2003 (10) TMI 256 - AT - Income Tax

Revision u/s 263 - Of orders prejudicial to interest of revenue - Genuineness of share-transactions - Assumption of jurisdiction - HELD THAT - In the case before us, CIT has considered the assessment order as erroneous and prejudicial to the interest of Revenue merely because the AO has not recorded the specific findings by elaborating the details. Delhi Bench of Tribunal held in the case of Sunil Lamba 2003 (5) TMI 208 - ITAT DELHI-A that if the AO does not deal with an issue or record specific findings in the assessment order it could not be said that there was no application of mind by the AO to the facts and details before him. It was held that order of CIT u/s 263 of the Act in that case has to be cancelled. Further, the Delhi Bench of Tribunal has also held in the case of Triveni Engineering Works Ltd. 2003 (5) TMI 215 - ITAT DELHI-E that CIT cannot invoke s. 263 for upsetting a concluded assessment framed by AO merely because he feels that a particular line of investigation which could have been effective and useful for the Revenue had not been adopted by the AO. We observe that the above cases of Delhi Bench of Tribunal also squarely apply to the case before us as the AO before completing assessment called for details of share transactions and had discussed with the representative of the assessee. The only fact is that the AO has not specifically stated the discussion he had with the assessee. This fact does not empower the learned CIT to invoke jurisdiction of s. 263 of the Act. Thus, the order of the learned CIT in the circumstances, is not justifiable and has to be cancelled. Thus, we are of the considered view that the order passed by the learned CIT in setting aside the assessment with the direction to the AO to complete the assessment de novo after making the relevant enquiries and investigation by calling for contract notes, challans, etc., from the books of brokers and making enquiries from stock exchanges is not sustainable and the same is liable to be quashed. Therefore, in our considered opinion, condition precedent for assuming jurisdiction u/s 263 did not exist in the case before us. Accordingly, we quash the impugned order of CIT passed u/s 263 of the Act. In the result, the appeal of the assessee stands allowed.

Summary

Issues Involved:
1. Whether the assessment of the appellant for the assessment year 1997-98 was erroneous and prejudicial to the interest of Revenue.
2. Whether the assumption of jurisdiction u/s 263 by the CIT was legal.

Summary:

Issue 1: Erroneous and Prejudicial Assessment
The CIT held that the assessment of the appellant for the assessment year 1997-98 was erroneous and prejudicial to the interest of Revenue, setting aside the same for de novo assessment after further enquiry/investigation. The CIT argued that the AO did not conduct proper enquiry, investigation, or verification regarding the genuineness of share transactions, which led to the acceptance of a significant share trading loss without adequate scrutiny. The assessee contended that the AO had duly examined, verified, and scrutinized all relevant materials, including purchase and sale bills, and that the transactions were genuine and conducted at market rates through brokers. The Tribunal found that the AO had indeed conducted enquiries and called for relevant details before completing the assessment, although the assessment order was brief and lacked detailed discussion. The Tribunal concluded that a brief assessment order, if passed after proper enquiries, cannot be deemed erroneous and prejudicial to the interest of Revenue solely for its brevity.

Issue 2: Assumption of Jurisdiction u/s 263
The Tribunal examined whether the CIT's assumption of jurisdiction u/s 263 was justified. The Tribunal referred to various judicial precedents, including the decisions of the Gujarat High Court in CIT vs. Arvind Jewellers, Kerala High Court in Paul Mathews & Sons vs. CIT, and Bombay High Court in CIT vs. Gabriel India Ltd., which established that an order cannot be considered erroneous merely because the CIT disagrees with the AO's view. The Tribunal emphasized that the CIT's power u/s 263 can only be exercised if the order is both erroneous and prejudicial to the interest of Revenue. The Tribunal found that the AO had made necessary enquiries and that the CIT's direction for further enquiry was not justified. The Tribunal held that the CIT's order lacked specific reasons to prove the share transactions were bogus or not genuine and that the CIT's assumption of jurisdiction u/s 263 was not sustainable.

Conclusion:
The Tribunal quashed the CIT's order passed u/s 263, concluding that the conditions precedent for assuming jurisdiction under s. 263 did not exist. The appeal of the assessee was allowed.