2021 (12) TMI 1 - AT - Income Tax

Revision u/s 263 - reopening of the assessment of the assessee in view of the provision u/s.263 - long term capital gain on account of sale of penny stock - As argued by assessee that once the issue has already been raised by the Assessing Officer and thereafter, the claim of the assessee was denied then, in the said circumstances, the assessment could not be revised in view of provision u/s.263 - HELD THAT - As decided in MRS. MANISHA AJAY SHAH VERSUS PRINCIPAL CIT-30, MUMBAI 2020 (10) TMI 660 - ITAT MUMBAI AO has issued a questionnaire wherein specific information was sought on transaction of equity shares and working of short term capital gain/long term capital gain. The assessee furnished a detailed reply to the notice issued under section 142(1) of the Act, wherein the assessee while replying to the query on transaction of shares, informed that a declaration under IDS 2016 has been made in respect of long term capital gain arising on sale of shares to GCM Securities Ltd. Ostensibly, the Assessing Officer after examining the documents accepted the same and made no addition. Merely for the reason that the Assessing Officer has taken a plausible view after examining the records that is not acceptable to the PCIT, would not make the assessment order erroneous. In the present case twin conditions set out in section 263 are not satisfied and hence, the PCIT wrongly assumed revisional jurisdiction. Thus it is quite clear that the fact of the present case is quite similar to the fact of the case under consideration. Taking into all these facts, we are of the view that the revision of assessment u/s.263 is not liable to be sustainable in the eyes of law. Therefore, we set aside the same and allowed the appeal of the assessee.

Summary

Issues:
Reopening of assessment under section 263 of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Act for the assessment year 2013-14. The main contention was regarding the addition made by the Assessing Officer on account of long term capital gain from the sale of penny stock. The PCIT believed that the entire sale proceeds should be considered, not just the capital gain. The Assessing Officer had issued a notice stating that the claim of exemption under section 10(38) was prima facie bogus, leading to the addition of the capital gain. The appellant argued that once the issue was raised and denied by the Assessing Officer, the assessment could not be revised under section 263. The appellant relied on a similar case to support this argument. The Tribunal found that the Assessing Officer had sought specific information on the share transactions, and after examining the documents, accepted the explanation provided by the assessee. The Tribunal concluded that the twin conditions required for invoking section 263 were not met, and hence, the PCIT wrongly assumed revisional jurisdiction. Therefore, the revision of assessment under section 263 was deemed unsustainable in the eyes of the law, leading to the appeal of the assessee being allowed.

In conclusion, the Tribunal set aside the order passed by the PCIT under section 263 and allowed the appeal of the assessee. The decision was based on the lack of satisfaction of the twin conditions required for invoking section 263, as the Assessing Officer had taken a plausible view after examining the records, which was not deemed erroneous by the Tribunal. The judgment highlighted the importance of meeting the statutory conditions before revising an assessment under section 263 of the Income Tax Act, 1961.