2019 (9) TMI 1177 - AT - Income Tax

Revision u/s 263 - guienity of long terms capital gains - HELD THAT - It has come on record that the Assessing Officer had issued sec. 133(6) letter / notice to the M/s SHCL during the course of scrutiny which stood adequately replied in assessee s favour. Coupled with this, all the relevant factual details in support of the assessee s share purchase document, contract notes, bank statement, (supra) already in the case records. CIT-DR fails to rebut the clinching fact that although the PCIT s detailed discussion extracted in the preceding paragraphs has sought to make out a case of artificial price rigging between the assessee, promoters entry operators of the entity in light of Ministry of Finance s letter dated 24.07.2015 figures, there is not even an iota of material quoted against the assessee to have been engaged in all the foregoing artificial price rigging. We are observing in view of all these facts that the Assessing Officer had rightly accepted the assessee s LTCG keeping in making the overwhelming evidence forming part of records. In case of CIT vs. Lakshmargarh Estate Trading Co. Ltd. 2013 (2) TMI 825 - CALCUTTA HIGH COURT and CIT vs. Bhagwati Prasad Agarwal 2009 (4) TMI 138 - CALCUTTA HIGH COURT have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee s foregoing LTCG derived from sale of shares to be genuine - We therefore reverse the PCIT s order under challenge and restore the impugned assessment framed by the Assessing Officer - decided in favour of assessee.

Issues Involved:
1. Legitimacy of Long Term Capital Gains (LTCG) claimed by the assessee.
2. Validity of the Principal Commissioner of Income Tax's (PCIT) revision jurisdiction under Section 263 of the Income Tax Act, 1961.
3. Adequacy of the Assessing Officer’s (AO) enquiry during the assessment process.

Detailed Analysis:

Legitimacy of Long Term Capital Gains (LTCG):
The PCIT questioned the legitimacy of the LTCG claimed by the assessee, suspecting them to be bogus transactions. The PCIT's order highlighted a detailed modus operandi involving syndicate members, brokers, and entry operators manipulating share prices of penny stock companies like "Unno Industries Ltd." to generate bogus LTCG. The PCIT referenced various reports and statements from the Director General of Income Tax (Investigation) and the Special Investigation Team (SIT) on Black Money, pointing out that such transactions were used to convert unaccounted income into accounted income without paying taxes. The PCIT concluded that the entire sale consideration should be added back as bogus cash credit under Section 68 of the Act, and an additional unexplained expenditure for commission payments should be added under Section 69C.

Validity of PCIT's Revision Jurisdiction under Section 263:
The PCIT exercised revision jurisdiction under Section 263, arguing that the AO's assessment was erroneous and prejudicial to the interests of the revenue. The PCIT's order emphasized that the AO failed to make necessary inquiries or verification regarding the transactions in question. The PCIT cited several judicial precedents, including the Supreme Court's decisions in Malabar Industrial Co. Ltd. vs. CIT and other cases, to support the argument that the AO's failure to conduct a thorough investigation rendered the assessment order erroneous and prejudicial to the revenue.

Adequacy of the AO’s Enquiry:
The assessee contested the PCIT's revision jurisdiction, arguing that the AO had conducted adequate inquiries during the assessment process. The assessee provided a detailed paper book containing all relevant documents, including purchase bills, contract notes, bank statements, and responses to the AO's notices. The assessee argued that the AO had verified all necessary facts and accepted the LTCG as genuine. The tribunal referred to various judicial precedents, including the co-ordinate bench's decision in M/s Saregama India Ltd. vs. CIT-1, Kolkata, which reiterated that an assessment order cannot be revised under Section 263 if the AO had taken one of the possible views after conducting inquiries.

Tribunal's Conclusion:
The tribunal concluded that the AO had conducted adequate inquiries and accepted the assessee's LTCG as genuine based on the overwhelming evidence provided. The tribunal noted that the PCIT's order was based on suspicious circumstances without any concrete evidence against the assessee. The tribunal emphasized that the AO's acceptance of the LTCG was a possible view supported by relevant facts and documents. Therefore, the tribunal held that the PCIT's exercise of revision jurisdiction under Section 263 was not sustainable and reversed the PCIT's order, restoring the original assessment order.

Outcome:
The tribunal allowed the assessee's appeal, concluding that the AO had rightly accepted the LTCG as genuine and that the PCIT's revision jurisdiction under Section 263 was not valid in this case. The tribunal's order applied to all eight assessees involved in the appeals.

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