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TMI Blog2023 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... of the considered view that there is no scope for the PCIT to set aside the assessment order u/s. 263. No doubt in case where there is complete lack of enquiries, the PCIT is having powers to set aside the assessment order. However, in a case where there is an enquiry, even if said enquiry is inadequate there is scope for the PCIT to step into revise the assessment order. On perusal of facts available on record, at best it can be said that it is not a case of lack of enquiry, but may be case of inadequate enquiry. Therefore, the powers exercised by the PCIT u/s. 263 of the Act is not in accordance with law. Report of investigation wing is not sacrosanct, but what is necessary to decide the issue is whether said transactions are genuine or not, is independent enquiry in light of available materials. In this case, the evidences filed by the assessee before the AO during the re-assessment proceedings clearly shows that long term capital gains declared u/s. 10(38) is nothing to do with survey conducted in the case of M/s. Onkar Supply Pvt Ltd and statement recorded from Shri Ashok Kumar Kayan. Therefore, we are of the considered view that capital gains declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the same pretext under which the assessment order is subjected to revision and that the learned AO after duly examining the documentary evidence filed by the assessed has considered the transaction in shares as genuine in nature. 6. The learned Principal Commissioner Of Income tax ought to have seen that the possible view taken by the AO cannot be sought to be disturbed merely because the CIT was of a different view. This was nothing but the CIT trying to substitute his view over the view taken by the AO in the revisionary jurisdiction u/ s 263 of the Act, which was not permissible as per law. 7. The learned Principal Commissioner Of Income tax ought to have seen that there is a distinction between lack of enquiry and inadequate enquiry. The learned PCIT ought to have seen that if there was any enquiry, even inadequate that would not by itself give occasion to Ld. Pr. CIT to pass orders u/ s 263, merely because he has different opinion in the matter. It is only in cases of lack of enquiry that such a course of action would be open for the Ld. Pr. CIT. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, he has admitted the fact that, the assessee is one of the beneficiary of such bogus transactions. Therefore, rejected arguments of the assessee and set aside assessment order passed by the AO u/s. 143(3) r.w.s. 147 of the Act dated 02.12.2019, and directed the Assessing Officer to carry out necessary enquiries and to decide the issue in accordance with law. The relevant findings of the PCIT are as under: 12. The above has been acknowledged by the assessee in his reply filed before the AO, where the entire reasons recorded was reproduced. A careful perusal of the same would reveal that the information recorded by the AO comprise (a) M/s Onkar Supply Pvt. Ltd. was engaged in providing accommodation entry in connivance with entry operators. (b) M/s Onkar Supply Pvt. Ltd. is one of the shell companies controlled and managed by Shri Beni Prasad Lahoti, entry operator. (c) Shri Ashok Kumar Kayan, a broker acted as an entry operator in providing accommodation entries for long term capital. gains through trading in bogus penny scrips. (d) As per sworn statement of the broker Shri Ashok Kumar Kayan the assessee is one of the beneficiaries of such bogus transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various information and evidence. The AO without examining any of the said information and evidence, assumed that the bogus transaction related to sale of share of M/s Onkar Supply Pvt Ltd and ạs the assesse had replied that it had not dealt with the shares of M/s Onkar Supply Pvt Ltd further assumed that the share transactions on Bakra Prathistan Ltd was genuine one. The information that M/s Dhanlabh Merchandise was a shell company and the evidence in the form of sworn deposition of Mr. Ashok Kumar Kayan, that the asessee was a beneficiary of bogus long term capital gain transaction was not considered and examined at all while making the decision. In this regard, it is relevant to refer to the principle laid down by the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income-tax [2000] 243 TTR 83 (SC)2000] 109 Taxman 66 (SC) that 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 Gawhati High Court Full bench in the case of CIT v Jawahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or instruction issued by the Board under section 119; or 3 ITA No. 2644/Del/2016Gurvinder Singh Suri (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 15. The Hon ble Supreme Court in the case of Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No. 2396/I2017) dated 29.11.2017 upheld the view that the ClIT is justified in invoking sec. 263 if the AO did not make any proper inquiry while making the assessment. 16. I find that the AO had not made any inquiry much less relevant inquiry to verify the genuineness of share transfer transaction. Admittedly, the assessee had done share transfer transaction with the broker Mr. Ashok Kumar Kayan. The AO was very much having the sworn deposition of the share broker Mr. Ashok Kumar Kayan that he had only provided accommodation entries and that the assessee was one among the beneficiaries of long term capital gain. But without inquiry and without application of mind, the AO had accepted the transaction and failed to make addition, though prima facie evidence on record show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng term capital gains. 20. It was contended that the CIT cannot revise the reassessment for the mistakes in the reasons recorded which was with the approval of the CIT. The argument is totally misleading. The functions performed by the CIT in giving approval under sec. 147 and in invoking the jurisdiction under sec. 263 are entirely different. While giving approval for the purpose of reopening the assessment under sec. 147 it is necessary that the AO has reasons to believe that income has escaped assessment. On the other hand, the power of revision is exercised by the CIT over the assessment order passed by the AO;and the pre-requisite conditions for the exercise of such jurisdiction is the satisfaction of the twin conditions that the order was erroneous and prejudicial to the interests of the revenue. The reassessment order passed by the AO is erroneous as he had not made the relevant inquiry to verify the genuineness of the share transfer transaction, even though there was information with the AO that M/s Dhanlabh Merchandise Ltd, and M/s Bakra Prasisthan Ltd were shell companies, and sworn deposition of the broker Ashok kumar Kayan that he had only provided accommodation en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of PCIT vs Laxman Industrial Resources Ltd [2017] 397 ITR 106 (Del). 7. The ld. DR, on the other hand supporting the order of the PCIT submitted that, the PCIT has elaborately discussed the issue in light of sworn statement recorded from Shri. Ashok Kumar Kayan, where he had categorically admitted that assessee is one of the beneficiaries of accommodation entries in the form of long term capital gains through various companies. The PCIT, had also discussed the issue in light of modes of operating employed by entry providers and also linked bogus long term capital gains declared by the assessee to said operations, and thus rightly held that assessment order passed by the AO is erroneous in so far it is prejudicial to the interests of the revenue. He, further referring to the assessment order dated 02.12.2019 submitted that no doubt the assessee has submitted written submissions on the issue and enclosed certain information. But, fact remains that the AO has not carried out required enquiries he ought to have been carried out in light of explanation (2) to section 263 of the Act. Therefore, the PCIT has rightly assumed jurisdiction and set aside the assessment order and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or simple reason that sole purpose of re-opening of assessment u/s. 147 of the Act is to tax escaped income on account of bogus long term capital gains declared by the assessee, and said reasonable belief has been drawn by the AO on the basis of information received from Income-tax Department, Kolkata. If you go by reasons recorded for re-opening of assessment, the AO noticed that during the course of survey proceedings by the Department on M/s. Onkar Supply Pvt Ltd, it was found that said entity was involved in providing accommodation entries of bogus long term capital gains in connivance with entry operators. It was further noted that Shri. Ashok Kumar Kayan, in his oath u/s. 131 of the Act had admitted his role in providing accommodation entries in bogus penny stocks and amounts transacted through the current account of M/s. Onkar Supply Pvt Ltd. During the course of reassessment proceedings, the AO on the basis of said information examined the case of the assessee in light of detailed submissions filed by the assessee and after examining details filed by the assessee, the AO came to the conclusion that long term capital gains declared by the assessee from sale of certain shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court has considered an identical issue on bogus long term capital gains, in light of report of investigation wing and after considering relevant facts, the Hon ble High Court clearly held that the AO cannot come to the conclusion on the basis of report of investigation wing that transactions of the assessee are bogus in nature, unless he conducts necessary enquiries to ascertain correct facts with regard to nature of transactions. The relevant findings of the Delhi High Court are as under: It is argued by the Revenue that the ITAT should have taken appropriate steps and remitted the matter, not merely confirming the CIT(A)'s opinion since the Investigation Wing's report confirmed unequivocally that the assessee was beneficiary to bogus transactions whereby the genuineness of identity of the shareholders, the genuineness and identity of the share applicants and the genuineness of transactions was suspect. This Court notices that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. It was not a case where the share applicants are merely provided confirmation letters. They had provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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