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TMI Blog2020 (12) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... rial placed before us suggests some application of mind, by Assessing Officer. Admittedly, the Ld. Pr. CIT in the impugned order has recorded the factum collection of evidence and recording of statement. Action of the Ld. PCIT revising the assessment order under the peculiarity of the facts and circumstances of the case cannot the sustained. The impugned order is therefore, set aside and the grounds raised by the assessee in this appeal are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Ld. Pr. CIT. Ld. DR further submitted that the assessing officer has not made any enquiry in respect of the issue. It is the case of no enquiry hence Ld. Pr. CIT was justified in restoring the issue to the file of the assessing officer. Ld. D.R further submitted that the case laws as relied by the Ld. counsel for the assessee do not help the assessee under the facts and circumstances of the present case. 7. We have heard rival submissions and perused the material available on record and gone through the orders of authorities below. We find that the Ld. Pr. CIT has issued a notice dated 21.12.2017 calling upon the assessee as to why the assessment order should not be revised. The relevant contents of the notice are reproduced as under: "Please refer to the assessment order dated 27.12.2016 for A.Y. 2014-15 in your case. On perusal of case record in your case for the A.Y. 2014-15 it is found that you have furnished your return of income declaring total income at ₹ 7,39,910/- on 31.03.2015. Assessment in your case u/s 143(3) of I.T. Act 1961 was completed by the ITO-5(3), Indore, vide order dated 27.12.2016 assessing total income at ₹ 7,39,910/-. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2014-15. In reply to the said show cause notice, we have to submit as under:- 1) That in the show cause notice, you have stated that case of the assessee was selected for the reason for suspicious transaction relating to long term capital gain on share. The assessee had shown long term, capital- gain of Ps: 22,10,437/ - on sale of shares of M/s. Sunrise Asian Limited, That in the show cause notice you have also reproduced table of long term capital gain on sale of shares of M/ S Sunrise Asian Limited, the same is reproduced as under:- 2. That in the show cause notice, you have stated that case of the assessee was selected for the reason for suspicious transaction relating to long term capital gain on share. The assessee had shown long term capital gain of ₹ 22,10,437/ - on sale of shares of M/ S Sunrise Asian Limited. That in the show cause notice you have also reproduced table of long term capital gain on sale of shares of M/ S Sunrise Asian Limited, the same is reproduced as under- S.No. Name of the company Date of purchase Date of sale Purchase cost Expenses on sale Sale proceed LTCG 1 Sunrise Asian Ltd. 16.1.12 14.2.14 72500 7964 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bank of India for dematerialisation of shares of M/s Sunrise Asian Limited 8 Sale note Dt. 14/02/2014 for sale of 2,900 shares issued by Indira Securities Pvt. Ltd 9 Sale note Dt. 28/02/2014 for sale of 1,000 shares issued by Indira Securities Pvt. Ltd 10 Sale note Dt. 04/03/2014 for sale of 900 shares issued by Indira Securities Pvt. Ltd 3.3) The assessing officer during the course of scrutiny assessment issued summon UIs 131 of the Act and statement of the assessee was also recorded on oath The assessee in her statement also explained the correct nature of transaction of Long term capital gain on sale of shares of M/ S Sunrise Asian Limited. 3.41 The assessing officer after receiving all the papers and recording of the statement of the assessee accepted the claim of Long term capital gain as genuine. 3.51 That on perusal of sale bills of M/ S Indira Securities P Limited, SIT was also deducted on the sale proceeds on sale of shares. 3.61 Copy of Quotation at the time of sale as downloaded from the site of the BSE is also enclosed as to justify the sale price on sale of shares of M/ S Sunrise Asia Limited. S.No. Name of the company Period 1 M/ s Sunris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to -the interests of the revenue Rampyari JJ.e1.Ji Saraoqiu. CIT 119681671 TR 84 (SC) and in Smt. Tara Aggarwal v. CIT {19731 88 ITR 323 (SC)". 4.3] Hon'ble Delhi High Court in the case of CIT us. Sun Beam Auto reported in 227 CTR 113 has pointed out a distinction between lack of inquiry and inadequate inquiry. If there is a lack of enquiry, then the assessment order can be branded as erroneous. The following observations of the Hon'ble Delhi High Court c worth to note:- "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasonsH white collecting entire expenditure as revenue expenditure. However, that by itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice in the set aside proceedings. Thus evidently it is not a case of no inquiry or wrong application of law or wrong assumption of facts and therefore the revisionary jurisdiction. exercised by the PCIT is not proper and as per the provisions of the section itself. We are of the considered opinion that in the present case the AO has specifically called for explanation from the assessee on all points during the course of assessment proceeding and thereafter has taken a possible view. Moreover, it is not necessary for the AO to give detailed findings or elaborate in the assessment order on each and every issue which has been examined during the course of scrutiny proceedings. Besides, the case of the assessee is squarely covered by the ratio laid down in the various case laws referred to by the Id AR discussed briefly hereinabove while a series of cases relied upon by the revenue have been carefully perused and are found to be distinguishable of facts and are not applicable. The amendment to section 263 is also prospective. Thus, the reversionary proceedings u/ s 263 of the Act are not validly initiated in view of the facts that the issues raked up by the Pr. CIT stand: examined by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is unsustainable in law. " 4.7.3 That Hon'ble Jurisdictional High court in the case of CIT vs Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that:- 9. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under suo motu revision is merely an administrative act. It is an act quasijudicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AD is' erroneous as well as prejudicial to the interests of the Revenue. The concept of "prejudicial to the interests of the Revenue" has to be correctly .. 'dnct"sou.ndly understood. It precisely means an order 'which ha« ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee during the course of proceedings before the under signed that the assessing officer has not made any enquiry whatsoever on the issue of the genuineness of the claim of LTCG. He didn't make any inquiries at all about the issue. 3.1. It is noted from records that the assessing officer didn't raise any query in the questionnaire issued during the course of assessment proceedings nor made any query on the order sheet during the course of assessment proceedings on this issue. The assessee in its submission has also not be able to give any evidence regarding the same. 3.1.1. The submission of the assessee on technical issues relating to applicability of section 263 are dealt with separately along with discussion on the .applicable judicial pronouncements in respect of the same, in upcoming part of this : order. However, on merits, it may be noted on a careful consideration of the facts that the assessee has sold 1,25,000 shares of Sunrise Asian Ltd. amounting to ₹ 23,43,676/- in F.Y. 2013-14. These shares are identified as penny stock in 84 BSE listed penny stock company. The assessee has said that the purchase cost these shares as on 16.01.2012 was amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15 is' erroneous in so far as it is prejudicial to the interest of revenue in respect of the issues in which necessary enquiry and investigations have not been carried out by the AO as indicated in the discussion; about the respective' issue. 'AO should have' verified' aspects related' to the issues mentioned above. He completed the assessment without making necessary investigation and enquiries which were necessary to arrive at the correct taxable income of the assessee. It may not be out of place to refer to the provisions of Explanation-2 to section 263 which reads as under:- "Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete non-application of mind by the Assessing Officer and of passing the assessment order in undue haste. {Para 17. h]. Thus, there can be no escape from. an axiomatic conclusion that in all these cases the enquiry co.i:u1'1Cted by the Assessing Officer's is exceedingly inadequate and hence fall in the category of 'no enquiry' conducted by the Assessing officer, what to talk of charactering it as an 'inadequate enquiry'. The highly inadequate enquiry conducted by the Assessing Officer resulting in drawing incorrect assumption of facts, makes the orders erroneous and prejudicial to the interests of the revenue. (Para 17. i.] Q. Whether Commissioner can set aside the assessment order and direct the Assessing Officer to conduct a thorough enquiry, thereby interfering with the jurisdiction of the Assessing Officer conferred on him in terms of sections 142(1) and 143(2) of the Act? A. A careful perusal of the provisions of section 142(1)/143(2) unveils that it is the prerogative of the Assessing officer to require the information 'on such points or matters' as he may require. Ordinarily it is not possible for the Assessing Officer to inquire into ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a particular transaction cry hoarse about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of papers on record in such circumstances 'cannot be construed as conducting a proper enquiry. If in. such circumstances, the Assessing Officer simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of 'no enquiry' because of the inaction on the part of the Assessing Officer to read a writing on the wall. [Para 19.a.} Thus, the instant case is a glaring example of not making relevant enquiry, which amounts to 'no enquiry' and hence it becomes a case of non application of mind by the Assessing Officer. {Para 19.e.} Q. Whether the order of the Commissioner was based on irrelevant consideration and was he supposed to point out: specifically where the Assessing Officer went wrong in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, is sufficient in itself to invoke the provisions of section 263.[Para 21.g.} 5.2. The excerpts from other important Judgments on the revisionary powers of Commissioner are reproduced hereunder: 1. CIT VS AMITABH BACHCHAN 2016 Making a claim which would prima facie disclose that the expenses in respect of which deduction had been claimed had been incurred and "~thereafter abandoning/ withdrawing the same gave rise to the necessity of further enquiry in the interest of the revenue. The notice issued under section 69C could not have been simply dropped on the ground that the claim has been withdrawn. Therefore, the Commissioner was perfectly justified in coming to his conclusions in respect of this issue. [Para 21} 2. Toyota Motor Corpn. (2008) 174 Taxman 395 Delhi Affirmed in (2008) 173 Taxman 458(SC) The reasoning given by the Tribunal could not be, accepted simply because the Assessing Officer himself did not say any such thing in his order. There is no doubt that the proceedings before the Assessing Officer are quasi-judicial proceedings and a decision taken by him in this regard must be supported by reasons. Otherwise, every order, such as the one passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Commissioner has to be satisfied of twin conditions, namely (i) the order of the Assessing Officer sought to be revised is erroneous; and i1i) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1}. 5.Crom ton Greaves Ltd. (2017) 82 taxmann.com 246 Mumbai _ ITAT Bench C) Held that on perusal of the said assessment order it was clear that the Assessing Officer had not made any enquiry with respect to the claim of deduction of the assessee-company with respect to provisions for warranty charges, . excise duty, sales tax and liquidity damages amounting to ₹ 17.72 crores claimed as deduction by the assessee-company from the income of the assessee-company and the claim made by the assesse-company was accepted by the Assessing Officer without any further enquiry, examination or verification as was warranted. 6. [2016J 237 Taxman 211 (Mad Income-tax Officer, Ward- VII(2), Chennai During relevant year, assessee made cash payments to suppliers of crackers _ Without examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer issued a show cause to the assessee along with questionnaire. The assessee in response there to filed a detailed submission. For the sake of clarity the submissions of the assessee are reproduced as under; 05/10/2016 To The Income Tax Officer 5(3) Aaykar Bhawan Indore Dear Sir, Re:- Shweta Agrawal, Indore Assessment Year 2014-15/ AESPA1653H With regard to the income tax case of the above assessee for the Assessment year 2014-15 and in pursuance to the notice as issued u/s 143(2) dt 17/08/2'016 of the Income Tax Act, we have been directed by the assessee to submit as under - 1.1 Copy of Acknowledgement of Income Tax Return along with computation of income for the Assessment Year 2014- 15, 2013- 14 and 2012- 13 are enclosed for your kind reference. 1.2 That the turnover of the assessee in the year under consideration does not exceed the limit as prescribed U/s 44AB of the Income Tax, hence the assessee was not liable to get its books of accounts audited U / s 44AB of the Income Tax Act. 1.3 Copy of Financial Statements of the assessee for the year ended 31-03-2014, 31-03-2013 and 31-03-2012 is enclosed for your kind perusal 1.4.1) Details of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f contract notes as issued by the broker in respect of sale of Shares along with the copy of D-Mat A/ c Statement of the assessee for the period 01/04/2013 to 31/03/2014 is enclosed for your kind reference. 6.1) Details of the Exempt income in the year under consideration is as under:- S.No. Nature of Income Amount (Rs.) Exempt U/s 1 Dividend Income 3,830 10(34) 2 LTCG of sale of SIT paid share 27,50,406 10(38) Total 27,54,236 6.2) That the assessee has received dividend income of ₹ 3,830/- from IDEA Cellular & Union Bank of India, the same is exempt u/s 10(34) of the Income Tax Act. 6.3] The assessee in the year under consideration has sold shares of M/s IDEA Cellular Limited and M/s Sunrise Asian Limited through her broker M/s India Securities Pvt. Ltd. 6.4] Copy of the following documents as to justify the amount of Long term capital gain of ₹ 27,50,406/- is enclosed:- S.No. Particulars Page No M/s IDEA Cellular Limited 1 Copy of D-mat statement of the assessee with the Union Bank of India for the period 01/04/2013 to 31/03/2014 25 2 Sale note Dt. 18/11/2013 for sale of 5,590 shares issued by Indira Securities Pvt. Ltd 26-27 M/s Sunri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso stated that the statement of the assessee u/s 131 of the Act was also recorded by the Assessing Officer. Ld. Counsel drew our attention to the statement of assessee enclosed at Paper Book pages 21 to 24. The assessee had replied to questions, it was stated that the shares were sold through exchange. Hence, it is not a case where no enquiry was conducted. In fact from the material placed before us suggests some application of mind, by Assessing Officer. Admittedly, the Ld. Pr. CIT in the impugned order has recorded the factum collection of evidence and recording of statement. In view of Ld. Pr. CIT the Assessing Officer ought to have made further enquiry. In this background now let us examine the correctness of the view taken by the Ld. Pr. CIT. The assessee has placed reliance on various case laws. The assessee has also placed reliance on the order of Co-ordinate Bench rendered in the case of Smt. Manita Vs. Pr. CIT ITA No.3432/Del/2019 dated 12.7.2019. The Co-ordinate Bench held as under :- 6. We have considered the rival submissions and perused the material on record. The A.O. in this case passed the assessment order under section 143(3) because the case was selected for sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year under appeal in which all the above items have been mentioned on which proposed notice under section 263 have been issued. All these facts were before A.O. at the assessment stage and all the details of sale and purchase of shares on which long term capital gains exemption was claimed have been mentioned in the return of income itself. Thus, there was no reason to believe that the A.O. did not examine this issue at the assessment stage. Further, the case was selected for scrutiny because the ITA.No.3432/Del./2019 Smt. Manita Muzaffarnagar suspicious long term capital gains earned by assessee. This information must be based on information received from Investigation Wing. Therefore, Ld. D.R. was not justified in contending that report of Investigation Wing have not been considered by the A.O. Since it was the sole reason for completing the scrutiny assessment, therefore, it could not be believed that A.O. would not have gone through the material available before him on record. May be the A.O. has not discussed the details in the assessment order but it would not give right to the Ld. Pr. CIT to hold that no investigation or enquiry have been made at assessment stage. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f jurisdiction under section 263. Only after undertaking an enquiry himself, the Principal Commissioner could have remitted the matter. Under section 263(1) to the Assessing Officer for afresh assessment. The Tribunal was not in error in setting aside the revision order under section 263 passed by the Principal commissioner." 10. A similar view has been taken by the Hon'ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. (supra) wherein it has been held as under: "That the findings recorded by the Tribunal were correct as the Commissioner had not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner was that "order passed by the Assessing Officer may be erroneous". The Commissioner had doubts about the valuation and sale consideration received but he should have examined this 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 this aspect and accepted the computation figures but he had reservations. The Commissioner in the order had recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conduct the inquiry." 12. In the present case also the A.O. conducted enquiry and had taken a possible view and the Pr. CIT simply directed the A.O. to make further enquiry in accordance with law but had not taken any step to make enquiry herself and also did not point out that how and in what manner the enquiries made by the A.O. were not sufficient. We therefore considering the totality of the facts and keeping in view the ratio laid down by the Hon'ble Delhi High Court in the aforesaid referred to cases, are of the view that the Ld. CIT(A) was not justified in holding the assessment order dt. 28/1 0/2015 passed by the A.O. as erroneous and prejudicial to the interest of the Revenue, therefore the impugned order is set aside. 15. It is submitted on behalf of the assessee that the issue of genuineness of the shares of M/s Sunrise Asian Limited has been examined by the Co-ordinate Bench of the Tribunal and this fact is duly recorded by it in the case of Dipesh Ramesh Vardhan Vs. DCIT-Central Circle -2(2), Mumbai ITA No.7648/Mum/2019 as observed in para 9 to 12 is as under :- 9. The fact that the assessee could not produce the concerned person of M/s SAL was right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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