2024 (5) TMI 584 - AT - Income Tax

Validity of Revision u/s 263 - Improper enquiries made by AO - bogus long term capital gain through share transaction of a penny stock company - CIT noted discrepancies in assessment proceedings u/s 147 r.w.s 144B - opinion of the Commissioner that the AO had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order - HELD THAT - CIT, taking shelter in Explanation 2 to Section 263(1) of the Act, held that the order of the AO was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order . If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assessee. As per Narayan Tatu Rane 2016 (5) TMI 1162 - ITAT MUMBAI as held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications. As decided in the case of PCIT vs. Usha Polychem India (P) Ltd 2023 (5) TMI 419 - CALCUTTA HIGH COURT where Principal Commissioner involved revision jurisdiction under section 263 in case of assessee on basis of an information received from Dy. Director (Investigation) regarding huge amount of unaccounted funds received in bank account of assessee, since a reassessment proceeding was already invoked and completed on basis of same information, impugned revision was unjustified - Decided in favour of assessee.

Summary

Issues Involved:
1. Exercise of Revision Jurisdiction u/s 263 of the Income Tax Act.
2. Examination of the Assessment Order for Errors and Prejudice to Revenue.
3. Adequacy of Enquiries and Verifications Made by the Assessing Officer.

Summary:

1. Exercise of Revision Jurisdiction u/s 263 of the Income Tax Act:
The assessee appealed against the Principal Commissioner of Income Tax (Pr. CIT), Kolkata's revision order dated 18.10.2023, passed u/s 263 of the Income Tax Act. The Pr. CIT directed the Assessing Officer (AO) to frame a fresh assessment, citing that the original assessment order was erroneous and prejudicial to the interest of revenue.

2. Examination of the Assessment Order for Errors and Prejudice to Revenue:
The assessee had filed a return declaring total income of Rs. 2,55,970/-. The AO reopened the assessment based on information from the Investigation Wing, which indicated that the assessee had received accommodation entries in the form of bogus long-term capital gains (LTCG) through share transactions of Blue Print Securities Limited. The AO completed the reassessment u/s 147 r.w.s 144B, accepting the assessee's declared income. The Pr. CIT found discrepancies and issued a show-cause notice, stating that the assessment order was erroneous and prejudicial to the revenue because the AO did not properly confront the assessee with the evidence gathered, including the statement of entry operators.

3. Adequacy of Enquiries and Verifications Made by the Assessing Officer:
The assessee argued that all necessary documents were submitted and verified by the National Faceless Assessment Centre (NFAC), which found the transactions genuine. The Pr. CIT, however, was not satisfied and observed that the AO did not make adequate enquiries or verifications. The Tribunal noted that the Pr. CIT did not discuss any specific documents or explanations provided by the assessee during the reassessment. The Tribunal highlighted that the Pr. CIT must examine the assessee's explanations and make necessary enquiries before concluding that the AO's order is erroneous and prejudicial to the revenue. The Tribunal found that the Pr. CIT's general observation of lack of enquiry was insufficient without pointing out specific errors or discrepancies.

Conclusion:
The Tribunal concluded that the Pr. CIT was not justified in setting aside the assessment order merely because he believed further enquiries were needed. The Tribunal emphasized that the Pr. CIT must provide specific reasons for his dissatisfaction with the AO's enquiries and the evidence provided by the assessee. Consequently, the Tribunal set aside the Pr. CIT's revision order, allowing the assessee's appeal.