2022 (3) TMI 761 - AT - Income Tax

Revision u/s 263 by CIT - assessee was reopened assessment u/s 147 r.w.s 148 of the Act mainly to examine the issue of long term capital gain resulting from the sale consideration - HELD THAT - In this case the AO has examined the issue of sale of shares and the resultant capital gain accruing there from during re-assessment proceedings by issuing various notices under section 142(1) as stated above and the assessee has duly replied and filed all the evidences. We note that assessee has even filed a detailed reply to the show cause notice dated 20.12.2017 as stated above and AO has accepted the claim of the assessee as genuine - we do not find any reason as to why the jurisdiction exercised by the Ld. PCIT under section 263 of the Act is valid as the AO, after examining the issue in detail, has taken one of the possible views on the matter. This is not a case of wrong appreciation of facts or wrong application of law by the AO. We find that the mere fact that AO has not elaborated the issue in the assessment order would not entitle the Ld. PCIT to exercise jurisdiction under section 263 of the Act and the case of the assessee is supported by the decision of Hon ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. 1993 (4) TMI 55 - BOMBAY HIGH COURT wherein the Hon ble Bombay High Court has held that the PCIT can not invoke the jurisdiction under section 263 of the Act merely on the ground that AO did not discuss the issue in the assessment order which indicated non application of mind as claim of the assessee required to be examined. - Decided in favour of assessee.

Summary

Issues Involved:
- Jurisdiction under Section 263 of the Income Tax Act.
- Examination of long-term capital gains (LTCG) on the sale of shares.
- Adequacy of enquiry conducted by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The primary issue raised by the assessee is against the Principal Commissioner of Income Tax (PCIT) exercising jurisdiction under Section 263 of the Income Tax Act. The PCIT held that the assessment framed under Section 143(3) read with Section 147 was erroneous and prejudicial to the interest of the Revenue. The PCIT directed the AO to conduct further enquiry and determine the correct income.

2. Examination of Long-Term Capital Gains (LTCG) on the Sale of Shares:
The assessee filed a return of income declaring total income of ?4,09,470/-. The case was reopened under Section 147 based on information from the Directorate of Investigation, which indicated that the assessee was a beneficiary of bogus LTCG claimed as exempt under Section 10(38). The AO issued multiple notices under Section 142(1) and conducted a detailed enquiry into the LTCG on the sale of shares of ICVL Chemical Ltd. The AO accepted the assessee's claim of LTCG as genuine and framed the assessment accordingly.

3. Adequacy of Enquiry Conducted by the Assessing Officer (AO):
The PCIT, upon examining the assessment records, concluded that the AO did not conduct adequate enquiry into the matter. The PCIT issued a show-cause notice under Section 263 and subsequently revised the assessment, directing the AO to re-examine the issue. The assessee contended that the AO had conducted a detailed enquiry, issuing multiple notices and receiving comprehensive replies with all necessary details. The AO's acceptance of the LTCG claim was based on this thorough examination.

Tribunal's Findings:
The Tribunal noted that the AO had indeed conducted a detailed enquiry during the reassessment proceedings. The AO issued several notices and received comprehensive replies from the assessee, including documentary evidence. The Tribunal emphasized that the AO had taken a possible and plausible view after examining the issue in detail. The Tribunal cited several judicial precedents, including decisions from the Supreme Court and the Bombay High Court, which supported the view that the mere absence of elaborate discussion in the assessment order does not render the assessment erroneous and prejudicial to the interest of the Revenue.

Conclusion:
The Tribunal concluded that the PCIT had improperly exercised jurisdiction under Section 263. The AO had conducted a detailed enquiry and taken a plausible view on the matter. Therefore, the revisionary proceedings under Section 263 and the consequent order passed by the PCIT were quashed.

Result:
The appeal of the assessee was allowed, and the order was pronounced in the open court on 05.01.2022.