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TMI Blog2020 (12) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act even when the order was passed by the assessing officer under section 143(3) of the Act after conducting necessary enquiries and after due application of mind. 3. 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 by invoking the provisions of section 263 of the Act even when the amount of long term capital gain of Rs. 22,10,437/- as earned on sale of shares and claimed exempt under section 10(38) of the Act was duly supported with ample documentary evidences which were never disproved during the course of revisionary proceedings. 4. The appellant reserves her right to add, alter and modify the grounds of appeal as taken by her." 2. Facts in brief are that the assessment u/s 143(3) of the Income Tax Act 1961(hereinafter referred as the Act) was framed vide order dated 27.12.2016. The assessing Officer accepted return filed by the assessee. Subsequently, the Ld. Pr. CIT after examining the records initiated the proceedings u/s 263 of the Act by issuing the notice dated 21.12.2017. In response thereto, the assessee filed reply which was found not acceptable by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut making required enquiries / investigations. 3. As per available records, it is found that' during the course of assessment proceedings for A. Y. 2014-15, the case was selected for complete scrutiny under CASS with the reason as under: "Suspicious transaction relating to long term capital gain on share (Inputs front Investigation Wing)'" You had purchased and sold the share of M/ s Sunrise Asian Limited as per the chart below:' You had claimed Rs. 22,10,437/- as exempt L.T.C.G. in return] income filed by you . The claim has been derived from the alleged investment in the share of M/s Sunrise Asian Limited., which has been classified as penny stock Company. From. the office note appended to the assessment order also it is found that "the AO has questioned this issued but did not carry out any enquiry/ investigation and accepted the claim. Accepting the said claim without conducting appropriate enquiry/ Investigation renders the assessment order U/s 143(3) dated 27/12/2016 erroneous and resultantly not disallowing .the said claim render the assessment order is prejudicial to the interest of revenue. You are, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long term capital gain was earned by the assessee as penny stock. In the concluded para you have stated that:- «From the office note appended to the assessment order also it is found that the AO has questioned this issue but did not carry out any enquiry / investigation and accepted the claim. Accepting the said claim without conducting appreciate enquiry / investigation renders the assessment order U/s 143(3) dated 27/ 12/2016 erroneous and resultantly not disallowing the said claim render the assessment order is prejudicial to the interest of revenue. You are, therefore) required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of AO dated 27-12- 2016 is erroneous in so far as it is prejudicial to the interest of revenue. " 3.1 The assessee in addition to the long term capital gain on sale of shares of M/ S Sunrise Asian Limited) also earned long term capital gain of Rs. 5)39) 969/ - on sale of shares of M/ S Idea Limited. Hence) it is proved beyond doubt that the assessee made regular investment in shares & securities. 3.2 The assessee during the course of assessment proceeding filed various docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident that share price of the shares on which these were sold by the assessee was duly verifiable. Hence, the assessing officer was rightly accepted the long term capital gain as shown by the aseessee 4.1 That in the present case in hand, the assessing Hofficer had make exhaustive inquiry and collect all the documents from the assessee and also recorded her statement. Hence, as per explanation 2 to section 263111 of the Act, the assessment order in question shall not be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. 4.2 That Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. CIT [20001 243 ITR 83 (SC) after considering the decisions of Rampyari Devi Saraogi (supra) and Smt. Tara Devi Aggarwal (.mpra): "There can be no doubt that the provision cannot be invoked 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 principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open". . 4.41 Hon'ble. Ahmedabad Bench of ITAT in the case of MIS Jay Agriculture Test vs. Pr. CIT (Appeal No. Income-tax Act, 1961. No.605/Ahd/2015 dated. 01.01.2015 has held that 01-2015 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totality and respectfully following the ratio laid down in the various decisions cf th« Jurisdictional and other High Courts, we are of the considered view that the jurisdiction by the Pr. CIT u/ s 263 of the Act was invalidly assumed. Accordingly we set aside the proceedings u/ s 263 of the Act as being invalid and also consequent u/ s 263 of the Act. 4.61 These principles have been re-iterated by the Apex Court in its judgment in Commissioner of Income Tax vs Amitabh Bachan {2016 (3) KLT SN.4 (C.No.3) SCI, where the court inter alia held thus: "There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under S.263 of the Act merely on the ground that there is another possible view of the matter. 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 vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AD is wrong. That may be so but that is not enough What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. 5 That in view of the above, 'in the present case, the assessing officer make detailed 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 conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue has been considered by the AO which is not correct inasmuch as no enquiries have been regarding the genuineness of such profits. It is not denied that assessing officer specifically asked for the details of share transactions and the contract notes etc were submitted during the assessment proceedings but the same, if not substantiated by the other prerequisites of a genuine transaction; remains unverified. It is also not denied that the transactions have been routed through banking channels and established through Demat account but the same also is insufficient to hold any transaction to be genuine without proper enquiry in this regard. 3.1.2. The submission of the assessee cannot be accepted as the fact remains that the AO has not examined this aspect .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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of long term capital gain was genuine or not. 5. Legal position on power of Commissioner for Revision u/s 263: Case laws on the power of Commissioner, favor Revenue, in following situations as regards enquiry by Assessing Officer: a. Complete failure to conduct relevant enquiry; b. Conducting enquiry but not taking it to its logical conclusion; c. Conducting enquiry but drawing the wrong conclusion. 5.1. Reference is invited to recent judgment of Kolkata Tribunal in the case of Marigold Nirman Pvt Ltd and related cases ITA 1365/KOL/2013 .DATED 3.0.7.15, also reported as SubhlakshmiVanijya (P., Ltd in 172 TIJ 721(KOL) has considered virtually the whole law on 263. It has answered following questions 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 va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to inquire before ,finalizing the assessment. It is only thereafter that the revisional powers of the commissioner under section 263 can come into play for ascertaining if the Assessing officer examined all the relevant points, which ought to have been examined. If the commissioner, on examination of records of assessment, comes to the conclusion that the Assessing officer failed to enquire into certain other relevant aspects which, in fact, necessitated thorough investigation, then he has all the power to revise the assessment' order. In the instant case, the assessment already stands finalized and now the commissioner is examining whether the Assessing officer properly examined the facts 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry has been conducted at all or the so-called enquiry conducted by the Assessing Officer is as good as no enquiry,' as is the case under consideration, in such circumstances, the Commissioner simply needs to point out those relevant aspects of assessment, which the Assessing Officer lost sight of, but were required to be properly probed. There can be no way for the Commissioner to tell erroneous approach of the Assessing Officer on merits in such circumstances because the view of the Assessing Officer on merits is not available. Requiring the Commissioner to indicate 'where the Assessing Officer went wrong on merits in the cases of no enquiry cases, is like requiring 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. {Para 10) It was found that the order passed by the Assessing Officer was cryptic, to say the least, and it colil1J not be sustained. The Tribunal could not substitute its own reasoning to ,justify the order passed by the Assessing Officer when the Assessing Officer himself did not give any reason in the order passed by him. [Para 11) Therefore, the matter was to be remanded to the file. of the Assessing Officer to decide the issue afresh in terms of the order passed by the Commissioner under section 263. [Para 12) 3. Jagdish Kumar 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue) Therefore, in view of the above discussions, I am of the considered opinion that the order dated 27.12.2016 for A.V. 2014-15 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the order without making required enquiries/investigations. Accordingly, I am satisfied that provisions of section 263 of LT. Act 1961 are required to be invoked. Therefore, the assessment for A.V. 2014- 15 framed on 27.12.2016 is hereby set-aside to the file of AO u/s 263 to re-examine issue of long term capital gain shown by the assessee and passing an order 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. Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,08,715 1.4.2) Copy of receipts in respect of LlC Premium as paid by the assessee along with 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 50204010029070 Current A/c 2 Union Bank of India Geeta Bhawan Branch, Indore 50202010012665 Saving A/c 3 Union Bank of India Geeta Bhawan Branch, Indore 50202010006070 Saving A/c 3.2) Copy of Bank Statements in respect of all the above mentioned bank accounts is enclosed for your kind reference. 3.3) The assessee has maintained same bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate, duly transferred in the name of the assessee 30 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 32-37 5 Copy of D-mat statement of the assessee with the Union Bank of India forthe period 01/04/2013 to 31/03/2014 25 6 Copy of share certificate as issued by the amalgamated company M/s Sunrise Asian Limited 38 7 Copy of Dematerialisation Request form to Union Bank of India for dematerialisation of shares of M/s Sunrise Asian Limited 39 8 Sale note Dt. 14/02/2014 for sale of 2,900 shares issued by Indira Securities Pvt. Ltd 40-42 9 Sale note Dt. 28/02/2014 for sale of 1,000 shares issued by Indira Securities Pvt. Ltd 43 10 Sale note Dt. 04/03/2014 for sale of 900 shares issued by Indira Securities Pvt. Ltd 44-45 7) That the assessee is acting as a broker/agent to various parties for purchase and sale of agri products in the name and style "M/s Samarth Impex". Copy of the Profit & Loss account of M/s Samarath Impex along with the copy of Ledger A/c of Commission & Brokerage in the books of accounts of the assessee is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of shares and how the sale consideration have been received by assessee through banking channel. The transaction was conducted through the Demat account. The A.O. after making a deep ITA.No.3432/Del./2019 Smt. Manita Muzaffarnagar. investigation into the issue of long term capital gains also noted in the assessment order that written submissions of the assessee along with copies of Demat account, source of investment in shares, bank account, copies of share certificates, copy of account of Mathiyan Construction are placed on record. It would, therefore, prove that A.O. examined the issue of long term capital gains with reference to sale of shares at assessment stage in the light of evidence and material on record. Thus the reasons for which the case was selected for scrutiny have been satisfied by the A.O. Learned Counsel for the Assessee has pointed out several documents in the paper book to show that on the issue of long term capital gains, A.O. raised a query to the assessee which is duly responded by assessee supported by all the documentary evidences. The assessee also filed copies of bank statement, cash flow and cash book to prove availability of funds with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted above in the light of material on record, we are of the view that it is not a case of inadequate or no enquiry, thus, Explanation-2 to Section 263 of the I.T. Act would not be attracted in the matter. In this view of the ITA.No.3432/Del./2019 Smt. ManitaMuzaffarnagar. matter, the assessment order could not be held to be erroneous in so far as it is prejudicial to the interests of the Revenue. We, accordingly, set aside the impugned order under section 263 of the I.T. Act and restore the assessment order. 14. Further reliance is placed upon the decision of Co-ordinate Bench in the case of Shashi Bhushan Gupta v. Pr. CIT ITA No.768/Chd/2018 held as under:- 9. On a similar issue the Hon'ble Delhi High Court in the case of Pr. CIT Vs. Delhi Airport Metro Express Pvt. Ltd. (supra) held as under: "For the purposes of exercise of revisional jurisdiction under section 263 of the Income-tax Act. 1961 by the Principal Commissioner the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. If the Principal Commissioner is of the view that the Assessing Officer did not undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le III to the Wealth-tax Act. 1957. was not applicable but the Assessing Officer should have adopted the formula/method. This reasoning could not be accepted and did not show or establish that the assessment order was erroneous." 11. Similarly the Hon'ble Delhi High Court in the case of Director of Income Tax Vs. Jyoti Foundation (supra) held as under: "Revisionary power under section 263 of the Income-tax Act. 1961 is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation ore treated as erroneous and prejudicial to the interests of the Revenue. but orders which ore passed after inquiry/ investigation on the question/issue are not perse or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. In cases where there is inadequate enquiry but not lock of enquiry. the commissioner must record a finding that the order / inquiry mode is er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Hon'ble Bombay High Court. Therefore, the existence of the said entity could not be doubted, in any manner. 10. The above conclusion is further fortified by the fact that in share sale transactions through online mode, the identity of the buyer of the shares would not be known to the assessee. Therefore, the adverse conclusion drawn by Ld. AO merely on the basis of the fact that the buyer of the shares were group entities of Shri Vipul Bhat, could not be sustained. The fact that there were independent buyers also would rebut the same and weaken the conclusion drawn by Ld. AO. 11. The Ld. AR has relied on plethora of judicial pronouncements in support of various submissions, which we have duly considered. These decisions would only support the conclusions drawn by us that once the assessee has discharged the onus of proving the genuineness of the transactions, the onus would shift on the revenue to dislodge assessee's claim and bring on record contrary evidences to rebut the same. Until and unless this exercise is carried out, the additions could not be sustained in the eyes of law. 12. To enumerate the few, the Hon'ble Bombay High Court in CIT V/s Shyam S.Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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