2022 (3) TMI 765 - AT - Income Tax

Revision u/s 263 - net profit/premium from transactions in the F O Segment - HELD THAT - There was nothing on record which occasion any further verification or examination by the A.O. in terms of seeking and enquiring facts and figures with NSEL in respect of assessee's transactions so undertaken through the broker. The A.O. has done what all was expected from him and he has carried out necessary examination and verification as was expected from him in terms of discharge of his statutory functions and as a person of reasonable intellect and understanding, nothing more could have been expected in the facts and circumstances of the present case. AO was not required to call for information from NSEL nor there were any circumstances which were apparent on record which could have necessitated to verify the information, so submitted by the assessee with NSEL during the course of assessment proceedings and therefore, it cannot be held that proper enquiries which should have been made have not been conducted by the A.O. and the findings of the ld. PCIT in this regard are thus set-aside and the assessment order so passed by the A.O. cannot be held erroneous in so far as prejudicial to the interest of the Revenue on this account. Net results of transactions so undertaken by the assessee during the year under consideration, it is also clear that right from the stage of show-cause till passing of the impugned order, the ld. PCIT has maintained a status quo or rather a silence and has blindly gone by the initial figure so stated in the show-cause notice and no efforts have been made even to look at the reconciliation so sought to be made by the assessee. Therefore, even taking into consideration the fresh material/data received from NSEL, which represent a broad, un-reconciled raw data, the said data and the figure cannot be termed as tangible and determinative number by any stretch of imagination and in absence of any specific finding recorded by the ld. PCIT, the same cannot form the basis for holding the assessment order so passed as erroneous in so far as prejudicial to the interest of Revenue. We find that similar view has been taken by the Coordinate Delhi Bench in case of CIT Vs. Rajshyama Constructions Pvt. Ltd. 2010 (8) TMI 988 - ITAT DELHI wherein the Coordinate Bench has held that in absence of specific material on record, the powers under section 263 have been wrongly exercised by the ld. CIT and only in cases where the ld. CIT is able to bring on record specific material which has not been verified by the Assessing officer, the order so passed by the Assessing officer can be held to be erroneous on an incorrect assumption of facts We find that there is no justifiable and legal basis for exercise of jurisdiction u/s. 263 by the ld. PCIT and the order so passed is hereby set-aside and the order of the Assessing officer passed u/s. 143(3) is sustained. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Erroneous and prejudicial to the interest of Revenue.
3. Proper enquiry and verification by the Assessing Officer (A.O.).
4. Use of new material and records for revision under Section 263.
5. Completeness and reliability of data from NSEL.

Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The primary issue was whether the Principal Commissioner of Income Tax (Pr. CIT) exceeded his jurisdiction under Section 263 of the Act. The assessees contended that the Pr. CIT had no grounds to invoke Section 263 as the original assessment was neither erroneous nor prejudicial to the interest of Revenue. The Tribunal noted that the Pr. CIT has wide powers under Section 263 to revise any order that is erroneous and prejudicial to the interest of Revenue. However, it was emphasized that the Pr. CIT must have concrete reasons to believe that the A.O.'s order was erroneous and prejudicial to the interest of Revenue.

2. Erroneous and prejudicial to the interest of Revenue:
The Pr. CIT argued that the A.O.'s failure to verify the differential net premium/profit as per NSEL data, amounting to ?29,79,543/-, rendered the original assessment order erroneous and prejudicial to the interest of Revenue. The Tribunal found that the A.O. had conducted necessary verifications with the broker M/s. Vikson Securities Pvt. Ltd. and had no reason to doubt the authenticity of the documents provided. The Tribunal concluded that the A.O.'s order was not erroneous and prejudicial to the interest of Revenue, as proper enquiries were made.

3. Proper enquiry and verification by the Assessing Officer (A.O.):
The Pr. CIT claimed that the A.O. failed to make proper enquiries and verification regarding the net premium/profit. The Tribunal found that the A.O. had indeed called for information from M/s. Vikson Securities Pvt. Ltd. and had verified the figures disclosed by the assessee. The Tribunal stated, "the A.O. has done what all was expected from him and he has carried out necessary examination and verification as was expected from him in terms of discharge of his statutory functions." Thus, the Tribunal concluded that the A.O. had conducted proper enquiries and the Pr. CIT's findings were set aside.

4. Use of new material and records for revision under Section 263:
The Pr. CIT used data from NSEL, which was not part of the original assessment record, to justify the revision under Section 263. The Tribunal noted that the Pr. CIT is entitled to consider new material that comes into possession during the enquiry. However, the Tribunal emphasized that such new material must be tangible and determinative. The Tribunal found that the NSEL data was incomplete and could not be relied upon without further verification. Therefore, the Pr. CIT's reliance on this data was unjustified.

5. Completeness and reliability of data from NSEL:
The Tribunal found that the data from NSEL was incomplete and did not reflect the net results of transactions undertaken by the assessee. The Tribunal stated, "the figure of ?47,41,907/- was a broad, un-reconciled figure forming part of raw data provided by NSEL and cannot be termed as tangible and determinative number reflective of net premium earned by the assessee." The Tribunal concluded that the NSEL data could not form the basis for holding the assessment order as erroneous and prejudicial to the interest of Revenue.

Conclusion:
The Tribunal set aside the order passed by the Pr. CIT under Section 263, sustaining the original assessment order passed by the A.O. The Tribunal concluded that the A.O. had conducted proper enquiries and verifications, and the Pr. CIT's reliance on incomplete and unverified NSEL data was unjustified. The appeals filed by the assessees were allowed.

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