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2024 (11) TMI 424 - AT - Income TaxRevision u/s 263 - loss from the derivative transactions - Lack of inquiry and inadequate inquiry - HELD THAT - CIT order clearly shows that he has set aside the matters of the record of the AO for re-examination of the issue and to make denovo assessment which means that the commissioner was also not certain about correctness of the claim of the assessee. This course of action on the part of the commissioner is not permissible when the AO has conducted inquiry twice and has taken view based on the material on record and therefore, the only course available with the Pr. CIT u/s 263 was to give a conclusive finding that the view taken by the AO is not sustainable under the law. The Hon ble Delhi High Court in case of CIT vs. Sunbeam Auto Ltd. 2009 (9) TMI 633 - DELHI HIGH COURT while dealing an issue of lack of inquiry and inadequate inquiry held that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open. AO has conducted an inquiry and was satisfied with the supporting evidences produced by the assessee in response to notice u/s 142(1) then it is not necessary for he AO to give an elaborate finding on the issue. CIT while passing revision order cannot remand the matter back to the AO for fresh adjudication simply because he himself was not sure about correctness of the claim of the assessee. Assessee appeal allowed. Accordingly in the facts and circumstances of the case when the order passed by the AO is not erroneous for want of inquiry then it is incumbent upon the Pr. CIT to give conclusive finding that the impugned order passed by the AO is not sustainable in law. Appeal of the assessee is allowed.
Issues Involved:
1. Legitimacy of the Principal Commissioner of Income Tax's (Pr. CIT) invocation of Section 263 of the Income Tax Act. 2. Whether the Assessment Officer (AO) conducted adequate inquiry into the assessee's claim of business loss from derivative transactions. 3. Determination of whether the AO's order was erroneous and prejudicial to the interest of the revenue. Detailed Analysis: 1. Legitimacy of the Pr. CIT's Invocation of Section 263: The Pr. CIT invoked Section 263 of the Income Tax Act, alleging that the AO's order was erroneous and prejudicial to the interest of the revenue due to inadequate inquiry into the assessee's claim of loss from derivative transactions through M/s Xpro Securities. The assessee contended that the AO had already scrutinized the claim during both the original assessment and the reassessment proceedings, and thus the Pr. CIT's invocation of Section 263 was unwarranted. The Tribunal found that the AO had indeed conducted inquiries during the assessments, and the Pr. CIT's action was not justified as it was based on a different opinion rather than a lack of inquiry. 2. Adequacy of AO's Inquiry into the Assessee's Claim: The AO had issued notices under Section 142(1) during both the original and reassessment proceedings, specifically querying the short-term capital loss claimed by the assessee. The assessee responded with detailed documentation, including bank statements, F&O ledgers, and broker notes, which the AO considered before accepting the return income. The Tribunal noted that the AO's inquiry was adequate and that the Pr. CIT did not provide any independent evidence to counter the AO's findings. The AO's acceptance of the assessee's claim was based on the material on record, and the Tribunal held that the AO's inquiry was sufficient. 3. Erroneous and Prejudicial Nature of the AO's Order: The Pr. CIT argued that the AO's order was erroneous and prejudicial to the revenue because it failed to disallow the alleged fictitious loss. However, the Tribunal emphasized that the AO had conducted inquiries and was satisfied with the evidence provided by the assessee. The Tribunal also observed that the Pr. CIT did not conduct any independent inquiry to substantiate the claim of fictitious losses. The Tribunal concluded that the AO's order was not erroneous or prejudicial to the interest of the revenue, as the AO had adopted one of the permissible courses of action based on the evidence. Conclusion: The Tribunal held that the Pr. CIT's invocation of Section 263 was not justified, as the AO had conducted adequate inquiries and the order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal set aside the Pr. CIT's order, allowing the appeal in favor of the assessee. The decision underscores the principle that an order cannot be deemed erroneous or prejudicial merely because the Pr. CIT holds a different opinion, especially when the AO has conducted a proper inquiry.
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