2021 (5) TMI 650 - AT - Income Tax

Revision u/s 263 - genuineness of LTCG - Whether assessment is both erroneous as well as prejudicial in interest of the Revenue simultaneously? - HELD THAT - 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 already in the case records. Coupled with this Learned 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. As in case GITESH TIKMANI GIRISH TIKMANI 2019 (9) TMI 1177 - ITAT KOLKATA CIT vs. Ratan ITA No. 105/2016 M/s. Classic Growers Ltd. 2013 (2) TMI 825 - CALCUTTA HIGH COURT CIT vs. Lakshmangarh Estate Trading Co. Ltd. 2013 (10) TMI 1037 - CALCUTTA HIGH COURT 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. Thus we hold that PCIT s exercise of revision jurisdiction merely on suspicious circumstances by invoking in sec. 263 Explanation (supra) with effect from 01.06.2015 is not sustaining. We therefore reverse the PCIT s order under challenge and restore the impugned assessment framed by the Assessing Officer - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of invoking powers under Section 263 of the Income Tax Act, 1961.
2. Adequacy of the Assessing Officer's inquiry into the transactions.
3. Validity of the Principal Commissioner's conclusions and directions.

Issue-wise Detailed Analysis:

1. Legality of Invoking Powers under Section 263 of the Income Tax Act, 1961:
The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263, which proposed to revise the assessment order passed under Section 143(3). The Pr. CIT's notice was based on the suggestion from the Assessing Officer (AO) that the assessment order was erroneous and prejudicial to the interest of the revenue. The assessee argued that the initiation of revisionary proceedings under Section 263 was illegal because the AO cannot suggest invoking these powers; it is the Pr. CIT who must independently verify the records and be satisfied of any error prejudicial to the revenue.

2. Adequacy of the Assessing Officer's Inquiry into the Transactions:
The assessee contended that the AO had conducted a thorough inquiry during the assessment proceedings. The AO issued notices under Sections 143(2), 142(1), and 133(6) to verify the transactions, and all details were provided by the assessee. The AO concluded that the transactions were genuine and accepted the return of income. The Pr. CIT, however, argued that the AO did not conduct extensive or necessary inquiries, particularly regarding the transfer of shares of Kailash Auto. The assessee countered that the AO's view was a possible one based on evidence, and thus, the assessment could not be revised under Section 263 as there was no error.

3. Validity of the Principal Commissioner's Conclusions and Directions:
The Pr. CIT's order suggested that the AO's assessment was erroneous due to lack of extensive inquiries. However, the Pr. CIT did not specify what additional inquiries were required or conduct any verification himself. The assessee argued that the Pr. CIT's conclusions were based on general statements and suspicions without concrete findings. The Tribunal noted that the AO had indeed conducted independent inquiries and verified documents, and thus, his view was supported by several ITAT decisions. The Tribunal emphasized that tax cannot be levied on assumptions and that the Pr. CIT had exceeded his powers under Section 263 by directing additions without proper basis.

The Tribunal cited several case laws to support the principle that an order can only be revised under Section 263 if it is both erroneous and prejudicial to the interests of the revenue. It reiterated that if the AO adopts a permissible view based on evidence, it cannot be considered erroneous merely because the Pr. CIT disagrees. The Tribunal concluded that the Pr. CIT's order was arbitrary and not sustainable, and thus, quashed the order passed under Section 263.

Conclusion:
The Tribunal allowed the appeal, holding that the AO had conducted adequate inquiries and the Pr. CIT's order under Section 263 was not justified. The Tribunal emphasized the necessity of concrete findings and proper basis for invoking revisionary powers under Section 263.