2023 (2) TMI 1330 - HC - Income Tax

Validity of Revision u/s 263 - Bogus LTCG/STCL through penny stock - as per Tribunal AO had conducted a thorough investigation was satisfied with the explanation and supporting material, leading to the dismissal of the appeal by the revenue HELD THAT - Tribunal has examined the facts and found that the assessing officer has carried out elaborate enquiry in respect of the short term capital loss claimed by the assessee on the three scrips. In this regard the learned standing Counsel appearing for the respondent/assessee has filed copy of the paper book which was filed before the Tribunal. From the paper book it is seen that the assessing officer had issued notice u/s 143(2) of the Act and called for certain documents which were submitted by the assessee along with their letter. Tribunal held that only inference that can be drawn is assessing officer having gone through the reply and the supporting material was satisfied with the same and has not preferred to draw any adverse view against the claim of the assessee. In respect of the short term capital loss from the sale of three scrips. Therefore, Tribunal found there was absolutely no justification on the part of the Principal Commissioner of Income Tax to invoke his jurisdiction under Section 263. As relying on Kaushallya Dealers Pvt. Ltd. 2023 (5) TMI 365 - CALCUTTA HIGH COURT wherein the issue which was considered was whether the exercise of power by the PCIT u/s 263 of the Act was justified. The transaction in the said case was more or less identical to the transaction in the case before us. It was found that elaborate explanation was given by the assessee to the query raised by the revenue and after taking note of the entire facts and conducting a detailed enquiry the assessing officer has complied with the assessment and in absence of twin conditions required to be fulfilled invoking the power under Section 263 the proceedings were held to be invalid and the order passed by the Tribunal was confirmed and the appeal by the revenue was dismissed.

Summary

Issues:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961
2. Quashing of assessment order under section 143(3) of the Act
3. Analysis of facts by the Income Tax Appellate Tribunal
4. Justification for invoking jurisdiction under Section 263
5. Comparison with a similar case

Jurisdiction under Section 263 of the Income Tax Act, 1961:
The appeal before the Calcutta High Court pertains to the invocation of jurisdiction under Section 263 of the Income Tax Act, 1961. The Court examined whether the Principal Commissioner of Income Tax was justified in invoking this jurisdiction. The Tribunal had extensively reviewed the facts, particularly the assessing officer's inquiry into the short term capital loss claimed by the assessee on three scrips. The Tribunal found that the assessing officer had conducted a thorough investigation, including issuing notices under various sections of the Act and examining supporting documents provided by the assessee. The Tribunal concluded that the assessing officer was satisfied with the explanation and supporting material, leading to the dismissal of the appeal by the revenue.

Quashing of assessment order under section 143(3) of the Act:
The Revenue had raised substantial questions of law regarding the quashing of the order passed under section 263 of the Income Tax Act. The Court noted that the assessing officer had carried out a detailed enquiry into the short term capital loss claimed by the assessee, including issuing notices and examining various documents related to the transactions in shares. The Tribunal found that the assessing officer had not raised any adverse view against the claim of the assessee, indicating satisfaction with the explanation and evidence provided. Consequently, the Tribunal held that there was no justification for the Principal Commissioner of Income Tax to invoke his jurisdiction under Section 263 of the Act.

Analysis of facts by the Income Tax Appellate Tribunal:
The Court emphasized that the Tribunal had thoroughly analyzed the facts of the case, particularly the assessing officer's inquiry and the supporting documents submitted by the assessee. The Tribunal considered the detailed replies and evidence provided by the assessee, including statements, ledgers, DP holding statements, contract notes, and bank statements. Based on this analysis, the Tribunal concluded that the assessing officer had conducted a comprehensive enquiry and was satisfied with the explanation and evidence presented by the assessee, leading to the dismissal of the appeal by the revenue.

Justification for invoking jurisdiction under Section 263:
The crux of the issue was whether the Principal Commissioner of Income Tax was justified in invoking his jurisdiction under Section 263 of the Act. The Court noted that the Tribunal had found no adverse view taken by the assessing officer against the claim of the assessee regarding short term capital loss. The Court referenced a similar case where elaborate explanations were provided by the assessee, and after a detailed enquiry, the assessing officer had complied with the assessment requirements. As the twin conditions for invoking the power under Section 263 were not met, the proceedings were deemed invalid, and the order passed by the Tribunal was confirmed.

Comparison with a similar case:
The Court drew parallels with a previous case involving a comparable transaction, where the assessing officer had conducted a detailed enquiry and found no adverse view against the assessee's claim. The Court highlighted that in the absence of fulfilling the necessary conditions for invoking Section 263, the proceedings were held to be invalid, leading to the dismissal of the appeal by the revenue. Based on these findings, the Court concluded that no substantial questions of law arose for consideration in the appeal, resulting in the dismissal of the appeal.