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TMI Blog2023 (4) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, we are of the considered view that the PCIT is completely erred in assuming his jurisdiction and revised assessment order u/s. 263 of the Act. Thus, we quashed order passed by the PCIT u/s. 263 of the Act.Appeal filed by the assessee is allowed. - ITA No. 421/Chny/2022 - - - Dated:- 22-3-2023 - SHRI V. DURGA RAO , HON BLE JUDICIAL MEMBER AND SHRI MANJUNATHA. G , HON BLE ACCOUNTANT MEMBER For the Appellant : Shri. D. Anand , Advocate For the Respondent : Shri. R. Mohan Reddy , CIT ORDER PER G. MANJUNATHA , ACCOUNTANT MEMBER : This appeal filed by the assessee is directed against the order passed by the Pr. Commissioner of Income Tax, Central- 1, Chennai, passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 28.03.2022 and pertains to assessment year 2012-13. 2. The assessee has raised the following grounds of appeal: 1. The order of the learned Principal Commissioner Of Income tax, (Central-l), Chennai is wrong, illegal and is opposed to law and facts of the case. 2. The learned Principal Commissioner Of Income tax, Central-l, Chennai, ought to have seen that the order of assessment is neither err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 order dated 28.03.2022 by allowing the appellants appeal and thus render justice. 3. The brief facts of the case are that, the assessee filed her return of income for the assessment year 2012-13 on 31.07.2012, admitting total income of Rs. 7,87,460/-. The assessment has been completed u/s. 143(3) r.w.s. 153A of the Act, on 31.03.2015 and assessed taxable income of Rs. 26,43,225/-. The case has been subsequently re-opened u/s. 147 of the Act, for the reasons recorded as per which information received by the Assessing Officer shows that, the assessee is one of the beneficiary of bogus long term capital gains derived from sale of certain shares through M/s. Onkar Supply Pvt Ltd. The assessment has been completed u/s. 143(3) r.w.s. 147 of the Act on 02.12.2019 and assessed total income of Rs. 26,43 ,225/-. 4. The case has been subsequently taken up for revision proceedings by the PCIT, Central-1, and show cause notice u/s. 263 of the Act, was issued and called upon the assessee to explain as to why the assessment order passed u/s. 143(3) r.w.s. 147 of the Act dated 02.12.2019 should not be revised. In response, the assessee submitted that the assessment order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ABRPV72908 Mukesh Agarwal SHO45 AAFPK6968E Pankaj Agarwal SH044 AFLPA1767N Rita Agarwal SHO46 AAGPR4368A Shoba Agarwal SH047 AAXPC8430H Bimla Devi SH054 AADPD8240L (c) Investigation report from the ADIT(Inv) that Shri Ashok Kumar Kayan provided entries in the form of bogus long term capital gain and that in his sworn statement gave the names of beneficiary with details of PAN and amount of such bogus TCG. The investigation report also refer to M/s. Onkar supply Ltd as one of the shell companies controlled and managed by Shri Beni Prasad Lahoti and its bank account used for providing accommodation entry to beneficiaries. 11. From the above, it is cogently clear that the assessee had obtained bogus accommodation entry for claiming long term capital gain exemption from its transaction in the shares of Dhanlab Merchandise merged with M/s. Bakra Pratist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide accommodation entry to beneficiaries. 2. Further, it is seen from the fund transaction of M/s Onkar Supply Pvt Ltd that major amnount of the fund were credited to the account of the Shri. Ashok Kumar Kayan, whose name appears in the departmental database of long term capital gains as entry operator. Statement under Oath u/s 131 was recorded from Shri. Ashok Kumar Kayan, wherein he accepted his role in providing accommodation entries to beneficiaries the form of LTCG through trading in bogus penny scrips and amounts transacted through the current account of M/ Onkar Supply Pvt Ltd are nothing but accommodation entries in the form of bogus LTCG. He further provided the list of all beneficiaries along with the bogus LTCG arising out of these transactions. 3. Name of the Smt. Shobha Agawal appears in the beneficiaries list provided by the Shri. AshokKumar Kayan and corresponding total bogus LTCG is to the tune of Rs.26,43,225/-. As the assesse is involved in such transaction related to such scrip in the F.Y 2011-12 pertaining to A. Y.2012-13 and that has introduced unaccounted cash into books of accOunts by way of accommodation entries and circular trading provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e few of the many shell companies managed and controlled by him for providing accommodation entries; and of Ashok Kumar Kayan that he had provided bogus Long term capital gain entry to the assesse and that the share transfer transaction was bogus. Despite having specific information that M/s. Dhanlabh Merchandise Ltd. is a shell company and the deposition of Ashok Kumar Kayan that the assessee was a beneficiary of the accommodation entries provided by him through bogus entries, and that the assessee had shown long term capital gain from sale of share of M/s. Dhanlabh Merchandise Ltd. which merged with M/s. Bakra Prathisthan Ltd., the AO did not attempt to make any inquiry or verification over the information and evidence with him. The AO had not even attempted to cross check the information with the reasons recorded and the submissions made before him. There is no discussion in the assessment order on the various matters recorded in the reasons to believe and his inferences on them. It could be seen that the in the reasons recorded that here are various information and evidence. The AO without examining any of the said information and evidence, assumed that the bogus transaction re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss all truthful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted. In Rajmandir Estates Pvt Ltd v Pr CIT, the Calcutta High Court held that where the AO did not apply his mind to certain pieces of evidence which should have provoked him to make further investigation but not made would be a justifiable reason to invoke jurisdiction under sec. 263 of the IT Act. 15. In this regard, it is relevant to refer to the Explanation 2 to sec. 263 which reads as under: Explanation 2. -- For the purposes of this section, it is hereby declared 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 3 ITA No. 2644/Del/2016Gurvinder Singh Suri (d) the order has not been passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incorrect to contend that the sole basis for invoking sec. 263 was the error in stating the reasons recorded. The proceedings under sec. 263 was initiated as the assessment order was erroneous as the AO did not make any inquiry to verify the genuineness of the alleged share facie material information to show transfer transaction, even though there was primate that the alleged share transfer transaction was bogus. Besides, various incriminating information and evidence formed the basis for the reopening of the assessment. Mere error in one piece of information recorded by the AO do not affect its validity, as all the other information and evidence directly prove prima facie the non-genuineness of the transaction. The failure of the AO to make any inquiry in respect of any of this information made the assessment erroneous and prejudicial to the interests of Revenue. The assessee's nexus is very evident from the sworn deposition of Ashok Kumar Kayan that he had provided accommodation entries to the assesse for claiming benefit of exemption of long term capital gains. 21. It was contended that the CIT cannot revise the reassessment for the mistakes in the reasons recorded w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring total income of Rs. 32,76,920/-, however, the Ao while completing the assessment had taken the total income at Rs. 7,87,460/-. This discrepancy may also be examined by the AO while completing the set aside proceedings. 6. The ld. Counsel for the assessee, submitted that the Ld. PCIT erred in setting aside the assessment order in exercise of his powers conferred u/s. 263 of the Act, without appreciating fact that while invoking power under revisionary jurisdiction, the PCIT must satisfy himself about erroneous order passed by the AO which caused prejudice to the interests of the revenue. In this case, the sole purpose for re-opening of assessment is to verify information received from Income-tax Department, Kolkata and during the re-assessment proceedings the assessee has filed all possible evidence and explained to the Assessing Officer that long term capital gains declared for the relevant assessment year is nothing to do with transactions with M/s. Onkar Supply Pvt Ltd, a Kolkata based company operated by Shri. Ashok Kumar Kayan. The AO, after considering relevant facts has rightly concluded the assessment without there being any addition towards capital gains an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 dated 02.12.2019, on the sole issue of long term capital gains declared by the assessee u/s. 10(38) of the Act. The PCIT, has discussed the issue in light of information received from Income-tax Department, Kolkata and more particularly statement recorded from One Mr. Ashok Kumar Kayan, claimed to be entry provider for various companies. As per said sworn statement of Shri Ashok Kumar Kayan, it was noticed that the assessee is one of the beneficiary of bogus long term capital gains of accommodation entries by the entry operator. Therefore, the PCIT came to the conclusion that although the assessment has been re-opened for specific purpose of examination on information received from Incometax Department, Kolkata, but the AO simply completed reassessment by accepting explanation furnished by the assessee without carrying out required enquiries he ought to have been carried out in terms of explanation (2) to section 263 of the Act, which rendered the assessment order as erroneous and prejudicial to the interests of the revenue. 9. We have carefully considered the reasons given by the PCIT to set aside the assessment order passed by the AO u/s. 143(3) r.w.s. 147 of the Act dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion received from Income-tax Department, Kolkata on the survey conducted in case of M/s. Onkar Supply Pvt Ltd and statement recorded from Shri. Ashok Kumar Kayan, a broker acted as an entry operator in providing accommodation entries of long term capital gains. Since, the issue is a subject matter of re-assessment proceedings from the Assessing Officer, it can be safely concluded that the AO has verified the issue in light of relevant facts under right perspective of law and concluded that long term capital gains declared by the assessee is genuine and thus, we are of the considered view that there is no scope for the PCIT to set aside the assessment order u/s. 263 of the Act. 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. In this case, 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 accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine 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) of the Act 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 from sale of certain shares cannot be considered as bogus only on the basis of report of Income-tax Department. 12. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that assessment order passed by the AO is neither erroneous nor prejudicial to the interests of the revenue, on the issue of long term capital gains declared u/s. 10(38) of the Act. Therefore, we are of the considered view that the PCIT is completely erred in assuming his jurisdiction and revised assessment order u/s. 263 of the Act. Thus, we quashed order passed by the PCIT u/s. 263 of the Act. 13. In the result, appeal filed by the assessee is allowed. Order pronounced in the court on 22nd March, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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