9911796707
TMI Blog2020 (1) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... on examination thereof he noted that the AO had allowed the set off of the short term capital loss of Rs. 15,49,658/- against other heads of income without enquiring into the allowability of such claim in terms of the CBDT Instruction No.287/30/2014-IT(Inv II)Vol. III dated 16.03.2016, which circular, according to him, debar from allowing short term losses arising from the transaction of penny stock. He accordingly issued a show cause notice calling upon the assessee as to why he should not exercise the revisional jurisdiction u/s. 263 of the Act and after hearing the assessee, the ld. Pr. CIT held that AO's order was erroneous and prejudicial to the revenue for lack of enquiry in respect of the claim of loss and was pleased to set aside the order of AO and directed him to pass order afresh after taking note of his observations in the impugned order passed u/s 263 of the Act. Aggrieved by the impugned revision order of the ld. Pr. CIT, the appellant has preferred this appeal before us. 4. 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 filed the return of income on 14.09.2014 declaring total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -à-vis bank statement. We also note that the AO had issued notice dated 01.08.2016 placed at page 5 of paper book wherein he has asked for the following information from the assessee: i) Name and address of the company in which investment is made ii) Copy of allotment letter iii) Copy of "Contract Note" in respect of quoted shares iv) Date of allotment of shares v) No. of shares vi) Value of shares vii) Source of payment made for obtaining shares viii) In this regard, you are also requested to furnish the evidence of mode of such payment along with the details of cheque number sand the copy of bank statement (FY 2013-14) highlighting the relevant entries therein showing the transaction. 6. We note that pursuant to the aforesaid notice, the assessee had replied vide letter dated 06.06.2016 which is found placed at page 6 of the paper book wherein the assessee had filed the details of trading in shares, details of investment and attached copy of the contract note and ledger copy as well as filed the details of stock. Likewise, from a perusal of the reply dated 08.08.2016, we note that the assessee had filed details of all directors, copy of tax audit report, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order u/s 263 of the Act and, therefore, the very assumption of jurisdiction u/s 263 was on an erroneous premises and so is bad in law and consequently the impugned order deserves to be quashed. 8. Per contra, the Ld. CIT, DR, supported the order of the Ld. Pr. CIT, and contended that since the AO did not follow the instruction of the CBDT on the subject as per the Explanation 2(c) of sec. 263 the order of the AO is deemed to be erroneous as well as prejudicial to the interest of the revenue and does not want us to interfere in the order of the Ld. Pr. CIT. 9. With the aforesaid factual background, let us examine whether the finding of the Pr.CIT that the AO's order is erroneous and prejudicial to Revenue on account of lack of enquiry on the part of AO was factually and legally justified and sustainable. We note that the assessee company has challenged in the first place, the very usurpation of jurisdiction by ld. Principal CIT to invoke his revisional powers enjoyed u/s 263 of the Act. To adjudicate this issue we have to first see whether the requisite jurisdiction necessary to assume revisional jurisdiction existed before the Pr. CIT exercised his powers. For that, we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 10. In the given facts of the present case the only fault found by the ld. Pr. CIT to interfere with the order of AO was the alleged lack of enquiry in respect of short term capital loss and for which he held the assessment order to be erroneous and prejudicial to interest of the Revenue. In the opinion of the Pr. CIT, before completing the assessment the AO did not conduct the enquiries which he was expected to conduct in view of the instruction dated 16.03.2016 issued by CBDT. We are aware of the fact that the Assessing Officer's role while framing an assessment is not only as an adjudicator but he is also an investigator. The AO has a dual role to dispense with i.e. he is an investigator as well as an adjudicator and therefore, if he fails in any one of the two roles as afore-stated, his order can be termed as erroneous. Keeping this proposition also in mind and the law laid in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es with tangible material that the finding of fact of AO in the order passed on the issue, was factually or legally wrong or view followed by him in the order was unsustainable in law. In such an event only the ld. Pr.CIT would be able to satisfy the jurisdictional fact which is required to interdict and exercise revisional jurisdiction u/s 263 of the Act. 12. In order to understand the difference between "lack of inquiry" and "inadequate inquiry" and when it can be termed as erroneous, let us look at the following case laws wherein their Lordships explained the difference between the two as follows:- INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also requested to furnish the evidence of Mode of such payment along with the details of cheque numbers and The copy of bank statement (F.Y. 2013-14) highlighting the relevant Entries therein showing the transaction. 3. Please furnish the following details in respect of Short Term Capital Loss (i) Name of Scrip, (ii) Date of purchase (iii) Quantity (iv) Rate (v) Mode of Payment (vi) Date of sale (vii) Quantity Sold (viii) Rate (ix) Date of Dividend declaration (x) Amount of dividend (xi) STT paid (xii) S.T. Capital Loss. 14. We note that the appellant complied with the above questionnaire as well by replying to it. On these facts therefore it cannot be said that AO did not enquire into the claim of short term capital loss or that the assessment order suffered from 'lack of enquiry'. It is noted that the SCN as well as the impugned order proceeded on the premise that the AO did not enquire into the short term capital loss in the manner set out by the CBDT in its Instruction No.287/30/2014-IT(Inv II)Vol. III dated 16.03.2016. The relevant extracts of the said Circular is as follows: "Kind attention is invited to the above referred EFS Instruction issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it is noted that the CBDT had only informed the field officers that a button 'Penny Stock' has been added on their Individual Transaction Screen to display information related to penny stock, including the investigation report of the Kolkata Investigation Directorate. Accordingly the CBDT had issued directions to CITs to ensure that the officers working under their respective jurisdictions should access this functionality. We do not find that the CBDT instruction referred to by the PCIT in his SCN, any way out lined the mode or the manner of the enquiry to be conducted by the Assessing Officers concerning such suspicious transactions inter alia including purchase& sale of penny stock shares. Upon being enquired as to whether the CBDT has laid down any specific guidelines for the field officers, pursuant to the above Instruction for investigation into the suspicious transactions in shares, the Ld. CIT, DR was unable to bring to our notice the so-called specific line of enquiry which the CBDT had mandated the AOs to abide by. We therefore find that very premise viz., violation of the directions contained in CBDT Instruction No.287/30/2014-IT(Inv II)Vol. III, based on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant 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. In the facts and circumstances as discussed above therefore 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, the AO had taken a plausible decision to allow the claim of short term capital loss as made by the appellant in the return of income in consonance with judicial decisions as under: 17. The Hon'ble Calcutta High Court in the case of Principal Commissioner Of Income vs M/S. Blb Cables And Conductors; ITAT No.78 of 2017, GA No.747 of 2017; dt. 19 June, 2018, had upheld the order of the Tribunal by observing as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on surmises. The AO must establish that cash has changed hands. There is no material or evidence even to suggest that the cheques directly or indirectly emanated from the appellant so that it could be said that the appellants' own money was brought back in the guise of sale proceeds''. 19. In the case of CIT vs. Lavanya Land Pvt Ltd. the Hon'ble Bombay High Court ruled that the allegations made by the authorities have to be supported by actual cash passing hands or actually has changed hands. 20. In the case of DOLARRAI HEMANI vs. ITO, this Tribunal held that the fact that the stock is thinly traded & there is unusually high gain, is not sufficient to treat the LTCG as bogus when all the paperwork is in order. The revenue has to bring material on record to support it's findings that there has been collusion/connivance between the Broker & the Appellant for the introduction of unaccounted money. 21. In the case of DCIT Vs. Sunita Khemka, ITAT Kolkata ruled that the AO cannot treat a transaction as bogus only the basis of suspicion or surmises. He has to bring material on record to support his findings that there has been a collusion/connivance between the Broker and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal has further recorded a finding of fact that the cash credits in the,bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, yn the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TTJ (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished." 12. The Hon'ble High Court of Rajasthan in CIT vs. Smt. Pushpa Malpani - reported in (2011) 242 CTR (Raj.) 559; (2011) 49 DTR 312 dismissed the appeal of department observing 'Whether or not there was sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO could not have added income, which was rightly deleted by the CIT(A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof. Consequently, no question of law, much less a substantial question of law, arises for adjudication.- C. Vasantlal & Co. vs. CIT (1962) 45 ITR 206 (SC), M.O. Thomakutty vs. CIT (.1958) 34 ITR 501 (Ker)) and Mukand Singh vs. Sales Tax Tribunal (1998) 107 STC 300 (Punjab) relied on; Umacharan Shaw &Bros. vs. CIT (1959) 37 ITR 271 (SC) Applied; Jaspal Singh vs. CIT (2006) 205 CTR (P & H) 624 distinguished" 25. M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) - " In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon'ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
