the assessee in this appeal are allowed. - ITA No.280/Ind/2019 (Assessment Year: 2014-15) - - - Dated:- 21-12-2020 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER Appellant by Shri S.N. Agrawal, CA Revenue by Shri Puneet Kumar, Sr. DR ORDER PER KUL BHARAT, J.M: This appeal by the assessee is directed against the order of ld. Pr. Commissioner of Income Tax (in short Ld. Pr. CIT )-2, Indore dated 10.01.2019 pertaining to assessment year 2014-15. The assessee has raised following grounds of appeal: 1. That on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT erred in setting aside the order as passed by the assessing officer under section 143(3) of the Act by invoking the provision of section 263 of the Act even when the order as passed by the assessing officer was neither erroneous nor prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the order of the Ld. Pr. CIT. Ld. DR further submitted that the assessing officer has not made any enquiry in respect of the issue. It is the case of no enquiry hence Ld. Pr. CIT was justified in restoring the issue to the file of the assessing officer. Ld. D.R further submitted that the case laws as relied by the Ld. counsel for the assessee do not help the assessee under the facts and circumstances of the present case. 7. We have heard rival submissions and perused the material available on record and gone through the orders of authorities below. We find that the Ld. Pr. CIT has issued a notice dated 21.12.2017 calling upon the assessee as to why the assessment order should not be revised. The relevant contents of the notice are reproduced as under: Please refer to the assessment order dated 27.12.2016 for A.Y. 2014-15 in your case. On perusal of case record in your case for the A.Y. 2014-15 it is found that you have furnished your return of income declaring total income at ₹ 7,39,910/- on 31.03.2015. Assessment in your case u/s 143(3) of I.T. Act 1961 was completed by the ITO-5(3), Indore, vide order dated 27.12.2016 assessing total income at ₹ 7,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the above assessee for the Asst Year 2014-15. In reply to the said show cause notice, we have to submit as under:- 1) That in the show cause notice, you have stated that case of the assessee was selected for the reason for suspicious transaction relating to long term capital gain on share. The assessee had shown long term, capital- gain of Ps: 22,10,437/ - on sale of shares of M/s. Sunrise Asian Limited, That in the show cause notice you have also reproduced table of long term capital gain on sale of shares of M/ S Sunrise Asian Limited, the same is reproduced as under:- 2. That in the show cause notice, you have stated that case of the assessee was selected for the reason for suspicious transaction relating to long term capital gain on share. The assessee had shown long term capital gain of ₹ 22,10,437/ - on sale of shares of M/ S Sunrise Asian Limited. That in the show cause notice you have also reproduced table of long term capital gain on sale of shares of M/ S Sunrise Asian Limited, the same is reproduced as under- S.No. Name of the company Date of purchase Date of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s M/s Sunrise Asian Limited) to the assessee is enclosed 2 Copy of Share transfer form for transfer of shares in the name of the assessee 3 Copy of Share certificate, duly transferred in the name of the assessee 4 Copy of Amalgamation Order passed by Bombay High Court for the amalgamation of M/s Santoshima Tradelinks Ltd and M/s Conart Traders Ltd., forming a new company M/s Sunrise Asian Limited 5 Copy of D-mat statement of the assessee with the Union Bank of India forthe period 01/04/2013 to 31/03/2014 6 Copy of share certificate as issued by the amalgamated company M/s Sunrise Asian Limited 7 Copy of Dematerialisation Request form to Union Bank of India for dematerialisation of shares of M/s Sunrise Asian Limited 8 Sale note Dt. 14/02/2014 for sale of 2,900 shares issued by Indira Securities Pvt. Ltd 9 Sale note Dt. 28/02/2014 for sale of 1,000 shares issued by Indira Securities P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to correct each and every type of mistake or error committed by the Assessing Officer; . it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same . category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue 'has to be read in conjunction with an erroneous order passed by the Assessing Officer. , 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 ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2015 has held that .' ' ,20. On due consideration of these facts, we are of the view that the AO has' examined the issue, though not discussed elaborately in the assessment order. But on record, he has called for information. from the assessee and thereafter accepted. It is the prerogative of the AO what to discuss in the assessment order and the assessee cannot force the AO to draft the assessment order in a particular manner. The assessment order cannot be termed erroneous as well as prejudicial to the interest of the Revenue on the ground that inquiry conducted by the AO. 4.5J Hon'ble Mumbai bench of ITAT in the case of Reliance Money Infrastructure Ltd Vs Pr CIT as reported in 51 CCH 0166 has held that :- 26. In view of the foregoing discussions, we note that the AO has passed the assessment order after obtaining and calling for details/clarifications of all the seven issues raised by the Pr. CIT in' the revisionary proceedings and thereafter framed the assessment whereas the Id Pr. CIT has not specified in his order. as to how the order of the AO is erroneous so as to prejudicial to the interest of the revenue. The Pr. CIT has even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. 4.7. I] The order as passed by the assessing officer was not erroneous, since, the view as taken by the assessing officer wasone of the possible view the basis of documents as furnished by the assessee. Hence, the order as passed by the assessing officer was not erroneous and prejudicial order. 4.7.2} That Hon'ble Apex Court in the case Of CIT Vs Max India Limited as reported ~ 295 ITR 0282 has held that:- 2. At this stage we may clarify that under para 1 0 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase prejudicial to the interest of the Revenue under s. 263 has to be read in conjunction with the expression erroneous order passed by the AD. Every loss of revenue as a consequence of an order of the AD cannot be treated as prejudicial to the interest of the Revenue. For example, when the 11'0 adopted one of the courses permissible in law and it has resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquiry and after duly verification. from the documents as submitted by the assessee, claim of long term. capital. gain as exempt u/ 10138) of the Act was accepted by the assessing officer which on the basis of documents as furnished by the assessee was correct and acceptable view. Hence, you are requested to drop the show cause notice as issued u/ s 263 of the Act. 9. Ld. Pr. CIT after considering the material on record and submissions of the assessee revised the order thereby he restored the assessment order to the file of the Assessing Officer to examine the issue of Long term Capital Gain and pass an order as per law after making proper enquiry and investigation as indicated in the impugned order. 10. We have heard the rival submission, perused the material available on records and gone through the impugned order. We find that Ld. Pr. CIT has revised the order by observing as under :- 3. I have carefully considered the facts of the case, the assessment records and the written submission given by the assessee. It is noted that the case was selected for scrutiny CASS with reason which has been clearly mentioned in show cause issued by this office. It is observed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect .during the course of scrutiny proceedings. He recorded the statement of the assessee but no further enquiry to corroborate the facts stated in the statement was done by the AO. It is noted that not even the trade data has been called for to examine the transactions. No enquiry has been made from the exchanges either. No examinations/ enquiries have been done from the company whose shares have been subjected to sale in order to show the said LTCG., In this case there was a report of DDT(Inv), Kolkata regarding manipulations in scrip and it has been informed that the scrip was used to convert one's, unaccounted income into accounted by adopting colorable device. The AO ignored the report and didn't make any further verification or inquiry or correspondence with the investigation wing, Kolkata and proceeded to pass the order. The issue required further verification and enquiries which have not been done by the AO during the course of scrutiny proceedings. Therefore, the assessment is erroneous in so far as it is prejudicial to the interest of revenue as per the definition given in Explanation 2 to sec. 263 on this issue. 4. Therefore, in view of the above disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with utmost clarity: Q. Whether the enquiry conducted by the Assessing Officer in such cases can be construed as proper enquiry? A. Though the Assessing Officer issued notices. under secti.on133(6) but it failed to comprehend the rationale or logic behind ........, nor to examine any of the .......t is highly improbable for any person. having sound mind to purchase at arm's length the shares of a private limited company, hardly having any worth, with face value of ₹ 10 at a premium of ₹ 190. This mere fact should have been cornerstone for the Assessing Officer to embark upon . further enquiry to unearth the truth. The genuineness of transactions of issue of share at such, hefty premium in this background of the matter was under dark cloud and it skipped the attention of the Assessing Officer. [Para 17.c.} There remains no doubt whatsoever that in the given circumstances, the Assessing Officer conducted half-baked enquiry ignoring vital aspects which were required to be examined......Confronted with such peculiar and hair-raising circumstances, the Assessing Officer should have got. alerted and dug,. the matter deep for unearthing the reality of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case. In such circumstances, it is impermissible to have a recourse to the provisions of sections 142(1) and 143(2) for demolishing the order under section 263. [Para 18.b] Q. Whether inadequate inquiry conducted by the Assessing Officer empowers the Commissioner to revise the assessment order? A. It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term 'enquiry' can be diverse in different circumstances. There cannot be straitjacket formula to positively conclude as to conducting or non-conducting of 'enquiry' by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are Just ordinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, the obtaining of the documents and the application of mind thereon, without a further r outside enquiry, may, mean. that the Assessing officer did conduct enquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry [or looking deep into it, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an impossible thing to be done. It is axiomatic that the law does not require an impossible to be complied with. In the instant case the extent of enquiry conducted by the Assessing Officer, being as good as no enquiry, is sufficient in itself to empower the Commissioner for invoking his jurisdiction under section 263. Under such circumstances, no impossible burden can be cast on the Commissioner to show the positive leakage of income in concrete terms, when he has simply set aside the assessment order and restored this aspect of the assessment to the file of the Assessing Officer for making a proper enquiry and then deciding. {Para 20.g.} Q. If the Assessing Officer has taken. a possible view, can still the revision be ordered? A. Where Assessing Officer fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, the Commissioner is empowered to set aside the assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, the Assessing Officer can't be said to have taken a possible view and it is not further required on the part of the Commissioner to expressly show where the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar Gulati 2004 139 TAXMAN 369 ALL. When an assessment is done under section 143(3), it is expected that the Assessing Officer will make a detailed enquiry to find. out the correct income of the assessee and not to take the facts placed by the assessee on their face value. No proper enquiry appeared to have been made by the Assessing Officer in the instant case. It is well settled that if the Assessing Officer fails to make a proper enquiry this is erroneous and prejudicial to the interest of the revenue. [Para 13) 4. Malabar Industrial Co. Ltd. 2000 109 Taxman 66 SC Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1} - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a .person, it will certainly be prejudicial to interests of revenue - Held, yes An incorrect assumption of facts or an incorrect application of law' will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder as per the law after making proper verification, inquiries and investigations. It would be not out of place to mention that the AO shall re-examine only the issue which has been indicated for further investigation in the preceding discussion. 11. There is no dispute regarding exercise of powers under Section 263 of the Act but such powers are not unfettered. In our considered view such powers should be exercised in accordance with law. If every case is sent to file of the Assessing Officer for reexamining the issues it would really burden the tax payers and result into waste of resources. Undisputedly, for invoking provisions of Section 263 twin conditions for the order sought to be revised are that it should be erroneous in so far it is prejudicial to the interest of revenue. These two conditions are required to be satisfied conjointly. If any of them is not satisfied in that event exercise of power under section 263 of the Act would become bad in law. 12. Now coming to the facts of the present case in this case the assessee had filed return of income on 31.10.2015 declaring total income of ₹ 7,39,910/-. The case of the assessee was picked up for scrutiny assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the copy of Home Loan A/c of the assessee with Union Bank of India is enclosed for your kind perusal. 2] Details of the sources of Income of the assessee during the year under consideration is as under:- S.No. Particulars Amount 1 Income from House property 3,90,000 2 Income from business (being proprietor of M/s Samarth Impex, Indore) 5,71,856 3 Income from Long Term Capital Gain (Exempt U/s 10(38) of the Income Tax Act 27,50,406 4 Interest on saving Bank Interest 8,715 5 Dividend Income 3,830 3.1] Details of all bank accounts as maintained by the assessee in the year under consideration is as under:- S.No. Bank Name Bank Address Account No. Type of A/c 1 Union Bank of India Geeta Bhawan Branch, Indore 502 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2) That the assessee has received dividend income of ₹ 3,830/- from IDEA Cellular Union Bank of India, the same is exempt u/s 10(34) of the Income Tax Act. 6.3] The assessee in the year under consideration has sold shares of M/s IDEA Cellular Limited and M/s Sunrise Asian Limited through her broker M/s India Securities Pvt. Ltd. 6.4] Copy of the following documents as to justify the amount of Long term capital gain of ₹ 27,50,406/- is enclosed:- S.No. Particulars Page No M/s IDEA Cellular Limited 1 Copy of D-mat statement of the assessee with the Union Bank of India for the period 01/04/2013 to 31/03/2014 25 2 Sale note Dt. 18/11/2013 for sale of 5,590 shares issued by Indira Securities Pvt. Ltd 26-27 M/s Sunrise Asian Limited 1 Purchase note as issued by M/s P Saji Textiles Limited regarding sale of shares of M/s Conart Trader s Limited (Now known as M/s Sunrise Asian Limited) to the assessee is enclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for the year under consideration is enclosed for your kind perusal. 8.3) That the assessee was not liable to deduct TDS as per the provisions of the Income Tax Act on the payments as made in the year under consideration. Letter dt 17.08.2016 as issued may please be treated as complied with. Thanking you. I hereby confirm the content of above letter Yours faithfully, Sd/- Sd/- (Shweta Agrawal) (C.A. Satyanarayan Agrawal) Assessee A.R. 13. It is also stated that the statement of the assessee u/s 131 of the Act was also recorded by the Assessing Officer. Ld. Counsel drew our attention to the statement of assessee enclosed at Paper Book pages 21 to 24. The assessee had replied to questions, it was stated that the shares were sold through exchange. Hence, it is not a case where no enquiry was conducted. In fact from the material placed before us suggests some application of mind, by Assessing Officer. Admittedly, the Ld. Pr. CIT in the impugned order has recorded the factum collection of evidence and recording of statement. In view of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry as is alleged in the show cause notice under section 263 of the I.T. Act. It is merely stated in the notice under section 263 of the I.T. Act that A.O. failed to make enquiry on these aspects. However, the record produced before us shows all the three issues have been explained by assessee before A.O. supported by documentary evidences. When similar submissions were made by the assessee before the Ld. Pr. CIT, nothing adverse have been pointed out in the impugned order as to how the A.O. has not made enquiries at assessment stage on all these issues. PB-13 is cash flow statement of assessee for assessment year under appeal in which all the above items have been mentioned on which proposed notice under section 263 have been issued. All these facts were before A.O. at the assessment stage and all the details of sale and purchase of shares on which long term capital gains exemption was claimed have been mentioned in the return of income itself. Thus, there was no reason to believe that the A.O. did not examine this issue at the assessment stage. Further, the case was selected for scrutiny because the ITA.No.3432/Del./2019 Smt. Manita Muzaffarnagar suspicious long term capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of its own funds during the assessment year in question, 2011-12, and. which were those assets that were handed over to it by the Corporation. The Principal Commissioner only referred to the circular issued by the Board and concluded that the Assessing Officer was duty bound to calculate and allow depreciation on the build-operate-transfer arrangement in conformity with the circular, but the Assessing Officer had failed to do so and that therefore the order vas erroneous and prejudicial to the Revenue. That did not constitute the reasons required to be given by the Principal Commissioner to justify the exercise of jurisdiction under section 263. Only after undertaking an enquiry himself, the Principal Commissioner could have remitted the matter. Under section 263(1) to the Assessing Officer for afresh assessment. The Tribunal was not in error in setting aside the revision order under section 263 passed by the Principal commissioner. 10. A similar view has been taken by the Hon'ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. (supra) wherein it has been held as under: That the findings recorded by the Tribunal were correct as the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous. It has further been held that: inquiries were certainly conducted by the Assessing Officer. It was not a case of no inquiry. The order under section 263 itself recorded that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called for. The inquiry should have been conducted by the 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 inquiry. 12. In the present case also the A.O. conducted enquiry and had taken a possible view and the Pr. CIT simply directed the A.O. to make further enquiry in accordance with law but had not taken any step to make enquiry herself and also did not point out that how and in what manner the enquiries made by the A.O. were not sufficient. We therefore considering the totality of the facts and keeping in view the ratio laid down by the Hon'ble Delhi High Court in the aforesaid referred to cases, are of the view that the Ld. CIT(A) was not justified in holding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add!. CIT (6 SOT 247 15/12/2005) held that personal knowledge and excitement on events should not lead the Assessing Officer to a state of affairs where salient evidences are overlooked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. We find that this decision was firstly been approved by Hon'ble Bombay High Court vide ITA No. 456 of 2007 on 07/09/2011 and thereafter, special leave petition against the said decision has been dismissed by Hon'ble Supreme Court vide SLP No. 20146 of 2012 dated 27/01/2014 which is reported as 88 CCH 0027 SCC. The SMC Bench of Tribunal in Anraj Hiralal Shah (HUF) Vis ITO (ITA No. 4514/Mum/2018 dated 16/07/2019) held that in the absence of any evidence to implicate the assessee or to prove that the transactions were bogus, the Long- Term Capital Gains declared by the assessee could not be doubted with. This case was dealing with gains earned by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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