2023 (5) TMI 636 - AT - Income Tax

Revision u/s 263 - suspicious transactions of Long Term Capital Gains - As per CIT AO did not make proper verification of the propriety of LTCG transactions and unsecured loans received during the year - HELD THAT - AO in the instant case, has arrived at a conclusion after collecting requisite evidences of external nature and in the absence of any adverse material per se, came to a conclusion which is plausible for a reasonable person instructed in law. The object of revisional power is not to impinge upon the powers of the Assessing Officer to frame the assessment and interfere therewith in all cases merely on account of some inadequacy in manner and extent of enquiry. As regards additions to bulding account, the case of assessee are two fold (i) no opportunity was given to assessee in clear violation of mandate of opportunity expressly provided under Section 263 of the Act and thus this issue could not be raked up at the first place (ii) the increase in capital is only Rs.14.40 lakh as against 78.46 lakh alleged by the Pr.CIT. The Pr.CIT was acted casually. All primary details were duly provided as called for. In the absence of any perceptible error in the action of the AO pointed out in the revisional order, the explanation offered on behalf of the assessee appears plausible. AO in the instant case, has specifically examined both the issues raised by the Pr.CIT albeit not probably in the manner in which the Pr.CIT would have liked but this cannot be the sacrosanct ground for assumption of jurisdiction under Section 263 of the Act. The Assessing Officer did raise the questions on points in issue and there appears to be active application of mind by the AO although, did not meet the expectation of the Pr.CIT. Thus one cannot possibly say that the AO had sleepwalked on the issues involved. Noticeably, the Pr.CIT himself has not entered into any minimal inquiry on the issues himself, if so considered expedient and there is not even prima facie demonstration of fallacy in the action of the AO which rendered the order erroneous and which also simultaneously caused prejudice to the revenue. Merely because the expectations of the Revisional Commissioner are purportedly not met, it should not, in our opinion, necessarily trigger revisional action under Section 263 of the Act in every case. Appeal of assessee allowed.

Summary

Issues Involved:
1. Whether the Assessing Officer (AO) failed to make proper enquiries and verify details, particularly regarding suspicious Long Term Capital Gain (LTCG) on shares.
2. Whether the Pr.CIT was justified in setting aside the assessment order under Section 263 due to alleged inadequacy of inquiry by the AO.
3. Whether the Pr.CIT's action regarding the increase in the building account was justified.

Summary:

Issue 1: Proper Enquiries and Verification by AO
The assessee filed a return of income for AY 2014-15, which was assessed at Rs. 3,82,800/-. The Pr.CIT issued a show cause notice under Section 263, alleging that the AO did not make proper enquiries or verify details, particularly regarding suspicious Long Term Capital Gain (LTCG) on shares. The assessee contended that all required documents, including proof of acquisition of shares, share certificates, dematerialization request form, contract notes, and demat account statements, were submitted to the AO. The AO, after examining these documents, found no reason for further inquiry. The assessee argued that the Pr.CIT's suspicion of penny stock transactions was unfounded and that the AO's assessment was reasonable and based on available facts.

Issue 2: Justification of Pr.CIT's Action under Section 263
The Pr.CIT set aside the AO's assessment order, directing a redo of the assessment. The assessee appealed, arguing that the AO had taken a plausible view based on facts and that the Pr.CIT's action was based on a generic observation without pointing out substantive errors. The Tribunal noted that the Pr.CIT's dissatisfaction with the AO's inquiry did not justify the invocation of Section 263. The Tribunal emphasized that the AO had conducted specific inquiries and collected requisite evidence, and the Pr.CIT had not demonstrated any perceptible error in the AO's action. The Tribunal concluded that the Pr.CIT's action was not justified, as it was based on mere dissatisfaction with the extent of the AO's inquiry.

Issue 3: Increase in Building Account
The Pr.CIT also raised concerns about the increase in the building account. The assessee argued that no opportunity was given to address this issue during the revisional proceedings and that all material particulars were duly provided to the AO. The Tribunal found that the Pr.CIT had acted casually, adopting an incorrect figure for the increase in the building account. The Tribunal held that the Pr.CIT's action was unjustifiable without a proper reference to the circumstances warranting independent verification.

Conclusion:
The Tribunal set aside and canceled the Pr.CIT's order under Section 263, restoring the AO's assessment order. The appeal of the assessee was allowed, and the Tribunal emphasized that the Pr.CIT's dissatisfaction with the AO's inquiry did not justify revisional action under Section 263. The Tribunal highlighted that the AO had conducted a reasonable inquiry and that the Pr.CIT had not demonstrated any substantive error in the AO's action.