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TMI Blog2021 (4) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... e termed as a case of no enquiry on the issue of LTCG. Resultantly, the Ld. Pr. CIT cannot brand the action of AO to accept the claim of assessee in respect of LTCG as a case of no enquiry on the part of AO to term it as an erroneous order; and which finding could have facilitated him to usurp/interfere by exercising his revisional jurisdiction u/s. 263. We should bear in mind that in case if he wanted to interfere in the present case (since AO had enquired) then he (Ld. Pr. CIT) himself ought to have conducted enquiry to bring out the fallacy as to show how the enquiry conducted by the AO was erroneous. And for that the Ld. Pr. CIT while conducting enquiry is supposed to confront the assessee during the revisional proceedings with the materials which he is going to use against it and after eliciting the reply of the assessee then only could have passed the impugned order directing the AO to make the addition on LTCG. Failure to do so vitiates the impugned order directing addition of LTCG As revenue could not point out any difference in the law and facts in respect of the facts of this present case in hand as well as in the case of Ritin Lakhmani Ors [ 2020 (11) TMI 768 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expressed his desire to invoke his revisional jurisdiction u/s. 263 of the Act. It was brought to our notice that the AO in the original assessment has scrutinised the assessment for AY 2014-15 since it was selected by the CASS especially for Suspicious Long Term Capital Gain on Shares (inputs from the Investigation Wing) . According to the Ld. AR, the original assessment was passed by the AO after thorough enquiry which can be noted from the documents filed before the AO which are available in the paper book consisting of 87 pages. 5. According to Ld. AR, the following documents were filed by the assessee when he enquired about the issue of Suspicious Long Term Capital Gain on Shares (hereinafter referred to as LTCG ) on which STT was levied : 6. And the AO himself has expressed his satisfaction after enquiry on this issue by holding as under: On perusal of the details submitted by the assessee that during the financial year 2013-14 relevant to assessment year 2015-15, assessee derived income from Long Term Capital Gain (with STT) and claimed exemption u/s. 10(38) of the Income Tax Act, 61. It was revealed that assessee had made some share transactions regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional power on that issue (LTCG). then only he can do so by spelling out how and where the AO erred in his enquiry and for that the Ld. Pr. CIT himself should conduct enquiry on the issue of LTCG. And the Ld. Pr. CIT during the revisional proceedings in this case has passed the impugned order behind its backs without confronting the assessee with the materials in his possession and thus erred in overturning the decision of AO, which is bad in law for violation of Natural Justice. Further, according to Ld. AR, on a perusal of the impugned action of Ld. Pr. CIT, it is discernible that Pr. CIT has based his actions on conjectures and surmises and are all general allegations/suspicion which cannot be used against the assessee to draw adverse inference. So, according to Ld. AR, the impugned order of Ld. Pr. CIT is bad for lack of jurisdiction and also on merits. Therefore, he prays that the order of the Ld. Pr. CIT be quashed. 8. Moreover, according to the Ld. AR, similar issue had come up before this Tribunal in the case of Ritin Lakhmani Ors Vs. PCIT, ITA Nos. 41 to 47/K/2019 and in those cases also in similar manner the Ld. Pr. CIT has exercised his revisional jurisdiction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to which the assessee had filed the documents 76 pages (supra), which the AO in his assessment order has acknowledged to have verified from the share trader, which facts are evident from the perusal of the original scrutiny assessment order (supra). So, the AO s action on the issue of accepting the claim of assessee in respect of LTCG which the Ld Pr CIT would like to rake up by passing the impugned order has already undergone enquiry by the AO; meaning the AO s action in the first round cannot be termed as a case of no enquiry on the issue of LTCG. Resultantly, the Ld. Pr. CIT cannot brand the action of AO to accept the claim of assessee in respect of LTCG as a case of no enquiry on the part of AO to term it as an erroneous order; and which finding could have facilitated him to usurp/interfere by exercising his revisional jurisdiction u/s. 263 of the Act. Further, we should bear in mind that in case if he wanted to interfere in the present case (since AO had enquired) then he (Ld. Pr. CIT) himself ought to have conducted enquiry to bring out the fallacy as to show how the enquiry conducted by the AO was erroneous. And for that the Ld. Pr. CIT while conducting enquiry is suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her mentions that it has come to light that, large scale manipulation has been done in the market price of shares of certain companies listed in the Bombay Stock Exchange by certain persons working as a syndicate, in order to provide entries of tax exempt bogus LTCG, to large number of persons, in lieu of unaccounted cash and that the basic object of this racket is to convert black money into white without payment of income tax. 3.2. The assessees replied on 29.11.2018 stating that the assessees had filed all necessary documents/evidences during the assessment proceedings to prove the genuineness of the transactions, in response to notice u/s 143(2) and 143(2)(i) of the Act before the AO. That the AO had made direct third party verification of the transactions by issuing notice u/s 133(6) of the Act and found nothing adverse. Hence the assumption that there was failure on the part of the AO to assess the income correctly is not correct. He relied on a number of case laws for the proposition that the claim for exemption u/s 10(38) of the Act has been correctly allowed. It was also claimed that there is no specific evidence or adverse material against the assessee which would impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 order dated 30.09.2020 for the proposition that proceedings u/s 263 of the Act cannot be initiated at the instance of the AO. 5.1. The ld. Counsel for the assessee further submitted that the AO during the course of assessment proceedings had made detailed enquiries by issuing notices u/s 133(6) of the Act to the parties and only obtained confirmation and accepted the claim of the assessee. He submitted that all bills and other evidences were furnished before the AO during the course of original assessment proceedings and the AO after examining the same has taken a positive view and that on these facts the Pr. CIT was wrong in exercising his jurisdiction u/s 263 of the Act. 5.2. He referred to para 5.12.4 of the order of the Pr. CIT, at page 13 of his order and submitted that the Pr. CIT does not dispute that all details were filed before the AO and that some judgements on this issue were in favour of the assessee and that he is exercising his jurisdiction because the Revenue has not accepted such decisions and as same are yet not settled in higher courts of law. 5.3. He vehemently contended that the Pr. CIT has not spelt out in his order, what more the AO should have do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that, the Pr. CIT has not conducted any enquiries or investigations on its own nor he has specified as to what were the enquiries that were not done by the AO warrants direction of additions u/s 68 and u/s 69C of the Act. He prayed that the order u/s 263 of the Act be quashed. 6. The ld. D/R on the other hand vehemently controverted the submissions of the assessee. At the first instance he submitted that Pr. CIT has observed that certain decisions of ITAT are in favour of the assessee and such observations cannot be read as if the Pr. CIT having conceded the issue. He pointed out that a number of decisions on the issue on hand are against the assessee and in favour of the Revenue. 6.1. On the issue of the proposal being received from the AO for involving the power of revision u/s 263 of the Act by the Pr. CIT, he argued that it is for the assessee to furnish evidence that this proposal has emanated from the AO and that the Pr. CIT has not applied his mind independently based on examination of records. He drew the attention of the Bench to the show cause notice issued u/s 263 of the Act and submitted that the ld. Pr. CIT has clearly stated that on examination of reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to properly examine the claims of the assessee and has granted exemption. He justified the directions of Pr. CIT requiring the AO to add the gross receipts in the consequential order to be passed u/s 143(3) of the Act. 7. In his reply, the ld. Counsel for the assessee submitted that the Hon ble Supreme Court in the case of CIT vs. S. Nelliappan [1967] 66 ITR 722 (SC) held that a legal ground can be taken by any party at any stage of the case by way of argument. He submitted that in India, the head of the family decides transactions to be done by all the family members and hence it is not correct for the ld. D/R to find fault that all the members of the family have purchased and sold shares. 7.1. He further submitted that various judicial authorities including Tribunal have in numerous decisions held that off-market transactions are legal and have to be accepted. He further submitted that the CIT(D/R) is trying to make out a new case by pointing out to the purchase bills and the date of payment etc. when the AO and the Pr. CIT have not found fault or raised any suspicion on this issue. He submitted that the special Bench of Tribunal in the case of Mahindra and Mahindra L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-06 order dated 28.11.2018. This judgement was followed by the Kolkata A Bench of the Tribunal in the case of The West Bengal National University of Juridical Science vs. Commissioner of Income Tax (Exemption) in ITA No. 2643/Kol/2019 for the AY 2016-17 order dated 30.09.2020. At para 8 9 it was held as follows: 8. We first take up the legal issue. The Assessing Officer on 25/04/2019, made the following proposals:- In this case the return for the A.Y-2016-17 was assessed u/s. 143(3) of the I.T. Act, 1961 on a total income of Rs. Nil on 31.10.2018. Later it was revealed that the assessee claimed set apart of fund u/s. 11 (2) of the Act for an amount of ₹ 17,04,30,176/-. However, the requisite Form-10 was not submitted online within the due date i.e. 17.10.2016. In this case the delay in filing Form-10 was condoned by Ld. CIT(Exemption), Kolkata vide his order dated 20.11.2017. However, as per provisions of section 13(9) of the Act both the return of income and Form-10 are required to be submitted on or before the due date of filing return as prescribed u/s 139(1) of the Act. In the instant case, the delay in filing Form-10 though was condoned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that when in the first place the AO noticing that he failed to properly enquire before assessing the assessee within the time limit prescribed by the statute cannot be allowed to get fresh innings to reassess because it was his duty to enquire properly within the time limit prescribed by the statute. Therefore, the very invocation of revisional jurisdiction on the proposal of the AO itself is bad in law and for coming to such a decision we rely on the decision of the Tribunal in the case of Shantai Exim Ltd. Vs. CIT (2017) 88 taxmann.com 361 (Ahd. Trib.) and the decision of ITAT, Mumbai Bench in the case of Ashok Kumar Shivpuri Vs. CIT for AY 2008-09 dated 07.11.2014. Therefore, we find merit in the contention of the Ld. AR and we quash the very usurpation of jurisdiction u/s. 263 of the Act by the CIT. Therefore, the appeal filed by the assessee is allowed. Similar view was taken by the Kolkata Bench of the Tribunal in the following cases: M/s. Luxmi Township Holding Ltd. vs. CIT; ITA No. 468/Kol/2019; Assessment Year 2014-15, order dt. 2014-15. Bangiya Gramm Vikash Bank vs. Pr. CIT in ITA No. 877/Kol/2015, Assessment Year 2010-11, order dt. 12/05/2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords, the following facts lead me to an inseparable conclusion that the transactions are not genuine and these connected parties have grossly misused the stock exchange system to generate bogus L TCG to aid and help beneficiaries to convert their unaccounted income into accounted one with no payment of taxes. The modus operandi, as emanating from the rep.ort of the Director General of Income Tax (Investigation),WB, Sikkim and NER, is reproduced ahead: The Scheme Entities involved in the transactions There are three categories of individuals who are involved in the transactions i) Syndicate Members. They are the promoters of the Penny Stock companies who own the initial share holding mostly in the name of paper companies either in afresh IPO or purchased from the shareholders of a dormant company. They are usually a group of 4-5 individuals who a/so referred to as Syndicate Members and are sometimes also referred to as Operators. Their nominees are directors of the Penny Stock companies which are indirectly controlled by them through such dummy directors. The whole operation is managed by them. They get the net commission income from the transactions. Thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides the required amount of cash which is routed through some of the paper companies of the entry operator and is finally parked in one company which will buy the share from the beneficiary. When everything is ready a specific date and time as well as price is fixed by the operator on which the transaction is made. The paper company issues cheque to the beneficiary. The beneficiary claims the receipt as exempt income U/S 10(38) of the I. T.Act, 1961. The above modus operandi has been confirmed by all entry operators in their statements at the time of proceedings U/S 132/133A/131 on various dates. 5.3 AII such penny stock companies were identified from the financial accounts of the companies, trading patterns of the scrips, statement of share brokers, statement of entry operators, statement of promoters of the companies and the post search/survey inquiries. The list contains the name of the scrip Unno Industries Ltd. having scrip code 519273which is the traded scrip in the instant case. Some common features of these companies, as specified in the said report, are: (1) Initial allotment of shares to beneficiaries is generally done through preferential allotment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by utilizing the mechanism of upper/lower circuit of the Exchange. 5.4 From the material available on record, it is proved beyond doubt that the alleged transactions and the scheme of colourable device mentioned in Para 5.lto 5.3 supra, is bogus and the entire sale consideration being bogus cash credit should have been added back U/S 68 of the Act and taxed at Maximum Marginal Rate. The benefit of (indexed) cost of acquisition should also not have been allowed to the assessee. In this regard, reference is made to the provisions of Sec 68 of the Act as reproduced below : Cash credits. 41. 68.42Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion 'of the [Assessing] Officer, satisfactory, the sum so credited may be charged 10 income-tax as the income of the assessee of that previous year: [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer is that he can launder such sale receipts through payment of no tax. SEBI has recently barred more than 250 entities, including individuals and companies, from the securities market for suspected tar: evasion and laundering of black money through stock market platforms. In one such instance price of a scrip rose from ₹ 10.20 to ₹ 489 in 150 trading days - a rise of 4694%. The SIT obtained the background details of these cases and studied them. A typical pattern is observed to be followed in such cases. A company with very poor financial fundaments in terms of past income or turnover is able to raise huge capital by allotment of Preferential allotment of shares is made to various entities. There is a sharp rise in price of scrip once the preferential allotment is done. This is normally achieved through circular trading of shares among a select group of companies. These groups of companies often have common promoters/directors. The scrips with thus artificially inflated price are offloaded through companies whose funding is provided by the same set of people who want to convert black money into white. There is an urgent need for h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parallel forces of accommodation entry providers were actively participating with their pre-settled game plan. This scrip was suspended by SEBI for Price rigging and insider trading. 5.6.3 Assessee had apparently sold the shares of UNNO INDUSTRIES LTD at pre-determined price, at pre-determined time to pre-determined parties who were seeking loss for setting off genuine capital gain with the help of different operators, members of BSE, share brokers and sub-brokers. The details of shares of UNNO Industries sold by the assessee, as available from the audit report are as under: Sl. No. Name of Shares Date of Purchase Purchase Price Rate per share Date of sale Sale price Rate per Share profit 1 2 3 4 40000 55000 35000 30000 27.12.11 50,000 68,750 43,750 37,500 ₹ 1.25 31.05.13 11.06.13 21.06.13 24.06.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind it. It is well settled principle of law as laid down by the Honble Apex Court in the case of Sumati Dayal vs. CIT (214 ITR 801) (SC) that the true nature of transactions have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. It is also well settled that tax authorities are entitled to look into surrounding circumstances to find out the reality of the transaction by applying the test of human probability. This was the principle laid down by the Hon 'ble Supreme Court in the case of CIT vs. Durga Prasad More 82 ITR 540 (sq. Reference may also be drawn to the ratio of the Judgment by Hon'ble High Court of Bombay in the case of Sanjay Bimalchand Jain v. Principal Commissioner of Income-tax-l, Nagpurre ported in [2018} 89 taxmann.com 196 (Bombay). It was held therein by their Lordships that where the assessee had purchased shares of penny stocks companies at lesser amount and sold such shares at much higher amount within a short time and had not tendered cogent evidence to explain as to how shares in an unknown company ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry on a relevant issue/point would render the assessment erroneous and prejudicial to the interest of the revenue as decided in the following cases by various courts: (1968) 67 ITR 84(SC) Ram Pyari Devi Saraogi (1973) 88 ITR 323(SC) Tara Devi Aggarwal (1975) 99 ITR 375(Delhi) Gee Vee enterprises (1966) 220 ITR 657 (Mad) K.A. Ramaswami Chettiar Another (1966) 220 ITR 456 (Delhi) Duggal and Co. (1966) 220 ITR 167 (MP) Mahavar Traders (1995) 213 ITR 843 (Raj) Emery Stone Mfg. Co. (1992) 198 ITR 611 (Ker) Malabar Industrial Co. - Malabar Industrial Co. Ltd. v. CIT: 243 ITR 83 -CIT vs. Max India Limited: 268 ITR 128 (P H) [affirmed in 295 ITR 282 (SC)] - CIT v Kwality Steel Suppliers Complex: 395 ITR I (SC) - CIT vs. Amitabh Bachchan: 384 ITR 200 (SC) -. CIT v. Hindustan Lever Ltd 343 ITR 161(Bom.) - CIT v . Vikas Polymers: 341 ITR 537 (Del.) - CIT v. Sunbeam Auto Ltd.: 332 ITR 167 (Del) -CIT vs. Development Credit Bank Ltd: 323 ITR 206 (Born.) - Vimgi Investment (P) Limited: 290 ITR 505 (Del) - Hari Iron Trading Co. vs. CIT: 263 ITR 437 (P H) - CIT vs. Gabriel India Limited: 203 ITR 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified. Raimandir Estates (P) Ltd Vs PCIT [2017] 77 taxmann.com 285 (SC)/(2017) 245 Taxman 127 (SC) wherein the Hon'ble Supreme Court has dismissed SLP against High Court's ruling that where assessee with a small amount of authorised share capital, raised huge sum on account of premium, exercise of revisionary powers by Commissioner opining that this could be a case of money laundering was justified. 5.12.3 Thus in the instant case, it can be summarised that the aforesaid twin conditions of rendering an assessment erroneous in so far as it is prejudicial to the interests of the revenue, are met since: (a) during the assessment proceedings, the assessing officer did not conduct extensive/ necessary enquiries regarding the issue of transfer of shares of Unno Industries Limited; (b) the AO whatsoever, in the original assessment order accepted the return of income filed by the assessee, more particularly on the issue of gain! loss on sale of shares in Unno Industries; 6. Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Hon'ble Supreme Court and Hon'ble High Court and in accordance with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e certain additions. The assessee is not confronted by any adverse material. No reference has been made to any specific adverse material. When the assessee is not confronted with any material no amount can be directed to be added by the ld. Pr. CIT, on the basis of suspicion, or material in the public domain on the general modus operandi adopted in such cases. It is necessary for the ld. Pr. CIT to have conducted his own enquiries, collected adverse material and confronted the assessee with such adverse material, consider the replied and only after following the principles of natural justice, he could have directed the additions in question against the assessee. Additions cannot be made based on general reasoning or some supposed material in the public domain which was never brought on record. Such direction is arbitrary and has to be struck down as bad in law. 17. The AO in this case has called for details and thereafter made enquiries with the parties by issuing notices u/s 133(6) of the Act. Only on receiving replies from third parties, the AO came to a conclusion that he could not find any discrepancy in the claim of the assessee for exemption u/s 10(38) of the Act. The P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax u/s 263 of the Act. The Hone ble Andhra Pradesh High Court in the case of Spectra Shares and Scrips Pvt. Ltd. V CIT (AP) 354 ITR 35 had considered a number of judgments on this issue of exercise of jurisdiciton u/s 263 of the Act by the Principal Commissioner of Income Tax and culled out the principles laid down in the judgments as below: 24. In Malabar Industrial Co.Ltd. ( 2 Supra), the Supreme Court held that a bare reading of Sec.263 makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue recourse cannot be had to Sec.263 (1) of the Act. It also held at pg-88 as follows: The phrase prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the section had become so complicated over the years that two views were inherently possible; and therefore, the subsequent amendment in 2005 even though retrospective will not attract the provision of Sec.263. 26. In Vikas Polymers (4 Supra), the Delhi High Court held that the power of suo motu revision exercisable by the Commissioner under the provisions of Sec.263 is supervisory in nature; that an erroneous judgment means one which is not in accordance with law; that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written differently or more elaborately; that the section does not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with the law; that to invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare reiteration by him that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latter on being satisfied with the explanation of the assessee and where the same accounting practice followed by the assessee for number of years with the approval of the Income Tax Authorities. It held that the Assessing Officer had called for explanation on the very item from the assessee and the assessee had furnished its explanation. Merely because the Assessing Officer in his order did not make an elaborate discussion in that regard, his order cannot be termed as erroneous. The opinion of the Assessing Officer is one of the possible views and there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. 28. In Gabriel India Ltd. (6 Supra), the Bombay High Court held that a consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. It held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepting the initial capital, the gift received and sale of jewellery, the income from business etc., without any enquiry or evidence whatsoever . He directed the income tax officer to do fresh assessment after making proper enquiry and investigation in regard to the jurisdiction. The assessee complained before the Supreme Court that no fair or reasonable opportunity was given to her. Supreme Court held that there was ample material to show that the income tax officer made the assessments in undue hurry; that he had passed a short stereo typed assessment order for each assessment year; that on the face of the record, the orders were pre-judicial to the interest of the Revenue; and no prejudice was caused to the assessee on account of failure of the Commissioner to indicate the results of the enquiry made by him, as she would have a full opportunity for showing to the income tax officer whether he had jurisdiction or not and whether the income tax assessed in the assessment years which were originally passed were correct or not 31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be culled out: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted, litigation would have no end except when legal ingenuity is exhausted f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. g) The power of the Commissioner under Sec.263 (1) is not Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable. 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 the case 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. Raison 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 with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of ₹ 1 lakh was to be received for sale of permit. If that is so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. 341 ITR 166 (Del) The prerequisite to the exercise of suo motu jurisdiction under s. 263 by the CIT is that the order of the AO is erroneous insofar as it is prejudicial to the interest of the Revenue. Two conditions are to be satisfied, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) the error committed by the AO in the order is prejudicial to the interest of the Revenue. Both these conditions are to be satisfied simultaneously. It is also well-settled principle that provisions of s. 263 would not be invoked merely to correct a mistake or error committed by the AO unless it has caused prejudice to the interest of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o justify exercise of power under s. 263. There is not even a whisper that the order is erroneous. Even if it is inferred that non-consideration of the issues pointed out by the CIT would amount to an erroneous order, it is not stated as to how this order is prejudicial to the interest of the Revenue. The penultimate paras of the order, at best, contain the observations that the AO was satisfied with making flimsy additions which were deleted by the CIT(A). There is not a whisper as to how this order was prejudicial to the interest of the Revenue. That apart, the approach of the Tribunal in discarding the observation of the CIT about not making proper inquiries in respect of the said four issues is also justified and without blemish. (Paras 12 to 14) First comment of the CIT was in respect of finished goods in the closing stock. The CIT found that these were to the tune of ₹ 5.28 crores. According to the CIT, when the total turnover of the assessee was ₹ 6.13 crores, the AO should have satisfied himself by calling for more details as to how there was closing stock of such a magnitude of ₹ 5.28 crores. Thus, the CIT has not doubted the statement of finish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h income was claimed as deduction under s. 80HHC, no benefit enured to the assessee on this account as claim under s. 80HHC was fully disallowed by the AO. It is not at all observed as to how the order of the AO on this account was erroneous and further as to how it was prejudicial to the interest of the Revenue. Thus, order of the CIT was rightly set aside by the Tribunal. In the case on hand the ld. CIT finds fault with the AO for not invoking Rule 8D while making disallowance u/s 14A. The Hon ble Delhi High Court in the case of Maxop Investments Ltd. Vs CIT (supra) held that the AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is not satisfied with the correctness of the claim of the assessee. This is a condition precedent while rejecting the claim of the assessee, with regard to incurring of expenditure or no expenditure in relation to exempt income. The AO will have to indicate cogent reasons for the same and Rule 8D comes into play only when the AO records a finding that he is not satisfied with the assessee s method. In the case in hand the AO has not made any such recording of satisfaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iota of material quoted against the assessee to have been engaged in all the foregoing artificial price rigging. We are observing in view of all these facts that the Assessing Officer had rightly accepted the assessee s LTCG keeping in making the overwhelming evidence forming part of records. This tribunal s coordinate bench decision (supra) as well as hon'ble jurisdictional high court s decisions CIT vs. Ratan ITA No.105/2016, M/s Classic Growers Ltd vs. CIT ITA 129/2012, CIT vs. Lakshmargarh Estate Trading Co. Ltd. (2013) 40 taxman 439 (Cal), CIT vs. Smt. Shreyashi Ganguly ITA 196/2012, CIT vs. Bhagwati Prasad Agarwal (2009/ TMI 34738/Cal in 22/2009 29.04.2009 have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon'ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee s foregoing LTCG derived from sale of shares to be genuine. That being the case, we hold that PCIT s exercise of revision jurisdiction merely on suspicious circumstances by invoking in sec. 263 Explanation (supra) with effect from 01.06.2015 is not sustaining. We therefore reverse the PCIT s order und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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