TMI Blog2021 (9) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the reply of the assessee to the specific queries and details called for and after perusal of the supporting materials, the AO being satisfied has accepted the claim of assessee in respect of loss on these scrips. Therefore the AO's action of accepting loss on the three (3) scrips cannot be termed as a case of no-enquiry on the part of the AO. Pre-condition to invoke revisional jurisdiction u/s. 263 of the Act is absent and therefore the Ld. PCIT has invoked the jurisdiction without satisfying the condition precedent i.e. the AO's action should be validly held to be erroneous as well as prejudicial to the revenue. Therefore, the impugned action of Ld. PCIT is without jurisdiction and therefore the impugned order is nullify. - Decided in favour of assessee. - I.T.A. No. 2651/Kol/2019 - - - Dated:- 17-9-2021 - A.T. Varkey, Member (J) And Manish Borad, Member (A) For the Appellant : S. M. Surana, Advocate For the Respondents : Manish Kanojia, DR ORDER Per Shri A.T. Varkey, JM This is an appeal filed by the Assessee against the order of Ld. PCIT-1, Kolkata dated 25.03.2019 passed u/s. 263 of Income Tax Act, 1961 (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation and CBDT's circular dated 16.03.2016 which debars short term capital loss arising from the transaction of such penny stock. According to Ld. PCIT, the short term capital loss of ₹ 89,11,796/- arising from penny stock transaction cannot be set off with other business income, hence the claim as allowed by the AO was irregular adjustment. According to Ld. PCIT, the CBDT has circulated list of penny stock companies wherein the names of three companies, whose shares assessee had purchased and sold figured. According to the Ld. PCIT, it was found that such companies were delisted from the major stock exchanges and in this factual background the CBDT circular, the AO supposed to have made independent investigation in depth and the AO erred in merely relying on the documents filed by the assessee to accept the claim of loss. Hence, according to Ld. PCIT, this is a case of non-application of mind of the AO and lack of proper enquiry on his part. Therefore, he was pleased to set aside the assessment order dated 21.12.2016 and directed the AO to pass fresh assessment order in accordance to law. 4. Aggrieved by the aforesaid action of Ld. PCIT, the assessee is before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Ld. AR, the jurisdictional condition precedent to invoke the revisional jurisdiction u/s. 263 was on wrong footing and erroneous assumption of facts, therefore, the Ld. PCIT's action is bad in law. 6. Before we advert to the facts and law involved in this lis before us, let us revisit the law governing the issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by ld. Principal CIT to invoke his revisional powers enjoyed u/s. 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercises his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s. 263 of the Act by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the Ld. PCIT is correct or not on this fault. For that the Ld. AR has drawn our attention to page 61 of the PB wherein the notice issued by the AO u/s. 142(1) dated 05.07.2016 to furnish the details of short term capital loss/gain/business loss. Pursuant to which the assessee replied vide letter dated 27.07.2016 wherein it filed the details of business Loss along with contract notes, demat account bank statement etc. Thereafter, the AO issued notice u/s. 142(1) of the Act dated 25.08.2016 wherein the AO asked the assessee to furnish the following specific details vide item No. 11 and also the assessee was directed to file the details of gain/loss on account of dealing in shares during the FY 2013-14 with documentary evidence like de mat account, contract notes and ledger account of the share brokers which reads as under: 1. Name of shares 2. Opening stock (a) Date of Purchase (b) Quantity (c) Rate (d) Total value 3. Purchase (a) Date of Purchase (b) Quantity (c) Rate (d) Total Value 4. Sales (a) Date of Sale (b) Quantity (c) Rate (d) Total Value 5. Closing Stock (a) Date of Purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO on the claim of the business loss on these scrips is erroneous since we have already discussed from the queries raised in the notice u/s. 142(1) of the Act, wherein details in respect of loss were called for and specific details of which have been elicited by the AO in respect of the business loss claimed as well as that of the details of investment in equity shares were enquired and collected in that process. Since the AO had issued the notice u/s. 142(1) of the Act on 05.07.2016/25.08.2016 it is presumed that the AO was aware of the report of Directorate of Investigation and also the CBDT order No. F No. 287/30/2014-IT(Inv. II)-Vol-III dated 16.03.2016 wherein the investigation wing has alerted the field officers in respect of certain nefarious activities involving business of penny stocks. This presumption of fact is based on the factual matrix which is evident from a perusal of the notice issued by AO u/s. 142(1) of the Act dated 05.07.2016/25.08.2016 which have prompted him to ask such detailed questions in order to elicit answers for it along with supporting material/documents to substantiate the claim of loss on scrips and fro this presumptions of fact we take the aid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done such an exercise, and in the light of the discussion (supra), and considering the enquiry made by AO on the issue, we presume that the AO has discharged his duty as an investigator on the issue of loss on the scrips in question and after taking note of CBDT circular No. 287/30/2014-IT(Inv. II)-Vol-III dated 16.03.2016 on penny stock and thereafter conducted the enquiry. And after perusal of the reply of the assessee to the specific queries and details called for and after perusal of the supporting materials, the AO being satisfied has accepted the claim of assessee in respect of loss on these scrips. Therefore the AO's action of accepting loss on the three (3) scrips cannot be termed as a case of no-enquiry on the part of the AO and is in line with CBDT Circular No. 6/2016 dated 29th February, 2016 which is on the subject matter discussed supra and the Ld. PCIT's opinion that amendment made in section 263 w.e.f. 01.06.2015 is applicable meaning though not expressed by the Ld. PCIT what he intends is that Explanation 2(c) of Section 263 of the Act is attracted which according to us is wrong in the light of the facts and circumstances as aforestated. In such a scenario, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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