2022 (3) TMI 1118 - AT - Income Tax

Revision u/s 263 - case of the assessee was selected for scrutiny through CASS - Allowability of loss of penny stock - HELD THAT - Perusal of records produced before us that the AO has specifically called for details of purchase and sale of shares during the original assessment proceedings and the assessee has furnished the details of sale and purchase of shares, proofs payment of STT, copy of DMat statement, copy of bank statement evidencing the payment for purchase of shares and receipt of sale consideration into the assessee s bank account through banking channels. We note that the AO has framed the assessment only after taking into account the above aforesaid details. Therefore, simply because the order does not speak or discuss about the loss on sale of shares should not be taken to mean that AO has not examined the details by the assessee or has not applied his mind to the details and there was complete lack of enquiry. In opinion the AO has take a possible view after taking into account the evidences filed by the assessee which are part of records and therefore the Ld. PCIT has no power to revise the assessment on the ground of lack of enquiry. In our considered view this is not a case of wrong assumption of facts or incorrect application of law and therefore the revisionary powers have been invalidly exercised. PCIT cannot exercise the jurisdiction u/s 263 of the Act where the AO has taken a plausible view on the basis evidences filed by the assessee which is not contrary to law and facts. - Decided in favour of assessee.

Summary

Issues:
Revisionary jurisdiction exercised by PCIT under section 263 of the Income Tax Act and the consequent order challenged by the assessee for being invalid and nullity as necessary conditions were not satisfied before invoking the revisionary jurisdiction.

Analysis:

1. The assessee challenged the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act. The PCIT concluded that certain issues were not examined by the Assessing Officer (AO) during the assessment proceedings, leading to an order erroneous and prejudicial to the revenue's interest. The PCIT issued a show cause notice proposing to revise the assessment on various issues, including suspicious transactions in penny stock, property valuation discrepancies, loan conversion into property purchase, and unverified loans. The assessee contended that these issues were examined during the assessment proceedings, and a plausible view was taken before the assessment was framed under section 143(3) of the Act.

2. The PCIT revised the assessment under section 263, directing the AO to verify the issues and frame the assessment afresh. The assessee, in response, pressed the appeal only concerning the loss from penny stock as additions were made by the AO in the set-aside proceedings. The assessee argued that the PCIT's order became academic for the remaining issues as no additions were made. The assessee emphasized that the AO had considered all evidence and explanations during the assessment proceedings, making the revisionary jurisdiction unnecessary.

3. The assessee's representative contended that the AO had called for details of the penny stock transactions during the original assessment, and the assessee provided relevant evidence. The representative argued that the AO had considered the evidence and taken a plausible view. The representative cited several decisions by coordinate benches supporting the position that revisionary jurisdiction should not be exercised if the AO has considered evidence and taken a plausible view.

4. The DR, on the other hand, supported the PCIT's order, stating that the PCIT had the power to revise the assessment if it was prejudicial and erroneous. The DR argued that the AO did not examine the issues further and ignored relevant investigation reports. However, the Tribunal noted that the AO had specifically called for and considered details of the penny stock transactions, and the assessment was based on the evidence provided by the assessee.

5. The Tribunal observed that the AO had examined the details provided by the assessee and taken a possible view, rendering the revisionary powers invalidly exercised. Citing relevant High Court decisions, the Tribunal held that if all necessary evidence is on record and duly examined by the AO, the order cannot be considered erroneous or prejudicial to revenue's interest. The Tribunal, following precedent and legal principles, quashed the PCIT's revisionary jurisdiction concerning the penny stock loss issue.

6. Consequently, the Tribunal allowed the assessee's appeal, finding merit in the contentions raised and the validity of the AO's assessment based on the evidence considered. The Tribunal's decision was in line with established legal principles and supported by relevant case law, ultimately upholding the assessee's position regarding the revisionary jurisdiction exercised by the PCIT.