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TMI Blog2024 (5) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order . If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assessee. As per Narayan Tatu Rane [ 2016 (5) TMI 1162 - ITAT MUMBAI] as held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications. As decided in the case of PCIT vs. Usha Polychem India (P) Ltd [ 2023 (5) TMI 419 - CALCUTTA HIGH COURT] where Principal Commissioner involved revision jurisdiction under section 263 in case of assessee on basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case assessment order was passed u/s 147 r.w.s. 144B on 30/03/2022 determining total income of Rs. 2,55,970/- accepting the return income of the assessee. 4.2 On examination of the assessment record, it is observed from the accounts filed that the assessee has claimed exempt Long Term Capital Gain amounting u/s 10(38) of the Income Tax Act, 1961 to the tune of Rs. 11,87,718/- on account of sale of shares of M/s. Blueprint Securities Limited (Scrip Code: 012630). Investigation was carried out by the Investigation Directorate which unearthed that the share price of M/s. Blueprint Securities Limited was artificially rigged in an abnormal manner which does not commensurate with the financials of the aforesaid concern. It is evident that the claim of LTCG on sale of shares of M/s. Blueprint Securities Limited(Scrip Code : 012630) is nothing but unaccounted income of the assessee brought back in the books in the form of bogus LTCG. Considering the above facts, the assessment order is erroneous so far as it is prejudicial to the interest of revenue. Accordingly, the assessment order is required to be revised. 4.3 In view of the above, you are requested to explain as to why the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed company M/s Blue Print Securities Limited. The assessee claims that sale was made through a SEBI recognized stock broker on online trading platform of CSE on which STT was paid. As per assessee, the payment of purchase of shares was also made through banking channels. The assessee also claimed that he was not aware of any investigation by Income Tax Department on basis of which the aforesaid stock was termed as penny stock. The assessee placed reliance on several decisions including the decision of Kolkata ITAT in case of Balaram Gupta vs ITO (Date of order 05.10.2018) wherein the ITAT has decided the issue of LTCG on the same scrip in favour of assessee. 6.1 The assessee has further submitted that during the reassessment proceedings he has filed supporting evidences of genuine exempt income u/s 10(38) and has also attended the video conference and merely a third-party information cannot be relied upon. As per assessee, nothing has been brought by the A.O. to show any nexus between the assessee and the entry operator. The assessee has placed reliance on the decision of Supreme Court in case of Malabar Industrial Co. Ltd. and decision of Gujarat High Court in case of CIT Vs Arvin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el in this respect has submitted that the reopening of the assessment was made only on the reason that the Assessing Officer had received information from the investigation wing that the assessee was beneficiary of a transaction from Blue Print Securities Limited. That the Assessing Officer in the reopened assessment proceedings thoroughly examined this issue. The assessee during the assessment proceedings submitted all the necessary documents to prove the genuineness of the transaction which are also reflected in the submissions made by the assessee before the ld. Pr. CIT as reproduced above. The ld. Counsel has also relied upon the paper-book to submit that the assessee company filed reply dated 28.12.2021 with enclosure of copy of ITR acknowledgement dated 05.12.2021 for A.Y 2013-14, copy of computation of income for A.Y 2013-14, copy of profit and loss a/c for F.Y 2012-13 before the Assessing Officer in response to the notice issued by him u/s 142(1) of the Act in the course of reassessment proceedings. Apart from that, the assessee also furnished details and evidences before the NFAC relating to the claim of exemption of long term capital gain u/s 10(38) on account of sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income- Tax Act reads as under: (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing] Officer 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, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 9.2. The sum and substance of the above reproduced section 263(1) can be summarized in the following points: 1) The Commissioner may call for and examine the record of any proceeding under the Act; 2) If he considers that the order passed by the AO is (i) erroneous; and (ii) is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and 4) He has to make or cause to make such enquiry as he deems necessary; 5) He may pass such order thereon as the circumstances of the case justify including, (i) an order enhancing or, (ii) modify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the Assessing Officer. 5.1 The ld. Pr. CIT, taking shelter in Explanation 2 to Section 263(1) of the Act, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the ld. Pr. CIT taken u/s 263. 11. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it 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 has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsonance with the principles of law which has in ultimate eventuate affected realization of lawful revenue either by the State has not been realized or it has gone beyond realization. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied] 12. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 7. Further, the Coordinate Mumbai Bench of the Tribunal in the case of Narayan Tatu Rane v. ITO reported in [2016] 70 taxmann.com 227 (Mum. Trib.) has held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications. The relevant part of the order of the Tribunal is reproduced as under: 20. Further clause (a) of Explanation states that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the assessee's appeal and held that the PCIT has not recorded any finding that he has reason to believe that income assessable to tax has escaped assessment and the revenue being aggrieved by the said finding on an appeal before us. What is important to note in the instant case is that the assessment for the year under consideration, AY 2012-13 was completed on 30-3-2015. Subsequently, the assessment was reopened based on the information received from the DDIT (Investigation) Unit 2(2), Kolkata dated 6-3-2019. Thereafter, notice under section 148 of the Act was issued on 29-3-2019 and in response to such notice the assessee filed its return of income declaring a total income of Rs. 23,440/-. Subsequently, notices were issued under sections 143(2), 142(1) of the Act and the assessee filed his response along with documents. The Assessing Officer on considering the documents and the return furnished by the assessee accepted the stand taken by the assessee and completed the assessment. It is seen that PCIT has exercised jurisdiction under section 263 of the Act on the very same information furnished by the DDIT (Investigation) Unit 2 (2) dated 6- 3-2019. On perusal of the o ..... 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