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2025 (2) TMI 825 - AT - Income TaxRevision u/s 263 - Short Term and Long Term Capital Gains earned during the year - HELD THAT - Assessee produced the details of share trading statement of broker Demat statement with re-conciliation sale/purchase bills of share trading and financial ledger of the broker and after going through those documents the AO made no addition. In the present case the AO raised specific query on the issue of Short Term and Long Term Capital Gains earned during the year and the Assessee has produced the cogent documents and after verifying the documents the A.O. came to a conclusion that no addition requires to be made and while doing so AO has also called for books of accounts and examined on test check basis to examine the genuineness of the transaction. PCIT committed error in invoking the provision of Section 263 accordingly findings merits in the Grounds of appeal of the Assessee we hereby quash the order impugned passed by the PCIT. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework involves Section 263 of the Income Tax Act, 1961, which allows the PCIT to revise any order passed by the AO if it is erroneous and prejudicial to the interests of the Revenue. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT established that both conditions must be satisfied for the invocation of Section 263. The Court in Kwality Steel Suppliers and Clicks India Finance Pvt. Ltd. further clarified that mere disagreement with the AO's view or inadequacy of inquiry does not justify the invocation of Section 263. Court's Interpretation and Reasoning The Tribunal noted that the AO had issued a specific query regarding the Short Term and Long Term Capital Gains, to which the Assessee responded with comprehensive documentation. The AO, after examining these documents, did not find it necessary to make any addition. The Tribunal emphasized that the AO had applied his mind and conducted inquiries, thereby fulfilling his duty under the Act. Key Evidence and Findings The Assessee provided detailed evidence during the original assessment, including share trading statements, Demat statements, sale/purchase bills, and financial ledgers. The AO reviewed these documents and concluded the assessment without any additions, indicating that the transactions were genuine. Application of Law to Facts Applying the principles from Malabar Industrial Co. Ltd. and subsequent judgments, the Tribunal found that the AO had exercised due diligence and conducted adequate inquiries. The Tribunal concluded that the original assessment order was neither erroneous nor prejudicial to the interests of the Revenue. Treatment of Competing Arguments The Department argued that the AO did not conduct proper inquiries, justifying the PCIT's invocation of Section 263. However, the Tribunal rejected this argument, noting that the PCIT did not invoke Explanation 2 to Section 263 in the notice or the order. The Tribunal highlighted that inadequacy of inquiry does not empower the PCIT to revise the order unless there is a clear error prejudicial to the Revenue. Conclusions The Tribunal concluded that the PCIT's order was based on a mere change of opinion and not on any substantive error or prejudice to the Revenue. The Tribunal quashed the PCIT's order as it did not meet the statutory requirements for invoking Section 263. SIGNIFICANT HOLDINGS The Tribunal held that:
Core Principles Established The judgment reinforced the principle that Section 263 cannot be invoked merely due to a difference in opinion or inadequate inquiry, unless the original order is both erroneous and prejudicial to the Revenue. The Tribunal emphasized that the PCIT must clearly demonstrate these conditions to exercise revisionary jurisdiction. Final Determinations on Each Issue The Tribunal determined that the PCIT's order under Section 263 was invalid and quashed it, allowing the Assessee's appeal.
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