2024 (5) TMI 493 - AT - Income Tax

Revision u/s 263 - Bogus LTCG/Share transaction - as per CIT AO failed to make necessary enquiries to ascertain the actual strength of the company investment profile of the assessee - assessee entered into transaction of only scrip (Suchak Trading Ltd) and the examination and inquiry of five entities who purchased the shares sold by assessee were left open without appropriate conclusion - as argued PCIT has not initiated this review on his own and therefore he was not right in assuming the jurisdiction - HELD THAT - DR in reply explained that the review proposal sent by AO to PCIT is part of their internal procedure and Ld. PCIT has carried independent inquiry of the subject matter of review. It is also clear from the material available on records that the AO in his proposal itself has stated that the assessment order is passed without proper examination of the facts. We also take into consideration the fact that LD. PCIT in his order has distinguished the judicial pronouncements on which the assessee relied on. Clause (a) of the Explanation 2 to section 263 empowers PCIT to invoke section 263. Clause (a) talks about the inquiry or investigation having not been made by the A.O. which should have been made . The phrase should have been done as provided in this clause means the verification/ enquiry which ought to have been done. Considering this provision coupled with the observations recorded by the Ld. PCIT as mentioned in the facts of the case above we are of the opinion that the Ld. PCIT has exercised his discretion reasonably. Ld. PCIT has applied his mind to the record his reasons for assuming the jurisdiction - no infirmity in the order of the Ld. PCIT in directing the AO to pass a fresh assessment order after allowing adequate opportunities of being heard to the assessee. Appeal filed by assessee is dismissed.

Summary

Issues Involved:
The appeal against the order u/s 263 of the Income Tax Act, 1961 relating to the Assessment Year 2015-16.

Facts of the Case:
The assessee declared total income for A.Y. 2015-16 at Rs. 8,18,770 and earned Long Term Capital Gain of Rs. 23,46,345 from the sale of shares of M/s Suchak Trading Limited claimed as exempt u/s 10(38) of the Act. The PCIT found that the AO failed to investigate key facts regarding the genuineness of the transactions, including admission of accommodation entries, suspicious price increase of shares, lack of genuine buyers, and trading suspension of the company. The PCIT noted inadequate inquiries by the AO and concluded that the assessment order was erroneous and prejudicial to revenue interests, issuing a show cause notice u/s 263.

Grounds of Appeal:
The additional grounds raised by the assessee questioned the PCIT's jurisdiction u/s 263. The Counsel argued that the AO had already inquired into the suspicious transactions, thus the PCIT had no jurisdiction. The Counsel also highlighted the submission made to the PCIT presuming the AO's actions and argued against the PCIT's assumption of jurisdiction. The PCIT had distinguished judicial pronouncements relied upon by the assessee, emphasizing the lack of proper examination by the AO.

Judgment:
The Tribunal dismissed all grounds of appeal, upholding the PCIT's order directing the AO to pass a fresh assessment order after providing adequate opportunities for the assessee to be heard. The Tribunal found no infirmity in the PCIT's exercise of discretion under section 263, stating that the PCIT reasonably applied his mind to the record and provided valid reasons for assuming jurisdiction. The appeal filed by the assessee was ultimately dismissed, with the order pronounced in open court on 8th May, 2024 at Ahmedabad.