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TMI Blog2022 (3) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... liance in this regard too. It is also not the case of the Department that the assessees did not discharge their onus before the AO. It is also seen that the claim/s u/s 57 have consistently been allowed in the earlier as well as later assessment years by raising specific queries and no specific reasons have been given for setting aside this issue to the file of the AO. It is also borne out from records that the offer for surrender on account of Long Term Capital Gain for AY 2013-14 and 2014-15 had been retracted as is evident from the Order - Therefore, we are unable to concur with the view taken by the Ld. PCIT that the AO had not conducted necessary enquiries prior to the passing of the assessment orders. We also do not agree with the argument advanced by the Ld. CIT DR that there was a non-application of mind on the part of the AO. In the present cases, no such inquiry has been carried out by the PCIT and he has simply directed the AO to carry out detailed inquires. In our considered opinion, PCIT, without making further inquiries on his own account, has simply stated in the impugned orders that the AO was required to make more inquiries. The Ld. PCIT has not pointed out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer (AO) u/s 143(3) of the Income Tax Act, 1961 (hereinafter called the Act ) in respect of the captioned assessees and has held that the assessments, as framed by the Assessing Officer, were erroneous and prejudicial to the interest of revenue as the Assessing Officer had allegedly framed the assessments without making the requisite enquiries/verifications and without due application of mind by the Assessing Officer. Since, the four appeals involve a common issue; they were heard together and are being disposed of by this common order for the sake of convenience. 2.0 At the request of the Ld. AR, the case of Shri Sanjay Jain, (ITA NO.140/CHD/2021) is being taken as lead case. The following grounds have been raised in this appeal by the assessee: 1. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has erred in assuming jurisdiction under section 263 of the Income Tax Act and thereby setting aside the order of AO completed under section 143(3) of the Act with the direction to make the assessment de novo. 2. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has erred in assuming the jurisdiction under section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to interest of revenue as observed by the learned Principal Commissioner of Income Tax (Central), Ludhiana. 7. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that the assessment was made under section 143(3) of the Act by the concerned AO after verifying the unsecured loans and making detailed inquiries. The loans were also verified by the Investigating Wing during post search inquiry made after the search. As such, the observations of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the loans were not examined as per section 68 of the Income Tax Act are against the facts and circumstances of the case. 8. That the appellant craves to add or amend the grounds of appeal. 2.1 The Ld. AR submitted that in this case the return of income was filed on 13.07.2016 along with the computation of income showing Salary Income, Income from House Property, Short term capital gain on sale of gold coin/s and on the sale of shares of Spice Jet Ltd. , Long term gain on transfer of eligible equity shares of Virtual Global Education Ltd., {for which, the exemption has been claimed u/s 10(36) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention was drawn to the copy of computation of Income for AY 2017-18, wherein, the deduction u/s 57 has been allowed, after raising a specific query. 2.4 Our attention was also drawn to the copy of the order sheet entries to substantiate that specific queries were raised by the AO in respect of long term capital gain with the proceedings starting from 16.05.2017 and concluding on 17.10.2017 and that the assessment was completed after due application of mind by the AO and only after seeking the necessary approval u/s 153D of the Act as mandatorily required. 2.5 It was submitted by the Ld. AR that subsequently, the Ld. PCIT issued a show cause notice wherein he raised the issue with regard to the long term capital gain on Gold Coin for ₹ 5580/- and also on unsecured loan and income from house property. It was submitted that again the assessee submitted the required details along with documentary evidences before the Ld. PCIT and also demonstrated before him that the relevant information had been called for by the AO in this regard too, which had been duly and satisfactorily responded to by the assessee which would go to prove the assessee s claim of deduction u/s 57 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case. 4. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to consider the fact that the assessment was made under section 143(3) of the Act by the AO after verifying the claim under section 57 of the Income Tax Act on account of payment of interest and also considering the history of the case that similar deduction has been allowed in the preceding six years for which the assessment has been made after search. Therefore, the finding of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any independent inquiries or investigation regarding the claim as per material on record shows that these expenses have no direct nexus with the taxable income is against the facts and circumstances of the case. 5. That the appellant craves to add or amend the grounds of appeal. 3.1 The Ld. AR submitted that in this case also, identical issue is involved. It was submitted that in this case the return of income was filed by the assessee on 13.07.2016 along with the computation of income as well as the balance sheet and other particulars. It was submitted that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention was also drawn to the comments of the Ld. Additional Commissioner of Income Tax, who, while granting approval u/s 153D had mentioned that the seized records were discussed from time to time and also full enquiry was conducted. 3.5 It was submitted that after the passing of the Assessment Order, subsequently, the Ld. PCIT issued show-cause notice wherein he raised the issue with regard to the Long Term Capital Gain for which, the exemption u/s 10(36) had been claimed as well as the issue of deduction claimed u/s 57 of the Act. The Ld. AR submitted that the assessee gave a detailed response to the show cause notice demonstrating that the AO had conducted adequate enquiries on both the issues mentioned in the show cause notice but the Ld. PCIT did not give any thoughtful consideration to the submissions made by the assessee but passed the impugned order in a summary manner, without any evidence on record and on the basis of the fact that the assessee had been claiming exemption u/s 10(36) of the Assessee in the earlier years and on the basis of the surrender made in the earlier years (which was factually incorrect) setting-aside the issue to the file of the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Central), Ludhiana has failed to consider the fact that the assessment was made under section 143(3) of the Act by the AO after verifying the claim under section 57 of the Income Tax Act on account of payment of interest and also considering the history of the case that similar deduction has been allowed in the preceding six years for which the assessment has been made after search. Therefore, the finding of the learned Principal Commissioner of Income Tax (Central), Ludhiana that the assessment has been made without making any independent inquiries or investigation regarding the claim as per material on record shows that these expenses have no direct nexus with the taxable income is against the facts and circumstances of the case. 5. That the appellant craves to add or amend the grounds of appeal. 4.1 The Ld. AR submitted that in this case the return of income was filed by the assessee on 13.07.2016 along with computation of income including the balance sheet. He drew our attention to the computation wherein the Long Term Capital Gain on sale of shares of Hind Securities and Virtual Global Education Ltd. and the exemption claimed u/s 10(36) of the Act has been menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being Long Term Capital Gain and deduction u/s 57 of the Act whereas in the original show cause notice issued and placed at Pages 71 to 73 of the Paper Book there were two more issues i.e. one with regard to unsecured loan raised from Swagat Trading and the other on account of Income from House Property . It was submitted that, the Ld. PCIT has not given any adverse finding with regard to the Income from House Property while passing the order u/s 263. The Ld. AR submitted that the assessee gave a detailed response to the show cause notice demonstrating that the AO had conducted adequate enquiries on the issue of Long Term Capital Gain, exemption u/s 10(36) of the Act, deduction u/s 57 of the Act as well as on unsecured loans but the Ld. PCIT did not give any thoughtful consideration to the submissions made by the assessee but passed the impugned order in a summary manner, without any evidence on record and on the basis of the fact that the assessee had been claiming exemption u/s 10(36) of the Assessee in the earlier years and on the basis of the surrender made in the earlier years (which was factually incorrect) setting-aside the issue to the file of the Assessing Officer. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these expenses have no direct nexus with the taxable income is against the facts and circumstances of the case. 5. That the learned Principal Commissioner of Income Tax (Central), Ludhiana has failed to appreciate the fact that the assessee declared short term capital gain of ₹ 4,650/-on purchase and sale of gold coins on the same da\ and taxable at the maximum rate of income tax. As such, the assessment made by the AO is not erroneous and prejudicial to the interest of revenue as observed by the learned Principal Commissioner of Income Tax (Central), Ludhiana 6. That the appellant craves to add or amend the grounds of appeal. 5.1 The Ld. AR submitted that the facts of this case are identical to the facts in the case of Shri Sanjay Jain. It was submitted that in this case the return of income was filed by the assessee on 13.07.2016 along with computation of income including the balance sheet. He drew our attention to the computation wherein the Short Term Capital Gain in respect of Gold Coin and Long Term Capital Gain on sale of shares of Spice Jet Ltd , Hind Securities and Virtual Global Education Ltd. and the exemption claimed u/s 10(36) of the Act has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion claimed u/s 57 of the Act. The Ld. AR submitted that the assessee gave a detailed response to the show cause notice demonstrating that the AO had conducted adequate enquiries on the issue of Long Term Capital Gain, exemption u/s 10(36) of the Act, deduction u/s 57 of the Act as well as on unsecured loans but the Ld. PCIT did not give any thoughtful consideration to the submissions made by the assessee but passed the impugned order in a summary manner, without any evidence on record and on the basis of the fact that the assessee had been claiming exemption u/s 10(36) of the Assessee in the earlier years and on the basis of the surrender made in the earlier years (which was factually incorrect) setting-aside the issue to the file of the Assessing Officer. It was submitted that on the issue of unsecured loans as well as deduction claimed u/s 57 of the Act, the Ld. PCIT set aside the issues to the file of the AO without appreciating the queries raised by the AO in this regard as well as the replies filed by the assessee along with the relevant evidences before the AO. 6.0 It was submitted by the Ld. AR that the factual matrix in all the cases was identical in as much as the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 263, and, thus, it was argued that the observation of the Ld. PCIT in the impugned order that he had occasion to peruse the assessment record is not correct. Reliance was placed on the order of the Amritsar Bench of the ITAT in the case of Ambey Construction in ITA No. 208/Asr/2017 vide order dated 07.05.2019, wherein the order of the Ld. PCIT u/s 263 was quashed as having been passed on the basis of the proposal given by the AO. Similar reliance was placed on the following judicial precedents: -Manish Chirani vs. PCIT in ITA No. 1161/Kol/2019 -John Galt International vs. PCIT in ITA No. 2155/Mum/2017 -Span Overseas Ltd. vs. CIT in ITA No. 1233/PN/2013 - Priyank Sharma vs. CIT in ITA No. 347/JP/2013 -Alfa Laval Lund AB Vs CIT (International Taxation) reported in 210 DTR 313. 6.3 The Ld. AR also argued that the impugned orders were liable to be set aside on another ground also for the reason that the orders of assessment had been passed on the basis of approval given by the Addl. Commissioner of Income Tax u/s 153D of the Act and that as per the order of the Delhi Bench of ITAT in the case of .Pankaj Bansal in ITA No. 383/Del/2021 Ors. it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to providing balance sheet/s, trading account/s, profit loss account/s of the companies whose shares have been traded by the assessees. 9.0 We have heard the rival contentions and have also perused records as well as the paper books filed by the assessees in support of their contention that the AO had made adequate enquiries during the course of assessment proceedings and further in support of their claim that the assesses had submitted all relevant documents and evidences in response to the queries raised by the AO in all the four cases. Undoubtedly, the four cases are identical on facts in as much as the returns filed by the assessees were filed showing identical transactions, the AO issued similar questionnaires, the Ld. PCIT also issued similar show cause notices and the impugned orders were also passed on identical reasoning. We have duly considered the assessment orders in all the four cases and at the very outset it can be seen that all the issues which were the subject matter of the show cause notices issued by the Ld. PCIT had already enquired into by the Assessing Officer and he, after duly considering the voluminous documents and evidences furnished by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 343 ITR 329 (Del). In this case, the Hon'ble Delhi High Court went on to observe that in case where there is in-adequate inquiry but no lack of inquiry, the CIT must give and record a finding that the order/enquiry made is erroneous and that this can happen only if an inquiry and verification is conducted by the CIT. The Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd (supra) also held that in most cases of alleged inadequate inquires it will be difficult to hold that the order of the Assessing officer, who had conducted enquiries and had acted as a Investigator, is erroneous, without the CIT conducting verification /inquiry himself. However, in the present cases, no such inquiry has been carried out by the Ld. PCIT and he has simply directed the Assessing officer to carry out detailed inquires. In our considered opinion, the Ld. PCIT, without making further inquiries on his own account, has simply stated in the impugned orders that the Assessing officer was required to make more inquiries. The Ld. PCIT has not pointed out as to what further inquiries was the Assessing officer required to make and as to how without those inquires the ordesr of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, if is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the Revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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