2022 (2) TMI 686 - AT - Income Tax

Revision u/s 263 - transaction of equity shares and working of short term capital gain/long term capital gain - HELD THAT - We observed on identical situation when once the AO has issued questionnaire and specific information was sought on transactions and assessee furnished the details as called for and assessee has filed all the details of purchase of shares which is through banking channel. Once the issue is addressed by the assessee to the satisfaction of the AO, in this scenario, the Coordinate Bench of the Tribunal in the case of Mrs. Manisha Ajay Shah 2020 (10) TMI 660 - ITAT MUMBAI considered the facts on record and quashed the order passed by the Ld. Pr.CIT. In our considered view the facts in the present case applicable mutatis mutandis to the above case. Therefore, we set aside the order passed u/s. 263 of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Whether the order passed by the Assessing Officer under section 143(3) of the Income-tax Act for the A.Y. 2015-16 was erroneous and prejudicial to the interest of revenue, justifying the invocation of section 263 of the Act.
2. Whether the entire sale consideration on the sale of penny stock share and the commission amounting to &8377; 20,17,239 were erroneously not taxed by the Assessing Officer.
3. Whether the Principal Commissioner of Income-tax-19, Mumbai was justified in setting aside the order of the Assistant Commissioner of Income-tax Officer-18(3) and directing a fresh assessment.

Analysis:
1. The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax-19, Mumbai, dated 24.03.2021, regarding the assessment for the A.Y. 2015-16. The Principal Commissioner observed that the transaction involving the purchase and sale of shares was part of an accommodation entry and held the long term capital gain as unexplained income. The order passed by the Assessing Officer was deemed erroneous and prejudicial to the interest of revenue, leading to the proposal for passing a fresh order or enhancing the assessment under section 263 of the Act.

2. The Principal Commissioner concluded that the entire sale consideration on the penny stock share and the commission of &8377; 20,17,239 should have been taxed by the Assessing Officer. The failure to do so, along with the lack of necessary enquiries and application of correct provisions of the Act, rendered the assessment erroneous and prejudicial to the interest of revenue. The order under section 263 directed the Assessing Officer to reassess the case after providing the assessee with an opportunity to be heard and present any evidence.

3. The assessee contended that the order under section 263 was unwarranted as the assessment order was not erroneous or prejudicial to revenue. During the hearing, the assessee argued that the conditions for invoking section 263 were not met, citing a similar case where the Tribunal quashed the order passed by the Principal Commissioner under section 263. The Tribunal found that the Assessing Officer had issued a questionnaire, and the assessee had provided detailed replies and evidence, demonstrating that the shares were purchased through legitimate banking transactions. The Tribunal held that the Principal Commissioner wrongly assumed revisional jurisdiction, as the twin conditions for invoking section 263 were not satisfied.

In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the order passed under section 263 of the Act, based on the lack of error in the original assessment order and the absence of prejudice to the revenue.