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2012 (4) TMI 91 - HC - Income TaxValidity of revisionary powers exercised by CIT u/s 263 exemption u/s 54F for LTCG on sale of shares granted by A.O. shares purchased on 21.04.2000 for Rs 19,536 sold on 02.05.2001 for Rs 6,36,640 increased price of more than 30 times in one year CIT suo-moto assumed jurisdiction on ground that AO failed to make any enquiry while accepting genuineness of the share transaction Tribunal set aside order of CIT Held that - Jurisdiction u/s 263 in the present case has not been exercised merely on the ground that the A.O. should have gone deeper into the matter but by pointing out that the A.O. had failed to apply his mind in allowing the benefit u/s 54F by accepting the genuineness of the capital gain - Decided in favor of Revenue.
Issues involved:
1. Validity of exercise of revisional jurisdiction under section 263 of the Income-tax Act, 1961. 2. Justification of canceling the order passed by the appellant under section 263 of the Act, 1961. Detailed Analysis: Issue 1: Validity of exercise of revisional jurisdiction under section 263 of the Income-tax Act, 1961 The case involved an appeal by the Revenue against the order passed by the Income-tax Appellate Tribunal, Gauhati Bench, concerning the assessment year 2002-03. The Commissioner of Income-tax exercised suo motu revisional jurisdiction under section 263 on the grounds that the Assessing Officer failed to conduct necessary inquiries regarding the genuineness of share transactions, especially considering the significant increase in share prices within a short span. The Commissioner directed the Assessing Officer to conduct a fresh inquiry. The Tribunal later set aside the Commissioner's order, stating that the Assessing Officer had already conducted detailed inquiries into the share transactions and related financial aspects. The Tribunal found that the exercise of jurisdiction under section 263 was not valid based on the facts presented. Issue 2: Justification of canceling the order passed by the appellant under section 263 of the Act, 1961 The appeal raised substantial questions of law regarding the validity of assuming jurisdiction under section 263 and canceling the order passed by the appellant. The Revenue relied on a previous judgment to support the exercise of revisional jurisdiction when the revised order was erroneous and prejudicial to Revenue's interests. However, the assessee argued that revisional jurisdiction could only be exercised for jurisdictional errors. The matter was referred to a Larger Bench, which reiterated the view that an order could be considered erroneous and within the scope of revisional jurisdiction if it was passed without considering relevant material, based on incorrect facts, or due to a wrong application of law. The Division Bench then analyzed the findings of the Assessing Officer, Commissioner of Income-tax, and the Income-tax Appellate Tribunal. The court concluded that the Commissioner's order was justified as it pointed out the failure to follow established norms and non-application of mind by the Assessing Officer. The court held that the Tribunal erred in ignoring these aspects and that the exercise of jurisdiction under section 263 was permissible in this case. In conclusion, the court allowed the appeal, emphasizing that the revisional jurisdiction under section 263 was validly exercised in this case due to the Assessing Officer's failure to apply his mind properly while allowing benefits under section 54F of the Act. The court rejected the argument that revisional jurisdiction could not be exercised merely because the Assessing Officer should have conducted a more thorough investigation.
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