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TMI Blog2022 (8) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of the Act has been invoked merely on the basis of audit objection. Rather, we find that the ld PCIT has taken into considered the entirety of material on record including audit objection as well as investigation report and thereafter, has considered it appropriate to exercise his revisionary jurisdiction u/s 263 as the perusal of such records prima facie demonstrated that the order so passed by the AO was erroneous as well as prejudicial to the interest of the Revenue. We therefore don t agree with the contention so advanced by the ld AR in this regard. - Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... der was set aside with a direction to pass a fresh order keeping in mind the observations made in the impugned order and after providing adequate opportunity to the assessee. 3. Against the said order and findings of the Ld. Pr.CIT, the assessee is in appeal before us. During the course of hearing, the Ld. AR taken us through the order of the AO and it was submitted that as is apparent from the reading of the assessment order, the matter relating to the amount received from M/s Bhole Nath Dealers Pvt. Ltd. towards of shares of M/s Booh Finance Pvt. Ltd. was duly examined by the AO. It was submitted that specific show cause notice was issued and in response, the assessee filed necessary information and documentation and books of account were produced along with bank statement which was verified and the returned income was accordingly accepted by the AO without drawing any adverse inference. It was further submitted that the Ld. Pr.CIT has issued the show cause notice based on the audit objection received from the Audit Party and there is no independent application of mind by the Ld. Pr.CIT and in this regard, our reference was drawn to the contents of the show cause notice as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent examination other than relying on the documentation submitted by the assessee. It was submitted that the Ld. Pr.CIT has accordingly rightly held that there is no evidence on record which establish that the AO had made attempt to collect evidence/papers from Kolkata in respect of round tripping/layering of transactions. It was further submitted that the genuineness of the transaction as so claimed by the assessee in respect of amount received on sale of shares to M/s Bhole Nath Dealers Pvt. Ltd. has not been examined in the instant case as so required in terms of provisions of section 68 of the Act. It was submitted that the mere fact of payment having been received by the assessee through banking channel was not sufficient to establish the genuineness of the sale transaction as so claimed by the assessee. It was submitted that the assessee has not furnished any documentary evidence regarding transfer of share in the form of share transfer Form and copy of share certificates and merely stating that the share certificates are not in the possession of the assessee and such statement being accepted by the AO on face value, shows that the AO has accepted assessee's version without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out further examination to verify the claim of the assessee. In the instant case, there is nothing on record which demonstrate any such action ever initiated by the Assessing officer. Therefore, where the information available on record prima facie demand a deeper examination and investigation, mere acceptance of claim of the assessee and taking on record whatever has been submitted in support of its claim, the Assessing officer would be failing in his statutory duty to carry out necessary examination and verification and where the same is pointed out by the ld PCIT, the latter is well within his jurisdiction by invoking provisions of section 263 of the Act. 6. Further, the claim of the assessee before the Assessing officer was that the amount of Rs 25 lacs has been received through normal banking channel from M/s Bhole Nath Dealers Pvt. Ltd. towards sale of shares of M/s Booh Finance Pvt. Ltd. In order to examine the said claim of the assessee, the Assessing officer issued a show cause and in response, the assessee submitted that it had purchased 145000 equity shares of Rs 100 each through banking channel in the financial year ended 31.03.2007 and out of these shares, durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of the purchaser and the transaction amount remitted and received in the assessee's bank account. Therefore, where the Assessing officer is accepting the version of the assessee without any corroborative documentation and without carrying out further enquiries/verification from so called purchaser of the shares, coupled with the fact that the basis of reopening of the assessment was information received from the Investigation Wing and our observation as stated in para 5 above, it is clearly a case where the Assessing officer has failed to carry out necessary verification and examination. 7. Coming to other contention raised by the ld AR that the Ld. Pr.CIT has issued the show cause notice based on the audit objection received from the Audit Party and there is no independent application of mind by the Ld. Pr.CIT and in support, reliance was placed on the decision of the Hon'ble Punjab and Haryana High Court in case of CIT vs Sohana Woollen Mills (supra). Recently, in case of Shri Rajinder Chauhan vs PCIT, Shimla (ITA No. 308/CHD/2020 dated 21.07.2022), this Bench had an occasion to examine similar contention raised by the assessee in that case and our findings therein read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation 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." 8.1 Thus, we are of the view that the argument canvassed on behalf of the assessee that merely because there is an Audit Objection, the exercise of powers u/s 263 is invalid, we hold cannot be accepted. What we understand from the aforesaid decision and various other decisions cited on this proposition is that a mechanical exercise of revisionary powers u/s 263 by the Revisionary Authority by merely citing the Audit Objection cannot be said to be a valid exercise of Revisionary Powers. The ld. PCIT is require to give an independent finding considering the record. The error in the order of the AO, that too such an error which is prejudicial to the interests of the Revenue, has to be pointed out by the Revisionary Authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers of the CIT under Section 263. The learned D.R. has cited the decision of the Supreme Court in the case of Kasturbhai Lalbhai (supra) which as rightly pointed by Shri Ganeshan has been overruled by the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. In any case that decision is inapplicable to the facts of this case. We are not called upon to decide as to whether the audit objection shall constitute information for the purposes of re-opening of an assessment under Section 147 as was the issue before the Supreme Court in the aforementioned case. The issue before us is limited as to whether the Commissioner of Income-tax would be justified in taking action under Section 263 when the matter is brought to his notice by the internal audit. In our view, the internal audit being a machinery under the administrative control of the CIT for the purposes of pointing out the acts of omissions, errors and prejudices caused to the revenue, they are doing so for and on behalf of the Commissioner of Income-tax. Such a report as already observed can form the basis for taking action under Section 263 provided the Commissioner of Income-tax appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k account statement was submitted by you to justify your contention that all the purchases of share transactions were routed through bank accounts. However in the absence of Share Certificate, any confirmation from purchaser/contract note or Share, Broker's Certificate, the transaction of sale of shares was not substantiated. The mere fact of payment by banking channel, by itself, is not enough to establish the genuineness of transactions. Genuineness of transactions in terms of section 68 of the Act has not been proved by you. 5. There is no evidence on record which can establish that the A.O. had made attempt to collect evidence/papers from Kolkata in respect of round tripping/layering of transactions. The A.O. has allowed the claim of the assessee without any proper verification. The A.O. has neither considered investigation report at the time of framing of assessment nor called any documents/information from Investigation Wing, Ludhiana. Hence, an amount of Rs. 25,00,000/- received on account of sale of shares of M/s Booh Finance Pvt. Ltd. to M/s Bholenath Dealers Pvt. Ltd. was remained unexplained." 10. We therefore do not agree with the contention of the Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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