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TMI Blog2020 (11) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... t to have been done. Ld. Pr. CIT himself ought to have made some enquiry regarding the impugned transactions before setting aside to the file of the assessing officer. Hence, the action of the Ld. Pr. CIT is contrary to the ratio laid down by the binding precedence. We, therefore, hold accordingly, impugned order is quashed. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... nse thereto, the assessee had filed a reply, thereafter the assessing officer passed order u/s 143(3) of the Act accepting the return filed by the assessee. Ld. Pr. CIT found that the assessment order was erroneous prejudicial to the interest of revenue. Hence, the order was set aside and assessing officer was asked to properly examine the issues and to verify the genuineness of the share transactions. 3. Aggrieved against this the assessee is in present appeal. 4. Ld. Counsel for the assessee vehemently argued that the action of the Ld. Pr. CIT is contrary to the settled principles of law and he further submitted that the exercise of the jurisdiction u/s 263 is not proper. The assessment order has been revised arbitrarily. Further, he relied upon various case laws i.e. Judgment of Hon'ble Supreme Court rendered in the case of CIT vs. Malabar Industrial Co. Ltd. (2000) 243 ITR 83 (SC). Further, the decisions of the Coordinate Bench of this Tribunal in the case of ITO vs. Shri Narayan Tatu Rane in ITANo.2690 & 2691/Mum/2016 and in the case of Pr. CIT vs. Sanjeen Kr. Khemka in ITANo.1361/Kol/2016 and the judgment of Hon'ble Delhi High Court in the case of ITO vs. Dg Housing Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh in light of the directions given by him in the impugned revision order, which is nothing but the change of opinion on the already decided issue. Aggrieved by the aforesaid revision order of Ld. CIT (Admn.), the assessee has preferred the present appeal before this Hon'ble Tribunal. In support of and elaboration to the grounds of appeal already taken, ground-wise submission is made as under: Grounds of Appeal Nos. 1 to 3: Under all these grounds of appeal, the assessee has challenged the action of Ld. CIT(Admn.) in passing the impugned revision order u/s 263 of the Act arbitrarily and without in any manner establishing as to how the Assessment Order passed by Ld. AO was erroneous and prejudicial to the interest of revenue more particularly when the ld. AO has conducted the enquiry in the manner specified to verify the long term capital gains from the sale of shares. As stated above, in the year under appeal assessee has claimed exempt income to the tune of ₹ 11,52,000/- from the sale of shares of M/s Jackson Investment Ltd. The ld. CIT(Adm.) in his order alleged that the capital gains declared is not genuine as M/s Jackson Investment Ltd. is detected to be penny sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al delivery of shares, credit of shares in demat account, sale of shares and finally debit of shares from demat account etc. were filed during the course of assessment proceedings. It is further submitted that purchase of shares were made in October, 2011 and shares were with assessee for long more than 3 years as well as these were dematerialized in between. Demat accounts are held by independent third party of repute, which cannot be doubted. Moreover it is not a case where shares were dematerialized that before their sale giving doubt to the entire transactions of sale. In the instant case shares were in Demat account since 18th February, 2013 and sold after nearly about 2 years in January, 2015 from Demat date (and about 3¼ year from purchase date). Further the issue has been settled by the Hon'ble Rajasthan High court in the case of Pooja Agarwal (APB 26- 33) which is binding in nature and was submitted before the ld., AO. The Ld. AO after considering all the details, facts, evidences and legal position prevailing at the time of passing of order has found the gain to be not non-genuine. It is pertinent to submit before your honour that Ld. CIT(Admn.) also could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] A perusal of above clarifies that order passed by assessing officer shall be "deemed to be erroneous and prejudicial to the interest of the revenue if AO has passed such order without making inquiries or verification which should have been made; It is worthwhile to note here that the phrase "which should have been made" here in no way means that enquiries should have been made in manner as desired by CIT, rather it means that before holding an order to be erroneous, CIT should have conducted necessary enquiries or verification which brings on record certain material in order to show that the finding given by the assessing officer is erroneous. In this regard reliance is placed on the following decisions: (1) Shri Narayan Tatu Rane vs ITO ITA No.2690 & 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. M/s. J.L. Morrison (India) Ltd.(ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under:- "By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision." We also rely on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : "When the CIT passed the impugned order under s. 263, two views were inherently possible on the word "profits" occurring in the proviso to s. 80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the order of Ld. AO cannot at all be held as erroneous and thus the action of Ld. CIT(Adm.) in passing the impugned order concluding that the said order is erroneous and prejudicial to the revenue is bad in law. It is further submitted that, the Hon'ble Bombay High Court in the case of CIT Vs. Gabrial India Ltd., reported in 203 ITR 108, has held that, "CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO". Further, in the case of CIT Vs. Sunbeam Auto Ltd., reported in 227 CTR 133, the Hon'ble Delhi High Court drew a distinction between "Lack of inquiry" and "inadequate enquiry" and held that, 'in the case of inadequate enquiry, provisions under section 263 cannot be invoked.' It may however, be noted that the instance case is neither the case of inadequate enquiry nor lack of enquiry during assessment proceedings as it can be seen that due, necessary and most pertinent enquiries to all the issues emerging from the return filed by the assessee were conducted by the Ld. AO. Therefore, in view of such legal position, no action u/s 263 could have been taken. It is a well established law by now that section 263 does not contemplate mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless the view taken by the Assessing Officer is unsustainable in law. Thus, it is submitted without admitting that the defect (if any) does not in anyway lead to supply the foundation for revising an otherwise valid order which can neither be said erroneous nor prejudicial to invoke section 263 of the Income Tax Act, 1961, which section cannot be permitted to be brought into play unless both the conditions i.e. the order has to be prejudicial as well as erroneous both, meaning thereby that the twin conditions are to be cumulatively satisfied before proceeding to revise an assessment order. In light of the facts / circumstances of the case, submissions made above, and the case laws relied upon, it is very humbly prayed that the impugned revision order of Ld. CIT(Admn.) may please be quashed and held bad in law, thereby restoring the assessment order of Ld. AO. Further, reliance is placed on the following case laws: 1. CIT Vs. M/s Chambal Fertilizers & Chemicals Ltd. (Raj HC) (2014) 51 TW (III) 157 Therefore, it is clear the CIT does not have unfettered and un-checked discretion / power to reverse the order. He can do so within the bounds of the law and has to satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible. 4. M/s Emgee Cables & Communication Ltd. Vs. CIT (2014) 51 TW (IV) 197 Section 263 - power of revision by commissioner - AO completed assessment at NIL - assessee involved in manufacture / trading of cable/copper/wire - declared income from interest & commission as business income - accepted by AO - CIT invoked sec 263 and set-aside the order of AO directing him to consider the said income as income from other sources and not from business - whether CIT justified in invoking sec 263? Held : No - CIT only wanted AO to make re-verification - cannot be said that that order of AO was without making proper enquiry - AO having taken one of the possible view - cannot be said that assessment order was erroneous and prejudicial to the interest of revenue. CIT Vs. Ganpat Ram Bishnoi, 296 ITR 292 (Raj.) Revision: S. 263 of Income tax Act, 1961: A.Y. 1993-94: Powers of Commissioner: No power to make short enquiries or to go into process of assessment again and again: Finding that AO made assessment after rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares for one year or so ant' then. sale it to one of the shell private limited companies of the operator. These facts were confirmed by the stake holders viz. Operator/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the Income-tax Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Jackson Investment Ltd, is a penny stock listed company. It has very small capital base but its mark capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i. e. M/s. Jackson Investment Limited is also available at ITS Data / AIR. (C)The AO inadvertently not considered the investigation made by the department in respect of M/s Jackson Investment Ltd, and allowed the claim of the assessee and he could not make proper enquiries a' assessment was becoming time barred. (D)The AO allowed exempt long term capital gains u/s 10(38) of the Income tax Act, 1961 of ₹ 11, 52, 000/- without making proper enqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares for 3 years and regularity of investing in shares. 3_ As per information received from the Director of Income tax (Investigation), Kolkata, a survey u/s 133A had been carried out on various share brokers. During the Survey, Various enquiries have been conducted by the Directorate o Investigation, Kolkata, on a project basis, which has resulted into th unearthing of a huge syndicate of Entry Operators, share brokers and mone launderers, involved in providing bogus accommodation of Long Term Capit Gain, Short term capital loss. 4. It has come to light that large scale manipulation has been done in mark price of shares of certain companies listed on the Bombay Stock Exchange certain persons working as a syndicate in order to provide entries of tax ex- pt bogus Long Term Capital Gains to large number of persons in lieu of unaccounted cash. The basic objective of this racket is to convert black money into white without payment of Income Tax. The unaccounted cash of such persons [beneficiaries] is utilized to purchase shares of such companies at a very high artificially inflated market price. 5. This practice is generally called, Accommodation Entry Scam, as the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. Act, 1961 is enclosed herewith. 12. In addition to the above information you are also required to furnish the following information/details:- Please note that no further adjournment shall be given as this is a time barring case. Non-compliance, part compliance or incomplete compliance may entail penal action, and/or adverse inference in respect of the said issue and/or taking recourse to rejection of book results and assessment u/s 144 of the Income Tax Act, 1961 without any further reference to you in this regard 8. In response thereto, the assessee stated as under: 1. (I). That the assesee has invested ₹ 40000/- for purchases of shares as per enclosed copy of contract not for sale & latter of transfer of share dated 20/10/2011. ( I I ) That the assessee has invested ₹ 40000/- out of his income from commission/brokerage earn on the sale of agriculture goods. (iii) That the assessee paid ₹ 40000/- through M/s Pleasant Dealcom Pvt Ltd as per enclosed sale bill. (iv) That requisite copy of contract note for sale & purchases enclosed. (v) That requisite copy of bank statement reflecting receipt of sale of investments enclosed. (vi) That requisite c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment through bank as per enclosed bank statement and the delivery of the shares has been taken & given through Demat account, Contract Notes for sale & purchases of shares enclosed, share transfer latter from M/ s Jackson Investment Ltd. dated 20/11/2011 enclosed. 9. That long term capital is genuine for the reasons (a) Payment for the sale of shares received ₹ 1187082.08 through Neft in the assessee's bank as per copy of the bank statement enclosed. (b) Delivery of the shares taken & given through Demat A/c as per enclosed copy of the same. (c) Contract Notes for Sale & purchases of the broker who are members of recognize stock exchange as per copy of the same enclosed. The assessee's Long term Capital Gain is genuine. The following cases of our jurisdictional High Court as well as High Court of the other state and tribunal support the case of the assessee in which it is held that such that where aseessee proved genuineness of share transactions by contract notes for sale and purchases, bank statement, demat account showing transfer in and out of shares can not be treated unexplained cash credit u/ s 68 of the I.T. Act 1961:- (i).High Court of Rajasthan at Jaip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandated further 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 matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of 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. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent‟s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT Mumbai Bench in the case of M/s Indus Best Hospitality & Realtors Pvt. Ltd. in ITA No. 3125/Mum/2017 vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is retrospective in nature. Since the year under consideration is AY 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar view has been taken by the various Coordinate Benches of the ITAT in the following cases:- ITA No. 3391/Del/2018 Assessment year 2014-15 (a) AV Industries v. ACIT [ITA No. 3469/Mu m/2010] dated 06.11.2015 (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 (c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017. (d) Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015] dated 09.09.2016 (e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017. 5.8 Accordingly, respectfully following the ratio of the various judgments as referred to in the preceding paragraphs, we have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersies as it must in other spheres of human activity. 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinizing the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon the various case laws i.e. Puja Gupta vs. Pr. CIT in ITANo.4057/Del/2018 and also heavily relied upon the amendment made in the law. We find that the coordinate Bench of this Tribunal in the case of ITO vs. Shri Narayan Tatu Rane(supra), M/s. Arun Kumar Garg, HUF, vs. Pr. CIT(supra) have ruled that the Pr. CIT can not pass the order u/s 263 of the Act on the ground that thorough enquiry should have been made by the Assessing Officer. In the present case the assessing officer had given a specific notice regarding the disputed transactions and the assesseee also gave specific reply to the show cause notice issued by the assessing officer. Therefore, it is not a case where the assessing officer has not made any enquiry regarding impugned transactions but the Ld. Pr. CIT invoked the provisions of section 263 of the Act on the ground that the enquiry was not made in the manner, it ought to have been done. In the light of the ratio laid down in the judgment of the Hon'ble Delhi High Court in the case ITO vs. Dg Housing Projects Ltd.(supra) and other decisions of the Coordinate Benches of this Tribunal i.e. ITO vs. Shri Narayan Tatu Rane(supra), M/s. Arun Kumar Garg, HUF, vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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