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2022 (4) TMI 485 - AT - Income TaxRevision u/s 263 by CIT - sale of investment in equity shares - HELD THAT - In the assessment order u/s 143(3) r.w.s. 147 AO specifically mentioned the issue pertaining to alleged transaction from sale of shares and after making a detailed enquiry and considering the documents received from the assessee from time to time, came to a conclusion that the alleged transaction is a genuine transaction of sale of shares as against the sale of investment assessee received consideration and the same is supported by sufficient material evidences. This is a clear case of complete and adequate enquiry conducted by the AO on the very same issue mentioned in the show cause notice issued u/s 263 and, further,AO was satisfied with these documents and those documents have been perused by us also, placed in paper book and find sufficient force in the contention of the ld. Counsel for the assessee that since there is a complete enquiry. Thus, ld. Pr. CIT erred in assuming jurisdiction u/s 263 of the Act as the AO has taken one of the permissible view provided under the law. This is a clear case of sale of investment by the assessee and, further, even if ld. Pr. CIT was not satisfied with the detailed enquiry conducted by the AO, he should have done independent enquiry on its own so as to find an error in the enquiry conducted by the ld. AO in view of the ratio laid down in the case of DG Housing Projects Ltd. 2012 (3) TMI 227 - DELHI HIGH COURT - No such finding is there in the impugned order and ld. Pr. CIT has only referred to the report of the Investigation Wing which was already put before the ld. AO and there is no other new material which could support the view of the ld. Pr. CIT holding the assessment order as erroneous and prejudicial to the interest of the Revenue. Firstly the issue raised in the show cause notice has been examined by ld. AO, being part of the reasons recorded for re-opening the case of the assessee and ld. AO after going various rounds and calling for various evidences and documents took the plausible view and accepted the transaction of ₹ 5,00,000/- received from sale of investment in equity shares as genuine. Secondly, ld. Pr. CIT erred in observing that ld. AO has not examined at all the issue of receipt of ₹ 5,00,000/-, thirdly, ld. Pr. CIT failed to appreciate that the assessee company is a non-banking financial company and the accounts are audited under the Companies Act and ld. AO took a permissible view in the matter after thoroughly examining the related documents. Fourthly, the present case is not a case of no enquiry but it is a case where complete and adequate enquiry has been conducted by the ld. AO. We, therefore, quash the impugned order passed u/s 263 of the Act and allow all grounds of the appeal raised by the assessee and restore the assessment order passed u/s 143(3) r.w.s. 147 - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Examination of the transaction of ?5,00,000 received from M/s. Igloo Vanijya Pvt. Ltd. 3. Adequacy of inquiry conducted by the Assessing Officer (AO). 4. Validity of the show-cause notice under Section 263. 5. Principle of natural justice and opportunity to reply. 6. Independent inquiry by the Principal Commissioner of Income Tax (Pr. CIT). Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The primary issue is whether the Pr. CIT was correct in invoking jurisdiction under Section 263 of the Income Tax Act. The Pr. CIT issued a show-cause notice stating that the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue because the AO did not examine the transaction of ?5,00,000 received from M/s. Igloo Vanijya Pvt. Ltd. The Tribunal reviewed the conditions under Section 263, emphasizing that the Pr. CIT must demonstrate that the AO's order was both erroneous and prejudicial to the Revenue. The Tribunal concluded that the AO had conducted a thorough inquiry and had taken a permissible view, thus the Pr. CIT's invocation of Section 263 was not justified. 2. Examination of the transaction of ?5,00,000 received from M/s. Igloo Vanijya Pvt. Ltd.: The Tribunal noted that the AO had examined the transaction of ?5,00,000 received from M/s. Igloo Vanijya Pvt. Ltd. against the sale of shares of M/s. Calcutta Gear Pvt. Ltd. The AO had called for various documents, including the share sale bill, ledger account, incorporation certificate, and bank statements, and was satisfied with the explanations provided by the assessee. The Tribunal found that the AO had made a detailed inquiry and had accepted the transaction as genuine. 3. Adequacy of inquiry conducted by the Assessing Officer (AO): The Tribunal emphasized that the AO had conducted an adequate inquiry into the transaction. The AO had issued notices under Sections 143(2) and 142(1) and had received detailed responses and documents from the assessee. The Tribunal referred to the AO's assessment order, which mentioned the examination of the transaction and the satisfaction with the explanations provided. The Tribunal concluded that the AO had applied his mind and had taken a plausible view, thus the inquiry was adequate. 4. Validity of the show-cause notice under Section 263: The Tribunal examined the validity of the show-cause notice issued by the Pr. CIT under Section 263. The assessee argued that the show-cause notice was not accompanied by the material on which the Pr. CIT's information was based. The Tribunal referred to judicial precedents, including the Hon'ble Allahabad High Court and the Hon'ble Supreme Court, which emphasized the need for proper and adequate opportunity to reply to allegations. The Tribunal found that the show-cause notice did not conform to the principles of natural justice and thus was not valid. 5. Principle of natural justice and opportunity to reply: The Tribunal highlighted the importance of the principle of natural justice, which requires that the assessee be given a proper and adequate opportunity to reply to the allegations. The Tribunal referred to the Hon'ble Supreme Court's decision in NDTV vs. DCIT, which emphasized the need for transparency and fairness in issuing show-cause notices. The Tribunal found that the Pr. CIT had not provided the assessee with the necessary documents and information to respond adequately, thus violating the principles of natural justice. 6. Independent inquiry by the Principal Commissioner of Income Tax (Pr. CIT): The Tribunal noted that the Pr. CIT had not conducted an independent inquiry before invoking Section 263. The Pr. CIT had solely relied on the information received from the Investigation Wing without verifying the facts independently. The Tribunal referred to the Hon'ble Delhi High Court's decision in DG Housing Projects Ltd., which stated that the Pr. CIT must conduct an independent inquiry and provide a finding on merits. The Tribunal concluded that the Pr. CIT had failed to conduct an independent inquiry, thus his order under Section 263 was not justified. Conclusion: The Tribunal quashed the order passed by the Pr. CIT under Section 263 of the Income Tax Act, holding that the AO had conducted a thorough and adequate inquiry, and had taken a permissible view. The Tribunal restored the assessment order passed by the AO under Section 143(3) read with Section 147 of the Act dated 29.12.2017. The appeal filed by the assessee was allowed.
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