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TMI Blog2022 (9) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent year gains. This view of the ld. PCIT, in our opinion, is not the right reason for exercising revisionary powers u/s. 263 of Act as the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law. Thus in our considered view, is not tenable since the verification of loss incurred in the years beginning AY 2009-10 is beyond the scope of scrutiny assessment of AY 2017- 18. From the perusal of facts, the security transactions have been scrutinized in the proceedings u/s.143(3) for AY 2015-16 and the revenue has accepted the losses including the brought forward losses. This supports the contention of the ld AR that since the brought forward loss has already been verified and accepted by the revenue during the assessment proceedings of AY 2015-16 the order of the AO passed for the year under consideration cannot be considered as erroneous on this ground. AO in the given case has conducted enquiry and perused the details submitted and has taken a decision to accept the brought forward loss based on explanation provided by the assessee after proper application of mind. We therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned assessing officer without appreciating the fact that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned Principal Commissioner of Income-tax, Bangalore 1, is ultra vires the scope of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. 3. The learned Principal Commissioner of Income-Tax is not justified in invoking the provision u/s 263 and holding that the order passed by the Assessing Officer u/s 143 (3) dated 5/11/2019 as erroneous and pre-judicial to the interest of the revenue by ignoring the fact that the Assessing Officer had applied his mind on the issues and had taken the view accepting and following judicial discipline. Therefore, the order u/s 263 does not survive and deserves to be cancelled. 4. The learned Principal Commissioner of Income-tax, Bangalore failed to appreciate the fact that the direction to make fresh assessment, tantamount to ordering for making fishing and roving enquires without any material in support thereof and consequently the impugned order u/s 263 of the Act passed by the authorities is bad in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y out another assessment for the year 2009-10 to verify the correctness of the claim. 11. If the claim for brought forward losses are to be verified the learned AO ought to have reopened the assessment for such year and could have verified the claim. Hence even at this juncture, during the revisory proceedings, the assessing officer can only verify if the loss is validly claimed and carried forward. The learned AO cannot carry out another assessment to verify the claim for 2009-10 to establish the genuinity of the claim of brought forward losses. Hence the order is bad in law. 12. Without prejudice, even assuming for the argument sake, without conceding now the Assessing officer does not have powers to conduct fresh assessment for assessment for AY 2009- 10 and AY 2014-15. For verification of the veracity of the losses, the only thing that can be done is to see if the returns are filed on time and validly carried forward. The Assessing officer shall not have powers to verify if the claim is correct or wrong. If done so, will tantamount to fresh assessment and will defeat the purpose of specifying limitation and time period allowed under the law in contrary to the established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of Rs.1,22,72,360. The case was selected for limited scrutiny under CASS and the assessment proceedings were initiated by serving notice u/s. 143(2) of the Act. The AO called on various details from time to time and concluded the assessment by making an addition of Rs.14,90,000 as unexplained money u/s.69A. The PCIT on verification of assessment records noticed that the assessee has set off Rs.2,04,83,780 being short term capital gain against the brought forward short term capital loss. The PCIT was of the view that the AO has not examined the veracity of the brought forward short term capital loss which is set off against the current year s short term capital again. Further, the assessee has claimed long term capital gain exempt income to the tune of Rs.5,74,00,974 on which STT is paid. The PCIT stated that no details of any transaction are available in the SFT data under ITS details in 360 degree view of the assessee and the AO did not verify the exempt income claim of the assessee. The PCIT issued a show cause notice to the assessee in this regard. 3. The assessee furnished year-wise details of brought forward loss from AY 2009-10 to 2017-18. The assessee also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were verified and accepted by the revenue. 6. The ld.DR supported the order of the PCIT. 7. We have considered the rival submissions and perused the material on record. The ld. AR also submitted a chart containing the details of brought forward and set off of losses from AY 2009-10 to 2017-18 (page 124 of PB) which is the summary of brought forward loss of the assessee as per the return of income filed which is reproduced below:- SI . No . Assessment year Date of filing ( DD / MM / Y House Property Loss Business or profession loss Short term capital Long term capital loss Loss from owning and maintaining race horses I 2009-10 26-07-2009 0 0 316177650 0 0 ii 2010-11 26-07-2010 0 0 2108184 0 0 iii 2011-12 30-07-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and if he considers that any order passed therein by the Assessing Officer 89[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 90[including,- **** Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94[or the Transfer Pricing Officer, as the case may be,] 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 95[Chief Commissioner or Chief Commissioner or 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 section 119; or (d) the order has not been passed in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation a lesser tax than what was just has been imposed. 11. There is no dispute that u/s. 263 of the Act, the PCIT does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary and the assessment order is prejudicial to the interests of the Revenue. However, in doing so, the PCIT must have some material which would enable to form a prima facie opinion that the order passed by the AO is erroneous, insofar as it is prejudicial to the interests of the Revenue. In the present case, the PCIT has not brought out any material on record to substantiate that the brought forward losses set off against current year gain is not the right amount. The PCIT in his order has stated that the sale consideration for AY 2014-15 is much lower than the cost of acquisition and that the AO has not examined the veracity of the short term capital loss and has allowed the set off of the same from current year gains. This view of the ld. PCIT, in our opinion, is not the right reason for exercising revisionary powers u/s. 263 of Act as the error envisaged by Section 263 of the Act is not one that depends on poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the loans were squared up amounts in the format prescribed therein. In compliance to thereof, the assessee has furnished complete details of the unsecured loans outstanding/ squared up vide para 3 of his letter dated 2-11-2015 placed as Annexure-2 at page 4 of paper book. The assessee has also furnished details consisting of copy of ledger account, copy of acknowledgment of income filed for A.Y. 2012-13 and 2013-14 and copy of bank statement reflecting the payment received was paid during the financial year 2012-13 relevant to assessment year 2013-14 which are placed at paper book, page 9 to 49 in respect of GTPL as well as PAFPL. This indicate that the assessee has furnished account confirmation of the depositor, acknowledgment of income of the parties, audited balanced sheet and profit and loss account of the parties and bank pass book and bank statement of the parties. During the course of assessee proceedings, form these facts it is clear that the assessee has not only proved the from these facts it is clear that the assessee has not only proved the identity of the lenders but also the genuineness of the transactions and credit worthiness of the lenders. Accordingly, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, we find that the Pr. CIT has not mentioned in the show-cause notice issued under section 263 that he is going to invoke the Explanation 2 to 263 hence, invocation of Explanation in the order without confronting the assessee is not appropriate and sustainable in law in support of this contention, the ld. Counsel has placed reliance on the following decision: CIT v. Amir Corporation 81 CCH 0069 (Guj.), CIT Mehrotra Brothem -270 ITR 0157 (MP,CIT v. Ganpet Ram Bishnoi - 296 ITR 0292 (Raj.), Cadila healthcare Ltd. v. Cl 7, Ahmedabadh-1 [ITA no. 1096/Ahd/2013 910/Ahd/2014], Sri Sa Contractors v. ITO [ITO no. 109Nizag/2002] and Pyare lal Jaiswal v. CIT, Vamnesi [(2014) 41 taxmann.com 27 (AII Trib.)]. It was contended by the Learned Counsel that clause -(a) (b) of Explanation 2 of Section 263 are not applicable as the Assessing Officer has made enquiry and verification which should have been made. Further, in the show cause notice, the Explanation-2 of section 263 was not invoked by the PCIT and it was referred in the order u/s.263 of the Act. Therefore, in the light of decision of the Co-ordinate Bench of Mumbai ga in the case of Narayan Tatu Rane - 70 taxmann.com 227 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n so far as it/s prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. 53.2 The interpretation of expression erroneous in so far as it/3 prejudicial to the interests of the revenue has been a contentious one. In order to provide clarity on the issue, section 263 of the Income-tax Act has been amended to provide 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 section 119; or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws relied by the ld. CIT(D.R.) are distinguishable on facts and in law hence, by the ld. Counsel as well and we concur the same hence not applicable to present facts of the case. Therefore, in absence of the same, the ld. CIT ought to have not exercised his jurisdiction under section 263 of the Act. Therefore, we cancel the impugned order under section 263 of the Act, allowing all grounds of appeal of the Assessee. 5. The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. 6. Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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