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TMI Blog2021 (6) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... -III dated 16.03.2016 on penny stock and thereafter conducted the enquiry. And after perusal of the reply of the assessee to the specific queries and details called for and after perusal of the supporting materials, the AO being satisfied has accepted the claim of assessee in respect of loss on these scrips. Therefore the AO s action of accepting short term capital loss on the three (3) scrips cannot be termed as a case of no-enquiry on the part of the AO as well as discussed supra the Ld. PCIT s opinion that Explanation 2(c) u/s. 263 is attracted in this case is incorrect in the light of the facts and circumstances as aforestated - condition precedent to invoke revisional jurisdiction u/s 263 of the Act is absent - Decided in favour of assessee. - I.T.A. No. 104/Kol/2020 - - - Dated:- 18-6-2021 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For the Appellant : Shri S. M. Surana, Advocate For the Respondent : Shri John Vincent D. Longstich, CIT DR ORDER PER SHRI A. T. VARKEY, JM: This is an appeal filed by the Assessee against the order of Ld. PCIT-4, Kolkata dated 21.02.2019 passed u/s 263 of Income Tax Act, 1961 ( hereinafter referred to as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed loss on scrips and also to show cause why remedial action u/s 263 of the Act should not be taken against the assessment order dated 21.12.2016. Thereafter, the Ld. PCIT in his impugned order notes that the assessee incurred short term capital loss to the tune of ₹ 97,12,491/- on the aforesaid scrips and in the computation of income the said loss was set off against the other heads of income. According to Ld. PCIT, even though the AO had specific information that the stock from which the assessee had incurred the loss were from penny stock, still he had allowed it. According to Ld. PCIT, the AO failed to examine the issue for which the case has been selected for scrutiny. According to Ld. PCIT, the AO was supposed to enquire into the fact as to whether the investment made by the assessee in the aforesaid shares was bona fide or not? And for that according to Ld. PCIT, the AO should have examined the background of investment which was not done. Further according to Ld. PCIT, the AO failed to enquire whether the assessee is a regular investor or the investment was deliberately made for availing the loss to set off the gain/income which were taxable. Moreover, according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. enquiry) of this issue can be attributed on the AO on the issue of short term capital loss. Therefore, according to Ld. AR, the jurisdictional condition precedent to invoke the revisional jurisdiction u/s 263 was on wrong footing and erroneous assumption of facts, therefore, the Ld. PCIT s action is bad in law. 6. Before we advert to the facts and law involved in this lis before us, let us revise the law governing the issue before us. The assessee 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. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercises his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three scrips (supra). Now we have to see whether the Ld. PCIT is correct or not. For that the Ld. AR has drawn our attention to page 25-26 of the PB wherein the notice issued by the AO u/s 142(1) dated 25.11.2016 which is reproduced as under: Your case for the A.Y. 2014-15 has been selected for scrutiny . In this regard, Notice U/s 143(2) I. T. Act has been duly served upon you, In continuation of the said Notice you are requested to furnish the following particulars/ documents-: 1. Nature of Business 2. Computation of income for the year under consideration 3. Statement of all Bank A/cs for the F.Y.2013-14 relevant to A.Y. 2014-15 4. Details of Investment in Equity Shares during the year under consideration (i) Name 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 alongwith the details of cheque numbers and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which resulted in loss and the same is found placed at page 28 to 69 of PB. From the reply of the assessee to the AO, it is noted that the assessee had filed, inter alia, the details of purchase and sale of shares in question along with copy of contract notes ,bills, copy of bank statements and thus along with the reply to the notice of AO, the assessee had filed the details of short term capital loss along with supporting material. Thereafter the AO has passed the assessment order without drawing any adverse view. In the aforesaid scenario the only inference that can be drawn is that the AO having gone through the reply and the supporting material being satisfied with the same has not preferred to draw any adverse view against the claim of the assessee in respect of short term capital loss from the sale of three scrips. Therefore, the allegation on the basis of which the Ld. PCIT wanted to interfere in the AO s order i.e. the non-enquiry by the AO on the claim of the short term capital loss on these scrips is erroneous since we have already discussed the contents of notice u/s. 142(1) of the Act, wherein details in respect of loss were called for and specific details of which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspicion howsoever strong cannot take the place of evidence/proof. In the light of the discussion, therefore, considering the enquiry made by AO on the issue, we presume that the AO has performed his task of an investigator on the issue of short term capital loss on the scrips in question after taking note of CBDT circular No. 287/30/2014-IT(inv.II)- Vol-III dated 16.03.2016 on penny stock and thereafter conducted the enquiry. And after perusal of the reply of the assessee to the specific queries and details called for and after perusal of the supporting materials, the AO being satisfied has accepted the claim of assessee in respect of loss on these scrips. Therefore the AO s action of accepting short term capital loss on the three (3) scrips cannot be termed as a case of no-enquiry on the part of the AO as well as discussed supra the Ld. PCIT s opinion that Explanation 2(c) u/s. 263 is attracted in this case is incorrect in the light of the facts and circumstances as aforestated. In such a scenario, the condition precedent to invoke revisional jurisdiction u/s 263 of the Act is absent and therefore the Ld. PCIT has invoked the jurisdiction without satisfying the condition prec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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