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TMI Blog2019 (7) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... based on which the Pr.CIT initiated the proceedings u/s 263 for alleged lack of enquiry by the AO into the appellant s claim of short term capital loss, is found to be factually untenable. On examination of the material placed before him by the appellant, the AO was satisfied that the short term capital loss was incurred by the appellant on sale of shares listed on the Bombay Stock Exchange. The appellant had filed before the AO the relevant details and also produced the time stamped contract notes issued by its broker. All the transactions were made through registered share broker at rates prevailing on the stock exchange on the relevant dates. The payment for acquisition of shares and the subsequent sale proceeds were also transacted through the appellant s regular bank account. It is noted that the listed shares were sold within a period of one year from the date of acquisition and therefore the gain/loss was short term in nature. We find that the AO had discharged his duties as an investigator as well as that of an adjudicator and applied his mind on the issue before him and taking into consideration the explanation rendered by the appellant, had taken a reasonable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations in the order u/s 263. Aggrieved by the revision order of the ld. Pr. CIT, the appellant has preferred this appeal before us. 3. We have heard both the parties and perused the paper book and case laws cited by both the parties. We note that the appellant company is engaged in the business of trading. The case of the appellant was selected for scrutiny under CASS and one of the reason for selection was suspicious transactions relating to short term capital loss on sale of shares. After examining the audited accounts, tax audit report computation of income furnished by the appellant; the AO vide notice u/s 142(1)dated 13.07.2016 required the assessee to submit the specific details of shares in which it had incurred short term capital loss. The Ld. AR drew our attention to the appellant s response dated 03.08.2016 which was at Pages 16 to 30 of the paper book and submitted that the complete details were furnished by the appellant vide submission dated 03.08.2016. He further invited our attention to the subsequent requisition dated 15.09.2016 issued by the AO u/s 142(1) inter alia calling for further details concerning short term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciples of natural justice; (iii) if the AO s order is passed by the without application of mind; or (iv) if the AO has not investigated the issue before him. In the circumstances enumerated above only the order passed by the Assessing Officer can be termed as erroneous for the purpose of S.263 of the Act. Coming next to the second limb, the AO s erroneous order can be revised by the CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. For invoking powers conferred by S.263; the CIT should not only show that the AO s order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order some real and tangible loss is caused to the interest of the revenue. Their Lordship in the said judgment therefore held that it has to be remembered tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission dated 03.08.2016. Along with the letter dated 03/08/2016 the appellant furnished a statement giving detailed break-up of the short term capital gain as well as short term capital loss incurred on sale of investments in shares and other securities. It is further noted that the appellant furnished copies of its bank statements, contract notes, etc. in support of its transactions conducted in shares of UNNO Industries Ltd which resulted in short term capital loss of ₹ 15,49,658/-. On examination of the details furnished, we find that the direct evidences furnished by the appellant ex-facie substantiated its claim of short term capital loss. Hence we do not find any substance in the SCN issued u/s 263 wherein it was claimed that AO did not conduct any enquiry on this issue. At the most it can be said that the enquiry conducted by the AO before passing of the order was not as per the standards expected by the Ld. Pr. CIT. The question that arises on the foregoing facts therefore is whether it was indeed a case of lack of enquiry or alleged inadequate enquiry. The settled position of law is that lack of enquiry on the part of the AO on an issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further ITA No.904/Kol/2017 M/s Rassco Steels Ltd. A.Y.2012-13 enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the CIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then the Ld. Pr. CIT should himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his order was unsustainable in law. In the given facts of the present case, as noted earlier, the AO had made due enquiries into the claim of short term capital loss incurred by the appellant in the shares of UNO Industries. The AO had called for complete details of the short term capital loss incurred in shares which was reported to be suspicious by the Investigation Wing. After examining the specific details furnished by the appellant vide its letter dated 03/08/2016 that the AO issued another questionnaire dated 15.09.2016 wherein he once again called for the following details : 2. Details of Investment in Equity Shares of ₹ 8606987/- during the year under consideration. (i) Name address of the company in which investment is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate has now uploaded details of such information in respect of individual assessees who have made transactions in such penny stocks. 3. Vide EFS Instruction under reference a new button 'Penny Stock' has been added on Individual Transaction Screen (ITS) to display information related to penny stock, now enabled on the screen of the Assessing Officers (AOs). Available information regarding the manipulative transactions has been captured in the functionality, including the investigation report of the Kolkaia Investigation Directorate. The functionality also contains a guidance note for the Assessing Officers. Such details are visible to the AOs of those assessees whose particulars have emanated out of the investigation report of Kolkata Investigation Directorate and whose cases have been considered actionable, at this stage. The details are also visible to supervisory officers of such AOs. 4. In case of any difficulty in viewing the information on ITS, Shri Vipul Agarwal, JD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company does business like this in other shares as well etc.It is for the non-enquiry into these peripherial issues that the ld. Pr.CIT held the order to erroneous and prejudicial to the interests of the Revenue. From the material placed before us and in view of the discussions in the earlier paras, we however note that these aspects did not have any material bearing in deciding whether assessee s transactions in shares and consequent loss incurred were genuine or not . In fact the SCN issued by the PCIT nowhere makes any reference to these factors for considering the AO s order to be erroneous. On the contrary we find that before the order of assessment was passed the AO had required the assessee to furnish transactional documents proving the purchase and sale of all shares held as investment during the year. On examination of the material placed before him by the appellant, the AO was satisfied that the short term capital loss was incurred by the appellant on sale of shares listed on the Bombay Stock Exchange. The appellant had filed before the Ld. AO the relevant details and also produced the time stamped contract notes issued by its broker. All the transactions were made thr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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